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Operator: Greetings, and welcome to the Personalis Fourth Quarter 2025 Earnings Conference. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Caroline Corner. Thank you. You may begin. Thank you, operator. Welcome to Personalis' Fourth Quarter 2025 Earnings Call. Joining today's call are Chris Hall, Chief Executive Officer and President; Aaron Tachibana, Chief Financial and Chief Operating Officer; and Rich Chen, Chief Medical Officer and EVP, R&D. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of U.S. securities laws, including any statements regarding trends and expectations for our financial performance this year and longer term, cash runway and liquidity position, revenue expectations and timing, size and booking of orders, products, services, technology, expansions of Clinical volume, reimbursement goals, the outcome and timing of reimbursement decisions, expectations for our existing and future collaboration activities, cost expectations, market size and our market opportunity and business outlook. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to review our recent filings, including the risk factors described in our most recent filings. Personalis undertakes no obligation to update these statements, except as required by applicable law. Our press release with our fourth quarter and full year 2025 results is available on our website, www.personalis.com, under the Investors section and includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website by 5:00 p.m. Pacific Time today. With that, I would like to turn the call over to Chris. Christopher Hall: Good afternoon, everyone. Thank you for joining us to discuss our fourth quarter and full year 2025 results. As we stand here at the beginning of 2026, I'm incredibly proud of the progress our team made over the past year and the momentum that we have today. 2025 was the year we validated our winning MRD strategy. 2026 is the year we expect to scale. Physicians increasingly trust our NeXT Personal test. Our Clinical volumes are building, and our strategic road map is being validated by the medical community. For those listening in for the first time, Personalis is a leader in MRD testing services, and we're helping patients, partners and doctors see more in cancer samples. We operate at the leading edge of MRD sensitivity. Our ultrasensitive NeXT Personal test is capable of detecting approximately single fragment of tumor DNA at 1 million. This is not merely a technical improvement. It's a Clinical necessity. This level of sensitivity allows physicians to detect cancer recurrence months ahead of standard imaging and provides them with far greater confidence in a negative result. The Clinical market for these types of tests known as Minimal Residual Disease or MRD test is growing rapidly and is expected to mature into a $20-plus billion opportunity, and Personalis is exceptionally well positioned to command a significant share of that opportunity. Beyond Clinical testing, we remain a leader in supporting biopharma companies through Clinical trials and drug development. Our platforms are used by our partner companies to analyze tumors and identify new biomarkers serving as the foundation for the next generation of personalized therapies. We are the engine that supports researchers as they explore new treatments and allow physicians to personalize treatment for every cancer patient. Now turning to our results. The headline of our performance is our explosive Clinical growth and our achievement of 2 Medicare coverage decisions. In the fourth quarter, we delivered 6,183 Clinical tests, this represents a 41% sequential growth over the third quarter of 2025 and a 329% increase year-over-year. Now to put that in context, in Q4 of 2024, we delivered just 1,441 tests. Our performance this quarter reflects the strong uptake of NeXT Personal in the marketplace. For the full year of 2025, we delivered more than 16,000 Clinical tests, growing 394% over 2024. We achieved $17.3 million of revenue in the fourth quarter, in line with our preliminary announcement last month. Our full year revenue of $69.6 million reflects a transitional period for our top line. As we previously discussed, we've shifted our commercial focus from lower-value project work to higher-value MRD partnerships, which meant that we experienced a nearly $20 million year-over-year decline in revenue from Natera while we set the stage for growth with our MRD engine. The uneven biopharma spending environment we discussed last year has persisted, creating variability in the timing of large project-based translational research. However, it is critical to note that the underlying demand for our strategic MRD offering remains exceptionally strong. We grew our MRD biopharma revenue by nearly 240% over 2024. We believe we are the partner of choice for biopharma companies who need to see what others cannot. And we expect penetration of our MRD testing into biopharma companies to be a growth driver for years to come. NeXT Personal has the potential to help these partners fail in early Clinical trials sooner, succeed in these trials quicker and enroll the right patients into their studies. Now innovation is the heartbeat of Personalis. Just as we've led the way in pioneering ultrasensitive MRD detection down to 1 part per million, we recently announced the next evolution of our NeXT Personal MRD test, our real-time variant tracker report. Cancer changes over time, and it can change in reaction to treatment. The real-time variant tracker allows for the detection of mutations targetable with therapy and the identification of resistance mutations during MRD surveillance with NeXT Personal. As an example, in metastatic HR-positive breast cancer patients, the ESR1 gene can acquire mutations over time that cause resistance to the hormone therapy patients may be receiving. Knowing when these mutations can happen allows physicians to adjust therapy proactively. The addition of this opt-in report is intended to give clinicians a dynamic window into how a patient's cancer is evolving in real time. We announced the early access program for this module for Clinical and academic leaders in January of this year. The feedback from early discussions with doctors has been positive, and we believe this provides a powerful new tool for physicians as they seek the best possible outcome for their patients. This new addition to NeXT Personal underlines our continued innovation in MRD and most importantly, our commitment to innovate for patients. Looking ahead to 2026, we expect total revenue to be in the range of $78 million to $80 million. However, to understand the velocity of the business, you must look at our strategic growth engines, that is, our Clinical revenue and our biopharma MRD revenue. We expect our strategic revenue to grow from approximately $14 million in 2025 to a range of $30 million to $32 million in 2026, which would be roughly 121% growth driven by the expectation that Clinical volumes will quadruple. I will now dig deeper into the 3 pillars of our Win-in-MRD strategy that are driving us forward. The first pillar is Clinical adoptions. Now the numbers speak for themselves. Last quarter, we had more than 900 oncologists ordering our test, and we're seeing strong retention among those who adopt NeXT Personal. We're scaling our commercial footprint to onboard more oncologists and drive testing volumes. We now have more than 10 dedicated reps in the field working in close coordination with our partner, Tempus. In 2025, we expanded our relationship with Tempus to include colorectal cancer, and our commercial efforts are fully aligned to champion the market shift towards ultrasensitive MRD testing. We're setting our initial 2026 annual volume guidance at 43,000 to 45,000 tests, which would be about 170% growth year-over-year. This underscores the tremendous momentum we are seeing and our confidence in our commercial team and our physician partners. Our second pillar is building Clinical evidence and the data we need to support continued positive reimbursement decisions. We made massive strides here in 2025. We submitted 3 dossiers for coverage to Medicare, backed by industry-leading Clinical data. In the fourth quarter, we successfully achieved Medicare coverage for breast cancer with favorable pricing. And just a few weeks ago, we received Medicare coverage for lung cancer. These coverage decisions validate the value of our technology and changing patient lives, and I'm proud of our team for these accomplishments. Both reimbursement frameworks are for ongoing cancer surveillance for patients, so our test can be used at multiple time points along the patient's cancer journey and across many years. We currently have an additional dossier under review with MolDX for the use of NeXT Personal to monitor immunotherapy in metastatic cancer patients. Though exact timing remains subject to MolDX review, we remain confident in our data. Our drive towards coverage has been powered by data and the strong performance of our NeXT Personal test. These last several months, we continue to build upon our foundation to transform Personalis from a high-growth testing company into a high-margin reimbursed Clinical powerhouse. The landmark studies with TRACERx, Royal Marsden and VHIO published in cells, Annals of Oncology and Clinical Cancer Research, respectively, are the anchors of our evidence base. The TRACERx lung cancer study is one of the largest, longest and most rigorous lung cancer MRD studies to date with over 400 patients. In this study, NeXT Personal showed exceptional sensitivity and specificity throughout the patient journey from diagnosis to surveillance even in lung adenocarcinoma, the most common yet difficult to detect subtype. Our Royal Marsden breast cancer study also showed exceptional sensitivity and specificity across HR-positive, HER2-positive and triple-negative breast cancers with 15-month plus medium lead time ahead of imaging. The VHIO study across 24 cancer types showed that advanced cancer patients receiving immunotherapy who achieved durable molecular clearance had 100% overall survival. The Pan-Cancer UCSD I-PREDICT study was just published in npj Precision Oncology, and it showed that NeXT Personal identified molecular progression and medium of 161 days over 5 months before imaging in late-stage cancer patients receiving immunotherapy. Yale University is leading the case study to demonstrate the utility of NeXT Personal in breast cancer. Furthermore, our prospective B-STRONGER-1 trial in triple-negative breast cancer is well underway, having now enrolled more than 200 patients. Overall, we're now involved in 35-plus additional studies that are powering the next generation of evidence, and that number just continues to grow. In 2026, we're focused on neoadjuvant breast cancer and colorectal cancer and submitting for coverage there. As a reminder, we've presented data earlier from PREDICT and SCANDARE. Those studies showed the power of NeXT Personal in neoadjuvant breast cancer and the British Columbia Cancer study showed the power of the technology in colorectal cancer. The third pillar is leading in the biopharma sector. MRD or NeXT Personal biopharma revenue grew nearly 240% this past year. Biopharma companies are realizing that to prove the efficacy of their next-generation therapies, they need the most sensitive detection tools available, and this has led to our success in driving their adoption of NeXT Personal. We made tremendous strides this last year with biopharma companies in terms of their adoption of NeXT Personal. As a part of that progress, our business has been evolving towards more prospective work where revenue from a project is spread out over several years compared with retrospective analysis where an entire study is analyzed in one batch. In 2026, we expect our biopharma revenue to be in the range of $20 million to $21 million. This growth in our core MRD offering is expected to propel our entire biopharma segment, providing a stable and high-value revenue stream that complements our Clinical expansion. In closing, Personalis is a different company than it was just a year ago. We've proven that we can build world-class Clinical evidence and win Medicare coverage, and we've proven that our technology is the gold standard for sensitivity. We're starting 2026 with the winds at our backs and the confidence that we are winning in MRD. Changing the way medicine is practiced is never easy, but progress like we've seen over the past year shows our efforts have been worthwhile. I want to thank our employees and collaborators for a great year and thank our biopharma partners, physician champions and their patients for trusting us to provide results that truly matter. Thank you. And I'll now turn it over to Aaron to dig deeper into our financial results. Aaron Tachibana: Thank you, Chris. I will be discussing our fourth quarter and full year 2025 results and then cover guidance for 2026. Total company revenue was $17.3 million for the fourth quarter of 2025. While this is a modest 3% increase year-over-year compared with $16.8 million for the same period last year, the headline number masks a positive rotation in the quality of our revenue. We are successfully replacing low-margin and sporadic legacy revenue with high velocity Clinical volume. And for the full year 2025, total company revenue was $69.6 million. As Chris mentioned, we navigated a planned $19.5 million decline in revenue from Natera during the year and also the conclusion of the Moderna melanoma trial enrollment, which was a $10 million decline from 2024. Despite these headwinds of nearly $29 million, we delivered 239% growth in biopharma MRD revenue over the prior year. We are no longer dependent on a single legacy contract. We are building a diversified and sustainable high-growth engine, which is centered around our Win-in-MRD strategy. Moving to our core revenue. Biopharma was $10.9 million in the fourth quarter compared with $12.2 million for the same period of the prior year. And for the full year 2025, biopharma revenue was $49 million compared with $51 million for 2024. Both the fourth quarter and the full year declines were due to the expected decrease in the Moderna volume mentioned earlier. For Clinical revenue, we recognized $0.9 million in the fourth quarter and $2 million for the full year of 2025 compared with $0.2 million for the fourth quarter and $0.8 million for the full year 2024. The fourth quarter 2025 includes initial breast cancer surveillance revenue, which was covered by Medicare in the fourth quarter. Now I want to address gross margin directly as it's a critical indicator of our MRD investment strategy. Gross margin was 11% in the fourth quarter and 22.7% for the full year. It's vital to understand that this margin compression is intentional, but temporary. We foresee margin dilution to continue into 2026 with the lowest point expected to be in the first quarter of the year until the time when our third reimbursement coverage, which is expected to be IO, begins to convert to revenue. The margin dynamic is driven by the strong growth in volume of NeXT Personal tests ahead of reimbursement revenue. In the fourth quarter alone, unreimbursed costs diluted margins by approximately 1,900 basis points. We are securing the oncologists and the volume now. So, when coverage decisions like the recent wins in breast and lung cancer come online, that volume run rate begins to convert to higher-margin revenue. We expect to realize benefits from investments to gain market share over the next 2 to 3 years as our Clinical revenue gets to scale. Operating expenses were $27.2 million in the fourth quarter compared with $22.7 million for the same period of the prior year. And for the full year 2025, operating expenses were $103.8 million compared with $95.1 million for the full year 2024. Our Clinical business is thriving, and we are investing for future growth. Most of the year-over-year increase was related to commercial expenses for ramping up test volume and also R&D investments for Clinical evidence to support reimbursement initiatives and technology development. The fourth quarter R&D expense was $13.1 million compared with $11.5 million for the same period of the prior year, and SG&A expense was $14.1 million compared with $11.2 million for the same period of the prior year. Net loss for the fourth quarter was $23.8 million compared with $16.4 million for the same period of the prior year. And for the full year 2025, net loss was $81.3 million, which was the same as 2024. Now let's review the balance sheet. We finished the fourth quarter with a strong balance sheet with cash and short-term investments of $240 million and no debt other than some small equipment loans. For the full year of 2025, we used approximately $74 million, just below our $75 million guidance. We operated with discipline throughout the year and even as revenue fluctuated, we managed more than $12 million in downward spending adjustments to protect our cash runway. Now looking into 2026, we entered the year with a focus on scaling volume. Our guidance reflects reimbursement coverage decisions received to date. Any upside may be realized from faster coverage expansion, payer adoption, faster volume growth for Clinical tests and continued strength in biopharma MRD demand. Additionally, we are guiding annually this year and not providing detailed quarterly ranges due to the variability and seasonality that may occur throughout the year. Our 2026 guidance is as follows: total company revenue in the range of $78 million to $80 million, and this assumes Clinical revenue of $10 million to $11 million, specifically from breast and lung cancer surveillance tests recently covered by Medicare. Revenue from pharma test and services and all other customers in the range of $55 million to $56 million. MRD revenue from these customers is expected to grow rapidly and to be in the range of $20 million to $21 million; population sequencing plus enterprise customers of approximately $13 million. Gross margin is expected to be in the range of 15% to 20% with the first quarter potentially being the lowest point of the year. Net loss of approximately $105 million. And we expect our cash usage to be approximately $100 million as we continue to invest in our Win-in-MRD strategy. This estimate reflects our decision to accelerate volume and gain market share. With $240 million of cash on hand, we expect to have the capital to execute our plans. Additionally, our success is opening up additional Clinical studies that may be able to influence guidelines. And therefore, we are stepping up investments in this area, too. What you are hearing from both Chris and I is unwavering confidence in our ability to execute our Win-in-MRD strategy and plans. We have proven that our ultrasensitive technology can help change patient care. The market is expanding fast towards the $20-plus billion estimates. We have growing test volume, and we are turning on the reimbursement engine to drive revenue growth this year and beyond. We look forward to updating you on our progress during the next conference call in a few months. And with that, I will turn the call back over to the operator to begin the Q&A session. Operator? Operator: [Operator Instructions] The first question we have is from Subhalaxmi Nambi of Guggenheim. Subhalaxmi Nambi: Moving in a short period of time from no reimbursement to now 2 indications, potentially more here early in 2026, how does that affect the focus of reps internally, externally with Tempus for Clinical and also your eye for still building the pharma business longer term? Christopher Hall: Yes. Thanks, Subbu. Appreciate the question. I think there's a couple of ways to think about it. I mean what we're starting to do is increasingly ungate the business increasingly to pick up steam. We had the number this year, guided the $43 million to $45 million that we think represents a good mix between investing aggressively, but at the same time, making sure that we manage the cash in a prudent way. And as we go through the year, we continue to make more progress potentially with reimbursement, either getting more decisions, we've got IO in front of us or find ways to collect more, et cetera, we could continue to invest more in the area as we go, and we'll play it as we go. But right now, this is the way that we see it. And we're continuing to push hard on biopharma companies. I mean those relationships and those are growth, that's a big growth driver. And we've spent a significant amount of time over the last 2 to 3 years establishing ourselves and growing that business. I think we're having a lot of success there. Subhalaxmi Nambi: Thank you for that Chris. How has reimbursement changed receptivity from clinicians compared to other competitors in the field? Have you seen an acceleration in ordering since the reimbursement announcement? Christopher Hall: Yes. I mean I think overall, what you have, getting reimbursement gives you gives you legitimacy in the conversations. I think being able to say that you pass through the process and the rigors of Medicare is gives you legitimacy when you're having discussions with physicians and certainly key opinion leaders. I think there's a wide recognition among people who are in the know that MolDX does a particularly phenomenal job reviewing the evidence and looking at it deeply. And so yes, I think it does help to reinforce the power of what you're doing when you've got Medicare coverage and does put wins to your back field. Operator: The next question we have is from Mark Massaro of BTIG. Vidyun Bais: This is Vidyun on for Mark. I just wanted to ask one on the biopharma outlook. So, are you seeing pushouts or cancellations of contracts there? And then just at a higher level, you're investing into NeXT Personal MRD and focusing more on the Clinical side of your portfolio. So just how material do you think MRD side of biopharma is versus other areas that you've done historically like PCV is longer term? Christopher Hall: Yes. Thanks. I mean I think we're seeing the sector stabilize right now. We haven't seen any pushouts or any big jolts to the business. I mean, last year was certainly more challenging. We're not seeing biopharma companies come rushing back in a major way for translational purposes. And we reflected, I think what we see right now is what we've reflected in the guide. I think things are stable right now in that sector overall is what we're seeing. I think we are making progress in MRD, and we feel like we've been accelerating our progress there. I mean, those customers are some of the most discriminating buyers. They often do head-to-head trials with the data. And so, when you win there, and you see the revenue growth that we're showing in that sector, which I think was nearly 240% year-over-year, and that came off a particularly strong year the year prior, and we see it continuing to grow this year. That reflects the decision of large companies that really do detailed analysis to choose personnel. So, we feel like we're well-positioned there. But we're investing heavily overall to win the space, both biopharma and also Clinical. We've always thought that those 2 work synergistically and that the evidence that we built in biopharma helps drive the Clinical business, and that's been one of the key vectors. As you know, with our relationship with Moderna, we've been focused on supporting them through the journey of their INT program, and that's been a potential driver of our revenue over the out years. Vidyun Bais: And then NeXT Personal, can you share any details on the mix of volumes you expect to run in '26? In your reimbursed indications versus your not reimbursed indications? I think the volume in, yes, go ahead. Christopher Hall: Yes, go ahead and finish the question, if you want. Vidyun Bais: Sure. I was just going to say, I think the volume in rev guide implies that a good chunk of the volumes you're running today are not lung and breast. So I just want to understand what indications you're seeing there. Christopher Hall: Sure. Aaron will take this one. Aaron Tachibana: Yes. So if you just look at the volume at the top level, so, for the 43,000 to 45,000 tests, roughly 20% or so is coming from breast, 15% to 20% is coming from lung. IO is somewhere between 20% and 25%, CRC is around 20% and all other is the remaining 20% or so. And it's true. There's a fair amount that we're running for zeros, right? We're not getting paid for only getting covered for breast and lung at this point in time. So it's less than half of the test, right? And Medicare is roughly half of the volume, and the fee-for-service is half of that half. And so again, we are running a lot of tests with zeros. But when you're dealing with physicians, you have to accept samples of all different cancer types. And that's what we're doing. We're doing really, really well. And we're finding that our ultrasensitive test is really sticky with physicians. Now, as we want to go forward here to drive more growth, we're going to be adding more physicians, right? We're adding more commercial heft on the Tempus side and internally. We're going to add another 10 or so reps. We ended the year with 10 reps. We're going to double it at this point in time. That's our current plan, and we could invest even further depending on how things go here in the first couple of quarters, right? So things are going really, really well. Christopher Hall: The guide didn't assume IO yet, but that's clearly out there, and we've got a significant amount of revenue. We expanded the relationship this past year with Tempus to include CRC, and we've gotten a tremendous uptick and energy around that for doctors. The data that we had at AACR last year showed that if you apply an ultrasensitive approach on the testing paradigm, you can get a dramatic leap in performance at Landmark. And that really raised a lot of eyebrows, and a significant number of physicians have been starting to adopt in the CRC. So we have been investing because that's been a historically strong space, and we've looked at it that, we're making investments in growing that market and our presence in the CRC market, and we've had a lot of progress. And so when Aaron talks about 20% of the samples coming from that group of physicians, or that 20% of our samples coming from CRC, that's been a really nice growth engine. And I think over the arc of time, progress we're making there is really going to pay off. Operator: The next question we have is from Thomas Flaten of Lake Street. Thomas Flaten: Aaron, just a follow-up on your last prepared comment about having the cash to execute your plan. Should I read that as having cash to break even? Or should I not read that far into it? Aaron Tachibana: Yes. So we haven't said anything about cash to breakeven or cash profitability or anything like that. So that's probably reading a little bit more into it. What we meant by that statement, Thomas, is that we had $240 million of cash at the end of the year. We're going to use approximately $100 million in 2026. So you can see just by the simple math, it's 2.5 years or so of cash on the balance sheet, which means we have plenty of capital here for the next couple of years to go and drive to go get market share. And that's the focus right now, really investing for market share. Thomas Flaten: Got it. Got it. And then just a question on the real-time variant tracker. I think, Chris, in your prepared comments, you mentioned that there was an opt-in test. So are people ordering it? I mean, of the physicians you went out to with the early access program, are they ordering it? Do they literally have to click a box? Or just mechanically, how does that work? And how do you drive the stickiness on that? Christopher Hall: Yes. I mean, Rich is with me and can add any color to it. But it's an opt-in module. It's not something that just everybody gets by default. Richard Chen: Yes. And we're getting geared up for the early access program as we speak. But we expect that physicians will opt in, and a lot of them will, and there's been a lot of excitement about it. Christopher Hall: Yes. One of the feedback is not just being able to quantify the tumor in the blood, but being able to track how the tumor is changing is really one of the key unmet needs in cancer. And so starting to superimpose this longitudinally really is, I think, exciting, and I think is the next big innovation in MRD and quite frankly, sort of underlines our ability to lead the space in innovating. I mean, having started with the ultrasensitive push that we've been pioneering and now starting to add this, I think, is a great positioning for where we are and the impact that we're making for patients. Thomas Flaten: Got it. And just one quick last one. Of the Clinical volume you're expecting this year, you mentioned that you had 900 oncologists ordering last year. Do you have a sense of how many docs are going to be responsible for that 43,000 to 45,000? Just again, big ranges are fine. I'm just curious about depth versus breadth. Christopher Hall: Yes. I mean, this year, we'll keep focusing on driving deeper within existing accounts. The 900 doctors ordering from us will continue to grow, and we'll continue to go broader, but we're focusing always on going deeper as is our partner, Tempus. Because I think people start to use the technology. They see the power of it, and our experience has been that the customers who have been with us longer tend to be the customers who order the most. And so we're focused on continuing to tell the story, underlying the value and driving deeper within existing relationships. Operator: The next question we have is from Kallum Titchmarsh of Morgan Stanley. Unknown Analyst: This is Jason on for Kallum. So maybe just a question on 2026 guidance. How should we think about the Q-over-Q Clinical volume growth? You delivered 6,200 Clinical tests in the fourth quarter. Is that a good jumping off point for you guys, from what you guys could grow 24%, 25% Q-over-Q to get to the midpoint of your volume guide? Aaron Tachibana: Yes. So we haven't given quarterly guidance. But if you take the 6183 exiting 2025 in the fourth quarter and just maybe linearize it, that probably gets you close. There would be a little bit of seasonality, right? The second and the fourth quarters are going to be the strongest, where the first and the third will have a little bit of seasonality. Christopher Hall: Yes. I mean Q1 is always and Q3 are always the slower growth quarters in this kind of an environment versus Q2 and Q4 because of the combination of vacations, holidays and then Q1 weather, and we've always seen that. But right now, we're still learning exactly how the seasonality works. But we saw that in our numbers last year. And I think that's, I've spent years in this business, that's pretty calm. Unknown Analyst: That was helpful. And then maybe just as a follow-up, for a question on the competitive landscape. There's a lot of new entrants in the MRD space, and there's been some consolidation in the space as well with one of the large MRD players recently making a large acquisition of another large MRD player in December and potentially integrating their IP to enhance the sensitivity of their assay. So could you just share your thoughts on the current competitive landscape and why you think you can gain share against arguably larger players with deeper pockets? Christopher Hall: Yes. I mean I think we've proven this over the last couple of years that we can execute. We've been focused on pioneering the story. I think a lot of people are trying to either get to or debut ultrasensitive products. Our intention is to stay ahead and continue to push forward. We're aligned with one of the biggest partners in the space, Tempus, which is providing the commercial infrastructure, which gives us the ability to move quickly and make progress, and we've gotten traction now with, we talked about in the script, 30-plus ongoing studies, and that continues to grow. And so we're investing heavily in R&D and driving forward. And so I think if you look at where we've been, where we are, we've emerged as one of the large players in the space. I think we've stitched together is only 3 companies with more than 2 coverages now in MRD, and we're there. And I think just in terms of test volume, we've emerged as a major player, and we've got momentum, and we're still the leaders in data and in terms of where it is. And so we feel like we're positioned well, and we're continuing to make the investments necessary to keep that position in the industry. Operator: The next question we have is from Bill Bonello of Craig-Hallum. William Bonello: So the volume expectations, obviously looked great, well above, I think, what people have been expecting. The Tempus comments last night were incredibly bullish. I think what might surprise people is sort of where you're ending up on the Clinical revenue, the gross margin and the cash flow guide. And you kind of talked about your philosophy, but maybe you can just give a little bit more color on what's prompting that. I mean, historically, your approach had kind of, as you said, been to sort of be a bit gated with the sales. I think there were some restrictions to Tempus in terms of kind of what you were encouraging them to do. You knew all along you'd be getting reimbursement. What, is it response you're getting from the field? Or what is it that's made you decide to sort of put on the gas at this point of time and maybe move away a little bit from that capital-light strategy you've talked about in the past? Aaron Tachibana: Bill, this is Aaron. Thanks for the question. And so exiting 2024, getting into 2025, we did meter things a little bit primarily because we had not received any coverage at all just at that point in time. And our balance sheet did not have $240 million back then either, right? And so those 2 items there have changed over the past few months. Having coverage now for breast cancer and lung cancer and having a healthy price that we're really, really pleased with that's going to give us the right unit economics and help us get our gross margins into the low 60s and show us a path to eventually 70%. But again, at full reimbursement gives us now the confidence that we should step on the gas and go fast because this market is going to turn into $20-plus, $30-plus billion over time. And so, there's only a few players in the market today. There are only 2 real tumor-informed players that have a really robust test. We are the leader in the ultrasensitive marketplace. And so, it behooves us to go fast right now while the window is open and there's very little competition in the ultrasensitive space. So, we see it as an opportunity to go get market share over the next year or 2. And in doing so, we would have to sacrifice a little bit on cash burn as well as on gross margin, primarily because until we get a few more coverages, right, it's going to be dilutive to our gross margins. Does that make sense? William Bonello: Yes. No, it does. And I get the capital and the reimbursement. I was just curious if you were seeing things in the market that we're saying, hey, we should really step up as well too. But it sounds like Christopher Hall: Bill, I mean we see strong demand. And I mean, I think you're hearing that from people talking about it. And we're here to meet the demands of the physicians, and we're still managing this carefully. I mean the step-up from 74 to 100 is not like a crazy drive forward. We're also investing heavily in R&D, both in the studies, the evidence development, pushing forward in multiple different ways to accelerate coverage. And then, and the guide at the current level doesn't have any more progress in coverage and reimbursement, and we feel like there's a lot of upside there, and that will continue to be helpful as we go forward. So we feel like this is the right spot. The guide, I think, hit a good cadence of investment versus weighed up against expansion. And I think the investments that we do make now will pay dividends in the future, and we could probably ungate and go ever faster, but that would spend even more money. And so I think this is, I think we've, we feel like we've hit the right balance here. William Bonello: Sure. Just a couple of follow-ups then. To the extent that you're allowed to talk about this, have you sort of given Tempus also the green light, maybe not to go full throttle, but do they have a little more freedom in what they can do with sales as well? Christopher Hall: Well, we're focused on going deeper within accounts, and we're focused on, we've added some more reps ourselves. And I feel like we're in a good position, and we work really well right now, and we're driving forward with the idea that we're building demand for this ultrasensitive approach and making progress. William Bonello: Okay. That was a good nonanswer. The last thing is just cash burn for the year. I think you, just in your comment, there was no cash flow statement. But I think in your comment, you just said it was about $70 million for this year. Is that right? Aaron Tachibana: Yes. So we used about $74 million, and that was in our prepared remarks, Bill, and we expect in 2026. Christopher Hall: $74 million to $100 million. Operator: The next question we have is from Mike Matson of Needham & Co. Joseph Conway: This is Joseph on for Mike. Just a couple here. In your prepared remarks, you called out, I guess, a heightened focus on CRC and neoadjuvant breast moving forward. Just wondering, should we expect maybe a submission at least for reimbursement in 2026 for those 2? And I have a couple more after that. Christopher Hall: Yes. No, absolutely. We're not, I mean we're not sort of laying out exact timelines because everything is dependent upon when we can get publications, both submitted with investigators and then accepted because we can't submit until those things happen. But yes, we're driving hard in order to be able to submit for coverage for both of those. But there's a lot of variability as to when and how that might happen. So that's not in the guide, if you will. But I mean, we're not, we're moving fast because we see a big demand for use of the technology for those indications for patients. Joseph Conway: Okay. And I guess just building on that, in terms of, I guess, evidence generation, your guys' strategy around evidence generation for additional cancer indications. I'm just wondering, is there any difference now in strategy compared to breast and lung in terms of, is the focus or at least part of the focus looking at trying to get into these very large, almost landmark studies. Is, now that you have reimbursement in two indications, do you think smaller studies can pass the bar for Medicare? You called out 35 clinical trials. So, is the idea here now quantity of trials rather than number of patients in the trial? I'm just trying to get some broad color on that. Christopher Hall: Rich will provide his thoughts on this one. Richard Chen: Yes. Thanks for your question. Yes. So, we've done think of the strategy of working with the top KOL in the world and establishing some baseline evidence for these indications as we expand out our reimbursement coverage. So, we're going to continue to do that. It's really paid off for us. And so, we debuted very, very strong data in neoadjuvant breast at conferences last year and then also colorectal cancer as well with top KOL. And we think that helps us in the Medicare coverage process. So, we'll continue to do that not only for those indications, but for others. In addition to that, we are also, we've had a lot of inbound interest from KOL wanting to expand into Clinical utility studies using our assay to make decisions for patients and then show that it actually makes a difference in outcomes. And this is really important for long term, not just for the field, but also getting into guidelines and things like that. So, you'll begin to see more of that as well. Joseph Conway: Okay. Great. Yes, that's helpful. Maybe just one last one. To get to that high gross margin target you guys have laid out, obviously, reimbursed test volume is the biggest factor there. But I'm just wondering in terms of other things like lab optimization, automation, what have you, I'm just wondering, have those steps all been completed? Are there more planned? What inning would you say you guys are in, in terms of really getting ready to ramp up reimbursed Clinical volume? Aaron Tachibana: Good question. So, we haven't said specifically what percent of completion are we on all of our operational aspects or projects. We continue to automate the workflow, which means as we add capacity and all the capacity for this year isn't all in place at one point in time, right, because you have to buy equipment, hire people, and that's going to weigh even further on margins if you get too far ahead of your skis. And so, we take it one step at a time. But having said that, we are continuing to automate, streamline the workflows, strip out costs from labor or overhead wherever we possibly can, right, as we go forward to be efficient. And over the last couple of years, as we launched the product, we've done a good job with getting ready. And so, we believe we're in a good position sitting here today. In terms of getting to the upper end of the range on margins, right, some of that is dependent upon what happens with biopharma as well because biopharma is a fee-for-service, they pay for every test. In terms of some of the commentary Chris made earlier, we have not baked in IO into our guide, right? And so that's not contemplated. Depending upon what happens with reimbursement coverage for other cancer types, that could help us as well in terms of moving towards the upper end or beyond. Reimbursement wins so far. Operator: [Operator Instructions] The next question we have is from Tom Stevens of TD Cowen. Thomas Stevens: Just a quick one on adjuvant reimbursement. So, have you outlined any expectations over the next couple of years in breast and lung on the potential for adjuvant reimbursement? And kind of what's the pushback from MolDX there? Any color would be helpful. And then kind of secondarily, on the neoadjuvant opportunity, I mean, could you lay out broad strokes where pharma is applying them in trials today, neoadjuvant feels like an easier use case and maybe some initial market sizing on the neoadjuvant opportunity, if you could also spare that. Christopher Hall: Yes. Richard is going to grab this one, Tom. Richard Chen: Yes. Thanks for the question. Yes. So, adjuvant breast and lung, rest assured, that is something that we are also focused on, and we'll be pursuing that just like the other indications that we've been successful with. So, we know that's important. With regards to neoadjuvant breast cancer in, or neoadjuvant use of the assay in biopharma, yes, I mean, there's a lot of interest there. I mean, as you know, the oncology pipeline for drugs, there's an intense interest in bringing the drugs that are being used in the adjuvant setting and bringing them earlier for patients. So, then the neoadjuvant setting is one that's really important. And they want to know if these drugs are working. And so, a highly sensitive assay like ours can be really, really helpful for that. We actually, and that, if you look at the data that we presented last year in neoadjuvant breast cancer, it just shows the power of an ultrasensitive approach. That was in triple-negative breast cancer and HER2-positive. And the current state-of-the-art biomarker that's used is something called pCR. And so, in those studies, we showed that our assay performed very well compared to pCR and in some cases, better. And so, you can imagine, since that data has come out, there's been a lot of interest in using an assay like ours to get an early read on their neoadjuvant studies and whether they're being successful or not. Thomas Stevens: Great. And then just any initial view on the sizing of the kind of Clinical market there and kind of what the potential for that could be long, long term? Richard Chen: Yes. So, I think we, there's definitely, we haven't estimated that. What I'd say is if you look at the patient journey for MRD, it does start with neoadjuvant, but it's a relatively small fraction of that entire patient journey. surveillance over time, over many years. There's going to be a lot of testing done there, both for breast cancer and early-stage lung cancer. That's why we started there, and we achieved coverage there. And now we're kind of working our way backwards into these other indications. Operator: Ladies and gentlemen, that concludes the question-and-answer session. And with that, this concludes today's teleconference. Thank you for joining us. You may now disconnect your lines. Goodbye.
Operator: Greetings. Welcome to PACS Group Fourth Quarter Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Mark Hancock, Executive Vice Chairman and Interim Chief Financial Officer. Thank you, and you may begin. Mark Hancock: Thank you, and good afternoon, everyone. Thank you for joining us for our earnings call. Before we begin the prepared remarks, we would like to remind you that this afternoon, PACS Group issued a press release announcing its fourth quarter and full year 2025 results. An investor presentation was published and is available on the Investor Relations section of pacs.com. I'd like to remind everyone that, during the course of today's conference call, we will discuss certain forward-looking information, including 2026 guidance for revenue and adjusted EBITDA that is based on our current expectations, assumptions and beliefs about our business. Any forward-looking statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. You should carefully consider the risk factors that may affect our future results as described in our 2025 Form 10-K and our other SEC filings. During this call, we will discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDAR and net leverage. These non-GAAP financial measures should be considered as a supplement to, and not a substitute for, measures prepared in accordance with GAAP. For a reconciliation of non-GAAP financial measures discussed during this call to the most directly comparable GAAP measures, please refer to the earnings release and the appendix included in the investor presentation, which are both published and available on the Investor Relations section of PACS Group's website. I'll now turn the call over to Jason Murray. Jason Murray: Thanks, Mark, and thank you all for joining us today. Today marks a very important milestone for PACS as we report our fourth quarter and full year 2025 results. This filing reflects a full year of performance as a scaled public company and highlights the significant progress we've made across the organization. We're especially proud to reach this point while delivering record performance, which is a testament to the strength of our platform, the dedication of our teams and our continued focus on operational excellence. The past year required significant focus and discipline across the organization as we continued to scale following the transformative growth of 2024. As our footprint expanded, we enhanced our infrastructure, systems and compliance structure to support a larger and more complex platform. We believe that work further positions PACS for sustainable growth as a public company. And as we enter 2026, we do so optimistically and expect a continued steady reporting cadence and disciplined execution that defines our operating model. Operationally, 2025 was defined by integration and performance. Following the transformative acquisition activity in 2024, our primary focus was successfully assimilating those facilities into the PACS operating model and driving measurable improvement across our expanded footprint. At the same time, we executed on 8 additional strategic acquisitions in 2025, all within our existing markets, further increasing density and deepening local scale. At the center of our performance remains our locally led centrally supported operating model. Our administrators and local leadership teams are empowered to make clinical and operational decisions closest to the patient where they matter most. At the same time, PACS Services provides the centralized support infrastructure, including accounting, compliance, HR, IT and regulatory expertise. This structure allows our teams to remain laser-focused on patient outcomes. This coordinated structure allows us to move with agility at the bedside while maintaining consistency, discipline and accountability across the company. From a clinical standpoint, we continue to see encouraging trends in quality ratings, occupancy and skilled mix across the portfolio. Our mature facilities are operating at strong occupancy levels and facilities acquired in 2024 continue progressing through integration and stabilization as they adopt our clinical systems and operating processes. We view this as a meaningful organic growth opportunity within our existing platform. As of December 31, 2025, PACS operates 321 facilities across 17 states, caring for more than 31,700 patients daily and supported by over 47,000 dedicated team members. The breadth of our platform provides geographic diversity, payer diversification and leadership depth. Just as importantly, our continued investment in our administrator and training program, along with our regional leadership development ensures that growth is supported by a strong and scalable bench of highly skilled operators. Capital allocation remained disciplined throughout the year. After a period of significant expansion in 2024, our focus in 2025 shifted toward optimizing the performance of those acquired assets while selectively increasing real estate ownership within our portfolio. Importantly, we maintained a strong balance sheet through this growth cycle, ending the year with net leverage of approximately 0.3x. We believe this positioning enhances durability and flexibility as we look ahead, allowing us to invest in organic initiatives, pursue selective acquisitions and support long-term shareholder value without compromising financial strength. We also believe our positioning within the broader skilled nursing landscape remains compelling. Demographic trends continue to point toward sustained growth in the aging population and increasing demand for post-acute services. At the same time, the industry remains fragmented, and many facilities are operated by smaller or independent providers. We believe our scale, operating model and strengthened infrastructure positions us to serve as a responsible consolidator over time, while continuing to elevate quality across the communities we serve. As we look ahead to 2026, our priorities are clear: continue integrating and optimizing our expanded portfolio, invest in our people and clinical capabilities and allocate capital with discipline as we evaluate a robust pipeline of potential acquisition opportunities. We believe the foundation we built operationally, financially and organizationally supports sustainable performance and long-term value creation. Most importantly, our confidence comes from our people. The dedication of our frontline caregivers, facility leaders and PACS service teams drives our results every day. Their commitment to delivering high-quality care in every community we serve gives us strong conviction in the path forward. We continue to prioritize exceptional clinical outcomes across both our mature and newly integrated facilities, and that focus is reflected in our quality ratings across the portfolio. Based on CMS quality measure star ratings, 207 of our facilities, representing 73.4% of our skilled nursing portfolio, are rated 4 or 5 stars in CMS quality measure. For the full year 2025, our average CMS QM star rating in our mature facilities was 4.4, up from 4.3 in 2024, and meaningfully above the industry average of approximately 3.5. While 1/10 increase may not appear modest numerically, at this level of performance, we believe it represents measurable improvement in patient outcomes, clinical processes and consistency of care across hundreds of facilities. These are not abstract statistics. They represent people. They represent better recovery rates, improved infection control, stronger care coordination and ultimately, better experience for our residents and families we serve. We view this sustained improvement as a meaningful indicator of the consistency of our operating model and the effectiveness of our clinical leadership at the local level. To bring this progress to life, we'd like to highlight a couple of examples that demonstrate how our teams execute at the facility level, whether through measurable improvements in CMS QM star ratings or zero-deficiency surveys. These examples reflect a broader pattern across our organization and reinforce the strength of our clinically driven approach. One example is from one of our facilities in Kentucky. At the beginning of 2025, this facility held a 2-star CMS quality measure rating. Rather than accept that as baseline, the local leadership team came together at the start of the year and set a clear objective: materially improve clinical performance and elevate the standard of care within the building. They began by analyzing each component that drives the CMS quality measure star calculation, identifying the areas where focused execution could have the greatest impact. From there, the team developed targeted action plans and accountability structures around those priorities. This was not a broad initiative. It was deliberate, data-driven and owned by the administrator and the interdisciplinary team on site. For example, to strengthen fault prevention and safety, the team identified residents at high risk, implemented structured rounding protocols, enhanced cross-department communication and instituted daily, weekly and monthly performance reviews to monitor progress and refine processes. Fault prevention became a constant topic of conversation throughout the facility. The same disciplined approach was applied to pressure ulcer prevention, mobility preservation, medication management and discharge planning. The results reflected measurable improvement across multiple CMS quality measure star categories during the reporting period, including reduction in falls with major injury, pressure ulcers and functional decline, along with meaningful improvement in discharge outcomes and medication management practices. By the end of 2025, this facility achieved a 5-star CMS quality measure rating, moving from 2 stars to 5 stars within a single year. Importantly, this progress was driven by empowered local leadership, supported by the resources, reporting tools and compliance infrastructure provided by PACS Services. This is our model in action: local teams, owning outcomes with the systems and support necessary to execute consistently and sustainably. A second example of execution across our platform is reflected in our survey performance. During 2025, we had a number of highly successful surveys across our portfolio with 7 total zero-deficiency surveys. In today's regulatory environment, particularly in skilled nursing, completing a standard survey with zero deficiency is a meaningful accomplishment. It reflects consistent compliance across clinical, operation, documentation, life safety, infection control and interdisciplinary care coordination. These outcomes are not the result of isolated preparation for survey week. They are the product of disciplined systems, internal auditing and leadership accountability embedded in our operating model. Zero-deficiency surveys signal strong regulatory execution, reduced compliance risk and the culture that prioritizes quality and consistency every day. One example we would like to highlight is the facility located in Oceanside, California. This facility is a new build that received its certificate of occupancy in January 2024 and represents the first newly built ground-up skilled nursing facility in San Diego County in many, many years. That alone reflects both the regulatory complexity of California and the level of commitment required to thoughtfully add new high-quality capacity to a community. Before generating revenue, we invested meaningfully in licensing preparation, staffing, equipment and clinical infrastructure to ensure the facility opened with a fully trained team and operational readiness from day 1. In total, we deployed millions of dollars in spending pre-revenue as part of that commitment. In April 2025, this facility completed its initial certification survey with zero deficiencies, an outcome that speaks to the rigor of our preparation and the strength of our clinical systems. Since opening, census has steadily increased and the facility reached profitability within its first year of operation. In 2025 alone, this facility saw over 250 admissions from acute hospital partners across San Diego County, reflecting both clinical capability and growing trust within the local health care ecosystem. While acquisitions remain our primary growth strategy, we have now completed 8 de novo projects since the inception of our company. Our facility in Oceanside reflects our long-term approach: invest ahead of revenue, build the team first, establish clinical excellence and allow census and profitability to follow. The fact that this facility achieved a deficiency-free survey following new construction and licensure reinforces the effectiveness of our locally led centrally supported model, even in newly developed operations. Taken together, these outcomes reflect disciplined execution across our platform. Our operating model is intentionally structured to drive measurable improvement over time, and 2025 has provided clear evidence of that execution at scale. Whether newly developed, recently integrated or long established, our facilities continue progressing across key clinical and regulatory metrics, including CMS QM star ratings, survey performance and quality measures, reinforcing our belief that disciplined local leadership supported by PACS Services produces sustained results. We believe our performance in 2025 reflects both sustained operational strength and the continued evolution of a significantly expanded platform. Over the last 15 months, we have integrated a substantial number of facilities acquired in 2024, strengthened our density in key markets and continued delivering high occupancy and clinical consistency across our mature portfolio. At the same time, we've continued enhancing our systems and processes to support a larger and more complex organization, reinforcing the foundation required to operate at scale as a public company. Consistent with that disciplined approach, during 2025, we deployed capital selectively, completing the acquisition of 8 additional facilities, all within existing markets where we believe we have strong operational infrastructure and leadership support. Today, our portfolio includes 35,379 total operating beds, of which 32,854 are skilled nursing beds and 2,525 are assisted living beds, which span across 17 states, reflecting a scaled and geographically diversified footprint. Portfolio performance remains strong. Total occupancy stands at 89.1% with our mature facilities delivering exceptional 94.9% occupancy, up from 94.4% last year. Within our cohort framework, facilities are categorized as new during their first 18 months under our ownership and as ramping from months 19 through 36 as they progress toward mature status. Occupancy within these cohorts reflects the continued integration and stabilization of facilities acquired over the past several years. A number of those acquisitions entered our portfolio at materially depressed occupancy levels, often representing communities where others were unwilling or unable to invest the operational focus required to improve performance. We act opportunistically in those situations, confident in our ability to apply the PACS operating model, strengthen clinical execution and rebuild trust within the local health care ecosystem. As those facilities continue integrating and advancing toward mature status, we expect steady improvement in occupancy and skilled mix over time. Our locally led centrally supported model remains foundational to driving occupancy and clinical performance. By matching patient acuity with the appropriate clinical capabilities at each facility, our teams are well positioned to meet the increasing complexity of patients being discharged from acute settings. As hospitals continue to rely on skilled nursing providers to manage higher acuity populations, we believe our structure and scale position us to serve as a trusted partner in that continuum. A critical component of sustaining this performance is leadership development. Through our Administrator in Training or AIT program, we continue building a scalable bench of highly skilled operators prepared to step into leadership roles across both existing and newly acquired facilities. We currently have 38 AITs in the program, reinforcing our ability to integrate acquisitions efficiently and maintain operational continuity as we grow. Importantly, we have strong retention within this program, and many of our AITs go on to serve as licensed administrators, regional vice presidents and in other senior leadership positions within PACS. This consistent investment and leadership depth remains a key differentiator in our model. Now as we close 2025 and look ahead to 2026, we do so with confidence and momentum. We believe the integration work of this past year, the clinical progress across our portfolio and the strength of our balance sheet collectively position us well for the next phase of growth. In January, we announced the acquisition of 3 additional facilities, 2 in Alaska and 1 in Idaho, including the purchase of the underlying real estate for the 2 Alaska properties. We view these transactions as a continuation of our disciplined growth strategy, expanding within markets we understand while selectively increasing real estate ownership in a manner that strengthens long-term alignment and financial flexibility. With a fully integrated platform, a strong capital position and a return to a normal reporting cadence, we believe we are well positioned to execute consistently and thoughtfully in 2026. The depth, resilience and commitment of our people continue to give us a competitive advantage that cannot be easily replicated. So with that, I'll now turn the call back to Mark to walk through our financial results and guidance in more detail. Mark Hancock: Thank you, Jason. Our fourth quarter and full year 2025 results reflect the strength of our operating platform and the disciplined execution across a significantly expanded portfolio. Let me begin with our fourth quarter performance. Revenue for the quarter was $1.36 billion, up approximately 12% over the same period in the prior year. Net income totaled $59.8 million for the quarter. Adjusted EBITDAR was $237.7 million, while adjusted EBITDA was $142.1 million. Fourth quarter performance reflects continued occupancy strength, stable skilled mix trends and consistent execution. Now turning to the full year 2025 results specifically. For the year ended December 31, 2025, total revenue was $5.29 billion, representing approximately a 29% growth increase over 2024. Net income for the full year was $191.5 million, with diluted earnings per share coming in at $1.22 per share. Adjusted EBITDAR was $883.9 million and adjusted EBITDA for the full year totaled $505 million. These results represent record performance for PACS and demonstrate our ability to scale profitably while maintaining operational discipline and investing in quality across our platform. From a portfolio standpoint, total occupancy for the year averaged 89.1%. Mature facilities continue to perform at a very high level, averaging 94.9% occupancy, which was up 0.5 from the prior year, reflecting sustained demand and clinical consistency across our established operations. Ramping facilities averaged 86.3% occupancy, which was down from over 93% in the prior year. This year-over-year change, however, reflects the graduation of facilities within certain cohorts and the corresponding shift between those buckets. As facilities acquired in late 2023 and early 2024, many of which entered the portfolio at lower starting occupancy levels, those facilities progressed into ramping status during 2025. While these facilities are still in the earlier stages of stabilization relative to our longer tenured ramping operations, we are seeing steady operational improvements as they adopt PACS clinical systems and procedures. We expect continued growth by way of occupancy and skilled mix as this cohort moves toward mature status. New facilities averaged 81.1% occupancy compared to 82.8% in 2024, again, reflecting the onboarding and stabilization period for the significant number of facilities acquired in the back half of 2024. We continue to view the progression from new to ramping to mature as a durable source of embedded organic growth within the existing platform. Revenue in 2025 increased 29%, reflecting the full year contribution from the newly acquired facilities in 2024 as well as same-store growth from our core portfolio. Cost of services increased 25% year-over-year, driven primarily by platform growth and continued clinical and operational investments across all of our cohorts. General and administrative expenses increased 21%, reflecting the scaling of both our PACS Services and regional infrastructures as we deepen our bench and maturity as a public company with enhanced compliance, risk management, accounting and technology. Overall, our cost structure remains aligned with revenue growth while enabling margin expansion through the disciplined and methodical approach we've taken in scaling the platform. Turning to capital structure and real estate ownership. We continued selectively increasing ownership of certain real estate in 2025. As of year-end, we now wholly own or partially own, through joint ventures, the real estate interest in 102 of the facilities that we operate. Our lease profile remains stable with average remaining terms of approximately 13 years for operating leases and 22 years for finance leases. Our strategy of exercising purchase options on our leased facilities allows us to reduce lease-adjusted leverage while improving our EBITDA. Our year-end cash balance reflects the purchase of several owned properties within our operating footprint, including facility real estate across multiple states as well as the acquisition of our new PACS Services office in Salt Lake City. We view our new service center as a significant investment in a permanent home for PACS, a place where our teams can continue to grow, collaborate and provide administrative services to our affiliated facilities over the long term. In total, these investments, including funds placed in escrow for acquisitions that closed in early January 2026, these investments exceeded $145 million during the quarter and were funded from existing liquidity. Importantly, even after this capital deployment, we maintained a strong and conservatively leveraged balance sheet. In summary, we ended the year with a net leverage of approximately 0.3x, even after the substantial acquisition activity completed in 2024 and the continued capital deployment in 2025. We believe this conservative balance sheet provides meaningful financial flexibility and positions us to be opportunistic with our growth strategies while maintaining sustainability across a variety of market cycles. Now turning to our outlook and guidance for 2026. For the full year 2026, we expect revenue to be in the range of $5.65 billion to $5.75 billion. The midpoint of approximately $5.7 billion represents nearly an 8% growth over 2025 revenue. We expect adjusted EBITDA for 2026 to be in the range of $555 million to $575 million with a midpoint of $565 million. This midpoint represents almost 12% growth over our 2025 adjusted EBITDA results. This outlook reflects steady organic growth and margin expansion through improved occupancy and skilled mix across our portfolio, stable reimbursement assumptions and continued disciplined capital allocation to support ongoing acquisition activity. We entered 2026 with a scaled platform, strengthened infrastructure and a strong balance sheet. We believe these factors position us to deliver consistent performance and expanded margins over time while maintaining flexibility for selective growth opportunities. With that, I'll turn the call back over to Jason. Jason Murray: Thanks, Mark. And as Mark mentioned, we expect the full year to deliver record revenue and adjusted EBITDA, and our performance year-to-date has already reached record levels for the company. This continued momentum highlights the strength of our model and our teams throughout the country. We intend to continue proving that strength quarter after quarter. We're energized and moving forward with discipline and focus, and we look forward to demonstrating our ability to execute and deliver results for both patients and shareholders. So with that, operator, I believe we're ready for questions. Operator: [Operator Instructions] Our first question comes from David MacDonald with Truist. David MacDonald: Just a couple of quick questions. I guess for starters, look, we're constantly hearing the conversation around affordability, cost-effective, high-quality care. I'm wondering if you guys can just talk a little bit about your payer conversations and potential share gain opportunities, just given the quality ratings that you guys are putting forth, and then if, kind of, you look within post-acute facility-based, where you stand in terms of cost effectiveness. Joshua Jergensen: Yes. Thanks for the question. This is Josh Jergensen. This has always been a part of the company's strategy. As we go into these facilities upon acquisition, we deploy our operating model, which begins with providing high-quality care. And as you mentioned, we feel that as we move those facilities toward the quality metrics that we've been able to prove out through the new ramping and mature cohorts, we become a very attractive partner for really any of the insurers in the space that are looking for places to send their patients with high-quality care, access to bed, bed availability, density. And so our ability to sit at the table and negotiate really strong contracts is something that we've begun to see play out, particularly as we have these facilities moving from new ramping to mature. So we believe this is only going to increase, and we've seen that even in our mature facilities as they continue to increase the percentage of their skilled mix that's contracted with managed care. And those relationships continue to expound, and we look forward to moving those facilities from lower quality, as they enter into our portfolio, to higher quality, and we believe that, that's going to continue to be a model that flows through and creates margin expansion for us. David MacDonald: And then, guys, I guess just a couple of other ones. Just -- you mentioned briefly kind of the M&A pipeline. I was wondering if you could provide any more detail there. That kind of 20-ish type of number, how we should still be thinking about it annually? And I would assume we should expect that you guys, where you have the opportunity, will look to continue to acquire the real estate along with the M&A transactions? Mark Hancock: Yes, David. So yes, I mean, I think in regards to guidance, consistent with kind of our historical practice, we've baked in kind of a nominal number of facilities being acquired in 2026 to the tune of about 5 facilities per quarter with nominal revenue as those come on because the -- as you know, we typically acquire underperforming assets that are very low occupied, 60% to 70% occupied when you take them on, so with nominal revenue and effectively 0 margin. So that's what's included in the guidance, and maybe I'll let Josh touch on kind of the pipeline. Joshua Jergensen: Yes. Pipeline, I would say, is very robust right now. We're starting to see a number of deals come through in very attractive areas as we continue to mature in the way that we evaluate deals. We feel really confident as we start to align the due diligence we're doing with deals that we're starting to see come up. And so, we're very excited. We also remain very strategic in the way that we go about these deals. We want to make sure that the model that we have translates well into taking these distressed facilities, deploying our model and have them be successful. And always, through the course of these acquisitions, we're looking at the opportunity, as you questioned at the end, the way that we evaluate the real estate. If there's an opportunity for us to take on both real estate and operations, we're going to take those opportunities as we strengthen and look to strengthen the balance sheet. But being an operator who's willing to partner with others who have capital to deploy and have access to deals, we also feel confident in our position with each of them as a high-quality operator and tenant of those facilities. And we've proven the ability to do both of those things. And I would imagine, as we continue to progress, you would see consistency in both operating facilities and the activity and use of capital being used to go out and find opportunities that include real estate as well. David MacDonald: Okay. And then, guys, just last one. You mentioned the San Diego area de novo. I'm just curious, is there potentially a chance that you could see maybe a little bit of de novo activity with a little bit more frequency? I mean I don't need to explain to you, California is probably one of the more difficult states. If you look across your footprint, are there some other states where maybe a little bit more -- doing a de novo here and there would make some more sense in terms of on a go-forward basis? Joshua Jergensen: Yes. I think everyone can see that, historically, the de novo development hasn't been the primary driver of our growth strategies as acquisitions have generally offered more attractive risk-adjusted returns and faster integration into our platform, and that's what makes those incredibly attractive. That being said, there are many opportunities to add high-quality product into an industry that has a number of assets that are old and dilapidated and need investment. And so while not opposed to continuing to do that, if there are states and areas where it makes sense to go through the process and the capital investment to add additional beds, we believe that will be a part of the strategy. As we look to the future, we would envision that it would probably look similar to how it has in the past, at least in the short term, where more of our acquisition will be driven by existing facility acquisition. David MacDonald: Okay. And guys, just one last one for me. Just coming back to M&A. Anything that you would call out in terms of pricing in terms of what you're seeing relative to these opportunities, either softening or strengthening in the pricing environment in terms of what you're looking at to have to pay to acquire some of these things? Mark Hancock: Yes, David. I mean we have seen price increases over recent years, right, with inflation and real estate prices going up and that being ultimately reflected in some of the leases that -- whether we acquire it via just operations or even the real estate cost per bed. And so we continue to see that in certain markets, but we also see that also starting to plateau in pricing versus, again, kind of the accelerated pricing we've seen in recent years. And so -- but we see a number of facilities, hundreds of facilities that come through our potential M&A pipeline. And we generally acquire and close on a very small fraction of those. So we are very selective and opportunistic, and we are disciplined in kind of our -- making sure that those facilities meet our investment profile. Operator: The next question comes from the line of Ben Hendrix with RBC. Benjamin Hendrix: Congratulations on the quarter. Jason Murray: Yes. Thanks, Ben. Benjamin Hendrix: You guys will be pretty well positioned for some of the changes in the value-based purchasing program for skilled nursing. But just wondering if you had any early observations on what you're seeing with the addition of the staffing measures and also the infection prevention measure in value-based purchasing for fee-for-service Medicare. Joshua Jergensen: Yes, I'll take that one. This is Josh again. Any time I think, as an organization, we see clinical quality tied to reimbursement, we feel very confident. Our model has always consistently began with care and the way that we provide our service to our patients, focusing on things like rehospitalization rates, focusing on staffing to acuity, educating our staff, training them, investing in the physical plans, which allows our facilities to be in a position to not only accept those patients, but do an excellent job taking care of them. And you see that through our clinical results. And so as reimbursement is tied to quality metrics and other things, we believe that we're positioned as well, if not better, than anyone else in the industry to actually see that be a net positive rather than something that's going to take away from future ability for the company to be financially successful. Benjamin Hendrix: Great. And then also along the same lines, the Transforming Episode Accountability Model or TEAM model, again, I think this -- it seems like this would be something that you all would be very well positioned for, but just wanted to get any -- that in your markets, if it's impacting your facilities or if you're seeing any change in referral sources? Joshua Jergensen: Very beginning stages of these programs, and I think each of you, obviously, been around the industry for a long time, know that a number of these have come up. This certainly is not the first. It won't be the last. Again, kind of back to the way that I answered the first part of the question, as there's an opportunity to identify ourselves as the top clinical provider in each of the communities that we're in, we believe that positions us in a great way to be the primary provider of choice. And each of these hospitals is becoming a lot more aware of the post-acute environments that they're relying on for discharge of their patients. Health plans are also very aware of what's going on in that regard as well. And we begin to have some of the conversation in a couple of the communities where they're beginning to roll these out. And because of our platform, because of the way we've gone about doing things clinically, because of the bed density, that's another part, and you heard Jason talk about the 8 acquisitions that we took on in existing states and communities where we already operate, that density gives these upstream providers access to beds. And that access allows them to put providers, hospitalists, rounding physicians or nurse practitioners in those facilities with higher volume of patients, improving the quality of care, the access to care. And so again, we feel very well positioned as that and other future programs will roll out because we've always led with care and quality. Operator: There are no further questions at this time. This now concludes our question-and-answer session. I would like to turn the floor back over to Jason Murray for closing comments. Jason Murray: Yes. Thank you, operator, and thank you all for joining us. I believe that's all we have. Have a great day. Operator: Ladies and gentlemen, thank you for your participation. That concludes today's conference. Please disconnect your lines, and have a wonderful day.
Operator: Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the Flutter Entertainment Fourth Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Paul Tymms, Group Director of Investor Relations. You may begin. Paul Tymms: Hi, everyone, and welcome to Flutter's Q4 update call. Joining me today are CEO, Peter Jackson; and CFO, Rob Coldrake. After this short intro, Peter will open with a summary of our operational performance in the quarter, and then Rob will update on our Q4 financials and new 2026 guidance. We will then open the lines for Q&A. Some of the information we are providing today constitutes forward-looking statements that involve risks, uncertainties and other factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors are detailed in our results materials and our SEC filings. All forward-looking statements are based on current expectations, and we undertake no obligation to update any forward-looking statements, except as required by law. Also, in our remarks or responses to questions, we will discuss non-GAAP financial measures. Reconciliations are included in the results materials we have released today, and I will now hand you over to Peter. Jeremy Jackson: Thank you, Paul. I'm pleased to share our strong fourth quarter results and reflect on our strategic progress in 2025. Flutter is the world's leading online sports betting and iGaming company with unique advantages delivered through the Flutter Edge and a proven track record of delivery. 2025 was another transformative year for the company, marked by our strategic execution, continued market leadership and disciplined investment, delivering group revenue up 17% and adjusted EBITDA 21% higher. In the U.S., we maintained our clear leadership position in both online sports betting and iGaming. We also launched FanDuel Predicts in Q4 to capitalize on the emerging prediction market opportunity. In our international business, we strengthened our portfolio with strategic acquisitions in Brazil and Italy, extending our positions in high-growth and exciting markets. We made significant progress on our transformation and efficiency programs, and we are well on track to deliver the anticipated revenue growth and cost efficiencies. Our swift disciplined responses to regulatory changes in India where sudden legislative change forced the cessation of real money gaming and to higher U.K. gaming taxes underscored our scale benefits and business agility. We entered 2026 in a strong position, and I've never had more conviction in our ability to capitalize on the long growth runway ahead. Turning to the fourth quarter. Our Q4 group performance was strong with revenue up 25% and adjusted EBITDA up 27%. In the U.S., revenue growth was 33% with adjusted EBITDA 90% higher, lapping the significantly unfavorable sports results in the prior year. We delivered another superb iGaming quarter. Revenue grew 33%, driven by 18% AMPs growth and an increase in player frequency as our successful content strategy and rewards scheme resonated well with our customers. FanDuel sportsbook Q4 revenue growth was 35% However, Q4 sportsbook trends across the market diverged from expectations. High gross revenue margins were offset by moderating handle performance. As a business, we always consider net revenue as our core revenue KPI, and we, therefore, always consider revenue and handle trends together in conjunction with customer activity levels. This was particularly important this quarter as adverse recycling was a key driver of the lower handle growth with persistently high gross revenue margins leading to lower levels of customer engagement. In addition, the second half of the NFL season saw less compelling content with fewer popular teams and favorite players making the playoffs this season, adversely impacting customer engagement. These market trends were far more pronounced for FanDuel for 2 reasons. First, our significant structural revenue advantage resulted in a greater impact from adverse recycling as FanDuel recorded persistently high NFL gross revenue margins throughout November and December. Overall, we finished the NFL season 100 bps ahead of our expected margin at 19%. Second, our standard generosity playbook proved less effective in Q4 as our investment phasing did not sufficiently align with the pattern of sports results during this period. As a result, we saw a higher churn within our customer base and resulted in loss of market share. We also don't believe prediction markets are having a meaningful impact on our business. As you'd expect, we've undertaken a comprehensive review and found no evidence of material cannibalization on our existing business. And this finding is reinforced by our Missouri launch, where customer acquisition trends exceeded expectations, reaching 5% of the population within the first 30 days, making Missouri one of our best state launches to date. Moderated market handle trends have continued into the start of 2026. We believe these trends reflect the halo impact of the factors evidenced in Q4, and we continue to monitor trends closely. And as set out in our shareholder letter, we have a clear U.S. strategy for 2026. Our market-leading, highly profitable U.S. position is driven by product superiority, enabled by our exceptional pricing capabilities, combined with highly disciplined customer acquisition. This has allowed FanDuel to deliver an estimated 70% share of market EBITDA. However, recent trends have led us to take additional actions to strengthen these capabilities to reinforce our leadership position. We will leverage our scale, proprietary technology and data advantages to deliver experiences competitors cannot easily replicate, including more intuitive bet building, smarter personalization and richer live engagement. In addition, we're enhancing how customers feel recognized and rewarded with more engaging reward experiences, including the launch of a new loyalty program, extending a core part of our casino success into sport. I'm confident that the ongoing improvements to our sportsbook product and generosity strategy will harness our scale and structural advantages, driving a sequential improvement in our performance throughout 2026 and deliver market share gains. Let me now update you on prediction markets and how we're going after this opportunity. We believe that prediction markets will accelerate state regulation of online sports betting and iGaming. This, in our view, is the most valuable long-term opportunity in the U.S. In the meantime, the near- to medium-term growth potential on prediction markets for FanDuel is significant. There is new TAM to go after. Prediction Markets will enable us to acquire new sports and entertainment first customers into the FanDuel ecosystem ahead of potential regulation. We can deliver attractive returns by providing sports markets to the 40% of the U.S. population who cannot currently access online regulated sports books. We are exceptionally well positioned to harness this opportunity, and we launched our own offering, FanDuel Predicts in Q4. Early signals have been encouraging with most activity focused on sports and with average volume per customer in line with expectations. We are also actively pursuing options to leverage our world-class proprietary pricing capabilities for market-making services, and we'll share further details in due course. Rob will update you on our predictions market financial guidance. But as outlined in our Q3, we'll invest meaningfully with ambition to deliver a leading position in this space. The opportunity across prediction markets is certainly far bigger than any potential cannibalization of existing sports. Moving on to our international business. International revenue grew 19% in Q4 and adjusted EBITDA increased 6%. We are making excellent progress on our strategic transformations and integrations, building a strong platform for future revenue growth and delivering cost savings. In the UKI, the Sky Bet sportsbook migration has delivered the expected cost savings, and we are now accelerating customer-facing investment to restore momentum. In SEA, Flutter regained the Italian online market leadership position in Q4. And the results of the PokerStars migration in Italy have been very encouraging with revenue growth of 13% and new customer volumes more than doubling in Q4. PokerStars migrations will continue at pace into 2026 following the successful precedent we have now created in Italy, driving further growth and delivering planned cost savings. The Snai business integration is progressing well. Customer acquisition initiatives, including Sisal's retail sign-up model and restructured generosity to boost cross-sell and reactivations drove all-time record iGaming AMPs and ensured Snai finished the year in revenue growth. The planned platform migration in Q2 will further accelerate this growth by providing Snai access to a vastly expanded product suite, including Sisal's leading products such as My Combo. In Brazil, improved casino and digital marketing capabilities drove a surge in customer acquisition, up 51% since the start of the year. We believe the Brazilian market presents a significant and compelling growth opportunity for Flutter and that the 2026 FIFA World Cup represents a unique moment in a soccer obsessed market to take market share. As a result, we expect to invest more. And while extending our investment time line shifts the phasing of profitability, we have strong conviction that disciplined near-term investments will build a larger, more profitable and sustainable business over the long term. Looking ahead to 2026, I'm confident in our strategic positioning. We have compelling plans in place to strengthen our leadership, unlock future value and deliver sustainable growth. I'll now hand you over to Rob to take you through the financials. Rob Coldrake: I'm pleased to present another quarter of strong financial delivery. Group revenue increased by 25% and adjusted EBITDA grew 27%, driven by a good year-on-year performance across both segments and the successful integration of our recent acquisitions. As Peter noted, we are making excellent progress on our strategic transformations and integrations, and we are firmly on track to achieve our targeted $300 million cost savings by 2027. We're embedding rigorous cost discipline across the business, identifying new efficiencies and optimizing opportunities to protect margins and fund strategic growth investments. In the quarter, group net income was $10 million compared to $156 million in the prior year as the strong adjusted EBITDA performance was offset by higher interest costs relating to the financing of our strategic M&A and increased tax expense, reflecting the significant step-up in U.S. profitability year-over-year. Earnings per share and adjusted earnings per share declined by $0.50 and $1.20, respectively, reflecting these factors. The group's net cash provided by operating activities declined by $224 million to $428 million, primarily reflecting the cash impact of these increased expenses and a $128 million adverse impact from a lower level of customer deposits year over year. Free cash flow declined by $335 million to $138 million, including the impact of M&A and increased investment in capital expenditure. The higher CapEx was driven by phasing of Italian concession payments and investment in future revenue-enhancing and cost efficiency projects such as our PokerStars transformations. We completed $245 million in share repurchases during Q4, bringing full year 2025 repurchases to $1 billion, in line with our guidance. Our disciplined capital allocation policy provides the flexibility to respond effectively to evolving market conditions and emerging opportunities. We remain committed to our long-term policy of returning capital to shareholders. We now expect to commence returning $250 million in H1 2026, and we'll provide guidance on our future buyback cadence as the year progresses, preserving our flexibility to invest in the business and strengthen our balance sheet. We ended the year with a leverage ratio of 3.7x. Strong profit growth and cash generation will continue to drive leverage reduction throughout 2026, moving us towards our target ratio of 2 to 2.5x over the medium term. Moving now to our outlook for 2026. In the U.S., we expect revenue of $7.8 billion and adjusted EBITDA of $1.05 billion, translating to year-over-year growth of 12% and 14%, respectively. This includes new state investment of $70 million in adjusted EBITDA as we expect to launch Alberta in Q2. The guidance also reflects current trading where the impact on our customer base from the very high gross revenue margins achieved in the second half of Q4, alongside a less compelling end to the NFL season has driven lower customer engagement levels into 2026. Outside of NFL, year-over-year trends improved in February. Although we believe that these market trends are largely transitory, we have taken a measured view of how these trends will progress, including when market handle growth rates will recover from the Q4 recycling impact. We also expect a sequential improvement in FanDuel's relative performance to the market due to improvements to our sportsbook product, generosity strategy and the launch of our new loyalty program during the year. We now expect that our prediction markets investment will be towards the upper end of the previously guided range, closer to $300 million to reflect the significant opportunity we believe exists to drive customer acquisition. While it's still very early days, our view remains that the shape of the profit ramp for prediction markets should be similar to new sportsbook state launches. In International, we expect revenue of $10.6 billion and adjusted EBITDA of $2.23 billion revenue at the midpoint, representing year-over-year growth of 13% and 1%, respectively. We are really pleased with the underlying momentum in the first 2 months of the year, particularly in SEA, where we have extended our online market leadership in Italy. The guidance incorporates an investment in Brazil of approximately $70 million to grow our market position and the previously guided impacts from the U.K. tax increases and the Indian market switch off. We expect our unallocated corporate costs to be $310 million; a $30 million increase compared with the prior year. This reflects an increased 2025 base driven by investment in shared technology, talent and costs associated with our U.S. listing, which will continue in 2026. To conclude and reiterate Peter's conviction, we are excited for the year ahead and look forward to another year of strong execution. With that, Peter and I are happy to take your questions. I'll hand you back to JL to manage the call. Operator: [Operator Instructions] Your first question comes from the line of Jordan Bender of Citizens. Jordan Bender: Peter, I want to start with one of the quotes from the press release where it says it's difficult to be definite as to when market growth rates will recover from the impact in 4Q recycling. I guess what I'm trying to figure out here is, do you think any of this what's going on could be structural in nature? And do you ever see this type of phenomenon happen across any of your other sports markets globally? And I guess the second or the follow-up question to that is your sportsbook AMPs were up 4% for the year. The story around increasing penetration into existing states is something that you've spoken to in the past. So I'm curious where you think you stand in terms of net new customers to support this environment where we are seeing handle flow. Jeremy Jackson: Let's start with your question around sort of handle and how that compares with other markets that we operate in. And I think it's worth acknowledging that the period of time we're talking about in the U.S. in Q4 is in the football season. And I've talked before about the very high levels of volatility that we see around football in the U.S. So I think -- when I think about other markets, the soccer-driven markets we see in the U.K. or Italy, racing in Australia, we would see less volatility and less sustained periods of very positive sports results. I can remember this time last year when we're talking about the football season and people were concerned as to whether we could ever see positive sports results in football. Clearly, this season, we've seen very strong results. And as I stated earlier, we've seen a margin of 19% across the full football season. And so when you compare that with last year and the very substantial step-up in margins year-over-year, you would expect to see a commensurate drop in handle, right? It's the math in terms of how it works from the customer play. So that phenomenon of sort of recycling and the impact that margin has on sort of growth of stakes is something that we've seen before. In terms of your second question around sort of AMPs, look, I think the important thing is that our sportsbook AMPs in our pre-2025 states were also growing in Q4. And look, in the combined sports and iGaming business, we saw mid-single-digit growth. So we're still seeing AMP growth in all the core cohorts. Operator: Your next question comes from the line of Paul Ruddy of Davy. Paul Ruddy: Just on -- it's a little bit of a follow-up that I forget to ask. But on the structural hold piece, it looks exceptionally strong. Has there been any change in strategy around pursuing a more, say, hold positive handle passive strategy in the way you've set yourselves up? And maybe if you could just give if there is any quantification of what you think the actual amount of handle impact might have been year-on-year from that recycling impact? Jeremy Jackson: I think one of the things I'd state is when I think about the NFL season this year. When you look at the sort of the quality of the teams that got into the latter stages of the competition, there were a lot less of the sort of key marquee players involved. And that has a significant impact for us because of our dependence on the parlay market. I actually suspect that we saw lower levels of parlay penetration than we would otherwise have done if we'd have sort of matchups like we'd had last year. So there's nothing -- we've not changed our big or anything like that, we simply saw a very considerable set of consecutively positive sports results. I think 10 out of 11 weeks, we saw very favorable weeks of above-average margin there fell a number of weeks above 30%, which we think has a real sort of impact on customer sentiment when you get to those sorts of levels. And then in terms of the blackout of trying to work out if it were not for that, what would have happened to handle, I mean it's very difficult. And I think there's a lot of -- it's a complex relationship between those things. And of course, you've also got the overlay of what's going on from a generosity perspective as well. So I think it's hard for us to make a full assessment. Operator: Your next question comes from the line of Barry Jonas of Truist Securities. Barry Jonas: Can you maybe talk a little bit about the prediction product today and how you see that improving moving forward? And then maybe as a follow-up, curious to get your thoughts on the probability of more U.S. state tax increases here. And is there any scenario where you might exit OSB in any uneconomically viable state to focus more on FanDuel Predicts? Jeremy Jackson: Yes, look, we've -- obviously, we're pleased we got our prediction market product into -- from a sports perspective into those 18 states where we can't currently offer our regulated OSB. Clearly, that's a lot of incremental opportunity for us to go after that otherwise we couldn't have had. We have got good plans to improve the breadth and quality of the product we have over the course of this year. There's obviously the World Cup coming up shortly, which is going to be a very important opportunity for us to showcase the quality of our soccer product, both for the half of America who are in states where there's regulated OSB, where we're very excited about that, but also into the half of America who will be reliant on our Predicts product. Soccer is actually the fourth most popular sport for us by GGR. So I think we're excited about that. And we believe that we have a lot of expertise in that globally and of course, we can couple that together with the quality of the FanDuel brand and our experience from the Betfair Exchange to really push hard. And there's lots of other product enhancements we intend to make over the course of the year before we get to the start of the NFL. Rob Coldrake: From a tax perspective, we're clearly at the outset of the year and moving into legislative season. As ever, there will be some noise and soundings about tax increases in certain states. I mean on the positive front, actually, just before coming on this call, we've had positive news already, getting a license in Arkansas, which is a positive move for us. And ultimately, if we do see any tax increase, there aren't any that we see with high degree of certainty at the moment. But as a scale operator, we're very well placed to mitigate those as we've proven in the past, and we have levers at our disposal and costs that we will use to mitigate that and work through it. Operator: Your next question comes from the line of Jeff Stantial of Stifel. Jeffrey Stantial: Maybe starting off on the handle trends in Q4 and year-to-date. Peter, you talked to some market share loss, which is expected to moderate as the year goes on. But if you look at performance in the Missouri launch, there really doesn't seem to be much dilution to market share at all. So maybe could you just help us reconcile those 2 data points? And then for my follow-up, Rob, it looks like unallocated corporate is pacing well above the '27 targets that you introduced a few years back. Can you just frame for us maybe what's changed, if anything? And where do you go from here? Jeremy Jackson: You're right. We've been very pleased with the launch in Missouri. And as I stated earlier, it's one of our most successful state launches to date in terms of the population penetration. I think we're very pleased with that. I think it's -- and it's down to our excellent new state playbook I think the point I'd make around some of the handle trends that we saw in Q4 last year, it really ties back to some of the stuff I was talking about in terms of the very strong and sustained periods of very high margins, coupled with the fact that we saw less popular teams getting into the playoffs for football. I suspect that there were some of our customers who, to use another sporting analogy, put their queues back in the rack and stopped betting. So look, I think what we'll have to do is reactivate those customers. We're excited about the product changes that we'll be delivering over the course of this year. I mentioned the loyalty program, the changes we're making to generosity, we've got the World Cup coming up. So I think there's a lot of great opportunities with March Madness for us to push hard and get these customers back on our platform. Rob Coldrake: From a corporate cost perspective, there's a couple of points to make. So we are slightly above our original guide. There's a couple of contextual points to this. The first is we obviously re-segmented the business at the start of 2025, and we saw some additional costs move into corporate as a result of that re-segmentation. The second point with regards to 2025 is we actually had some reduced revenue-driven cost allocations as part of the year-end closeout, which is just kind of left pocket, right pocket. We have been investing in cost in the center overall with the Flutter Edge, and we're seeing excellent payback in terms of the transformation, strategic transformation work that's going on across the group. And what I'd say lastly is actually we've just kicked off a comprehensive cost optimization program across the group, and we are looking to optimize further efficiencies as we go through 2026. Operator: Your next question comes from the line of Brandt Montour of Barclays. Brandt Montour: So digging into U.S. revenue guidance for '26, low teens growth expectations. I think we kind of got a sense now for sort of some conservatism around handle. Have you guys changed your philosophy around how you guide for sport outcomes or for structural hold within that guide? Rob Coldrake: I'll pick this up. So -- no, we've not changed our philosophy. What I'd say in summary for 2026 is we've taken a sensible measured approach to our guidance. The guidance includes 12% revenue growth for 2026 and 14% EBITDA growth in the U.S. We're not including any revenue from prediction markets in that as we want to trade through the period initially before we take a view on that. As Peter mentioned, it's quite a complex relationship between handle and gross revenue margin, and that's why we look at revenue as our core KPI, and we guide to revenue only. We also haven't talked about iGaming yet, but we're assuming that the iGaming growth continues in the high teens, and we'll have double-digit sportsbook growth on revenue. So overall, as I said, it's a sensible and measured approach that we feel comfortable with. We should also see some sequential improvement through the year as we land some of the product and generosity initiatives that we talked to in the shareholder letter. Operator: Your next question comes from the line of Ed Young of Morgan Stanley. Edward Young: My question is around the less effective generosity playbook. You mentioned phasing, improved competitor offerings and elevated generosity in the market. So my question is, how should we square your commentary around your new generosity strategy, which you said you want to be sort of disciplined but also competitive. Is that you saying effectively that you need to make your scale count by keeping your generosity at higher levels? And then my follow-up is, the commentary is also about the improved competitor's offerings. So what's not worked on the product side to maintain sufficient leadership versus competition? And what sort of additional investment are you making or do you think you need to make to make that right? Jeremy Jackson: Thank you for the question. On generosity, look, I think it is a very important sort of topic for us. I talked about some of these heightened levels of margin that we saw. I think -- look, it's fair to say that we didn't execute our generosity strategy as well as we should have done. We pushed hard in the beginning of Q4. And actually, when you look at what the pattern of gross win margins were throughout the back end of Q4, we just saw this very sustained period, including a number of weeks, as I said earlier, above 30% we should have pushed harder generosity at those points, and we didn't. And that's something that we will address and make sure that we incorporate into our playbook for the future. So this isn't about putting more money on the table. This is about using what we have in a smarter way. And I think tying to that point about being smarter with it, when I look at what we do with our casino business, we get a lot more credit for the generosity we give our customers there as a result of the loyalty program that we have. The rewards program has been a really important driver of the success we seen in casino. And we must be one of the few consumer businesses in the state that doesn't have a loyalty program to full stop for sports. It's been very successful for us in casino. And as I said, we'll bring those -- we'll bring that experience into our sportsbook, which I think will be very important. That's something that we'll do in Q2 this year. So we're going to remain disciplined. We saw a very unusual situation after the last couple of years where we've seen low margins in football sort of very high and very sustained periods of margin, and we didn't have the right playbook or tools really to be able to deal with it. Rob Coldrake: Picking up on the second part of your question around products. We don't necessarily think this is something that's not worked for us per se, but more a bit of a narrowing of the gap in terms of the product advantage that we've typically held over the last few years. And -- as we think about this, we're looking to double down on the product advantage that we've had previously, and we're working on a number of things, both in the U.S. and in our international business. As we outlined in the release, there's a few specific areas. So we're looking at differentiation and innovation and really enhancing our SGP offering. You'd see actually outside of the U.S. In Italy, our My Combo products working extremely well for us, and that's allowed us to take the leadership position back in Italy. The rewards piece that Peter talked about and also just elevating the core journeys and the personalization and experience of being on the FanDuel site, which we've got a team working on. The other piece, which we obviously talked about a lot previously is our outcome-based pricing and how this really provides the structure and the foundations behind our product innovation and improvements moving forward. And we still remain incredibly excited about this. It's taking a little while to work through. But fundamentally, we expect this to be a significant product advantage for us when we fully land that and roll that capability out. Operator: Your next question comes from the line of Shaun Kelley of Bank of America. Shaun Kelley: I wanted to follow up on Rob's comment about the double-digit growth you're seeing in sportsbook or you're expecting, I guess, embedded in the guidance. Just Rob, can you help us compare that to the run rates you're seeing in the business right now? I know current quarter is a little harder to comment on, but the market has been so dynamic. It's been a little hard to track. And while we can see handle numbers, it's harder to get that full NGR picture. So any color you could give us there to kind of square what you're seeing in the business with that outlook would be helpful. And then also, if you could just comment maybe high level on what you're seeing share-wise for the NBA because it feels like we've seen that as a product that Flutter has historically done extremely well in, but we've seen some competition ramp up there. Rob Coldrake: So yes, in terms of current trading, we started off the year with a continuation of the trends that we observed late in Q4. So the closing stages of the NFL season, as Peter alluded to, including the playoffs and the Super Bowl saw some slightly less compelling player narratives and that drove continued low levels of customer engagement into the start of the year. But outside of the NFL, we started to see trends improving month-on-month into February, which is encouraging. We think some of the customer fatigue from the positive sports results persisted into January as well. As Peter said, we had 10 out of 11 positive weeks. We ended up the NFL season with a 19.3% margin on NFL, which is incredibly strong for a season overall. And in terms of February data based on the small sample that we have, the week-to-week volume trends are definitely improving, suggesting that part of this was potentially an NFL season-specific dynamic. But at this stage, it's still quite early. Visibility remains slightly limited on whether the current market dynamics will be short-lived or what we'll see over the next quarter or a few months. But we're quite confident about our Q1 guide, and we'll continue to monitor the trends very closely. We're confident that we have the right plans in place to continue improving our U.S. performance over the course of the year. And we've definitely seen a sequential improvement even over the last few weeks. Jeremy Jackson: On the question around sort of a high level on NBA, look, this has always been an area that's important to us. Again, it's down to things like the quality of the players that we have engaged in the games with the strength of our parlay offering. There are -- there's inevitably a bit of a sort of bleed across between customers who are betting on both football and NBA that if they've seen those very high margins on football inevitably will have some impact on their ability to stake on NBA. Operator: Your next question comes from the line of Jed Kelly of Oppenheimer. Jed Kelly: Just going back to your prediction markets. Do you feel like you potentially would want to acquire your own DCM license just to control your own destiny? Or can you just talk about how your JV with the CME is progressing? Jeremy Jackson: We spent a lot of time working out how we wanted to tackle prediction markets. And I think we've got our product into the market. We're into those 18 states that we can't offer our regulated sports betting product in. And look, we're going to make a series of product changes over the course of this year. We're very happy with the CME. We've got a strong pipeline of product improvements coming through. I also referenced some of the stuff we're looking at around sort of market making as well. So there's a lot going on in this space. We're investing -- we plan to invest a lot of money. And look, I hope we sat here in a year's time when we've been able to invest very successfully and acquire a lot of customers onto our platform. Operator: Your next question comes from the line of Dan Politzer of JPMorgan. Daniel Politzer: I want to go back on prediction markets, unsurprisingly, I guess. I guess what have you seen that justifies the incremental spend there? Because it sounded like things so far were tracking in line with your expectations. And along those lines, how do you think about the competitive landscape evolving if and when we do get perfect regulatory clarity here? Jeremy Jackson: We've got experience of investing organically in our business. I mean I think about what we're doing in Brazil at the moment. I think about all the quarters we had post PASPA being repealed. But we've always taken a very disciplined approach when opportunities arise. And we will make sure that we acquire as much business as we can. Clearly, the phasing of our marketing will align with our sort of product road map and scale over the course of this year. This quarter is more about sort of test and learn to understand how we optimize our spend and drive conversion. We expect to invest heavily in the second half of the year. And look, given the opportunity we see, we expect to be towards the top end of the figures. But I reserve the right to spend more if we find opportunities are bigger. Operator: Your next question comes from the line of Bernie McTernan of Needham & Company. Stefanos Crist: This is Stefanos Crist calling in for Bernie. Just wanted to follow up on Arkansas. We understand there's a 51% revenue share. Just wanted to ask why launch now and maybe why not do Predicts instead of the traditional sportsbook. Jeremy Jackson: Look, I'm happy to pick it up. And I think what we've seen in Missouri with our new state playbook, I think, is a really good example of when you've given customers or consumers the choice the breadth of offering that you have in a traditional OSB together with the generosity playbook you can provide means it's a much more compelling offering. So look, we're super excited. That's what our sort of true north is for us in the business. We'd like to see more states passing regulation for OSB and indeed, iGaming. Look, it's -- so those 2 areas, we'd love to see more states pass. There are only 2 national players in the state. So look, we're excited to get our playbook going and see what we can do in the state. Operator: Your next question comes from the line of Ben Shelley of UBS. Benjamin Shelley: Do you expect U.S. online sports betting market share to stabilize in 2026? And more broadly, what's giving you confidence in sequential improvement in your competitive position through the year? Jeremy Jackson: We are confident in the quality of the products that we have in the market. We're excited about the introduction of our loyalty program. There is more work we're doing around generosity. And as Rob mentioned on the question earlier, there are enhancements that we're making to our products as well. So I'm very confident in our ability to execute. We have consistently done that. And I think that we will be able to hold our market share. And look, I'd like us to take more market share to the extent that we can get good returns on it, and we will spend that money. Operator: Your next question comes from the line of Clark Lampen of BTIG. William Lampen: My questions are related to the sportsbook loyalty program. I think, Peter, #1, just for clarification, I think you said that, that was going to roll out in Q2. I wanted to make sure that they had that correct. And then second, I wanted to see if you could give us a little bit of color around when you introduced the same offering for your iGaming business, what the immediate impact was? Was it a revenue driver? Did it help you with promo? I think that that's -- there have clearly been a bunch of questions on the call thus far around the direction of promo. So maybe with that as a reference point, was it helpful to promo? Is that a source of leverage, I guess, for iGaming when you introduced that? Any color that you can provide a reference point would be helpful. Jeremy Jackson: I mean, the perspective from our casino business where our rewards program has been a really important part of the success of that business. We got to a record market share in Q4 with 28%. Look -- and we're still building our loyalty, the rewards program, right? There's still changes we're making. We're still integrating more of the generosity into the program. So we've been at it a long time in the casino business, and there's still a way to go. So it's a little bit like our parlay products. We're never done. There's always improvements and changes we can make. So look, we will launch a loyalty program for our sportsbook. And I think one of the immediate benefits that we've seen in casino is that you get much better sort of saliency from your customers around the rewards that you're giving them. And I expect to see that happen in our sportsbook. I mean there's -- we sometimes describe it sort of link and labeling. And so I think that's the immediate step change we'd expect to see. And so I hope it will help drive increases in wallet share. Operator: Your next question comes from the line of Ian Moore of Bernstein. Ian Moore: One on capital allocation. How would you rank, I guess, the different inputs you're weighing in deciding at one point you become more active on share repurchases through the year? And I guess, any update you're willing to give on progress toward resolution of the FOX option? Rob Coldrake: Maybe I'll start on the capital allocation question. So as I mentioned in my prepared comments, the capital allocation framework remains consistent with what we outlined at our Investor Day in 2024, and we remain committed to the long-term policy of returning capital to our shareholders. As we often say, we are an and company. So we'll ensure our capital allocation decisions are balanced by the opportunities to invest for growth, but also to optimize for leverage over time. And our current approach really provides us with the flexibility to respond effectively to evolving market conditions and emerging opportunities. And in 2026, we'll prioritize significant capital deployment across both the organic investment in our core business which has historically yielded the highest returns, by the way, and strategic investment in the newly emerging prediction markets opportunity. So there's a lot to go after. We continue to generate a lot of cash in this business, and we can and will delever quickly, but there's lots of interesting and exciting allocation opportunities ahead of us through 2026, which we want to get behind. Jeremy Jackson: There's nothing to say on the FOX option at this stage. Operator: Your next question comes from the line of Robert Fishman of MoffettNathanson. Robert Fishman: Any more color you can provide? I think you said high teens growth that you're expecting for the U.S. iGaming in 2026. Just how sustainable do you think that is as we think about the years ahead? Rob Coldrake: Well, if you think about the iGaming market in 2025, it grew around 26%, and our revenue growth was 33%. I think as the states mature, we'd expect some moderation of that growth, but we feel confident it's going to continue to be mid- to high teens. Therefore, we do expect continued strong growth, and we're excited about the product road map that we've got in iGaming. There's definitely still a long way to go on the penetration rates in iGaming. If you look at what we set out, I think it's 9.5% at the Investor Day, we're about 6.5%, I think, as we stand today. So lots to still go after there, and we're incredibly pleased, as I said earlier, with our iGaming performance. Operator: Your next question comes from the line of Joe Stauff of Susquehanna. Joseph Stauff: Sorry about it, but I wanted to ask a little bit more just on generosity investments and those returns in -- for FanDuel. So it certainly makes sense, right, in [ iCasino ], you get a higher return, you get more betting events, that makes sense. But do you get a return? -- does that -- that seems to me to be a unique customer, meaning that customer doesn't necessarily cross-promote into OSB. And so your generosity investments in OSB, at least for that, does cross-promote. Is that maybe part, I guess, of what we're trying to figure out and what happened essentially in the third and fourth quarter with respect to like your approach because obviously, you're gunning on the [ iCasino ], and it's worked. I was just wondering if that's part -- if that's a realistic understanding of kind of how you're allocating that capital and why the returns are lower. Jeremy Jackson: Yes, I think there's 2 things going on, and I just make sure I understand your question. I think effectively, we did not deploy our generosity efficiently in Q4. I mean, particularly when you think about the very long sequence of very high margins, particularly with some of those real peak weeks, we were not efficient and effective. We should have been deploying more generosity at those points there. I think separately, we have had lots of success with deploying our loyalty or rewards program into casino. In all of our businesses, we deploy a lot of generosity to customers. And one of the advantages of bundling up that generosity within a loyalty program is consumers understand better what's been going on. And I actually think one of the issues for us in Q4 was there's a bit of a whipsaw where generosity was on, it was off, it's on, and it's off. And particularly at a time when margins were running very hot, I think we're probably causing a bit of confusion amongst our customers, and we're just not deploying it effectively. So that's what we're going to address, get to a more efficient and effective distribution of generosity. And I think that's very important. Operator: Your next question comes from the line of Chad Beynon of Macquarie Group. Chad Beynon: With respect to the upcoming U.K. iGaming impact, has anything changed just in the current landscape in terms of how your competitors are maybe running their business, promos, marketing, et cetera? And could this potentially adjust how you're thinking about mitigation? Rob Coldrake: Well, we obviously laid out our top-level plans for mitigation when the changes were introduced in Q4 last year. And to this point, we're not seeing anything different to what we'd anticipated in terms of activity. But it's actually early days because the tax changes don't actually hit until April. And what we expect will happen is that people will start to moderate behavior from that point onwards. If you think about the market share of iGaming in the U.K., there's a very long tail. So there's circa 30% of the market shares in the long tail with much inferior economics to us given our scale. And actually, we fully anticipate that there will be some changes in marketing and generosity and return to player dynamics as we move through the year. We were reasonably conservative in terms of our view in terms of what we recapture versus the tax increase, and we still remain confident in that. Operator: Your next question comes from the line of John DeCree of CBRE. John DeCree: Peter, I wanted to circle back to a comment you made in the prepared remarks of your sentiment that we share as well, and that is prediction markets should accelerate OSB and iGaming regulation in the states. So curious if you could share any more color on that view and your perspective. You probably have as good of a view or better than anyone. And what kind of inputs help you feel confident that, that might come to fruition? Jeremy Jackson: We have -- I think we're singing to the choir if you are in agreement with me. I think we do believe that the noise around prediction markets, and it is an opportunity for us to acquire customers in advance of the states regulating, but we do think it will help hasten the regulation of iGaming and online sports betting. We've got an extensive team who are focused on this, and we're having some very fruitful conversations at the moment. Look, we've just had some good news in Arkansas. Who knows where else the next shoe to drop will be. I'm excited to see some iGaming states come along at some point soon. Operator: Your next question comes from the line of Monique Pollard of Citi. Monique Pollard: Apologies if I missed it, but I couldn't see anywhere if you could help clarify how much you spent on FanDuel Predicts in the fourth quarter? Just conscious that you didn't have -- it was only a handful of states during Q4 before the wider launch in January. And basically, the follow-up question to that is me just trying to understand how much of the guidance change in the FanDuel Predicts for 2026 to the upper end is just a timing shift versus how much is it that you've seen something in the Predicts customers you've acquired so far that makes you think it's worth pushing more aggressively on that opportunity in 2026? Rob Coldrake: Yes, it's Rob here. We didn't actually confirm a number in the release, so you didn't miss anything. It is actually lower than the $45 million that we guided at Q3, so ended up spending slightly less than that in the quarter. I think Peter outlined earlier on very well what our intentions are for 2026. So we've now said that we're going to be towards the top end of the range. What I would say is that within that, we retain our right to have flexibility on that spend. It's a very fast-moving category, and our investment will ultimately be driven by the types of returns that we see. But ultimately, both of us would be delighted to be sitting here at the end of the year saying that we've actually invested at the top end or beyond that envelope because that will mean that we're really achieving traction in the prediction market space. Operator: Your next question comes from the line of Ryan Sigdahl of Craig-Hallum. Ryan Sigdahl: Peter, I hear you on the NFL playoffs. I know we were all sad Vikings didn't make it. My question is, given the more pronounced moderation in customer activity and the unfavorable recycling in the U.S., I guess, especially relative to your peers, curious how the company -- how you plan to maintain your structurally higher hold while also retaining share of players' wallets. Jeremy Jackson: Ryan, yes, I mean, I think we've discussed some of these factors already. The key issue that we saw in Q4 wasn't that we had over the course of this football season, the 19% margin. That was great. And you look at where the gross win margin was for Q4 and sort of we're in line with what we anticipated doing for 2027. The issue really was how we deployed our generosity. And that's something that we are addressing. I've talked about that. We've got to make sure that the generosity strategy reflects what we're seeing in the market. And those 10 out of 11 weeks with very high and sustained margins and then a number of weeks at 30%, those -- they really impacted our business. And the relationship around what we're doing with generosity with where margins are, the sort of hangover impact that you get for a couple of weeks after those very high margins is something we want to make sure that we address. Personalized generosity is the way to deal with that because, of course, even when we're talking about very high margins, there's still averages and there's customers who've done well and customers have done badly within that. And that's what the team have got a lot of experience of doing in Australia. We're learning from that and deploying it into the U.S. business. So this isn't so much a matter of the issue of the high margins. It's more how we make sure that we spend generosity effectively. Customers understand what's happening, and we don't have the sort of the situation where we're a bit inconsistent and that is not helpful for customers, particularly with these consecutive high margins. Operator: And your last question comes from the line of Richard Stuber of Deutsche Bank. Richard Stuber: Just for me, a question on sort of credit cards. I did read somewhere that you now stop taking credit card deposits. I was wondering, have these credit card deposits been largely offset by the same customers using alternative payment methods? Or have those credit card customers broadly left? And is that sort of a similar thing which your competitors are doing in terms of credit cards? Rob Coldrake: Yes, this is something that we have been anticipating for and also something that we've navigated in a number of our markets around the world, but we're actually anticipating a de minimis impact from this. It comes in at the start of March. It's within our plans, and we're not expecting it to have a material impact. Jeremy Jackson: Okay. I think we are done with the questions. Thank you very much, everybody, for dialing in. Much appreciated. Operator: This concludes today's conference call. You may now disconnect.
Operator: Thank you for standing by, and welcome to Autodesk Fourth Quarter and Full Year Fiscal 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Simon Mays-Smith, Vice President, Investor Relations. Please go ahead. Simon Mays-Smith: Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss Autodesk's fiscal '26 fourth quarter and full year results. Andrew Anagnost, our CEO; and Janesh Moorjani, our CFO, are on the line with me. During this call, we will make forward-looking statements, including outlook and related assumptions on products, artificial intelligence, sales and marketing optimization, go-to-market strategies and trends. Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-Q and the Form 8-K filed with today's press release for important risks and other factors that may cause our actual results to differ from those in our forward-looking statements. Forward-looking statements made during the call are being made as of today. If this call is relayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements. We will quote several numeric or growth changes during the call as we discuss our financial performance. Unless otherwise noted, each such reference represents a year-on-year comparison. All non-GAAP numbers referenced in today's call are reconciled in our press release and supplemental materials available on our Investor Relations website. And now I will turn the call over to Andrew. Andrew Anagnost: Thank you, Simon, and welcome, everyone, to the call. We delivered strong fiscal '26 results today with billings, revenue, non-GAAP operating margin, non-GAAP earnings per share and free cash flow, all above the high end of our guidance ranges. As demonstrated at Autodesk University and our Investor Day and reflected in our results today, we remain well positioned to deliver for Autodesk customers and investors. We have successfully executed one of the most far-reaching transformations in enterprise software, redefining our business model, evolving our go-to-market, reimagining our products and scaling our platform. In January, we completed the final phase of our go-to-market optimization. While initiatives like this are difficult and complex, they are making Autodesk more resilient and unlocking new avenues for growth and margin expansion. We're also enhancing our portfolio with cloud-based platforms and capabilities that seamlessly connect design, make and operate workflows. These platforms enable partners and customers to extend and customize our solutions, driving greater value creation and expanding our addressable market opportunity. And we're defining the AI revolution for our industries to empower customers with new tasks, workflow and system automations, and capturing shared value to subscription, consumption and outcome-based business models that blend human and machine capabilities. In the coming months, Autodesk will roll out powerful AI capabilities built on a combination of frontier models and our proprietary models that understand 3D design and make. Autodesk is building the future and the path to it for our customers. We have been preparing for and working towards the cloud and AI for more than a decade. It's why I believe our best days and greatest opportunities lie ahead. I will now turn the call over to Janesh to discuss our quarterly financial performance and guidance. I'll then come back to update you on our strategic growth initiatives and why Autodesk is best placed to benefit from 3D agentic AI. Janesh Moorjani: Thanks, Andrew. Q4 was another robust quarter for Autodesk, capping off a strong fiscal year. Autodesk continues to demonstrate growth and resilience, investing to advance our leadership in cloud platform and AI while also expanding operating margins. Overall, the underlying momentum of the business in the fourth quarter was similar to prior quarters and better than the assumptions we built into our guidance ranges. We again saw strength in AECO, particularly in construction and emerging markets, with sustained investment in data centers, infrastructure and industrial buildings more than offsetting softness in commercial. EBA and product subscription billings, linearity of billings during the quarter and upfront revenue were also strong. Total revenue in the fourth quarter grew 19% as reported and in constant currency. The contribution from the new transaction model to revenue was approximately $137 million in the quarter. Total revenue grew 14% in constant currency and excluding the impact of the new transaction model. Please see the tables in our press release, earnings deck and Excel financials for details by product and region. Billings increased 33% as reported and 30% in constant currency. The contribution from the new transaction model to billings was approximately $185 million in the quarter. Billings grew 32% in constant currency and excluding the impact of the new transaction model. As a reminder, our billings growth rate in fiscal '26 was skewed by the new transaction model and by the transition to annual billings for most multiyear contracts. Turning to margins. Fourth quarter GAAP and non-GAAP operating margins were 22% and 38%, respectively. GAAP operating margin was broadly flat year-over-year, primarily reflecting a restructuring charge of $100 million related to our go-to-market optimization. The action we announced in January marks the culmination of our sales and marketing optimization program and reflects our sustained commitment to both investing in our strategic priorities and achieving the long-term margin goal we talked about at our Investor Day. Non-GAAP operating margin was up 120 basis points year-over-year, benefiting from operating leverage from our revenue outperformance as well as ongoing cost discipline, partly offset by the margin drag from the new transaction model. Fourth quarter free cash flow of $972 million benefited from overall billings strength as well as the linearity of billings in the quarter. Moving on to capital allocation. We repurchased approximately 1.1 million shares for $333 million in the fourth quarter. For the year, our share repurchases increased to $1.4 billion, a bit more than 50% of our free cash flow and reduced our shares outstanding by 2.1 million shares. Recent share price weakness triggered greater share repurchases under our programmatic share repurchase grid. This increased share repurchase activity above guidance, lowered our average purchase price and further reduced share count. Let me finish with guidance. Our guidance philosophy is unchanged. Our guidance continues to be based on the range of possible outcomes in our bottom-up sales forecast, which is grounded in the momentum of our business. We've assumed the macroeconomic environment will remain broadly stable through the year. You will recall, our guidance at the start of fiscal '26 was shaped by a prudent assessment of a few key factors. First, as we entered fiscal '26, we anticipated potential disruption from our restructuring and marketing, customer success and sales operations. We see the potential for disruption again in fiscal '27 and we believe that both the probability and the potential impact of disruption are higher given the focus of the restructuring this year is on customer-facing sales functions. We have embedded this risk discretely into our guidance for fiscal '27. Second, last year, we anticipated potential disruption from our appointment of a new Chief Revenue Officer. This did not materialize as Andy Elder settled into his role rapidly. And finally, last year, I was new to Autodesk. Over the past year, I've gained a deep understanding of the business and its resilience, which has strengthened my confidence in Autodesk's ability to grow at scale, invest in its strategic priorities and drive expanded profitability. So the way to frame our fiscal '27 guidance is that we expect the underlying momentum of the business will remain strong. Like last year, our constant currency guidance incorporates prudence to reflect temporary risk to billings and revenue as we operationalize our sales optimization plan. Unlike last year, it does not reflect additional prudence for a new CFO and CRO. And of course, we cannot assume that we will get any tailwind from currency movements this year in the same way as we did last year. Let me point out a few items in our guidance measures. As you can see from our guidance, billings growth in fiscal '27 no longer has a tailwind from the new transaction model or from the transition to annual billings for most multiyear contracts. We expect billings to be slightly more weighted towards the second half of the year, in part reflecting our assumption that there will be short-term disruption earlier in the year from our sales restructuring and in part due to the weighting of our largest EBA cohort in the fourth quarter. On revenue, the noise from the new transaction model will significantly diminish during the year from a tailwind of roughly 3.5 percentage points in the first quarter to roughly 1.5 percentage points for the full year. We will talk about it less as that noise fades. And again, our assumption that there will be some impact on billings from our sales restructuring earlier in the year is reflected in the implied revenue growth later in the year. Non-GAAP margins will reflect ongoing operating leverage, savings from restructuring, sustained investments in our long-term strategic priorities, roughly 1 point of incremental headwind from the new transaction model and prudence to reflect risk as we operationalize our sales optimization plan. Free cash flow will reflect 2 discrete movements in fiscal '27. First, we expect cash restructuring outflows of between $135 million and $160 million during the year. And second, we do not expect to pay meaningful U.S. federal cash tax in fiscal '27 due to the R&D investment provisions in the One Big Beautiful Bill Act. The net effect of these discrete cash movements is immaterial to free cash flow in fiscal '27. Our U.S. federal cash tax payments will begin to normalize in fiscal '28. Additionally, we continue to manage our stock-based compensation with discipline. We expect SBC to fall below 10% of revenue in fiscal '27 continuing the trend of the last few years. Reflecting all this, for fiscal '27, our billings guidance range is $8.48 billion to $8.58 billion. Our revenue guidance range is $8.1 billion to $8.17 billion. Our GAAP operating margin guidance range is 26% to 28%. Our non-GAAP operating margin guidance range is 38.5% to 39%. Our free cash flow guidance range is $2.7 billion to $2.8 billion. Our capital allocation framework is unchanged. We will continue to deploy cash to the highest return opportunities, prioritize organic investment in R&D and accelerate the realization of our strategy with targeted and tuck-in acquisitions. And we will maintain a healthy buyback program with the goal of reducing share count over time. Over the last few years, we've applied approximately 50% of our free cash flow towards share buybacks, and we expect to do the same in fiscal '27. We expect our share buyback in fiscal '27 to be similar to fiscal '26 in total dollars with the precise amount determined by our purchasing grids. Subject to acquisitions, we expect to apply approximately 50% of our free cash flow towards share buybacks over a multiyear period. In summary, we remain disciplined and focused on the controllable factors that drive our revenue, operating margin, earnings per share and capital allocation, which are the key building blocks of free cash flow per share. The slide deck on our website has modeling assumptions for the first quarter and full year fiscal '27. As I mentioned at Investor Day, we are updating and streamlining certain disclosures to simplify Autodesk's reporting. There's more detail on those changes in the deck, too. Andrew, back to you. Andrew Anagnost: Thank you, Janesh. Autodesk is focused on the convergence of design and make in the cloud, enabled by platform, industry clouds and AI. Let me give you some examples of our progress in the quarter. Our customers in AECO, architecture, engineering, construction and operations, are demanding convergence. Convergence reduces risk, increases quality and optimizes cost and resource use during the design and build phase of an asset, and it enhances efficiency, resilience and reuse during operations. All of this is in service of deploying fewer resources to every project so they can bid on and win more projects with the resources they have. To better serve these needs, we intend to deploy capital to extend our footprint deeper into operations, applying the same playbook that proved successful in construction. Forma for Construction, previously known as Autodesk Construction Cloud, is a fast-growing component of our make solutions and has strong momentum with owners, designers, GCs and subcontractors seeking to converge design and construction workflows. For example, following a competitive RFP process, Prestige Group, a top 3 real estate developer and asset owner in India, selected Autodesk as its core design to delivery platform for its engineering, digital transformation. We won back a major U.S. utility displacing a competitive solution with Forma for Construction, further demonstrating the value customers see in our modern, scalable platform, common data environment and tighter integration across design and construction workflows. A major hyperscaler is expanding its partnership with Autodesk to accelerate time to operation, cost management and digital twin workflows across data centers and facilities while improving collaboration and coordination across an ecosystem of more than 2,000 companies, including GCs and subcontractors. As part of its enterprise digital strategy, a global pharmaceutical company chose Autodesk to be a strategic technology partner for the design, build and operation of its facilities to connect data, systems and workflows throughout the entire project and asset life cycle. Arup, a global engineering consultancy is expanding and standardizing on Forma for data-centric workflows, real-time collaboration across disciplines and geographies, and AI-driven insights to drive innovation and better outcomes for clients in the built environment. Three ENR Top 400 Contractors adopted Forma for Construction this quarter, including Roebbelen, which is replacing a competitive solution to leverage the power of a connected construction platform across preconstruction, construction and virtual design and construction. These stories have a common theme, converging people, processes and data across the project life cycle to increase efficiency and resilience, decrease risk and prepare for an agentic AI world. Our comprehensive end-to-end industry clouds and platform drive convergence and extend our footprint further into the larger growth segments like infrastructure and construction that we discussed at Investor Day. All this is reflected in our strong momentum in both infrastructure and construction. In manufacturing, customers are demanding convergence as they invest in their digital transformation to leverage granular and unified data and embrace AI-driven automation capable of industry transformation. By consolidating our design and make platform, customers have the flexibility and connectivity across workflows to increase agility, innovation and resilience. For example, after successfully adopting Fusion for in-house design and manufacturing of spare parts on production lines, a global brewing company is expanding the deployment to additional breweries to deliver cost savings and improve equipment uptime. A special purpose shipbuilding and marine engineering firm with more than 2,000 employees is adopting Fusion Manage as a mission-critical system for every new vessel project, aligning project management and multi-supplier collaboration in one place. Typhoon, a Belgian industrial manufacturer, selected our manufacturing solutions to replace legacy unintegrated tools, which were causing lost engineering hours to non-value-added tasks and inefficient collaboration. Seeking a unified future-ready platform, a multinational automotive manufacturer is replacing a competitive solution with Autodesk design solutions to standardize workflows and improve integration and collaboration across creative and technical teams. A diversified industrial manufacturer is transitioning more than 900 users onto Autodesk's design and manufacturing solutions from a complex network of legacy systems. While Autodesk Platform Services will be leveraged by sales teams to rapidly modify and visualize product configurations in customer conversations, a global manufacturer of advanced lithium-ion batteries is leveraging Autodesk's manufacturing solutions for asset standardization, digital factory simulation and simulation-driven quality improvements to drive growth and efficiency. Converged data opens up new opportunities for Autodesk. As customers seek efficient innovation, attach rates of Fusion's extensions are growing strongly, and we've delivered meaningful productivity gains to customers where we deploy AI. We have continued to see success with our AI-powered Sketch AutoConstrain in Fusion. Since its launch last year, the AI model has delivered over 3.8 million constraints, up from 2.6 million last quarter. Along the way, the model has been retrained and the UX improved. As a result, the acceptance rates by AutoConstrain suggestions to commercial users have now grown to almost 2/3 with 90% of those sketches fully constrained. In education, we expanded our relationship with Vellore Institute of Technology, VIT, in India, where students are applying industrial-grade Autodesk tools to real-world design challenges. For example, engineering students are using Fusion to design, simulate and optimize a formula race car. While architecture students are leveraging Revit and Forma to design, simulate and visualize complex architectural projects, which embeds sustainability and constructability. And lastly, we continue to find new ways for our customers to consume our products and services in ways that work best for them. For example, Sobha, a real estate developer that designs, engineers, constructs and finishes units in-house uses our Flex offering to scale usage dynamically across projects and regions while maintaining full visibility and control over consumption and cost and aligning investments directly to business outcomes. Let me finish by talking about AI. Building agentic AI requires data, context and expertise. Scaling and monetizing it requires a platform and next-generation business models that can go-to-market. Let me unpack that a bit by talking about what's needed to build agentic AI capabilities. First, data. AI agents need large quantities of physical world data to learn how to drive design, make and operate decisions. This data needs to be high-fidelity, contextual, geometry-rich, span 2 and 3 dimensions and represent physics and engineering-based principles for the entire design, make, operate life cycle. Few companies have access to large amounts of real-world data to train agentic AI for our industries. Autodesk does. Second, context. Autodesk operates at the intersection of digital and physical worlds. This is one of the most complex real-world context in technology. When making inferences, agentic AI has to operate inside a live project where the correct answer depends on the design intent, current model state, regulations and standards, constraints, dependencies, permissions and approvals. Autodesk provides agents with this context. Decisions must be compliant, coordinated, traceable and reversible. Autodesk is a system of record where authoritative project and product context lives and where changes are executed, check and recorded. This makes Autodesk the natural control point for agentic workflows. Autodesk AI can propose and enable humans to verify and safely commit. Few companies understand this complex industry context across every discipline in the process. Autodesk does. And third, expertise. Specialized data and context are prerequisites, but so is specialized AI expertise. For almost a decade, Autodesk has been building a world-class AI team for 3D design, make and operate and cultivating a broad external ecosystem to support it. Over that time, we have built a strong reputation for having access to the right data, undertaking cutting-edge research and solving the most complex problems in 3D AI. With those strong foundations reinforced by Autodesk's unique purpose and culture, we have been able to attract and retain top talent and develop our own 2D and 3D multimodal models that understand how the world is designed and made. Few companies have been building their 3D AI capabilities, talent pool and ecosystem for almost a decade. Even fewer have sufficient breadth and depth of 3D AI capabilities and expertise to build on. Autodesk has and does. Data and context fuel the knowledge graph, which is foundational to any artificial intelligence. Data scarcity and context complexity makes the knowledge graph hard to replicate for our industries. Even with data and context, you need sufficient specialized expertise to generate unique and valuable intellectual property. And then you need an ecosystem of partners built around that intellectual property, as you saw recently with our investment in World Labs. Few companies have all this. Autodesk does. Let's move on to scaling and monetizing agentic AI. In preparation for the cloud and AI, Autodesk modernized its platform and go-to-market over the last few years, well ahead of industry peers. Few industry peers are ready for the business models and go-to-market motions that will monetize their AI-driven future. Autodesk is. We built a platform that provides the identity, permissions, geometry kernels, data models and compute infrastructure needed to deploy AI safely and at scale into design, engineering, manufacturing and construction environments. Platforms enable safety, innovation and efficiency at scale. Autodesk has built Autodesk Platform Services, APS, as an open platform that is purpose-built for an agentic AI world. It means we can ingest and process data more efficiently, accelerate our agentic AI innovation and deploy agentic AI solutions at scale. Few companies have built infrastructure specifically for our industries. Autodesk has. To summarize, building agentic AI for design and make requires data, context and talent. Scaling and monetizing it requires a platform and next-generation business models in go-to-market. Few companies have all these advantages. Autodesk does. It is not a coincidence. We have been preparing for and working towards the cloud and AI for more than a decade. While some new entrants have some of the required capabilities, they lack the data and context needed to deliver value. At Autodesk University and last year's Investor Day, we demonstrated how we're defining the AI revolution for our industries, empowering customers with new task, workflow and system automations and capturing shared value through subscription, consumption and outcome-based business models that blend human and machine capabilities. The pace of our innovation continues, and we have much more to share with you in the coming months. I've never been more confident in the long-term value we are creating for our customers, for the industries that shape the world and for you, our shareholders. Operator, we would now like to open the call up for questions. Operator: [Operator Instructions] Our first question comes from the line of Saket Kalia of Barclays. Saket Kalia: Andrew, maybe just to start with you. I want to zoom into your AI comments a little bit because I thought they were super interesting. When you think back to Investor Day last year, I think you talked about Autodesk's path to AI monetization, and today, you're talking about sort of the AI competitive moats. Could we maybe talk about where Autodesk fits into the broader AI ecosystem? And maybe specifically, how do you sort of see your relationship with the LLMs evolving over time? And how do those competitive moats maybe help balance that relationship? Sorry, there's a lot there, but does that make sense? Andrew Anagnost: Yes. That makes sense. Thank you for that question, Saket. It's a great question. Look, at a high level, it's not our goal to compete with the core capabilities of what the frontier models are good at. What our goal is, is to ensure that the combination of what the frontier models do, what an LLM does and what our proprietary foundation models do is always better than what a frontier model can do alone. And the reason we have so much conviction about that is really kind of the things I highlighted in the opening commentary, but I'll kind of go through it again a little bit here, right? It's the data, the context and the expertise. We are sitting on volumes, large volumes of data about real-world problems, real-world situations, real-world constraints that is simply very scarce and very hard to get access to. When you combine that with the deep context knowledge we have around design and engineering, into preconstruction planning and construction, into manufacturing and all the things that go into making something, you get this strong combination between data and context that's very difficult to replicate. And that's going to allow us to always kind of stay in front of what is going on in the horizontal and the base foundation models. And that's really our goal. Most companies in our industry are really going to struggle to do that because they don't have the volume of real-world data, they don't have the deep design and make context. We do, and we continue to use that and will continue to use that to stay ahead. Saket Kalia: Janesh, maybe for my follow-up for you. It was helpful sort of how you compare the guidance from -- for this year compared to last year at this time. Could we maybe talk a little bit about the absolute levels of prudence that you've incorporated into the FY '27 guide maybe compared to last year? And how you've sort of thought about that prudence over the year? Janesh Moorjani: Saket, I'm happy to talk about that. And maybe I'll just start by saying that the underlying momentum of the business remains really strong, and we see the demand drivers from fiscal '26 continuing this year here in fiscal '27. In terms of the guidance, as I mentioned in the opening remarks, like last year, we've reflected prudence in the guidance to reflect the temporary risk that we see to billings and revenue related to the sales optimization plan. But unlike last year, we have not reflected additional prudence for a new CRO or CFO. On the modeling and how that plays out over the year, we've assumed that there will be a short-term disruption in the early part of the year to billings growth from the sales restructure and then that assumption flows through rapidly to the underlying revenue growth later in the year. If I think about where those potential impacts might be, it will likely be out on new product subscriptions because on renewal billings, which is, as you know, the largest part of the business and then also on self-serve and EBAs, we expect those to be relatively unaffected. But absent that temporary disruption on new product subscriptions, we expect the underlying customer demand to remain strong throughout the year. Operator: Our next question comes from the line of Jay Vleeschhouwer of Griffin Securities. Jay Vleeschhouwer: Andrew, for you first. There are obviously many ingredients to your product-led growth, and you spoke about that, and it's certainly baked into your billings guidance. But I'd like to ask about two parts of that, one quite old, one very new. The older part is how you're thinking about the relative positioning of and development of Forma versus Revit? And the newer part is how you're thinking about what seems to be multiple opportunities to connect the World Labs technology into various parts of Autodesk, your data models, Tandem, Forma, et cetera, how you're thinking about that. And then secondly, as a follow-up, it's sad but true that you're going to be discontinuing the disclosure of direct and indirect percentages. So maybe take the opportunity to talk about your thinking of the role of the channel, the opportunities and priorities that you're setting for the channel from here and then perhaps also for the Autodesk Store. Andrew Anagnost: That sounded like 3 questions, but I'll treat it as 2. All right. First off, let's talk about the relative trajectory of Forma versus Revit. As you know, our industries evolve over time. Even with rapid technological changes, projects go on for months to years. There's a lot of complexity, older projects over their lifetime often go back on previous releases and all the things associated with that. So there's a rate and pace of technology absorption that's kind of unique to our industry. So when we look at the trajectory of Forma and Revit, there's a couple of things that are really important. One, Forma and the whole stack around Forma, from design to make, is going to be very much focused on the cloud and AI-enabled tools. Everyone is going to have access to the workflow tools, the agentic layer, that's the Autodesk Assistant, but some of these deep kind of model -- foundation model-driven workflows are going to be built into Forma and already are. Revit is going to benefit from all the workflow enhancements associated with, like I said, the agentic layer of the Autodesk Assistant, but it's also going to be tightly coupled to the workflow with Forma. And that's always part and parcel of how we think about things. We want to bridge the 2 worlds for our customers, so that as they go through their technical transition over many years likely, they have a clean path between these products and these products work together in a clean and powerful way throughout that whole transition. And it's very important to us, but look for a lot of the model-based agentic features to show up in Forma, the assistant-based workflow agentic layer will absolutely work across Forma and Revit. Now when you talk about World Labs, look, we're very excited about that investment. And we're excited to work with a deep technology company that's focused on something that we feel is really important. World models are important for physical AI because of their ability to spatially reason, reason about physics and also respond to real-world changes because of their awareness of what's going on in 3D. We see this as a fun foundational kind of horizontal technology that will power lots of solutions. It's starting in worlds that are associated with games and media entertainment, but there's so much more there, Jay. It will go deeper into initial architecture design, it will end up going into areas associated with digital twins, with factory automation, robotics, all of these things associated with that. So we're partnering them to bring that technology, first, into the media and entertainment space and kind of create workflows between Marble and our tools. But over time, look for us to engage more deeply with World Labs and connect their technology with our technology in all sorts of interesting ways, just like we do with the large language models today. And the last one, okay, sorry, that's right, a 3-part question. The direct, indirect piece, okay? So yes, you're right. We're not going to disclose that split because most everything is coming in direct to Autodesk now. It's an agency model. We're capturing things directly, and I think it's important to recognize that. So in terms of the channel incentives and the things that we're doing to change things, we're doing the exact same thing with the channel that we're doing with us. We're focusing the channel on new business creation, going after new accounts, going after expansion in existing accounts. Our channel is compensated that way now. Renewals are compensated lower. New business is compensated higher. Our sales force is compensated that way. So we have tight alignment on new business growth, both from new accounts and expansion between our sales force and our channel. And as a result, that will drive more of these numbers higher as time goes on. Operator: Our next question is from the line of Adam Borg from Stifel. Adam Borg: Andrew, obviously, you hit on AI in the prepared remarks and kind of the moats that you perceive Autodesk to have. And of course, AI has been on all of our software minds of late. But I'd like to just take a step back and when you speak to customers, where exactly are they in their AI journey? And what exactly is that they want Autodesk to help them with on this front? Andrew Anagnost: Yes. Look, the customers are -- especially in the GC and engineering community, they're exploring AI pretty aggressively right now, trying to understand what it can do and how it can help them. Absolutely, they want to see the complexity and time of creating a model to be reduced over time. But really, one of the things we're working on very closely with them is wrangling data and bringing data together in intelligent ways so that they can actually get insights and action things in an agentic way on top of complex data flows. And that's one of the areas we're engaged with a lot of customers. That's why you see engagement on platform services and people extending their environments and building, frankly, on top of our -- building very complex life cycle workflows on top of our APIs in our environment. So that's an area of strong engagement right now. Adam Borg: And then maybe as a quick follow-up for Janesh. Back at the Analyst Day, we talked about consumption mix of total revenue, I think, in fiscal '25, that was 17%. Any update you have for fiscal '26 and how we should think about this consumption-based mix over the course of the year? Janesh Moorjani: Yes, Adam, I'd say it was about similar. And just as a reminder, when we talked about this at Analyst Day, we said that EBAs were roughly 15% and the pure usage based, which is largely Flex, that was roughly 2%. So in the aggregate, it was about 17%, and that was for fiscal '25 and fiscal '26, I think, was roughly similar. That's what we saw here in the year. Operator: Our next question comes from the line of Joshua Tilton of Wolfe Research. Joshua Tilton: Huge congrats on a very strong end to the year. I have 2 questions. I'll ask them at once. My first question is, obviously, you can't help but notice that the revenue growth guidance for this year is starting at a higher point than you started the guidance for last year. Could you maybe walk us through some of the puts and takes for revenue growth maybe actually finishing the year above what you grew revenue last year? And then maybe my follow-up to that is in regards to Saket's question, when we weigh all the puts and takes that you discussed around the conservatism in the guidance, we put an equal sign after that. Does that equal guidance that is more conservative this year than last year, less conservative, similar conservatism? Just what's the answer to the question of what do all the puts and takes mean for conservatism this year versus last year? Janesh Moorjani: Josh, this is Janesh. I'll give you a single answer to both of those questions, which is, overall, when I step back and think about fiscal '26, we were very pleased with how the business performed. And you saw that across the quarters. That strength reflected the broad momentum that we've got and strong execution across the entire portfolio. The current year guide primarily reflects the prudence for the near-term go-to-market optimization. And that impacts billings in the early part of the year with the flow-through to revenue over time. Ultimately, remember that the new transaction model and the go-to-market optimization are really both designed to improve our long-term new business capture. That's been the core thesis that we've shared before. We remain confident in it for the long term, but we are staying disciplined about what we assume in the near term. Operator: Our next question comes from the line of Jason Celino of KeyBanc Capital Markets. Jason Celino: I have 2 questions. Maybe the first one for Andrew. It's an AI question, sorry, but it's not about competition or moat. But maybe a scenario in which AI actually works in architects and civil engineers become efficient and so efficient that these customers don't need to grow headcount, how much has the industry grown head count historically? And if that's able to be applied to Autodesk growth? And then what happens in a scenario where the AI efficiency is what we kind of think it might be and how might that affect your future growth opportunities, if that makes sense? Andrew Anagnost: Yes. No, that absolutely makes sense, Jason. So first off, I just want to make sure that you understand, in our industry, we have a fundamental capacity problem. There is not enough capacity in the ecosystems that we serve to build everything that needs to be built and rebuild everything that needs to be rebuilt. When capacity is sucked up in one area, it takes away from other areas. So remember, there's this underlying capacity problem, not enough money, people, materials to build and rebuild everything. When you look at the way we're moving forward, we absolutely want fewer people per project because we want our customers executing more projects. There's plenty of demand for projects out there. So at a kind of a task-based automation level, right, the kinds of things that you're seeing us do right now around speeding up modeling activity and things like that, that's kind of improving the core value of a seat of software. And we don't expect seats to go away anytime soon. There will be a solid core of seats, but the task-based automation is going to add to the value of that seat. That seat is going to get more valuable as we enable one person to execute on more aspects of a project. So again, it's fewer people for projects, more projects executed at the task-based level and at a seat-based level. The important thing to recognize -- wait, there's something else here, okay? I wanted to talk about the workflow automation a little bit, Jason, because as we move into workflow automation, basically with the agentic layer of the Autodesk Assistant, we're actually monetizing the project now, not just the task that individuals are doing, but the whole disciplines across the project. As you know, we already deliver project-based pricing around construction. We deliver site-based pricing and consumption-based pricing. We're going to monetize more of that project activity through consumption as we reduce the number of people working per project will monetize other aspects of the cross-disciplinary nature over the project. And that's important to recognize because that expands our TAM. And the last piece, and if you have a follow-up, that's fine, is around the systems automation. When you get to the level of systems automation, you certainly help with the individual and the project, but you also get into the wallet of the person paying for the project, the owner. And that puts you in a position where you've actually expanded your TAM deeper into the actual kind of total spend on the project, the total spend on the product, what the end user or the owner or the operator wants to get out of that product. So multiple avenues for us to monetize agentic AI across that entire process from task workflow to system. Jason Celino: Interesting. Yes, maybe we can explore it in another instance, but yes, it seems quite incremental. And then my one follow-up for Janesh is quick. It sounds like Q4 benefited from some better linearity. Maybe is it possible to understand like what happened where some deals from Q1 closed earlier in Q4. It's just when I look at the implied Q1 guide ex-currency, ex-model transition benefit, looks like it's deselling by 4 or 5 points. So curious if there was any details on that. Janesh Moorjani: Yes. Jason, I'm happy to provide some color there. Q4 was a very strong quarter, as you noted, and we're very pleased with that momentum. In terms of the exit rate of 14%, there's 2 factors that I'd call out. First off, for fiscal '27, recall that we've got this near-term impact to billings that has some impact on revenue, not only for the full year, but it has some impact on revenue growth in Q1 itself. So that's something to consider. And also, Q4 benefited from lapping an easier fourth quarter from the year ago period. So that's also something you need to adjust for when you look at that 14%. But overall, when I look at our momentum, and I look at the underlying strength of the business and the improvements we've made in the go-to-market model, we feel very good about where the business is today. Operator: Our next question comes from the line of Bhavin Shah of Deutsche Bank. Bhavin Shah: I have 2 as well. I guess, first, either Andrew or Janesh. I think you guys have been pretty clear about the continued need to optimize the sales organization and changing up the incentives with the partners. And I know you talked this an account with your guide. But maybe can you talk operationally, what are you guys doing to help mitigate any impact that might have any disruption there? How do you make sure that renewal activity is healthy as you kind of incentivize new business? Janesh Moorjani: Yes, I'm happy to take that. We -- when we made the changes to the partner compensation plans for fiscal '27, that was for the partners that are operating in the new transaction model. And just as a reminder, this has all been part of our broader plan around incentivizing partners to focus on more new business, and it's really been a core element of our overall new transactional model thesis. And so the change that we made was to increase the incentives on new business and reduce the incentives on renewals starting fiscal '27 with the goal of keeping the total dollars unchanged. And as part of that, we did -- we were aware that there might be opportunity for people to think about the timing of transactions, and we did put operational guardrails in place with the partners to try and avoid that kind of activity. And so we actually saw those work quite effectively. There are some early renewals that happen every year. But here in Q4, those were not remarkably different than what we typically see. They were not a significant contributor to the outperformance in the quarter. And also, as you know, early renewals don't even impact revenue. So we really didn't see any impact from pull forwards or early renewals associated with that activity. Bhavin Shah: Got it. And maybe, Andrew, look, as you have a conversation with customers this quarter, particularly your larger EBA customers that are looking to expense Autodesk for multiple years. What are the types of things that your customers are asking you to help solve that might be different than what they were maybe a year or 2 years ago? And how is that helping inform your product road map into the future? Andrew Anagnost: Yes. So look, as we've moved more across design and make and deeper into each aspect of those, customers are really kind of asking us for what we're classically calling convergence. They want us to kind of stitch the glue together between those things. They want fast feedback between a design decision and a make decision, between a make decision and a design decision and they want some kind of agentic layer that helps them sort through the noise and helps them get to what's right, what's wrong and how do we quickly focus on the thing that needs to be changed so that they reduce downstream risk later. That's the kind of things we're digging into. That's why people are investing more and more in what we're doing because of the way we've connected design and make together across the whole life cycle. Operator: Our next question comes from the line of Joe Vruwink of Baird. Joseph Vruwink: I asked a long-winded question, so I might have ask 2 separately, but I wanted to start with Autodesk Platform Services. It's certainly being put to good use now within how a lot of customers are thinking about AI projects. And I specifically wanted to ask about the new monetization strategy you've launched around customers opting into their intended API use. When you think about just how those bundles are being priced, are they priced initially to drive adoption, so we might not see like a discrete uplift factor you're calling out in FY '27. But if you do your job that might very well contribute to growth in, let's say, FY '28? Andrew Anagnost: So API monetization is very much specifically targeting machine usage of our IP. So someone that's doing a lot of 24/7 compute and access of some of our more complex APIs. We actually have customers that do that. Remember, when they call an API, they're not just pulling a piece of data, they're actually calling some functionality that sits on our cloud. And some of our customers have been doing fairly sophisticated things running these tools over and over again through large periods of time. So we're targeting monetizing that machine usage. And frankly, in Q4, we already had some customers lean in and pay up on the consumption model around API usage that was driving a lot of value inside their accounts. So positive early signs on that. But remember, there's not a lot of customers doing that yet. We're just getting ready for that future where people are driving a lot of machine usage. We don't want to get in the way of the people running regular usage, adopting, integrating and using our APIs in ways that are not agentic or machine-driven. So that's where we're at right now, and we're already seeing customers kind of engaging with us on some of these areas of deep machine execution. Joseph Vruwink: Okay. And that kind of gets to my second question but a lot of your larger customers, they already have in-house development teams with Autodesk Centers of Excellence. I'm just thinking about the AI risk narrative that customers can go and build whatever they want. Well, you kind of allowed them to build a lot of what they want, but it's all complementary to Autodesk. Does that change anytime soon? Or are you actually seeing this whole strategy drive usage into your kind of mainstay products. And so it ends up kind of lifting all boats, if you will. Andrew Anagnost: Yes, it's absolutely the latter. What we're seeing is the customers are leaning into using these APIs to actually build solutions that they might have used behind the firewall solutions for in the past. And that's true in both the AEC base and the manufacturing base, kind of old behind the firewall, kind of rigid, inflexible implementation, they're kind of dying. I like to call them my next dead thing working. I used to talk about files being dead thing, working now. Now behind the firewall implementations and complex rigid systems with dead things working. And I think our customers are exploring our APIs and our IP in really elastic ways to try to build solutions on top of what we've built so that they can kind of do things that they used to bring in large vendors to do with complex back-office implementations on our stack, which is lifting the rest of our stack up with it. Operator: Our next question comes from the line of Ken Wong of Oppenheimer & Company. Hoi-Fung Wong: Andrew, can you talk about the go-to-market optimization that you're putting in place in '27, the commission changes, the direct sales restructuring, like how much of these actions were originally in the blueprint? How much of it is because observations from '26, whether it was execution or the really strong results help inform these particular changes? Andrew Anagnost: Yes, Ken, for the most part, these were part of the original blueprint, right? We knew that we had a series of goals we wanted to accomplish in terms of driving go-to-market efficiency. We knew that we were highly focused on renewal optimization, renewal automation, reducing overlap of resources on renewal activities so that we could more efficiently bring in the renewal dollars, and we knew we wanted to shift money to new business development and new business acquisition. So these were really basically baked into our thinking from the get-go in terms of how we were phasing out our go-to-market optimization. Hoi-Fung Wong: And then, Janesh, just a follow up on that. In terms of the 7% reduction in force, how should we think about the reallocation of those resources? I'd assume a few people have done math and would have assumed a little bit more on the margin profitability side, but it looks like it's reinvested in the business? Janesh Moorjani: Yes, Ken, we guided to 75 basis points of improvement year-over-year, and that's on the back of very strong outperformance in fiscal '26. That reflects both the underlying operating leverage and also the savings from the restructuring. And as you noted and as we mentioned when we announced the restructuring, we are making planned investments back into the business as well. And then also, as a reminder, we've got roughly 1 additional point of headwind from the new transaction model. So that's something else to factor into. And then finally, I'll just point out on the overall operating margin is that we've also reflected the prudence that we embedded on the revenue guide. We've reflected that as it flows through to the operating margin as well. So that's something else to factor in. Operator: Our next question comes from the line of Alexei Gogolev of JPMorgan. Alexei Gogolev: Andrew, in some of the recent comments that you made, you were talking about the upside from data centers. I was wondering if you could talk a bit more where you think this upside could come from. Are the design centers increasing seats or are there new products being sold, new design teams being built? Because my thinking is that some of those projects are quite penetrated among the customer base and all these well-known architect teams, they probably already have Autodesk. So where would this upside come from? Andrew Anagnost: Yes. The data center projects are driven by very sophisticated owners. So a lot of what's happening is that the owners are buying more of our suite to manage the design and the execution of these projects. And that's actually getting deeper into the supply chain. We expect the demand for data centers and tools for data centers to continue into several years from now. But remember, when that demand shifts, it opens up capacity for other types of projects that come in, like there's lots of infrastructure projects in the U.S. that I guarantee you are being stalled by the fact that capacity is being consumed by data center work right now. But the owners are driving a lot of the adoption of technology, and they're looking at the design through make cycle. Like I said, they're very sophisticated operators, and they buy very sophisticated tools and they go deep into the process across our entire stack. Alexei Gogolev: Janesh, very quick question on free cash flow. So you mentioned that there will be a restructuring charge, partially offset by cash tax benefit from OBBBA. So these net effects of the cash movements, they seem to be somewhat immaterial for fiscal '27. But does this mean we should see a step up in free cash flow margin and free cash flow conversion in fiscal '28? Janesh Moorjani: One of the important things to keep in mind about '28, Alexei, is that our federal tax payments will begin to normalize from fiscal '28. So you just need to factor that in discretely. Operator: Our next question comes from the line of Tyler Radke of Citi. Tyler Radke: So just a follow-up on sort of the underlying growth. So obviously, there was some upfront benefits and billings linearity benefits exiting this year. But as we think about that drop-off implied in the guide, can you just help us understand how much is sort of driven by the go-to-market changes in that restructuring? And I guess, specifically, like what are the biggest risks this year that you didn't maybe necessarily see pan out in Phase 1 of the restructuring? And then are you thinking about sort of the data center contribution similarly for this year? Or should that be an incremental tailwind just given we're all seeing CapEx numbers go up into the right? Janesh Moorjani: Yes. Tyler, this is Janesh. Maybe I'll take that. So a couple of thoughts on the 14% for Q4 and comparing that to the Q1 growth rate. As I mentioned earlier, there's 2 things to keep in mind. One is that the 14% laps a really easy fourth quarter from last year. So that's just something that you need to account for. It's naturally a higher number than you saw in Q1, Q2 and Q3 of last year. And then if I -- the other factor is that there is an impact to revenue growth in Q1 from the go-to-market changes that we have assumed. The reason that -- or the difference between this restructure and the prior one is that the earlier restructure that we had about a year or so ago, that focused primarily on non-selling roles, and most of those were in marketing and customer success and sales operations. In this restructuring, as we mentioned, when we announced it, the majority of the impact is actually in customer-facing sales roles. So when you have that, there's always a natural level of disruption that happens associated with that, and that's just something that we needed to discretely call out and consider here in the guidance. And then I'm sorry, what was the second part of your question? Tyler Radke: Yes. It was just around the -- obviously, the data center as an end market has been strong. Like how are you thinking about that for next year? Is that going to be a sort of a greater percentage of your end market or business? Janesh Moorjani: Yes. It's -- we've been very happy with the momentum we've seen in data centers for a few quarters now. But as Andrew said just a couple of minutes ago, for us, the way we think about this is, our industry is fundamentally faced with capacity and productivity challenges. And when demand shifts to one part of the industry, if for any reason that demand erodes, then the capacity shifts elsewhere. So we think of it in the aggregate and think of it as a shift more than anything else. Data center, the business has been great. We'll continue to see how that contributes to the business in fiscal '27. We saw some strong business close here in fiscal '26 by way of demand from -- for cloud from customers that are building out these data centers. And then longer term, that ultimately translates into an opportunity even for operations, which we've talked about externally before. Tyler Radke: And then just a quick follow-up for Andrew. Post the World Labs investment, are there sort of other partnerships and investments that we should be expecting you to make? Or do you sort of feel like that sort of has you covered at least for now, obviously, a rapidly evolving market? Andrew Anagnost: Yes. Look, it is a rapidly evolving market. In terms of big partners that we'll be engaging with, World Labs is a pretty significant one. But look for us to lean into the operations space in an interesting way, very similar to what we did in construction following a very similar playbook so that we can kind of move quickly and start to turn that opportunity into even a greater life cycle opportunity for Autodesk moving from like months to years of engagement on projects to decades. Operator: Our next question comes from the line of Michael Turrin of Wells Fargo. Michael Turrin: Just one for me, apologies for being on mute. Just the manufacturing segment accelerated to now above 20% growth. Can you speak to what's driving the strength there? And I'm curious if it's all correlated with some of the emerging markets commentary that you're making? Or just any other just kind of supporting details you can provide there? Janesh Moorjani: Yes. Overall, what I'd say is manufacturing continued to perform well for us. The make business in the aggregate performed well. You saw that with 23% growth, which includes construction and Fusion. Construction revenue actually accelerated during the quarter. Some of the trend -- the underlying trends that we've seen earlier in the year by way of the strengthened demand, those continued. We continue to focus on our strategy of continuing to drive multi-seat adoption in manufacturing accounts. And then we also continue to see strong adoption of some of the features like we talked about the AutoConstrain feature and provided some statistics on that. So we're seeing great adoption there, too. Those are some of the things I would call out. Operator: Thank you. And ladies and gentlemen, that is all the time we have for Q&A today. I would now like to turn the conference back to Simon Mays-Smith for closing remarks. Sir? Simon Mays-Smith: Thank you, Latif, and thanks, everyone, for coming along. We look forward to seeing many of you over the coming weeks. If you have questions, please just ping me or the Investor Relations team, and we look forward to catching up again next quarter. Thanks so much. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the Curaleaf Holdings' fourth quarter and full year 2025 conference call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Camilo Lyon, Chief Investment Officer. Please go ahead. Camilo Russi Lyon: Good afternoon, everyone, and welcome to Curaleaf Holdings' fourth quarter and full year 2025 conference call. Today, I am joined by Chairman and Chief Executive Officer, Boris Jordan; and Chief Financial Officer, Ed Kremer. Before we begin, I'd like to remind everyone that the comments on today's call will include forward-looking statements within the meaning of Canadian and United States securities laws, which, by their nature, involve estimates, projections, plans, goals, forecasts and assumptions, including the successful integration of acquisitions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements on certain material factors or assumptions that were applied in drawing a conclusion or making a forecast in such statements. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information about the material factors and assumptions forming the basis of the forward-looking statements and risk factors can be found in the company's filings and press releases on SEDAR and EDGAR. During today's conference call, in order to provide greater transparency regarding Curaleaf's operating performance, we will refer to certain non-GAAP financial measures and non-GAAP financial ratios that involve adjustments to GAAP results. Such non-GAAP measures and ratios do not have a standardized meaning under U.S. GAAP. Any non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by U.S. GAAP, should not be considered measures of Curaleaf's liquidity and are unlikely to be comparable to non-GAAP financial measures provided by other companies. Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable U.S. GAAP financial measure under the heading Reconciliation of non-GAAP Financial Measures in our earnings press release issued today and available on our Investor Relations website at ir.curaleaf.com. With that, I'll turn the call over to Chairman and CEO, Boris Jordan. Boris? Boris Jordan: Thank you, Camilo. Good afternoon, everyone, and thank you for joining us to discuss our fourth quarter and full year 2025 results. We closed 2025 with clear momentum, delivering fourth quarter revenue of $333 million, our strongest performance in 6 quarters. Revenue increased 5% sequentially and 2% year-over-year, bolstered by a broad-based return to growth in nearly all of our domestic markets despite a persistently challenging pricing environment. Our international team closed out an impressive year with $51 million in the fourth quarter revenue, representing 10% sequential growth and 65% year-over-year revenue growth. Adjusted gross margin expanded to 49%, up 20 basis points from last year as the benefits from productivity gains in our cultivation facilities outweighed price compression. Adjusted EBITDA totaled $69 million or 21% of sales, inclusive of a 120 basis point drag from international. Operating and free cash flow from continuing operations were $42 million and $25 million, respectively. That's after paying $39 million in acquisition-related debt during the quarter. For the full year, revenue reached $1.27 billion with adjusted gross margin of 50% and adjusted EBITDA of $275 million or 22% of revenue. We generated $152 million in operating cash flow and $89 million in free cash flow from continuing operations, while ending the year with $102 million of cash on the balance sheet. These results were delivered despite a third consecutive year of double-digit price compression, underscoring the strength, discipline and resilience of our operating model and the success of our return to Roots plan. Reflecting on the progress we made in 2025, we took decisive actions to fundamentally reset and strengthen the business. First, we transformed our cultivation network. Through disciplined execution and best practice standardization, we doubled yields across our facilities, materially lowering production costs and mitigating the impact of sustained price compression on margins. Importantly, this increase in output did not come at the expense of quality. By leveraging genetics from Dark Heart, we significantly improved flower quality, consistency and strain diversity. In the fourth quarter, average flower potency across our facilities reached 31%, the highest level in our history. This combination of higher yields and higher quality represents a structural improvement in our cultivation platform, not a temporary gain. Second, we overhauled our buying, planning and merchandising functions to better align supply with demand at the local level. The impact was immediate, particularly in Florida, where stronger product allocation discipline paired with consistency -- consistently higher quality flower drove meaningful improvements in conversion, traffic and customer satisfaction. This created a virtuous cycle of stronger sell-through, improved in-stock positioning and enhanced customer loyalty. We are now systematically replicating this playbook across our other states, and we are encouraged by the early traction. We believe there remains substantial runway to unlock incremental productivity and same-store growth. Third, we accelerated innovation across our product portfolio. In April, we launched Anthem Classic, our cigarette style pre-rolls in select markets to overwhelming consumer response. We followed that in September with Anthem Bold, our infused pre-roll line, which has also exceeded expectations. Demand has consistently outpaced supply. In less than a year, Anthem has become a top 5 national pre-roll brand in its 4 launch markets: New York, New Jersey, Illinois and Arizona, demonstrating the strength of our innovation engine and brand-building capabilities. These initiatives represent just a portion of the foundational work completed in 2025. We are now seeing the benefits of flow-through the P&L in the form of improved margins, stronger sell-through and organic growth momentum. Importantly, we believe there remains significant opportunity to further amplify these gains as we continue to scale the operating discipline and innovation framework we have put in place. While price compression continues to impact most markets, we believe 2025 represents the trough. Structural changes to the industry, most notably the federal hemp ban scheduled to take effect in November are expected to materially alter market dynamics. Over the past 3 years, we believe the regulated cannabis market was disrupted not by excess cultivation capacity, but by the rapid proliferation of low-cost, lightly regulated hemp-derived THC products that could be shipped nationally. As this loophole closes and consumers migrate back to the regulated dispensary channel, we expect demand to normalize, pricing pressures to abate and the industry to return to a more rational and sustainable pricing environment. A defining moment for the U.S. cannabis industry occurred last December when President Trump issued an executive order directing the reclassification of cannabis from Schedule I to Schedule III. This is the most consequential federal action taken on cannabis in the last 55 years. When, not if the final rule becomes effective, which we expect to occur ahead of the midterm elections, it will serve as the foundational catalyst for broader reform. Momentum from rescheduling will bring us closer to a U.S. exchange uplisting, expanded access to money center institutions and credit card usage, which will create a fundamentally improved operating and capital markets landscape. These anticipated regulatory and capital market improvements are already driving increased consolidation across the sector. We are seeing this primarily through asset sales by undercapitalized operators, targeted bolt-on retail acquisitions by scaled platforms seeking to leverage their fixed infrastructure and smaller category-specific brands merging to achieve scaled operations. As a result, we expect industry consolidation to accelerate meaningfully in 2026, led by a few operators of which Curaleaf is one, with strong balance sheet, access to capital and proven execution. We have built our business through both organic and acquisitive means and will leverage investor appetite to partner with scaled operators to further increase our leading position in the market. In support of this opportunity set, last week, we completed the refinancing of our $475 million senior secured notes maturing on December 15, 2026 of which $457 million was outstanding, issuing a new $500 million senior secured note with a 3-year maturity at an 11.5% coupon due February 18, 2029. This landmark transaction sets a new precedent as the largest transaction in U.S. cannabis, extends our runway and significantly enhances our financial flexibility. I am pleased with the strong demand expressed in our offering from both new and existing investors, demonstrating the growing institutional interest, not only in Curaleaf but also the broader cannabis industry. With this refinancing complete, we are well positioned to pursue growth initiatives while maintaining disciplined capital allocation. With our debt refinancing and Return to Our Roots plan now complete, we have decisively reset the foundation of our business. We have strengthened leadership across critical functions, embedded data-driven decision-making and sharpened operational execution. Our strong fourth quarter performance reflects the evolution of our Built for Growth initiative, driving organic growth through the -- through high-quality brand portfolio, premium customer experiences and operational excellence. We believe this positions the company for sustained growth and value creation as industry conditions improve. Importantly, the results we delivered in the fourth quarter provide tangible proof points that reinforce our conviction in the direction we are heading. During the quarter, the Curaleaf family of brands captured the #1 overall market share position according to Hoodie Analytics, with Select maintaining its #1 ranking in the vape category. These outcomes are a direct result of disciplined execution and brand focus, and they reflect the collective efforts of our employees across the organization who consistently support our portfolio of brands and deliver high-quality service to our customers. Domestically, our fourth quarter year-over-year outperformance was driven primarily by strength in Ohio, Utah, Pennsylvania and Florida, each a clear example of our operating [ lease, net ] translating into tangible results. Ohio continues to benefit from its transition to adult use, coupled with the successful ramp of 2 new stores. Early performance has exceeded expectations, reflecting both favorable market dynamics and disciplined execution at the store level. Utah remains a healthy and stable medical market, where we are gaining share through increased consumer adoption of our brand portfolio and expanded wholesale penetration. Our focused approach to product mix and distribution continues to unlock incremental growth. Pennsylvania delivered strong performance throughout the year, driven largely by the consistently high-quality flower output from our cultivation network. The improvements we made in yield, potency and strain diversity have directly translated into stronger sell-through and brand loyalty. Similarly, Florida's resurgence is directly tied to a step change improvement in our flower quality and in-store execution. As product consistently improved, we saw corresponding gains in traffic, conversion and customer satisfaction, validating the structural work completed earlier in the year. I would be remiss if I didn't highlight that we believe is one of our most significant and fastest-growing opportunities in 2026, New York. After growing our business in the state by 14% last year and achieving the #1 overall brand share position, we have established a leadership platform in one of the most important emerging adult-use markets in the country. We are now intensely focused on extending that leadership by becoming the brand house of choice for wholesale partners statewide. Our portfolio is uniquely positioned to capture growth across multiple segments with Anthem driving momentum in pre-rolls, Select strengthening our vapes and Dark Heart elevating our premium flower offering. As distribution expands and market infrastructure matures, we believe our scale, brand equity and execution discipline position us to capture disproportionate share as the market ramps. New York represents not only a near-term growth catalyst, but a strategic long-term value driver within our U.S. portfolio. The common thread across all these states is clear: high-quality products, disciplined execution and elevated service levels. That formula is repeatable, scalable and central to how we intend to drive performance in 2026. Innovation remains a core driver to our growth strategy. To expand our addressable market and attract new customers, we must consistently lead with differential products, new flower genetics, advanced delivery technologies and category-defining formats that elevate both quality and customer experience. As part of that commitment, next month, we will launch Briq 2.0, the next generation of our highly successful vape platform across 13 states. Building on the strong performance of Briq, this upgraded version enhances functionality, reliability and overall user experience, positioning us to further strengthen our share in the vape category. In parallel, we are expanding Dark Heart as our flagship premium flower offering, reinforcing our ability to compete at the high end of the market with differentiated genetics and superior consistency. We will share more details on that expansion in the coming months. Our objective in every category we enter is not simply participation but leadership through uncompromising product quality and a superior customer service. Sustained focus and disciplined execution against these principles will enable durable market share gains, stronger brand equity and long-term value creation for shareholders. Curaleaf International delivered another exceptional revenue quarter, generating revenue of $51 million, an increase of 65% year-over-year and putting the business on an annual run rate of over $200 million, led by strong performance in Germany and the United Kingdom. This momentum reflects the strength of our differentiated platform across key European markets. In Germany, not only are we the largest supplier of flower to the market, but also consumer demand remained robust for our portfolio of brands. Our value tier brand, [indiscernible] continued to gain traction with cost-conscious patients, while our [ QMID ] vape, the first medically approved inhalation device also benefited from strong consumer adoption. Germany remains one of the most dynamic and scalable medical markets in Europe, and we are well positioned across both premium and value tiers to further leverage our strong market position. In the U.K., Curaleaf Clinic expanded its active patient count once again, reinforcing our #1 market share position. The U.K. continues to be a steady, consistently growing market for us, underpinned by disciplined patient acquisition, high retention rates and vertically integrated operations that leverage technology. Elsewhere, Poland began to recover meaningfully following the easing of our prior regulatory restrictions on telemedicine. Patient access has improved, demand trends are strengthening, and we are seeing tangible momentum reemerge, positioning the market for continued growth as we move into 2026. In Australia, we are prioritizing expansion in 2026 by leveraging our European innovation pipeline to introduce new products tailored to local demand. We see a clear opportunity to capture incremental market share through product quality, brand positioning and disciplined commercial execution. Collectively, these markets demonstrate the breadth and resilience of our international platform. They provide multiple growth vectors and reinforce our ability to allocate capital towards markets with favorable regulatory trajectories and attractive long-term returns. Turning to Four 20 Pharma, our premium German brand. As anticipated, the put option on the remaining 45% ownership stake was exercised, and we will fully own the business and the brand. Upon closing, we will have 100% ownership of our international operations following the buyout of our minority partner in Curaleaf International last summer. Full ownership meaningfully simplifies our corporate structure, enhances transparency around the performance and valuation of our International segment. This is particularly relevant in the recent cross-border transactions between Canadian and German operators, which have helped clarify valuation benchmarks in the European market. With complete control of our international platform, we are better positioned to drive strategic alignment, capture full economic upside and maximize long-term shareholder value. Turning to new international [indiscernible] in France and Turkey. Regulators in each country are actively advancing rule-making process that will define their respective medical cannabis frameworks. In Spain and France, we could see programs commence as early as the fourth quarter with initial commercialization centered predominantly on extracts and distribution expected through hospital pharmacy channels. In Turkey, we currently anticipate a program launch in the first quarter of 2027, while precise timing remains subject to regulatory finalization, progress continues to move constructively. As we have seen across other European markets, these programs are likely to begin modestly in scale before ramping over time as patient enrollment expands, supply chains mature and regulatory clarity improves. Importantly, as form factor restrictions evolve beyond extracts and access broadens, we expect growth trajectories to accelerate meaningfully. Over the longer term, we believe these markets will -- markets with a combined population of over 200 million people have the potential to become significant contributors to our international business, reinforcing our first-mover advantage and disciplined expansion strategy in Europe. In light of the restrictive regulatory challenges affecting hemp-derived THC products expected to take effect later this year, we made the deliberate decision to discontinue our hemp business. The revenue impact was de minimis as the business was still in its early start-up phase. Similarly, we also decided to exit Missouri, a state in which we were subscale producers of formulated products with no vertical presence. These decisions reflect our disciplined approach to capital allocation and our focus on opportunities where we have scale, visibility and clear path to attractive returns. While we believe there may be ultimately a role for hemp-derived THC beverages within the broader consumer landscape, the timing, regulatory framework and economic parameters of that category remain highly uncertain. That said, consumer adoption of alternatives to alcohol continues to accelerate, representing a meaningful long-term trend. We will continue to monitor regulatory developments closely, including ongoing discussions among members of Congress, and we will reassess our participation if and when the category evolves into a more defined regulated economically compelling opportunity. 2025 was a pivotal and highly productive year for our company. We executed a necessary and comprehensive reset of the business. And with each successive quarter, our Return to Our Roots plan gained traction and delivered measurable results. That work has now established a structurally stronger, more disciplined operating foundation. We are transitioning from stabilization to acceleration with our Build for Growth strategy. By leveraging the platform we have strengthened, improved cultivation economics, tighter merchandising discipline, brand-led innovation and enhanced execution, we are positioned to drive sustainable organic growth. At the same time, we will remain disciplined but opportunistic in pursuing acquisitions that enhance scale, expand capabilities and accelerate market share gains. Together, these initiatives position us to capture incremental share in 2026 and beyond. As the global leader in cannabis, we recognize our responsibility to advance the industry across regulatory environment, responsible adoption and scientific research, areas where we will continue to commit capital. I want to recognize and thank our global team for the extraordinary focus and execution over the past year. Their commitment has reshaped the business and built a foundation capable of supporting growth, both domestically and internationally. With that foundation now firmly in place, I'm confident in our trajectory and energized by the opportunities ahead. With that, I'll turn the call over to our CFO, Ed Kremer. Ed? Edward Kremer: Thanks, Boris. All my comments will reflect continuing operations, which exclude Hemp and Missouri, 2 business units we exited in the fourth quarter. Total revenue for the fourth quarter was $333 million, representing 5% sequential growth and a 2% increase compared to the same period last year. Strength was broad-based as most of our markets saw sequential growth led by Ohio, International, Florida and Pennsylvania. International revenue grew by 65% year-over-year, driven primarily by Germany and the U.K. By channel, retail revenue was $237 million compared to $247 million in the fourth quarter of 2024, a decline of 4% year-over-year, partially offset by strength in wholesale, which increased 15% year-over-year to $91 million, representing 27% of total revenue. The robust momentum in wholesale was driven by market share gains in Curaleaf International, a strong recovery in Massachusetts, strong sell-through and reorders in Arizona and Ohio, all supported by the increased quality and product availability of our brands. For 2025, total revenue was $1.27 billion. Retail revenue was $923 million, while wholesale revenue was $332 million. We opened a total of 9 new dispensaries, including 5 in Florida, 3 in Ohio and 1 in Maine. International revenue of $172 million grew by a very healthy 63% over 2024. The work our commercial and operations teams accomplished in 2025 resulted in the strong market share position we maintained throughout the year. In the fourth quarter, that work to prioritize high-quality flower culminated in the Curaleaf portfolio of brands reaching the #1 share position according to Hoodie Analytics data. What's more, Select continued to command the #1 vape share in the market. Our relentless focus on quality and innovation are pillars for us to build long-term durable brands and consumers will see more of this innovation in 2026. Fourth quarter adjusted gross profit was $162 million, resulting in a 49% adjusted gross margin, an increase of 20 basis points compared to the prior year period. Continued productivity and efficiency gains in our cultivation facilities were the primary drivers of the margin expansion, partially offset by pricing pressure. These gains were partially offset by price compression and higher utility expenses. For the year, our adjusted gross profit was $633 million, resulting in a 50% adjusted gross margin, an increase of 150 basis points compared to the prior year. SG&A expenses were $111 million in the fourth quarter, an increase of $11 million from the year ago period. Core SG&A, which excludes add-backs, was $107 million, an increase of $10 million from the prior year. The year-over-year increase in our core SG&A primarily reflects international expansion and new store openings in Florida and Ohio. Core SG&A was 32% of revenue in the fourth quarter, a 260 basis point increase compared to the prior year due to aforementioned investments. For the year, SG&A and core SG&A was $428 million and $413 million, respectively. As a percent of sales, core SG&A was 33%. Fourth quarter net loss from continuing operations was $49 million or a loss of $0.06 per share. Excluding onetime noncash impairments of $6 million, adjusted net loss from continuing operations was $39 million or a loss of $0.05 per share. For 2025, net loss from continuing operations was $202 million or a loss of $0.26 a share. Excluding onetime noncash impairments and other add-backs, adjusted net loss from continuing operations was $176 million or a loss of $0.23 per share. In the fourth quarter, adjusted EBITDA was $69 million, a decrease of 9% compared to last year. Fourth quarter adjusted EBITDA margin was 21%, a decrease of 260 basis points versus last year. Our International segment profitability is improving. However, margins remain below the corporate average and thus weighed on fourth quarter EBITDA by 120 basis points. The year adjusted EBITDA was $275 million, and adjusted EBITDA margin was 22%, a decrease of 100 basis points compared to the prior year. Turning to our balance sheet and cash flow. We ended the quarter with cash and cash equivalents of $102 million. Inventory increased $8 million or 4% compared to last year's fourth quarter due to growth in our International segment. Our domestic inventory decreased 2% compared to last year. Operating and free cash flow from continuing operations were $42 million and $25 million, respectively. For the full year 2025, we generated operating and free cash flow from continuing operations of $152 million and $89 million, respectively. Capital expenditures in the fourth quarter were $17 million, bringing the total spend for the year to $63 million. The expenditures were driven by investments of facility upgrades, retail dispensary openings and IT infrastructure projects. For 2026, we expect capital expenditures to be approximately $80 million. The primary buckets of investment include international, automation, relocation and renovation of existing stores, coupled with at least 10 new dispensary openings in select locations, IT infrastructure and expenses associated with the relocation of our corporate headquarters. Our outstanding debt at quarter end was $549 million. During the year, we reduced our acquisition debt by $57 million. Last week, we completed the refinancing of our $475 million senior secured note due December 2026 with a $500 million, 11.5% senior secured note due February 2029. This highly successful and oversubscribed transaction extends our maturities, gives us ample financial flexibility and allows us to fund the buyout of the put option for the remaining 45% of the Four 20 Pharma business in Germany, we did not own. Once that transaction is completed, we will own 100% of our international business. Turning to guidance for the first quarter. Due to normal seasonality, we expect total revenue to be down mid-single digits sequentially from the fourth quarter. And with that, I'll turn the call back over to the operator to open the line for questions. Operator: [Operator Instructions] And the first question will come from Aaron Grey with Alliance Global Partners. Aaron Grey: Nice finish to the year for 2025. I want to talk a bit about pricing pressure and outlook. Boris, you spoke to another year of double-digit pricing pressure. So I want to get some color in terms of your outlook for 2026 on pricing, if you're starting to see some price stabilization in certain markets? And then second part to that question, just relating to your comfort in terms of having levers available to offset the pricing pressure as we saw in 2025, albeit from your back to Roots initiative or yield improvements. Boris Jordan: Aaron, thank you. Yes, we continue to see pricing pressure across most markets in the United States. And I think that, that will probably continue through the first half of the year. I do expect, however, as the hemp ban comes into play towards the end of the year, a stabilization in pricing across markets as what we're starting to see is a short -- in some markets, we're starting to see shortage of certain products. And I think that, that's led by the fact that hemp has been prevalent on shelves across the whole country. Slowly some of those products are starting to disappear. We're starting to see less advertising. I think a lot of the C-stores are going to stop carrying a lot of these hemp products over the next several months. And as that happens, I think you will see a certain migration of customers over to the regulated market. We certainly think about 50% of the $25 billion estimated revenue of the hemp market will probably move over to the regulated market. That's largely the flower, vape and edibles part of the market, whereas we anticipate that beverage will probably stay within the hemp market and the structure that will be established for it. But otherwise, we do start -- I think we will start to see a firming of pricing going into the year-end and probably maybe even some price moves higher going into 2027. In terms of our ability to fight those price compressions across markets, we are constantly focused on our efficiencies. We're getting more and more efficiencies out of our grow operations. We're doing a lot of improvements in both automation as well as in the grows themselves. We don't believe that we have squeezed every possible thing we can out of these efficiencies, and we do expect more of these efficiencies to come to fruition this year and feel comfortable that we'll be able to hold on to our margin profile that we have now. Operator: The next question will come from Russell Stanley with Beacon. Russell Stanley: Just on the international business, I'm wondering how you're thinking about margin expectations there in '26, given the drag in Q4 at 120 bps. Germany is continuing to scale nicely as a tailwind, but you've got multiple new markets that justify their own investment. So I'm wondering where you think the margin drag will be this year and next? Just wondering what your mind's eye is showing on that front. Boris Jordan: So we anticipate European margins to stay basically flat to where they were this year. As our business scales, we do anticipate small improvements in those margins heading closer to the U.S. margins that we receive in the business. However, we think that it's probably a little bit early as we are continuing to invest in our new markets, as I said, France, Spain and Turkey, which is a drag and those markets will not hit -- will not start to revenue generate until at best the fourth quarter of this year and early next year. So I think that as the business scales in 2027, margins will start to improve and start to get better closer to that 50% gross margin. But this year, we anticipate margins being at the same sort of level of 42% to 43% that we're achieving. However, I do want to say that we have the absolute best-in-class gross margins in the European market of any other operator in the market today. And so we're very proud of the way we operate our business in Europe. And those margins of Curaleaf are substantially better than all of our competition in European market. Using our U.S. experience in running the business and applying that in the European markets has helped us receive the best-in-class margins in Europe. Operator: The next question will come from Bill Kirk with ROTH Capital. William Kirk: What gives you guys confidence that the intoxicating hemp group won't be able to delay the ban or find some sort of reprieve? And then in states where you've effectively seen a ban already like Massachusetts, what have you seen in your dispensaries in Massachusetts as intoxicating hemp has gone away? Boris Jordan: So again, I want to reiterate that the federal ban on hemp products is a 1-year ban from the time it was enacted in November of last year. And so even in Massachusetts, where you have local bans in other states as well, you still see those products because federally, those products are allowed to be sold in those markets. However, specifically in Massachusetts, Curaleaf, not directly related to the hemp ban, we have seen a marketable improvement in both margin and performance for Curaleaf in Massachusetts. However, in terms of our confidence, as you know, we spent an enormous amount of time in Washington down the hill, and we are hearing there is 0 chance that the Republicans are going to vote for an extension of the hemp ban at this point in time. There may be some compromises around some of the medical programs that are going to play. And there may be, at some point, a compromise around beverage. But I can tell you that I think chances are pretty low on that right now. And at the moment, the Republican side of which controls both the House and the Senate at this point in time has no interest. And I believe today, there was more information that came out of Washington. They have no interest in voting on extension of the hemp program. Operator: And the next question will come from Frederico Gomes with ATB Cormark Capital Markets. Frederico Yokota Gomes: Question is on the pricing environment in Germany and the U.K., Boris. Are prices holding up well in those 2 markets? Or do you see any sort of pressures coming there this year? Boris Jordan: I think the growth profile in both of those markets are very early stage. I mean, Germany is still around $1 billion market. The U.K. is around 50,000 to 70,000 patients. These are very, very early-stage markets. So we anticipate growth to continue to be very, very strong in both of those markets going forward. If you think about it, Germany has a program that is less than half the size of Florida, and it's got 4.5x the population. So we're not particularly concerned about the growth profile in these markets. However, there has been pressure on prices in both Germany and less so in the U.K., but it's starting in the U.K. But Curaleaf tends to operate at the upper end of the product segment. And so therefore, we've been able to hold on to our margins, given that our supply chain and our facilities that are available for us to move product are best-in-class, and we've been able to continue to hold on to our margins at the higher level. Again, we think growth will help in the scalability of the business and therefore, holding margins. But we are seeing at the low end of the product portfolio, which we do not participate in, we are definitely seeing pricing pressures at the low end. Operator: [Operator Instructions] Our next question will come from Kenric Tyghe with Canaccord Genuity. Kenric Tyghe: Boris, if we look at this through the lens of the consumer, what were the biggest changes from your Return to Our Roots plan that supported the outperformance in key markets like New York, Ohio, Florida, Pennsylvania in the quarter. I mean, essentially, what you're speaking to here is an increased share of wallet in a very tough backdrop, which takes some doing. What were the changes that drove it? And how sticky do you think those changes will prove in the eyes of the consumer? Boris Jordan: I think in Curaleaf's case, it was definitely product quality. We had a massive focus since I became the CEO 1.5 years ago on improving the product quality, also assortment and making sure that we have the right products in the right places at the right time. So between product quality and supply chain as well as being able to be more efficient in the manufacturing process and therefore, bringing down our cost base and the manufacturing of our products, all of those things contributed for us to be able to grow transactions. And I think that with our marketing launches that you're going to start seeing here at the end of the third quarter going to the fourth quarter, a lot of revamps, we think we'll continue to see an improvement in traffic in not only our stores, but also through our marketing efforts, our products in third-party stores where we're wholesaling. Operator: And this will conclude our question-and-answer session. I would now like to turn the conference back over to Mr. Camilo Lyon for any closing remarks. Please go ahead. Camilo Russi Lyon: Thank you, everyone, for joining. We will talk to you again in May for our Q1 earnings results. Have a great night. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hi, everyone. Thanks for joining our fourth quarter 2025 earnings call. Today's call will be 45 minutes. We have Jack and Amrita with us today, along with Owen Jennings, our business lead; and Nick Molnar, our Sales and Marketing Lead for Block. We will begin this call with some short remarks before opening the call directly to your questions. During Q&A, we will take questions from conference call participants. We would also like to remind everyone that we will be making forward-looking statements on this call. All statements other than statements of historical facts could be considered to be forward-looking. These forward-looking statements include discussions of our outlook, strategy and guidance as well as our long-term targets and goals and how we plan to operate moving forward. These statements are subject to risks and uncertainties, including changes in macroeconomic conditions and risks related to the workforce reduction we announced earlier today. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered an indication of future performance. Please take a look at our filings with the SEC for a discussion of the factors that could cause our results to differ. Also note that the forward-looking statements, including earnings guidance for 2026 and our future operating plans discussed on this call are based on information available to us and assumptions we believe are reasonable as of today's date. We disclaim any obligation to update any forward-looking statements, except as required by law. Further, any discussion during this call of our lending and banking products refer to products that are offered through Square Financial Services or our bank partners. Within these remarks, we will also discuss metrics related to our investment framework, including Rule of 40. With Rule of 40, we are evaluating the sum of our gross profit growth and adjusted operating income margin. Also, we will discuss certain non-GAAP financial measures during this call. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being audio webcast on our Investor Relations website. An audio replay of this call and the transcript for Jack and Amrita's opening remarks will be available on our website shortly. With that, I'd like to turn it over to Jack. Jack Dorsey: Thank you all for joining us. Today, we shared a difficult decision with our team. We're reducing Block from over 10,000 people to just under 6,000. I said everything I needed to say to our team in an e-mail posted to Twitter. So please read it if you'd like. What I want to talk to you about now is why I believe this is the right path for our company and what Block looks like going forward. We're making this change after delivering one of our strongest years. We set clear priorities for the year, and we executed on all of them. In 2025, gross profit growth more than doubled from the first quarter to the fourth quarter. We surpassed Rule of 40 in the fourth quarter. We reignited Cash App network growth and engagement. We scaled our lending products and delivered strong returns. We accelerated Square GPV growth and had our strongest new volume added year on record. We shipped our first Proto units, and we increased share repurchases to return more capital to shareholders. We have conviction in achieving the long-term financial targets we laid out at Investor Day and are meaningfully raising our initial outlook for 2026. We know how to grow this business, and this decision today is a choice about how we operate it going forward. The core thesis is simple. Intelligence tools have changed what it means to build and run a company. We're already seeing it internally. A significantly smaller team using the tools we're building can do more and do it better. And intelligence tool capabilities are compounding faster every single week. I don't think we're early to this realization. I think most companies are late. Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes. I'd rather get there honestly and on our own terms than be forced into it reactively. And this isn't just about efficiency. Block serves millions of customers, sellers and consumers who are going to feel the economic effects of the same shift, small businesses that rely on us to get paid, to manage their money, to access capital, individuals navigating a financial landscape that's changing fast. Our job is to help them navigate it through it. That's not a new mission for us, but the urgency behind it is more pronounced and the speed at which we need to deliver is accelerating. So here's how we're going to operate from here. First, intelligence will be at the core of how the entire company works, how we make decisions, how we build trust and manage risk, how we build products and how we serve customers. We're moving toward a model where our customers can build their own features directly on top of our capabilities that changes the nature of what we are as a company, and it dramatically increases the value we can deliver per customer. Second, extreme focus. There are 4 things we're going to focus on building now as a company, customer capabilities, interfaces where we can compose and deliver those capabilities, proactive intelligence based on our deep customer understanding and real-time data and an intelligence model to fully orchestrate the company's operations. This allows us to best serve the master plan we laid out at Investor Day. And third, speed. A company of our new size has no excuse for being slow. We will decide faster, ship faster and learn faster. The structure we're building is designed exactly for that. We believe Block will be significantly more valuable as a smaller, faster intelligence native company. Everything we do from here is in service of that. Amrita will now share more detail on the quarter and our outlook for the year. Amrita Ahuja: Thanks, Jack, and thank you all for joining. The organizational changes we're sharing today represent a deliberate choice about Block's next phase of growth. The decision impacts many employees who played an important role in building Block, and we're deeply grateful for their contributions. As Jack mentioned, we're making this change after delivering a strong year across the business. In the fourth quarter, we outperformed our guidance across gross profit, adjusted operating income and adjusted EPS, translating product velocity into strong financial performance. Block generated $2.87 billion in gross profit, representing 24% year-over-year growth. And we grew adjusted operating income 46% year-over-year to $588 million, delivering 3 points of margin expansion even as we invested in initiatives with strong ROIs that we expect to drive future growth. On a per share basis, we grew adjusted diluted EPS 38% year-over-year. We repurchased $790 million of shares in the fourth quarter, bringing our total for 2025 to $2.3 billion. We exceeded Rule of 40 in Q4, and we believe we're on track to sustain it on an annual basis moving forward. Stepping back, 2025 was a pivotal year for Block. Gross profit growth more than doubled from the first quarter to the fourth quarter, leading to $10.36 billion in gross profit for the full year and growth of 17% year-over-year. Even with additional investment in go-to-market, we grew adjusted operating income 30% year-over-year in 2025, delivering 2 points of margin expansion. Cash App monthly actives returned to growth in the second half of 2025, ending the year at $59 million, and we executed on our engagement strategies with primary banking actives growing 22% year-over-year to 9.3 million monthly actives in December. We grew consumer lending origination volume by 50% year-over-year in 2025, while sustaining strong margins and healthy risk loss performance. We accelerated Square GPV growth from 8.6% in 2024 to 10% in 2025 and delivered our strongest year ever for new volume added or NVA, as we expanded our distribution channels. We continue to lean into our differentiated vertical integration and hardware design expertise with the launch of 2 new devices, Square Handheld and our second-generation Square Register to better serve a wider range of seller use cases. We began shipping Proto mining rigs with Proto gross profit scaling in the fourth quarter. Reviewing further some Q4 specifics. Cash App gross profit grew 33% year-over-year to $1.83 billion, accelerating relative to Q3. Throughout 2025, we focused on reigniting Cash App's network growth, and that work has paid off. In Q4, we grew monthly actives to 59 billion. Our focus on deepening engagement is also working with primary banking actives attach rate growing meaningfully in Q4. These customers have generated nearly 10x the gross profit of peer-to-peer only actives and we believe they create a foundation for long-term inflows per active growth. Cash App Commerce enablement volume grew 17% year-over-year to $54.7 billion in Q4, driven by strength in Cash App Card, where we saw the strongest quarter for new Cash App Card actives in over a year and saw Cash App Green drive increased retention and Cash App Card volume. Commerce monetization rate increased 4 basis points year-over-year as attach rates for Afterpay Post-Purchase continued to increase. We also grew consumer lending origination volume 69% year-over-year in the fourth quarter, with consumer lending variable profit growth consistent with originations growth. Within consumer lending origination volume, Borrow delivered an exceptional fourth quarter with origination volume growing more than 3x year-over-year. We leaned into Borrow offers for Cash App Green actives as one element of our new status program. Many customers deeply value access to liquidity. And beyond strong stand-alone unit economics, we've seen Borrow drive deeper engagement across other parts of Cash App. Our lending strategy is focused on maximizing variable profit, scaling responsibly while maintaining disciplined risk management. That approach was on display in Q4 and early 2026. Q4 was the strongest quarter for first-time Borrow actives ever, which drove higher portfolio losses in December and January based on the mix shift to new cohorts, which have higher losses by design. As of mid-February, all 2026 cohorts are trending below our risk loss targets, demonstrating our ability to quickly calibrate risk and adjust exposure for new cohorts based on the strength of our underwriting team, product design and our proprietary data and credit infrastructure. Turning to Square, where our distribution motion has continued to gain traction. 2025 was our strongest year ever for NVA growth of 17% -- with growth of 17%. That momentum continued into the fourth quarter with 29% year-over-year NVA growth. We saw progress across both marketing-led self-onboarding and sales channels, with sales-led NVA growing 62% year-over-year in Q4. In addition, we now partner with over 100 independent sales organizations, complementing our direct sales motion and extending our reach to more new sellers. GPV grew 10.3% in Q4, and we've seen growth reaccelerate so far in Q1, with growth quarter-to-date as of February 24 of over 12% year-over-year. Square gross profit grew 7.5% year-over-year in Q4, driven by growth in financial solutions. Hardware costs and higher processing costs were each a 2 percentage point headwind to Square gross profit growth in Q4, consistent with the expectations shared at our Investor Day. Looking ahead, we expect our new organizational design to increase velocity. We have seen significant improvement in AI tooling capabilities. We've seen engineering work that would have taken weeks to complete be done by a small team in a fraction of the time with agentic coding tools. These are reflected in our developer velocity metrics, where we've seen a greater than 40% increase in production code shipped per engineer since September. We've been prioritizing automation in how we build internally for the past couple of years as we've built bespoke tools and increased AI adoption. Some of our automation work streams are nearly fully rolled out. Others are earlier in their maturity, and we expect to continue to develop automation improvements in parallel with the advancements of the underlying technology. The outcomes we have seen are encouraging, and the long-term impact will depend on thoughtful implementation at scale. We are taking this decisive action from a position of strength. Gross profit growth accelerated throughout 2025, and we expect to sustain strong growth in 2026, with execution across a portfolio of ramping or new initiatives in Square and Cash App. In Cash App, we expect to compound our gains in our banking and commerce ecosystems, scale Cash App Green further and expand MoneyBot to our full customer base in the coming weeks and months. We launched Afterpay pre-purchase in February with strong early indications of demand and expect to scale it throughout the year. We also recently launched Pay-in-Four, buy now, pay later functionality for peer-to-peer transactions, which is a first for the industry. Our focus is to ramp these products along with Borrow while maintaining healthy loss rates. In Square, we expect to ramp go-to-market motions further across self-onboarding, sales and partnerships. We're focused on excellence in our food and beverage products and accelerating product velocity across other verticals to continue to drive net volume retention higher. We recently launched Square AI to all markets and are excited to deliver more proactive intelligence capabilities to our sellers as we build towards ManagerBot. We continue to be focused on connecting our ecosystems and believe we're finding product market fit with neighborhoods. Our focus now is on scaling. We're moving from an inbound motion to an auto enrollment motion for sellers, and we recently added in-store redemption capabilities to increase functionality for consumers and widen the addressable market to more sellers. Our guidance reflects this product velocity momentum. For the full year, we expect year-over-year gross profit growth of 18% to $12.2 billion, an increase relative to our Investor Day guidance and an acceleration relative to what we delivered in 2025. For Q1, we expect year-over-year gross profit growth of 22% to $2.8 billion. In addition to the growth momentum we're seeing, our guidance also reflects a smaller cost structure going forward. We believe the actions we're taking today will enable us to deliver faster product innovation for customers in the future while also enabling us to invest meaningfully in our business. With this change in cost structure, combined with the investments we plan to make, we are increasing our guidance for adjusted operating income in 2026 to $3.2 billion, reflecting year-over-year growth of 54% and 6 points of margin expansion relative to 2025. We are increasing our expectation for adjusted diluted EPS in 2026 to $3.66, also reflecting year-over-year growth of 54%. For Q1, we expect adjusted operating income of $600 million and adjusted diluted EPS of $0.67, reflecting year-over-year growth of 29% and 20%, respectively. Before wrapping up, a few additional considerations related to our guidance. Our Q1 operating income guidance includes a modest benefit from today's announcement, but we expect the organizational changes we announced today to begin to more meaningfully impact adjusted operating income in the second quarter with the full impact of our new cost structure more meaningfully improving profitability in the second half of the year. Given these timing dynamics and the pacing of investments in both risk loss and sales and marketing, we expect adjusted operating income margins to expand each quarter throughout the year from our Q1 starting point of 21%. We expect these margins to expand at a faster rate in Q3 and Q4 relative to Q2, and we expect to deliver just under 60% of our 2026 adjusted operating income guidance in the second half of the year. Within OpEx, we expect higher risk loss growth in the first half of the year based on our strong Borrow growth rate expectations in Q1 and Q2. In Square, we continue to expect gross profit growth to be roughly in line with GPV growth later in the second half of the year. In the first half, we anticipate a continued spread between gross profit and GPV growth with some potential variability driven by hardware costs and the pace at which we move upmarket. We view Square gross profit growth, excluding hardware costs as a clear measure of core profitability as we view hardware to be a customer acquisition investment to win larger, more retentive sellers. We expect increasing software attach rates to be a key driver of gross profit growth acceleration, and we expect to continue to evolve our pricing and packaging to ensure appropriate price to value while delivering attractive total cost of ownership for sellers. We have strong conviction in Cash App strategies to grow its network and deepen engagement, which have helped drive 2 quarters of sequential actives growth across monthly actives and primary banking actives. While monthly actives may fluctuate from time to time, we continue to expect low single-digit actives growth in 2026 and over the long term. We expect approximately $60 million in net interest expense in Q1 and $200 million for the full year, up modestly from the expectations we shared on our third quarter earnings call as we deployed more capital into buybacks and Borrow growth in the fourth quarter. And finally, similar to last quarter, we expect a mid-20% non-GAAP effective tax rate in 2026. And with that, I'd like to open up the call to Q&A. Operator: [Operator Instructions] Our first question comes from the line of Tien-Tsin Huang from JPMorgan. Tien-Tsin Huang: Jack, I do want to ask a question to you, if you don't mind. And knowing you here, I'm sure you put a lot of heavy thought into this reduction in force. So I'd love to just hear a little bit more on why now? We're just, what, 3 months removed from Investor Day. So why are you ready to make this change now? And why is this the right level to run the company at? Jack Dorsey: Yes. There's a few things that have all been compounding towards this moment in this time. As you know, like we have been working very hard to functionalize the company. That's a big part of what gives us more confidence in making this move. We were operating a company with basically 2 companies with inside of it, both having their own structure, a lot of duplication. And as we functionalized, it allowed us to act more like one company and recognize where there are common capabilities and common foundation. And we're still doing a lot of that work, but I have the confidence that we're in a place that we can move much faster there. I also believe we were one of the first -- we were the first agentic harness out in the market. This is Goose. But something happened in December of last year, just last year, where the models just got in order of magnitude more capable and more intelligent. And it's really shown a path forward in terms of us being able to apply it to nearly every single thing that we do. So if there are any gaps in our usage of AI right now, it's an application gap. And I'm really confident that we can go through the majority of our organization, certainly our development, but the majority of our organization and apply these tools in a much stronger way that has the effect of allowing us to ship much faster to explore a lot of the paths much broader, so we can run the right experiments and get to the right answers and get feedback immediately for product market fit and ultimately to operate more and more of the company in a way that I think all companies will eventually go. I do think the tools are at a state right now where every single company out there is going to run and grow in a fundamentally different way and be structured in a fundamentally different way. And a big part of me wanting to do this right now is I wanted to get ahead of it. And I'm confident that we've laid the foundation in order to do that and to push really fast to get there. So we're in a place where like a lot of what we've been working with and all these threads are coming together in the right moment. And I want to make sure that we're ahead of the market, ahead of our customers' expectations and actually building for the future. And I do believe that a lot of the expectation going forward is not just that we deliver intelligence to our customers through ManagerBot and MoneyBot, for instance, but the very end of that is that they can build their own features and build their own visualizations on top of our capabilities through our interfaces. We have incredible distribution. We have incredible understanding in real time of real transactional data on both sides of the counter. And we can proactively prompt our customers, and we can proactively compose interfaces that will fit the task before them, which I think is quite unique and not something that you can find certainly at other companies in our space, but also more broadly in technology. And I intend that we win in this space and that we grow and bring this intelligence to both sellers and to individuals and ideally to bring them together into this one ecosystem we're calling neighborhoods. Operator: Our next question comes from the line of Darrin Peller with Wolfe Research. Darrin Peller: You can hear me okay? Amrita Ahuja: Loud and clear. Darrin Peller: Okay. Great. Look, I mean, there were some very strong trends, especially in Cash App, considering users growing again, inflows per active growth accelerating double digits. And also on Square, we're seeing new sales helping with NVA accelerate nearly 30%. Just -- if you could just touch on what you think drives sustainable momentum across both the businesses and especially in light of the reduced headcount levels. Just want to touch on how you're sustaining this and how you really expect to sustain solid momentum like this as shown in your guidance, just again, just given the changes in the business. Owen Jennings: Sure. I think we have a lot of conviction in our ability to sustain these durable growth rates. I think that there's 2 high-level ways to answer your question. The first is just around the org structure and the org size and what does that mean? And then the second probably is just from a product development and road map standpoint, how are we feeling? So on the org structure side, to reiterate some of what Jack was talking about, what we've seen is that smaller, more nimble teams have allowed us to move faster and actually get products into our customers' hands more quickly. With the moves today, we are eliminating some of the organizational debt or organizational overhang that has existed. We're also inherently increasing talent density across the org, including the development org. And obviously, we're getting all the benefits of the AI tools and the improvements in the foundational models, and that's flowing through to everything that we're doing, particularly on the software development side. So I'd say, overall, on the org structure and org side of things, we're feeling really confident, and we're actually feeling like this is going to help us execute more quickly and with more precision. On the second category, which is just product development road map and the growth levers that we have, again, we have really strong conviction in our road map and how that's going to flow through to gross profit growth. I think the clearest signal is, in my mind, it's the increase to the gross profit guide that we gave today. But I would tend to break this down into a few different categories. I think we have, first, just like the core network growth of Cash App and Square. Then we have key product launches that we're planning on in the coming months and quarters that are very high conviction. And then last, we have some of the bigger bets. I think those are green across the board. So we continue to have teams that are focused on core network growth, whether that's actives growth and inflows per active growth on the Cash App and Afterpay side or whether that's teams focused on net volume retention and driving new GTV on the Square side. From a product launch perspective, we have a ton of things that we've been shipping over the past few weeks and things that are coming down the pike from like how we're thinking about improvements and enhancements to Cash App Green, how we're thinking about scaling Cash App Card functionality and growing Cash App Pay, the Bitcoin improvements that we're making, Afterpay in the Cash Card pre-purchase just rolled out to the initial cohort a few weeks ago, and we're seeing really, really encouraging signs there in early data. Similarly, on the Square side, we've shipped a number of key features that drive that food and beverage excellence. We have a number of other features that are coming down the pike in the coming months. We're continuing to refine our pricing and packaging. The list goes on. And so we feel really confident in those levers and how they're going to flow through. But then, of course, it's not just about the near-term growth. It's also how are you investing in a way that's going to drive that durable growth over time. And so we have part of our development portfolio allocated to things like neighborhoods and scaling neighborhoods to MoneyBot, to ManagerBot to Cash App credit score, a lot of which we think kind of represent the future of the product experience for our interfaces at Block and which should drive gross profit growth, not just this year but into the future. So overall, we're feeling really confident in our ability to sustain these healthy growth rates. Operator: Our next question comes from the line of Ramsey El-Assal with Cantor Fitzgerald. Our next question comes from the line of Bryan Bergin with TD Cowen. Bryan Bergin: Hope you can hear me. I wanted to just follow up on the org changes and hoping you could talk more about how those changes today may flow through the financial outlook this year and potentially beyond. So I appreciate the cadence color. Just wanted to follow up on those cost impacts and how that may translate to where you can exit '26 on AOI. Any important free cash flow impacts to be mindful of as well there as you go through '26 and beyond? And just also where are the investment dollars shifting to from headcount? Amrita Ahuja: Bryan, it's Amrita. Happy to take the question. We'll start on sort of the cadence throughout the year around AOI and maybe even before that, starting on gross profit, and then we'll share some of the investment areas as well. So obviously, as you've heard, we've raised both our gross profit guidance from 17% growth at Investor Day for 26% to 18%, and meaningfully raised our adjusted operating income guidance. From a gross profit perspective, in terms of the pacing throughout the year, we expect a very strong Q1 with 22% gross profit growth. And we've been prudent in our tax season assumptions with that. We also expect to sustain strong gross profit growth throughout the year and end the year in the mid-teens gross profit growth range, in line with the longer-term Investor Day guidance we gave in the mid-teens as we look forward as well. From a profitability standpoint, we expect to grow AOI nearly 30% in this first quarter and expect margins, as I noted earlier, to expand throughout the year off of that Q1 21% margin range. Really, the reason for that margin expansion throughout the year is a couple of things. First, look, strong underlying unit economic strength in the business and incremental margins driving that leverage. Second, timing of some of the cost structure changes. As I noted earlier, you'd see a less meaningful impact on the -- from the cost structure changes to our Q1 results given the timing in the quarter and the notice periods for employees outside the U.S. as well as seeing some of that notice period dynamic flow through into Q2. Timing related to sales and marketing spend, where we expect to see some meaningful increase in spend from Q1 to Q2, again, on the back of strong returns that we're seeing where that can drive long-term profitable growth. And then risk loss growth, as I noted earlier, being higher in the first half of the year on the back of really strong Borrow, continued growth for Borrow in the first half of this year. And so ultimately, that we're delivering strong AOI growth to start the year, but expect that to compound throughout the year with just under 60% of the $3.2 billion in AOI we expect to come in the second half of the year. And similar trends really as you look across EPS as well. Just to then quickly on the second part of your question, in terms of where our opportunities to invest are, they're really in addition to the normal course of our business across product innovation and go-to-market, there's 3 things that I'd call out here. One is that we see meaningful opportunity to invest in our people, invest in hiring, invest in retaining a world-class team to deliver for our customers. Ultimately, we expect to hire some more senior AI engineering talent. We'll continue to level up our engineering and product capabilities. Second, as I noted, we're going to continue to invest in go-to-market to scale our customer acquisition efforts further. And then third, we'll keep building on our AI infrastructure, including the tools and the capabilities ultimately that we're going to need to build a world-class organization. So those are some of the 3 areas of investment that I'd see playing out throughout the year as well. Operator: Our next question comes from the line of Dan Dolev with Mizuho. Dan Dolev: So yes, I just wanted to ask about your primary banking actives, Amrita and Jack. I mean this looks like a very, very strong quarter, 1 million PBAs added, accelerating growth to almost 23% and these customers generate over 10x profit per active. So this sounds very excited. I remember you guys have talked about this as kind of the Holy Grail is adding the banking active. So I wanted to know kind of more what you're doing there and how exciting this one could be over time. Owen Jennings: Thanks for the question, Dan. This is Owen. I can take the first crack at it. As you said, we're really, really excited about where primary banking actives came in, in Q4. As you know, we launched Cash App Green in November at Cash App Releases. And the whole concept around Green was to expand access to the banking benefits that we offer to customers. We used to only offer those benefits to direct deposit actives. Now, we have a broader understanding of how customers themselves see banking primacy. And so if customers are spending more than $500 a month on Cash App Card, they're eligible for Cash App Green and everything that comes with it. The results following the launch of Green were fantastic. So as you noted, 9.3 million primary banking actives in December, growing 22%, up about 1 million from September. I think over and above the count of primary banking actives, it's actually the engagement that's most exciting. As you noted, gross profit per active is almost 10x what we see for a peer-to-peer only active. We've also seen since the launch of Green, cohort retention has improved for primary banking actives since we launched. And then we've seen incremental engagement across a number of different products and features on Cash App. For example, seeing incremental gross profit coming from Borrow, from Cash App Card, from Instant Deposit. And that's as you'd expect, as the Green program is really just an incredible incentive for customers to bring more and more of their financial life to Cash App. I think one good example, just showing the increase in engagement is on personalized offers. So for Green customers, we're giving personalized instant discounts on Cash App Card to those customers. Before we launched Green, we saw engagement or like the attach rate with offers at around 2%. And then following Green, we see it at around 14%. So just a massive shift in customer behavior that's coming from this program. I think ultimately, this is tied to our broader strategy around serving the modern earner. We continue to see a huge opportunity here as we talked about at Investor Day. This is a really big and it's a growing part of the U.S. population. And these folks are typically underserved by the legacy financial system. And so what we're seeing is an increase in the number of individuals who are -- they're earning flexibly across hourly wages, across gig work, freelance work, they're entrepreneurs, they're solopreneurs and there's no perfect financial institution out there to serve their needs. And we think that this is a place where Cash App is leading and where Cash App will continue to lead. And I think the key part here is that this was the first launch of Green. So we're really just getting started. I think on the last earnings call, I talked about how we love a complex system with lots of knobs and dials that we can tune in order to reward customers and steer customer behavior. This is just the beginning of our approach for how we're going to drive more and more primary banking actives, but it's a good first sign. Operator: Our next question comes from the line of Jason Kupferberg with Wells Fargo. Jason Kupferberg: Really good to see that the Q1 GPV reaccelerated 12% quarter-to-date despite some of the weather events out there. There is an easy compare, though in Q1. So just wanted to get your sense of visibility on the full year guide there, which I believe is low to mid-teens. And maybe if you can just touch on the vertical trends that you've seen quarter-to-date, if there's been any variation in trajectory among the major verticals. Amrita Ahuja: I'll kick us off on some of the latest GPV trends and by vertical, and then I think Nick may add in on some of what we're seeing from a go-to-market perspective and how that inflects the curve in the future. If you take a step back, Jason, as we look across all of the updates and changes we've made from a product ecosystem to a distribution channel perspective, we believe the strategy that we've got in Square is paying off. When you look at the broader years of '24 versus '25, we accelerated GPV growth from 8.6% to 10%. We did see, of course, as you know, a moderation in the fourth quarter relative to the third quarter. Again, through Tuesday, year-to-date, we've seen GPV growth reaccelerate to over 12% and in the U.S. as well, accelerating to over 7.5%. Ultimately, in the key verticals of focus for us, we've seen really strong results. Food and beverage GPV up 16% year-over-year, mid-market sellers also exhibiting continued strong performance in the fourth quarter. And we now view an opportunity to bring the playbook that we've used successfully in food and beverage over the past 12, 18 months to other verticals within the Square ecosystem to drive further strength as well. And so as we look back at what we can deliver in '26, we continue to have conviction that we can accelerate GPV further in '26 relative to 2025. And again, that's on the back of some of the really continued progress that Nick and team are making from a new volume added perspective with our strongest year ever in 2025. But I'll turn it to you, Nick, to share more on that. Nicholas Molnar: Yes. Thanks, Amrita. Look, as NVA continues to grow and has seen acceleration in '25, it does illustrate that it will build compounding cohort curves and only contribute more meaningfully in terms of GPV growth over the course of 2026. We did a lot of great work in 2025. As Amrita mentioned, we exited '25 with new volume added in Q4 above 29%. We saw very strong growth from a self-onboarded perspective and still 65% of our volume comes from our self-onboarded sellers, which is a real competitive advantage for Square. Marketing is still holding the [ 4 to 5 ] quarter payback period, which is highly efficient. We saw an even steeper acceleration from a sales perspective. Sales-led NVA in Q4 was up 62%, as was referenced in the opening remarks, which significantly exceeded the 40% growth target that we spoke about late last year. We've stayed very focused on the marginal ROI as we've scaled our field sales team and our telesales team and our investment has been successful. We had 15 U.S.-based sales reps in Q1. We're now over 140 by year-end, and we just did our first deal in Australia and the U.K. through our field team. So seeing that continue to expand. Over 50% of our inbound leads for our field team is through our partnership channel in Q4. And particularly with Cisco, where we're seeing 80% growth in referrals quarter-over-quarter, we've really lifted our strategic relationship with them and seeing strong progress. And if I just look forward to 2026, our existing reps will continue to scale just given time in seat and many of them were ramping during the course of 2025. We scaled our independent sales organization partners to over 100. We have a great team leading that, and it's complementing our direct to sales motion and scaling across multiple geographies. And then as Owen mentioned, we're really seeing a lift in product velocity and quickly closing the gap from a competitive product set perspective. So 2025 is our strongest year ever in NVA, fueled by a transformed go-to-market motion across marketing, sales, partnerships, and I really expect that to continue to compound into 2026. Operator: Our next question comes from the line of Will Nance with Goldman Sachs. William Nance: I was wondering if you could talk on MAU growth. I think it came in a little bit stronger than what the Street was looking for, I think more or less in line with what you talked about on the Investor Day. So could you just remind us about how you're thinking about the growth algorithm in Cash App from an MAU perspective? Owen Jennings: Sure. Thanks. We're really happy with the growth in actives in the second half of last year and in particular, in Q4, in December. As you said, we hit 59 million monthly active accounts in December. That was up from 58 million in September. This was driven by a few different things, efforts across multiplayer money, network enhancements, our go-to-market motion and then also just our focus on teams in the next generation. So on the multiplayer money side, we had some key launches. We rolled out peer-to-peer on web. We're in the process of rolling out our new core payment flow. And that -- critically, that's connected to MoneyBot, and then it also is the flow that is built to support stablecoins. So continuing to tweak things there and get that rolled out to 100%. We also launched payment links, which just makes it easy to get paid into Cash App and you can send those links through text or DM or what have you. We continue the evergreen work on the network enhancement side, just making sure that we're reducing friction where we can and making Cash App easy and simple to use. Teens and families, we've continued to invest in as well. And then right now, we're working on expanding access to Cash App Cards and savings accounts for children who are 6 to 12 years old. Right now, the teens program is for those 13 to 17 years old, and we've seen strength where we can kind of grow with those individuals, and we expect it to be the same for children who are 6 to 12. And then marketing is obviously always on full funnel across all of the channels, how we think about incentives, how we think about rewards. I think critically, it's not just about the actives number itself. It's also about the quality of actives. So what we're seeing is higher engagement rates and higher attach rates for new actives. For instance, in December, 21% of new actives attached to a banking product, and that was up pretty meaningfully versus December of the previous year. So all in all, we feel good about the growth algorithm. There's a number of things that are contributing to actives growth. We feel confident in that low single-digit year-over-year growth number that we've given. There might be some wiggles month-to-month or quarter-to-quarter, but we're feeling really good about where we are. And of course, we're trying to do everything that we can to surpass those expectations. Operator: Our next question comes from the line of Tim Chiodo with UBS. Timothy Chiodo: Great. Let's shift gears a little bit. I want to talk about a new revenue stream. So Cash App Score recently was made available effectively as a service to other third-party lenders. You mentioned that this is early, but you're already having some good conversations with some third-party lenders. My understanding is they would effectively be buyers of this service and incorporating it into their own underwriting flows as maybe a part of a more holistic approach to underwriting. But the main point is, I was hoping you could talk a little bit about the revenue opportunity and the pricing model. Owen Jennings: Tim, thanks for the question. I'll just set the stage a little bit before I get into the details. I think what we're seeing in the U.S. is a lot of consumers moving away from credit cards and moving toward other forms of payment, and that's especially true for younger individuals. And so a byproduct of this is that a decent share of the population is now basically anonymous to the legacy credit bureaus. But as time goes on, those folks are contributing more and more to the U.S. economy, and this is kind of the bet on the next generation and the modern earner that we've been talking about. But right now, to some extent, they're getting left out of the traditional credit model. On the flip side, meanwhile, we lent out $18.5 billion to consumers in Q4, and that number was up almost 70% year-over-year. We did that profitably. And we were able to do that largely because of the unique data that we have on our customers that we use to generate a unique Cash App credit score for each of our customers. So then now we're thinking through how do we leverage this credit score. I think the first step is that we're going to show the Cash App credit score to our customers. I think there's a couple of benefits there. First is just building transparent -- giving transparency and building trust with our customers. We also think this could be a meaningful driver of behavior, just incenting customers to engage more with Cash App in order to drive their credit score. I think second, to your point, we do intend to partner with certain third parties or allow third parties to buy credit score data from us. Since Investor Day, and we have a website out now as well, we've seen really, really strong demand from a number of different folks, and we've had a number of conversations. So it's clear that there's a tremendous amount of demand out there. Also, just given the criticality of this for us going forward, we want to be super deliberate in terms of how we design that program and where we choose to monetize and the sorts of folks that we choose to partner with. And then there are subsequent things that you can imagine where it's not just a data mechanism taking place, but also there's actually UI within Cash App, where we're able to connect customers with certain credit offerings where maybe we don't power those things right now, but we can increase access and we can bring down cost because of the unique data that we have. So at this point, I would say where we are is, it's always been clear to us internally that the credit score is extremely valuable. That's how we underwrite such a large book and do it so profitably. Now I think it's increasingly clear that it's valuable for consumers and it's seen as really valuable for other lenders. I think probably the most interesting thing that I would say here, and I'll end with this is that I think this is just further indicative of how critical Borrow and our lending products are to the Cash App ecosystem overall. I think we have an opportunity here to build a very high-margin product, a very high-margin gross profit stream. But that could only really exist because of Borrow and Cash App Afterpay and our other lending products. And so it's just part of the overall ecosystem on the Cash App side and how we're trying to increase access. Operator: Our next question comes from the line of Andrew Schmidt with KeyBanc. Andrew Schmidt: I appreciate the move today. I got to ask on BNPL. A number of good comments there, momentum in Afterpay post-purchase, the new product that's rolling out in 2026. Just curious as a starting point, how 4Q came in versus expectations? And then how we should think about growth into 2026 across core Afterpay, post-purchase and then some of the newer products you're rolling out? Nicholas Molnar: Thanks for the question. I'm happy to take this question. So Firstly, when I think about buy now, pay later, I think about it more from the lens of our kind of commerce consortium. And I think that more appropriately represents what's going on in the market. It's no longer just about paying for. It's about pay now, paying for through our integrated merchant relationships, Afterpay on the Cash App Card, pay monthly. I think this is kind of the apples-to-apples view, and that's how we looked at it internally. As we've been kind of executing over the last period, we've been very focused on disciplined profitable growth for both Afterpay and Cash App [ will be as ] a focus for GPV and commerce volume was up 17% and consumer lending originations, as Owen mentioned, up 69% year-over-year, but really focused as well on being conscious from a risk loss perspective and scaling in the right way. For Afterpay specifically, we added large partners like Fanatics and Endeavour Group, which is the largest liquor retailer in Australia. Post-purchase buy now, pay later has continued to gain traction and is one of the fastest-growing products which is primarily net new customers to Afterpay. And then as Owen also mentioned, we're in the early days of rolling out pre-purchase Afterpay on the Cash App Card, which we started in February, enabling financing for eligible actives. And so I'm happy by what we're seeing from a buy now, pay later perspective. Cash App Pay as well. I know you didn't mention it, but it's important as part of this kind of commerce stack. It's continued to scale at a very meaningful pace, up 55% year-on-year and active surpassing 8 million in the fourth quarter. And when I look at these merchant partnerships, where we're seeing strong product market fit, new distribution opportunities like Instacart and Target. It provides a unique and simple on-ramp for Afterpay down the track, given we designed this from a single integration, single contract, single settlement perspective. And then to your question and point on 2026, I still believe there's a very large and growing TAM, and we're very well positioned to capture it. 90 million Americans are expected to use buy now, pay later in 2026 and volume doubling by 2031. And given Cash App's scaled customer base and particularly the scale of the Cash App Card, it's differentiated owned by us, and I'm really excited to see that continue to -- for us to continue taking that to market. So looking forward to the rest of 2026 and focus on our broader commerce performance. Operator: Our next question comes from the line of Rayna Kumar with Oppenheimer. Rayna Kumar: Just want to go back to Cash App Borrow for a second. Can you talk specifically about your expectations for Cash App Borrow growth in '26? And separately, how have loss rates trended in Borrow and with BNPL? Amrita Ahuja: Rayna, it's Amrita. Happy to see -- there's a little bit of feedback, okay, I think that's better. Yes, Borrow had an incredible quarter, as you saw, and we continue to be excited about the growth path for 2026 with Borrow. As I noted on the call, we expect to see even stronger growth in the first half of the year relative to the second half, and you'd see that flow through. What we've seen so far is that variable profit margins continue to be strong. And even the fourth quarter with the pretty astounding 223% year-over-year origination volume growth, 50% quarter-over-quarter growth, even with that, we saw variable profit margins in line with our targets across both new and mature cohorts despite that triple-digit origination growth. Really, as we think about what's driving that Borrow growth, I think we'll continue to drive growth as we head into '26. And there's really 2 big drivers. One is, as you know, we've transitioned Borrow loan origination to SFS. And SFS is now fully -- this is our Bank Square Financial Services. SFS is now fully originating all Borrow loans. And with that, we have both improved unit economics on Borrow loans and new states that we can expand into. And that expansion is underway, but we see an opportunity to go much further there. And so that is a big driver, that expansion across new states and the improved unit economics is a big driver of the growth that you've seen in Q4, and we'd expect to see in '26. The second big thing is the deep integration of Borrow into this broader Cash App ecosystem and in particular, with our program around Cash App Green. In the fourth quarter, we leaned into those Borrow loans. We know that they're so attractive to the modern earner. And we saw a lot of success where customers were excited to either get their first Borrow loan or get a higher limit as they became a Cash App Green customer. When we think if you step back again and think about Borrow, it is an important element for the modern earner and how they can address the variability in their income. These many customers have cited to us, they seek flexibility and Borrow provides that for them as they think about those periods in between paychecks. And that's really a primary driver here for why they would take out a Borrow loan and why we've seen such astounding product market fit across our customer base here. And again, expanding Borrow rapidly, but still doing that responsibly, given the product design attributes and given the very, very strong underwriting models that we've built through our 15 years of understanding lending and really strong growth across each of the 2 businesses from a lending perspective. So that's really what's driven Borrow as we think about this past year and why we continue to expect strong momentum for Borrow into '26. Operator: Our next question comes from the line of Ramsey El-Assal with Cantor Fitzgerald. Ramsey El-Assal: So AI, you guys have woven AI into obviously, a lot of the conversations having a transformative impact across your business. So I have a 2-parter. I guess, first, do you see AI as a new competitive vector where Block has an opportunity, maybe a rare opportunity to sort of leapfrog competitors or redefine the competitive landscape? I guess second, what gives you guys the right to win here? What are Block's competitive advantages in AI? Jack Dorsey: Yes. I do. So I think it goes back to those 4 things that we want to focus on right now in terms of what we build as a company. The first that sets us apart is all of our capabilities that we've built up over time. That's everything from our network and peer-to-peer. It's the fact that we can issue cards, that we can accept cards, that we can lend money to sellers and individuals. These are very, very hard to acquire as capabilities, and they're hard to maintain. And these are things that represent exact use cases that customers are coming to us in the first place for. When you pair that with the interface, we have a massive install interface on the Square side with our merchants. We have the same on the Cash App side through an app and the website. What we'll be able to do is compose these capabilities fluidly to deliver them to all of our customers in real time in a much more personalized way, in a way that they're going to feel like they can actually build their features and their functionality themselves. I think that's a significant advantage. I think the biggest advantage, though, is our understanding of our customers. We have an understanding of both sides of the counter. We have real-time data, which is very real transactional data, and we can connect it from the merchant to the consumer. And we can actually use that understanding to be a lot more proactive. Instead of our customers coming to our intelligence systems and knowing what question to ask and what to prompt the AI, we can actually prompt our customers, and we can do it in the right time so that they can have an experience where they have an intelligence system that is looking to protect their business and to protect their individual finances and help them along whatever goals they might have. And these are out today and something that we're going to continue to build on. And then finally, is making sure that we're using this intelligence, and we're building these world models to help us orchestrate the company much better and be a whole lot more efficient about how we work and how we deliver and how we ship. So I think all 4 of those together, I know all 4 of those together really set us apart. And a big part of the move we made today was to get us in position to do just that and to be ahead of our customers' expectations and to be ahead of the curve and actually being able to deliver that new functionality. Operator: We will now take our last question from Bryan Keane with Citi. Bryan Keane: Amrita, the guidance for '26 today is above what was outlined at the Analyst Day. What does that mean for the 2028 targets of $15.5 billion in gross profit and adjusted EPS of [ $5.50 ], and I think it was $4 billion in free cash flow. What's the bridge that needs -- that you need now to get there? Or are those targets a little bit different? Amrita Ahuja: Bryan, thanks for the question. At the simplest level, what you're hearing from us today is we believe we have a path to accelerate the strategies we laid out at Investor Day. We've meaningfully raised our 2026 outlook, not just on profitability, but also on gross profit, showing that path to exiting this year still in that mid-teens growth range, which is really important as we think about heading into '27 and '28 because of the strong unit economics and incremental profitability in our business, that leads to that path of compounding profitability at a greater rate than gross profit. So while we're not updating our Investor Day targets on '27 and '28 today, what you see is a really credible and profitable path to delivering compounding profitability at meaningful scale in that '27, '28 view for our business, and we couldn't be more excited to get to work for 2026. Operator: Thank you for participating in today's call. You may now disconnect.
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.
Operator: Good day. Thank you for standing by. Welcome to the Rhythm Pharmaceuticals, Inc. fourth quarter and fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Dave Connolly. Please go ahead. David Connolly: Thank you, Tanya. I'm David Connolly here at Rhythm Pharmaceuticals, Inc. For those of you participating on the conference call, our slides can be accessed and controlled by going to the Investors section of our website, ir.rhythmtx.com. This morning, we issued our press release that provides the fourth quarter of 2025 and full year of 2025 financial results and a business update. That press release is also available on our website. Our agenda is listed on slide 2. On the call today are David Meeker, our Chairman, Chief Executive Officer, and President, Jennifer Lee, Executive Vice President, Head of North America, Hunter Smith, Chief Financial Officer, and Yann Mazabraud, Executive Vice President, Head of International, is on the line joining us from Europe. On slide 3, I'll remind you that this call contains remarks concerning future expectations, plans, and prospects, which constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent annual or quarterly reports on file with the SEC. In addition, any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent dates. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David Meeker, who will begin on slide 5. David Meeker: Thank you, Dave. Good morning. Thank you all for joining. We pre-announced our revenue for the fourth quarter, highlighting the continued strong performance by our commercial teams. The BBS opportunity continues to grow at a steady rate, both in the United States and ex-US markets. Jennifer's North American team, which was fully hired and in place at the start of the fourth quarter, continues to take full advantage of the PDUFA extension to prepare for our expected launch. Our growing early access experience with HO in Europe reinforces our belief in this opportunity, as Yann will highlight. I'm pleased to report we had our end of phase 2 meeting with the FDA for the bivamelagon HO study. We were able to share the nine-month data, which included a minimum of six months on drug for the original placebo patients. I will share these new data that show persistent BMI reductions and consistent safety and tolerability over the next few slides. Our goal will be to present the data, including the full 52-week data, at a medical meeting mid-year. Slide 6 is to remind you of the original bivamelagon phase 2 design. Patients were randomized to either placebo or 1 of 3 dosing cohorts for a period of 14 weeks. Last July, we announced positive top-line results at 14 weeks, with patients in the 400 mg and 600 mg arms achieving a mean BMI reduction of 7.7% and 9.3%, respectively. Similar BMI reductions as achieved by setmelanotide at the same time point. At the end of 14 weeks, the study remained blinded. All patients were then redose escalated to preserve the blind from 200 milligrams to the target dose of 600 milligrams for the balance of the open label extension period. Slide 7 shows the disposition of the 28 patients. As a reminder, one patient discontinued after the first visit due to rectal bleeding, judged unrelated to study drug. One 64-year-old male, who had lost 14.5% at 14 weeks in the 600 milligram cohort, chose not to continue into the open label for personal reasons. One patient has stopped taking the drug but remains in the trial as a retained dropout. In summary, 26 of 28 patients remain active in the trial, including the retained dropout patients. 25 out of 28 remain on active drug. The next 4 slides show individual patient data at 40 weeks. Slide 8 shows the placebo patients whose baseline BMI was calculated from their 14-week clinic visit when they converted to active drug. With the exception of the 12-year-old female, who we believe was not compliant, all patients showed a response to drug after 14 weeks, which included the uptitration period, with further deepening at 26 weeks, the week 40 visit. Of note, one patient did not have her 40-week visit, but she remains in the trial. Similarly, for the original 200 milligram cohort on slide 9, all patients, with the exception of the retained dropout patient who is actively gaining weight and the patient who we believe is not compliant, have had a response at 28 weeks and further deepening at 40 weeks. The modest response on 200 milligrams alone at 14 weeks does suggest that this dose is probably subtherapeutic for many patients. Slides 10 and 11 show the data for the original 400 and 600 milligram cohorts. With the exception of the 2 patients who are not fully compliant, 1 each in the original 400 and 600 milligram cohorts, all patients have had a good response to drug, with 11 of 14 patients decreasing by 10% or more. The mean BMI decrease for the 400 milligram cohort at 40 weeks, including the non-compliant patient, was 10.8%, and the mean BMI decrease for the 600 milligram cohort, including the non-compliant patient who gained 7.5% and the patient who dropped out at 14 weeks, was 14.3%. Of note, the setmelanotide phase 3 data at the 40-week time point in patients not on a concomitant GLP-1 from our phase 3 study was 15%. With regard to safety, the drug is better tolerated when taken with a small amount of food. The side effect profile continues to mimic what we see with setmelanotide. The nausea and vomiting tends to occur early, and then patients tolerize. The episodes of diarrhea tend to be a little more sporadic, are mild in severity, and no patients have discontinued because of diarrhea. In this trial, the compliance issues have been predominantly in the younger teenagers, who we believe have struggled with the size of the pills. As we have indicated, we will have an easier-to-swallow single pill formulation going forward for each of 200, 400, and 600 milligram doses, and we will have a chewable tablet for younger patients. Next steps for this program will include bioequivalent studies comparing the new and old formulations, a drug-drug interaction study, and a hepatic impairment study. We expect to have the majority of this work completed and drug supply for phase 3 studies by the end of the year, with a goal of initiating the phase 3 HO study by year-end 2026. I would characterize our FDA meeting as highly constructive on multiple fronts. They confirmed that bivamelagon is ready to move to phase 3. As many of you know, we were hoping, given the prior setmelanotide data and the placebo cohort data, that we could negotiate a 6-month double-blind period and a smaller number of subjects, given the effect of the drug. They were firm that with a new chemical entity, a full 12-month double-blind, randomized controlled trial would be required, as well as a larger number of patients to build up the safety database. We are awaiting the final minutes from that meeting. Expect that number to be closer to the full 142 patient study in our setmelanotide trial. Our plan will be to run this trial largely in countries where setmelanotide will not be available for acquired HO in the near future, which should facilitate enrollment. There was no discussion of setmelanotide in the upcoming PDUFA date. The FDA is communicating with us on the expected timeline, and we have received the first feedback on the label. I'm not going to make further comments today on that, on that feedback, as it is preliminary and pending the final submission of data on all 142 patients, which will be incorporated into the label. As shown on slide 13, we have multiple upcoming milestones with PDUFA for HO, top-line data from our Japanese HO cohort and the M and A readout all coming in March. For M and A, we are working to get the top-line data with the goal of releasing that data by the end of March. The PWS trial continues on track to get to the full 6-month data by mid-year. At our December release, we indicated that 1 patient had discontinued his trial. Since then, we've had no further dropouts, with all remaining 17 patients continuing on treatment. We have taken no further data cuts and have no further patient updates to provide on this call. The RM-718 weekly formulation continues to enroll in HO, and we are on track to have initial 3-month data by mid-year. With that, I'll turn the call over to Jennifer. Jennifer Lee: Thank you, David. Starting with BBS, we had another steady quarter of growth in prescriptions as our teams continue to focus on educating healthcare providers to expedite patient diagnosis and working with payers to secure approval for reimbursement. Importantly, patients are benefiting from IMCIVREE therapy as it is the only approved therapy that targets the root cause of rare MC4R pathway diseases like BBS. We continue to be inspired by patient success stories. For example, 1 adult male patient with BBS, who is a resident of an assisted living facility, had such severe hyperphagia and preoccupation with food that he could not participate in group outings. After 6 months on IMCIVREE therapy, he not only lost 40 pounds, but his hyperphagia had quieted down meaningfully, and now he's able to socialize with others and participate in group activities. On slide 15. Our teams are continuing to prepare for the Acquired Hypothalamic Obesity launch, pending regulatory approval and our March 20th PDUFA goal date. Acquired HO is a distinct post-injury neuroendocrine disease characterized by impairment of the MC4R pathway, leading to hyperphagia and accelerated and sustained weight gain. With an estimated prevalence of 10,000 in the United States, Acquired HO represents a significant opportunity for Rhythm Pharmaceuticals, Inc. to expand the reach of IMCIVREE and the benefit it brings to patients. If approved, IMCIVREE would be the first therapy for these patients that currently have no approved treatment option. As we've discussed previously, we expanded our sales force from 16 to 42, all highly experienced launching new therapies in rare diseases. With the extra time ahead of launch, our engagement efforts have continued. Claims data helped us identify healthcare providers who we believe are caring for patients with Acquired HO. Our HCP engagement has been focused on disease awareness to help drive suspected cases to formalize diagnoses of acquired HO. We already have engaged with HCPs who care for more than 2,000 patients diagnosed with or suspected to have acquired HO. Let me outline an example of the ongoing dialogue around patients suspected to have HO. Our team engaged with an endocrinologist who treats several patients with sustained hypothalamic injury. During a meeting with a field team member, who outlined that injury in the hypothalamus could cause impairment of the MC4R pathway, leading to acquired hypothalamic obesity, the physician noted that 1 patient, in particular, stood out. This patient experienced severe weight gain following treatment of a brain tumor, subsequently underwent gastric bypass surgery, and later initiated GLP-1 therapy with minimal benefit. Now, with a clear understanding of the clinical diagnosis of acquired hypothalamic obesity and appropriate screening criteria, this physician indicated he suspects additional patients may have acquired HO, and he'll bring them back for evaluation and diagnosis confirmation. Moving on to the next slide. We have also learned more about the management of AHO patients through our territory manager's disease education efforts. In addition to the ongoing engagement of our MSL or Medical Science Liaison team, we have identified approximately 40 priority medical centers throughout the nation based on their significant concentration of AHO patients. Approximately one-third of the potential AHO patients who we have identified via claims data are managed within these centers. The majority of these have pituitary centers, where hypothalamic disorders are managed by multidisciplinary teams. While there are similarities within these organizations relating to which specialty is brought in to manage the tumor and treatment, as well as the hormonal dysfunctions associated with the procedure, there is variability in terms of who manages AHO. In one center, the endocrinologist involved in the treatment of the hormonal dysfunctions would also take on the responsibility to treat the weight gain. In another center, these patients' hormonal dysfunctions would be managed by the endocrinologist, but they would be sent to the community PCP or obesity specialist to be treated for their weight gain. Understanding these differences allows us to better pinpoint who would potentially be the diagnoser of AHO versus the obesity treater and future potential prescriber of IMCIVREE, if approved for AHO. Our team continues their ACP engagement and identification of patients who would benefit from IMCIVREE once approved. On to my last slide. Beyond ACP engagement, we also continue to engage with payers to secure access for patients as soon as possible following approval. Our education and engagement around BBS established a robust base for securing access for AHO, as payers have come to recognize the differentiation of MC4R pathway diseases and the value that IMCIVREE offers patients. For acquired hypothalamic obesity, payer coverage following approval, our expectation is for policy updates to occur within 3 to 9 months. We are excited by the progress we have made and are ready for launch, pending approval in acquired hypothalamic obesity. Let me turn it over to Yann. Yann Mazabraud: Thank you, Jennifer. I will begin on slide 19. We had a strong year in 2025, as our international organization has grown to more than 100 employees across 13 countries. With the ongoing BBS and POMC LEPR cells and the reimbursed early access programs for Acquired Hypothalamic Obesity in France and Italy, IMCIVREE is now available in more than 25 countries outside the United States, including eight countries newly added during the year. Our growth in 2025 was driven by sales in countries with established access and new countries coming online. Our team engages with key experts across Europe to advance education and the understanding of rare MC4R pathway diseases. In 2025, 64 abstracts, both originals and anchors, were accepted for posters or oral presentations at 12 international and national scientific congresses. Next slide. Here I highlight one recent publication entitled, Early Onset of Obesity Model: Impact of Early-Onset Obesity on Comorbidity Risk and Life Expectancy, which was very recently published in Obesity Facts, the European Journal of Obesity. This peer-reviewed early-onset obesity disease model, which we developed in collaboration with leading European experts, integrates data from more than 140 publications to quantify how the age of onset, the severity, and the duration of obesity negatively affect the risk of comorbidities, the health outcomes, and the life expectancy. This reinforces that early-onset obesity is a serious progressive disease and stresses the urgent need for early intervention. This finding supports recent focus on early diagnosis and treatment of obesity, driven by impairment of the MC4R pathway. We are addressing the underlying cause earlier as a potential to reduce long-term disease burden and create meaningful benefits for patients, families, and healthcare systems. Next slide 21. Now moving to acquired hypothalamic obesity. We are planning for multiple opportunities in Europe and Japan, with a higher per capita prevalence of acquired HO than the United States and Europe, and an estimated population of 5,000-8,000 patients. Japan represents a meaningful long-term opportunity for our MC4R agonist franchise. We continue to make significant progress ahead of our anticipated Japanese launch, establishing a strong leadership team focused on engaging with experts and healthcare centers. Earlier this month, our team had a very positive in-person meeting with the Japanese PMDA, and as David said, we anticipate top-line data from the phase 3 cohort of Japanese patients in March. In Europe, our EMA submission for HO is under review. We anticipate the CHMP opinion in Q2 and the EU marketing authorization in the second half of 2026. The steady growth in our reimbursed early access programs for HO in France and Italy is a very positive indicator for success in Europe and helped establish foundational relationships with expert physicians and local authorities. The French regulatory authorities renewed this month the authorization for the IMCIVREE AP1 reimbursed early access program, which clearly illustrates the benefits patients are receiving as part of this program and the high unmet need. Pending marketing authorization from the EMA in the second half of 2026, we will begin to establish reimbursement for acquired HO in Europe on a country-by-country basis, as we have done before for POMC LIPA and BBS. With that, I will turn over to Hunter. Hunter C. Smith: Thank you, Yann. 2025 proved to be a strong year, with solid growth in global sales of IMCIVREE and multiple value-driving milestones achieved across our portfolio of MC4R agonists. We entered 2026 well capitalized, with more promising potential catalysts ahead. I'll begin on slide 23 and walk you through our results for the fourth quarter, which was another solid quarter, as well as the full-year revenue, both of which we pre-announced in January. Revenues from sales of IMCIVREE were $57.3 million for the fourth quarter of 2025, representing a quarter-over-quarter increase of 12% and $194.8 million for the full year, an increase of approximately 50% from 2024. On a sequential quarterly basis, revenue growth was driven by an increase of approximately 10% in the number of patients on reimbursed therapy globally. In the fourth quarter of 2025, $39 million, or 68% of product revenue, was generated in the United States, and $18.3 million, or 32% of product revenue, was generated outside the United States. On slide 24 is the walk from the $51.3 million in global sales in Q3 to the $57.3 million in Q4. In the fourth quarter, the volume of vials shipped to our specialty pharmacy in the United States was approximately 1.7 million greater than the vials dispensed to patients. This compares to an excess of vials shipped over dispense of 3 million in Q3 2025. The net effect produced a negative $1.3 million inventory swing from Q3 to Q4. For the second consecutive quarter, inventory days on hand at the specialty pharmacy increased. You have approximately 20 days versus a normalized level of around 10-15 days. As was the case with year-end 2024, as is common across our industry, this type of growth in days on hand represents a potential pull forward of revenue from the quarter of actual patient demand and can, with all other things being equal, have a dampening effect on the first quarter of the year. U.S. revenue grew by $2.1 million quarter-over-quarter due to increases in product dispensed to patients. Ex-U.S. revenues increased $5.2 million, or 40%, versus the third quarter of 2025. The sequential increase was largely due to the negative impact on the third quarter of a one-time $3.2 million charge related to the final agreement with France on the reimbursed price for IMCIVREE for the treatment of BBS, POMC, and LEPR deficiencies. On slide 25 is the financial snapshot of year-over-year performance, as well as the fourth quarter 2025 results compared to the fourth quarter of 2024. Net product revenues in Q4 2025 increased by $15.4 million, or 37%, over Q4 2024. Gross to net for US sales was approximately 84.6%, generally in line with the gross to net percentage from previous quarters. Cost of goods sold this quarter was 8.5% of product revenue and was mostly attributable to cost of materials and our royalty payment on setmelanotide due to Ipsen. COGS, as a % of product revenue, was down slightly this quarter based on an increase in finished goods inventory. We generally expect cost of goods sold to be between 10% and 12% of net product revenue, with variation due to how our inventory balances change and the corresponding capitalization of labor and overhead costs, as was the case in Q4. Research and development expenses were $42 million for Q4, compared to $41.2 million in the same quarter last year. Sequentially, R&D expenses decreased by approximately $4 million compared to the third quarter of 2025. More than half of that decrease was due to the transition of our area development managers in the United States to sales reps or territory managers, moving their salaries and stock compensation to SG&A, effective October the first. Costs in the fourth quarter from our Phase 3 HO trial with setmelanotide and our Phase 2 trial with bivamelagon decreased from the third quarter. SG&A expenses were $57.5 million for Q4 2025, as compared to $38.1 million in Q4 last year. Sequentially, SG&A expenses increased by $5.1 million, or approximately 10%, compared to the third quarter of 2025. Increased SG&A spend from Q3 to Q4 was due to increased headcount costs and professional fees associated with the anticipated launch in acquired hypothalamic obesity, including the transfer of the field force described previously. For Q4 2025, weighted average common shares outstanding were approximately 67 million. Our GAAP EPS for the fourth quarter of 2025 was a net loss per basic and diluted share of $0.73, which includes $0.02 per share from $1.3 million of accrued dividends on convertible preferred stock. Cash used in operations was approximately $25 million in the fourth quarter and $116 million for the full year. We ended 2025 with approximately $389 million in cash equivalents, and short-term investments, which we expect to be sufficient to fund planned operations for at least 24 months. On slide 26, a few additional items of note. Our GAAP operating expenses for 2025 totaled $362.3 million. That included $66.8 million in stock-based compensation. Non-GAAP operating expenses for the year were $295.5 million. This came in at the lower end of the range that we guided for at this time last year. Our common share count is 68,285,039 shares as of February 24th. This number includes 729,164 shares of common stock, which were converted from preferred shares since the end of the third quarter. Recall, we raised $150 million in gross cash proceeds through the issuance of convertible preferred shares in April 2024. Following this partial conversion, there are 202,395,831 potential common shares that could be converted from the remaining preferred shares. The recent conversions represented almost 25% of the initial preferred shares, hence reducing our liability of dividends payable to preferred shareholders. Lastly, on slide 27, we are offering annual guidance on non-GAAP operating expenses. For 2026, we anticipate approximately $385 million-$415 million, which includes non-GAAP R&D expenses of $197 million-$213 million, and non-GAAP SG&A expenses of $188 million-$202 million. The overall increase in non-GAAP operating expenses for 2026 of approximately $104.5 million at the midpoint, which is about 35% over 2025, is the result of the success of our clinical programs in 2025 and represents future investments drived at driving long-term growth and increasing shareholder value. There are three primary drivers of the growth in anticipated 2026 spending. First, approximately 30% of the year-over-year increase will come from increased spending on formulation development, manufacturing, and clinical supply of our next generation MC4R agonists, bivamelagon and RM-718, as we continue to move both compounds through proof of concept studies and hopefully registrational studies in the coming years. Second, approximately 25% of the increase will be on U.S. commercial operations in support of the HO launch. Third, approximately 15% of the increase will be to build out Rhythm's operations in Japan in anticipation of a potential approval in HO. Overall, this forecasted year-over-year growth in operating expenses is the product of the last few years' clinical, regulatory, and commercial success, and represents a meaningful opportunity to invest in Rhythm's long-term potential to serve patients with MC4R pathway diseases. With that, I'll hand the call back over to David. Thank you. David Meeker: Thank you, Hunter. Tanya, we can open it up for questions. Thank you. Operator: Certainly. As a reminder, to ask a question, you will need to 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 stand by while we compile our Q&A roster. We will now open for questions. Our first question will be coming from Derek Christian Archila of Wells Fargo. Your line is open, Derek. Derek Christian Archila: Good morning, and thanks for taking the questions. Congrats on all the progress here. David, just first on bivamelagon phase 3, your comments suggest that this will largely look like setmelanotide phase 3, so, in terms of sample size and duration, but are there any changes to enrollment criteria that you would, you know, think of or other features of the trial that you can comment on? David Meeker: No. I mean, those are the principal things that we were looking to get feedback on. I think, you know, to your point, the trial will largely mimic our phase three. We continue to look at our patient reported outcome measures, some other things we can do to get better and better at, for example, understanding hyperphagia slash hunger. Some of these patient-reported outcome tools have not been validated, et cetera. That's an area which, as a company, we might modify, but we didn't get specific feedback from the FDA. Derek Christian Archila: Got it. Maybe just to follow up, you know, on the guidelines potentially for HO that could be implemented or, you know, kind of evolve over time, I guess specifically for post-surgical patients, where it seems like physicians want to, you know, intervene early prior to that significant weight gain. Just any comments on how that might evolve over time and what you're hearing? Thanks. David Meeker: Yeah, I mean, it's a good question. You know, we've had 6 months post surgery as a entry criteria to make sure that patients were stable on their hormones. That's very much a developmental issue because you don't know everything, and you wanna have things as, or the minimal number of things that might confound your interpretation of the results. In the real world, which is your question, and we've had this feedback from multiple thought leaders and the like, I mean, earlier is better. Why would you if you know the patient has HO, why would you make them wait 6 months to begin to intervene? You wouldn't do that for their thyroid hormone replacement, for example. I don't think there'll be that kind of guidance in the label. We'll see where, you know, guidelines, quote, unquote, "come out." Those will emerge over time, but I haven't heard that. I think the consensus would be, you know, as soon as you, the treating physician, are comfortable, yeah, you want to intervene. Derek Christian Archila: Got it. Thank you. Operator: Our next question will be coming from the line of Tazeen Ahmad of Bank of America. Tazeen, your line is open. Tazeen Ahmad: Okay, thanks, guys, and good morning. Can you give us an update on where you are with the PWS study? When is the next data update from that? What type of deepening response are you looking for? Are you looking for more weight loss, or are you looking for better hunger control? Or just can you give us a sense of that? Thank you. David Meeker: Yeah. Thanks, Tazeen. As I said in my comments, we're still on track for mid-year, in terms of providing that update for the 17 patients who remain on drug. I think, you know, the one piece of updated data I gave you today was that 17 of 18 patients remain on treatment. I think for a challenging disease, these patients tend not to remain on drug if they don't feel like they're benefiting, so we would take that as encouraging. I don't have an additional cut of the data, so as I said, I don't have further updates there. In terms of what we're looking for, again, we've been very clear and continue to learn, this is a more challenging disease in the sense that there's a lot of other things going on. They have multiple genes affected, not just those potentially impacting the MC4R pathway that are at play in this disease and can confound results. I think our goal remains the same. We'd be looking to clear 5% on the BMI change. We'll see how we do there, and of course, we'll collect hunger. I mean, the hyperphagia scores, HQ-CT, we shared that data in December with the caveat, you know, this is an uncontrolled trial, so those kind of measures, you really need a placebo control group to know exactly how you're performing. We will have that data, and of course, we'll share it. Operator: Our next question will be coming from the line of Unknown Analyst of Morgan Stanley. Your line is open. Unknown Analyst: Good morning. Thanks for taking the question, and congratulations on all the progress as well. Maybe just one question on IMCIVREE trends. You mentioned the potential for dampening of sales in 1Q, given some pull forward in 4Q. Maybe you can give a little bit of color on how to think about the growth. Is it just a slowing of growth, or should we think more flattish? Thanks. Hunter C. Smith: Well, I'm not, I'm not gonna give you comment sort of on where external estimates are. We did see negative growth Q4 to Q1 in 2024 into 2025. The buildup of inventory this year in absolute terms is less. You know, we'll see how that shakes out, you know, but it's just that dynamic in and of itself, that inventory represents a pull forward of sales from 1 quarter into, from Q4 out of Q1 into Q4. I think the only other thing is we have the typical experience that faces us every Q1, where there are a lot of plan renewals and plan changes for individual patients. Some patients rotate on to our bridge program, and then those get resolved, and they rotate off. Unknown Analyst: Understood. Very helpful. Thank you. Operator: Our next question comes from the line of Whitney Ijem of Canaccord Genuity. Your line is open, Whitney. Whitney Ijem: Hey, good morning, guys. I just wanted to follow up on EMANATE. You guys have talked about POMC PCSK1 and the SH2B1 substudies as being higher probability. Can you just talk to us a little bit, remind us, is that just driven by the enrollment and the powering of those substudies, or are there genetic biological considerations there as well? David Meeker: Let me summarize what I've said previously, you know, important to remind. The way we've handicapped this is, yes, we think that the POMC heads are the most likely to be positive, and that's based on the fact that, you know, we did have an assay going into the trial that allowed us to determine which of the variants were most likely to be pathogenic, meaning that they had true loss of function. There's a range of variants there, of course, the assay has its limitations. The bottom line is we felt that in that cohort, we were enrolling predominantly patients who would have true loss of function. That was our best, and we were able to enroll that cohort fully. The leptin receptor, we also had insight into which patients might have true loss of function. It turns out the leptin receptor head group is extremely rare, those that have this potential loss-of-function variant. That cohort was very significantly under-enrolled, and we weren't so optimistic there or not. SRC1, mostly VUS, Variant of Unknown Significance. Variants of Unknown Significance disproportionately tend to be benign. Again, we think there's a high risk that one may not be positive. The reason we remain somewhat hopeful on SH2B1 is that there's two groups there. One is those who have this deletion, 16p11.2 deletion. By definition, with a deletion, they would have loss of function. The other part, group of that, and that's enrolled, the missense mutations associated with SH2B1, you're back in this, you know, how many of those are VUS, and of the VUS, how many are benign versus pathogenic? Long story short, that's how we handicapped it. Again, we're working to, you know, get that data out by the end of the year. The other thing I've said is, you know, you're, you know, we, like I said, we've been, you know, careful and modest in terms of our, you know, projections here and what we think might happen. I think whatever we get, we're gonna learn a lot from these studies, and minimally, you know, they will form the basis for the next round of studies with our next generation studies, molecules, which we would do anyway. When we report out, we'll try to give you some insight into how we think about the future there. Whitney Ijem: Got it. That's helpful. Just one quick follow-up. Should we still be thinking about kind of the 5% weight loss as the kind of bar for success, either based on powering or just how you're thinking about it? David Meeker: Yeah, I mean, 5% is the guidelines. That's why we, you know, Prader-Willi, of course, where we think, you know, it's a really tough disease. I mean, that is the minimal threshold, so that's certainly the threshold here. I think in some of our other indications, you know, you get into, you know, where the world expects more today from a weight loss drug. Yeah, technically, it's 5% plus. I think, you know, what we would look at is, A, is the study positive? Then, B, do we think it's clinically meaningful and would be a meaningful offering, to the, you know, to patients with that, you know, specific genetic defect? Operator: Our next question will be coming from the line of Corinne Johnson of Goldman Sachs. Your line is open, Corinne. Corinne Johnson: Good morning, everyone. Maybe you mentioned this study for BIVA and that the FDA was pretty explicit that new molecules would require a year-long phase three, I guess. How are you thinking about that then, as it relates to the planned development of RM-718 in the same indication? Kind of separately, but in the same vein, how do you think about managing kind of quality control of the phase three program as you think through enrolling patients kind of ex U.S. in order to get that patient population? Okay, thanks. David Meeker: Good question. First on RM-718, yes, the read-through there would, you know, highly likely to be the same. I mean, you know, to be honest, you know, we'd go back, I would look to have another conversation with them. I think part of BIVA is it's a small molecule. I think RM-718's a peptide. It's highly analogous to setmelanotide. I don't know if they would look at that any differently, but, you know, a conservative base case here is, yes, RM-718 will have to do the same thing that we're being guided to for BIVA. Quality control outside the U.S., you know, the world's small. I mean, the sophistication of running trials, outside in these other countries, I mean, there's a number of centers and, you know, one or more centers in many or most countries, which are pretty sophisticated. CROs are structured to run trials globally. I'm not at all worried about quality. I mean, you pay attention to that, and we'll be careful, of course, but I think quality control is not the issue. Our challenge as always is, you know, rare diseases, you wanna find sites that have good access to patients. Operator: Good. Thank you. Operator: Our next question will be coming from Philip M. Nadeau of TD Cowen. Your line is open, Phil. Philip M. Nadeau: Morning. Congrats on progress, and thanks for taking our questions. Two from us. First, in the bivamelagon phase 3 trial, what dose will you be exploring? It seems like you think 200 milligrams is underdosed. 600 did look a little bit more potent, but the patient numbers were small, so we're curious what dosing paradigm you will use. Second, on hypothalamic obesity, I think the last number of identified patients that you gave to us was 2,000. Sounds like, as your sales reps are out there shaking the trees and doing medical education, you're finding more and more patients. Any update to that number? Thanks. David Meeker: Oh, dosing. Sorry. So the dosing will be we’ll dose escalate from 200 up to 600. 600 will be the target dose. You know, we look at the data the same way you did. I think there is a difference between 400 and 600 milligrams. I think we're still on a dose response part of the curve there. The other thing, which has been pretty encouraging, and I will say, you know, we've got, you know, a number of patients out for the full year. What happens, so I have a little insight there. I mean, what happens in HO is many of the patients continue to just gradually deepen over time. I'll remind you back to a patient from our phase 2 study, the most fairly affected oldest individual in that trial, a 24-year-old man who had a starting BMI of 52, 50+, and over a period of 4 years, he just continued to gradually decrease his BMI down to a normal BMI of 24. I think, you know, what we're seeing here is not inconsistent with that, is a gradual, you know, deepening over time. So short answer to your question is yes, the target dose will be 600. There'll be patients who maybe do fine on 400, just as there are patients who do okay on 2 milligrams as opposed to 3 with setmelanotide. I think, you know, we're incredibly encouraged here, and I think, you know, this data gives us high confidence that this pathway is central to HO, and we're correcting, as you might expect, in a hormonal replacement strategy. With regard to patients, you know, we updated in September, and, you know, we've stayed away from sort of giving you monthly or quarterly updates on those patient numbers, 'cause after a while, I'm not sure how helpful that is. You are absolutely correct, and as Jennifer highlighted in her comments, you know, the team's been doing a lot of work. You know, we're continuing to find more patients. Yes, that number's gone up. We're learning a lot about, you know, the nature of this community, you know, how many patients carry a diagnosis of HO and how many patients are, quote, unquote, "in suspected category." You know, this belief in the overall opportunity, the 10,000, is high, and it's higher than it was last September, for example, and we feel really good about the progress we're making. Philip M. Nadeau: That's very helpful. Thank you. Operator: Thank you. Our next question will be coming from the line of Jonathan Wolleben of Citizens. Your line is open, John. Jonathan Wolleben: Hey, thanks for taking the question. Just one on Japan. Hunter, you mentioned the investment you guys will be making there. Just wondering how we should think about the opportunity in Japan and the trajectory of a potential adoption. David Meeker: Yeah. Yann, you want to take that? Yann, are you... Did we lose you? Yann Mazabraud: Yeah, I'm back. Okay, sorry. Yes. Potential first, as I said earlier, we estimate the prevalence between 5,000 and 8,000 patients, and it's a well-documented prevalence, we are quite sure of this number. The second point was your question about our capabilities. We are currently building out our team. We have set up an affiliate. We have a full management team in place, and we already have a field medical team in the ground. From a timeline point of view, David mentioned the data in March, following that, you can count on 12 months of regulatory and market access and pricing aspects, which means that we should have a launch in the next 12 months from now. Jonathan Wolleben: Thank you. Great. Thanks. Operator: Our next question will be coming from the line of Unknown Analyst of Leerink Partners. Your line is open. Unknown Analyst: Hey, guys. Good morning. Thanks for taking the questions. Just on the HO expansion, appreciate the color on the regulatory interactions. It sounds like you're entering labeling negotiations, which is great. As we think through some of the color you're giving here around reimbursement and payer coverage and activating sites and patients, can you just elaborate a little bit on how you think about the launch cadence relative to BBS? Thanks so much. Jennifer Lee: Yeah. From the perspective of HO versus BBS, one, I think there are similarities and some differences. I think from a similarity perspective, you know, there's still a lot of opportunity, as we've outlined, just in terms of getting these patients to an actual diagnosis of Acquired Hypothalamic Obesity, versus just being seen as a patient with obesity for many causes that it may not be the root cause just in terms of what they are going through. There's still opportunity there. I think the other piece is from the perspective of a timeline of care coverage. You know, although we have a great starting point, just in terms of all the dialogue we had with BBS, in terms of the differentiation of, you know, MC4R pathway diseases, versus general obesity, it's still gonna take some time just in terms of going through the process of having specific CNT meetings, so that we get, you know, a specific policy for the expansion of the indication in place. We're similarly, in the meantime, going to be working through the process as we get the RXs in, pair by pair. There are some similarities. I think some of the differences is that in terms of HO, the precision and confidence, just in terms of the data we have to really pinpoint it down to the right physician to educate, to get these patients to a diagnosis, we feel a lot more confident about that. I think in comparison to BBS, you know, those sort of crumbs to lead us to the right physicians is stronger. I think the other aspect is, you know, we know even though, like, our teams are targeted by the data and following where the patients are, it just made sense that we are actually being led to these medical centers that have these pituitary, you know, centers and capabilities. We know where they go once they have the brain tumor, where they're treated, and they stay in that situation for a period of time so that as they start to encounter the symptoms of HO, we have the ability to really target those incident patients to get to a diagnosis that is not missed. That's a bit different than what it was like for BBS, which once again, gives us a bit more confidence just in terms of being able to identify them earlier in their journey. Operator: Next question. Operator: Our next question will be coming from Seamus Fernandez of Guggenheim Securities. Your line is open, Seamus. Evan Wang: Hi, guys. Thanks for the question. This is Evan Wang on for Seamus Fernandez. Just two from us. First, with RM-718, I saw some narrow timelines for Part D. Curious if there's any potential strategies to accelerate timelines there, potentially, like a phase 2, 3, just given some of the feedback and data that's around biva and setmel? Second, curious if you're exploring or planning to explore other areas of MC4R development, maybe in or other kind of avenues to treat obesity. Thanks. David Meeker: Just to clarify on that last part of the question, other indications that we're thinking about, other approaches? Is that what you’re— Evan Wang: Other indications or approaches for, it's mostly, I guess, obesity-related treatment. Thanks. David Meeker: Okay, for RM-718, is there a strategy to accelerate? I mean, we take, I think, a pretty aggressive view in general. I mean, regulators don't always agree with our approach, we end up sometimes in more conservative or conventional approaches. I think RM-718, as I said earlier, is likely to be highly similar to bivamelagon. We'll go with this initial experience and this open label study, and move right to a Phase 3. I don't know if there's an opportunity to accelerate things further there. The other thing is the pressure on the next gen in HO is we want to get it out as soon as possible. It's a little different. From an initial indication opportunity where those patients have no other treatment, and, you know, setmelanotide will be approved and out there, patients will have an option. Again, we'll move as quickly as we can, but it's not quite the same criticality as it might be if there was no treatment available at all. With regard to other indications, I mean, we've talked about, you know, the different kinds of, or the different areas that we're interested. One is genetics, you know, EMANATE being the first, you know, attempt beyond our initial approvals in POMC and LEPR. We have the DAYBREAK study, we will be coming back to specific genes. We will do that development work, as we've said, with next-generation molecules, probably not both molecules in every one of those genetic indications, but we'll come back to you with an updated plan there. With regard to, you know, other approaches to obesity, I mean, yes, we're open to that. We have, you know, early programs where we're thinking about different ways we might complement MC4R. That's all early. We're not at a point where we're prepared to talk about that yet, but we are fully committed to optimizing therapy for these patients with MC4R and deficiencies, and that would include potentially additional approaches. Operator: Our next question will be coming from the line of Unknown Analyst of Needham & Company. Your line is open, Joseph. Unknown Analyst: Good morning, this is Eddie on for Joey. I appreciate you taking our questions. Just a follow-up on MC4R, and the M and A sub-studies, can you remind us again, if you intend to submit these as a combined sNDA, for a broader MC4R pathway, or, just talk about how the regulatory path, might necessitate sort of, mutation-specific approvals, and then how this might change, for these next gen therapies as you kind of move through the trials, in later years? A follow-up. I'm sorry if I misheard. Did you say that in the biva OLE, that you saw moderately better results, patients not on GLP-1? If I heard that right, can you describe why that might be the case? Thank you. David Meeker: Yeah, let me take that last piece first. You know, when we're trying to create an apples to apples comparison, we took the patients in our RM-493-040 Phase 3 setmelanotide trial. If you remember, there was, in the treated group, about 15 patients who were on a GLP-1. That group did have a better result. If you remember, they got in the trial by not having responded to a GLP-1. Once they got setmelanotide, they had a very good response, and if you were just to look at that cohort, you know, their actual % decrease was greater than the group that did not get a GLP-1. Trial was not designed to, you know, prove that that might be a better outcome, but what we've concluded biologically is, yes, once you correct the underlying defect in setmelanotide, restore the hormonal deficiency, then your ability to respond to another anti-obesity medicine might be restored. We gain weight for a different reason if you're a patient who's got incremental weight because they love ice cream and they eat ice cream all the time, you know, then, you know, a GLP-1 in that setting, once you've corrected the hormonal deficiency might make sense. That was an apples and apples change there, and that was the goal there. Your question about EMANATE, in terms of regulatory filing strategy, no, these will be filed individually. Even if all four were positive, you know, we would file four separate sNDAs. They would be, like I said, one at a time evaluations. In the future, I mean, is there an opportunity for a mechanistic kind of approval that wouldn't require a full phase 3 for every genetic indication? I think that's possible. I would say we're definitely not, or the regulators are definitely not there today. That's not an unreasonable question for the future. Operator: Our next question will be coming from the line of Paul Andrew Matteis of Stifel. Your line is open, Paul. Unknown Analyst: Hi, this is Matthew on for Paul. Thanks so much for taking our question. I guess I had one on acquired HO. For the FDA review, we appreciate the pivotal phase 3 was already large, but will you be able to supplement your data package with the Japanese cohort? Does the timing work out such that you'll be able to include this before the PDUFA? Thank you so much. David Meeker: Yeah, Matthew, it's a good clarification. The answer is yes, and that's partly... I mean, when the FDA gave us their extension back in November, they were very aware of the exact timing of the last patient in visits. So they had done the calculation, recognizing that there was a very short period of time between when we would have data from that last patient, a Japanese patient, and being able to get the data in on the full 142 patients, which is what they wanted. So we're on that path, and we will get that data in. Yes, they are prepared to deal with the fact that, yes, it's now we're down to a relatively short period of time between that final data submission and the label or potential approval on March 20th. Unknown Analyst: Thank you. That's super helpful. Operator: Our next question will be coming from the line of Unknown Analyst of Citi. Your line is open, Samantha. Unknown Analyst: Hi, good morning. Thanks very much for taking the question. Just maybe one clarification on the phase 3. You mentioned that you were going to primarily enroll outside in countries where setmelanotide is not available. How does that work necessarily for enrollment in the U.S.? Just on Prader-Willi, can you just talk about your latest thinking on a potential phase 3 trial? Would you plan to take both setmelanotide and semaglutide forward, or is it more likely that you choose one of these drugs to advance? Thanks very much. David Meeker: Yeah. Okay, with regard to the phase 3 for HO, yes, we will run it predominantly outside. I wouldn't exclude having a U.S. site, but, you know, setmelanotide will be approved. Patients here have an option, so, the U.S., for multiple reasons, becomes a little more complicated. We do not need to have a site in the U.S., I mean, we already have U.S. data coming out of our phase 2 study. I'm not, again, I'm not so worried about our ability to execute the trial. I'm not using the U.S., but, you know, you never say never, so I would defer final decisions on that. For Prader-Willi, setmelanotide versus RM-718, I think, you know, this is something, as we've highlighted before, the advantage of going forward with setmelanotide is, you know, we've got data on setmelanotide already. It'd be a supplemental NDA, and so we could, in a sense, roll into that phase three. The advantage of going with RM-718, for example, is that, it's a next gen. We're gonna do a next gen study sooner or later, and that's the end game. If the RM-718 program is at a point where the gap between when we might start with setmelanotide and when we could start with RM-718 is not so great, I think, you know, we would, you know, take that time delay, if you will, and just go right to RM-718 and avoid having to run two studies there. That decision is yet to be made. We'll see how all this plays forward. Operator: Our last question will be coming from the line of Unknown Analyst of RBC. Your line is open, Lisa. Unknown Analyst: Oh, great. Thanks so much for taking our question, and congrats on the progress. I just have one on biva. Wondering if you can expand on your dose selection comments, and I realize this might be a bit early, as the phase three is not yet even started, but long term, is it possible patients could dose down with a maintenance dose if they happen to reach a normal BMI in the real world? Any color here would be helpful. Thanks so much. David Meeker: Yeah, yeah, I'll briefly repeat what I said before in the dose selection. I do think 200 is probably on the border in terms of being therapeutic for most patients. I think 400-600 is more likely in range, 600 does seem to have, you know, a continued dose response, 600 for sure will be our targeted dose, just the way 3 milligrams was our targeted dose in the HO setmelanotide trial. You know, with regard to dosing down, you know, what's interesting here is the biology, pathophysiology, it's a hormonal deficiency. You know, in theory, you take whatever amount you need to restore your hormonal deficiency, but it's not a biologic setting where dosing down makes sense. I think our expectation is most patients will stay at their target dose. That's been true with setmelanotide as we go forward. It's not, you know, you get your weight loss, and then you can kind of go to a low dose to maintain. That's not the pathophysiology. Operator: I'm showing no further questions. I'd now like to turn the call back to David Meeker for closing remarks. David Meeker: Great, thank you. Thanks all for tuning in. Again, we remain really excited about the progress here at Rhythm Pharmaceuticals, Inc. Lots of exciting things coming up. 2025 was a big year. 2026 is gonna be equally big. Look forward to our next update. Thanks, all. Operator: This concludes today's program. Thank you for participating. You may now disconnect.
Operator: Greetings, everyone, and welcome to the Nomad Foods' Fourth Quarter of 2025 Q&A Conference Call. Please be aware that today's event is being recorded. I'd now like to turn the floor over to your host, Jason English, Head of Investor Relations. Please go ahead. Jason English: Thank you. Hello, and welcome to Nomad Foods' Fourth Quarter 2025 Earnings Question-and-answer Session. We have posted the associated press release, prepared remarks and investor presentation on Nomad Foods website at nomadfoods.com. I hope you've all had a chance to review that. I'm Jason English, Head of Investor Relations and Corporate Strategy. I'm joined by Dominic Brisby, our CEO; and Ruben Baldew, our CFO. During this call, we will make forward-looking statements about the performance that are based on our view of the company's prospects, expectations and intentions at this time. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and our investor presentation, which includes cautionary language. We will also discuss non-IFRS financial measures during the call today. These non-IFRS financial measures should not be considered a replacement for and should be read together with IFRS results. Users can find the IFRS to non-IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within this presentation represents adjusted figures. All adjusted figures have been adjusted primarily for, when applicable, share-based payment expenses and related employer payroll taxes, exceptional items and foreign currency translation charges and/or gains. Unless otherwise noted, today's comments from here will refer to those adjusted numbers. There it is, the fun part is out of the way. With that, operator, let's open the line to questions. Operator: [Operator Instructions] And our first question comes from Jon Tanwanteng from CJS Securities. Jonathan Tanwanteng: The first one I would ask, if you could, is what are the underlying components of volume and price in your guidance? And if you could go beyond that, perhaps what's your thoughts on net pricing versus inflation after the year? Ruben Baldew: Yes. So we have a guidance. Thanks for the question, first of all, Ruben speaking here. So our overall guidance is a net sales guidance. We're not breaking it down in terms of volumes and in terms of price, but I can give you a bit more context. As you've heard this morning also in our prepared remarks, we are guiding for a negative decline. And the main reason for that is the following. Firstly, we're in the midst of our negotiations, our annual negotiation. And this is normal with -- as it is normal with negotiation, we're seeing some delay and disruption and retaliation. We think that's temporary, but that will have an impact on our guidance. Second bit is that big part of our inflation actually is in Fish. We're seeing cost inflation in Fish. So we will be taking pricing on Fish. We expect competition to follow. But as we've seen in the past, there might be a time lag, and that's actually the biggest contributor to our negative guidance. And thirdly, as Dominic shared, this will be a year where we will be driving change, change to make Nomad the better company in terms of driving opportunities, but with change does come disruption. Now the first 2 points links to your question on volume and price. We do expect price to be a contributor. But also when we talk about price, there's mix in there. We will be continuing to drive potatoes growth. So that will be a bit of an offset there. But we also expect negative volume because of the reasons I mentioned, especially on taking price in Fish and the price lag of our competition. Jonathan Tanwanteng: Understood. Looking beyond '26, how should we expect normalized growth to look like, especially relative to the long-term targets you put out last year, especially if you take all these initiatives to improve your operating structure and efficiency? Dominic Brisby: So this is Dominic. Thanks for the question. So first of all, to be clear, I fully expect us to return to growth in 2027 and 2028, and I see tremendous growth potential for this business. What I'm not going to do right now is to commit to specific numbers or ranges currently. We're currently in the process of putting together multiyear plans in terms of what we're going to deliver and how we're going to deliver them. And I'm excited to have the chance to share these with you at our Analyst Day later this year. At that time, we'll be much more specific in terms of what we're going to do, what our building blocks are and what our multiyear targets are. But just to put this in context, a measure of how much I believe in this business and how much Ruben believes in this business is the fact that over the coming weeks, we're both going to be making substantial share purchases in the company. So 2026 is a transition year. It's a year in which we're enacting a lot of change, but the long-term future in our mind looks very positive. Operator: And our next question comes from John Baumgartner from Mizuho. John Baumgartner: I wanted to ask, Dominic, in the prepared remarks, there was a reference to, I think, strengthening relationships with retailers and doing better at the point of purchase. And I'm curious, some of the commentary over the past 6 to 9 months from some of the larger retailers in Europe, it seems that they're focusing quite a bit more on fresh food. It seems as though they're focusing more on investing in private label quality as opposed to just, I guess, competing on price. How do you think about -- I guess, how do you see the retail environment changing? Are you seeing retailers managing these categories differently? And how do you think about the reinvestment required to get people back to that fresh food case -- the frozen food case, excuse me? Dominic Brisby: Yes. So first of all, thanks for the question. So I think the overall behavior of European retailers hasn't changed dramatically over recent months or even the past couple of years. What we do see, though, is a continuation of an existing trend. There's nothing new about retailers wanting to make sure their private label offerings are high quality. And the focus on fresh has been quite a big theme in Europe as well. Now some of this is retailer driven. Some of this is driven by us as well as a clear leader in frozen. And certainly, we see a few opportunities, a, to strengthen our position at the point of sale and to strengthen our position with retailers, but also to make sure that we're creating excitement and animation at the point of sale. That means making sure that we roll out some of our great innovations, for example, Chicken Shop, which is working well in the U.K. There's no reason why that can't work well across Europe, creating more animation and more excitement. Secondly, making sure we have more disruptive and exciting positions at the point of sale to drive people into the frozen aisle, but also to make sure when they're there, they have something exciting to look at and focus on. And in terms of investments, there are some areas where this will require investment, and we've factored significant investment within our plan for this year to drive greater strength at the point of sale. But there's some where it won't require great investment. They'll just require more smartness from our side. For example, making sure that our packaging is not only much better than private label, but much better than the competitors as well and much better than we've been before. And particularly when you're walking through the frozen food aisle, because of the nature of packaging because it's generally not transparent, we have an opportunity to communicate much more on the packaging than would be the case in other categories. So we see a chance to be much more aggressive there than we have been before. This is something we're working on significantly. But in terms of retailer behavior, we're not seeing any dramatic shift versus where retailer behavior has been over recent years. Jason English: John, this is Jason. I would just add a comment about the opportunity to shift growth back out of fresh into frozen, at least that was my interpretation. I would just note that the frozen category is actually delivering very robust growth for our retailers. Throughout last year, it grew 2.4% across our overall footprint, which continues to track above overall food. So there are still healthy category tailwinds and step into some markets like Italy category growth of 3%; Germany, 4.5%. So we are fortunate to be in a category that is delivering growth for retail partners and that obviously affords us opportunities. John Baumgartner: Okay. Okay. Great. And then just a follow-up on the supply chain side on the fish business. We've seen some reports in Europe about some, I guess, disruptions on the IT platform and some digital systems on illegal fishing catches. Are you seeing any disruptions on the inflow of trade at the ports in Europe at this point? Or is that a nonevent for Nomad? Ruben Baldew: No, that's not an event for us. If you look at our ingredients and main items, we don't see that for our supply. Jason English: There was disruption, John, as you noted, it was reported in the Financial Times. And the programs, the policies that were being put in place that caused those disruptions have been temporarily suspended until they can be resolved. So the disruption was short term in nature and not long enough to impact our business or frankly, we don't believe it impacted the category or any of our competitors either. Operator: Our next question is a follow-up from John Tanwanteng from CJS Securities. Jonathan Tanwanteng: I was just wondering if you could provide more detail on the pricing negotiations and when you expect them to conclude? Number one. And what the -- if that's going to be a rolling thing through the next few quarters or if it's going to be all over before Q2? Dominic Brisby: So in the case of most European retailers, the price negotiations are happening right now. There are certain exceptions in certain markets and with certain customers. But for the most part -- there are a few exceptions, but for the most part, we expect most of that to be included -- to be concluded during the course of Q1. Jonathan Tanwanteng: Got it. And as a follow-on to that, assuming your competitors do follow you, how do you expect share to change throughout the year? Is there a point where you expect volume or value share to start coming back to you guys as the year progresses? Dominic Brisby: I mean, obviously, we have no idea what our competitors are doing in terms of pricing, although we monitor it carefully. The key point from our side, of course, we have a fairly meaningful differential in price versus private label. The key point from our side is to make sure we give consumers strong reasons to pay. There are a few ways that we do that. First is through making sure our products are superior. Our products always have been superior, but actually during the course of this year, they're going to be even more superior, for example, with the new coating on fish fingers, which we're rolling out. Secondly, to make sure that our brands are stronger. Again, our brands have always been stronger if you look at our brand equity metrics, but we see opportunities to be much more effective in terms of how we spend our A&P. And thirdly, it comes back to the point I made a second ago, making sure that at the point of sale, we're noticeably stronger, noticeably more noticeable and noticeably more disruptive than anyone else. And this is what we're going to be focusing on. Jonathan Tanwanteng: Okay. Great. And then last of all, it's good to see you committing to open share repurchases, but I was wondering if there's any change to the corporate capital allocation plan and if repurchases remain the priority for you guys? Dominic Brisby: So our top priority is to invest in the business to maximize our organic growth potential. And so we're very clear about that. Beyond that, our priority is going to depend on the circumstances. So as you know, buybacks have been a priority for us as we believe that our shares are trading well below their intrinsic value. And we continue to have an appetite to repurchase shares at current prices, but we're going to balance that carefully against our leverage ratio and our broader liquidity needs. We're also looking forward, M&A could potentially reemerge in the future if various conditions change, for example, if we're less cheap and deals are less expensive. The one thing I can assure you of and the one thing I want to be very clear about is that either way, we and the Board are absolutely intent on allocating capital in ways that we believe maximizes shareholder returns. Operator: [Operator Instructions] And it's showing no additional questions at this time, I would like to turn the floor back over to Dominic Brisby for any closing comments. Dominic Brisby: So thank you all for joining us today and for your interest in Nomad Foods. I very much look forward to meeting many of you in the days and weeks ahead. Thank you. Operator: And with that, we'll conclude today's question-and-answer session. We do thank you for joining. You may now disconnect your lines.
Operator: Welcome to Grupo Aval's Fourth Quarter 2025 Consolidated Results Conference Call. My name is Regina, and I will be your operator for today's call. Grupo Aval Acciones y Valores S.A., Grupo Aval is an issuer of securities in Colombia and in the United States SEC. As such, it is subject to compliance with securities regulation in Colombia and applicable U.S. securities regulation. Grupo Aval is also subject to the inspection and supervision of the Superintendency of Finance as holding company of the Aval Financial conglomerate. The consolidated financial information included in this document is presented in accordance with IFRS as currently issued by the IASB. Unconsolidated financial information of our subsidiaries and the Colombian banking system are presented in accordance with Colombian IFRS, as reported, the Superintendency of Finance. Details of the calculations of non-IFRS measures such as ROAA and ROAE, among others, are explained when required in this report. On November 27, 2025, Banco de Bogota's subsidiary, Multi Financial Holding, Inc. MFG, entered into a share purchase agreement with BAC International Corporation, BIC, a subsidiary of BAC Holding International Corp. for the disposal of 99.57% of the issued and outstanding shares of Multi Financial Group, Inc. MFG, the parent company of Multibank Inc. For comparability purposes only, we have prepared and present supplemental unaudited pro forma financial information for the periods prior to 4Q '25, which reflects the reclassification of the operations relating to MFG as noncurrent assets and liabilities held for sale and discontinued operations. This supplemental unaudited pro forma financial information does not intend to represent and should not be considered indicative of the results of operations or financial position that would have been achieved had the transaction occurred on the dates assumed nor is it intended to project our results of operations or financial position for any future period or date. The pro forma financial information is unaudited and the completion of the external audit for the year ended December 31, 2025, may result in adjustments to the unaudited pro forma financial information presented herein. This report includes forward-looking statements. In some cases, you can identify these forward-looking statements by words such as may, will, should, expects, plans, anticipates, believes, estimates, predicts, potential, or continue or the negative of these and other comparable words. Actual results and events may differ materially from those anticipated herein as a consequence of changes in general, economic, and business conditions, changes in interest and currency rates, and other risks described from time to time in our filings with the Registro Nacional de Valores y Emisores and the SEC. Recipients of this document are responsible for the assessment and use of the information provided herein. Matters described in this presentation and our knowledge of them may change extensively and materially over time, but we expressly disclaim any obligation to review, update, or correct the information provided in this report, including any forward-looking statements, and do not intend to provide any update for such material developments prior to our next earnings report. The financial statements of Grupo Aval Acciones y Valores S.A. in accordance with Colombian regulations must be filed with the market and with the Superintendency of Finance with the opinion of an external auditor. At the time of this quarterly call, this process is still ongoing. The content of this document and the figures included herein are intended to provide a summary of the subjects discussed rather than a comprehensive description. When applicable in this document, we refer to billions as thousands of millions. [Operator Instructions] I will now turn the call over to Ms. Maria Lorena Gutierrez Botero, Chief Executive Officer. Ms. Maria Lorena Gutierrez Botero, you may begin. Maria Gutierrez Botero: Thank you. Good morning, and thank you for joining Grupo Aval's fourth quarter and full year 2025 earnings call. I'm so sorry, but I have a little flu, oh, a terrible flu, but I'm trying to -- that you can understand me. I am joined today by Diego Solano, our Chief Financial Officer; Camilo Perez, Chief Economist at Banco de Bogota; Paula Duran, Corporate Vice President of Sustainability and Strategic Project. I would like to start by highlighting the positive evolution of our results during 2025, despite the challenging and volatile local and global environment. We reached COP 1.7 trillion in net income during 2025, a 70% increase compared to the previous year and more than twice that of 2023. This improvement was primarily driven by stronger contributions from our banking business and a record performance year by Porvenir. Since our last call, we completed important milestones in line with our strategic focus to strengthen our strategic priorities. First, we completed the merger of our trust company. Second, we reached an agreement to acquire Banco Itau's Colombian retail business. Third, we reached an agreement to divest MFG. And fourth, Corfi has successfully completed transaction that will grow in business in the short-term. On January 2, 2026, we successfully merged our fiduciary businesses from Fiduciaria Bogota, Fiduciaria de Occidente, and Fiduciaria Popular into Aval Fiduciaria. This transaction consolidates our trust services into a single strong entity, enhancing our value proposition for existing and new customers and generating operational efficiencies. We expect this to result in an increase of our market share in trust fee income and AUMs and improve the profitability of this business. On December 23, 2025, Banco de Bogota announced the acquisition of Banco Itau with the banking business in Colombia and Panama. This move reinforces Banco de Bogota's focus on the affluent segment, enhances the quality of our client needs and strengthens our competitive positioning in Colombia. The acquisition is expected to add around 267,000 clients with USD 6.5 trillion in loans and USD 4.1 trillion in deposits. The deal excludes Itau's corporate banking and is pending regulatory approval. On November 27, Banco de Bogota announced that it has reached an agreement to sell MFG, a Panamanian bank to [ CAB ], that is the Central American Bank. This unit has delivered modest results since its acquisition in 2020 and require a large scale to achieve the desired performance. The divestment of MFG strengthens Banco de Bogota's position to pursue a stronger growth in its core market and reallocate capital towards businesses with a stronger strategic alignment and long-term potential. The sale process for this operation is expected to close over the following months, following regulatory approvals in Panama. This quarter, Multi Financial Group's balance sheet and P&L have been classified as discontinued operations. Corfi announced 2 major acquisitions. The first one, Corfi announced agreement to participate with a 51% stake in Sencia, the concessionaire of the 20 -- 29 sorry, year public-private partnership for the renovation, construction, and operation and maintenance of Bogota Nemesio Camacho Stadium complex. Sencia will develop a USD 2.4 trillion project, includes a new 50,000-seat stadium, cultural and commercial components, public space development, and mobility solutions. In the energy and gas sector, Promigas signed an agreement to acquire 100% of Zelestra's renewable energy generation platform, reinforcing its transformation into a multi-energy platform with operations in Colombia, Chile, and Peru. This transaction has a portfolio of more than 19 solar and storage projects totaling 1.4 gigawatts of contracted capacity and over 2.1 gigawatts under development, supporting diversification of nonregulated businesses and stable long-term contracted revenues, subject to project approvals in Colombia and Peru. Regarding results from continued operation for the quarter, positive trends continued to consolidate during the quarter. Our risk-adjusted NIM on loans for the quarter stood at 3.34%, the highest level in 3 years, while our cost of risk continued its positive trend. Return on average equity came in slightly below our initial expectations, mainly due to a weaker-than-expected NIM on investments triggered by volatile local and international capital markets and the onetime effects related to the MFG sale agreement, which Diego will explain in detail. I will now pass on to Paula, who will go over our sustainability achievements for the year. Paula? Paula Duran: Thank you, Maria Lorena. Good morning, everyone. In the fourth quarter, we closed an extraordinary year for sustainability, further consolidating our ESG strategy. One profitability is built by integrating strong financial performance, measurable social impact, and responsible environmental management. Our framework is structured around 3 pillars: Returns with purpose, opportunities for all, and environmental value. Under our first pillar, returns with purpose, we continue to scale sustainable finance. Our sustainable loan portfolio reached COP 44.9 trillion, including COP 36.2 trillion in social lending and COP 8.7 trillion in green lending. Social lending included targeted credit lines for senior citizens, housing, women entrepreneurs, coffee growers, and micro businesses. Green lending supported renewable energy, infrastructure, sustainable mobility and water management projects, among others. In our investment portfolio, Maria Lorena already mentioned our agreement with Zelestra that reinforces our commitment to clean energy. We also received important external recognitions. In the S&P Corporate Sustainability Assessment, we achieved a historic score of 81 out of 100 and were included in the S&P Sustainability EU. Additionally, Banco de Bogota, Equity Colombia, Banco de Occidente and Villas were also included in the EU, demonstrating the consistency and consolidation of our sustainability strategy across the group. In the MSCI assessment, we improved our rating to BBB, driven by stronger social impact metrics and enhanced responsible investment practice. On our second pillar, opportunities for all, this pillar focuses on generating inclusive growth and shared value. We calculated the total economic value generated and distributed, which reached COP 41 trillion in 2025. In this value distributed to more than 31,000 suppliers that received COP 11 trillion, our 67,500 employees also earned COP 3.8 trillion. We also paid COP 3.4 trillion in taxes and generated COP 13 trillion in returns for our clients. Additionally, we invested COP 70 billion in voluntary social programs, benefiting more than 2 million people, focusing on community infrastructure, education and research, socioeconomic development, and the promotion of culture, art and sports. Through Mision La Guajira, the most significant private sector social initiative in Colombia, we fulfilled our commitment, benefiting more than 21,500 people across 80 communities with potable water, electricity, and connectivity. The program also included financial education initiatives and supported over 1,500 value artisans fostering sustainable live schools. We also supported the VAMOS Finances scholarship program exceeding our fundraising goals and reaching COP 1.1 billion, benefiting more than 1,200 students. For our third pillar, environmental balance, we joined the partnership for Carbon Accounting Financials, CAF, committing to measuring the contributions associated with our financial activities. We also launched our nature strategy aligned with the NSE and began a pilot implementation with one of our entities. At the group level, we also achieved tangible equal efficiency improvements. Energy consumption reduced by 9.6%, renewable energy use increased to 38%, water consumption reduced by 2%, and waste generation decreased by 9%. In summary, we closed 2025 with meaningful progress across all 3 pillars, reinforcing our position as the Aval that drives support and transform the group. We continue to generate opportunities for more sustainable development and create long-term value for our shareholders and all stakeholders. Thank you. Maria Gutierrez Botero: Thank you, Paula. Now moving to the macro environment. A lot has happened since our last call that has changed our expectation for 2026. A massive and technical increase in minimum wages has triggered a substantial increase in inflation expectations and has a strong terms from the Central Bank to control inflation expectations. These recent events add to the increase in real interest rate expectations that result from growing concerns on the current administration's fiscal discipline. As a result, since our last call, we have raised 200 basis points our expectation on 2026 inflation and 350 basis points year-end 2026 Central Bank intervention rate, changing the improvement trends we previously anticipated. 2025 was characterized by elevated global uncertainty. The year was marked by abrupt changes in U.S. economic policy, increased trade tensions and greater economic fragmentation. Despite these challenges, global growth proved resilient, reaching an estimated of 3.3%, supported by a second half recovery, higher investment, and accelerated adoption of artificial intelligence technologies. In Colombia, economic activity remained resilient. GDP growth closed at 2.6% for 2025, driven primarily by household consumption and public spending. However, the GDP outlook remains challenging. Investment level stand at historical low levels and the country's fiscal deficit is among the largest globally, despite interest savings achieved through the government's liability management strategy. Household consumptions and government spending alone cannot sustain structural economic growth if investment remains absent and the government continues to crowd out the private sector. Inflation closed the year at 5.1%, remaining above the Central Bank's target range. Furthermore, inflationary pressures derived from -- derived from the 23.7% increase in the minimum wage led to the beginning of a new restrictive cycle in monetary policy as evidenced by 100 basis points increase in the Central Bank rate in January. Moving on to the exchange rate. The weaker U.S. dollar and the heavy dollar inflows from remittances and the national government liability management strategies led to 14.8% appreciation of the Colombian peso relative to the U.S. dollar. Camilo will now elaborate on our economic outlook. Camilo? Camilo Perez Alvarez: Thank you, Maria Lorena. Good morning. The Colombian economy grew by 2.6% in 2025, below the consensus estimate and that of technical staff of the Central Bank. The surprise came from investment results with gross fixed capital formation growing only 1.3%. The weak growth in investment was offset by the divestment of machinery and equipment, which registered an annual increase of 9% due to the needs faced by businesses to meet higher domestic demand. Meanwhile, investment in housing, infrastructure, and intellectual property contracted annually. As a result, Colombia ended 2025 with an investment rate of 16.6% of GDP, the lowest level so far this century. Ultimately, high levels of uncertainty, elevated interest rates due to persistent inflation and large fiscal deficits have led the country to face a complex investment landscape with the financial mining and energy construction and communication sectors being the most impacted. Conversely, the economy found supporting household and public sector spending. On the household side, higher income from wages, remittances, government transfers, coffee exports, and tourism led to an acceleration in private consumption growth from 1.6% in 2024 to 3.6% in 2025. The growth in goods expenditures surpassed that of services. As a result, sectors such as commerce, lodging, food, transportation, recreation, and services in general continued their upward trend. In manufacturing, while growth was observed in line with the increased household demand for goods, the appreciation of the peso reduced the competitiveness of local production. Meanwhile, amid the suspension of the fiscal rule and the higher budget execution, public spending increased from 0.6% growth in 2024 to 7.1% in 2025, the highest rate since 2021. Also public spending boosted local activity, it was financed with increased debt, leading to a widening of the primary fiscal deficit. Thus the fiscal stimulus appears unsustainable and ultimately display the private sector in an example of carrying out. In the external sector, lower national competitiveness explained by the appreciation of the Colombian peso against the dollar and higher labor hiring costs led to exports moderating the growth rate from 3.2% in 2024 to 1.8% in 2025. By 2026, amid more adverse financial conditions, weakening private consumption, a more challenging fiscal situation and high uncertainty surrounding the elections, the Colombian economy is projected to moderate its growth rate to 2.4%. Turning to prices. Inflation ended 2025 at 5.1%, virtually unchanged from 2024. Here, inflation improvements in rents and regulated prices were offset by increased pressure of food, goods, and services different from rents. At this point, higher labor costs resulting from the significant minimum wage increase, the reduction in working hours and the approval of labor reform weighed on inflation on goods and services. Meanwhile, high household and government spending limited the scope of improvement in inflation. By 2026, the minimum wage increase of over 23%, which in real terms was the highest in history, will lead to a resurgence of inflation. Specifically, inflation is expected to end 2026 at around 6.2%. The impact on inflation is also greater, thanks to the appreciation of the Colombian peso and its effect on the prices of inputs as well as the policy of reducing gasoline prices and the lower indexation based on rents. On the fiscal front, the government closed 2025 with the highest primary fiscal deficit, which excludes interest payments since the crisis of the 1990s and the pandemic. The government addressed the high spending pressures with active debt issuance using alternative mechanisms such as the direct sale of debt to an important investment fund and so of short and long-term debt during the year. Calculations by our economic research team indicate that the Ministry of Finance issued more than COP 110 billion of treasury bonds in 2025 when the stipulated limit was COP 95 billion. For 2026, no major changes are anticipated on the fiscal front. In fact, the deficit could exceed 7% of GDP, given the absence of the fiscal rule and, again, considering high spending and weak revenues. With this scenario where inflation is rebounding and the fiscal situation remains vulnerable, the Central Bank would consolidate an upward trend in interest rates. Our economic research team expects the benchmark interest rate to rise from 9.25% at the end of the year-end of 2025 to 11.25% by mid-2026, a level at which it would remain for at least the remainder of the year. The risks are tilted upwards. With a scenario of higher domestic interest rates, a weak dollar globally due to the United States trade policies and expectations of lower rates from the Federal Reserve, the exchange rate closed 2025 at COP 3,780 per dollar, 50% lower than at the end of 2024. However, in the second half of the year, the downward trend in the exchange rate intensified due to the government sale of dollars. In the second half of the year, the government sold more than $7 billion, an amount not seen since the pandemic. In 2026, the Colombian peso is expected to continue finding support from the wider interest rate differential, the international outlook and the nation's ample dollar availability. However, the election results will be crucial. Currently, the exchange rate is expected to remain below COP 4,000 per dollar throughout the year. Regarding the dynamics of dollar flows in the Colombian economy, it is important to note that for the first time in history, remittances surpassed oil exports as the primary source of dollars of the economy. This further consolidated diversification of the export basket. Finally, the legislative and presidential elections to be held in the first half of 2026 will define the country's economic future. It is too early to draw conclusions about the election results, but the central scenario is based on the expectation that Colombia will have a more fiscally disciplined government, which will reduce uncertainty and promote investment and in general, will make public policy decisions based on technical criteria that boost economic growth. Thank you. Back to you, Maria Lorena. Maria Gutierrez Botero: Thank you, Camilo. Turning to our financial results. 2025 was a transition year. In the banking segment, gross loans ended the year at COP 190.1 trillion, increasing by 4.8% compared to 2024. Profitability improved meaningfully, supported by a sharp decline in funding costs that expanded the spread between loan yields and funding costs by 41 basis points. Cost of risk improved from 2.3% to 1.9%, reflecting a stronger consumer portfolio performance and disciplined underwriting. Expense growth remained below the increase in the minimum wage, improving efficiency metrics. As a result, return on equity in the banking sector reached double digits. Banco Popular, Banco AV Villas returned to the profitability and Banco de Bogota, Banco de Occidente continue improving the results. Despite a weak market results at year-end, Porvenir delivered its strongest annual performance to date. Assets under management reached USD 271.2 trillion, an increase -- sorry, an increase 14.9% and ROAE reached 21.2%. Corfi worked throughout the year to lay the foundation for a new growth cycle driven by portfolio rotation and entry into high potential sectors. Deleveraging efforts and decline in rates led to a 16% reduction in funding costs, reflecting lower debt levels and more favorable interest rates. Finally, operational efficiencies continued to materialize following the exit from financial services. Now I would like to pass the call to Diego, who will give details of our results. Diego? Diego Saravia: Thank you, Maria Lorena. I will start on Pages 11 and 12 with a few charts showing the growth rate and quality of our loan portfolio relative to the rest of the Colombian banking system. For comparability reasons, these are unconsolidated figures under Colombian IFRS as published by the Superintendency of Finance. Starting on Page 11. During 2025, loans for the banking system grew 2.1% in real terms with mortgages growing 6.3%, consumer loans 1.48%, commercial loans 0.7%, all in real terms. During 2025, we continue to focus on profitable growth. We focused on local currency commercial loans in segments other than large corporates and on personal loans and credit cards and consumer lending. Peso-denominated commercial loan market share remained unchanged at 26.3%. We are selective in large corporate commercial lending given the aggressive pricing competition present throughout the year, where we lost 204 basis points. However, we gained 131 basis points of market share in local currency-denominated commercial loans other than large corporates. We gained market share in products and segments where we were underweighted such as factoring, where we gained 543 basis points to 24.2% and government loans where we gained 219 basis points to 23%. Regarding our dollar-denominated commercial loans where we have historically been overweighted, we reduced our market share by 356 basis points to 35.3%. In addition, in peso terms, the balances of dollar-denominated commercial loans were negatively impacted by the 14.8% appreciation of the Colombian peso over the year. As a result of the above, our market share for commercial loans fell 37 basis points. Consumer loans, we focused on diversifying our portfolio towards higher yielding and short-term loans, reducing our concentration in payroll lending. We gained 138 basis points of market share on personal loans to 21.5%. The Itau consumer business acquisition will take us to market weight. To strengthen our credit card business where we lost 132 basis points to 17.4%, we launched the [indiscernible] and other initiatives. All of this while maintaining our leadership position in payroll lending where we have 42.2% market share. Overall, our market share for consumer loans closed at 28.9% with a 53 basis points decrease. Moving on to mortgages. We continue gaining market share with 117 basis points increase throughout the year. As a result of the above mentioned, we closed our market share in total loans at 25%, 28 basis points lower than in 2024. On Page 12, loan quality for both the system and Aval banks showed an improvement during the year across all categories. Our banks continue to exhibit better loan quality portfolio than the system in all categories. I will now move to the consolidated results of Grupo Aval under IFRS. As mentioned by Maria Lorena, Banco Bogota entered into a share purchase agreement to sell MFG of Romanian bank. As a result, in December 2025, we classified this operation as noncurrent assets and liabilities held for sale and discontinued operations. For reason of comparison with previously reported periods, we're showing retrospectively on this call pro forma balances and ratios, classifying MFG as noncurrent assets and liabilities held for sale and discontinued operations. On Page 13, we present assets and loans. Assets grew 6.4% year-on-year and 1.5% for the quarter to COP 349 trillion. Fixed income investments, which account for 15.8% of our assets reached COP 5.2 trillion, growing 21.2% year-on-year and decreasing 0.2% over the quarter. Gross loans, which account for 54.7% of our assets reached COP 190.9 trillion, growing 46% year-on-year and 1.5% over the quarter. Growth metrics were affected by a 4.2% depreciation of the Colombian peso during the quarter and 14.8% over the year. Peso-denominated loans that now account for 91.3% of gross loans grew 6.8% year-on-year and 1.7% during the quarter. Commercial loans expanded by 1.9% year-on-year and 1.1% over the quarter. Peso-denominated commercial loans that account for 84.7% of gross loans grew 5.5% year-on-year and 1.4% during the quarter. Dollar-denominated commercial loans, which accounts for 15.3% of commercial loans grew 0.4% in dollar terms year-on-year and 3.9% during the quarter. In peso terms, our dollar-denominated loans contracted 14.5% year-on-year and 0.5% quarter-on-quarter. Consumer loans grew 4.7% year-on-year and 1.2% during the quarter. Personal loans grew 12% year-on-year and 5% during the quarter. Credit cards contracted 1.5% year-on-year and increased 2.9% during the quarter. Our loans grew 0.6% year-on-year and 1.1% during the quarter. Payroll loans increased 3.2% year-on-year and decreased 0.9% during the quarter. Mortgages grew 19.6% year-on-year and 3.9% during the quarter. On Page 14, we present the evolution of funding and deposits. Total funding increased 8.7% year-on-year and 1.4% in the quarter. The bank borrowings grew 28% year-on-year, in line with the expansion of our trading investment portfolio, as mentioned before, and account for 8.2% of total funding. Deposits that account for around 3/4 of our funding grew 11.2% year-on-year and 3.6% quarter-on-quarter. Our deposit to net loan ratio closed at 113%. On Page 15, we present the evolution of our total capitalization, our attributable shareholders' equity and the capital adequacy ratio of our banks. Our total equity increased 0.3% over the quarter and 4.8% year-on-year, while our attributable equity increased 0.2% over the quarter and 5.7% year-on-year. Total solvency and Tier 1 ratios evidence a relative stability in most of our banks. On Page 16, we present NIM, our net interest margin. Net interest income reached COP 9.3 trillion for the year, increasing 17.4% compared to 2024. Total NIM for the year increased 28 basis points to 3.78% in 2025. Our consolidated NIM on loans expanded by 28 basis points year-on-year to 4.71%, while NIM on investments decreased by 8 basis points to 0.82%. NIM on loans incorporates an 84% year-on-year expansion of NIM on retail loans to 6.33% and an 18 basis points year-on-year contraction in NIM on commercial loans to 3.5%. Focusing on our banking segment, the total NIM of our banking segment expanded 8 basis points over the year to 4.47% due to the same dynamics that affected our consolidated net interest margin. NIM on loans was 5.24%, increasing 9 basis points year-on-year. This incorporates a 69 basis points year-on-year increase in NIM on retail loans to 6.9% and a 39 basis points year-on-year decrease in NIM on commercial loans to 4.02%. Quarterly NIM was negatively impacted by adverse capital market performance, driven by a 3.48% negative NIM on investments. In contrast, NIM on loans for the quarter reached 5.05%, 48 basis points higher than the previous quarter and the best result in 12 quarters. As discussed by Maria Lorena, the recent shift in the monetary cycle in response to recent government decisions will act as a headwind for NIM over the next quarters. The development of our financial diversification strategic pillar continues to pay off. We have diversified our funding sources towards less sensitive non maturing deposits, including deposits from individuals and cash management linked deposits. Our banks lowered maturities and repricing gaps and actively implemented interest rate hedging strategies. On Page 17, we present our yield on loans, cost of funds spreads. On a consolidated basis, the average yield on loans for the year decreased 126 basis points to 12.06%, while the annual average 3-month IDR decreased 158 basis points to 9.4%. Consolidated cost of deposits decreased 148 basis points during the year to 6.63%, while our cost of funds decreased 141 basis points to 6.8%. On Pages 18 through 20, we present several portfolio quality ratios -- starting on Page 18. Loan portfolio quality ratios continued to improve during the quarter. PDL metrics continue to improve in all categories. 30-day PDL formation for the year reached COP 4.2 trillion, 32.8% lower than for 2024. 30-day PDLs were 4.37%, a 98 basis points improvement over 12 months and 37 basis points over the quarter. 90-day PDLs were 3.29%, a 77 basis points improvement over 12 months and 11 basis points improvement over the quarter. Commercial loans 30-day PDLs were 3.84%, a 101 improvement year-on-year and 38 basis points improvement quarter-on-quarter. 90-day PDLs were 3.48%, a 91 basis points improvement over the year and 19 basis points over the quarter. Consumer 30-day PDLs improved 117 basis points year-on-year and 16 basis points over the quarter to 4.67%. 90-day PDLs improved 63 basis points year-on-year and 5 basis points during the quarter to 2.79%. Mortgage 30-day PDLs and 90-day PDLs improved 8 basis points and 10 basis points, respectively, over the quarter to 6.18% and 3.75%, respectively. Finally, the ratio of charge-offs to average 90-day PDLs for 2025 was 0.82x. On Page 19. The share of our portfolio classified as Stage 1 grew to 89.8%, while Stage 3 decreased for a 6-month consecutive quarter -- consecutive quarter to 5.7%, driven by improvements in our consumer portfolio. Coverage measured as allowances for Stages 2 and 3 as a percentage of Stages 2 and 3 was 33.6%, decreasing 545 basis points relative to a year earlier due to improvement in the mix. On Page 20, in 2025, cost of risk net of recoveries fell 38 basis points to 1.9%, in line with our expectations for the year. For consumer loans, cost of risk net of recoveries improved 157 basis points to 4.2%. This includes a 449 basis points improvement in personal loans to 8.4%. For commercial loans, cost of risk net of recoveries was 0.7%. During the fourth quarter of 2025, cost of risk net of recoveries fell 27 basis points to 1.7%, the lowest in 12 quarters, driven by a decrease both in commercial and consumer portfolios of 36 basis points to 0.6% and 23 basis points to 3.8%, respectively. On Page 21, we present net fees and other income. Annual gross fee income grew 6.8%, while net fee increased 5.3%, quarterly gross and net fee income increased 8.5% and 9.6% year-on-year. In terms of annual gross fees, pension and trust fees grew 9.1% and 14.9%, boosted by performance-based management fees that followed the positive returns of the financial markets throughout the year. Our annual income from the nonfinancial sector was 84% of that recorded in 2024, mainly due to a lower contribution from the infrastructure sector. Quarterly income was affected by a lower income from the energy and gas sector and the infrastructure sector as well. This was partially offset by income from hotels. Finally, at the bottom of the page, the annual increase in the operating income is mainly driven by a COP 605 billion improvement in derivatives and FX gains. Hedging strategies relative to the nonfinancial sector are registered under foreign exchange gains and account for COP 863 billion yearly improvement. During the quarter, one of Promigas transportation pipelines measured as fair value reverted to the company's PP&E and implied a onetime fair value recognition of COP 303 billion. This effect was registered under net income from other financial instruments mandatory at fair value to P&L. This positive effect was offset by a onetime remeasurement of the deferred tax liabilities to COP 359 billion. Net-net, the transaction had a COP 56 billion negative effect on net income and COP 12 billion negative effect on our attributable net income. On Page 22, we present some efficiency ratios. Cost to assets remained flat at 2.6% Annual cost to income improved 101 basis points to 52.2% over the quarter. On a quarterly basis, it reached 54.9%, 550 basis points lower than a year earlier. Annual expenses grew 9.6% during the year. General and admin expenses grew 9.4% year-on-year. Personnel expenses grew 6.9% year-on-year, well below the 9.5% increase in Colombia's minimum wage. Finally, on Page 23, we present our net income and profitability ratios. Attributable net income from continued operations for the quarter was COP 474 million, 57.5% higher than the same quarter of the previous year. Total attributable net income for the year reached COP 1.72 trillion or COP 72.5 per share, increasing close to 70% compared to the previous year. Our annual return on average assets was 1% and our average annual return on average equity was 9.6%, 28 basis points and 366 basis points above 2024, respectively. In terms of discontinued operations, the results contributed by MFG's operations as all attributable net income adding COP 18 billion. To wrap up, we are updating our guidance to reflect changes in the macro environment impacting our business. We expect loan growth in the 10% area with commercial loans growing at 7% and retail loans growing at 14%. Total NIM in the 4.3% area with NIM on loans in the 4.7% area. Our NIM of the banking segment in the 5.1% area with NIM on loans in the 5.4% area. Cost of risk net of recoveries in the 2% area, cost to assets in the 2.8% area. Income from the nonfinancial sector, 1.3x that of 2025. Our fee income ratio in the 21% area. And finally, we expect a 2026 return on average equity to be in the 10.5% area. This guidance does not incorporate the recently announced wealth tax, which we estimate will have an impact on our ROE of 1 percentage point area. Back to you, Maria Lorena. Maria Gutierrez Botero: Okay. Thank you, Diego. Before moving into questions and answers, I would like to share some final thoughts of Colombia and Grupo Aval in 2026. We expect 2026 to continue to be challenging in Colombia given the effects of political volatility and electoral uncertainty. Economic conditions are expected to remain challenging, both locally and globally. We expect GDP growth to remain moderate in 2026 and a restrictive monetary environment. The massive minimum wage increase will put pressure on our cost base that of our customers. Inflation will remain above the Central Bank's target range, which implies a return to a higher for longer interest rate environment. Despite this backdrop, we strongly believe that we should remain focused in our strategy and improving our business and abstain from echoing uncertainty. The financial sector will continue to be a pillar of trust and investment. We expect to continue growing our financial business and invest through core fee in the nonfinancial sector in the region during 2026. As a result, we expect to continue strengthening our core business, supported on an expansion of risk-adjusted NIM on loans, commercial and operational effectiveness and a stronger fee generation. In 2026, we will continue delivering new and innovative products. In addition, during this year, we expect to see increases in efficiencies from shared services and IT integration initiatives and strengthening a client-center unified corporate culture. So we are now open for questions. Operator: [Operator Instructions] Our first question will come from the line of Daniel Mora with CrediCorp Capital. Daniel Mora: I have a couple of questions. The first one is regarding the new tax for companies. I would like to know what did you understand for liquid equity as it says that it is gross equity minus debt for the tax? So I would like to understand how it will be applied for Bank of Aval, you already mentioned a 1% point for the consolidated ROE, but I would like to understand what will be the impact across Bank of Aval? That will be the first question. And the second one is also on regulatory issues and regarding taxes, considering the previous economic emergency decree was put on hold, what is the effective tax rate that you are using in your numbers? Are you considering the 15% tax surcharge or paying, for example, deferred taxes? Diego Saravia: Okay. I'll try to answer you, of course. I can't be a tax adviser here for you, but our understanding of how the network tax works is similar to what we've done -- we've experienced in the past, and it is subtracting from the tax base, the equity tax base of the bank or the company, its tax acquisition price of the shares it holds in its taxable balance sheet. That's the way it is expected to work, and it is similar to what has been in the past, the kind of language that we've seen in what has come up to date is basically the same that we saw in 2014. Regarding what happens to the group, yes, attributable should be something in the order of magnitude of 1 percentage point. And if you think that the attributable net -- the attributable equity of Grupo Aval is roughly 55%, 60% of the consolidated group. If you add what our group will be contributing to the tax in that sense would be almost twice of what we do attributable to our shareholders. Regarding how we calculate our tax in our guidance. The number comes out something similar to 35%. That is a combination of the taxes that we have to pay for our financial companies that have a surcharge in our numbers of 5% and then the taxes that other companies pay less those that have some exceptions. So... Maria Gutierrez Botero: But it means that is without the economic emergency... Diego Saravia: Exactly. Maria Gutierrez Botero: For the situation that we have before that. Diego Saravia: Exactly. That is what we expect on our base. And as I mentioned, the equity tax would add up to that around 5 percentage points if you were to make our calculation based on marginal tax. Operator: Our next question will come from the line of Brian Flores with Citibank. Brian Flores: Can you provide an update on the guidance you provided in the third quarter regarding loan growth, cost of risk, and ROE? I think it would be very useful. And then just to confirm, basically, you're saying your base case is no change in the tax rate, right? You're basically saying we have no surcharge and we have no wealth tax. That is the base case implied in the guidance, right? Diego Saravia: Yes. The 10.5%, you're right, the 10.5% basically takes taxes as well, not the taxes from the emergency, and that's why we are guiding into an additional effect that we could have from the wealth tax. Regarding our guidance, we have slightly reduced our guidance on growth. And regarding ROE, there is an implied 150 basis points reduction in guidance and ROE compared to our last call. Brian Flores: Okay. So just to confirm here, you were, if I'm not mistaken, guiding for a range of 12% to 12.5%. We're basically going to 11% or close to 11%. Is this... Diego Saravia: Just restating, we are in the 10.5% area guiding. Last time we were in the 12% area with an upward bias at that point. Brian Flores: Okay. If I may, you basically are explaining that you are seeing no changes in the tax rate, slightly lower loan growth. So which is the driver here on the reduction? Is it -- I know you're liability sensitive or not as asset sensitive as other banks, so it could be the NIM? Or do you think this is more related to cost of risk? Because you mentioned efficiencies should be better in 2026 and onwards from what I understood. Diego Saravia: Yes. It's a combination of several things. One and the main driver is a better mix of our loan portfolio that is also helping us to cope with the kind of behavior of the Central Bank rate that will imply a relatively better NIM year-on-year. There could be a reduction if you take the numbers that we had for the fourth quarter that was the best quarter in NIM, as I mentioned. However, year-on-year that there's an improvement. There's other things that are going to happen, and it is we expect Porvenir to have a better performance than what we had guided before, basically for 2 reasons. One, higher minimum wage implies higher fees from contributions from our customers. And then a higher interest rate environment is positive for Porvenir. On top of that, we have the other inorganic discussions that Maria Lorena pointed out that we expect to help us. We expect to see our mix improve. You've seen that throughout the past years, we've been moving towards retail to the retail segment. We've been working strongly on improving that organically and organically. That also improves our performance. And actually, when we compare our cost of risk, there is no change in cost of risk. The other area that -- where we could see a substantial improvement is NIM coming from investments. In general terms, we've seen volatility in this year, and there's been points in time as was fourth quarter where NIM on investments was negative on our results. Brian Flores: Super clear. I am very sorry to insist here. Just that I don't understand because if you're assuming no change in cost of risk and you're assuming a better mix and what I understood is a stable NIM, but then you're mentioning basically the reduction on ROE is of 100 bps year-over-year in the guidance. Is this only coming directly from a reduction in your expectations of loan growth, which I assume they were around 8% in the last call? Diego Saravia: Yes. I have to correct myself. I just pulled out our guidance last time. We have actually a slight pickup on retail. And we also have, as I mentioned before, when you look at our effective tax rate, we're also building in a higher tax rate for this year. Operator: [Operator Instructions] There are no further questions at this time. Ms. Maria Lorena Gutierrez Botero, I turn the call back over to you. Maria Gutierrez Botero: I just want to say thank you for being here with us and see you in 3 months. Bye. Operator: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to Q4 '25 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Katie keita, IR Lead. Please go ahead. Katie Keita: Thank you, operator, and welcome, everyone, to Kneat's earnings conference call for the fourth quarter of 2025 and the full year. Today's call will be hosted by Eddie Ryan, Kneat's CEO, and Dave O'Reilly, Kneat's CFO. Note that the safe harbor statement on Slide 2 and the forward-looking statements disclosure at the end of the earnings release inform you that some comments made on today's call may contain forward-looking information. This information by its nature is subject to risks and uncertainties, so actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult our relevant filings, which can be found on SEDAR and on our website. Also during the call, we may refer to certain supplementary financial measures as key performance indicators. We use both IFRS and supplementary financial measures as key performance indicators when planning, monitoring and evaluating our performance. Management believes that these non-IFRS measures provide additional insight into the company's financial results, and certain investors may use this information to evaluate our performance from period to period. With that, I will now pass the call to Eddie Ryan, CEO of Kneat. Edmund Ryan: Good morning, everyone, and thank you for joining the call today. In order to leave more time for your questions, we will keep our prepared remarks brief. As I laid out in my letter to shareholders, 2025 was a year that proved the strength of Kneat's resilience. In a period of macro uncertainty, elongated buying cycles and new considerations presented by AI, we continue to gain share with software revenue up 33% for the full year, and we welcomed a record number of new customers. These new customers were added to exceptionally stable base of existing large customers. Our net revenue retention was 115%, reflecting continued expansion with that base. Customers come to Kneat today because we are a trusted domain expert in a field where confidence in the product is paramount. There is our highly regulated mission-critical environments where validation data needs to be attributable, traceable and auditable, all things for which needed has been purpose-built. With this in mind, Kneat's advantage in leveraging AI to deliver business value for companies is clear. Over the last while, we have been building AI into our platform to accelerate the advantages Kneat already brings to validation. We introduced AI-powered features designed specifically for environments adhering to good manufacturing practices. These include content review agents, a natural language process analysis expert, a user support expert and an instant language translation function. Building in AI to improve the platform extends our competitive advantage, which was already considerable. With these tailwinds, we are excited about where we are heading in 2026. Our platform is second to none. Our pipeline is strong and our land and expand model, which contains significant expansion potential and brings more with each new customer we add is proving to scale, putting cash flow profitability within line of sight. This is a necessary milestone as we plan for the long game in pursuit of our mission that any regulated company can be confident they are developing, manufacturing and delivering their products to the highest safety standard. I will now turn it over to Dave, who will take you through the numbers. Dave O'Reilly: Good morning. As you have the numbers and commentary in our materials that went out last night, I won't go through them in detail again. However, before we turn it over to you for your questions, I do want to first highlight a few numbers on what drove them. First, ARR growth in the quarter year-over-year was 24%, solid, but not as high as we were expecting. While changes to FX rates since Q3 added $1.1 million headwind, some of the delta came from expansions being pushed to a future period. This means we expect these same deals to materialize in 2026, if not in Q1, then in the subsequent quarter. Incremental ARR is historically back-end loaded, and we also expect 2026 to be no different. Second, operating expenses in the fourth quarter came down from Q3 and for the full year were up 33%. After 2024 in which we held headcount steady, we invest in key talent in 2025 to drive the platform forward, expand our presence within our growing number of customers and amplify our voice in the life sciences space. Finally, on our financial position and outlook, we ended the year with $48.7 million of cash on the balance sheet. This, together with a fortified team sets us up for a pivotal year. As Eddie mentioned, we are targeting for 2026 to be cash flow breakeven. Meeting this target is contingent upon meeting our own top line growth expectations for the year. With that, I'll turn it over to you for your questions. Edmund Ryan: I do show we have a first question in queue coming from the line of Doug Taylor from Canaccord Genuity, please go ahead. Doug Taylor: Hi, thank you. Hopefully, you can hear me. Edmund Ryan: Yes, we do. Can you, Doug? Doug Taylor: Okay. Thanks, Eddie and Dave. I'll start with an AI question seems unavoidable these days. I appreciate all the commentary you provided on AI in your letter overnight in your prepared remarks. You framed this as additive versus competitive to your platform. I guess I'd like to ask what -- if you could provide anything you've heard, like what your customers are saying on the subject? Are they building things with AI that sit on top of your data and your infrastructure? Is there evidence of that? I'm just looking for some anecdotes to wrap around the subject. Edmund Ryan: Yes. Good question, Doug. Yes. So we're not seeing anybody sitting on top, right, doing anything like that. And look, we're dealing with the biggest pharmaceuticals in the world, as you know, and we've been dealing with them for for over 10 years, 15 years. And one of the things that is really critical to them is data integrity and compliance. And Kneat is a system of record for that data integrity and compliance. And when I talk about data integrity in the compliance world, I'm not talking about data in the database being managed and protected there and secure. I'm talking about the interaction with that data and the audit trail on that data and who put that data there, when they put it there, when they changed it, no matter how small that data is. So everything is attributable, it's auditable and it's traceable. So this is the kind of data integrity that this industry requires, right? And -- so we see that as a real moat from our perspective. We accept, yes, that there has to be additional AI to support that, and we would see AI from our perspective is doing the heavy lifting as part of the workflow processes and that type of thing for the customer and bringing value to that way. And over time, where it may go to the next level. So just back to your point, Doug, on the customers today, we have very intimate relations with these customers, and we would be sharing our road map and we'll be sharing what we have in AI already with them. And they're aligned with us, very much aligned with us in what use cases they want AI to support them in and what part of the workflow they want it to be present in and how they don't want it to be -- it's a human aid at this point in time. So -- does that answer your question, Doug? Doug Taylor: Yes. I mean it does. And so taking the AI as being additive and not in any way competitive with your solution as if we set that aside, the ARR growth in this last year was slower than in prior years, partly because you're lapping some larger numbers, but also you've referred to these deferred expansion plans for a few quarters now. And I think some of that was attributed to the uncertainty as it relates to global trade and things like that. And that's no less confusing today than it was maybe last quarter. So I guess I'd like to refresh our understanding of the duration of those deferrals. When do you see those start picking up again and perhaps returning your NRR to some of the levels that we've seen Kneat enjoy earlier in 2026 and beyond. Edmund Ryan: Yes, we definitely expect it to go up. And what I would say is it's only when you look back on the year, you can see how the year panned out fully, right? And we are back end of the year type where we do a lot of our ARR addition traditionally. And what I would say is quarter 2, we began to see the macro environment, Doug, as you know, and the uncertainty and what we will have seen that follow through to the year -- the full year. Our budgets were deprioritized in certain areas where they were cut and frozen temporarily. So that's what we've seen. All of those, what we call deferred expansions, they're all still in our pipeline, as Dave said in his earlier notes, and they're all being worked on and the engagement is ongoing on all of those. So I expect them to come through for us as well through 2026. Do I know exactly what the year ahead is like from a macro perspective? There's still uncertainty from last year, but I think it's beginning to stabilize more in that perspective. Other things are coming into play like AI and stuff like that. Doug Taylor: So the message there being you'd expect ARR to rebound from the 2025 level -- sorry, NRR, I should say, based on what you said? Edmund Ryan: Absolutely. Doug Taylor: Okay. And then I guess, a similar comment or question about what was definitely clear last year was a very strong pace of new customer additions, new logo wins. Is the setup in the pipeline this year for you to extend that streak? Edmund Ryan: Yes. We added, I think, net new -- there was a bit of churn in there as well. But net new, we had 20-odd percent new customers in '25. And as you know, in recent years, we focus more on strategic and enterprise. So very, very happy with that delivery from our sales team. And we're seeing these deals being more and more matured and for that reason, going through more diligence and more competitors involved and more RFPs, and we're winning the majority of these RFPs. So very excited about that. And that puts in a great platform for the future, as you know. And I would say the marketing team has done a great job of building the pipeline, and we see a similar and better pipeline for the year ahead and beyond. Doug Taylor: Okay. One last question for me and perhaps this one for Dave. You've stuck to the cash breakeven bogey for this year, and we're in this year now. So I do want to give that a little more attention. To start with, just to confirm, once again, you're talking about free cash flow or operating cash flow breakeven as being the target you expect to eclipse this year given the capitalized R&D. And if so, I mean, in any event, it's a big lift from where you were over this past year. So I just want to maybe walk through some of the assumptions, not necessarily the revenue, but the margin assumptions and spending and budget for OpEx that would get us to that objective. Dave O'Reilly: Thanks, Doug. Yes, it's still very much our objective for 2026 is to be cash flow breakeven. To your point, we can get into some of that detail. But what I would say is that the messaging that we've given before, certainly in Q3 about the adjusted EBITDA margins, I still expect that to hold true for the next 12 months. I expect our capitalized R&D, I would expect that to be relatively static year-over-year. I still expect a little bit of growth on our OpEx, and I expect improvement on our gross margin lines. Doug Taylor: And so just to be clear then, to be cash flow, you would have adjusted EBITDA that would surpass your capitalized R&D, I mean, that would be necessary for free cash flow breakeven. And just maybe sharpen my understanding there. Dave O'Reilly: To an extent, yes, Doug. It should cover the vast majority. There's a couple of other levers on the balance sheet that will help us hit that number in '26, such as our R&D tax credits. And so it's not just the adjusted EBITDA that will get us there. As I mentioned, there's another couple of levers on our balance sheet that will help us in the pursuit of cash flow breakeven. Doug Taylor: All right. I appreciate the answers to my questions. I'll pass the line. Edmund Ryan: Thank you. And I show our next question in the queue comes from the line of Gavin Fairweather from ATB Cormark. Gavin Fairweather: Hey, thanks for taking my questions. Eddie, in your letter, you called for an expansion of incremental ARR in 2026 versus 2025. I think that's the first time you've kind of provided that type of guidance. So maybe you could just flush out what you're seeing in the macro and the pipeline that kind of gives you that confidence to hang that out there in your letter. Edmund Ryan: Yes. So I'm trying to remember that statement. But, yes, so for -- we -- as I said, we put in a lot of strong customers over the last couple of years into the pipe -- sorry, into our customer portfolio. So as you know, Gavin, we focused on enterprise and strategic a couple of years ago, and they are beginning to show fruit now, the ability for them to expand into the future. They take a year, maybe 2 years to get going, and we're seeing that playing in as well. We're also having these great conversations with our customers around new potential areas that we will bring value for them. So outside of validation, adjacencies areas, and we expect to be delivering to some of these areas as well in '26. Gavin Fairweather: Yes, that kind of flows into my next question. I mean, I was looking for a bit more detail on how conversations are going in the base around CSA and adjacencies and how you're thinking about potential adoption in 2026? Like how many customers would be speaking to you about moving into some of these new areas? Edmund Ryan: Yes. We would say that we are already deploying in some of these areas with some of our customers. We have some really engaging opportunities under discussion with some customers. And we see us being able to capitalize on that further. And these are couple of the biggest customers in the world, right, who are talking about looking at these new adjacencies. So we're really upbeat about that. And we will hope to announce them in due course, Gavin. But I would say, just to give you a flavor, they're more deeper in the manufacturing space adjacent to validation, where we've already earned the right to be there. We've proven our ability to be great at data integrity in a validation environment. And now we can take that same capability to adjacent areas. And the one thing I would say is that I think our ability to be great at data is going to enable more processes in the future because of the -- if you've got this great data integrity underpinning your AI, then you'd be more inclined to put processes in there that can give you that quality. And I think great AI is going to be great data integrity. And as I said, it's not just data and databases, data is managed and [ police], and that's what I think will be great as well. Gavin Fairweather: Appreciate that. And then maybe a couple for Dave. The gross margins seem to be increasing faster than your mix would kind of imply. So maybe you can just discuss where you're getting some leverage on the COGS line, whether it's still coming through in SaaS or also if you're starting to make a bit of money on the services line? Dave O'Reilly: Yes. So in Q4, there's a couple of credits that we booked to our P&L in Q4 related to year-end accrual releases. So there's probably 0.5% on our gross margin because of that in Q4. But to your point, sales mix is still beneficial to us. We are eking out a little bit more margin on RPS. I think historically, that's been running at around 15%. I expect that to increase over the next 12 months. SaaS is continuing to be an 80% kind of level. And that will flow into '26. Gavin Fairweather: Great. And then just lastly, on debt. If I remember correctly, I think some of that debt on the balance sheet, the penalties for prepayments start to roll off over the course of 2026. So just on capital allocation, maybe you can discuss your plans. Obviously, you have more cash on the balance sheet than you have debt. So should we be thinking about some of that debt starting to move off the balance sheet there? Dave O'Reilly: You're exactly right. '26, there are -- there's a couple of tranches that will roll out of penalty zones if we were to clear those tranches. But it's certainly not in our short-term projection. We're talking about cash flow neutrality in the year. If we do make that call, we'll certainly amend it. But right now, we're just probably going to let them continue to pay. If we see the opportunity to clear them down sooner, we absolutely will. Gavin Fairweather: Thanks a lot, I'll pass the line. Edmund Ryan: Thank you. And I show our next question comes from the line of Justin Keywood from Stifel. Please go ahead. Justin Keywood: Hi. Thanks for taking my call. Just circling back on the outlook and the expectation for incremental ARR in 2026 over 2025. Doing the math, does that imply there's an expectation for $15 million in additional ARR this year? Edmund Ryan: So yes. So we don't put a number on it, Justin. But when we look at the add-ons and for this year, they will include the delayed expansions from '25, and we see also outside of that cohort, we see expansions from the other cohort of customers we have. And today, we service over 130 customers. And we also see that the new customers kicking in, they would be the ones outside that cohort of the deferred expansion. So yes, we see those definitely in the number increase on '25. Justin Keywood: Okay. Good to hear. That's helpful. And then just circling back to the AI discussion. I'm wondering if there's an opportunity to deploy some of the AI tools that are out there, particularly around coding within Kneat's own business, the R&D expense continues to appear to be increasing at a decent rate. And is there an opportunity to perhaps replace some of those functions with AI? Edmund Ryan: Absolutely. And our team has been doing automated enhancements for quite a while. I would say, Justin, at the beginning -- like in the last 6 months, they really begin to see tools that can really add value. And I think we are hearing about in the news, and it's true. And we are acknowledging it. Our team is acknowledging it quite well. So we have dedicated AI teams in place now looking to enhance everything. And we're seeing some really good improvements in productivity in certain areas, right? I mean, we're still building features into a big platform and coding is one part of it, understanding what you're doing from your domain experience is a huge part of this, articulating those requirements to any tool, whether it's an agent or whether it's a human that actually codes it is a good part of the work. And we're getting -- I would say the tools helping us across the board, not just in the coding itself. There's value there. There's good stuff happening there. There's ability to reverse engineered pieces of code and reengineer them again and a lot of good things happening. So I expect we will be focused -- we are focused on that, Justin, and I expect we will, over time, start bringing that down. The goal now is to get more out of the team we have. And any of those hires that are going in this year are primarily related to that AI for the product, for our Kneat GX platform, but also AI to improve our productivity in the organization. Justin Keywood: Very interesting. So would it be fair to assume the R&D or additions to intangible assets to be leveling off at this level? And perhaps that's where to Dave's outlook on breakeven free cash flow. Is that where the operating leverage is going to show up with that R&D level normalizing? Edmund Ryan: Do you want to take that, Dave? Dave O'Reilly: Yes. Just there will still be some growth in the R&D function. To Eddie's point, it's probably going to be around the AI team and helping accelerate the development. But we're also going to see that shift. I mentioned this one in the prior quarter that we're going to probably see a little bit more R&D expense to the income statement as we capitalize less. And I would imagine that what we will see being capitalized year-over-year being very static. Justin Keywood: Very helpful. Thanks for taking my questions. Edmund Ryan: No problem. Thank you. And I show our next question comes from the line of David Kwan from TD Cowen. Please go ahead. David Kwan: Hey, everyone. Dave, maybe I just wanted to clarify the comments on the gross margin. So I think you said there was about 50 bps of year-end accruals. So maybe the normalized gross margins were in the 77% range. So could 2026 gross margins be at this level or maybe even better than that? Dave O'Reilly: I would assume that they should be at a similar level, David, yes. It does depend on the mix when we get there. Obviously, our PS revenue is running at -- historically has been around 15%. I expect that to be 20% and above. And that depends on where we finish up from a PS revenue in '26. But I do expect the gross margin to be up around the 77% range. David Kwan: Sounds great. That's helpful. And just digging into the NRR, the decline there. Obviously, you talked about some expansion projects getting pushed out there and some churn. Could you -- you mentioned, I guess, that there weren't any customer or customers that were switching to competitors. But I was just wondering if you had any color on what the churn was related to like did those customers go bankrupt? Or was there something else? Edmund Ryan: Yes, David, thanks for that. So I would say that there are 3 aspects of the churn, there's the deferred expansions, there's the FX going against us and then there is the churn element. And I would say, yes, most -- all of those customers actually, in fact, have had some degree of financial difficulty to some extent. And yes, there's 1 or 2 of those customers actually closed down. But for those customers that discontinued using Kneat, we're not aware of any of them going to a competitor at all, and that's very clear to us. So some of the -- when we look back and again, talking about the -- how we focus on enterprise and strategic customers over the last couple of years. Prior to that, we would have sold to a lot of different types of customers. And maybe the product market fit may not have been or the product company fit may not have been 100%. So we're seeing some of those bubbing up a little bit as well over the last year. David Kwan: Well, thanks for that color Eddie. And can you say like how much of ARR it represented? I'm guessing it's relatively small, but if you could quantify it. Edmund Ryan: Yes. It's smallish, I would say that if you were looking at where we wanted to be on our overall growth versus where we were, it's probably divided into 3 things, maybe 40%, 50%, Dave, you might be able to correct me here is related to the deals that were pushed out and the other 50% is between China and FX. David Kwan: Great. And just one last question. I expect it's maybe a bit early here, but just obviously, with the Supreme Court's tariff ruling, is that -- do you expect that to probably lead to continued hesitation from your customers just as it relates to the uncertainties on their expansion plans? Edmund Ryan: Yes. I haven't consumed that fully, David, I would say, right? What I am seeing is more stability in the customers, more clear on what they were doing. Maybe this adds another bit of volatility to the situation. But I had a feeling that things were improving, and it's a bit early for me to comment on that. David Kwan: That's great. Thanks guys. Edmund Ryan: Thank you. And I show our last question in the queue comes from the line of Erin Kyle from CIBC. Please go ahead. Erin Kyle: Hi, good morning. Thanks for taking my questions. I apologize if any of this has been asked already. I just kicked off the call a little bit earlier here, but I want to go back to some of the comments in the shareholder letter around retention. And you called out that you're not aware of any churn to competitors, which is good to hear. But I wanted to expand there and maybe ask if you're seeing any pricing pressure from increased competition in the space or anything to call out there? Edmund Ryan: Yes. So I said earlier on, Erin, that of all the new deals last year, we are winning the majority of them by far. And I would say that there's definitely more competition in valuations and that competition was entering to 2025 and having the ability to maybe slow down the sales process a little bit. But also, there's also the macros that we were slowing down the sales process. So I would say that definitely, there's not a huge amount of pricing pressure. We're not pushing our prices down in any way. We're winning the deals. We're holding our prices. I would say a little bit here and there, maybe we can be a bit innovative around the contracts and stuff like that and the multiyears and that type of thing. But no significant impact on our pricing. And that's -- but we put a lot of effort into making sure our customers understand how great our product is before we get to the pricing stage, and I think that helps a lot. Erin Kyle: Okay. That's helpful. Thank you. And then maybe can you just remind us the percentage of your customer base that's on the enterprise-wide licenses? And maybe just discuss whether you've been making a more dedicated push towards enterprise-wide. I believe you have. And then can you let us know if customers have been receptive to this model? Or what's the reaction to maybe moving to more enterprise-wide licenses? Edmund Ryan: Yes, that's an ongoing thing. As customers step up in volume, they go to more enterprise, and we have done quite a bit of that over the last, I'd say, 14 months or so, 16 months, and we continue to do it. And it's a very win-win situation, and we do very well from that. Percentage-wise I find it hard to tell you exactly right now. Dave might have a number on it, but we don't track that number. But I would say that if we were to take our strategic maybe top 30 customers, I would say we have 30% on some form of strategic longer-term deal. That's kind of an order of magnitude now, Erin. So I can't -- I have to come back to you with that number if you want to follow up on this. Erin Kyle: Sure. Maybe I'll follow up offline. Thank you. Dave O'Reilly: Thank you. That concludes our Q&A session for today. I would now like to turn the conference back to Eddie Ryan, CEO, for closing remarks. Please go ahead. Edmund Ryan: Thank you. We are excited about what we are setting out to accomplish in 2026. We are in a great spot to keep our momentum going as the go-to validation platform for the world's biggest life sciences companies. We continue to deploy AI to help our customers work faster and smarter while keeping their data 100% compliant in a way that they can see, understand and trust. And with an experienced and energized team, we are confident in our ability to sign up even more new business this year than last. Thank you for your support and for believing in what we are doing. Dave O'Reilly: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good evening, and welcome to PRA Group's Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Mr. Najim Mostamand, Vice President, Investor Relations for PRA Group. Please go ahead. Najim Mostamand: Thank you. Good evening, everyone, and thank you for joining us. With me today are Martin Sjolund, President and Chief Executive Officer; and Rakesh Sehgal, Executive Vice President and Chief Financial Officer. We will make forward-looking statements during the call, which are based on management's current beliefs, projections, assumptions, and expectations. We assume no obligation to revise or update these statements. We caution listeners that these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that could cause our actual results to differ materially from our expectations. Please refer to our earnings press release issued today and our SEC filings for a detailed discussion of these factors. The earnings release, the slide presentation that we will use during today's call, and our SEC filings, can all be found in the Investor Relations section of our website at www.pragroup.com. Additionally, a replay of this call will be available shortly after its conclusion, and the replay dial-in information is included in the earnings press release. All comparisons mentioned today will be between Q4 2025 and Q4 2024, unless otherwise noted. During our call, we will discuss certain financial measures on an adjusted basis. Please refer to the appendix of the slide presentation used during this call for a reconciliation of the most directly comparable U.S. GAAP financial measures to non-GAAP financial measures. And with that, I'd now like to turn the call over to Martin. Martin Sjolund: Thank you, Najim, and thank you, everyone, for joining us this evening. 2025 was a year of significant progress for PRA as we focused on strengthening our U.S. platform, building on the strength and momentum of our European franchise, executing on our near-term priorities, and developing our longer-term strategy. As you can see on the slide, the key financial and operational metrics are moving in the right direction. We purchased $1.2 billion of portfolios in 2025, in line with our target and our third highest investment year on record. These purchases, along with our numerous operational improvements, have driven our estimated remaining collections, or ERC, to a record $8.6 billion. Cash collections of $2.1 billion were a new record, up double-digits for both the quarter and the year, primarily driven by the continued momentum of our operational initiatives, especially in the U.S. legal channel, supplemented by the continued strong performance in Europe. This also drove record revenue of $1.2 billion. Adjusted cash efficiency improved to 61% from 59% last year as we delivered on our cash efficiency target while investing $125 million in the U.S. legal collections channel in 2025. We expect these legal investments to generate significant cash collections in the years to come. Adjusted net income increased to $73 million in 2025, and adjusted EBITDA for the last 12 months was up 16% to $1.3 billion, growing faster than cash collections of 13% in the same period. This suggests that we continue to gain operating leverage even as we increased investments in the legal channel. I think the results you see today demonstrate how far we have come as a company over the past 3 years and especially in 2025. We've made solid progress across several key areas of our business. First, we've been increasing our purchase price multiples, both in the U.S. and Europe, as we continue to prioritize returns over volume. Purchase price multiples are a proxy for gross returns. On a net basis, we know that even lower multiples can still generate good returns if the costs are lower and the cash timing is faster. Both higher multiples and lower expense rates are the goal we're firmly focused on. Second, we've made numerous enhancements to our capabilities, especially in the U.S. We revamped our legal collection process, introduced new call center strategies, and expanded digital collections. We also introduced offshore calling and built a network of external debt collection agencies, or DCAs, to give us flexibility. In fact, we now have more than 2 million accounts being serviced by DCAs in the U.S. Third, we have also been making great progress in modernizing our IT platform. In Europe, we have all of our core markets on one common cloud platform and on one cloud-based omni-channel contact platform. In the U.S., we are well underway in our cloud migration and have initiated the transition to our new global contact platform. At the same time, we're exploring and deploying new technologies globally, such as AI. We've already started testing a range of AI initiatives from processing documents to interactive chatbots, to using large language models to process massive unstructured data sets to help us inform our collection strategies. We see an opportunity for AI to create real value across a range of standardized processes and we are already running very interesting pilots in a number of markets. Our global footprint really helps here since we can test new AI applications in smaller markets and then scale up the ones that deliver real value. On the underwriting side, we have leveraged our top global talent to help us dial in our models and are seeing good performance on the most recent vintages. Fourth, we continue to focus on cost. In the U.S., we made the difficult decision to eliminate more than 115 corporate and overhead roles in the fourth quarter, which resulted in total annualized gross savings of $20 million with around $3 million of these savings being offset by increased outsourcing costs. We have also continued to transition to lower cost call center offshoring, which now represents roughly 1/3 of our U.S. agent headcount. To demonstrate the growing operating leverage in our business, our U.S. call center headcount decreased by 548 agents, or 42%, since the start of 2025, while our 2025 U.S. core cash collections were up 20% versus the prior year. And lastly, we maintained our strong and diversified capital structure with staggered maturities and leverage that has been declining steadily from a peak of 2.9x in 2024 to 2.7x at the end of 2025. We also returned capital to shareholders by repurchasing $20 million of our stock in 2025. The foundations of the business are strong, the future looks bright, and I'm very excited about the opportunities we have to build on this momentum. I will come back to share more on this after Rakesh provides a summary of our Q4 and full year financial results. Rakesh Sehgal: Thanks, Martin. We purchased $315 million of portfolios during the fourth quarter, with $112 million in the U.S. and $157 million in Europe and $45 million in other markets. For the full year, we purchased $1.2 billion of portfolios, in line with our 2025 target as we continue to focus on driving higher returns and net income while balancing investments with leverage. This approach is having a positive impact as the returns from our purchases have increased meaningfully over the past 2 years. Our purchase price multiples, which are a proxy for gross portfolio yields, were 2.16x for U.S. core in 2025 compared to 2.11x in 2024, and higher than the 1.91x in 2023. Similarly, we have seen an uptick in our Europe core purchase price multiples, with 2025 ending at 1.85x, up from 1.8x in 2024 and 1.69x in 2023. While our purchase price multiples have ticked up, we are ultimately focused on delivering higher net returns, which incorporate the cost to collect, the funding cost, and the timing of cash flows. As a reminder, our European portfolios in aggregate have lower purchase price multiples due to the lower cost to collect in certain countries. ERC at quarter end was $8.6 billion, up 15% year-over-year. ERC is well-diversified, with the U.S. accounting for 42% and Europe accounting for 51% of our ERC. This diversification helps mitigate risk from any single market and economic cycles. The replenishment rate, defined as the amount we would need to invest over the next 12 months to maintain current ERC levels based on the average purchase price multiples in 2025, was $982 million. As we look ahead to the next 18 months, we expect portfolio supply to remain stable. U.S. credit card balances are at $1.1 trillion, and industry-wide charge-off rates of 4%-plus are still higher versus pre-pandemic levels, with certain card issuers having charge-off rates north of that, providing significant supply opportunities. Cash collections for the quarter were $532 million, reflecting a strong 14% growth year-over-year. For the full year, cash collections grew 13% to $2.1 billion, exceeding the high single-digit growth target we had for 2025. Cash collections were driven by continued growth in our U.S. legal collections channel and strong performance in Europe across multiple markets. In addition, our digital channel continues to show significant momentum, with global cash collections up 25% in 2025. U.S. cash collections grew 17% in Q4 as well as in the full year 2025. U.S. legal cash collections for the full year grew 28% to $483 million, and were up approximately 83% since 2023 when we first started seeing the benefits from the improvements made in that channel. It's important to note that legal is not the channel that we lead with, but in cases where we are not able to get customers to engage with us through our other channels, we will eventually consider an account for legal collections. The legal channel typically provides greater collections certainty and a higher overall amount of cash collected versus other channels. Legal accounted for 48% of U.S. core cash collections in 2025 compared to 39% 2 years ago. Europe cash collections grew 11% for the fourth quarter and 13% for full year 2025. We had strong cash collections this quarter relative to our expectations. Globally, cash collections exceeded our expectations by 7%, with the U.S. exceeding by 5% and Europe exceeding by 10%. The U.S. core COVID vintages of '21, '22 and '23, which now comprise 9% of ERC, collectively performed in line with expectations in Q4. Our recent U.S. vintages have also performed well, with the 2024 vintage increasing relative to expectations driven by strong legal performance, and the 2025 vintage is performing to expectations. With respect to the consumer environment, our overall customer profile remains stable across the U.S. and Europe. Moving to a summary of our income statement. Portfolio revenue increased 15% during the quarter and 8% in 2025, driven primarily by the growth in Portfolio income. Portfolio income, which is the more stable and predictable yield component of our revenue, grew 14% in the quarter to $263 million and 18% for the full year to $1 billion, a company record. Our Portfolio income increased by 34% compared to 2023, as we have continued to benefit from a healthy supply environment and improved purchase price multiples. Portfolio income has been growing faster than cash collections and is contributing more to net income, and we expect the Portfolio income contribution to net income, to increase as we move forward. Changes in expected recoveries were $64 million in the quarter and $176 million in 2025. Of the $176 million, 68% or $121 million came from cash over-performance or cash received above our expectations, and the remaining $56 million or 32% was from changes in expected future recoveries or the net present value of the increase in our ERC. Let me dive a little deeper into what is actually driving our Portfolio income. Some of the factors include: number one, higher purchase price multiples on our investments as we become more selective in our buying and more effective in our collection capabilities; number two, improved cash performance driven by operational initiatives such as legal and digital collections; and number three, when appropriate, increasing our future projections of ERC on existing portfolios to reflect higher levels of expected lifetime collections, leading to portfolio write-ups. As you can see on the chart, we have a long track record of cash over-performance, especially in Europe. You may recall we did a deep dive on our U.S. vintages in the third quarter. We may do these deep dives from time to time across our global vintages. Turning now to the rest of the income statement. Operating expenses were $208 million for the quarter and $1.2 billion for the full year. Excluding the non-cash goodwill impairment charge recorded in Q3, adjusted operating expenses were $819 million in 2025, up 6% from the prior year, primarily due to the continued investments in the legal collections channel. Legal collection costs were $44 million this quarter, up $10 million from the prior-year period. For the full year, legal collection costs were $162 million, up $37 million, up 30% from the prior year. What is important is that when you look at the composition of our expenses, you'll see that our operating model is becoming more flexible and variable. Over the past couple of years, our U.S. onshore agent headcount has declined by 42% in 2025. The percentage of offshore agents has grown from 0% to approximately 32%. The number of U.S. call centers has shrunk from 6 to 3. Our IT infrastructure is moving more to third-party cloud versus on-premise data centers, and we have been using more DCAs. This progress gives us greater optionality to flex up or down as needed, further supporting our business through different stages of the credit cycle. Net interest expense was $64 million for the quarter and $252 million for the full year. The year-over-year increase for both periods primarily reflects an increase in debt balances due to new portfolio purchases. Net income attributable to PRA for the quarter was $57 million. This reflects an effective tax rate of 4% for the quarter, driven by a number of factors impacting the year, including the non-cash goodwill impairment charge and the geographic mix of earnings during the fourth quarter. For the full year, net loss attributable to PRA was $305 million, which was driven by the non-cash goodwill impairment charge of $413 million we recorded in the third quarter. On an adjusted basis, after excluding the gain on sale of our equity investment in Brazil in Q2 and the non-cash goodwill impairment charge, net income was $73 million or $1.84 in adjusted diluted earnings per share, up 3% from the $71 million in 2024. The adjusted net income in 2025 demonstrates the earnings power of our platform with a higher portion of net income from portfolio income as we continue to improve core operations, reduce overhead, and invest in legal, digital, and offshoring to transform the business. Ultimately, while there will be variability in our net income on a quarterly basis, our focus remains on growing the bottom line and improving returns with the goal of continuing the trends you have seen in 2025. Although our Q4 results give a glimpse into the kind of earnings power that we can generate from our significant ERC and our improving operations, we are not yet at a point where that magnitude of earnings is a baseline. Q1, for example, tends to have higher operating expenses as we begin the year with enhanced marketing to our customers. Also, Q4 results were impacted by an unusually low effective tax rate. Due to the quarter-to-quarter variability that can occur, we believe it is more helpful to look at the business on an annual or rolling four-quarter average basis. In addition to net income, we also focus on cash metrics, which we believe provides a more telling measure of our operating success. Cash efficiency ratio was 61% for the quarter and 42% for the full year. On an adjusted basis, excluding the goodwill impairment charge, cash efficiency was 61% for the full year, in line with our 60% plus target for the year. Adjusted EBITDA for the last 12 months was $1.3 billion, up 16% year-over-year, driven by our cash collections growth of 13% exceeding adjusted operating expense growth of 6%. Adjusted EBITDA was also up 31% compared to 2023. Our net leverage, defined as net debt-to-adjusted EBITDA, was 2.7x as of December 31, compared to 2.8x in the prior year period and 2.9x at the peak in September 2024 as we continue to reduce leverage. You will note that not only is adjusted EBITDA increasing, but the quantum of debt has been fairly stable over the past 3 quarters as we generate higher cash flow. With adjusted EBITDA continuing to grow, we expect to further de-lever in the near-term. In terms of our funding, we have ample liquidity and a strong capital structure that is well-diversified between bank and bond debt. As of December 31, we had $3.2 billion in total committed capital under our credit facilities, with total availability of $1.1 billion, comprised of $825 million available, based on current ERC and $274 million of additional availability that we can draw from, subject to borrowing base and debt covenants, including advance rates. Over the past couple of years, we have taken numerous actions to further diversify and strengthen our capital structure, including most recently issuing our first ever Eurobond in late 2025. We have no debt maturities until November 2027 when our European credit facility matures. We are already in discussions with our long-standing partners to refinance the facility this year. During the quarter, we also repurchased $10 million of our shares, bringing the total amount repurchased in 2025 to $20 million. We have approximately $50 million remaining under our Board authorization and will continue to evaluate share repurchases as part of our overall capital allocation strategy. As we have previously noted, the authorization remains subject to the discretion of our Board and repurchases are subject to restrictive covenants in our credit facilities and the indentures that cover our outstanding notes. Overall, as our 2025 financial performance shows, we are moving in the right direction, improving our financial profile and delivering higher returns while reducing leverage. I'll now turn it back over to Martin. Martin Sjolund: Thanks, Rakesh. PRA has come a long way in the past 3 years, and I want to share our strategy for the next few years. To set the stage and provide a little bit of context, we're celebrating PRA's 30th anniversary this year. And looking back at our history, we can see 3 distinct phases of our company's evolution. The first phase of PRA, or PRA 1.0, was when PRA grew from a startup into one of the leading players in the U.S. industry. We see PRA 2.0 as the period of global expansion into Europe, South America, and beyond, building one of the most globally diversified companies in the industry. And now PRA 3.0 is about how we evolve PRA into a high-performing, technology-enabled global allocator of capital. This strategy has 3 important vectors: one, capital and investing; two, operations, technology, and data; and three, people and culture. The first vector is capital and investing, where we are focused on investing with discipline and allocating capital to the highest return opportunities. This vector has 4 main elements. Number one, we will make disciplined global NPL investments. We will do this by leveraging our global diversification, which allows us to allocate capital across a range of markets. We manage this through a global investment framework, prioritizing long-term returns over growth for growth's sake, and expanding carefully into new product opportunities that fit our return profile. On this point, we have been exploring the possibility of new asset classes that leverage our data and capabilities. Number two, we're focused on delivering a strong financial profile, one that can generate more predictable net income, significantly grow cash flow, create a more flexible cost profile, and reduce our leverage to the mid 2x area over time. Number three, we will maintain a conservative balance sheet with ample liquidity and well-diversified and staggered funding. We will also explore alternative funding mechanisms to create optionality and flexibility for the future. And number four, we will continue to employ a prudent capital allocation strategy, prioritizing investments in the core business, whether that's through disciplined purchases of portfolios with attractive returns, or investments in our operations. In addition, we will evaluate opportunistic share repurchases when we believe that they can create incremental value. At the same time, we're focused on ensuring that all markets and segments are delivering the returns we need. Turning now to the second vector, operations, technology, and data. Here we are focused on continuing to modernize the engine, becoming leaner, more flexible, and more tech-driven. The first subcomponent here is transforming our operations. We aim to balance a mix of in-house collections with a range of flexible external capabilities. The internal platform gives us cost benefits in the legal channel, good customer engagement, more visibility of data, and better predictability. On the external side, we will continue to leverage our U.S. offshore operations, which are still growing and provide a low cost and effective platform for certain types of collection activity. Today, offshoring represents about 1/3 of our U.S. agents, and we will look to grow this mix in the coming years. We will also leverage our global network of DCAs to create flexibility to scale up and down and to leverage specialist capabilities. At the same time, we will also be using automation and scale across the business, specifically in the legal collections channel. Finally, we plan to continue driving digital innovation that makes it easier for customers to work with us in resolving their debts, while providing us with a very low-cost collection channel. The second subcomponent is fully leveraging technology. We are driving scale benefits by leveraging technology standardization where it makes sense for us. This is already in place in Europe, and we expect to make significant progress on this in the U.S. in 2026. We're also planning to modernize our U.S. core system and data architecture. This should improve our ability to rapidly apply new technologies and save us significant cost over time. The third subcomponent is enhanced data and analytics. This has long been a key part of what we do, and we are investing in talent and data to generate better customer insights. We also believe that AI has the potential to transform a company like ours. PRA has large data sets from the 70 million accounts we have acquired globally. We have hundreds of millions of documents and billions of call recordings. There's a significant opportunity to digitize workflows, serve customers digitally, and use virtual agents to transform customer service. This will take time, but with our data, our scale, and our continued investment in technology and talent, we see a big opportunity. In fact, we recently hired a senior AI leader into our new Charlotte office, and we are excited to see how he can help us accelerate our progress. The final subcomponent is disciplined cost management. As I have said from day 1, cost is very important in a business like ours. Although we made a lot of progress last year, cost control is a mindset, not just a one-off project. So we will continue our drive to reduce our costs and create flexibility in our cost structure. This includes employing a bottoms-up approach of zero-based reviews, while driving synergies across existing overhead functions. We will also be shifting more toward a variable cost structure, leveraging external legal capabilities, call center offshoring, and DCAs globally. The third and final vector of our 3.0 strategy is people and culture, where we're focused on establishing a winning culture by embedding a high-performance ownership mindset. I'm a strong believer in the importance of culture in an organization. We can develop the best strategy on paper, but at the end of the day, it's only as good as the teams of people across PRA who will execute this strategy. PRA has a highly talented team of people, many who have been with us for decades. We will focus on continuing to build on the strong culture we have in place, both leveraging the long experience of those who have been here for decades and integrating fresh perspectives from people who joined recently. but who bring critical external perspectives. We want to create an environment where talented and successful people collaborate together to execute on our strategy, deliver for customers, and hit our targets. Some of the key elements here include talent hubs to ensure we can access the talent we need and company-wide objectives and key results, or OKRs, to ensure that we're executing on our plans. We will also continue to make sure that staff incentives are aligned with shareholders. And lastly, our governance and values continue to be a source of strength. We maintain a strong compliance culture and operate under the guidance of a global Board with diverse and highly relevant experience. As a responsible corporate citizen, we remain committed to supporting the communities where we operate, an attribute that has defined us for the last 30 years. Finally, I want to give a sense of our financial trajectory when we deliver on these 3 vectors. One, we will remain disciplined with our investments. As I mentioned, we will prioritize returns over growth for growth's sake, and hence will not chase investments that do not meet our return thresholds. Based on what we see today, we anticipate investments in the range of $1 billion to $1.3 billion per year, with 2026 projected to be at a similar level as 2025. Two, by driving cash initiatives and managing costs, we expect our adjusted EBITDA to continue to grow. Our aim is for adjusted EBITDA to continue growing faster than cash collections, even as we invest in legal collections, IT, and AI. Three, as I said at the start, we are very focused on our leverage. This strategy should see our net leverage continue to decline over the next few years, and we aim to land in the mid 2 times area. And finally, returns. Ultimately, our goal is to deliver returns in line with what investors would expect from a specialty finance company like ours. As you can see on the slide, we made significant progress in these metrics over the past 3 years, and we expect to continue moving in the right direction. Overall, I feel confident in where PRA is and where we are heading. Our prospects for 2026 look good and the outlook beyond that is even better. We are confident that the actions we are going to take will continue to drive stronger financial results and unlock meaningful long-term value for our shareholders. Thank you everyone for tuning in and for your time, support, and continued confidence in our future. Next week we will be participating at the Raymond James Conference, and we look forward to seeing many of you there. And with that, we'll open it up for questions. Operator: [Operator Instructions] Your first question comes from the line of David Scharf from Citizens Capital Markets. David Scharf: I -- Martin, really appreciate all of the detail that was provided on all of these initiatives in the presentation. Maybe just kind of a bigger picture question. There's a lot to digest there. I mean it looks like you're really attacking every facet of the business. From an investor looking in from the outside, is there any maybe prioritization they should think about in terms of maybe what are the top 3 things that are outlined in all of the things on those 3 slides, whether it's more offshoring or more outsourcing? Just to maybe provide some guideposts that we should be paying most attention to? Martin Sjolund: Yes, thanks. As I've been saying for a while now, we wanted to lay out what our strategy was for the coming 3 years. We've really broken it down into these 3 vectors that I talked about. So on one hand, you have capital and investing. So making sure that we do that in a prudent way, that we are not chasing growth for growth's sake, but really focused on returns. And that we -- the other part of that is that -- making sure that we have a really strong funding structure. So we're in a strong position on funding today, and that's something that's very important to us. The second vector is really around the whole operations. And so there, continuing to create this cost flexibility is very important. PRA, we're celebrating 30 years, and I've been here for 15 of those 30 years. And over time, that's something we've really learned is that it's important to have flexibility on the cost side and to constantly be working to creating a lean and efficient platform. So I would say that's the second part. And the third part is really just around technology. We will continue to modernize this platform. There is a big opportunity for us as we do that. And things like AI, as I mentioned before, if you think of the tens of millions of customer accounts and hundreds of millions of documents, and the processes we run in different countries across the world, I really do believe that there's a significant opportunity for us to leverage technology and AI, in particular, to improve the business. So I'd say those are some of the main themes. But overall -- I know it's a lot to digest here, but we did want to give a thorough review of the initiatives that we're driving across the global company. David Scharf: Got it. No, understood. Actually, that's very helpful to kind of zero in on those handful of initiatives. And then maybe just as a quick follow-up. I don't know if this is more on the confidential side, but are you able to share potentially what new asset classes you were considering looking at or experimenting with? Martin Sjolund: No, not really. I wouldn't be able to do that. What I can say is we look at things that are adjacent. And remember, we're in a lot of markets across the world, not just here in the U.S., but it's -- we clearly believe that there's attractive return opportunities in adjacent asset classes. What we typically do, though, is to approach those in a careful way. So we'll buy sample portfolios, we'll make investments, we'll start building data, improving underwriting models and making sure that we have the operational capabilities to execute. And then as we do that, we'll ramp up more quickly thereafter. So it's really just to signal that we think that there's an opportunity for us using our capabilities and our platform and our underwriting capabilities to move into more segments over the longer term. Operator: Your next question comes from the line of Mark Hughes from Truist. Mark Hughes: Martin, how should we think about the collections in 2026? You've given us some good guideposts around purchasing and EBITDA, net income. Anything you'd like to say about the collections? Martin Sjolund: No. Well, I think -- just to start, I think we entered 2026 with really strong momentum. We had really good cash performance in 2025. we're seeing, I think, all the key metrics ticking in the right direction. So we had growing cash EBITDA faster than cash. We have reducing our leverage. And on the funding side, we've been able to get the Eurobond out. And so I think we entered the year in a really strong way, and we'll continue to invest, as Rakesh mentioned earlier, in the U.S. legal channel. So I think that's an important part of what we're doing. I don't know, Rakesh, anything to add to that? Rakesh Sehgal: Yes. What I would add, Mark, is, look, we had a very strong 2025, where we delivered 13% cash collections growth. That's higher than the high-single digits that we had telegraphed. And a lot of that, I would say, number one, came from the higher buying that we had in 2024, where we bought $1.4 billion, our highest ever. And so that obviously played a big role in 2025. This past year, we had our third highest year of buying at 1.2. And so we are still going to see strong cash growth, albeit not at the levels that we saw in 2025. But importantly, it's not about just the cash growth. It's about delivering the bottom line. So we expect that ultimately, that cash is going to grow faster than our cost. And ultimately, we're going to drive higher cash EBITDA growth rates as well. Mark Hughes: Very good. And then the competitive dynamic, kind of the supply/demand in Europe. I wonder if you could maybe just give a couple of quick thoughts on that? Martin Sjolund: Yes. I mean we see Europe in a fairly stable place. We have -- as we shared earlier, we saw the multiples in Europe for us in 2025 ticked up. So that shows, I think, on our part, good discipline in terms of our buying. The European market remains competitive. I think we've been saying that for some time. So it's a competitive market. And I think this is where we really benefit from our diversification. We are able to channel our investments to the markets where we see the best returns. And because we run lean markets, we can also hang back when we need to. So I think that's really the key thing for us. So we'll continue to allocate capital to markets where the returns are good. Overall, in Europe, I think the supply environment is stable. It's competitive, but there's still enough opportunity for us to deploy the capital that we want to deploy. And there will be certain markets from time to time that become very stretched on pricing. But because we're in so many markets, we're able to channel the capital to the right place. Mark Hughes: Martin, if you think about the improvement, say, over the last several quarters since you've taken over, collections have been quite strong. How much of that is kind of rebalancing collections between domestic and offshore? Was there some kind of refinement in your scoring system or your kind of systems that target particular consumers that made a difference here? I'm just sort of curious what, from your perspective, has been the biggest contributor to this improvement here lately? Martin Sjolund: I really think the results you're seeing are the result of several years of initiatives that have been made across the business here. So you've had a number of initiatives ranging from building out the DCA network, significant investments in legal collections and also strong growth on the digital channel as well. So I think all of these things are not -- that's not something that has happened overnight. They've been put in place, and we've really been able to, I think, tune them. We've -- I mentioned AI earlier, just as an example, we've been able to use AI to address unstructured data in documentation. So we could go through millions of documents and identify cases that are suitable for legal, and that's one of the things that's driving this. So I think collections to me is really like an oil tanker. It's not easy to change it in -- on the short-term. But through these initiatives and just in a disciplined and structured way executing on these initiatives across a range of them, I think we've seen these improvements. Mark Hughes: And then I think you talked about the -- your share repurchase authorization, looking to improve your leverage. It looks like EBITDA you expect to improve. Any early thoughts in terms of perhaps increasing the tempo of share buybacks? Rakesh Sehgal: Yes. Mark, look, we're always looking at opportunities to drive shareholder value and drive equity value. And for us, share repurchase is part of that toolkit. But number one, our priority is to continue to invest in the business, continue to buy portfolios at higher returns that create that sustainable growth in our net income. The second is to also invest in our business. So whether that's on the legal channel, the digital channel that Martin mentioned, but to the extent we see that there is an opportunity to do share buybacks given what we believe is the intrinsic value of the business and how the market is valuing us, we would absolutely look to do share buyback. As I mentioned earlier on the call, we do have $50 million currently under our Board authorization, and that actually lines up now pretty well with what is available under the various covenants in our credit facilities as well as our notes. The good news is given the momentum that we have created in 2025 and delivering that $73 million of net income, that capacity actually has increased quite a bit versus where we were earlier in the year in 2025. So you should see us continuing to opportunistically undertaking share repurchases as we move into 2026 and recalibrate where the market thinks about our business today. Operator: [Operator Instructions] Your next question comes from the line of Robert Dodd from Raymond James. Robert Dodd: Congrats on the quarter. A lot to digest here. If I look at kind of the summary where all the vectors kind of come together with the financials because, well, that's what I did. The disciplined investment seems like you're not expecting an upward sloping to the right investment horizon. You want to be very careful about that. I get that. You are expecting adjusted EBITDA to grow though. So I think my 2 takeaways from that, you expect growth in collections faster than investments and you expect growth in expenses slower than collections. I think my takeaways, you can correct me if I'm wrong there. On the growth in collections faster than investments, I mean, is this an expectation that with all these new technology tools, AI, searching documents, et cetera, that you can reach kind of more customers in a pool? Or do you expect to get more cash from the same number of customers in that pool, if -- how would you rank those kind of -- probably both, but the relative components there about how you think the technology is going to work on the collections versus investment side? And then I've got questions about expenses, obviously. Martin Sjolund: Okay. Yes, we'll come back to that. Yes. No, the -- it's really about pulling a number of levers here as we go. So on one hand, we are investing significantly in legal, in particular, in the U.S. And that is something that -- there's a bit of a catch-up effect there where we've identified opportunities to invest in legal, and we see a good performance on those legal collections from portfolios that we've had for some time. So that's one of the things driving it. We're improving our digital collections significantly. As we said earlier, that was up 25% last year. And we see that as we are able to tune that and improve that, we can also drive additional liquidation through that. So you have that. On the other hand, you have the call centers where by using more offshore resources, it makes it more economical for us to call accounts where with a higher cost profile, it doesn't make sense. But when you have a lower cost, you're able to penetrate some of those portfolios more deeply. So there's a number of levers there. There's also the external debt collection agencies. This was something that in the U.S. we didn't really do before. But outside the U.S., it's always been an important part of how we operate. And certain DCAs have specialist capabilities. They might have certain trade capabilities. And so we're getting better about leveraging those capabilities and putting accounts out that maybe weren't being worked fully by us in the past, but there's still opportunity and value there. So all of those things together are helping to drive the cash. And then I know you mentioned you wanted to come back to cost, but the other part of this, obviously, is the cost side. So we made significant adjustments to our cost base during last year, as we mentioned, over 500 call center agents reduction and also 115 on the corporate overhead side. So as those cost reductions start to work their way through over time, we see the benefit of that, too. So we're really working both to improve our cash on one side and to reduce our cost on the other. And as these things come together, that's why we think we have a good direction of travel on the key metrics, ultimately leading to higher returns, even though we're being cautious on the investing side. And that's why on the investments, as you said, we're not going to buy our way out of this. That's not our goal. We want to get -- generate returns, but really tune the platform so that we can get our returns up, and then we can think about pushing on beyond that. Robert Dodd: Got it. Got it. Thank you for answering the question I was about to ask. One follow-up to that. I mean on the -- to your point, I mean, the DCAs, et cetera, and you moved to more variable and outsourced call centers, et cetera. How far do you think you can push the overall expense structure to fully variable, if you will? I mean, obviously, there's still -- you still got 3 call centers. You still got a lot of things, but you've gone cloud, et cetera. I mean how much of the in-house fixed cost infrastructure do you think you need to keep versus how much can you go to a fully variable expense structure? Martin Sjolund: Robert, it really -- I really see this as a trade-off. So we have markets where we have 0 people. We just have accounts and we place them with the debt collection agencies and there they go. So that is a completely variable model. We don't have a single person sitting there. Then we have other markets where we do every single thing ourselves in-house. And then a lot of markets are on a spectrum somewhere in between there. So I don't really think that there's a perfect model out there from running all these different countries. The benefits of in-house collections is that you often have a cost advantage because by definition, if you outsource to someone else, they need to make money, too. So by doing it in-house, you can do it in a less expensive way. You can have more control of the accounts, you can have more control of the data and so on. So there's benefits to that. But on the other hand, as we know, it's harder to flex the cost if you're doing everything yourself. And if the volumes go up or the volumes go down, it's not easy to adjust your cost base to that. So I think that really, it's about having a mix. And if I look across all of our countries, like I said, you will find some countries are on one absolute extreme and others are on the other. The biggest markets like the U.K. or the U.S., I think, are probably somewhere in between where I think a mix of variable collection channels with internal -- we have a big enough scale for internal in-house collections to be cost effective, but we can also leverage these external channels for the marginal collections, if you will. So that's really how I think about it. Operator: There are no further questions at this time. I would like to turn the call back to Martin Sjolund, President and CEO, for closing comments. Martin Sjolund: Okay. Well, yes, I want to thank everyone for listening. Just to emphasize, I think we had a really, really strong Q4. We feel positive about the outlook ahead. I tried to lay out the -- what our strategy is going forward and how these 3 vectors of capital and investing, operations, technology and data and people and culture, are really going to come together, and I think put PRA on a really strong trajectory going forward. We look forward to attending the Raymond James conference next week, and we'll be getting into a little bit more detail on each of these vectors to talk about -- more about our plans. So thanks for listening. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the Flutter Entertainment Fourth Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Paul Tymms, Group Director of Investor Relations. You may begin. Paul Tymms: Hi, everyone, and welcome to Flutter's Q4 update call. Joining me today are CEO, Peter Jackson; and CFO, Rob Coldrake. After this short intro, Peter will open with a summary of our operational performance in the quarter, and then Rob will update on our Q4 financials and new 2026 guidance. We will then open the lines for Q&A. Some of the information we are providing today constitutes forward-looking statements that involve risks, uncertainties and other factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors are detailed in our results materials and our SEC filings. All forward-looking statements are based on current expectations, and we undertake no obligation to update any forward-looking statements, except as required by law. Also, in our remarks or responses to questions, we will discuss non-GAAP financial measures. Reconciliations are included in the results materials we have released today, and I will now hand you over to Peter. Jeremy Jackson: Thank you, Paul. I'm pleased to share our strong fourth quarter results and reflect on our strategic progress in 2025. Flutter is the world's leading online sports betting and iGaming company with unique advantages delivered through the Flutter Edge and a proven track record of delivery. 2025 was another transformative year for the company, marked by our strategic execution, continued market leadership and disciplined investment, delivering group revenue up 17% and adjusted EBITDA 21% higher. In the U.S., we maintained our clear leadership position in both online sports betting and iGaming. We also launched FanDuel Predicts in Q4 to capitalize on the emerging prediction market opportunity. In our international business, we strengthened our portfolio with strategic acquisitions in Brazil and Italy, extending our positions in high-growth and exciting markets. We made significant progress on our transformation and efficiency programs, and we are well on track to deliver the anticipated revenue growth and cost efficiencies. Our swift disciplined responses to regulatory changes in India where sudden legislative change forced the cessation of real money gaming and to higher U.K. gaming taxes underscored our scale benefits and business agility. We entered 2026 in a strong position, and I've never had more conviction in our ability to capitalize on the long growth runway ahead. Turning to the fourth quarter. Our Q4 group performance was strong with revenue up 25% and adjusted EBITDA up 27%. In the U.S., revenue growth was 33% with adjusted EBITDA 90% higher, lapping the significantly unfavorable sports results in the prior year. We delivered another superb iGaming quarter. Revenue grew 33%, driven by 18% AMPs growth and an increase in player frequency as our successful content strategy and rewards scheme resonated well with our customers. FanDuel sportsbook Q4 revenue growth was 35% However, Q4 sportsbook trends across the market diverged from expectations. High gross revenue margins were offset by moderating handle performance. As a business, we always consider net revenue as our core revenue KPI, and we, therefore, always consider revenue and handle trends together in conjunction with customer activity levels. This was particularly important this quarter as adverse recycling was a key driver of the lower handle growth with persistently high gross revenue margins leading to lower levels of customer engagement. In addition, the second half of the NFL season saw less compelling content with fewer popular teams and favorite players making the playoffs this season, adversely impacting customer engagement. These market trends were far more pronounced for FanDuel for 2 reasons. First, our significant structural revenue advantage resulted in a greater impact from adverse recycling as FanDuel recorded persistently high NFL gross revenue margins throughout November and December. Overall, we finished the NFL season 100 bps ahead of our expected margin at 19%. Second, our standard generosity playbook proved less effective in Q4 as our investment phasing did not sufficiently align with the pattern of sports results during this period. As a result, we saw a higher churn within our customer base and resulted in loss of market share. We also don't believe prediction markets are having a meaningful impact on our business. As you'd expect, we've undertaken a comprehensive review and found no evidence of material cannibalization on our existing business. And this finding is reinforced by our Missouri launch, where customer acquisition trends exceeded expectations, reaching 5% of the population within the first 30 days, making Missouri one of our best state launches to date. Moderated market handle trends have continued into the start of 2026. We believe these trends reflect the halo impact of the factors evidenced in Q4, and we continue to monitor trends closely. And as set out in our shareholder letter, we have a clear U.S. strategy for 2026. Our market-leading, highly profitable U.S. position is driven by product superiority, enabled by our exceptional pricing capabilities, combined with highly disciplined customer acquisition. This has allowed FanDuel to deliver an estimated 70% share of market EBITDA. However, recent trends have led us to take additional actions to strengthen these capabilities to reinforce our leadership position. We will leverage our scale, proprietary technology and data advantages to deliver experiences competitors cannot easily replicate, including more intuitive bet building, smarter personalization and richer live engagement. In addition, we're enhancing how customers feel recognized and rewarded with more engaging reward experiences, including the launch of a new loyalty program, extending a core part of our casino success into sport. I'm confident that the ongoing improvements to our sportsbook product and generosity strategy will harness our scale and structural advantages, driving a sequential improvement in our performance throughout 2026 and deliver market share gains. Let me now update you on prediction markets and how we're going after this opportunity. We believe that prediction markets will accelerate state regulation of online sports betting and iGaming. This, in our view, is the most valuable long-term opportunity in the U.S. In the meantime, the near- to medium-term growth potential on prediction markets for FanDuel is significant. There is new TAM to go after. Prediction Markets will enable us to acquire new sports and entertainment first customers into the FanDuel ecosystem ahead of potential regulation. We can deliver attractive returns by providing sports markets to the 40% of the U.S. population who cannot currently access online regulated sports books. We are exceptionally well positioned to harness this opportunity, and we launched our own offering, FanDuel Predicts in Q4. Early signals have been encouraging with most activity focused on sports and with average volume per customer in line with expectations. We are also actively pursuing options to leverage our world-class proprietary pricing capabilities for market-making services, and we'll share further details in due course. Rob will update you on our predictions market financial guidance. But as outlined in our Q3, we'll invest meaningfully with ambition to deliver a leading position in this space. The opportunity across prediction markets is certainly far bigger than any potential cannibalization of existing sports. Moving on to our international business. International revenue grew 19% in Q4 and adjusted EBITDA increased 6%. We are making excellent progress on our strategic transformations and integrations, building a strong platform for future revenue growth and delivering cost savings. In the UKI, the Sky Bet sportsbook migration has delivered the expected cost savings, and we are now accelerating customer-facing investment to restore momentum. In SEA, Flutter regained the Italian online market leadership position in Q4. And the results of the PokerStars migration in Italy have been very encouraging with revenue growth of 13% and new customer volumes more than doubling in Q4. PokerStars migrations will continue at pace into 2026 following the successful precedent we have now created in Italy, driving further growth and delivering planned cost savings. The Snai business integration is progressing well. Customer acquisition initiatives, including Sisal's retail sign-up model and restructured generosity to boost cross-sell and reactivations drove all-time record iGaming AMPs and ensured Snai finished the year in revenue growth. The planned platform migration in Q2 will further accelerate this growth by providing Snai access to a vastly expanded product suite, including Sisal's leading products such as My Combo. In Brazil, improved casino and digital marketing capabilities drove a surge in customer acquisition, up 51% since the start of the year. We believe the Brazilian market presents a significant and compelling growth opportunity for Flutter and that the 2026 FIFA World Cup represents a unique moment in a soccer obsessed market to take market share. As a result, we expect to invest more. And while extending our investment time line shifts the phasing of profitability, we have strong conviction that disciplined near-term investments will build a larger, more profitable and sustainable business over the long term. Looking ahead to 2026, I'm confident in our strategic positioning. We have compelling plans in place to strengthen our leadership, unlock future value and deliver sustainable growth. I'll now hand you over to Rob to take you through the financials. Rob Coldrake: I'm pleased to present another quarter of strong financial delivery. Group revenue increased by 25% and adjusted EBITDA grew 27%, driven by a good year-on-year performance across both segments and the successful integration of our recent acquisitions. As Peter noted, we are making excellent progress on our strategic transformations and integrations, and we are firmly on track to achieve our targeted $300 million cost savings by 2027. We're embedding rigorous cost discipline across the business, identifying new efficiencies and optimizing opportunities to protect margins and fund strategic growth investments. In the quarter, group net income was $10 million compared to $156 million in the prior year as the strong adjusted EBITDA performance was offset by higher interest costs relating to the financing of our strategic M&A and increased tax expense, reflecting the significant step-up in U.S. profitability year-over-year. Earnings per share and adjusted earnings per share declined by $0.50 and $1.20, respectively, reflecting these factors. The group's net cash provided by operating activities declined by $224 million to $428 million, primarily reflecting the cash impact of these increased expenses and a $128 million adverse impact from a lower level of customer deposits year over year. Free cash flow declined by $335 million to $138 million, including the impact of M&A and increased investment in capital expenditure. The higher CapEx was driven by phasing of Italian concession payments and investment in future revenue-enhancing and cost efficiency projects such as our PokerStars transformations. We completed $245 million in share repurchases during Q4, bringing full year 2025 repurchases to $1 billion, in line with our guidance. Our disciplined capital allocation policy provides the flexibility to respond effectively to evolving market conditions and emerging opportunities. We remain committed to our long-term policy of returning capital to shareholders. We now expect to commence returning $250 million in H1 2026, and we'll provide guidance on our future buyback cadence as the year progresses, preserving our flexibility to invest in the business and strengthen our balance sheet. We ended the year with a leverage ratio of 3.7x. Strong profit growth and cash generation will continue to drive leverage reduction throughout 2026, moving us towards our target ratio of 2 to 2.5x over the medium term. Moving now to our outlook for 2026. In the U.S., we expect revenue of $7.8 billion and adjusted EBITDA of $1.05 billion, translating to year-over-year growth of 12% and 14%, respectively. This includes new state investment of $70 million in adjusted EBITDA as we expect to launch Alberta in Q2. The guidance also reflects current trading where the impact on our customer base from the very high gross revenue margins achieved in the second half of Q4, alongside a less compelling end to the NFL season has driven lower customer engagement levels into 2026. Outside of NFL, year-over-year trends improved in February. Although we believe that these market trends are largely transitory, we have taken a measured view of how these trends will progress, including when market handle growth rates will recover from the Q4 recycling impact. We also expect a sequential improvement in FanDuel's relative performance to the market due to improvements to our sportsbook product, generosity strategy and the launch of our new loyalty program during the year. We now expect that our prediction markets investment will be towards the upper end of the previously guided range, closer to $300 million to reflect the significant opportunity we believe exists to drive customer acquisition. While it's still very early days, our view remains that the shape of the profit ramp for prediction markets should be similar to new sportsbook state launches. In International, we expect revenue of $10.6 billion and adjusted EBITDA of $2.23 billion revenue at the midpoint, representing year-over-year growth of 13% and 1%, respectively. We are really pleased with the underlying momentum in the first 2 months of the year, particularly in SEA, where we have extended our online market leadership in Italy. The guidance incorporates an investment in Brazil of approximately $70 million to grow our market position and the previously guided impacts from the U.K. tax increases and the Indian market switch off. We expect our unallocated corporate costs to be $310 million; a $30 million increase compared with the prior year. This reflects an increased 2025 base driven by investment in shared technology, talent and costs associated with our U.S. listing, which will continue in 2026. To conclude and reiterate Peter's conviction, we are excited for the year ahead and look forward to another year of strong execution. With that, Peter and I are happy to take your questions. I'll hand you back to JL to manage the call. Operator: [Operator Instructions] Your first question comes from the line of Jordan Bender of Citizens. Jordan Bender: Peter, I want to start with one of the quotes from the press release where it says it's difficult to be definite as to when market growth rates will recover from the impact in 4Q recycling. I guess what I'm trying to figure out here is, do you think any of this what's going on could be structural in nature? And do you ever see this type of phenomenon happen across any of your other sports markets globally? And I guess the second or the follow-up question to that is your sportsbook AMPs were up 4% for the year. The story around increasing penetration into existing states is something that you've spoken to in the past. So I'm curious where you think you stand in terms of net new customers to support this environment where we are seeing handle flow. Jeremy Jackson: Let's start with your question around sort of handle and how that compares with other markets that we operate in. And I think it's worth acknowledging that the period of time we're talking about in the U.S. in Q4 is in the football season. And I've talked before about the very high levels of volatility that we see around football in the U.S. So I think -- when I think about other markets, the soccer-driven markets we see in the U.K. or Italy, racing in Australia, we would see less volatility and less sustained periods of very positive sports results. I can remember this time last year when we're talking about the football season and people were concerned as to whether we could ever see positive sports results in football. Clearly, this season, we've seen very strong results. And as I stated earlier, we've seen a margin of 19% across the full football season. And so when you compare that with last year and the very substantial step-up in margins year-over-year, you would expect to see a commensurate drop in handle, right? It's the math in terms of how it works from the customer play. So that phenomenon of sort of recycling and the impact that margin has on sort of growth of stakes is something that we've seen before. In terms of your second question around sort of AMPs, look, I think the important thing is that our sportsbook AMPs in our pre-2025 states were also growing in Q4. And look, in the combined sports and iGaming business, we saw mid-single-digit growth. So we're still seeing AMP growth in all the core cohorts. Operator: Your next question comes from the line of Paul Ruddy of Davy. Paul Ruddy: Just on -- it's a little bit of a follow-up that I forget to ask. But on the structural hold piece, it looks exceptionally strong. Has there been any change in strategy around pursuing a more, say, hold positive handle passive strategy in the way you've set yourselves up? And maybe if you could just give if there is any quantification of what you think the actual amount of handle impact might have been year-on-year from that recycling impact? Jeremy Jackson: I think one of the things I'd state is when I think about the NFL season this year. When you look at the sort of the quality of the teams that got into the latter stages of the competition, there were a lot less of the sort of key marquee players involved. And that has a significant impact for us because of our dependence on the parlay market. I actually suspect that we saw lower levels of parlay penetration than we would otherwise have done if we'd have sort of matchups like we'd had last year. So there's nothing -- we've not changed our big or anything like that, we simply saw a very considerable set of consecutively positive sports results. I think 10 out of 11 weeks, we saw very favorable weeks of above-average margin there fell a number of weeks above 30%, which we think has a real sort of impact on customer sentiment when you get to those sorts of levels. And then in terms of the blackout of trying to work out if it were not for that, what would have happened to handle, I mean it's very difficult. And I think there's a lot of -- it's a complex relationship between those things. And of course, you've also got the overlay of what's going on from a generosity perspective as well. So I think it's hard for us to make a full assessment. Operator: Your next question comes from the line of Barry Jonas of Truist Securities. Barry Jonas: Can you maybe talk a little bit about the prediction product today and how you see that improving moving forward? And then maybe as a follow-up, curious to get your thoughts on the probability of more U.S. state tax increases here. And is there any scenario where you might exit OSB in any uneconomically viable state to focus more on FanDuel Predicts? Jeremy Jackson: Yes, look, we've -- obviously, we're pleased we got our prediction market product into -- from a sports perspective into those 18 states where we can't currently offer our regulated OSB. Clearly, that's a lot of incremental opportunity for us to go after that otherwise we couldn't have had. We have got good plans to improve the breadth and quality of the product we have over the course of this year. There's obviously the World Cup coming up shortly, which is going to be a very important opportunity for us to showcase the quality of our soccer product, both for the half of America who are in states where there's regulated OSB, where we're very excited about that, but also into the half of America who will be reliant on our Predicts product. Soccer is actually the fourth most popular sport for us by GGR. So I think we're excited about that. And we believe that we have a lot of expertise in that globally and of course, we can couple that together with the quality of the FanDuel brand and our experience from the Betfair Exchange to really push hard. And there's lots of other product enhancements we intend to make over the course of the year before we get to the start of the NFL. Rob Coldrake: From a tax perspective, we're clearly at the outset of the year and moving into legislative season. As ever, there will be some noise and soundings about tax increases in certain states. I mean on the positive front, actually, just before coming on this call, we've had positive news already, getting a license in Arkansas, which is a positive move for us. And ultimately, if we do see any tax increase, there aren't any that we see with high degree of certainty at the moment. But as a scale operator, we're very well placed to mitigate those as we've proven in the past, and we have levers at our disposal and costs that we will use to mitigate that and work through it. Operator: Your next question comes from the line of Jeff Stantial of Stifel. Jeffrey Stantial: Maybe starting off on the handle trends in Q4 and year-to-date. Peter, you talked to some market share loss, which is expected to moderate as the year goes on. But if you look at performance in the Missouri launch, there really doesn't seem to be much dilution to market share at all. So maybe could you just help us reconcile those 2 data points? And then for my follow-up, Rob, it looks like unallocated corporate is pacing well above the '27 targets that you introduced a few years back. Can you just frame for us maybe what's changed, if anything? And where do you go from here? Jeremy Jackson: You're right. We've been very pleased with the launch in Missouri. And as I stated earlier, it's one of our most successful state launches to date in terms of the population penetration. I think we're very pleased with that. I think it's -- and it's down to our excellent new state playbook I think the point I'd make around some of the handle trends that we saw in Q4 last year, it really ties back to some of the stuff I was talking about in terms of the very strong and sustained periods of very high margins, coupled with the fact that we saw less popular teams getting into the playoffs for football. I suspect that there were some of our customers who, to use another sporting analogy, put their queues back in the rack and stopped betting. So look, I think what we'll have to do is reactivate those customers. We're excited about the product changes that we'll be delivering over the course of this year. I mentioned the loyalty program, the changes we're making to generosity, we've got the World Cup coming up. So I think there's a lot of great opportunities with March Madness for us to push hard and get these customers back on our platform. Rob Coldrake: From a corporate cost perspective, there's a couple of points to make. So we are slightly above our original guide. There's a couple of contextual points to this. The first is we obviously re-segmented the business at the start of 2025, and we saw some additional costs move into corporate as a result of that re-segmentation. The second point with regards to 2025 is we actually had some reduced revenue-driven cost allocations as part of the year-end closeout, which is just kind of left pocket, right pocket. We have been investing in cost in the center overall with the Flutter Edge, and we're seeing excellent payback in terms of the transformation, strategic transformation work that's going on across the group. And what I'd say lastly is actually we've just kicked off a comprehensive cost optimization program across the group, and we are looking to optimize further efficiencies as we go through 2026. Operator: Your next question comes from the line of Brandt Montour of Barclays. Brandt Montour: So digging into U.S. revenue guidance for '26, low teens growth expectations. I think we kind of got a sense now for sort of some conservatism around handle. Have you guys changed your philosophy around how you guide for sport outcomes or for structural hold within that guide? Rob Coldrake: I'll pick this up. So -- no, we've not changed our philosophy. What I'd say in summary for 2026 is we've taken a sensible measured approach to our guidance. The guidance includes 12% revenue growth for 2026 and 14% EBITDA growth in the U.S. We're not including any revenue from prediction markets in that as we want to trade through the period initially before we take a view on that. As Peter mentioned, it's quite a complex relationship between handle and gross revenue margin, and that's why we look at revenue as our core KPI, and we guide to revenue only. We also haven't talked about iGaming yet, but we're assuming that the iGaming growth continues in the high teens, and we'll have double-digit sportsbook growth on revenue. So overall, as I said, it's a sensible and measured approach that we feel comfortable with. We should also see some sequential improvement through the year as we land some of the product and generosity initiatives that we talked to in the shareholder letter. Operator: Your next question comes from the line of Ed Young of Morgan Stanley. Edward Young: My question is around the less effective generosity playbook. You mentioned phasing, improved competitor offerings and elevated generosity in the market. So my question is, how should we square your commentary around your new generosity strategy, which you said you want to be sort of disciplined but also competitive. Is that you saying effectively that you need to make your scale count by keeping your generosity at higher levels? And then my follow-up is, the commentary is also about the improved competitor's offerings. So what's not worked on the product side to maintain sufficient leadership versus competition? And what sort of additional investment are you making or do you think you need to make to make that right? Jeremy Jackson: Thank you for the question. On generosity, look, I think it is a very important sort of topic for us. I talked about some of these heightened levels of margin that we saw. I think -- look, it's fair to say that we didn't execute our generosity strategy as well as we should have done. We pushed hard in the beginning of Q4. And actually, when you look at what the pattern of gross win margins were throughout the back end of Q4, we just saw this very sustained period, including a number of weeks, as I said earlier, above 30% we should have pushed harder generosity at those points, and we didn't. And that's something that we will address and make sure that we incorporate into our playbook for the future. So this isn't about putting more money on the table. This is about using what we have in a smarter way. And I think tying to that point about being smarter with it, when I look at what we do with our casino business, we get a lot more credit for the generosity we give our customers there as a result of the loyalty program that we have. The rewards program has been a really important driver of the success we seen in casino. And we must be one of the few consumer businesses in the state that doesn't have a loyalty program to full stop for sports. It's been very successful for us in casino. And as I said, we'll bring those -- we'll bring that experience into our sportsbook, which I think will be very important. That's something that we'll do in Q2 this year. So we're going to remain disciplined. We saw a very unusual situation after the last couple of years where we've seen low margins in football sort of very high and very sustained periods of margin, and we didn't have the right playbook or tools really to be able to deal with it. Rob Coldrake: Picking up on the second part of your question around products. We don't necessarily think this is something that's not worked for us per se, but more a bit of a narrowing of the gap in terms of the product advantage that we've typically held over the last few years. And -- as we think about this, we're looking to double down on the product advantage that we've had previously, and we're working on a number of things, both in the U.S. and in our international business. As we outlined in the release, there's a few specific areas. So we're looking at differentiation and innovation and really enhancing our SGP offering. You'd see actually outside of the U.S. In Italy, our My Combo products working extremely well for us, and that's allowed us to take the leadership position back in Italy. The rewards piece that Peter talked about and also just elevating the core journeys and the personalization and experience of being on the FanDuel site, which we've got a team working on. The other piece, which we obviously talked about a lot previously is our outcome-based pricing and how this really provides the structure and the foundations behind our product innovation and improvements moving forward. And we still remain incredibly excited about this. It's taking a little while to work through. But fundamentally, we expect this to be a significant product advantage for us when we fully land that and roll that capability out. Operator: Your next question comes from the line of Shaun Kelley of Bank of America. Shaun Kelley: I wanted to follow up on Rob's comment about the double-digit growth you're seeing in sportsbook or you're expecting, I guess, embedded in the guidance. Just Rob, can you help us compare that to the run rates you're seeing in the business right now? I know current quarter is a little harder to comment on, but the market has been so dynamic. It's been a little hard to track. And while we can see handle numbers, it's harder to get that full NGR picture. So any color you could give us there to kind of square what you're seeing in the business with that outlook would be helpful. And then also, if you could just comment maybe high level on what you're seeing share-wise for the NBA because it feels like we've seen that as a product that Flutter has historically done extremely well in, but we've seen some competition ramp up there. Rob Coldrake: So yes, in terms of current trading, we started off the year with a continuation of the trends that we observed late in Q4. So the closing stages of the NFL season, as Peter alluded to, including the playoffs and the Super Bowl saw some slightly less compelling player narratives and that drove continued low levels of customer engagement into the start of the year. But outside of the NFL, we started to see trends improving month-on-month into February, which is encouraging. We think some of the customer fatigue from the positive sports results persisted into January as well. As Peter said, we had 10 out of 11 positive weeks. We ended up the NFL season with a 19.3% margin on NFL, which is incredibly strong for a season overall. And in terms of February data based on the small sample that we have, the week-to-week volume trends are definitely improving, suggesting that part of this was potentially an NFL season-specific dynamic. But at this stage, it's still quite early. Visibility remains slightly limited on whether the current market dynamics will be short-lived or what we'll see over the next quarter or a few months. But we're quite confident about our Q1 guide, and we'll continue to monitor the trends very closely. We're confident that we have the right plans in place to continue improving our U.S. performance over the course of the year. And we've definitely seen a sequential improvement even over the last few weeks. Jeremy Jackson: On the question around sort of a high level on NBA, look, this has always been an area that's important to us. Again, it's down to things like the quality of the players that we have engaged in the games with the strength of our parlay offering. There are -- there's inevitably a bit of a sort of bleed across between customers who are betting on both football and NBA that if they've seen those very high margins on football inevitably will have some impact on their ability to stake on NBA. Operator: Your next question comes from the line of Jed Kelly of Oppenheimer. Jed Kelly: Just going back to your prediction markets. Do you feel like you potentially would want to acquire your own DCM license just to control your own destiny? Or can you just talk about how your JV with the CME is progressing? Jeremy Jackson: We spent a lot of time working out how we wanted to tackle prediction markets. And I think we've got our product into the market. We're into those 18 states that we can't offer our regulated sports betting product in. And look, we're going to make a series of product changes over the course of this year. We're very happy with the CME. We've got a strong pipeline of product improvements coming through. I also referenced some of the stuff we're looking at around sort of market making as well. So there's a lot going on in this space. We're investing -- we plan to invest a lot of money. And look, I hope we sat here in a year's time when we've been able to invest very successfully and acquire a lot of customers onto our platform. Operator: Your next question comes from the line of Dan Politzer of JPMorgan. Daniel Politzer: I want to go back on prediction markets, unsurprisingly, I guess. I guess what have you seen that justifies the incremental spend there? Because it sounded like things so far were tracking in line with your expectations. And along those lines, how do you think about the competitive landscape evolving if and when we do get perfect regulatory clarity here? Jeremy Jackson: We've got experience of investing organically in our business. I mean I think about what we're doing in Brazil at the moment. I think about all the quarters we had post PASPA being repealed. But we've always taken a very disciplined approach when opportunities arise. And we will make sure that we acquire as much business as we can. Clearly, the phasing of our marketing will align with our sort of product road map and scale over the course of this year. This quarter is more about sort of test and learn to understand how we optimize our spend and drive conversion. We expect to invest heavily in the second half of the year. And look, given the opportunity we see, we expect to be towards the top end of the figures. But I reserve the right to spend more if we find opportunities are bigger. Operator: Your next question comes from the line of Bernie McTernan of Needham & Company. Stefanos Crist: This is Stefanos Crist calling in for Bernie. Just wanted to follow up on Arkansas. We understand there's a 51% revenue share. Just wanted to ask why launch now and maybe why not do Predicts instead of the traditional sportsbook. Jeremy Jackson: Look, I'm happy to pick it up. And I think what we've seen in Missouri with our new state playbook, I think, is a really good example of when you've given customers or consumers the choice the breadth of offering that you have in a traditional OSB together with the generosity playbook you can provide means it's a much more compelling offering. So look, we're super excited. That's what our sort of true north is for us in the business. We'd like to see more states passing regulation for OSB and indeed, iGaming. Look, it's -- so those 2 areas, we'd love to see more states pass. There are only 2 national players in the state. So look, we're excited to get our playbook going and see what we can do in the state. Operator: Your next question comes from the line of Ben Shelley of UBS. Benjamin Shelley: Do you expect U.S. online sports betting market share to stabilize in 2026? And more broadly, what's giving you confidence in sequential improvement in your competitive position through the year? Jeremy Jackson: We are confident in the quality of the products that we have in the market. We're excited about the introduction of our loyalty program. There is more work we're doing around generosity. And as Rob mentioned on the question earlier, there are enhancements that we're making to our products as well. So I'm very confident in our ability to execute. We have consistently done that. And I think that we will be able to hold our market share. And look, I'd like us to take more market share to the extent that we can get good returns on it, and we will spend that money. Operator: Your next question comes from the line of Clark Lampen of BTIG. William Lampen: My questions are related to the sportsbook loyalty program. I think, Peter, #1, just for clarification, I think you said that, that was going to roll out in Q2. I wanted to make sure that they had that correct. And then second, I wanted to see if you could give us a little bit of color around when you introduced the same offering for your iGaming business, what the immediate impact was? Was it a revenue driver? Did it help you with promo? I think that that's -- there have clearly been a bunch of questions on the call thus far around the direction of promo. So maybe with that as a reference point, was it helpful to promo? Is that a source of leverage, I guess, for iGaming when you introduced that? Any color that you can provide a reference point would be helpful. Jeremy Jackson: I mean, the perspective from our casino business where our rewards program has been a really important part of the success of that business. We got to a record market share in Q4 with 28%. Look -- and we're still building our loyalty, the rewards program, right? There's still changes we're making. We're still integrating more of the generosity into the program. So we've been at it a long time in the casino business, and there's still a way to go. So it's a little bit like our parlay products. We're never done. There's always improvements and changes we can make. So look, we will launch a loyalty program for our sportsbook. And I think one of the immediate benefits that we've seen in casino is that you get much better sort of saliency from your customers around the rewards that you're giving them. And I expect to see that happen in our sportsbook. I mean there's -- we sometimes describe it sort of link and labeling. And so I think that's the immediate step change we'd expect to see. And so I hope it will help drive increases in wallet share. Operator: Your next question comes from the line of Ian Moore of Bernstein. Ian Moore: One on capital allocation. How would you rank, I guess, the different inputs you're weighing in deciding at one point you become more active on share repurchases through the year? And I guess, any update you're willing to give on progress toward resolution of the FOX option? Rob Coldrake: Maybe I'll start on the capital allocation question. So as I mentioned in my prepared comments, the capital allocation framework remains consistent with what we outlined at our Investor Day in 2024, and we remain committed to the long-term policy of returning capital to our shareholders. As we often say, we are an and company. So we'll ensure our capital allocation decisions are balanced by the opportunities to invest for growth, but also to optimize for leverage over time. And our current approach really provides us with the flexibility to respond effectively to evolving market conditions and emerging opportunities. And in 2026, we'll prioritize significant capital deployment across both the organic investment in our core business which has historically yielded the highest returns, by the way, and strategic investment in the newly emerging prediction markets opportunity. So there's a lot to go after. We continue to generate a lot of cash in this business, and we can and will delever quickly, but there's lots of interesting and exciting allocation opportunities ahead of us through 2026, which we want to get behind. Jeremy Jackson: There's nothing to say on the FOX option at this stage. Operator: Your next question comes from the line of Robert Fishman of MoffettNathanson. Robert Fishman: Any more color you can provide? I think you said high teens growth that you're expecting for the U.S. iGaming in 2026. Just how sustainable do you think that is as we think about the years ahead? Rob Coldrake: Well, if you think about the iGaming market in 2025, it grew around 26%, and our revenue growth was 33%. I think as the states mature, we'd expect some moderation of that growth, but we feel confident it's going to continue to be mid- to high teens. Therefore, we do expect continued strong growth, and we're excited about the product road map that we've got in iGaming. There's definitely still a long way to go on the penetration rates in iGaming. If you look at what we set out, I think it's 9.5% at the Investor Day, we're about 6.5%, I think, as we stand today. So lots to still go after there, and we're incredibly pleased, as I said earlier, with our iGaming performance. Operator: Your next question comes from the line of Joe Stauff of Susquehanna. Joseph Stauff: Sorry about it, but I wanted to ask a little bit more just on generosity investments and those returns in -- for FanDuel. So it certainly makes sense, right, in [ iCasino ], you get a higher return, you get more betting events, that makes sense. But do you get a return? -- does that -- that seems to me to be a unique customer, meaning that customer doesn't necessarily cross-promote into OSB. And so your generosity investments in OSB, at least for that, does cross-promote. Is that maybe part, I guess, of what we're trying to figure out and what happened essentially in the third and fourth quarter with respect to like your approach because obviously, you're gunning on the [ iCasino ], and it's worked. I was just wondering if that's part -- if that's a realistic understanding of kind of how you're allocating that capital and why the returns are lower. Jeremy Jackson: Yes, I think there's 2 things going on, and I just make sure I understand your question. I think effectively, we did not deploy our generosity efficiently in Q4. I mean, particularly when you think about the very long sequence of very high margins, particularly with some of those real peak weeks, we were not efficient and effective. We should have been deploying more generosity at those points there. I think separately, we have had lots of success with deploying our loyalty or rewards program into casino. In all of our businesses, we deploy a lot of generosity to customers. And one of the advantages of bundling up that generosity within a loyalty program is consumers understand better what's been going on. And I actually think one of the issues for us in Q4 was there's a bit of a whipsaw where generosity was on, it was off, it's on, and it's off. And particularly at a time when margins were running very hot, I think we're probably causing a bit of confusion amongst our customers, and we're just not deploying it effectively. So that's what we're going to address, get to a more efficient and effective distribution of generosity. And I think that's very important. Operator: Your next question comes from the line of Chad Beynon of Macquarie Group. Chad Beynon: With respect to the upcoming U.K. iGaming impact, has anything changed just in the current landscape in terms of how your competitors are maybe running their business, promos, marketing, et cetera? And could this potentially adjust how you're thinking about mitigation? Rob Coldrake: Well, we obviously laid out our top-level plans for mitigation when the changes were introduced in Q4 last year. And to this point, we're not seeing anything different to what we'd anticipated in terms of activity. But it's actually early days because the tax changes don't actually hit until April. And what we expect will happen is that people will start to moderate behavior from that point onwards. If you think about the market share of iGaming in the U.K., there's a very long tail. So there's circa 30% of the market shares in the long tail with much inferior economics to us given our scale. And actually, we fully anticipate that there will be some changes in marketing and generosity and return to player dynamics as we move through the year. We were reasonably conservative in terms of our view in terms of what we recapture versus the tax increase, and we still remain confident in that. Operator: Your next question comes from the line of John DeCree of CBRE. John DeCree: Peter, I wanted to circle back to a comment you made in the prepared remarks of your sentiment that we share as well, and that is prediction markets should accelerate OSB and iGaming regulation in the states. So curious if you could share any more color on that view and your perspective. You probably have as good of a view or better than anyone. And what kind of inputs help you feel confident that, that might come to fruition? Jeremy Jackson: We have -- I think we're singing to the choir if you are in agreement with me. I think we do believe that the noise around prediction markets, and it is an opportunity for us to acquire customers in advance of the states regulating, but we do think it will help hasten the regulation of iGaming and online sports betting. We've got an extensive team who are focused on this, and we're having some very fruitful conversations at the moment. Look, we've just had some good news in Arkansas. Who knows where else the next shoe to drop will be. I'm excited to see some iGaming states come along at some point soon. Operator: Your next question comes from the line of Monique Pollard of Citi. Monique Pollard: Apologies if I missed it, but I couldn't see anywhere if you could help clarify how much you spent on FanDuel Predicts in the fourth quarter? Just conscious that you didn't have -- it was only a handful of states during Q4 before the wider launch in January. And basically, the follow-up question to that is me just trying to understand how much of the guidance change in the FanDuel Predicts for 2026 to the upper end is just a timing shift versus how much is it that you've seen something in the Predicts customers you've acquired so far that makes you think it's worth pushing more aggressively on that opportunity in 2026? Rob Coldrake: Yes, it's Rob here. We didn't actually confirm a number in the release, so you didn't miss anything. It is actually lower than the $45 million that we guided at Q3, so ended up spending slightly less than that in the quarter. I think Peter outlined earlier on very well what our intentions are for 2026. So we've now said that we're going to be towards the top end of the range. What I would say is that within that, we retain our right to have flexibility on that spend. It's a very fast-moving category, and our investment will ultimately be driven by the types of returns that we see. But ultimately, both of us would be delighted to be sitting here at the end of the year saying that we've actually invested at the top end or beyond that envelope because that will mean that we're really achieving traction in the prediction market space. Operator: Your next question comes from the line of Ryan Sigdahl of Craig-Hallum. Ryan Sigdahl: Peter, I hear you on the NFL playoffs. I know we were all sad Vikings didn't make it. My question is, given the more pronounced moderation in customer activity and the unfavorable recycling in the U.S., I guess, especially relative to your peers, curious how the company -- how you plan to maintain your structurally higher hold while also retaining share of players' wallets. Jeremy Jackson: Ryan, yes, I mean, I think we've discussed some of these factors already. The key issue that we saw in Q4 wasn't that we had over the course of this football season, the 19% margin. That was great. And you look at where the gross win margin was for Q4 and sort of we're in line with what we anticipated doing for 2027. The issue really was how we deployed our generosity. And that's something that we are addressing. I've talked about that. We've got to make sure that the generosity strategy reflects what we're seeing in the market. And those 10 out of 11 weeks with very high and sustained margins and then a number of weeks at 30%, those -- they really impacted our business. And the relationship around what we're doing with generosity with where margins are, the sort of hangover impact that you get for a couple of weeks after those very high margins is something we want to make sure that we address. Personalized generosity is the way to deal with that because, of course, even when we're talking about very high margins, there's still averages and there's customers who've done well and customers have done badly within that. And that's what the team have got a lot of experience of doing in Australia. We're learning from that and deploying it into the U.S. business. So this isn't so much a matter of the issue of the high margins. It's more how we make sure that we spend generosity effectively. Customers understand what's happening, and we don't have the sort of the situation where we're a bit inconsistent and that is not helpful for customers, particularly with these consecutive high margins. Operator: And your last question comes from the line of Richard Stuber of Deutsche Bank. Richard Stuber: Just for me, a question on sort of credit cards. I did read somewhere that you now stop taking credit card deposits. I was wondering, have these credit card deposits been largely offset by the same customers using alternative payment methods? Or have those credit card customers broadly left? And is that sort of a similar thing which your competitors are doing in terms of credit cards? Rob Coldrake: Yes, this is something that we have been anticipating for and also something that we've navigated in a number of our markets around the world, but we're actually anticipating a de minimis impact from this. It comes in at the start of March. It's within our plans, and we're not expecting it to have a material impact. Jeremy Jackson: Okay. I think we are done with the questions. Thank you very much, everybody, for dialing in. Much appreciated. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, everyone, and thank you for standing by. Welcome to the SoundHound Q4 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Scott Smith, Head of Investor Relations. Please go ahead. Scott Smith: Good afternoon, and thank you for joining our fourth quarter and full year 2025 conference call. With me today is our CEO, Keyvan Mohajer; and our CFO, Nitesh Sharan. We will begin with some short remarks before moving to Q&A. We'd also like to remind everyone that we will be making forward-looking statements on this call. Actual results could differ materially from those suggested by our forward-looking statements. Please refer to our filings with the SEC for a detailed discussion of the risks and uncertainties that could affect our business and for discussion statements that qualify as forward-looking statements. In addition, we may discuss certain non-GAAP measures. Please refer to today's press release for more detailed financial results and further details on the definitions, limitations, and uses of those measures and reconciliations from GAAP to non-GAAP. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We undertake no obligation to update any forward-looking statements, except as required by law. Finally, this call is being audio webcast in its entirety on our Investor Relations website. An audio replay will be available following today's call. With that, I would like to turn the call over to our CEO, Keyvan Mohajer. Please go ahead, Keyvan. Keyvan Mohajer: Thank you, Scott, and thank you to everyone for joining the call today. 2025 was a record year for SoundHound, nearly doubling our revenue year-over-year. We also had a record fourth quarter. Revenue was up 59%, while all key profit metrics improved. We broke another record in Q4. We signed over 100 customer deals, making it our biggest quarter yet. We won across different industries in a variety of regions. Just to name a few, we signed a new prominent automotive logo in Japan to use our AI assistant with a 7-digit unit commitment. In the U.S., we signed a multiyear deal with one of the largest telecommunications companies in the world to use our technology. We signed a multiyear global deal with one of the largest athletic shoes and apparel companies to power their AI customer service. We closed deals with health care providers, universities, insurance companies, financial institutions, e-commerce merchants, retail, military, and many more. Our execution with channel partners was also exceptional with multiple 7-figure deals in 2025. I'll dive into other business highlights specific to Q4 shortly. But first, I wanted to touch on a few recent market dynamics. The power of AI is disrupting traditional software and services companies, and this is creating further tailwinds for SoundHound. In this inevitable AI transformation, companies need a partner like SoundHound to help them rapidly reinvent themselves. We partner with our customers to overcome their challenges and achieve their ambitions, creating incredible end user experiences for their employees and customers. With the exponential advances in AI, we believe we are entering a new era where companies with deep tech and data moats will create the most value. This makes SoundHound very well positioned with decades of deep tech innovation and data accumulation. SoundHound AI was founded with a mission to deliver voice and conversational AI experiences that are deeply integrated into user environments and deliver value where it matters most. This early vision now positions us perfectly for the Agentic AI revolution we are seeing today. We believe our Agentic platform is the only solution that is ready to be deployed across a multitude of vertical use cases and a huge and growing range of touch points and modalities from call centers to cars, robots, phones, apps, TVs, and websites, all with a unified AI agent framework. This means that our customers can build an agent once and deploy it anywhere. At SoundHound, we offer the best models and innovation regardless of where they come from. We can give customers access to big tech models, emerging models, other third-party models as well as SoundHound's own models that consistently outperform big tech players. With us, our customers will have access to the latest and greatest technologies as fast as they become available. And because of our deep expertise in conversational AI, we are able to optimize our own technologies to meet customer needs. This ranges from offering Polaris, our custom speech recognition foundation model to our unique method of arbitrating the conversation across on device, cloud, on-premise, and even human augmented services. This combination of capabilities is the foundation of our unique and differentiated Agentic Plus framework, which blends agentic, deterministic, and human-assisted understanding, representing the full mix of what our customers want. In addition, SoundHound has a massive amount of data and has processed billions of interactions over the years across all major global languages supported by having a physical presence in multiple markets and geographies. This allows us to compete and win against big tech while new players are faced with the traditional limitations of scale and reach we've long since overcome. With those considerations in mind, we believe SoundHound is the strongest bet in an ever-changing world of AI evolution. We recently previewed our Agentic platform to public audiences, and they were blown away. The Consumer Technology Association, the body that organizes CES, consistently calls our tech as an example of one of the most exciting trends at the whole show. Our customers agree, and we are proud to navigate this exciting and dynamic period by their side. Here are some proof points, as I highlight, some of the many wins in this quarter alone. In automotive, besides the Japanese OEM previously mentioned, other notable customer wins include a new Korean OEM with a global footprint, an iconic Italian manufacturer of high-performance luxury sports cars as well as a Chinese and Vietnamese manufacturer. We also signed our first 2-wheeler and have seen strong interest from at least a half dozen other OEMs. Stellantis also expanded further with the adoption of live generative AI capabilities for real-time responses, and we added an Italian commercial truck company, which will offer SoundHound voice assistant to its wide range of vehicles. We also signed a multiyear renewal with one of the largest American automobile manufacturers to deploy our enterprise AI solutions. In voice commerce, coming off a successful CES, we are seeing lots of momentum. Thanks to our deep penetration in restaurants, this highly anticipated solution is quickly advancing to go live in the U.S. with a prominent German automotive OEM. The list of engaged OEMs is growing rapidly, and we are now starting to see early signs of the flywheel effect taking shape. In January, we also unveiled our fully agentic voice platform for in-vehicle and on-TV commerce and showcased a leading smart TV manufacturer and a national pizza restaurant working together seamlessly. The solution is expected to go live later this year. And we are quickly building out an ecosystem well beyond food ordering from the car or TV with Parkopedia and OpenTable partnerships announced in Q4 and further plans to extend to events and travel booking very soon. In restaurants, our Voice Inside solution is seeing high demand with a number of top 25 restaurant chains signing up to collect data for drive-thru efficiency. Panda Express also expanded into dozens more locations, while Casey's General Store agreed to a multiyear renewal and added Smart Answering to handle nonfood ordering calls. We had franchise wins with both IHOP and Jersey Mike's. In retail and consumer goods, we signed one of the fastest-growing global health clubs in the U.S. and a multi-hundred unit personal care company to adopt our outbound innovative automated solution for customer retention campaigns. And for managing inbound calls, we signed 2 nonprofit organizations, one that has a large network of thrift stores and another one with a large number of fitness and health locations. In enterprise AI, we signed a record number of deals across various solutions and verticals, including in financial services, a New York-based global financial services platforms company, a large American multinational payment card services corporation, and BNP Paribas. In health care, an eyewear and optical retailer, which operates or manages over 700 stores in 40 U.S. states, an independent health care practice that supports more than 1,300 locations in 45 states, and a Virginia-based health care and wellness services with over 80 health care facilities. In insurance, a Fortune 100 multinational insurance and asset management company headquartered in Germany, a global Japanese insurance company that has offices spread throughout the U.S. and one of the first motor clubs in the U.S. with more than 16 million members across 21 states. In government and education, a U.S. government-sponsored enterprise helping to make housing more accessible and affordable. A large Florida-based university to support their health system. And likewise, we signed on with a local government to a city in Florida. In hospitality, one of the world's leading providers of food and support services operating in over 25 countries and an American ticket sales and distribution company with operations in over 35 countries around the world. In telecommunications, in addition to the large telco I mentioned previously, we signed a European telecommunications company that provides cable television, broadband internet, and fixed telephony and a large British broadcast and telecommunications company. I mentioned some of the success we've had with large 7-figure deals in 2025 with our channel partners. And in Q4, we continue to build out our ecosystem with the following partners. With one of the largest telecommunications companies in the world, we are adding SoundHound Agentic AI call center automation to SMBs in their large business marketplace. In addition, we partnered with Bridgepointe, which expands our enterprise AI adoption across their vast network and a large customer experience management company providing services to approximately 150,000 businesses. We renewed our partnership with a global technology and professional services company that delivers technology solutions and mission services to every major agency across the U.S. government and a large multinational professional services firm to provide our solutions to financial services firms across Spain. Importantly, our enterprise AI technology is making a difference and helping businesses tackle some of their biggest challenges. One large health care network reported that their AI agent built on SoundHound platform now handles more than 1/3 of all patient appointment scheduling, helping to unclog the system that gets patients what they need more quickly. This customer is already looking to expand our platform to tackle additional use cases like prescription refills and pharmacy inquiries. In a completely different industry, telecommunications, another customer reported a 20% reduction in the labor costs associated with billing disputes, thanks to AI agents that analyze invoices and execute adjustments. And in auto insurance, our platform was able to help the customer increase containment by 10 percentage points with respect to very complex use cases in under 60 days. In short, we are seeing great traction because our technology is delivering real-world results. In closing, we had a record 2025. This is happening because we are an AI-first company and customers from a broad range of verticals are coming to us to automate their complex processes and make them more human-like to better serve their customers. We are leading the charge in a market disruption that is in the very early stages. We have a massive TAM, and we are poised to win. With that, I'll now turn the call over to Nitesh to talk about our financial performance, key growth drivers, and business outlook. Nitesh Sharan: Thank you, Keyvan, and good afternoon, everyone. Q4 was our strongest quarter with $55.1 million in revenue, up 59% and improvements across all profit measures. For the full year, we delivered $169 million in revenue, up 99% versus the prior year, and up more than fivefold in the few years that we have been a public company. We achieved this record performance through our disruptive technology, breakthrough innovation, hyperresponsiveness to customers and by scaling across our broadening enterprise portfolio. And we operationalize this with cost discipline, driving a clear pathway to breakeven profitability. The market momentum in our space continues to accelerate. Generative AI, Agentic AI, and Voice AI are now base level customer requirements. Customer service is undergoing a once-in-a-generation disruption and enterprises are clamoring for innovators like us to provide high customer engagement solutions to improve their top and bottom lines. From the beginning, we have built our business to deliver successful AI-driven outcomes and our pricing architecture is purpose-built for that. In a world where seat-based pricing models are quickly becoming antiquated because of their deteriorating price/value equations, our Agentic solutions seamlessly drive outcome-focused consumption and success rates that create economic incentives fully aligned with our customers. That's a sustainable model. It's a differentiated moat with our entrenchment deepening. Let me share some examples across our business. We have been growing the automotive installed base for years, and our monthly active users continue to expand rapidly with Q4 growth in excess of 50% year-on-year. More notably, their query activity or usage continues to accelerate with Q4 audio queries up roughly 75% from the prior year. And note that this is only cloud-based queries. We also offer edge-based solutions that don't require internet connectivity, so these volume metrics meaningfully understate the full auto customer engagement. The volume of queries we deliver in IoT and smart devices is even larger than the automotive base and also growing strongly. Our new voice commerce engines fit so well here and the idea of ordering a pizza or a salad naturally via voice ordering on your TV while watching the Super Bowl or Olympics personally resonates with me. On that point, in restaurants, we continue to grow locations, but what's even more directly impacting our revenue and our customers' business is order activity, which in Q4, we saw cross 9 million calls for the first time, up strong double digits from the prior year. That's a lot of meals from Chipotle, Casey's and many others. In our enterprise business, our AI platform is delivering measurably better customer outcomes quarter after quarter. Containment rates hit record highs, now resolving the majority of inbound interactions without any human escalation and with certain containment levels even crossing 90%. Our automation intensity crossed a meaningful architectural threshold in Q4, chaining multiple targeted actions per customer engagement into fully autonomous resolutions. Our omnichannel multimodal systems are driving better resolution rates, resulting in compounding returns per interaction. All this comes together in our comprehensive query volume, which now is in the billions per month, up 12x since we went public. With that, let me discuss the fourth quarter financial results in more detail. Q4 revenue was $55.1 million, up 59% year-over-year. The growth was driven across multiple verticals. Our enterprise AI business performed particularly well in health care and financial services. We also saw strong year-over-year growth in our restaurant business as our automation rates continue to improve, integrations deepen, and customer adoption continues to expand at a healthy rate. In automotive, we continue to accelerate our Asia business and see traction in the world's fastest-growing markets. As Keyvan mentioned, we signed a new Japanese automotive OEM in Q4, and we had several deals in Asia in 2025 with commitments of millions of units. This broad-based expansion once again enabled us to realize strong customer diversification with no customers contributing greater than 10% of our revenue for the quarter or full year. In Q4, our GAAP and non-GAAP gross margins were both up year-over-year. Our GAAP gross margin was 48% and adjusted for noncash amortization of purchase intangibles and employee stock compensation, our non-GAAP gross margin was 61%. We continue to drive efficiencies by modernizing infrastructure, optimizing cloud spend, consolidating legacy systems and improving the efficiency of our core platforms, such as shifting from third-party solutions to our own homebuilt ones. And our continued efforts to prune our portfolio of low-margin acquired contracts has been resulting in the sequential improvements in non-GAAP gross margin this year. We expect to continue focusing on profitable contracts and either adjusting or moving away from those that don't meet our minimum thresholds. That said, there are deals that have a clear near-term path to automation using our AI, and we will not hesitate to make the critical investments in them to build long-term sustainable profitable returns. R&D expenses were $24.8 million in Q4, up 22% year-over-year, largely due to acquisitions and related headcount and development costs. We continue to invest in innovation to maintain our technological leadership. For example, we continue building our Agentic AI solutions, leveraging our vast data to further improve our Polaris foundation model and are expanding our in-house real-time audio-to-audio and embedded vertical API integrations into production environments. We also continue to differentiate across the entire voice AI stack, including via best-in-class text-to-speech built on modern architectures for differentiated speed, accuracy, prosody, and with code switching multilingual capability for an increasingly diverse and integrated world. Sales and marketing expenses were $17.4 million in Q4, reflecting an 82% year-over-year increase, primarily driven by acquisitions. We continue to invest in go-to-market efforts via direct and indirect sales as well as customer success to increase retention. In addition, we continue to elevate our brand and market presence to drive demand and lead generation. G&A expenses were $21.2 million in Q4, reflecting a 29% year-over-year increase, primarily driven by various legal, advisory, and other costs related to our acquisitions. We also continue to drive operational efficiencies throughout the organization and improve our global control environment. We had noncash employee stock compensation of $20.8 million and depreciation and amortization, including the amortization of intangibles of $10 million in Q4, all of which are included in our GAAP results. Adjusted EBITDA was a loss of $7.4 million, an improvement of 56% year-over-year. GAAP net income of $40.1 million and GAAP net earnings per share of $0.10 were positively impacted by the change in fair value of contingent liabilities of approximately $85 million. This relates to the acquisitions we have completed and is a nonoperating and noncash expense and primarily reflects the quarter-on-quarter fluctuation in our stock price. As such, this item has been excluded in our non-GAAP results. Non-GAAP net loss was $7.3 million and non-GAAP net loss per share was $0.02 in the quarter. This adjusts for items such as noncash depreciation and amortization, M&A transaction costs, and stock-based compensation. Our balance sheet remains strong with cash and equivalents at quarter end of $248 million with no debt. With that, let me discuss our financial outlook. We are starting 2026 with strong momentum. As Keyvan mentioned, we broke a record in Q4 with over 100 customer deals across every industry we operate in. Our pipeline continues to build across several verticals. We have a strong foundational customer base to expand upon through full portfolio upsell and cross-sell, and we continue to aggressively release new Agentic and voice AI capabilities to dramatically improve customer outcomes. With the greater scale achieved in 2025, we have increased visibility in the near-term and expect to continue to grow rapidly over the long-term. For 2026, we expect our revenue to be in a range of $225 million to $260 million. As in prior years, there will be a ramp in revenue through the year given the nature of our customer base, underlying seasonality, and expected large deal timing, both for renewals and new deals. That said, we expect the seasonality to improve as our recurring mix of business continues to grow. Overall, this outlook affirms our expectation of another year of very strong growth. We remain committed to delivering accelerated growth while being mindful of the journey to profitability. Our strong cash position and debt-free balance sheet gives us the capacity to remain prudent and appropriately balancing growth with profit maximization. We will continue to drive scale through targeted investments. Last quarter, I mentioned that we see additional acquisition cost synergies of $20 million on an annualized basis. And in Q1, we have already executed most of that, the effect of which we expect to appear in future quarters. I also noted last quarter that we are entering our breakeven phase after many years in heavy investment mode. This transition won't be linear or uniform. We expect it should be progressive and ultimately compounding. Our long-term expectation is that we can operate this business at scale with 70% plus gross margins and 30% plus EBIT margins. For the near-term, though, we expect to calibrate the investments based on the opportunities in front of us and their expected returns, and we will continue to balance the importance of delivering profitability in the near term with fueling sustainable, profitable growth over the long term. With that, we will now move to Q&A. Operator: [Operator Instructions] Your first question comes from the line of Scott Buck from H.C. Wainwright & Company. Scott Buck: As we went through the 4Q highlights, clearly, a lot of balls in the air. I'm curious, how are you handling from a deployment and customer service capacity standpoint? Are you starting to feel a little constrained? Keyvan Mohajer: Thanks for the question. We are definitely doing a lot. And I've been saying for the past few quarters that this is the time for us to do more, partly because, yes, we are in many industries, but the ingredients we are using to power these experiences is the same. So the decades of work we've done to build the best-in-class speech recognition, conversational AI, Agentic orchestration, all of that is the same regardless of whether we are in automotive or we are providing customer service for a health care company or insurance company. And we are -- because of the advances in AI, we are actually able to deploy faster, go live faster, develop faster. And we are able to keep up with the demand with fewer people and less resources. So demand is going up and what we need to do to deliver to these customers, the resources requirement is actually going down. So we expect that to be a further tailwind for us. Scott Buck: Great. That's helpful. And then I wanted to ask, you called out a number of renewals. Can you talk a little bit about any changes in pricing or upselling you're seeing as you go through the renewal process with customers? Keyvan Mohajer: Yes. So in -- we have customers that we've had for a while, for example, some of the automotive logos that we've had for a number of years. These renewals are actually an upsell moment because we bring them the Agentic solution. The Gen AI solution that we developed 3 years ago, that was an upsell moment. Now we have the Agentic solution. That's another upsell moment. So it's basically the renewal with a price increase and sometimes with a bigger volume commitment. And we are seeing the same in customer service, again, especially with the customers we've had for a number of years, the Agentic platform that is an upgrade, partly, it could come at a higher price. And for deals that are based on containment rate, we expect to generate more revenue because we contain more of the incoming calls. For example, if I'm going to use some numbers, but in the industry, there's no like one number for containment rate because it depends on the use case. We've seen, for example, in the use case, a 30% containment go to 70%, 80%, sometimes over 90%. That means we handle more than 90% of the incoming calls without kicking to a human, and we get paid more as we contain more calls. So some of the increase in revenue is just going to come from upgrading our existing customers to the Agentic solution even without a renewal and even without increasing the price, it's going to generate more revenue for us. Operator: Your next question comes from the line of Brian Schwartz with Oppenheimer. Brian Schwartz: Congratulations on a very good year. Keyvan, I want to start with you. And your enterprise AI business clearly has strong momentum, especially in the higher regulated industries that you pointed out. You're building deeper entrenchment. But in the market, certainly over the last like 3, 4, 5 months, there's been a lot of fear about software companies' long-term growth that these larger LLM providers are going to be able to just build workflows above software companies' platforms and bypass them and it's going to be much more challenging for companies to grow. So I was hoping you could address that, how you see the durability of the enterprise AI business as we enter this agentic era? And then I have a follow-up for Nitesh. Keyvan Mohajer: Sure. That's a great question. So I think there are 2 flavors of that question. One is what's happening to software and services companies, so not necessarily SoundHound. And that has been a tailwind for us for the past 3-plus years because of Gen AI. So the concept of that is the automation is coming, and that is going to disrupt services companies and SaaS companies. Everything is going to get automated and more and more automated. And that's not a new thing. It's been -- we've been benefiting from that for 3 years, and these companies that want to automate basically come to SoundHound to help them automate. There is maybe a second flavor of that question, which is what happens to companies like SoundHound with the latest advances in AI where software development is becoming easier. We think of that as another tailwind. And a really good analogy that has resonated with me is imagine the internet companies when we had connections with dial-up modems. So good internet companies were there, and they were delivering their websites to their visitors. And then dial-up modem became broadband internet, so bandwidths went up in orders of magnitude. That was a great thing for internet companies. Now some didn't maybe reinvent themselves quickly, but the services that these internet companies could provide became a lot more richer and powerful. And we feel the same way that we can move faster, like the earlier question that was asked like can we -- we have so many customers, how quickly can we deliver? We use AI to build AI to deliver to the customers that want AI. And we think that pace is going to be better for us. The quality is going to be higher because we are utilizing these advances in AI. Brian Schwartz: I just wanted to ask you that question, Keyvan, because you're such a pioneer in terms of technology in this industry. I appreciate you sharing your perspective. The question I have for Nitesh is just thinking about how you're thinking about planning the progression of the efficiency of the business. So maybe asking it in terms of the operating profile here in 2026. Clearly, the business is accelerating. I think you're gaining efficiency in your development from your -- as Keyvan talked about with your own Agentic and AI. But how do you think about the rest of the investment profile? Are you looking to accelerate your investments? Are you looking to keep your margins stable where they are today? Are you looking to show improvement in terms of the efficiency and the EBITDA margin 2026? Nitesh Sharan: Thanks, Brian. I'll take that from a couple of different angles. First, with respect to continuing that AI efficiency play, I think there's a multitude of ways as that plays out here. #1, our efficiency in product development is better. Certainly, we're seeing that. I think our efficiency in deployment and delivery is better. We're seeing that. And then even just operationally, we're all across the company, utilizing tools that may not be core to what SoundHound develops. But certainly, in my G&A function, there's definitely a number of areas that we're driving efficiencies. And I think that's a responsibility that all of us take to leverage the latest and greatest to be responsible with our costs. #2, to your question on just the profile, I'll go back to my prepared remarks a little bit. We are now shifting from an era, I'd say, from the origins of SoundHound where we were heavily investing primarily in our innovation, but maybe more recently in building up the go-to-market capabilities to now this area -- to this era of breakeven. And we're not trying to be super precise one quarter delivering one specific number. But more importantly, we start with the premise that we are in the very early innings of massive transformational shift, whether that's the LLM-driven capabilities that we're seeing with these amazing engines to the voice AI era of how we're able to engage with consumers and customers in really unique, more efficient, seamless ways to get all sorts of transactions done or obviously now to Agentic and how we can deliver great platforms and capabilities to enhance customer capabilities and solutions, predominantly, I think, for us in the customer service space and rewrite how those traditional sort of ways that people get their billing inquiries resolved or they book travel or they order food or whatnot or get health care appointments, all that's getting rewritten. And we're just in the early innings of it. So we need to be focused because we know that the outsized returns are there for us to go after. So we're going to keep fueling in getting the hyper growth that we've been delivering over the last couple of years. And it's our view that, that level of growth, strong -- very strong growth should continue for the foreseeable future. So with that, to every incremental dollar point, that should go into fueling growth, but we need to be mindful that we're going to do it efficiently. So to your point, as we continue to scale, we absolutely expect efficiencies on our operating leverage. And I think from an EBITDA basis, we'll continue to see year-over-year improvements in EBITDA. We'll continue to see leverage on the P&L. And I think our R&D, in particular, I think we'll be able to drive efficiencies. And then I think it's a matter of go-to-market kind of we're going to -- we are investing both in direct and indirect channel. And I think the indirect channel has been great for us. We highlighted it briefly in the prepared remarks of just the additional scale we can get through indirect channel partners. So across R&D, across sales and marketing and across G&A, we think there's efficiency and ultimately, that will land towards what I characterized in the prepared remarks is us moving into this era of breakeven zone. Operator: Your next question comes from the line of Gil Luria with D.A. Davidson. Unknown Analyst: Great. This is [ Lucky ] on for Gil Luria. You guys had pretty strong traction, it sounds like with auto OEMs, especially on net new in the quarter despite previous headwinds from tariffs impacting the industry. I guess is there anything to call out as to why you had particularly prominent success in that vertical this quarter? Keyvan Mohajer: Yes. It actually was a great year in automotive for us. Earlier in the year, we closed with a big Chinese OEM, also with multiple millions of units committed. Then we had a robot maker in China, then we had more deals in India. And then we're very proud that we have won a prominent logo in Japan. And I think it's because of the great solutions we've created. We've been in automotive for a number of years. We are well known for having the best solution, and we partner with our customers to achieve their vision and ambition. Our Pillar 3 vision is paying off. It's -- we predicted a flywheel effect from Pillar 3. And to summarize it quickly, we power cars and TVs and devices in Pillar 1 and then we power customer service for merchants in Pillar 2, and then we connect them in Pillar 3 together. So while you're driving, you can order a copy, you can book appointments, you can reserve tables. And that's a monetizable moment. We call it the voice commerce. And just the concept of being able to deliver value to the drivers while generating revenue for us and share that revenue with the OEM is creating a flywheel for us and a lot of OEMs are choosing to work with us. So it's a combination of being a great partner, having the best technology and the concept of monetization with our Agentic AI in the cars. Nitesh Sharan: And hopefully, Lucky, you're also noticing that we're seeing this growth in the fastest-growing markets, too. So oftentimes in the fastest-growing markets, it's sort of where they want the best-of-breed technology, and I think that's what's playing out here as well. Unknown Analyst: I think that makes a lot of sense. Maybe the last question from me. As you enter your next phase of growth here, you touched on it already, but can you kind of stack rank the top investment priorities to capture the opportunity in front of you? And any update on your M&A strategy in light of the broad decline in valuations across software here recently? Keyvan Mohajer: Maybe I'll take some of it and Nitesh can add. Our Agentic platform is an area we are heavily investing in. It delivers a much better user experience. It has a higher containment rate. And then the latest version of our platform, it uses AI to create AI. So a lot of the experiences that it used to take us maybe a team of -- a large team of developers, weeks and months to deliver. You just tell it what you need to do and it just does it for you. So that is going to allow us to move faster, deliver better quality, have a higher containment rates, win more customers. So that's one area of focus for us. And that is going to be everywhere. It's going to be in automotive. It's going to be in customer service, Pillar 1, Pillar 2, Pillar 3. The next area that I would highlight is voice commerce. We've been -- it's a vision that we pioneered. We are ahead of others in the space. It's a great idea, but it will take time for people to catch up because we are -- we have the largest number of merchants that are using our voice AI, like we are the largest number of restaurants, and we have a huge footprint in cars and TVs and devices. So we are in a very good position to bring this to market. Nitesh Sharan: Yes. And I can add on the M&A part of your question. I think a couple of years in, I'll just say, I think the M&A approach we're taking seems right to us. I think we'll keep being mindful about what's in the marketplace and potential partnerships being aware of opportunities to combine. And so far, they've been companies that have had really amazing customer relationships we've been able to harness together and bring our innovation jointly to expand those relationships, use some of those landing points to expand broader in the relevant industries. And I think we'll continue to seek some of those opportunities. The -- because we've done a few, I'd say there's a lot more inbound also interest. And so we have a pretty strict and disciplined formula or methodology we go through in assessing if one may make sense, and we'll just keep that discipline. There's plenty that we look at that don't make sense for us. And I think we put a lot of scrutiny into when it might. Again, since things are moving really fast, we've said before, and I'll just repeat that we know we can do a lot of good things with what we've built here, but we don't want to be insular. And so we want to be aware of all the great things and partnerships that we can build. So I think M&A, certainly, thinking out the next few years, will continue to be a really important part of our muscle. Operator: Your next question comes from the line of Mike Latimore with Northland Capital Markets. Vijay Devar: This is Vijay Devar for Mike Latimore. A couple of questions. So one, how many Amelia customers are live on your Agentic AI version 7.3 and are likely to go live this year? Nitesh Sharan: Yes. Hello, Vijay. We said last time, and I think we're just continuing to make progress that we had early last year sort of early adopter program where we piloted with, I think, at the time, we said 15 or so customers and that ramped through the summer. And we've been on this pathway of migration where we assume that we kind of are on a pathway to get the majority -- vast majority, I think, over 75% migrated over by the middle of this year. So we're continuing to be on that pathway, making incremental progress every quarter that we go by, and we continue to see that in Q4, and we're already continuing to see acceleration in Q1. One of the good things with our new Agentic platform that we highlighted at the Consumer Electronics Show that we talked about in the prepared remarks is that's something that we're getting a lot of early traction from customers on the channel our Head of Sales there and saying that the customer feedback has been superb. And so one of the great things we've been trying to deploy is sort of automated migration paths to allow people to migrate from prior version to Amelia 7.3 onto the new version that we're rolling out. So we are excited that our migration path in, especially going back to one of the earlier questions about the efficiency now with delivery and AI and what it's allowing us, it is allowing for more rapid migration patterns. Vijay Devar: Got it. So when the customer moves to 7.3, is there incremental revenue to SoundHound? Keyvan Mohajer: Yes. So as I mentioned, just a pure higher containment rate is expected to increase our revenue. Many of our deals, we get paid when we successfully avoid a caller to go to a human. And by going to Agentic, we've seen just as an example, numbers going from like a 30% containment to over 90% containment. In some cases, we also get paid more for the upgrading to Agentic. So it's a mix of both, but either way directionally positive for revenue. Nitesh Sharan: The other thing we've seen with the recent versions is sort of interactions that previously fell outside or would have to get escalated or things we can capture now at a much greater rate. So all of that is incremental revenue for us. Operator: [Operator Instructions] Your next question comes from the line of James Fish with Piper Sandler. James Fish: Just on the CX side of things, how is Amelia effectively winning new customers versus the contact center pure play, the CRM offerings, and even some of the other stand-alone AI solutions out there? Really, what's making them different that's resonating with customers? And then I've got a follow-up. Keyvan Mohajer: Yes. So we -- so first of all, SoundHound, with the acquisitions we've made, we are a combination of teams and companies with several decades of collective experience in customer service. So we've been at this for a long time. And we have deep technology and we have data. And we are also very deep in a lot of these industries like health care, insurance, banking and so on and the reputation, the experience, the relationships all help us. But if you zoom out, and this might answer an earlier question that maybe I didn't quite answer from Scott was, if a customer chooses to work with a big tech, that's a very high-risk decision because when you choose a company like Google or OpenAI as your vendor and by the way, these companies are not really deep into customer service. They provide tools for others like SoundHound. But if they just go deep with one big tech, they're going to miss out on innovation that might come out of other big tech. So if you -- for example, you're betting on Google models and then if OpenAI creates an ecosystem that benefits the world, you might miss out on it or vice versa. So -- but SoundHound provides -- our philosophy is we provide the best technology, the best model to our customers, no matter where it comes from. Most of the time it comes from us because we have our own models that we've created over a long period of time with a lot of data and we compare it with the big tech models and we beat them in accuracy, speed and cost. But if for some edge cases or use cases or scenarios, a big tech model is better, we bring it to our platform and we use it for our customers. So by choosing SoundHound, they are more guaranteed to get the best as soon as it becomes available, no matter where it comes from versus when they bid on a big tech, then it's a very expensive risk. And beyond the big tech, there are some new players. Most of those are maybe 2 years old. Some are doing better than others. But the way we think about them, they are LEGO players. They -- because of the nature of how old they are, 1 or 2 years, they don't have their own tech. So they are scrambling and building -- getting one API from -- for speech recognition from one source and then for text-to-speech from another source from -- LLMs from another source. And they are basically putting it together like LEGOs, and they're only at it for a couple of years. And that puts SoundHound at a much bigger advantage because we've been at this for, again, decades. We have our own models, and we have proven success in enterprise. We are in 7 of the top 10 banks. We process billions of queries. And in terms of quality of service and the reputation, we are in a very good position. Nitesh Sharan: And maybe I can add one thing, Jim. And I said this in the prepared remarks, but it's salient to your question. I think fundamentally, legacy -- this goes back to the earlier question on, I think, for Brian on disruption in software. Models that were built seat-based pricing that value was on let's get more users using our tool, and it wasn't as directly tied to customer outcomes, that is at risk because the tools are getting so good and we're building those. And our solutions are directly -- our economic model, our pricing model is directly tied to customers achieving or seeing real value. Did a prescription get refilled? Did appointment get booked? Did food get ordered? So I think just architecturally, we're better to Keyvan's point. And I'd say also the economic incentive alignment is also an advantage for us. James Fish: Got it. Very detailed answer, guys. Appreciate that. Maybe, Nitesh, for you. Just a -- I'm getting it asked here after hours, just to hammer home a fine point. Is there much further M&A included in the annual guide? Obviously, you guys have a ton of opportunity. You guys have a strategic sense of doing acquisitions and folding them in. Just trying to understand if there's further M&A contemplated in the guide. And given the environment, there's a lot of sensitivity to stock-based comp. You guys are a bit of an outlier here. I guess, how are you handling your stock comp going forward and the dilution we've seen historically? Nitesh Sharan: Sure. Thanks, Jim. For the first part of that, to be very direct, no, our guidance does not contemplate M&A that we haven't done or that is not baked into the outlook. Our outlook reflects the base of business, the pipeline of deals we have in motion, the existing customer activity that's recurring and we're upselling and expanding, and that's what's reflected in the outlook range. Now as I mentioned in an earlier call, certainly, there are M&A ideas out there and conversations we have from time to time and inbounds we receive that if they happen, we will -- if they're meaningful and material and we need to update an outlook, we will certainly do that like we have in the past. Your second question on stock-based comp, yes. So I'll start with this general point at SoundHound, which I think a lot of us internally have a lot of pride around, and I give all credit to Keyvan and the culture he's built. Like this is a company where we want all employees to participate in the full contribution. And so we do distribute equity to our entire company. And I don't think that's the same as every other company. So we feel pride because everybody here is an owner. And we've also seen historically a lot of volatility that makes in some of the math on our P&L, especially with the acquisitions, you get mark-to-market activity that when you have a stock that's so volatile, you'll distribute a grant. By the time it gets valued for P&L purposes, it's at $20 and then that amortizes over 4 years. So that is something that's a little different because we're such a high-vol stock. But I take the general element of your question. We do think of the economic impact certainly of dilution and certainly of where stock comp fits in our overall compensation profile. And we want to be competitive. We want to attract all the right talent and make sure we have the right people. To an earlier question, though, we are always vigilantly looking at our cost structure and can we do things more efficiently. And we have historically taken cost actions, including to our people when we needed to. But -- so I'm mindful of the element of your question. I think we do try to be equitable in our distribution of stock comp. We are mindful of the dilution impact. We are mindful to your point on it is probably a higher percent of revenue than you might see elsewhere. I think as we scale, you will see that normalize certainly as you will with some of the other operating lines. But again, I'll close with what I started with, which is I think we generally do feel a sense of pride that we do distribute equity to all -- everybody at this company, and that makes us all combined owners in the outcome and success of what we build. Operator: Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
Operator: Good day, everyone. My name is Kahai Illani, and I will be your conference operator today. At this time, I would like to welcome you to the Kymera Therapeutics Fourth Quarter 2025 Results Call. [Operator Instructions] At this time, I would like to turn the call over to Justine Koenigsberg, Vice President, Investor Relations. Justine Koenigsberg: Good morning, and welcome to Kymera Therapeutics Quarterly Update Conference Call. Joining me today are Nello Mainolfi, our Founder, President and Chief Executive Officer; Jared Gollob, our Chief Medical Officer; and Bruce Jacobs, our Chief Financial Officer. Following our prepared remarks, we will open the call for questions from our publishing analysts. [Operator Instructions] Before we begin, I would like to remind you that today's discussion will include forward-looking statements subject to risks and uncertainties described in our most recent Form 10-K filed with the SEC. Please note that any forward-looking statements speak only as of today's date. And with that, I will now turn the call over to Nello. Nello Mainolfi: Thank you, Justine, and thank you, everybody, for joining us this morning. As this is our year-end 2025 call, I wanted to spend a few minutes recapping what was an incredible year for Kymera. Those of you that know us well appreciate the fact that we're always forward-looking, highly focused on what's in front of us. And the bulk of the call would feature just that. But given how important our 2025 accomplishments were, I'm hoping that a quick reflection on the year will provide some context for the foundation we have set for 2026 and beyond. Before we start, I would like to mention that this year, we will celebrate our 10th year anniversary since Kymera's founding in May of 2016. Over the past decade, we've executed on our strategy and have built the capabilities, the platform and the team to deliver on our goal to develop the next-generation breakthrough immunology medicines. We've accomplished so much in our short history, but arguably, 2025 was truly a breakout year. I'll start with the significant progress in our first and best-in-class STAT6 Degrader Program. We shared outstanding results from both our Phase I healthy volunteer study and our Phase Ib study in AD patients. In the healthy volunteer study, KT-621 demonstrated robust STAT6 degradation with excellent safety and tolerability. That was followed by a highly encouraging impact on efficacy endpoints in Phase Ib that supports our view that KT-621 has the potential to deliver robust efficacy in line with pathway biologics with the convenience of oral daily dosing. On the strength of these 2 studies, we launched our first Phase IIb study in atopic dermatitis patients last fall and started the asthma Phase IIb early this year. Jared will talk more about our KT-621 clinical development plans, but both studies are benefiting from the awareness of and appreciation for the data we have recently shared as well as from clear enthusiasm from clinicians and patients around promising oral options. We were busy advancing the rest of our pipeline as well. In May, we unveiled our first-in-class IRF5 program, supported by a compelling preclinical profile and validating human genetics. Last year, we completed IND-enabling studies, and we're excited to announce this morning that after IND clearance from the FDA, we recently initiated dosing in the Phase I healthy volunteer study with KT-579. Finally, we're building on the success of our internal pipeline by advancing our existing collaborations with Sanofi around IRAK4 and by signing a new partnership last year with Gilead around our first-in-class CDK2 molecular glue program. Bruce will provide an update later in the call on the potential upcoming collaboration milestones, which would be incremental to our financial position. Speaking of finances in 2025, we raised almost $1 billion, bringing our year-end cash balance to $1.6 billion. We believe that this amount of capital, which extends our runway into 2029, will enable us to execute on our broad development plans that are designed to realize the full potential of our wholly-owned programs while maintaining the productivity of our discovery engine, which we expect will expand our innovative pipeline. Now with 2025 behind us, our focus is squarely on 2026 and beyond and the multiple milestones we plan to achieve. For KT-621, we expect to complete enrollment in the AD study this year and share data by mid-2027. The first patient was dosed in the asthma trial last month, and we expect to share that data in late 2027. In the meanwhile, we're planning to report scientific publication and presentation to continue to build awareness of this exciting program. This is an important year for KT-579, our lead IRF5 degrader. We expect to complete the recently started Phase I healthy volunteer study and share the data later this year. And the next step will be to advance the program into a patient proof-of-concept study, which we expect to be in lupus soon after that. Our partner, Sanofi, is expected to start the healthy volunteer Phase I trial with KT-485 this year. We also hope to be able to advance our CDK2 program in partnership with Gilead into further development. Finally, our goal continues to be to announce at least one new program annually, and we're targeting the second half of this year to share our new development candidate program. We clearly have a busy 2026 plan, which makes me particularly happy to announce the most recent addition to Kymera's leadership team, Neil Graham, who joined us as Kymera's Chief Development Officer. Neil is a seasoned life sciences executive with more than 30 years' experience in global drug development in both early and late-stage clinical trials across a wide therapeutic spectrum, including dermatology, allergy, rheumatology, virology and pulmonology. Neil has led several groundbreaking programs, including the development of dupilumab at Regeneron. We're thrilled to have him join our team as we enter the next phase of our growth and look forward to his contributions as we continue our efforts to build a fully integrated commercial company. Now before I turn the call over to Jared, I wanted to spend the remainder of my remarks speaking in more details of the unprecedented market opportunity of our STAT6 program. I can't overstate the opportunity we have to significantly increase the number of patients who are treated effectively. We hear overwhelmingly from both physicians and patients that current advanced therapies, including biologics, just aren't sufficient. There is a palpable excitement for the potential of a simple and convenient oral therapy for Type 2 diseases that doesn't compromise on safety or efficacy. We have cited these numbers in the past. We believe there are about 140 million diagnosed Type 2 patients in the U.S., 5 major EU countries and Japan. Of this total, about 50 million patients are estimated to be in the moderate to severe category. Yet despite this significant need, only an estimated 2 million patients are treated with advanced systemic therapies, mostly biologics and overwhelmingly with dupilumab. So the question is why are so many patients not treated with advanced systemic therapies? The gap is clearly not due to lack of need, but it reflects barriers built into the current treatment paradigm. There are many patients who rely on local therapies, most often topical or inhalers depending on the diseases. However, most of these treatments do not address the underlying drivers of Type 2 diseases and as a result, do not deliver adequate treatment for many moderate to severe patients. There are existing oral systemic therapies in both asthma and AD, for example, but those can be limited by efficacy. And certainly, for example, in the case of JAKs, safety concerns, including box warning and the requirements from blood monitoring and initiation and/or during treatment. Finally, injectable biologics have delivered important advances and now account for the majority of systemic therapy use, actually more than 75%. However, they're associated with significant treatment burden, injection site pain, needle fatigue, burdensome loading regimens after often 4 to 5 injections in the first month, cold stain storage requirements and ultimately with high drop-off rates over time. So when we ask why so many moderate to severe patients remain untreated with advanced therapies, the answer lies in the limitation in efficacy for some, safety concerns for others and very real convenience and access hurdles built into the system. The consequence is that millions of patients who would benefit from more effective therapies remain untreated, cycling through suboptimal options and living with inadequately controlled disease. This is the unmet need, and this is the opportunity in front of us. Going from patient numbers and unmet needs to market opportunities, the gap is even larger. As previously mentioned, about 2 million patients are currently receiving advanced systemic therapies for Type 2 diseases. This segment represents an annual market value of about $20 billion with dupilumab serving as the predominant drug. Although this is already a significant figure, the broader market opportunity is much larger. given that there's tens of millions of patients that are not reached by current approved drugs. In fact, I would characterize the current Type 2 market as very early in its development. Historically, the introduction of new products and mechanism has expanded immunology markets by enabling access to additional patient populations. In addition, an oral therapy that overcomes many limitations associated with existing treatments while maintaining safety and efficacy could, for the first time, provide a viable alternative for millions of patients across all age groups. It is reasonable to assume, in my opinion, that the current market for Type 2 diseases is positioned for substantial expansion well beyond the current $20 billion. In fact, a comparable example can be found in the psoriasis market, which has experienced a fivefold growth over the past decade, mostly thanks to new drugs and oral therapies. I think this all comes well together when we consider the limitation of existing therapies and what KT-621 has to offer, a drug that has the potential to deliver biologics-like efficacy and safety without requiring patients to compromise efficacy and safety for convenience, a drug that has the potential to change the way patients are treated around the world. How will it do so? In two important ways: one, expand the existing treatment -- treated patient population, which for us is the #1 goal. Second, provide an easy and convenient alternative to patients currently on injectable biologics, many of whom, based on our market analysis and industry survey data are eagerly waiting to switch to an oral therapy. So then how might this paradigm shift look? And what will it mean for patients with Type 2 diseases. Our goal and the cornerstone of our development plan is to position KT-621 as the product of choice for this large underserved or inadequately [ deserved ] patient population. In many inflammatory diseases, advanced systemic treatments are typically reserved for patients who fail conventional therapies, which in turn are typically biologics. We believe having an effective safe oral medicine, we can fundamentally change the treatment paradigm, making it practical to intervene earlier in the disease course rather than waiting for significant progression or treatment failure. If successful, we believe KT-621 has the potential to shift advanced therapy from being a last resort for a small subset of patients to a mainstream option for millions and improve standard of care. I hope that context around the market opportunity makes it clear why we believe that KT-621 has the potential to be one of the biggest programs in the biotechnology and pharma industry. With that context, let's turn the call over to Jared and discuss clinical progress with KT-621 and KT-579, our IRF5 degrader. Jared? Jared Gollob: Thanks, Nello. As you've heard, we're building significant momentum across our pipeline, driven by the strong scientific, clinical and operational foundation that we've established. This morning, I'll discuss our ongoing KT-621 Phase IIb trials in atopic dermatitis and asthma. I'll then provide additional context on our clinical development strategy for KT-579, our oral IRF5 degrader. I'll begin with KT-621, our oral STAT6 degrader. In December, as many of you are aware, we released the BroADen Phase Ib results, providing the first look at KT-621's impact on patients with atopic dermatitis. The data demonstrated a dupilumab-like profile that strongly supports continued development of KT-621 in both AD and asthma. Across all of the study's objectives, we exceeded expectations. We demonstrated strong fidelity of translation from healthy volunteers to patients with deep STAT6 degradation in blood and skin. We observed a significant reduction in Type 2 biomarkers across blood and skin lesions, including TARC and Eotaxin-3 and importantly, also in lungs as measured using fractional exhaled nitric oxide or FeNO testing. The greatest impact on FeNO was observed in AD patients with comorbid asthma who had the highest baseline FeNO levels. We also achieved robust improvements across all key AD clinical endpoints, including EASI, Pruritus NRS, IGA, SCORAD and patient-reported outcomes or PROs, addressing disease severity and quality of life. For all of these endpoints, KT-621 data were in line with or numerically exceeded published data for dupilumab at 4 weeks, further highlighting the exciting potential patient impact. In addition to these effects on AD, KT-621 had a clinically meaningful impact on patient-reported outcomes, measuring disease control in patients with comorbid asthma as well as on symptoms and quality of life in patients with comorbid allergic rhinitis. And importantly, KT-621 was well-tolerated with a favorable safety profile. I should also note that we recently completed the 6- to 9-month GLP toxicology studies in rat and nonhuman primate and consistent with earlier KT-621 tox studies, we did not observe any adverse findings of any type across all doses and concentrations tested. We now have 2 parallel Phase IIb dose-ranging placebo-controlled trials underway in AD and asthma, supported by the positive biomarker and clinical endpoint results in both AD and comorbid asthma from BroADen. The BROADEN2 trial in approximately 200 adult and adolescent patients with moderate to severe atopic dermatitis has a primary endpoint of percent change from baseline in EASI at 16 weeks. The study continues to progress as planned with completion of enrollment expected by the end of 2026 and announcement of top line results by mid-2027. We will update you all on enrollment later in the year, but we can say now that we are confident in achieving this timeline based on the strong interest from patients and clinicians in a safe and effective oral therapy and given the high level of awareness of and appreciation for the KT-621 data we have generated. Moving on to asthma. Just last month, we announced that we had dosed the first patient in our Phase IIb BREADTH trial in approximately 264 adult patients with moderate to severe eosinophilic asthma. The trial's primary endpoint is change from baseline in pre-bronchodilator FEV1 at 12 weeks. Using pre-bronchodilator FEV1 will allow [indiscernible] effects across dose levels in a smaller, faster study and will inform dose selection and probability of success for subsequent Phase III trials. Data from this trial are expected in late 2027. Taken together, we expect to generate data in close to 500 patients next year from both KT-621 Phase IIb studies while also continuing to build our safety database with long-term treatment in AD patients rolling on to the 52-week open-label extension portion of BROADEN2. Importantly, these trials are designed to support parallel Phase III development beyond atopic dermatitis in asthma and other Type 2 dermatologic, respiratory and gastrointestinal diseases as part of the overarching regulatory strategy for KT-621. Turning now to our novel IRF5 degrader program. We view IRF5 as an exciting new opportunity to address complex autoimmune diseases. We continue to receive positive feedback from KOLs and investigators on the potential of KT-579 to offer an effective oral treatment for diseases such as lupus, IBD and RA. This past fall, we presented additional compelling KT-579 data in lupus and RA preclinical models at the American College of Rheumatology meeting in Chicago. Chronic heterogeneous inflammatory conditions like lupus, RA, IBD and others are driven by broad immune dysregulation across multiple inflammatory pathways, including Type 1 interferons, pro-inflammatory cytokines and B cell-derived autoantibodies. While biologics have clinically validated each of these pathways individually, the current treatment paradigm has been constrained by the reliance on injectable therapies optimized for narrow segments of disease biology and therefore, incapable of addressing the full complexity of the inflammation underlying the various disease manifestations. As a result, many patients experienced incomplete responses or loss of efficacy over time. An oral medicine capable of modulating multiple disease-defining immune pathways simultaneously could enable more effective and durable disease control and potentially expand access to treatment across broader patient populations. IRF5 is a genetically validated transcription factor that functions as a central amplifier of immune responses. In autoimmune diseases, where there is strong genetic association with IRF5, persistent IRF5-mediated immune activation drives skewed inflammatory signaling across Type 1 interferon, pro-inflammatory cytokine and autoantibody pathways. KT-579 is designed to selectively degrade IRF5, enabling modulation of these interconnected inflammatory pathways through targeting of a single master regulator with a goal of rebalancing the immune system while avoiding the infectious adverse events caused by broad immunosuppression. We are encouraged by the strong genetic rationale, our compelling preclinical efficacy and safety data and the potential to deliver a novel oral therapy across multiple serious autoimmune diseases with significant unmet medical need. With that said, we are now focused on advancing KT-579 in our ongoing Phase I healthy volunteer trial and reporting the first-in-human data in the second half of 2026. In terms of the Phase I specifics, the study is designed to evaluate both single and multiple ascending doses of KT-579 administered orally once daily compared with placebo. The primary aim of the SAD/MAD study is to demonstrate robust degradation of IRF5 in blood, which we define as a reduction of approximately 90% or greater at dose levels that are safe and well-tolerated. Because the IRF5 pathway is not activated in healthy volunteers, we plan to use full blood ex vivo stimulation assays to assess the functional impact of IRF5 degradation on the induction of Type 1 interferons, pro-inflammatory cytokines and inflammatory pathway gene transcripts by TLR7, 8 and 9 agonists. It's our expectation that we should see a 50% to 80% reduction in these biomarkers across the 3 TLR pathways assessed if we're engaging IRF5 effectively, which would increase the probability of IRF5 degradation translating into clinical activity in subsequent patient studies with KT-579. As we did with our STAT6 program, we also expect to conduct a Phase Ib patient study and intend to share more details on the design and patient population later. We have said, however, that we would expect to focus the study on lupus patients, which we believe is the right patient population for our first proof-of-concept study given the strong genetic association of IRF5 with lupus and the robust activity of KT-579 across multiple mouse models of lupus. I'll now turn the call over to Bruce for a review of the fourth quarter results. Bruce? Bruce Jacobs: Thanks, Jared. As I walk through the fourth quarter results, please reference the tables found in today's press release, which was filed this morning. Collaboration revenue in the fourth quarter of 2025 of $2.9 million is attributable to our Gilead partnership. More broadly, with respect to Gilead, we received an upfront payment of $40 million upon signing the licensing and option agreement last year. Under this agreement, we're eligible for up to $750 million in total milestone payments, including $45 million payment payable if and when Gilead exercises its option on the CDK2 program at the declaration of a mutually agreed upon development candidate. In addition, Sanofi is advancing KT-485, our oral IRAK4 degrader, with plans to initiate Phase I testing this year. We expect to share additional updates on this program in the coming months, including the receipt of a milestone upon dosing of the first healthy volunteer. As a reminder, under the structure of the Sanofi agreement, we have the potential to realize nearly $1 billion in total milestones. While these 2 potential near-term milestones are not reflected in our current cash guidance and are not expected to materially impact our runway, they remain important validation points and support a continued advancement of these partnered programs and the downstream value we can realize. We look forward to sharing further progress as these programs move forward. With respect to operating expenses, R&D for the quarter was $83.8 million. Of that, approximately $7.6 million represented noncash stock-based compensation. The adjusted cash R&D spend of $76.2 million which excludes that stock-based comp, reflects a 16% increase from the comparable amount in the third quarter of 2025. On the G&A side, our spending for the quarter was $16.9 million, of which $6.9 million was noncash stock-based comp. The adjusted cash G&A spend of $10 million, again, excluding that stock-based comp, reflects a 1% increase from the comparable amount in the third quarter of 2025. And finally, we are well-capitalized to execute on our goals. As Nello mentioned previously, we ended in December with a cash balance of $1.6 billion, providing a runway into 2029. This allows us to complete both KT-621 Phase IIb trials in AD and asthma and to fund a large part of the first Phase III trial for KT-621. The runway also will allow us to advance KT-579 through initial POC testing and to progress our research pipeline as we scale and grow Kymera. With that, we'll pause while we regroup in our conference room and assemble the queue for your questions. Thank you. Operator: Thank you. [Operator Instructions] Your first question comes from the line of Marc Frahm with TD Cowen. Marc Frahm: Congrats on all the progress. Maybe a high-level one for Nello. Since your Phase I data came out with the STAT6, a handful of other kind of early mid-stage programs in AD have also read out data, and there were some data even ahead of yours. So over the past year, there's just a lot going on in AD. What's your kind of vision for what the treatment of AD looks like and how these therapies all fit together when you roll the clock forward a few years? And then maybe if I can sneak a little bit in for Jared also. Just for IRF5, can you just remind us what really could be learned in the healthy volunteer portion of that trial beyond target engagement and safety or do we really need to learn more and have to wait for that lupus cohort to enroll? Nello Mainolfi: Thanks, Marc. Great question. So I'll start with the first one. So just to remind you, as we shared today, hopefully, even more clearly than before, the AD, I would say the Type 2 diseases market is still very early. Again, there is -- if you look at moderate to severe patients, there is about 40 million to 50 million patients in the 7 major market and only about 2 have been dosed with advanced systemic therapy. So clearly, there is a need of more therapies. And as we mentioned and others have done so, we mentioned if you parallel AD to psoriasis, psoriasis market in the past 10 years has grown fivefold. Maybe it is somewhere around where psoriasis was 5, 10 years ago or so. So we expect this market to increase dramatically. And you can only do that by bringing in new therapies to the market. So first, I want to start by saying that this is obviously a non zero-sum game, right? I think there is a need of new therapies and new therapies would benefit patients first, but also actually companies that develop all the other therapies. I mean, for 2 simple reasons. We need -- especially from our viewpoint, patients need convenient oral options that can increase the probability of patients with moderate to severe disease to access effective therapies. And so I think that that will transform how these diseases are treated. With our mechanism with STAT6, I think the main difference that I could point to without going company by company, which will take us half a day, is that we are targeting an intracellular target of the most validated pathway in Th2 inflammation, which is IL-4 and 13. So we're going after well-validated efficacy and safety. We're going after a well-defined patient population. And so I think we have a level of derisking that I would point to being, I think, superior to many other agents that are still interesting and exciting that are out there. So I think we need more therapy. I think it's great that there are more drugs. And obviously, we need to move into late-stage development to really assess for our drug and many others, what is the risk benefit that we can bring to patients. Jared, do you want to take the IRF5? Jared Gollob: Sure. Yes, Marc. Regarding IRF5, as you mentioned, the primary clinical objective is safety and then our primary translational objective is to show 90% or greater IRF5 knockdown in blood. And showing that knockdown is going to be important, we think, from a derisking standpoint for the subsequent patient studies because of the strong genetic association between IRF5 and lupus and the strong preclinical activity in multiple lupus models that we've seen with that degree of IRF5 knockdown. Now with that being said, yes, it's true that unlike STAT6, where we had circulating biomarkers like TARC and Eotaxin-3 that were useful for us to assess that sort of translation in healthies, with regard to IL-4/IL-13 pathway. Here for IRF5, while we don't have those circulating biomarkers, as we mentioned, we have these ex vivo stimulation assays, which I think will provide very important functional information around IRF5 degradation. These assays are looking at stimulation of toll-like receptor 7, 8 and 9, which are the 3 toll-like receptors driving hyper interferon, pro-inflammatory cytokine and B cell autoantibody production. And to be able to show an impact across those 3 pathways on ex vivo stim, we believe, significantly derisk our probability of success in subsequent patient studies, including the lupus studies. Nello Mainolfi: And maybe just to add a quick thing on top of Jared, like if I think a bit more from my point of view, maybe higher, more simple level, which hopefully still scientifically sound, we know that the strength of this program is the genetic association, right? There is very few programs in the history of drug development that have the strength and the depth of genetics that we have with IRF5. And that's why it's one of the most interesting programs in immunology, I think, in the next 5 to 10 years. So -- but when you have genetic association, you try to figure out, okay, biologically, what does that mean? So we've shown preclinically that actually IRF5 activation leads to, as Jared said, activation of this pro-inflammatory cytokines, Type 1 interferon and B cell activation, autoantibody activation. So even in healthy volunteers, we can prove even ex vivo that we can block these 3 axes of inflammation. I think it's going to tell us that you combine that with the genetics that it should work into patients. Operator: Your next question comes from the line of Geoff Meacham with Citi. Geoffrey Meacham: Can you hear me? Okay. Awesome. So I just had a couple. Thanks for the question, first of all. So on 621, the BROADEN2 and BREADTH studies are probably mature next year. We're used to seeing you guys have Phase I biomarker data and kind of maybe -- a lot of data points along the way. For these Phase IIbs, is it going to be -- let's just wait until the full and final? Are you guys planning on having any kind of biomarker or interim analysis or anything like that for these 2 studies? And then for the IRF5, interesting program for sure. The indications you guys have talked about include some that are very much unmet need, lupus, Sjogren's in particular and definitely not as crowded. Curious how that informs like your priorities when you think about kind of development for this program? Nello Mainolfi: Thanks, Geoff. So on the first one, obviously, we'd love to get data along the way and understand what's going on in the Phase IIb studies. But obviously, these are important studies that are placebo-controlled. And to protect the integrity of the study, we're going to wait until the end of the study to unblind and obviously share the data. For IRF5, yes, so I think I go back to the reasons to believe, and as I said, human genetics, lupus, Sjogren's, myositis, RA, IBD, those are areas that we believe this target is extremely relevant. And so we're letting that combined with the preclinical data guide us. So those -- the reason why we've talked often about some of those indications is because they match so well both the genetics, the preclinical data, the unmet need. I mean if you look at the ones you mentioned, lupus, Sjogren's, these are diseases that don't have effective therapies that are approved or at least some that don't have, maybe I should say, at least oral effective therapies that are approved, which will serve a much broader population than what's being evaluated now in clinical development that I believe are really probably going to be positioned for really late-stage patients. I think another important axis of our development plan will be outside of, let's call it, this interferon-related pathways or pathologies, which could be, again, IBD could potentially be [indiscernible] down the road. And I think we plan to share more data on IBD, which is increasingly becoming an area of focus for this program, at least preclinically, and we hope for it to be clinically as well in the not-so-distant future. Operator: Your next question comes from Charles Ndiaye with Stifel. Charles Ndiaye: Congrats on the quarter. One question from our side. I guess, as you think about starting Phase IIs for 621 outside of asthma or AD, what are sort of some of the gating factors? Nello Mainolfi: Yes. So as we've outlined in the past, I believe it's still on our corporate deck. There is a new one today on our website. Our strategy is to use the ongoing dose-ranging Phase IIb study, the one in AD to support late development in all of the other derm indications, the one in asthma to support late development in the other respiratory indications. So we actually do not plan to start any new Phase II studies. The new studies that you see us starting will be, we believe, all registrational studies. Now obviously, some of this still has to be vetted with the right authorities, but that's our current strategy. And we believe this is a strategy that has been proven to be successful with other drugs in this pathway. So it wouldn't be the first time that this is adopted. Operator: The next question comes from Brad Canino. Bradley Canino: A question from me on the trigger to start the KT-621 Phase IIIs. So to initiate, how far into the Phase IIs do you need to reach and what needs to be collected from those studies? And will this be one study start or multiple at once? Nello Mainolfi: Yes. Thanks, Brad. So unlike what we may be getting everybody used to that we start a study while the previous one was still ongoing as we've done for the healthy and Phase Ib. For starting a Phase III study, we need to complete Phase II. We need to have an FDA meeting post Phase II, and then we can start Phase III. I assure you that we will do our best as we always have, to do that as quickly as possible. But obviously, there are some things that we must do in order to move into Phase III. With regards to how many, as you know, at least the paradigm that companies have adopted in the past 10 years for, let's say, atopic dermatitis registration has been 3 Phase III studies, 2, there are 2 placebo-controlled, mostly placebo-controlled studies and then one on top of topical corticosteroid. So we -- if that will continue to be the paradigm, which is something, obviously, we will explore given the recent news from FDA. But let's say, that continues to be the paradigm, you should expect us to start all studies as much in parallel as possible. Operator: Great. The next question comes from Eli Merle with Barclays. Eliana Merle: Congrats on all the progress. In terms of 621, if you could talk about both the clinical and preclinical data that you've seen, where do you see the most potential room for efficacy improvements over dupilumab? And can you talk about some of the respiratory preclinical model data and compare that to what's been seen preclinically in atopic dermatitis? Nello Mainolfi: Yes. Thanks, Eli. You often asked the tricky question. So we want to make sure like we maintain kind of our credibility when we compare a drug that is -- have been so successful in millions of patients with the drug that has been so far in about a couple of hundred patients or subjects and up to 28 days. So I'm always very thoughtful about how we make comparisons. What I can say is that in our preclinical models, if you look at the asthma models that we both published, KT-621 has performed always at least as well and in many cases, better than dupilumab. We don't know whether that is the result of the model or it's actually real biological differences or drug distribution differences. And that's why we're really excited that we're in a Phase II study, so we can assess the full clinical activity of our drug in a large study with hundreds of patients. With regards to AD, the preclinical AD models are not very robust. We like to talk about the asthma model because it's a highly translatable model. The AD preclinical models, you have this local activation with a pathway activator that is not really, in many cases, a Type 2 discrete pathway activator. So we also show really robust activity. But to be honest, as a scientist myself, I don't like to talk about preclinical AD models that are mostly useless. But if we look at the clinical data, obviously, you've seen the data from last December, we have shown really robust activity. I start from biomarkers. I look at what we've shown even with biomarkers that were either not shown to change much with dupilumab like IL-31 or the ones that we showed comparable if not superior Eotaxin, even FeNO. And then we look at all the clinical endpoints that we measured, we've been consistently at least as good as the injectable biologics. So again, it's hard for me to say it will be equal, slightly inferior, slightly better. But I think we delivered that ballpark scenario that we talked about for last year. And so for us to really know how it looks, we need to wait for the Phase II studies. And to be honest, the only other thing to keep in mind is you can never compare drugs unless you run a head-to-head study. But our goal, again, is to deliver an oral drug with biologics like activity with great safety and the convenience of being an oral pill that one can take once a day, stop and start whenever they want. I think that will transform the treatment paradigm for Type 2 diseases well beyond whether the drug is exactly like dupilumab, slightly less or slightly better. I don't think that will matter if we can deliver the type of drug with the profile that we speak about. Operator: Your next question comes from [ Anna Lee ] from Truist. Unknown Analyst: This is Anna on for Kripa. One quick question on 621. I was just wondering if you could give us kind of an overview on how you're thinking about compliance you're seeing in the Phase IIb trials right now and how the durability of 621 kind of ties into that? Nello Mainolfi: Cool. So that's a great question. So when you -- compliance, you mean patients taking the drug. That's what you mean? Yes. So I think that's obviously -- it's a very important point because when you're in a clinical trial or an injectable biologics, you can actually ensure 100% adherence, right, because patients often, in most cases, actually go on site to receive the injection. When you -- the beauty of oral drugs is actually you give patients freedom, right? That's the beauty of oral drugs. And that obviously plays a role into clinical studies. So we have measures that probably go even beyond what has been done generally to make sure that we understand patients' adherence well. So we are confident that the adherence of patients will be the one that will allow us to have a great integrity of our study. I will also add that the beauty about protein degraders, unlike small molecule inhibitors, if you miss a small molecule inhibitor dose, you actually lose all your activity. If you miss one dose of KT-621, this is not an advertisement to not take the dose every day. But I will say, if you miss a dose of KT-621, if you miss one dose, you will not lose any of pathway degradation. So we have that additional layer of, let's call it, protection against any challenges that might come with humans forgetting one dose during a study or during normal life. Operator: The next question comes from Judah Frommer with Morgan Stanley. Judah Frommer: Congrats on the progress. Just on IRF5, I think we're clear on how you think about STAT6 degradation versus inhibition. Kind of same question for IRF5. I think we'll get a little bit of preclinical data from an inhibitor next month. And then just on the targeted nature of your degrader, any risk of kind of pan-IRF inhibition? I think IRF8 has been a question in degrading IRF5 previously. Nello Mainolfi: Yes. Maybe I'll start and then I'll pass it to Jared to speak even maybe it's an opportunity to talk about how we think about the safety of IRF5. But maybe I'll talk more about the chemistry of it, even that I'm technically still a chemist. So the beauty about this target and the challenges with this target is that it's extremely hard to find a molecule that binds to IRF5 only without binding to all the other IRFs. You mentioned a few. I think there is 11 or 12, sometimes I lose count, but there's more than 10 IRFs. So we need to bind only two IRF5. And there are different -- I like to call them splicing variants, people call them differently. There are different IRF5 splicing variants. They all need to be targeted. So you need to be consistent across the IRF5 family, but do not bind to any other IRF. So we've been able to do that. Our selectivity is pristine because we've been able to find this molecule that is actually not functional. So it does not inhibit anything. It only binds to IRF5, all the IRF5s splicing variants, but not other IRFs. And this allows us to give the utmost selectivity. So we're not worried about any of those things. But Jared, do you want to speak about why we think 5 only is potentially really interesting. Jared Gollob: Yes. I think IRF5, because it is one of multiple different IRFs, there is a certain redundancy there when it comes to the role of IRF in innate immunity. So even getting rid of IRF5 really does not impact overall innate or adaptive immunity. It's also true that IRF5, its expression is very restricted, especially to certain immune cell subtypes like B cells and dendritic cells and monocytes and macrophages. So it's not ubiquitously expressed, which is another reason why one can knock it down and do so safely. And its activation is also very context specific. So here, in the context of pathologic inflammation, that's where you're going to see activation, where you're going to see activation in restricted cell types. And that's the reason why you can really degrade IRF5 strongly and chronically and not get broad immunosuppression and not have infectious adverse events. And in fact, if you look at mouse knockouts for IRF5, you don't see any susceptibility to infections or any phenotype. And in our preclinical animal tox studies, including our 4-week GLP tox studies in nonhuman primates as well as in rats, we don't see any adverse events -- adverse findings. We don't see any susceptibility to infection. So for all those reasons, we believe that this is a safe target for us to degrade deeply and chronically. Operator: The next question comes from Joe Catanzaro with Mizuho. Joseph Catanzaro: Hope you guys can hear me okay. Maybe one on 579 and something kind of maybe related to something you just said, Jared. But I was looking at another healthy volunteer study for another anti-inflammatory drug, and they actually utilize a skin immune challenge model where they injected volunteers with actually a TLR agonist and then looked at cytokines. Wondering if you guys are aware of that model, whether you considered this? And if you did consider why you didn't decide to use it? And then I guess related, what informs the 50% to 80% target reductions in biomarkers? Is that all preclinical or is there some genetic basis for that target reduction? Nello Mainolfi: So maybe I'll take the first one and Jared takes the second one. So yes, we're obviously well aware of there are many type of skin challenge model, sometimes even systemic models, systemic challenge model, people have done LPS, inhaled LPS, local LPS. So there are many models that one could run preclinically for healthy volunteer studies. We philosophically feel like the right context to ask these pathway questions are in patients. And what you do by activating the skin is you artificially activate a pathway and then you look at downstream regulation. You can do that just the same way by taking the blood and ex vivo activating the pathway. So yes, you could do those things. We just don't believe that it's the complexity of it derisks any more or less what we would do with an ex vivo blood stimulation. If you have questions about does your drug reach particular tissues and especially with small molecule inhibitors where you actually cannot measure target engagement, that is a way to do it. But we can measure target engagement directly. So we don't need a surrogate downstream biomarker to make sure our drug gets to the tissue. So that's at least our view. Jared, do you want to speak to the? Jared Gollob: Yes. I mean we know in terms of the amount of knockdown that we think we need or the amount of functional inhibition that we would need for those pathways. One has to keep in mind that here, we're talking about not just one pathway that's controlled by IRF5, but multiple pathways. Here, we're looking at 3 different TLR pathways, for example, 7, 8 and 9. And so whereas you're talking about one pathway and all your activity is dependent on one pathway, you might have a threshold that could be 80%, 90% or more to really have clinical impact. Here, we know that if you're impacting multiple different pathways in parallel at the same time, you don't need necessarily 90-plus percent inhibition, 50% to 80% inhibition from our preclinical data across multiple different pathways can have a synergy that can give you significant activity in preclinical models. So that's the reason why we say that, that's sort of a range, which is really just a range, if you're seeing it across multiple different TLR pathways with these ex vivo stim models would be very encouraging, and we would expect to translate into activity in subsequent patient studies in diseases like lupus. Operator: The next question is from Derek Archila with Wells Fargo. Unknown Analyst: This is [ Hal ]. I'm calling in for Derek. So I guess our question is about the potential oral autoantibody delivery program. Just kind of the timing and what data, what events we can hear more from these assets? Nello Mainolfi: Sorry, I didn't quite get the question. Say that again? Unknown Analyst: The internal oral antibody. Nello Mainolfi: So do you mean the next oral immunology program that we were going to disclose? Yes. So as we said in, I believe it's in the press release and in our remarks earlier, we plan to disclose at least a novel program, most likely an immunology program this year and likely would be in the second half of the year. Operator: The next question comes from Brian Cheng with JPMorgan. Lut Ming Cheng: Just on IRF5, as you mentioned, 50% to 80% reduction across the TLR7, 8, 9 pathways. Just thinking about IRF5 regulates many of the levers in the pathways. Are there any specific downstream cytokines that you can point to today that will be the most impacted, most reliable and perhaps the easiest to monitor from an ex vivo stimulation test setting to best assess the PD of the drug? Nello Mainolfi: Yes, that's a great question. Jared, do you want to take that one? Jared Gollob: Yes. Through the stimulation of these pathways, there are key cytokines that we can look at. So for example, Type 1 interferon psych interferon beta, we can look at interferon beta protein production in these ex vivo stim assays. We can also look at gene transcripts that are part of the type 1 interferon pathways, looking beyond just the interferon itself. You can look at various genes that are part of the type 1 interferon pathways. We can also look for pro-inflammatory cytokines like IL-12 and tumor necrosis factor and even IL-6, which are stimulated by macrophages and dendritic cells. So these are a number of different pro-inflammatory cytokines that are coming off of these TLR pathways that can all be measured either the protein level or the gene transcript level that will be very helpful biomarkers for us. Operator: The next question is from Brian Abrahams with RBC. Unknown Analyst: Can you hear me? This is [ Kevin ] on for Brian. Maybe just on IRF5. How are you guys thinking about degradation in -- I know you mentioned whole blood, but just in PBMCs and maybe potentially skin as well. I think that's something you're looking at in the MAD portion. And I know you talked about IRF5 not being as activated in healthy volunteers. So just maybe curious what our expectations should be there for degradation in those tissues. And just kind of how much do we really know about sort of IRF5 expression in healthy volunteers and how that impacts your expectations for the study? Nello Mainolfi: Yes. I mean in blood, we know that we can measure IRF5 well. And in fact, when we say blood, we obviously then practically need PBMCs because we isolate PBMCs as we measure it using mass spec. The expression of IRF5 in healthy volunteers in the skin is extremely low. And so for that reason, we believe it's going to be -- it would be really hard to measure IRF5 in healthy volunteers. This is something that as we go into patients and especially if we go into lupus with cutaneous manifestation or even CLE, eventually, that's maybe a context where we can look at IRF5 expression. I think in [indiscernible] expectation is to be extremely low, lowest than any other program that we've looked at even preclinically. So hard to measure. Operator: [Operator Instructions] Your next question comes from Sudan Loganathan from Stephens. Sudan Loganathan: I wanted to ask my question around 621's opportunity in asthma. Looking at the current FDA-approved treatment options for AD, not all of them have really panned out that well in asthma as maybe people have expected. STAT6 degradation is a new approach. So curious to hear what theoretical and preclinical data you may have that gives you some conviction here that it also has an opportunity in asthma. Nello Mainolfi: Yes. I think IL-4 and 13, and just I remind everybody that there's only one drug that blocks IL-4 and 13, which is dupilumab. And so that has shown to have really, really robust activity in eosinophilic asthma and actually eosinophilic COPD, chronic rhinositis with nasal polyps. So it's well established to really have huge impact on patients with Type 2 inflammation in respiratory tract. So STAT6 biology, again, we've shown it extensively preclinically and also in the early clinical development that we can mimic the same IL-4 and 13 blockade. And again, I refer you to the asthma studies that we've published preclinical study that we published, showing the robust activity we see both on biomarkers and efficacy endpoint. The pheno reduction that we've seen in patients is actually even more robust than biologics in asthma patients. So we have all the ingredients to have reasons to believe that this drug actually is going to -- has the potential to be extremely effective in asthma. Operator: Next question is from Jeet Mukherjee with BTIG. Jeet Mukherjee: As we just look ahead to the evolving competitive landscape in atopic dermatitis and specifically on the next-gen oral agents that might be coming around the corner, just your thoughts on ITK as a target and some of the recent data we've seen there and how that might compare and contrast to STAT6. Nello Mainolfi: Yes, great question. As I said earlier, I think more mechanisms are great for patients first. I think, obviously, these are very different mechanisms. STAT6 is an IL-4 and 13 drug, as I said, the most validated pathway in the space, both in terms of safety and efficacy. We have shown preclinically that we can mimic biologics, both in terms of efficacy. And I would actually argue in safety, we just shared today that we completed chronic tox, so 6- to 9-month tox in rodents and nonhuman primates, again, without any adverse event. Other targets, ITK is a target that we've looked extensively at Kymera. We decided not to work on it because the human genetics show that because of challenges with clearing ETV, I think all patients end up developing some form of lymphoma. So this is the reason why we decided not to work on that target. That doesn't mean that it could not be a great target. It's just something that we don't believe fulfills the risk-benefit profile of Kymera and how our target selection strategy has been evolved over the years. But again, I think more mechanisms, especially with complementary pathways, whether it's ITK or others, I think are going to be great for patients and expand in this market that we need to do so that more patients get access to more therapies. Operator: Next question is from Faisal Khurshid with Jefferies. Faisal Khurshid: I wanted to ask, as you guys get the sites up and running in the Phase IIb studies, do you expect to provide any kind of color or context around how enrollment is going in those studies? Nello Mainolfi: No. I think what we -- obviously, if we feel we're not on track, obviously, we will share. But as long as we remain on track with the expectation, we don't plan to be providing ongoing updates on enrollment. I don't think it's necessary. But obviously, again, if we deviate from expectation, we will make sure to do so. Operator: Next question is from Biren Amin with Piper Sandler. Biren Amin: Congrats on the quarter and all the progress. For the Phase IIb AD trial, what measures are you taking in the trial to mitigate against placebo response? For example, will you be requiring photographic evidence of AD at baseline to provide evidence of moderate to severe disease on screening? So I guess that's first question. Second question on 579. I know you're enrolling healthy volunteers. However, there are healthy volunteers that may have positive antinuclear antibodies, but do not have autoimmune disease. Would you potentially screen for these types of healthy volunteers and that may potentially provide read-through into your Phase Ib lupus trial? Nello Mainolfi: Great question, Biren. I'll take the second one quickly. Jared, do you mind taking the first one? Yes. So great idea. Sometimes simple is better than complicated. So we're going to actually enroll healthy volunteers that are healthy, move quickly through it, selected dose and go into patients. That doesn't mean your idea is not a good one. It's just not what we're planning to do. Jared, do you want to take that? Jared Gollob: Yes. I think in the Phase IIb, I mean, your question about avoiding high placebo rates is an important one. And while I can't get into all the details at a high level, I can tell you that we're paying a lot of attention to this, both with regards to our eligibility criteria, how we're providing oversight with every patient that comes on and is screened in terms of looking to make sure that patients are truly meeting eligibility criteria, not just in terms of actually having AD, but also having moderate to severe disease. And we've carefully trained the investigators and selected investigators who are more certified dermatologists to make sure that they're fully capable of doing all of the clinical endpoint measurements across the study and that they're doing it consistently from baseline all the way through to the end of the study. And we also have global site selection. So we're not just in the U.S., we're also ex U.S. And in fact, the majority of our sites are ex U.S., whether that be in Europe or in Asia and Australia. And I think that's also important because access to drugs like dupilumab are diminished ex U.S. And so those are patients who are more apt to come in maybe more on the severe end of the spectrum of disease, and that can also be very helpful in helping to mitigate placebo effect, which you tend to see in milder patients compared to more severe patients. So I think all of those steps are being taken, and we're really very actively staying on top of all of that to try to mitigate a high placebo rate on study. Nello Mainolfi: I mean we're doing -- I'm sorry, we're way out of time. But we're doing lots of things, probably more things than anybody has done before to ensure that we do that. Obviously, we can't guarantee the lowest placebo rate, but we're trying our best. Operator: Your final question comes from [ Paurav Desai ] with B. Riley. Unknown Analyst: I'm on for Mayank. On asthma trial, if you could kindly confirm the dose levels are the same as BROADEN2? And how might you be enriching for pheno in your target patient population? And is there a chance your 12-week FEV1 endpoint data could come around the same time as your 16-week BroADen Phase II study? And also it would be helpful to learn competitive trial enrollment dynamics in atopic dermatitis versus asthma. Nello Mainolfi: Yes. Thank you. These are 4 questions in one. But let's see if you guys have to help me remembering. So the first one, the dose levels, yes, they are the same across AD and asthma. So the inclusion criteria for the asthma study is high [ EOS ] more than 300, high pheno more than 25. So that's how we're going to select that patient population. In terms of timing, we said that we expect the Phase IIb AD study data by middle of next year, while the asthma data by the end of next year. So I guess that answers the question. Things would always change one way or the other. And as I said earlier, if they change materially, we will share. And then competitive dynamics, all I can say that we have seen a ton of enthusiasm for our study in both actually, I would say, AD and asthma. And that's for 2 main -- actually, I would say 3 reasons. One, sites and hopefully also patients appreciate the really, really interesting and innovative science of our program. They appreciate that this -- while this is a novel target within a well-established biology and clinical experimentation. It's an oral drug and has some compelling early data. When you put all of that together, we have seen a ton of enthusiasm. So we really hope that this enthusiasm will translate into good enrollment. And that's what we're seeing so far, but we're still a long way to the finish line. Operator: There are no more questions at this time. Yes. There are no more questions at this time and I'd now like to turn the call over to Nello Mainolfi for closing remarks. Nello Mainolfi: Yes. So first, let me apologize. This call has taken the longest that we've ever done. I'm not really sure why. But I want to thank everybody for attending the call. All great questions, so I don't blame our analysts. And you know where to find us. We're very excited about where we are. This is a pivotal time for the company. And so we're excited to engage beyond the call if there are questions, and enjoy the rest of the day.
Operator: Ladies and gentlemen, thank you for standing by. I am Gellie, your Chorus Call operator. Welcome, and thank you for joining the OTE conference call and live webcast to present and discuss the fourth quarter and full year 2025 financial results. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Kostas Nebis, CEO of OTE Group; Mr. Babis Mazarakis, Chief Financial Officer; Mr. Panayiotis Gabrielides, Chief Marketing Officer, Consumer segment, OTE Group; and Mr. Evrikos Sarsentis, Head of IR and M&A. Mr. Nebis, you may proceed. Kostas Nebis: Thank you, and warm welcome, everyone. Thank you for joining OTE's Fourth Quarter and Full Year 2025 Results Call. 2025 was another successful year for OTE. We achieved solid results that highlight the effectiveness of our strategy and the dedication of our teams. Revenues increased, profitability growth gathered pace with positive momentum visible both in our Fixed and Mobile businesses. Throughout the year, our performance has accelerated. And in the final quarter of the year, this momentum became even more pronounced. In the Fixed segment, we have seen a return to retail growth after 4 years, marking a significant inflection point. We accelerated the transition to Fiber-to-the-Home, leveraging on the ongoing expansion of our FTTH network. In 2025, we delivered record high FTTH customer additions and this strong momentum continued throughout the fourth quarter. We have also seen increased utilization of our fiber infrastructure, which is essential for maximizing the returns on our investments. Additionally, the introduction of the new regulatory framework ending the sale of FTTC products in buildings already connected with FTTH will further support the shift to fiber connections. This will bring increased customer satisfaction, lower churn and meaningful cost savings. We remain, by a long way, the largest fiber network provider in Greece and the recent strategic acquisition of TERNA FIBER for the UFBB projects will allow us to extend the FTTH coverage in the coming years. At the same time, as the project becomes commercially available, we anticipate it will accelerate the fiber transition process of our customer base. We are particularly pleased that our fiber investments are delivering measurable national impact. In 2025, Greece improved its global Fixed Broadband ranking by 18 positions based on Ookla Speedtest Global Index, primarily driven by our accelerated rollout. This progress is fully aligned with our vision to elevate Greece at the forefront of digitization in Europe. Our FWA service launched in 2025 to bridge fiber connectivity gaps has gained strong momentum and is supporting our Fixed Retail positive trajectory. I would also like to highlight the outstanding performance of our Pay-TV business over the past year. We delivered robust double-digit growth, fueled by our strategic partnership for sports content sharing and the enhanced antipiracy measures. Additionally, the recent removal of the 10% special tax starting this year supports our confidence for continued momentum as the product becomes even more affordable. Turning to our Mobile segment. We continue to deliver outstanding results, further solidifying our market leadership. In the fourth quarter, our Mobile business achieved particularly robust growth, accelerating further from the positive performance that we had achieved throughout the year. The ongoing transition from prepaid to postpaid plans, rising demand for high data allowances and higher adoption of 5G-enabled devices have all contributed to this performance. We're especially proud to operate the only commercial available 5G stand-alone network in Greece, setting us apart from the competition. Through our 5G SA deployment, Greece now ranks fourth globally and first in Europe in 5G stand-alone speeds, once again based on Ookla global 5G stand-alone footprint, reinforcing our structural advantage in mobile. Our commitment to delivering top quality network performance was further validated this year as we once again received certifications from both Ookla and umlaut. These recognitions underscore our ongoing dedication to providing the best network experience in the country. In B2B, OTE played a pivotal role in advancing digitization. Our ICT business achieved robust double-digit growth and expanded to deliver international projects as well, further reinforcing our leadership in digital transformation and underscoring our commitment to Greece's digital future. We have expanded our services to private and international segments outside Greece to fill the gap once the EU RRF drives out next year. We continue to invest in our core competencies while strengthening at the same time our market differentiation and reinforcing the value that we deliver to our customers. Our non-phone services continue to grow and an energy partnership with Protergia brought new value-added benefits to our households. We introduced the Magenta AI platform, bringing the power of AI to the hands of our customers, a value-enhancing offering that fosters innovation, drives diversification and further strengthening our commitment to customer satisfaction. Finally, I would like to say a few words about our shareholder remuneration. In 2025, we streamlined our portfolio by selling our Romanian operations. And this has significantly enhanced our annual cash flow generation and enabled us to deliver additional value to our shareholders. Today, we announced our new remuneration policy, which from now on will be based on the actual free cash flow of the previous year instead of the projected free cash flow, marking a significant step forward and towards enhancing visibility, transparency and flexibility. We are proposing a 22% increase in the dividend and a 16% increase in our share buyback program. Our payout is virtually 100% of our free cash flow, clearly demonstrating our commitment to returning value to our shareholders. Beyond our financial performance, in 2025, we continue to pursue responsibly our growth. Our strong commitment to sustainability continue to deliver positive results as reflected in our sustainability statement. This year marked a major climate milestone since we achieved greenhouse gas neutrality in the group's own operation. Looking ahead, we remain steadfast in our mission to accelerate growth, drive digital and AI-led transformation, leading Gigabit networks with a clear aspiration to become Europe's top digital telco. We are committed to enhancing our operating and production model by leveraging innovative technologies, notably AI to boost efficiency and performance. We are confident that we will meet the evolving needs of our customers, creating lasting value for all and position Greece among the leaders in digitization in Europe. It is a strong market positioning that gives us the confidence to target a further growth acceleration this year to approximately 3% in EBITDA despite the challenges in the market. I will let Babis provide the details for the last quarter of the previous year. Briefly, I would like to emphasize that we continued our growth acceleration, boosted from all angles of our key revenue streams. Babis, to you. Charalampos Mazarakis: Thank you, Kostas, and welcome to everyone on the call from me as well. Before moving on to the details of the quarter, let me briefly walk you through our new shareholder policy, which we consider a significant step towards delivering attractive and sustainable returns to our shareholders. And this reflects our strengthened financial position and reinforces our clear commitment to delivering value to our shareholders. So following the completion of Romania disposal, we distributed an extraordinary dividend of EUR 40 million in December 2025. And now we adopt our new Shareholder Remuneration Policy to usual market practice by basing it on the actual free cash flow generated in the previous year, we call it [ ex-post ] free cash flow instead of the projected free cash flow, the example, free cash flow. This approach provides greater visibility and transparency on performance and the remuneration while maintaining the flexibility required to ensure a smooth and sustainable remuneration trajectory. In 2026, we intend to distribute virtually 100% of the actual 2025 free cash flow, including the funds used to undertake the processing of the UFBB II project. Overall, this translates into total shareholder remuneration of EUR 532 million, comprising EUR 355 million in dividends, equivalent to EUR 0.8777 per share and EUR 177 million allocated to share buybacks. This represents a 22% year-on-year increase in dividends and a 16% increase in share buybacks compared to 2024. Now turning on the quarterly analysis. In Greece, we achieved a robust 8.7% decrease in revenues, supported by strong performance in System Solutions, positive trajectory in Fixed Retail and accelerated growth in Mobile. Retail Fixed service revenues increased by 2.6% this quarter with higher FTTH uptake, the main engine of our Fixed Retail growth alongside strong TV growth and rising Fixed Wireless Access adoption. Turning to our FTTH. We had an excellent fourth quarter, adding a record of net 58,000 additions, bringing our total FTTH customer base to 567,000. Retail FTTH represents 24% of our total broadband base compared to only 17% a year ago. This continued momentum together with sustainable wholesale demand for our infrastructure is driving higher network utilization, which has increased to 34%, highlighting both the strong demand of our FTTH network and the resilience of our wholesale partnerships. Furthermore, the recently adopted regulatory framework allowing to stop-selling FTTC in buildings already connected with FTTH is accelerating the transition to fiber and improving the monetization of our network investments. During the quarter, we continue to make strong progress in the deployment of our Fiber-to-the-Home network, reaching 2.1 million home passed, in line with our plan and targeting 2.4 million homes passed by 2026. Our Fixed Retail trends continue to be supported by our FWA, Fixed Wireless Access service, which continues to gain strong momentum with total subscribers reaching 55,000, highlighting the growing contribution of FWA to our Broadband business. Our TV segment delivered another robust quarter with revenue growth maintaining its double-digit momentum. Our customer base continued to expand, increasing by 7.1% with 19,000 net additions in quarter 4 of 2025, exceeding the same quarter last year, a nice achievement more than a year after the agreement implementation. We have now reached the anniversary of the benefit from the ARPU increase. However, the antipiracy legislation in place and the recent removal of the 10% special tax on pay-TV as of January 2026 gives us confidence in further adoption for legitimate platforms. Turning to our Mobile operations. Service revenues grew by 5.2%, accelerating further and delivering the strongest quarterly performance of the year. Our Postpaid segment continues its strong growth trajectory with the customer base expanding by 7.2%, making the ninth consecutive year of growth. This performance was supported by ongoing pre- to post migrations and record postpaid customer additions of 60,000 in the quarter. Postpaid customers account for 43% of the total mobile base compared to 40% a year ago. We are also seeing continued progress in the adoption of unlimited packages, while 5G device penetration has now increased to 42.2% compared to only 33.5% in 2024. The strong growth in our Mobile operations is underpinned by our network leadership, which continues to be a key one of our competitive strengths. As Kostas mentioned, this was once again validated this year by our performance across key metrics. 5G now covers over 99% of the population, while 5G plus nearly 78%. Data usage continues its strong growth with average monthly consumption per user rising to 18.3 gigabytes, representing a 30% increase year-on-year. In our Wholesale segment, revenue declined by 5% in the quarter, reflecting the natural drop in national streams and the anticipated drop in almost zero-margin international wholesale activities, which began phasing out and are expected to decline significantly over the next 2 years with an estimated impact of approximately EUR 170 million in '26 and a further EUR 130 million in '27 in revenues with no impact in EBITDA. On the national wholesale front, we continue to see a steady decline, while at the same time, experiencing increasing volumes on our infrastructure as a result of wholesale agreements. Indicatively, we added 135,000 wholesale net additions in 2025 compared to 60,000 a year ago. Other revenues grew by 26.7% during the quarter, driven by solid performance across our ICT portfolio. In particular, our System Solutions segment delivered an exceptional performance, recording a 57.5% year-on-year increase, reflecting strong demand and continued execution momentum in this area. As the, Recovery and Resilience Facility, RRF, gradually reaches its conclusion, its value contribution is expected to taper off. However, nationally funded projects are anticipated to continue supporting activity levels, while our strategic focus has increasingly shifted towards the private sector and our EU presence. Total operating expenses, excluding depreciation, amortization and one-off items increased by EUR 65 million in the quarter, driven solely by costs directly linked to top line growth, most notably higher third-party fees recorded within other operating expenses, reflecting the strong momentum in our ICT. We are also continuing to incur operating expenses related to the expanding FTTH adoption, particularly costs associated with the final phase of customer connections. At the same time, we remain firmly focused on our cost discipline across the organization with savings most visible in personnel expenses, supported by the ongoing benefits of our voluntary exit programs. In parallel, as part of our transformation of our model, we selectively deploy AI-driven automation to structurally improve efficiency supporting a further improvement in our indirect cost to service revenue ratio. As a result, adjusted EBITDA after leases increased by 2.3% in the quarter 4 of 2025, marking our strongest quarterly growth rate of the year. This performance provides a solid foundation as we look ahead to 2026, where we expect to accelerate EBITDA growth to approximately 3%. Now let's have a look at the CapEx and cash flow. Firstly, CapEx in the fourth quarter amounted to EUR 174.5 million, bringing full year CapEx to EUR 612 million, up nearly 9% compared to 2024. The increase primarily reflects the continued expansion of our FTTH footprint as well as the ongoing rollout of our 5G stand-alone network, further supporting our FWA growth. For 2026, we expect CapEx to be around EUR 600 million. Free cash flow after leases from continuing operations reached EUR 168 million in the quarter, up from EUR 145 million in the same period last year. The increase was mainly driven by higher EBITDA in the quarter and improved working capital performance, which more than offset higher CapEx. For the full year of 2025, free cash flow stood at EUR 543 million. Turning now to our outlook for 2026. We expect free cash flow to amount to approximately EUR 750 million. This estimate is based on the assumption that the upcoming spectrum auction takes place in 2027. As you know, a public consultation process is currently underway and the final timing and costs have not yet been confirmed. Excluding the one-off tax benefits, which are coming from the Romanian disposal and the resulting lower tax prepayments, the underlying organic free cash flow for 2026 is estimated to be around between -- in the range between EUR 570 million and EUR 580 million. With that, we conclude our speech and we are happy to take your questions. Thank you, operator. Operator: [Operator Instructions] The first question is from the line of Draziotis Stamatios with Eurobank Equities. Stamatios Draziotis: Three quick ones, if I may, please. Firstly, on Mobile growth in Q4, which as you mentioned accelerated materially to 5.2% up. Could you just tell us to what extent this reflected pricing actions, i.e., what the impact of pricing was in isolation? Secondly, on the outlook for next year, the acceleration of EBITDA growth to 3% stems from what exactly as per your budget? I mean I know there are many things that you've considered, but what is the main driver? Is it the stronger mobile setup? Is it cost savings? And lastly, on the cash returns, just to clarify, you've guided for this EUR 570 million, EUR 580 million underlying free cash flow generation in '26. Given you will have basically already ring-fenced the spectrum-related amounts. Is it fair to interpret this as the likely envelope for total shareholder remuneration next year, obviously, subject to Board decisions? Kostas Nebis: Thank you, Stamatios, for the questions. Let me start with the first 2. As far as the Mobile growth is concerned, I mean, we are really pleased that throughout the year, we have seen Mobile growing in a healthy manner with a positive momentum across all quarters. It is true that in the last quarter of the year, we have seen a slightly higher growth rate. To a certain extent, this is also due to a stronger December, also part of it coming from the CPI implementation. Also the fact that the Christmas offerings of this year have had a slightly lower effect versus last year. So these are the 2 things. Now going forward, I mean, when it comes to the Mobile performance, we expect more or less similar trends like in 2025, and I'm referring to the annual trends. The levers, the growth levers are more or less the same. We are relying a lot on pre to post migration. We still have a big chunk of our customers still on prepaid. This is helping us drive ARPU up by providing extra value to our customers. This is one thing. The second one is also Babis commented, we are trying to push postpaid customers to high-value tariffs, including the unlimited. We still have a big part of our customer base who have not yet migrated to unlimited. And at the same time, we are facilitating that by penetrating deeper into our customer base, the 5G devices. So these are the key levers based on which we have been growing our Mobile service revenue in '23 -- or in '25, and we expect similar trends in '26 as well. Now when it comes to our EBITDA growth and moving from 2.1% that we managed to deliver this year to 3%, I think that the biggest difference is going to be on the IDC front on our costs because top line-driven growth, we expect more or less similar numbers as in 2025. But as a result of us running a couple of IDC-focused initiatives like a massive waste load reduction program in our front line. This in conjunction with our operating/production model transformation using technology, digital technologies, including AI, will help us also deliver an incremental boost to our EBITDA by rationalizing our costs. So this is the biggest difference comparing the 2 years. Charalampos Mazarakis: Yes, regarding the forecast, our guidance for this year's organic or underlying free cash flow, as you said, this estimate to be between EUR 570 million and EUR 580 million. That will be the base, which will conclude and decide in 2027, what will be the Shareholder Remuneration Policy. Obviously, the payout and the split will be decided in early 2027. Stamatios Draziotis: That's clear, Babis. If I can just follow up on this. I know it's early days, but is there any reason why this amount will be lower? I'm just trying to think because could there be anything else other than spectrum? I mean of significant size. Or is there anything that could swing this number or actually drag it lower? Charalampos Mazarakis: Well, the results of the spectrum auction cannot be predicted, of course, that's one thing. Also, what is -- what we are also taking under consideration, as it was mentioned in the Shareholder Remuneration Policy is the fact that all the one-off items which these years were the positive tax break and the prepayments that are associated with that one. Obviously, this will be repeated -- will go the other way around in 2027. So our ambition here is to ensure that these one-offs are smoothen out in order to have a proper trajectory in our shareholder remuneration growth. So we'll take this under consideration when the time comes to decide the shareholder policy for 2027. However, I want to be very clear that the organic base to decide upon is the range between EUR 570 million and EUR 580 million. Operator: The next question is from the line of Soni Ajay with JPMorgan. Ajay Soni: I've got 2. And the first is around your fixed growth of 2.6% this quarter. So you stated FTTH is a key driver. TV is growing double digit. I just want to understand the building blocks to get to the 2.6% between the growth within FTTH, TV, Fixed Wireless Access and then maybe some of the headwinds, which could be from copper or FTTC, so that's the first question. The second one was just a follow-up on -- you're talking about pushing clients to unlimited data bundles. I'm just trying to understand the size of the opportunity for you guys. So maybe a few questions within this, but it would be good to know what portion of your base is not on unlimited data bundles? And what's the ARPU uplift when you push them to the unlimited data bundle? And then also -- sorry, within this is maybe an understanding of how this trend has evolved this year? What have you been able to do so far this year on this initiative? Kostas Nebis: Okay. So let me start with the first question around fixed. Yes, indeed, I mean, Q4 was a very strong quarter. I mean on the back of both our Fixed Broadband performance as well as our pay-TV performance. I mean the main driver is, for sure, the FTTH penetration. So we recorded another record quarter, and we had a record year when it comes to FTTH net adds, moving customers from copper to FTTH is always coming with a plus when it comes to the ARPU. This is one lever. The second lever is, of course, Fixed Wireless Access. That was an important addition to our Fixed portfolio lineup because this allowed us to be more competitive in parts of the country where we were suffering from Starlink, especially the poor copper served part of the country. With us positioning ourselves with the Fixed Wireless Access product, we managed to, first of all, defend our customers while at the same time, generating some ARPU uplift moving them from copper to Fixed Wireless Access services. And pay-TV, I mean, we still believe that there's a lot more to come. The pay-TV penetration, the legitimate pay-TV penetration in Greece is still south of 35% when on average in Europe, it is ranging between 50% and 60%. So what we experienced now is all the benefits from the stricter antipiracy measures that the government has pushed through. This in combination with the fact that we have the elimination of the special tax levy that was effectively making the legitimate pay-TV prices 10% more expensive. This is out of the 1st of January. These all 3 are contributing to the growth that we have seen for the first time after 4 years in the Fixed Retail revenues. And this is more or less what we expect to see also stepping into 2026. Of course, taking into consideration the challenges in the competitive environment. But we believe -- I mean, we feel confident that when it comes to the Fixed Retail revenues, we are going to stay on the positive territory during the course of 2026. Now when it comes to Mobile, I mean, as I said, there are 2 key levers which are driving the Mobile service revenue growth. And these key levers have been behind this roughly 3% full year service revenue growth that we have experienced during 2025. As I said before, we are expecting a similar kind of growth trajectory in 2026 by moving customers from prepaid to postpaid. This is delivering roughly EUR 3 to EUR 4 uplift out of every transaction, but also moving customers from -- within the Postpaid segment from lower value bundles to higher value bundles including unlimited. Now in particular to your question with what is the percentage of our base who are still not migrated to unlimited is roughly 60% to 65%. And by moving customers not only to unlimited, it's not only one tariff. We are trying to progressively step up the customers from lower bundle tariffs, data tariffs to higher data tariffs, including the unlimited. We are generating roughly EUR 1 to EUR 2 out of every of these migrations transactions, just to give you some indicative numbers. Ajay Soni: Great. And what's that trend been? So what have you managed to move the unlimited base from and to during this year? Kostas Nebis: The unlimited base grew by 7 to 8 percentage points this year. This compares to roughly 10 percentage points last year. So this is the base. But we still have 65-ish percent of the base still not migrated to unlimited. So a lot of room to grow further. Operator: The next question is from the line of Rakicevic Sofija with Goldman Sachs. Sofija Rakicevic: I have 3 questions. The first one is, what are the key risks that you currently see in the German -- sorry, in the Greek market and your execution with it? And also, overall, what are the key risks to your 2026 guidance? The second question is you have implemented price increases on Mobile, but how are you thinking about price increases in Fixed, including both fiber and TV? Could you do more in 2026 and beyond? And lastly, could this rising fiber demand drive incremental CapEx beyond your current plans? And how do you expect for it to impact OpEx going into 2026? Kostas Nebis: Okay. Let me take the second question first about price increase. I mean when it comes to pricing, I mean you need to understand we are constantly monitoring the market developments. We are operating in a very competitive market. And we are adjusting our prices accordingly, aiming to always provide the best value to our customers. So I don't have anything particular to comment at this point in time. I'm just sharing our thinking and our attitude when it comes to pricing. When it comes to the FTTH and CapEx, I think that we have already guided for roughly EUR 600 million. This is what we have included in our envelope to support all our investment needs with FTTH for sure being one of the most important ones, but not the only one. And your last question -- I mean, your first question, when it comes to risk, I would not call them risk, we would call them challenges. As I said, we are operating in a very competitive environment. So what we are trying to do is to stay focused on our priorities, on our strategic priorities on our investment plan and play on our strengths. And these are good enough and strong enough in order to allow us to defend our relative position in the market, but also to grow going forward. Babis, I do not know whether you would like to add something. Charalampos Mazarakis: Just to add that the CapEx envelopes that we experienced in 2025, but also our guidance 2026 include already the rollout in the FTTH network that is necessary to support the growth that are supporting our guidance. So -- and as we, I think, repeatedly said in previous calls is that these levels of EUR 600 million is the peak that we see already as we are implementing the networks. Operator: Ms. Rakicevic, are you finished with your questions. Sofija Rakicevic: Yes. Operator: The next question is from the line of Patrick Maurice with Barclays. Maurice Patrick: It's actually Maurice Patrick at Barclays. I've got a few questions, please. The first one really relates to competitive fiber dynamics. We don't get a huge amount of details from PPC Group, although looking at your fiber numbers, it would suggest that really there isn't much disruption taking place in the fiber market from competing fiber networks. Maybe I'll ask the questions one by one. But if you could comment on your disruption from PPC and how you're seeing that impacting your business would be helpful. Kostas Nebis: Okay. I mean with regards to PPC, well, first of all, what we have seen out of them is that their activities have been limited to the introduction of a broadband-only product, in a relatively small footprint, at least compared to our footprint. I mean, to have -- I have to be honest here, we have not yet felt any material pressure or effect on our numbers. So we'll see how this is going to develop. So we are managing to defend our broadband market share, as you can tell from our broadband numbers. And what we are leveraging is, first of all, our FTTH footprint, the one that we have already completed, the one that we are already building as well as our wholesale agreements with our partners and to repeat one more time that we have the most comprehensive and differentiated portfolio at this point in time in the market. So these are the things that are helping us defend our relative position. Now does this cover your question you asked... Maurice Patrick: Yes, that's good. So I was going to ask a follow-up, and the next question really was about wholesale. I missed some of the points you made about the revenue lower wholesale, high infrastructure point. I caught the point where you talked about 125,000 wholesale adds this year versus 60,000. But clearly, you have reciprocal arrangements with Vodafone and Wind regarding fiber where they sell in your footprint and likewise, you on [ their. ] So very helpful if you can put -- maybe repeat those revenue -- wholesale revenue numbers that you gave, I think, in the presentation, I missed them. Kostas Nebis: Okay. Let me start with the wholesale numbers, the wholesale fiber numbers on the back of the wholesale agreement. What we have seen in 2025 is us effectively doubling the net additions on to our fiber infrastructure coming out of us serving both Vodafone as well as Nova, so just to give you some numbers back in 2024, we have had 60,000 net adds on our infrastructure on a wholesale level. This 60,000 was -- has grown to 135,000 during the course of 2025. So more than doubled during the course of the year. And when it comes to the wholesale revenues, is this what you are asking for? Or you want to -- beyond... Maurice Patrick: I think you made in your prepared remarks a few comments about the wholesale revenue direction. I didn't catch them. Charalampos Mazarakis: So the wholesale revenues for this year, as we also had guided in the previous calls, declined, the national wholesale revenues by roughly EUR 15 million. And we expect something similar lines also in 2026. So no change in the trend there. Kostas Nebis: Well, I understand that as we are rolling out, also Vodafone and Nova are rolling out in their part of Greece. And once they roll out, they are also migrating the customers to the retail customers to their own infrastructure, which has a pressure on our wholesale revenues. Maurice Patrick: Super clear. And then if I could ask a follow-up question to AJ's about FWA. So you've reported the FWA customer base. You seem to suggest in your remarks that it's really a defensive mechanism against Starlink as opposed to an alternative to OTE broadband. It would be very helpful if you could maybe expand a bit more in terms of what sort of -- what data usage do you see from these FWA customers? Is it typically in areas where you don't have fiber, where you're targeting them? Those sort of dynamics would be very helpful. Kostas Nebis: Good question. It is entirely in areas where we don't have fiber. So we have the right policies in place in order to make sure that this product is only sold in areas where we don't have fiber. And we call it more of a bridge technology in a sense that we are leveraging on our 5G network capabilities and particularly the 3.5 gigahertz and our stand-alone network, which allow us to allocate a slice of our network to these customers in order to provide faster speeds until we get there with our FTTH rollout, which takes more time in order to expand and to reach every corner of [ new countries. ] Now when it comes to traffic, what we see is, I would say, very similar to Fixed Broadband usages in the range of 300, 400 gigs. This is what customers normally do. And this is a result of us providing a very competitive product to the one that they would get from Starlink. So this has helped us a lot kind of slow down a bit, at least the amount of customers that we were losing to Starlink until we launched the service at the beginning of the year. And the traction has been extremely positive. We closed the year with slightly more than 55,000 customers now. We have exceeded the 65,000 customers. Very good reception from our customers, both as a defensive tool, but also in some cases, also as a slightly offensive one in areas where customers have chosen to take Starlink or some FMS solutions, we are not delivering on their expectations. But predominantly a defense and a bridge technology until FTTH gets there. Operator: The next question is from the line of Karidis John with Deutsche Bank. John Karidis: Firstly, can I ask about ICT revenue? It's really difficult from our side of the fence to sort of forecast this going forward. So anything you can say to help us would be useful. And in particular, on ICT revenue, with regard to business that you do outside Greece, how significant is that overall versus the total ICT revenue that you generate? And who do you sort of compete against? And why do you win versus your competitors? Secondly, I just wanted to confirm that essentially, in any one period with regard to wholesale cost to access Nova's premium sports content. If you both have the same number of ads, then your net costs are nothing. But if in any particular period, you add more customers than they do, then you actually have an incremental cost. Do I understand this correctly, please? And then very lastly, in terms of energy costs, I'm trying to understand how we should think about these going forward, both in terms of OTE becoming more efficient and therefore, using less of it or maybe growing less fast, the usage, but also what's happening to unit prices, the ones that you have to -- that you incur? Kostas Nebis: Okay. John, thanks for the question. So let me start with the ICT. I understand the stagger. It is a multifaceted kind of initiative, which cuts across both Greece, including public sector, private sector, but also our efforts in the European Commission. So first of all, if we could provide some guidance, I would say we are expecting 2026 to be in double digits growth. I would say, in between 10% and 20%. This is what we see out of the pipeline that we have already kind of lined up. This is one information I could possibly provide. Now with regards to the questions that what makes us different is, first of all, our credibility. We have a strong track record of delivering on time. This is the biggest challenge that all projects are facing. One thing is to assign, another thing is to deliver them. So we have managed to build credibility both in the Greek market as well as outside Greece, being very reliable. We have the right people, the right skill set, but also the right track record that makes everybody feel confident that once they assign the project to us, it will be delivered on time. When it comes to the contribution of our European business, it is not immaterial. It is progressively growing. It is, I would say, something around 15% and 20% of our total System Solution business. Now your second question was about pay-TV. I think that you have picked it up rightly. So yes, if we outgrow Nova when it comes to the way we scale our base, yes, there is some extra costs, which are already factored into our P&L. So whatever you see reported also includes this cost element. Charalampos Mazarakis: And regarding the energy, I think you framed it very well. We have, first of all, quite a few programs for energy saving around the network. So while we are expanding our network in terms of base stations and also via fixed infrastructure, we envisage that for 2026, we will manage to have a stable consumption. So therefore, whatever increase comes from the expansion of network is offset by the cost savings programs. Now regarding the pricing, given the turbulence in the previous years, we are now having a good percentage of our total energy consumption under PPA agreement. So we have a little bit more -- high visibility for the costs. Therefore, overall, we expect 2026 cost of energy to be broadly in line with 2025 after a reduction in '25 versus '24, thanks to the PPA that we signed. John Karidis: Congratulations to the entire team for a great set of numbers. Operator: Ladies and gentlemen, there are no audio questions at this moment. So we will now proceed with our webcast participant questions, the written questions. The next question is from Raciborski Piotr with Wood & Co. And I quote, "What is the exact value of the one-off tax item related to Telekom Romania sale? What apart from the tax item causes the difference between FCF and adjusted FCF?" Charalampos Mazarakis: So as we explained in the call, the difference between the, let's say, the top line expected free cash flow of EUR 750 million and the organic, which is between EUR 570 million and EUR 580 million is directly due to tax items. This comprised 2 things. One is the direct tax break we have from the sale of Romania. This is in the area of EUR 130-plus million. And the remaining is the fact that because of the lower tax payments this year, we are also called to pay less of the prepayment of the tax for the next year because this is the structure of the Greek tax system, of a difference around EUR 40 million to EUR 50 million. Now the latter part of the prepayment will be reversed next year because the tax break will not be present in 2027. Therefore, this prepayment that we see this year will be paid next year. So in order to normalize all these one-off effects, we have, I think, correctly guided for the organic part of the free cash flow, which is the base for our forecast. Operator: The next question is from our webcast participant, [ Katsikas George with Banking News. ] And I quote, "Could you tell us what plans you have for the EUR 500 million bond that matures in September?" Kostas Nebis: The plan is obviously to refinance it. And as the time approaches to this date, we'll be coming more explicit about how this is going to be refinanced. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Kostas Nebis: So thanks a lot for your attention, questions and for your interest in OTE. We will meet again in May to discuss the first quarter results. Until then, have a nice day. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good evening.
Ana Fuentes: Good evening, and thank you very much for taking the time to attend Gestamp 2025 Full Year Results Presentation on what I know is a super busy for many of you. I'm Ana Fuentes, M&A and IR Director. Before we begin, let me refer you to the disclaimer on Slide #2 of this presentation, which has been posted on our website and that set out the legal framework, under which this presentation must be considered. The conference call will be led by our Executive Chairman, Mr. Francisco Riberas; and our CFO, Mr. Ignacio Mosquera. As usual, at the end of this conference call, we'll open the floor for Q&A session. Now please let me hand the call over to our Executive Chairman. Francisco Jose Riberas de Mera: So good afternoon, and thanks for attending this call with us in this busy day. So moving forward, overall, 2025 has been a good year for Gestamp by year, which has been marked by a complex context with the global tariff war that is still alive with many regulatory changes in different geographies, but mainly in U.S. and Europe. A year also with the major OEMs realigning their strategies to slower EV adoption and also with a limited growth in terms of volumes everywhere, but in China or India. In this context, Gestamp has focused on delivering a strong set of results in 2025, taking action in order to align our exposure to EV programs in line with our customers and enhancing our balance sheet profile with more -- adding more flexibility and more optionality for us in the future and of course, also delivering in our commitment for North America in the frame of the Phoenix Plan. In terms of the market, in terms of global manufacturing of light vehicles in our footprint has had limited volumes, again, another year, but probably volumes which were better -- which have been better than initially forecasted. In fact, by February 2025, we were expecting volumes in 2025 to be very much in line with 2024. Then when the tariff war started in April, the forecast was reduced. But at the end of the year, final volume has been around 85.5 million. So that meaning around a 4% increase. So a growth, clear growth, but only driven by Asia. In fact, between China mainly and India, the growth has been around 3.5 million units comparing with 2024 and it's been again a decrease in Europe and also in this case, in this year in North America. So moving to Slide 6. And as mentioned, Gestamp has met all the 2025 upgraded targets. In terms of revenues, we have been below the market growth with Gescrap also performing below 2024 due to the lower prices of the scrap. But in this environment, we have been able to increase our auto margin profitability by 78 basis points, generating a very sound free cash flow of EUR 228 million more than guided. and reducing our leverage ratio to 1.4x EBITDA, which is the lowest since the IPO. So basically, a quite solid year, reinforcing our fundamentals. So that means focusing in increasing profitability and increasing our balance sheet strength. With more focus on revenues, some revenues at FX constant have underperformed the market. In fact, the light vehicle manufacturing in our footprint has increased by 4.1% while at the same time, Gestamp sales at FX constant has been reduced by 1.2%. So that means a 5.2% underperformance, only 0.6% underperformance if we exclude in this analysis, the China impact. By regions, in Europe, the overperformance in East Europe has been cash compensated some slight underperformance in Western Europe. Basically, in North America, we are in line with the market. We had some underperforming in Mercosur due to some specific problems of some of our relevant customers in that area. And in Asia, we have a clear underperformance in China, but in the rest of the Asian countries, including India, we have more than a 15% overperformance. In our revenues in a reported basis, we are below 2024 figures by 5.4% from EUR 12 billion reported revenues in 2024, we have this year EUR 11.350 billion in 2025. There is a decrease, which is mainly coming from FX impact versus euro in most of the geographies, but also due to some lower activity and also to some lower scrap prices. If we go to the Slide #9, during 2025, Gestamp has entered into different agreements with certain customers impacting our profit and loss accounts, mainly in the fourth quarter 2025 and around EUR 34 million positive accounting impact at the EBITDA level with an asset write-down totaling EUR 52 million regarding these programs. So overall, these both items generating a net EUR 19 million negative impact at EBIT level. So these are effects, which are linked to the realignment strategies announced by several of our customers, largely driven by a slowdown in their EV rollout plan. And of course, these settlements fall within the framework of Gestamp's ongoing constructive negotiations with customers and always preserving our long-term relationship with them. So moving to Slide #10. So basically, 2025 has been another year of increasing profitability without growth. Our EBITDA margin for the auto business has increased from 11.1% in 2024 to 11.9% in 2025. Even without taking into consideration the extraordinary impact explained before, this increase has been to 11.6%. So again, a very solid recovery of profitability in our auto business activities. And we have been able to increase this profitability because we have a very clear focus in different actions like cost reduction initiatives, trying to introduce all kind of flexibility measures, of course, this constructive customers negotiations and with a clear focus in delivering on the Phoenix Plan. Moving to the Slide 11 about the Phoenix Plan. For the second year of the Phoenix Plan, we have been able clearly to match the target. And in this case, the target was to achieve more than 8% EBITDA margin. And we have done it in a market, which has been much weaker than expected when the Phoenix Plan was launched. At that time, we were forecasting a manufacturing level in North America of around 14.9 million units of light vehicles, but the real figures in 2025 have been EUR 14 million. So that means almost 6% decrease in terms of volumes, in terms of car manufacturing in North America. In this context, in the full year with sales of EUR 2,241 million, we have been able to generate EUR 182 million EBITDA. So that means 8.1%, which means a clear improvement comparing with the 7% EBITDA margin we had in 2024. And that we have been able also to do it with a very solid result in the fourth quarter with more than 11% EBITDA margin. So -- and we have been able to do it with extraordinary Phoenix cost below the plan with EUR 16 million in terms of profit and loss account and EUR 30 million in terms of CapEx cost. And in terms of Gescrap, we had a year which has been the performance of Gescrap has been clearly impacted by the scrap prices evolution. The scrap prices have been going down month after month in Europe with a total decrease of 12% in the scrap prices in Europe, more than 20% decrease in China and a little bit more stable in U.S. So that means that our revenues in terms of sales have been decreasing by 6.8%, even though in terms of tons, we have been able to preserve a very good level of activity. But this continued decrease of the price of the scrap has forced our company to reduce the profitability in terms of EBIT from EUR 42 million EBIT in 2024 to EUR 28.3 million. So -- but we are expecting for 2025 the scrap of the prices to be stabilizing and even growing. So that means that the profitability of the scrap for the future should be able to recover. Apart of that, we have also made an important acquisition. In this case, the company Industrias López Soriano. With this acquisition in scrap basically in the Iberian Peninsula, we have been able to get ourselves introduced in a different sector, the sector of the Shredding and also in the sector that now we are an active player in the recycling of waste of electrical and electronic equipment. Okay. So now with this, now I hand it over to Ignacio Mosquera. Ignacio Vazquez: Thank you very much, Paco, and good evening to everyone. Moving to Slide #14. Let's have a closer look to our financial performance in 2025. We have reached revenues of EUR 11.349 billion, which entails a 5.4% decrease when compared to the EUR 12.01 billion from 2024. As we have seen before, revenue has been strongly impacted by ForEx in most of our geographies. In the auto business, at FX constant, revenues have declined by 1.2% year-on-year. In terms of EBITDA, we have generated EUR 1.307 billion in 2025, meaning an 11.5% margin and a 1% increase year-on-year. Excluding the Phoenix impact, EBITDA in absolute terms would amount to EUR 1.323 billion, therefore, an EBITDA margin of 11.7%. As a result of the one-off impacts mentioned before by Paco and higher amortizations, reported EBIT decreased by 6.2% year-on-year to EUR 546 million with an EBIT margin of 4.8% or 5% excluding Phoenix impact. Phoenix Plan aimed at restructuring our NAFTA operations, has had a EUR 16 million impact in P&L and a EUR 13 million impact in CapEx for the entire year. Net income in the year has been EUR 152 million that compares to the EUR 188 million reported in 2024, mainly due to an increase of depreciation and amortization levels and a higher interest expense due to increased exchange impacts in 2025. Net debt has closed the year at EUR 1.821 billion, therefore, a decrease of EUR 276 million on a reported basis. As for free cash flow, we have reached EUR 278 million in 2025, excluding the extraordinary impact of the Phoenix Plan or EUR 249 million as reported. To sum up, we continue to demonstrate our ability to perform strongly and strengthen our balance sheet in a challenging market environment together with a negative ForEx evolution. If we now move to Slide #15, we can see the performance by region on a year-on-year basis. Looking at each region in detail, revenues in Western Europe have decreased by 4.2% year-on-year in 2025 to around EUR 4 billion. Performance in the region has been strongly affected mainly by volume pressure in the period and to a lesser extent, the fall in raw material prices. In terms of EBITDA, it reached almost EUR 453 million, and EBITDA margin stood at 11.2% in the period, down from the 11.4% reported in 2024. Profitability in the period has been impacted mainly by volume drop with still limited operating leverage despite the flexibility measures, which have been taken. As we mentioned in our previous call, results of these measures will take some time with limited tangible results in the short term. In Eastern Europe, the performance in 2025 has been very solid, proving again our strong market positioning in the region. On a reported basis, during 2025, revenues have grown year-on-year by 1.2%, up to levels of EUR 1.925 billion, and EBITDA levels have increased by 15.4% to EUR 293 million. Eastern Europe region has been strongly impacted by ForEx this year. EBITDA margin of 15.2% is above the 13.3% reported last year. The reported -- the profitability improvement is mainly attributed to a better project mix, highlighting the strong project ramp-up in Turkey and the good evolution of the business in the remaining countries. In Europe, overall, considering both regions as a whole, we have managed to improve our profitability, partly due to the shift in the mix to Eastern Europe. In NAFTA, Phoenix Plan continues to show signs of improvement in the underlying operations with a very good EBITDA margin evolution in 2025 despite the underlying end market conditions and FX impact. Our revenues have decreased by 6.7% year-on-year, while EBITDA has increased by 7.8% if we exclude Phoenix impact of EUR 16 million in full year 2025. This higher EBITDA in absolute terms leads to an EBITDA margin of 8.1%, improving last year's profitability and also slightly surpassing the target we had set of 8% for 2025. As you all know, turning around the operations in NAFTA to improve our market positioning and profitability is at the top of our priorities, and these show results and the profitability achieved in Q4 sets the way to achieve the target of a 10% margin in 2026. In Mercosur, 2025 has been marked by the ForEx evolution in Brazil and Argentina, leading to lower revenues in the period decreasing by 15.7%. Despite the revenue decrease, EBITDA has increased by 4.9% year-on-year, leading to an 11.8% EBITDA margin versus 9.4% last year. We have been able to improve our profitability in 240 basis points, thanks to the flexibility measures and the turnaround of our business in Argentina, where last year, we did some restructuring. In Asia, reported revenues have decreased by 7.7% year-on-year in 2025 to EUR 1.823 billion within a complex and very competitive market environment. Our negative revenue evolution in the period is partially explained by the ForEx evolution in China. However, our performance continues to evolve very positively. Despite negative revenues evolution in the period, we have managed to maintain similar levels of profitability with an EBITDA margin of 14.5% for 2025, which places Asia as the second most profitable region for the group. Our approach continues to be focused on premium products in the region. We keep on working to gain positioning in this region, maintaining strong levels of profitability. Asian region remains a great opportunity for us, not only China, where we continue to develop these high value-added products, but also India, where we have undertaken new projects with a strong performance. Finally, Gescrap has seen revenues decreasing by 6.8% year-on-year to EUR 534 million as a result of the sustained decline in scrap prices, as mentioned before. As a consequence, EBITDA in absolute terms has decreased by 23.5% year-on-year, reaching EUR 39 million in the period. Overall, we have seen that our unique business model and geographic diversification has supported and driven our performance in a year marked by volumes volatility and lack of growth. Turning to Slide 16. We see that we ended 2024 with a net debt of EUR 1.821 billion, which is EUR 276 billion below the EUR 2.97 billion reported in December 2024. This EUR 276 million decrease includes dividend payments of EUR 111 million and cash in of EUR 220 million of minorities acquisitions, so M&A and equity contributions, mainly due to the transaction executed with Banco Santander earlier in the year. During the year, the company has generated a positive free cash flow of EUR 278 million, excluding extraordinary Phoenix costs, surpassing significantly the updated guidance for 2025, partly due to one-off compensations mentioned earlier by Paco, which came in, in Q4. Moving to Slide #17. We ended December 2024 with a net financial debt of EUR 1.821 billion, which implies a net debt-to-EBITDA ratio of 1.4x, driven by free cash flow generation as well as cash inflow from the partial real estate asset sale of EUR 246 million. This is the lowest debt level since the IPO of the company, both on net level and on leverage ratios and complying with our commitment to be between 1 to 1.5x net debt-to-EBITDA target. As we have mentioned, our priority is to preserve our financial strength, and we remain disciplined over leverage in absolute and relative terms. Looking at Slide #18, we are proud to share the actions carried out during 2025 and that have been key to provide a strong balance sheet. Firstly, and as a reminder, in September, we closed our partial real estate sale and leaseback agreement of our assets located in Spain, strengthening our balance sheet. Secondly, in October, we closed the new senior secured bonds issuance that contributed to extend our debt maturity structure at a very attractive cost. As a reminder, Gestamp's new EUR 500 million senior secured bonds represent the tightest price callable bond by an auto parts issuer since September 2021 with a coupon of 4%, 375%, which underpins the debt investor support to the group. Further to that, in January, we executed an amendment to our syndicated facility agreement and our revolving credit facility, extending the maturity from 2027 and 2028 to 2030 and 2031. These 2 transactions have allowed us to increase pro forma average debt life from 2.6 to 4.3 years. We continue actively managing our balance sheet structure to strengthen it and flexibilize our financial profile. Finally, on Slide #19, we present the return on capital employed. We have managed to reach 15.8% return on capital employed in 2025, improving by 80 bps between 2024 and 2025 and by 180 bps since 2022 when we first released our new return on capital employed KPI. As we have made clear, Gestamp aims at remaining disciplined on CapEx investments and improving profitability. Our long-term strategy is focused on generating value for our shareholders. Thank you all. And now I hand over the presentation to Paco for the outlook and closing remarks. Francisco Jose Riberas de Mera: Thank you, Ignacio. So moving to the Slide 21. I would say that in terms of the market, nowadays, we are not expecting any growth for the market in 2026 versus 2025. And for the following years up to 2029 or 2030, we're assuming a limited growth of around 0.9% CAGR. In 2026, even though we are assuming a flat market, we are considering that the volumes in Europe will be stable with some decrease in Western Europe that could be more or less compensated by some increase in Eastern Europe. We see some increase in terms of volumes in areas like Mercosur and India. And probably we are now expecting a slight decrease for the first time in many years in China. In terms of the -- what we can expect for Gestamp in 2026, so basically very similar to what we have in 2025. So we see a market context in 2026, which means with a limited volume growth in our key geographies with, of course, still regulatory changes, especially in Europe, but also in NAFTA to happen with cost pressure expected coming from customers and also coming from the environment. And of course, some slower EV adoption, but probably with a little bit less volatility. So in this context, we will remain executing the same way we have done it in 2025, trying to base ourselves in kind of this execution of this solid backlog, trying also to focus ourselves in increasing profitability, even though we are not expecting any kind of volume increase. The idea is that we need to keep on improving the strength of our balance sheet and also increasing the flexibility of our balance sheet and of course, trying to focus in meeting the guidance for 2026. In terms of the backlog, at the end of 2025, we had EUR 47.5 billion backlog, which is covering more than 85% of the revenues expected by the group in the next 5 years. Solid backlog, but less backlog than we had 1 year ago because this has been impacted in terms of euros due to the negative ForEx and also it has been impacted by the rethinking of some of our customers of some of their EV programs. So basically, now what we have is a kind of a change in the backlog that we have because we have more content of programs, which are carryover with a less capital-intensive profile. And of course, we are using our CapEx in the future in a kind of conservative approach, trying to ensure the profitability and to be able to mitigate risk, but also to preserve some CapEx in order to be able to support the new customers and to support also footprint diversification with the new area. So again, I think, again, the message is the same. We are going to keep on in 2026 being very focused in working on profitability with a clear road map. The idea is to reinforce all kind of actions in order to have a very good control of all levels of cost, whether it's corporate division level or in the plant level trying to increase flexibility, trying to implement all kind of rightsizing of our operation whenever is required and trying to be more flexible and try to do our CapEx more in a steady basis. Of course, trying to be able to keep on moving with constructive negotiation with our customers and all the different regions and of course, also trying to be able to remain very focused in the third year of the Phoenix Plan, which is a very important milestone as I stated 2 years ago and which is going to provide our group to be able to get the profitability levels in NAFTA region equivalent to the rest of the group. In terms of the financial profile, and as Ignacio has already explained in the previous slide, by the end of 2025, we have been able to achieve a very, very solid financial profile, with a leverage of 1.4x net debt to EBITDA, which is the lowest since the IPO and mainly thanks to a very positive free cash flow generation during the last 6 years of more than EUR 1.4 billion. So taking all into account for 2026 in terms of the guidance, what's clear, the focus of the group is going to be to be another year of reinforcing our financial positioning. We are assuming a scenario in terms of market which is going to remain very flat. And in this environment of a flat market, we are guiding in terms of profitability, to be able to increase our EBITDA margin as a reported basis of more than 11.7% EBITDA margin in 2026. That means that we are guiding for an increase of the profitability in our auto market to be above 11.9% and in terms of Gescrap to increase also the profitability of more than 7.4% that we had in 2025. And in terms of our balance sheet, we are, again, looking for a less capital-intensive business profile. And what we are guiding is to have a good group operating cash flow conversion in the range of 35%. So that means that the operating cash flow defined as reported EBITDA minus the net cash CapEx. So again, clear focus in increasing profitability, a commitment to increase profitability in both auto business and Gescrap and improving our financial position by limiting our cash CapEx to the EBITDA that we are going to generate in this year. Moving to Slide 27. In the Phoenix Plan, the last year of the Phoenix Plan, the third year of the Phoenix Plan, we are expecting to complete the plant with a CapEx impact expectation of EUR 21 million and EUR 90 million impact in terms of profit and loss account, so a total of EUR 40 million. And in the total amount if we include the 3 years in the plan of EUR 100 million as guided 3 years ago or 2 years ago. And for 2026, we stress again our commitment to generate an EBITDA of more than 10% in 2026. And of course, a target that is right now very achievable in what we see and of course, a first stage in order to be able to increase the profitability of our North American operations to the level -- average levels of the rest of the group. So that's all with us. So message that full year 2025, we have been able to achieve very solid results in a difficult environment. For 2026, we are not expecting the market to recover, but we commit ourselves to increase our profitability and to increase also our financial profile. And of course, third year of the Phoenix plan, absolutely committed to be able to deliver. So that's all from my side and now open to your questions. Operator: [Operator Instructions]. And our first question came from the line of Francisco Ruiz from BNP Paribas. Francisco Ruiz: I have 3 questions, if I may. The first one is on your guidance for top line. I mean you commented that you do not expect any growth in this year, mainly also with deceleration in Asia. But mainly I still remember the old stamp when we talk about the -- I mean, the increase on growth above the market due to the increase of outsourcing. I mean, what is this driver? I mean it's already over. And on the other hand, I mean, could we think that the flat growth that the market expected and you are also assuming is because you are projecting nonprofitable projects that in the past you used to assume? The second question is a more modeling question. And if you could give us what's the split of the EUR 34 million extraordinaries in the different divisions -- and if this is something what we could expect also in the future or there are more contracts like this to be accounted in 2026 or '27? And last but not least is on the leverage. I mean, you are reaching a level, which is well below, I mean all-time low. What are you going to do with the cash, I mean, from here? Francisco Jose Riberas de Mera: Okay. Thank you very much for your questions. In terms of the revenues, in terms of the top line, it's true that we are not giving a clear guidance for that. It's true also that the market has not been growing in the last years. And also, we have been reporting in Europe, we have been quite impacted by the FX. In fact, we have made the analysis. And if we were to have the revenues in the kind of currency levels that we had in 2022, we are losing more than EUR 1.5 billion just because of FX because we are reporting in euros. For this year, we don't see a growth. As mentioned, the market is not assuming any growth. And of course, we are always planning that we will do our best, but we consider that it is better for us now to assume that we need to focus in profitability and rather just to be waiting for volumes to come back. So we are doing our job. We are assuming that the bad news are going to be there, and we are putting a lot of stress in the operations. As you know well, because you know us for years, we have been growing for many years. We have a very good position in the market. We have this kind of position with the traditional customers and also with the new customers. And that's why I feel very comfortable that our positioning and our market share remains quite intact. In terms of the leverage that you mentioned, I think it is true that we have reached this 1.4x, which is below all the different levels. I think for us, right now, the focus is in the cash flow generation. I think it's very clear for us. And what to do in the future with that is something that is not now our first priority. Of course, as we have already commented, the market that will have some opportunities. There will be some consolidation. There will be opportunities to increase the remuneration to shareholders. But today, it's very early. Today, I think the clear focus for us is to really focus on profitability and focus and generate a very sound free cash flow. You had another question around the claims. I don't -- I prefer not to provide you with data around what kind of customers or programs or regions. But I think I am quite positive surprised that even though customers are suffering, the kind of negotiations that we are having with them are very positive and I think are fair, not easy, but are fair. And I think the kind of this impact at the end of the day is no more than a compensation of the different expenses that we had in these programs and now these programs are canceled and the customers are doing a clear recognition of what we have been doing for them because they also want to preserve our long-term relationship. So I would prefer not to give you much more details, but probably there will be more -- a little bit more in the -- during 2026. Operator: [Operator Instructions]. And our next question comes from the line of Robert Jackson from Banco Santander. Robert Jackson: First question is related to your comments, Francisco, on the footprint diversification. Could you elaborate more on this comment, give us a bit more detail what the thoughts are on this outlook? That was my first question. Francisco Jose Riberas de Mera: Okay. So if I understand well around our footprint diversification, so that means that we are trying to, of course, to try to invest whenever the markets are growing. Even though, of course, we are trying to preserve our strength in terms of balance sheet. Probably in terms of the more clear bets in terms of growth is India. And India is a place that we are growing. We are investing. We are investing in opening new plants over there and also, which is something which was a kind of surprise to me, increasing in some specific high-tech technologies for that market. And we are growing a lot in areas like specific chassis solutions and also a lot in new hot forming lines. So India is a market that we see growth, and we are investing in that growth. Of course, in terms of growth, there could be other opportunities. There are other markets that we have a very good position like Brazil that we see still some room to grow, areas like, for instance, in Morocco that we are growing. But this is what we are expecting to do that. In terms of where we need to reduce in some extent our position, I think clearly, we are doing year after year some kind of downsizing of our operations in Western Europe. Robert Jackson: Okay. Second question is related to the NAFTA improvements. We saw a significant improvement in the rise in the EBITDA margin from the third to the fourth quarter. Is there -- what are the main drivers behind these relevant increases? Or is it just a general improvement? Ignacio Vazquez: Well, Robert, just to confirm, you're asking because we cannot hear you very well. You're asking about EBITDA margin drivers in fourth quarter? Robert Jackson: Yes. Yes. EBITDA margin in NAFTA, more specifically the improvement in NAFTA, in NAFTA, yes. Why is the NAFTA EBITDA margin increased so significantly. Just to get a better understanding looking forward into the next few -- into 2026? Francisco Jose Riberas de Mera: Yes. Well, I think, Robert, as you know, we usually have some kind of increase in the EBITDA margin in the fourth quarter compared with the -- that happened also in 2024. So it's in line with the trend that we have every year because we have -- and we have also this year some kind of agreements by the end of the year, for instance, when we are trying to be paid by the different agreements with customers around tooling and programs. So basically, it's a kind of trend that we have that we try to do this settlement and accounting of these agreements and negotiations with customers by the end of the year. So that's why basically we have this EBITDA margin in the fourth quarter more than the average EBITDA margin of the previous quarter, but this was very similar to the kind of evolution we had in 2024. Robert Jackson: Okay. I was just wondering whether there was any specific changes on an operational level, but you've answered my question. Operator: There are no further questions from the conference call at this time. So I will hand back to the management team. Thank you. Ana Fuentes: Well, thank you for your time today. We hope the call has been useful. And as always, the IR team remains at your disposal for any further questions you may have. Wishing you all a very [ good evening ]. Francisco Jose Riberas de Mera: Okay. Thank you. Ignacio Vazquez: Thank you very much.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 Ducommun Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Suman Mookerji, Senior Vice President and Chief Financial Officer. Please go ahead. Suman Mookerji: Thank you, and welcome to Ducommun's 2025 Fourth Quarter Conference Call. With me today is Steve Oswald, Chairman, President and Chief Executive Officer. I'm going to discuss certain limitations to any forward-looking statements regarding future events, projections or performance that we may make during the prepared remarks or the Q&A session that follows. Certain statements today that are not historical facts, including any statements as to future market and regulatory conditions, results of operations and financial projections, including those under our Vision 2027 game plan for investors, are forward-looking statements under the Private Securities Litigation Reform Act of 1995, and are, therefore, prospective. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In addition, estimates of future operating results are based on the company's current business, which is subject to change. Particular risks facing Ducommun include, amongst others, the cyclicality of our end-use markets; the level of U.S. government defense spending; our customers may experience changes in production rates or delays in the launch and certification of new products; timing of orders from our customers, which are subject to cancellation, modification or rescheduling; our ability to obtain additional financing and service existing debt to fund capital expenditures and meet our working capital needs; legal and regulatory risks, including pending litigation matters generally and as well as any potential losses arising from third-party subrogation claims related to the Guaymas Performance Center fire that may become material; the cost of expansion, consolidation and acquisitions, competition, economic and geopolitical developments, including supply chain issues; our ability to successfully implement restructuring, realignment and cost reduction initiatives that could adversely impact our ability to achieve our strategic objectives; international trade restrictions and our ability to obtain necessary U.S. government approvals for proposed sales to certain foreign customers; the impact of tariffs and elevated interest rates, risks associated with a prolonged partial or total U.S. government shutdown; the ability to attract and retain key personnel and avoid labor disruptions; the ability to adequately protect and enforce intellectual property rights, pandemics, disasters, natural or otherwise and risk of cybersecurity attacks. Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed from time to time with the SEC as well as the press release issued today for a detailed discussion of the risks. Our forward-looking statements are subject to those risks. Statements made during this call are only as of the time made, and we do not intend to update any statements made in this presentation, except if and as required by regulatory authorities. This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for a reconciliation of the GAAP to non-GAAP measures referenced on this call. We have filed our 2025 annual report on Form 10-K with the SEC. I would now like to turn the call over to Steve Oswald for a review of the operating results. Steve? Stephen Oswald: Okay. Thank you, Suman, and thanks, everyone, for joining us today for our fourth quarter conference call. Today, and as usual, I will give an update of the current situation of the company, after which Suman will review our financials in detail. Let me start off again on this quarterly call with Ducommun's Vision 2027 game plan for investors as we exit our third year of execution and enter the fourth on very strong footing. Strategy and vision were developed coming out of the COVID pandemic over the summer and fall of 2022, unanimously approved by the Ducommun Board in November 2022 and then presented the following month in New York to investors, where we got excellent feedback. Since that time, Ducommun's management has been executing the strategy by increasing the revenue percentage of engineered products and aftermarket content, which is at 23% this year, up from 15% in 2022, consolidating our rooftop footprint in contract manufacturing, continuing our focused acquisition program, executing the offloading strategy with defense primes in high-growth segments, driving value-added pricing and expanding content on key commercial aerospace platforms. All of us here as well as my fellow Board members continue to have a high level of conviction in the Vision 2027 strategy and financial goals and believe the market catalyst ahead presents a unique value creation opportunity for shareholders. The Q4 2025 results show again that strategy and initiatives are working with gross and adjusted EBITDA margins at record levels and tracking to meet and exceed our Vision 2027 goals with much more opportunities to come for DCO. I'm also very pleased to announce that our next investor conference will be held this September in New York on the 17th, and we will present the next 5-year vision for DCO as a follow-up to our current Vision 2027. I strongly believe Vision 2032 will be very compelling for shareholders, and I look forward to it. We will announce further details of the event in the spring. For Q4, I'm pleased to report that revenues reached a new quarterly record of $215.8 million or 9.4% over last year, beating our prior record of $212.6 million set last quarter and making this our 19th consecutive quarter with year-over-year growth in revenue. We achieved this with our fourth consecutive quarter of double-digit growth in DCO, military and space segment. Our commercial aerospace segment, which has been challenged all year due to destocking at BA and SPR, returned to growth in the quarter. I'm also happy to report that this quarter, the company's remaining performance obligation, RPOs grew to a new record level of $1.1 billion, increasing $75 million sequentially. The growth in RPO during the quarter was in our defense businesses and primarily in missiles, as you would expect. We closed on a number of opportunities and are well positioned for continuing revenue growth, and we expect the bookings momentum to continue in 2026. One of the highlights in the quarter was orders for the MIR program for DCO's Tulsa and Huntsville, Arkansas operations that totaled more than $80 million at good margins, a major win and one of the highest in DCO's history in terms of dollars and for just one program. Our book-to-bill overall was 1.3x in Q4, a great result for DCO after a very strong book-to-bill in Q3 as well. Gross margins also grew $13.4 million to 27.7% in Q4, a significant increase from 23.5% last year in Q4. While the quarter did benefit from a nontypical favorable product mix, which helped margins by approximately 100 basis points, the trend in gross margin still has been very positive throughout 2025 and positions us well to achieve our Vision 2027 margin targets. We continue to realize benefits from our growing Engineered Products portfolio with aftermarket, strategic value pricing initiatives, restructuring actions and productivity improvements. We have transitioned all programs from our closed facilities and are seeing meaningful cost savings in our P&L already with an expected run rate of $11 million to $13 million savings still on target by the end of 2026. For adjusted operating income margin in Q4, the team delivered an impressive 11.4%, well above the prior year of 8.2%. This was supported by growth in adjusted operating income margins in both the Structural Systems and Electronic Systems segment during the quarter. Adjusted EBITDA continues to improve towards our Vision 2027 goal of 18% in 2027 from 13% in 2022. DCO achieved 17.5% in the quarter or $37.9 million, up $10.6 million from Q4 2024. This includes about approximately 100 basis points of benefit from mix, which I mentioned earlier, but even without that represents tremendous progress in the past 3 years and a terrific job by the DCO team. GAAP EPS was $0.48 per diluted share in Q4 2025 versus $0.45 for Q4 2024. With the adjustments, diluted EPS was $1.05 a share in Q4 2025, $0.30 above adjusted diluted EPS of $0.75 in the prior year quarter. The higher GAAP and adjusted diluted EPS during the quarter was driven by improved operating income. Full year 2025 revenue grew 5% to a record $825 million. Our military and space business grew 14% in 2025, driven by strong performance across missiles, military rotorcraft, fixed wing platform and radar. Our commercial aerospace business declined as communicated early in 2025 by 7%, with destocking at BA and SPR headwind all year. Our noncore industrial businesses grew 3% year-over-year, providing nice volume and margin without interrupting our military and commercial aerospace focus. Full year 2025 adjusted EBITDA margins expanded 160 basis points to 16.4%, another year of record-breaking performance as we make steady progress towards our Vision 2027 target of 18% EBITDA margins. In 2025, we closed on over $915 million in bookings, a full year book-to-bill of 1.1, with continued positive news coming out of commercial aerospace and increased Department of War budgets, including the ramp-up in missile production, we have strong confidence in the momentum from both our primary end markets. We also announced in early Q4 that we entered into a binding settlement term sheet to resolve the Guaymas, Mexico fire litigation against us. The term sheet provided for, among other things, the final dismissal of the Guaymas fire litigation against Ducommun with prejudice and the release of claims against us in exchange for issuing a payment of $150 million, $56 million of that was funded by our insurance carriers. In addition, we also settled two ancillary subrogation claims of $1.35 million and $4 million, respectively. The Guaymas fire occurred in June of 2020. We recorded settlements to related costs of $7.6 million in Q4, and those charges are reflected in our GAAP earnings -- on our results. Except for the ancillary subrogation claim of $4 million, payment was made in November, and that is reflected in our Q4 cash flow used in operating activities. On the outlook for 2026, we expect to see continued strength in the defense business and a recovery in our commercial aerospace business during the second half once we get through destocking. We expect mid- to high single-digit revenue for the year of 2026, with growth ramping up throughout the year. Based on the current order book, we are expecting first half of 2026 to be in the low mid-single-digit range with growth ramping up in the second half of the year. In addition, tariffs have not been a material impact on results, and we expect that to continue, a good story for our investors. Now let me provide some additional color on our markets, products and programs. Beginning with our military and space sector, we saw revenues of $124 million compared to $109 million in Q4 2024. This represents a growth of 13%, was driven by strong performance in our military fixed wing and rotorcraft franchise as well as satellite-related business and continued growth in missile and radar. In addition, our facility consolidation and product line moves are now complete with Apache tail rotor blade now in production at its new location in Coxsackie, New York, the TOW missile case in production in Guaymas, Mexico and the Tomahawk in production at Joplin, Missouri. We have all heard the recent announcement from the Department of War to ramp up production capacity on key missile programs. Department of War has entered into long-term framework agreements with Raytheon, our largest customer, and Lockheed Martin to significantly increase production on key programs, including PAC-3, THAAD, AMRAAM, SM3, Tomahawk, amongst others. DCO is well positioned as an existing supplier with defense primes on all these programs and is in great shape with our capacity at our operations to fully benefit. These frameworks, agreements and DoD push to increase production should be another strong catalyst for growth in our military and space segment starting in 2027 and beyond. In 2025, DCO's missile business grew 20% compared to 2024, and we expect this trend to continue. During Q4, we booked in excess of $130 million in orders in our missile franchise with a book-to-bill exceeding 4x. We had significant wins on MIR, Tomahawk, AMRAAM, Standard Missiles and THAAD. With missile production expected to ramp up very meaningfully over the next few years, we expect this to be a big driver for growth. This is supported by demand to replenish stockpiles in the United States and also support FMS order activity. For context, Ducommun is a supplier on over a dozen key missile platforms, including AMRAAM, MIR, PAC-3, SM2, SM3, SM6, Tomahawk, Naval Strike and TOW amongst others, which is excellent news for the company and our shareholders. Within our commercial aerospace operations, fourth quarter revenue increased 1% year-over-year to $82 million as we continue to work through Boeing and Spirit destocking on the MAX. In the quarter, we had growth in both 787 and A320 as well as in-flight entertainment compared to Q4 of 2024. The outlook is promising as Boeing increases their 737 MAX build rates from 38 to 42 and then to 47 later this year and with the new production line in Everett going live this summer. Completion of the Spirit acquisition has also helped with improving operations. We expect destocking for our products on the MAX, particularly those flowing through the legacy Spirit operations to persist through the first half of 2026 and gradually ebb in the back half of the year. The steady progress by Boeing ramping up production rates will certainly help with this. Additionally, Boeing is building momentum on 787 builds and making big investments in the South Carolina facility to increase capacity and ramp up production to 10 by the end of this year, with a further rate ramp in 2027 and beyond. DCO has 150,000 per shipset content on this platform, so this will help us as well. We're also monitoring the production at Airbus as they work through their engine issues, but overall, we remain very optimistic about DCO's commercial aerospace business in 2026 with much more growth ahead in 2027 and beyond as we get past destocking and industry supply issues. Our balance of defense and commercial aerospace businesses helped drive growth for the company in 2025. We very much like the mix and balance it provides. The outlook going forward is very positive for both end markets, and that is exciting news for the company and its shareholders. With that, I'll have Suman review our financial results in detail. Suman? Suman Mookerji: Thank you, Steve. As a reminder, please see the company's 10-K and Q4 earnings release for a further description of information mentioned on today's call. As Steve discussed, our fourth quarter results reflect another record quarter of revenue with strong growth across most of our military end markets, including fixed wing aircraft, rotorcraft, missiles and radars. Gross margin and EBITDA margins both reached new record levels. And while favorable mix contributed about 100 basis points to our results, margins would have been very strong even without that benefit. We have completed our facility consolidation projects, and this will drive further synergies in 2026 as we ramp up production of the various product lines that were moved. These actions, along with our strategic pricing initiatives drove continued gross margin expansion in Q4 and keeps us on pace to achieve our Vision 2027 goal of 18% EBITDA margin. Now turning to our fourth quarter results. Revenue for the fourth quarter of 2025 was $215.8 million versus $197.3 million for the fourth quarter of 2024. The year-over-year increase of 9.4% reflects strong growth in military and space of 13%, driven by increases in fixed-wing aircraft, military rotorcraft, missiles and radars. Our commercial aerospace business returned to growth in the quarter with revenues up 1% year-over-year with growth in A320, 787 and Bell helicopters, offsetting lower sales on the 737 MAX. We posted total gross profit of $59.8 million or 27.7% of revenue for the quarter versus $46.4 million or 23.5% of revenue in the prior year period. We continue to provide adjusted gross margins as we had certain non-GAAP cost of revenue adjustment items in the prior year period relating to inventory step-up amortization from our acquisitions. On an adjusted basis, our gross margins were 27.7% in Q4 2025, up 370 basis points from 24% in Q4 2024. I also want to add that we did not see any material impact from tariffs in the fourth quarter. And as Steve mentioned, we do not anticipate any significant impact to our P&L at this time. We are a U.S. manufacturing business with U.S. employees and generate over 95% of revenue from our domestic facilities. Our revenues are also largely to domestic customers with U.S. revenues in excess of 85% in 2025. Revenues to China were 3% in 2025, mostly one customer for Airbus, and there has been no impact to those volumes or orders at this time due to the tariffs. Our supply chain is also largely domestic with less than 5% of our direct suppliers being foreign. Some of our domestic suppliers do source material from outside the United States, but even that is a very manageable spend with China being a low single-digit percentage. We expect to largely mitigate the impact of tariffs on our material spend through military duty-free exemptions, alternate sourcing of materials from domestic suppliers or by passing on the impact to our customers. Ducommun reported operating income for the fourth quarter of $14 million or 6.5% of revenue compared to operating income of $10.4 million or 5.3% of revenue in the prior year period. Adjusted operating income was $24.6 million or 11.4% of revenue this quarter compared to $16.1 million or 8.2% of revenue in the comparable period last year. The company reported net income for the fourth quarter of 2025 of $7.4 million or $0.48 per diluted share compared to $6.8 million or $0.45 per diluted share a year ago. On an adjusted basis, the company reported net income of $16.2 million or $1.05 per diluted share compared to adjusted net income of $11.4 million or $0.75 in Q4 2024. The GAAP net income and higher adjusted net income during the quarter was driven by the higher adjusted operating income after excluding litigation settlement and related costs. Now let me turn to our segment results. Our Structural Systems segment posted revenue of $96 million in the fourth quarter of 2025 versus $90 million last year. The year-over-year change reflected $5 million of higher revenue in our military and space business, driven by military rotorcraft and fixed wing aircraft platforms. Our commercial aerospace business grew 1% with growth on Airbus platforms and 787 offsetting weakness on the 737 MAX. Structural Systems operating income for the quarter was $14.6 million or 15.2% of revenue compared to $3.2 million or 3.6% of revenue for the prior year quarter. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 17.8% in Q4 2025 versus 9.2% in Q4 2024. The increase in year-over-year margin was driven by savings from plant consolidation and favorable sales mix. Our Electronic Systems segment posted revenue of $120 million in the fourth quarter of 2025 versus $107 million in the prior year period. The year-over-year change reflected $9.4 million in higher revenues in military and space applications, driven by strong growth in fixed-wing aircraft, rotorcraft, missiles and radar. Our industrial business increased $3 million during Q4. Commercial aerospace in the quarter was flat to prior year with in-flight entertainment and other commercial aerospace offsetting lower revenues on the 737 MAX. Electronic Systems operating income for the fourth quarter was $22 million or 18.4% of revenue versus $19 million or 17.7% of revenue in the prior year period. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 18.6% in Q4 2025 versus 17.7% in Q4 2024. The year-over-year increase was driven by higher manufacturing volume and favorable sales mix. Next, I would like to provide an update on our restructuring program. As a reminder and as discussed previously, we commenced a restructuring initiative back in 2022. These actions were taken to better position the company for stronger performance in the short and long term. This included the shutdown of our facilities in Monrovia, California and Berryville, Arkansas and the transfer of that work to our low-cost operation in Guaymas, Mexico and to other existing performance centers in the United States. I'm happy to report that we have closed out the restructuring program as of Q4 and have moved all transitioning programs into production at the receiving facilities. Production is now ongoing on rotor blades for the Apache helicopter at our Coxsackie, New York facility, 737 MAX spoilers and TOW missile cases in Guaymas, Mexico and Tomahawk components in our Joplin, Missouri facility. During Q4 2025, we recorded $0.6 million net in restructuring charges. We do not expect additional restructuring expenses in 2026 related to this program. As previously communicated, we expect to generate $11 million to $13 million in annual savings from our actions and have already seen meaningful realization of savings in 2024 and 2025. We expect the synergies to further ramp in 2026 as the receiving facilities move up the learning curve and move to full rate production. Turning to liquidity and capital resources. In Q4 2025, we used $74.7 million in cash from operating activities as we paid out the litigation settlement-related items. Excluding the $101.2 million in payments related to litigation settlement, non-GAAP adjusted cash provided by operating activities was $26.5 million during the quarter compared to $18.4 million in Q4 of last year. The improvement was due to higher adjusted operating income and lower cash taxes, partially offset by higher operating working capital. For the full year 2025, we used $33.4 million in cash flow from operating activities as we paid litigation settlement-related items of $103.2 million. Excluding these onetime litigation settlement-related payments, non-GAAP adjusted net cash provided by operating activities was $69.8 million, which is more than 2x the number from 2024 of $34.2 million. This strong improvement in operating cash flow is great news for the company. Also, in Q4, the company amended its credit agreement, which now includes a $200 million term loan and a $450 million revolver. This new $650 million facility lowers our cost of capital and gives us incremental capacity to execute on our acquisition strategy. As of the end of the fourth quarter, we had available liquidity of $390 million, comprising of the unutilized portion of our revolver and cash on hand. Interest expense in Q4 2025 was $3.5 million compared to $3.6 million in Q4 of 2024. The year-over-year improvement in interest cost was primarily due to lower interest rate costs, offset by a higher debt balance. In November 2021, we put in place an interest rate hedge that went into effect for a 7-year period starting January '24 and pegs the 1-month term SOFR at 170 basis points for $150 million of our debt. The hedge is still in place and will continue to drive significant interest cost savings in 2026 and beyond. To conclude the financial overview, I would like to say that the fourth quarter results demonstrate that our Vision 2027 strategy is working and that we are positioned well for 2026 and beyond. I'll now turn it back over to Steve for his closing remarks. Steve? Stephen Oswald: Okay. Thanks, Suman. In closing, look, 2025 was a great year and Q4 another success for DCO and its shareholders to continue to drive our Vision 2027 strategy. So I'm very pleased with that. We achieved another quarter of record revenue and gross margins and adjusted EBITDA margins were also at records of 27.7% and 17.5%, respectively. The company is also well positioned to meet and exceed our Vision 2027 target of 25% plus of engineered product revenues with full year 2025 at 23%. As everyone knows, driving this percentage as high as possible is our #1 strategic focus, and we're fully committed to realizing that as we go forward. Finally, with the continued strength in defense activity and commercial build rates heading higher, I'm also very optimistic about what lies ahead in 2026 and the next few years for our shareholders, employees and other stakeholders. Okay. So with that, let's go to questions. Thank you for listening. Operator: [Operator Instructions] Our first question comes from John Godyn from Citi. Unknown Analyst: This is Bradley Eyster on for John Godyn. So I just wanted to follow up on the commentary about the inventory destocking that you guys previously highlighted. And I also want to look at it in conjunction with the movements we saw in inventory working capital in the fourth quarter. So I know you outlined headwinds in the first half and -- and we're expecting an improvement in the back half of this year. But with the working capital in the fourth quarter being pretty favorable, how should we think about the magnitude of the headwinds you previously called out for the first half '26? Is there any change here? Are you seeing an acceleration of inventory draw higher than expected? I'm just curious how to look at this one. Suman Mookerji: I think we're -- our expectations are in line with previous comments on destocking. We expect there to be continued destocking, and there are two elements of destocking, right, destocking at our customer and destocking in our facility. Destocking in our facility does help reduce working capital tied up in the business. So we expect some of that to happen, as previously discussed in Q1 and Q2 and for the rest of the year. I think from an external destocking perspective, we see more of that happening in the first half and then ebbing as we get into the second half of 2026 as we see inventory getting burned down, mainly at Spirit -- the legacy Spirit or Boeing Wichita and also, to some extent, at Boeing Direct. Unknown Analyst: Got it. I also want to switch gears to the defense side. So with all the primes talking about increasing their investment in capacity. I was curious if you guys can talk a bit more about your potential medium-term opportunities here, like once this capacity begins to take effect, do you benefit proportionally of this capacity increase? Are there opportunities for you to grow faster than the market? Any color I could probably here would be appreciated. Stephen Oswald: Yes. Let me just jump in here. Well, first of all, I mean, this -- we really call it, at least for missiles that we call it a franchise within Ducommun because this has been one of our legacies is -- I mentioned in the script before the questions that we go across all the major missile programs. The good news is that these are all things we know how to make. These are things that are already in production. And the other thing that I mentioned is that we have a significant amount of capacity for most and where we might have a little less that we're putting CapEx into that. So that's all very positive. Now on the other side, we're not the OEM. So we have to work with the OEM and wait for the orders. But they need to get the orders from either the State Department through FMS or the Department of War. So we really see this major sort of move in 2027. We are in contact and Raytheon is having meetings and Lockheed as well. And so we couldn't be happier with all the agreements that are happening. It's just going to -- it's going to be a little bit of a lag just because these things take a little bit of time, unfortunately. Stay tuned. Operator: Our next question comes from Mike Crawford from B. Riley Securities. Michael Crawford: Maybe just to dig down into that a little bit more. I mean you've optimized your footprint, you're done with the restructuring. And could you characterize like how much room you have to grow in your new footprint without, let's say, growth CapEx? Stephen Oswald: I think we -- I mean, this would be a high-level number maybe, but it's at least we have 30% -- I mean I'm being conservative. We probably have 30% of room in our factories right now for this missile increase. So I'd say we're... Suman Mookerji: And the CapEx -- additional incremental CapEx required to expand that capacity is not significant. It is something that we can accommodate within our regular CapEx budget and can implement quickly. Defense electronics capacity increases for the products we make do not entail significant CapEx or take a lot of time to put in place. So we are actively evaluating all other capacity across each of our factories in the context of all this potential new business and making investments where needed to adjust capacity. But as Steve said, here in the near term over the next 12 months, given the at least 30% existing open capacity, there is no issue in meeting demand. Stephen Oswald: Yes. Mike, let me give you an example. We have a factory in Joplin, Missouri that that's where the Tomahawk is going to go. Joplin runs about $100 million a year in revenue. They do world-class cabling and other things and -- mostly defense, but some commercial, too. And we're putting the Tomahawk in a building that's already standing there that wasn't utilized. And so that's why we have that 30-plus percent. And we think that we could do $200 million in revenue in the next 3 or 4 years there with what we have. So that's very exciting to us for just one plant that's a big mover for DCO. Michael Crawford: Great. No, that's super helpful. And then just maybe one separate question for me. And just on -- you do call out that you're partnering with primes on hypersonics and counter-hypersonic programs. Is that more on the structural side as opposed to the electronics? Or what are you doing there? Suman Mookerji: More on the electronics side with interconnects, ruggedized interconnects that we have presence on hypersonics. Stephen Oswald: Yes, a lot of cables, Mike. Operator: Our next question comes from Ken Herbert from RBC. Kenneth Herbert: Steve and Suman, nice quarter. The exit rate on margins is pretty strong. How do we think about the puts and takes on margins in '26 and sort of what's implied in terms of margin expansion on the, call it, mid- to high single-digit top line outlook? Stephen Oswald: You want to take that? Suman Mookerji: Sure. Ken, excellent point and question. I would look at the exit rate not based off of Q4's EBITDA of 17.5%, but versus look at the blended EBITDA margin over the year and view that as an exit rate. As we noted, there was about 100 basis points of favorability driven by unusually or atypical product and business revenue mix in the quarter, which helped margins, but we are seeing ourselves exiting closer to the 16.5% on EBITDA as the baseline for 2026, with improvement opportunities, especially as we go into the back half as revenue scale as well as the production ramps up on the product lines that have been moved in 2025. Stephen Oswald: Yes. I think that's fair, Ken. I think that's probably right. I mean we had a little bit of extra benefit in Q4. Of course, we'll take it, but I think the other number is a better one to use. Kenneth Herbert: Okay. That's helpful. And increasingly, the 2027 targets look increasingly attainable. What -- maybe not today, but when do you think you'd be prepared to provide an update to those numbers, especially on the margin potential of the business? Stephen Oswald: Yes, that's a good question. Thank you for bringing that up. That will be in September. So when we announce our -- we have our investor meeting, the first part of it will be an update on the Vision 2027, and then we'll roll into the Vision 2032 and our plans for the company and investors. Kenneth Herbert: Perfect. And just one final question. Can you level set us on what missiles and munitions represent within the defense portfolio? Because it sounds like the growth opportunity in that business is clearly going to be much better than company average growth. Suman Mookerji: Absolutely, Ken. So missiles are about 1/4 of our defense business. And as you noted, the opportunity is significant for us going forward there. Stephen Oswald: Yes, Ken, that MIR order was a big deal for us. We don't see $80 million orders very often here. We love them, but we don't see them very often. So we were -- it's a long time coming, but that's a nice shot in the arm for the company. Operator: Our next question comes from Tony Bancroft from Gabelli Funds. George Bancroft: Great call, great quarter. Well done. Just you talked about a little bit before, but more in broader strokes, with this announcement of a potential $1.5 trillion budget, even if it goes over a longer period of time, it's still materially much larger than I think most people would even expect. How do you look at that as far as keeping up with the growth, assuming directionally that's where it's going? I know you said you have capacity, but I mean, quadrupling these numbers we've seen, are you able to do it? And then I guess, at some point, there is going to be a run rate and normalization? And how do you guys look at overcapacity? That might even be an issue right now for quite a while, but do you think about that? How do you look at that? And then maybe on top of that, a $1.5 trillion budget has got to be a lot of new opportunities. Would you guys be looking at adjacencies or even other areas to involve yourself in? Stephen Oswald: Yes. Thank you, Tony. Good to be with you. I think obviously, overall, it's a great opportunity for DCO. We're -- the nice thing is our relationships with defense primes are very strong. I mentioned RTX is our largest customer. So we're critical to their success, which is what we want, right? So we're -- and we're sole sourcing a lot of things. And so that's positive. If you can see, we've done a lot of good work with Northrop Grumman in the past. I've talked about that when I first came on and through the years about getting relationships with other primes other than just having this huge number of Raytheon. And we've done that and Lockheed as well and working on other things. So we think it's -- we read the headline and took our breath away a little bit, but we feel really good about it. And on the capacity side, again, we have really good footprints in the Midwest for these electronic systems. We have, again, I think, at least 30% in our back pocket. And that's just with, as Suman mentioned, regular CapEx feeding every year for the company. So nothing extraordinary you're going to hear from us, I'm sure, in the next few years. And lastly, we're continuing to work on building relationship with new warfare and building relationships with -- we already have a relationship with GA and other companies to take advantage of the CCA warfare program as well as others, hypersonics. So our defense business is strong. It's only going to get stronger. It's only going to get bigger. Operator: [Operator Instructions] Our next question comes from Sam Struhsaker from Truist Securities. Samuel Struhsaker: I guess, first and foremost, I'm a little bit curious just on the destocking on the MAX. I'm curious, is there any way you could maybe break out, I guess, kind of how much of what remains is internal versus external? Suman Mookerji: Yes. It is more external than internal. I wouldn't say that -- we haven't really broken that out publicly. But I would say that yes, it is more external versus internal on the MAX. And for context, let's also keep in mind that the large commercial platforms are about -- including both Boeing and Airbus are about 50% of our commercial aerospace revenues. So the impact of destocking as well as the recovery needs to be weighted in our commercial aerospace forecast accordingly. Stephen Oswald: Yes. And I also say this, we had 1% growth in Q4, which obviously is nice. But part of that, we had a big revenue bump up in in-flight entertainment versus Q4 2024. So that was one of the big reasons we got to the positive side in Q4. So yes, we don't break it out. We're -- the best news is that as we go forward here, we got all confidence that Kelly and Boeing are going to do their thing. And we're going to -- this is -- there's better days ahead, let's put it that way, okay, because the pull, the demand side is going to help a big time on this. Samuel Struhsaker: Got it. Absolutely. And I mean, I guess, kind of in turning to maybe the better days ahead, so to speak, are you guys saying that you're totally prepared once the destocking is out to switch production to whatever the rate increases are at Boeing and Airbus? Is it kind of move up throughout the year? Stephen Oswald: Yes, you kind of came in or come out, but I think what you asked is that are we ready for the build rate increases for both Airbus and BA? Samuel Struhsaker: Yes. Stephen Oswald: Yes, 100%. We can't wait. We're waiting for the year. Samuel Struhsaker: Awesome. And then if I could just sneak in one last one. All the production lines that just recently got moved in and out are now up and running with their new facilities. So they're not necessarily all quite at full run rate. But I was curious if you could put any kind of details around the cadence of those all getting to full run rate and if there will be any kind of margin benefit that you might associate with that once they are running at full rate. Suman Mookerji: So I think we expect that to get to full rate by the second half of this year. We had projected $11 million to $13 million in total synergies as of Q4 of 2025, I would say approximately half of that is in the P&L on a run rate basis with another $6 million to $7 million to go, and that will come into the P&L over the course of this year, getting to run rate by the end of this year. Stephen Oswald: Yes. The last one is the Tomahawk. We made 18 cables for it. And there's a lot has to happen on that missile. And that's the one we are still working on a few things. That will be second half for sure. Operator: Our next question comes from Connor Dessert from Goldman Sachs. Connor Dessert: You've got Connor Dessert on for Noah Poponak today. I appreciate the commentary that you guys had about upsizing the credit facility so that you could execute more on the acquisition strategy. I was curious if you guys could give us an update on what the M&A market is looking like from your perspective today. We've heard some other A&D suppliers comment that activity has picked up, and there are a lot more potential deals out there with more willing sellers. So I was curious if you guys are seeing a similar level of activity for the assets that are in your target range and how competitive some of the bidding processes are for those assets? Suman Mookerji: Yes, we are seeing increased activity. We are very much involved in any and all processes that involve assets with engineered products within our size range. It is competitive. There are -- and valuations are not cheap, but we'll remain disciplined. We continue to evaluate multiple opportunities. And we think that there are opportunities where we can create value at the current multiples at which these assets are trading. Stephen Oswald: Yes. We're seeing good things. More to come on that. Connor Dessert: Okay. That's helpful. And then just kind of a follow-up on that. As I look out through '26 and '27, I think Vision 2027, you guys have had a $75 million revenue contribution placeholder from M&A. It starts to look a little more possible that at least the bottom end of that range could be reached just organically from here. Is that kind of the right way to think about it given some of the pickup in momentum, especially in some of the defense areas of the business? Or in your guys' view, does that Vision 2027 still rely on that $75 million placeholder from M&A? Suman Mookerji: Yes. I would say, yes, it does getting to that -- within that range will definitely require the M&A piece, mainly driven by commercial aerospace recovery pace that we have seen versus what everyone would have naturally expected back in December of 2022 when we put that plan together. The production outlook at that point in time versus reality today is very different. Defense has been great, and we'll continue to see strong growth. We should continue to remain bullish but some of that will happen in 2027 and beyond in terms of production ramp-up on some of these missile platforms. So the longer-term outlook for the company and defense is very strong, but it's -- not all of it is going to come into 2026 and 2027. Stephen Oswald: But we're going to -- we're working on the $75 million. I mean, we purchased BLR in 2023. So that's part of the $75 million, which is helping, but we've got more work to do on the $75 million, and we're hard at it there, Connor. Operator: I am showing no further questions at this time. I would now like to hand it over to Steve Oswald for closing remarks. Stephen Oswald: Great. Thank you. And again, thanks for joining us. I very much appreciate your time this morning. Also all the excellent questions. We always appreciate the dialogue after our script -- reading our scripts. So I thought that was great. We are excited about the year. We're also looking forward, as I mentioned earlier, to our September meeting in New York, and we hope that everybody can either make it personally in-person or online. We think it will be an exciting, exciting day for not only to update on the Vision 2027 progress, which we're happy about, but also talk about our big future together. So with that, I'll leave it, and have a great and a safe day. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good afternoon. This is the conference operator. Welcome, and thank you for joining the Technip Energies' Full Year 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Phillip Lindsay, Head of Investor Relations. Please go ahead, sir. Phillip Lindsay: Thank you, Maria. Hello, and welcome to Technip Energies' financial results for full year 2025. On the call today, our CEO, Arnaud Pieton, who will discuss our full year performance and business highlights. This will be followed by CFO, Bruno Vibert, who will discuss our financials. Arnaud will then return to the outlook and conclusion before opening for questions. Before we start, I encourage you to take note of the forward-looking statements on Slide 3. I'll now pass the call over to Arnaud. Arnaud Pieton: Thank you, Phil, and a very warm welcome to our 2025 full year results presentation. Before discussing the highlights, let me remind you of what truly sets Technip Energies apart. We are focused on delivering controlled quality growth underpinned by our robust selectivity-driven backlog and differentiated market positioning. We are frontrunners in energy and decarbonization, harnessing our distinct strength and driving transformation to unlock superior profitability. Our strong net cash balance sheet gives us real payout, and we consistently convert most of our profits into free cash flow. And as we execute our business strategy, channel capital into dividend growth and value-enhancing investments, we are accelerating value creation for our shareholders. Turning to the highlights. 2025 was a year of successful delivery. We demonstrated strong execution across our global portfolio. We strategically positioned the company for sustained profitable growth. And through some disciplined capital deployment, we enhanced our earnings quality, reinforcing the resilience and stability of our business model. In terms of headline figures, 2025 marks our strongest year yet with revenue and recurring EBITDA both rising by 5% to reach new highs at EUR 7.2 billion and EUR 638 million, respectively. Both our business segments delivered year-over-year growth in EBITDA with a robust performance for project delivery and solid margin expansion in EPS to above 14%. Free cash flow, excluding nonrecurring items, increased by 5%, reaching EUR 578 million. And consistent with our capital allocation framework, we are proposing a dividend of EUR 1 per share, up 18% and a EUR 150 million share buyback program. In summary, a solid 2025 that sets a strong foundation for us to achieve our growth objectives. Let me turn now to our execution, beginning with project delivery. Our portfolio continues to demonstrate the power of replication, modularization, digital tools, and we are executing with disciplined management of scope, cost, and risk. To provide perspective into the scale of our operations, at T.EN, our workforce now exceeds 18,000, yet we take on responsibility and care for more than 100,000 across our sites. In 2025 alone, we surpassed 320 million worked hours with zero fatalities. We strive to be the industry's reference on safety. Operationally, across our major projects, we achieved strong progress on LNG execution, including NFE and NFS in Qatar, advancement towards completion of key downstream and petrochemical assets, and solid early progress on decarbonization projects, including Net Zero Teesside and Blue Point No. 1. This performance reflects the culture of operational discipline that defines Technip Energies. And as you know, excellence in execution is the cornerstone of our value proposition and a prerequisite to our continued commercial success. Staying on the execution theme, but now spotlighting TPS, an important component of our equity story. In 2025, TPS delivered solid EBITDA margins, advancing by 140 basis points year-over-year to more than 14%. This improvement was driven by a strong performance in our product activities, including ethylene furnace deliveries. Furthermore, catalyst supply and strength in project management consultancy also contributed to this margin expansion. What this performance clearly demonstrates is the potential of TPS to drive margin accretion and improved quality of earnings for the group. 2025 was further distinguished with the completion of our first major acquisition. This transaction exemplifies our disciplined capital allocation strategy to enhance our technology and products offering. It extends T.EN's capability across materials science and the catalyst value chain and enhances our ability to deliver high-performance process critical solutions to our clients. With around 70% of its revenues tied to operating expenditure, AM&C materially expands our TPS offering across the asset life cycle. In terms of financial impact, we closed the transaction on December 31, and the cash outlay is reflected in our year-end balance sheet. As a result, TPS will benefit from a full year contribution in 2026, which we anticipate exceeding EUR 200 million in revenue with EBITDA margins of around 25%. In summary, AM&C is immediately accretive and accelerates our TPS growth strategy. It benefits from positive long-term market trends and establishes a strong platform to unlock further value for our stakeholders. Let me now turn to the significant announcement made yesterday, the award of North Field West in Qatar. This major EPC contract builds on our FEED engagement and incumbency in the NFE and NFS projects, which are under execution. As we embark on this next phase for NFW, we will deliver 2 state-of-the-art LNG trains, each of 8 million tonnes per year. The project will benefit from something we like very much, replication and consistency in train design, plus it will leverage construction synergies, ensuring efficiency and excellence in execution. The facility will also be complemented by a fully integrated carbon capture system. With this award, Technip Energies has 82 million tonnes per annum of LNG under construction globally. It further strengthens our medium-term visibility and solidifies our leadership in LNG. Before I hand over to Bruno, let me briefly reflect on our sustainability journey to 2025 and the launch of our new roadmap to 2030. Sustainability at T.EN is a core element of our strategy, our culture, and our value proposition. And 5 years into our journey, we can be proud of our progress on many fronts, including the reduction in our Scope 1 and 2 emissions by 46%, our work on human rights and a material gender diversity improvement in our organization. Looking ahead, our journey is evolving. We have enhanced our strategy and developed our 2030 scorecard. It is more business-oriented and further integrate sustainability as a core driver of value creation. This new scorecard, which features in the appendix of today's presentation, aims, in particular, at delivering impact through continued innovation. With that, let me now hand over to Bruno to walk you through the financial performance in more details. Bruno Vibert: Thanks, Arnaud, and good afternoon, everyone. Technip Energies delivered a year of strong execution and high-quality growth in 2025. Turning to the highlights. We achieved record revenues of EUR 7.2 billion and recurring EBITDA of EUR 638 million, both metrics up about 5% year-over-year. The growth was driven by a notably strong performance from project delivery and robust margin in TPS. For reference, in Q4, in acknowledgment of the strong performance delivered, better than expected really, we recorded a supplemental EUR 20 million expense for bonus payments to our employees, which was pretty much evenly split between business segments. This momentum translated into a 4% year-over-year increase in EPS, excluding nonrecurring items, despite lower net financial income. Our strong operational performance also drove healthy free cash flow generation with more than 91% conversion from EBITDA, excluding nonrecurring items. These results provide a solid foundation for continued shareholder returns, which I will discuss later. After the completion of the AM&C transaction at the end of 2025, we maintain a strong balance sheet with net cash adjusted for project-related cash of approximately EUR 1 billion, providing us with significant flexibility for capital allocation. In summary, our teams continue to execute well and deliver our leading financial performance. Turning to our segment reporting. I'll begin with project delivery, where strong growth continues. Revenues rose by 10% year-over-year to EUR 5.4 billion, fueled by major projects in LNG, decarbonization, and offshore, which are advancing through high activity phases. Execution remains solid as evidenced by EBITDA margins consistently in a tight range. Our backlog remains high quality and our margins best-in-class with medium-term upside potential as we progress on the execution of our portfolio. Finally, with some major awards shifting right in 2025, project delivery backlog has declined by 18% year-over-year to EUR 14.4 billion. However, as Arnaud will elaborate, our near-term award momentum is strong, and we anticipate an inflection that will reinforce our growth outlook. Moving to Technology Products & Services, TPS. The clear highlight for TPS in 2025 was margin strength with EBITDA margins up 140 basis points year-over-year to a new record of 14.3%. This was driven by strong performance in our proprietary product activities as well as favorable mix due to catalyst supply and project management consultancy. These margin gains more than offset a 9% revenue decline, impacted by low cycle for chemical as well as foreign exchange. Finally, TPS achieved a book-to-bill of 0.84 as strength in services awards was more than offset by lower T&P awards. As a result of this and FX, TPS backlog fell to just over EUR 1.5 billion. As a reminder, TPS backlog is typically understated by several hundred millions of euros as PMC work is booked only when called up by the customer. Additionally, the inclusion of AM&C, while not a backlog business, provides predictable recurring revenues and is expected to generate over EUR 200 million for TPS in 2026. In summary, a favorable mix driving strong profitability for TPS, and we continue to advance the strategic shift towards higher-value technology solutions and scalable product platforms that enhance the resiliency and earnings power of the segment over the cycle. Turning to other key performance items, beginning with the income statement. Net financial income totaled EUR 89 million, down EUR 30 million from last year, reflecting the downward global trend in interest rates. The effective tax rate at 29.7% was consistent with the upper end of our guidance. Net profit adjusted for nonrecurring items edged higher year-over-year. Notably, we delivered a robust 19% return on equity, underscoring the strength of our earnings relative to equity. Moving to other balance sheet items. Gross debt rose to EUR 1 billion, mainly as a result of commercial paper issuance to partially finance the AM&C acquisition. Commercial paper market conditions were particularly favorable as we were closing the transaction, offering an attractive arbitrage versus prevailing rates on our cash investments. In December, we fully drew down on the EUR 40 million facility from the European Investment Bank as part of the TechEU initiative. This loan supports our R&D in clean energy technologies, including the development of Reju. Finally, T.EN's economic net cash position adjusted for project associated cash is circa EUR 1 billion, ensuring flexibility to invest in value-accretive opportunities and deliver shareholder returns. Now let's take a closer look at our cash flows. Free cash flow, excluding working capital and provisions reached EUR 497 million, with cash conversion from recurring EBITDA at 78%. However, this is presented inclusive of nonrecurring items. If we adjust for nonrecurring items, which is a basis for our proposed dividend, cash conversion exceeds 90%. This reflects our asset-light business model, operational excellence, and strong financial income generated from our cash position. Working capital was a modest inflow of EUR 22 million for the year. As I've highlighted before, working capital inflows can be uneven, but are broadly neutral over the long-term as we have demonstrated. Capital expenditure represented about 1% of our group revenue, totaling EUR 89 million. Notable investments include the planned expansion of our Dahej facility in India and upgrade to our lab and office infrastructure. The integration of AM&C is not expected to materially change our capital intensity. Other items of note include the EUR 150 million in dividend distributed in the second quarter and the cash outlay associated with the AM&C transaction. We closed the year with more than EUR 3.8 billion gross cash. Before talking about capital allocation, let's review our guidance for 2026. Project delivery revenues are expected to be between EUR 6.3 billion to EUR 6.7 billion, with an EBITDA margin of approximately 8%. For TPS, we anticipate revenues in the range of EUR 2 billion to EUR 2.2 billion with an EBITDA margin of 14.5%. As a reminder, this guidance reflects a full contribution from the AM&C acquisition. Other items, including effective tax rate and corporate costs are consistent with the prior year. In addition, as we did for 2025, we have earmarked up to EUR 50 million to invest into adjacent business models, including Reju. Reju continues to advance on maturing its technology, site selection, and building the full ecosystem, positioning it for a possible FID by year-end 2026. Looking beyond our 2028 financial framework, I'm happy to report that we are trending comfortably ahead in establishing T.EN as an EUR 800 million plus EBITDA company, an ambition we first declared at our 2024 Capital Markets Day. Before passing back to Arnaud, let me address our capital allocation priorities and shareholder returns. With EUR 578 million in recurring free cash flow generation in 2025 and our balance sheet in excellent shape, we remain disciplined and focused on how we allocate capital. Our strategy is clear. First, we are committed to rewarding shareholders through dividend, distributing a minimum of 25% to 35% of recurring free cash flow. The proposed dividend today equates to a payout of circa 30%. Second, we prioritize value-accretive investments. This means actively pursuing M&A to grow our TPS segment and looking at adjacent business models that can enhance our quality of earnings. Additionally, when it make sense, we can and we will supplement these investments with share buyback as an additional means of returning capital to our shareholders. With the EUR 150 million buyback program announced today alongside the proposed dividend, we intend to return approximately EUR 300 million to investors in 2026, equivalent to about 5% of our market cap. And together with our ongoing ability to deliver sustainable earnings growth, this underpins the highly attractive total returns we can offer to our shareholders. With that, I'll pass on to Arnaud to discuss the outlook. Arnaud Pieton: Thank you, Bruno. Turning now to the outlook and how we see our markets evolving. The macro landscape remains complex, shaped by geopolitical shift and policy uncertainty. Yet the underlying fundamentals across our markets are strong and resilient. Energy demand is rising and plastics consumption is set to grow, while the lowering of carbon intensity together with circularity and products end of life responsibility remain central themes. As electrification accelerates, grid stability becomes crucial. Natural gas plays an indispensable role here. No gas, no grid stability and with no grid stability, no renewables scale up. The global energy system demands innovation and technical sophistication, qualities that T.EN delivers. The investment cycle in gas and LNG will continue well into next decade with focus shifting from oversupply concerns to risks of further future undersupply. A pragmatic decarbonization is essential and affordability is needed to drive adoption of carbon capture, cleaner fuels, and other low-carbon solutions. Circularity solves for more sustainable solutions, but also for sovereignty through development of localized ecosystems. And as we prepare this future through Reju and other industrial partnerships, T.EN will selectively target opportunities in adjacent markets, including nuclear. In summary, T.EN's engineering expertise and project execution enable us to deliver sustainable and economically viable solutions at the scale required for today's and tomorrow's markets. Let's turn to our near-term commercial momentum, which is exceptionally strong. Beyond the Qatar NFW win already discussed, our strength in enhanced replication is further illustrated by progression on Coral Norte floating LNG in Mozambique. Also this month, we confirmed a substantial contract to develop a 100 kPa plant to produce sustainable aviation fuel in the Netherlands for Sky Energy. Further cementing our leadership in the sustainable fuels market. For TPS, we have good line of sight for technology licensing and product awards in ethylene, hydrogen, and phosphates and expect to be able to confirm details in the coming months. When we consider awards already confirmed this year in SAF and in LNG, plus prospects anticipated to materialize in the near term, including Commonwealth LNG, this yields an inflection of new awards exceeding EUR 12 billion. This is equivalent to 75% of our year-end backlog. Beyond our near-term award potential, as shown in appendix, our global commercial pipeline remains strong and well balanced, and we anticipate reaching our highest ever annual order intake in 2026. Let me now put this into context with respect to our backlog. An important attribute of Technip Energies' equity story is the clarity and confidence afforded by our multiyear backlog. This is not just our base load. It is the foundation upon which we build sustainable free cash flow and our enablers for effective deployment of capital and the growth of TPS. It's what allows us to look to the future with certainty and ambition. We prioritize quality, not quantity. Through discipline and selectivity, we focus on opportunities where we bring differentiation. Project delivery is not a quarterly business. Lumpiness is inherent to this business and does not hinder our long-term progress. In fact, when we look beyond the quarterly fluctuations, we see a clear pattern of incremental growth in our backlog, reinforcing our long-term resilience. We are in a period of sustained structural demand for our capabilities. And with the strength of our near-term commercial pipeline, we are confident that 2026 will establish new highs with potential to reach EUR 24 billion of backlog. This milestone will provide us with one of the most exciting execution pipelines in our history, firmly underpinning our growth trajectory. So to conclude, 2025 was a successful year of delivery, marked by strong execution and excellent results. We delivered revenue and EBITDA growth. We achieved high free cash flow conversion, and we completed our first major acquisition. We also positioned for important awards that will secure our growth trajectory for the coming years. And we are trending comfortably ahead in establishing Technip Energies as an EUR 800 million-plus EBITDA company. The confidence we have in our outlook is demonstrated through significantly enhanced shareholder returns, and we continue to build for the long-term, supported by our robust net cash balance sheet. And with that, let's open the line for questions. Operator: [Operator Instructions] The first question is from Richard Dawson of Berenberg. Richard Dawson: Firstly, on NFW, and congratulations on getting that award in yesterday. And the timing of that award is maybe slightly earlier than we had expected. So could you provide any color on what brought that forward, and maybe any comments on the actual size of the order intake? And then secondly, on the buyback, should we read anything into the launch of that buyback and maybe your outlook on further value-accretive investments? I appreciate you've just closed AM&C. -- but given your capital allocation priorities of dividends first and accretive M&A, followed by a buyback if there are no M&A options. Is it fair to say that maybe there are a few M&A options out there and hence you're launching this buyback? Arnaud Pieton: Hello, Richard, thanks for the question. So NFW, I'm happy that you're surprised by the timing of it. We are not totally. As you know, we at Technip Energies like to be involved in the early engagement on FEED stage. And so we were engaged there. And NFW, the timing of it, why now? It's -- well, simply because as being the incumbent on NFE and NFS, NFW being somewhat an addition to NFS. There was, I would say, a sweet spot for maximizing synergies with notably site utilization, storage areas, construction resources. So there was really a sweet spot for NFW to kick off, which was presented to our client and the client was aware of that, and we worked jointly with them on converging towards taking advantage of the sweet spot for synergies between NFS and NFW. So this is exactly what has driven the award of NFW. As a reminder, maybe, those 2 additional megatrends of LNG were first announced by Qatar Energy CEO early 2024 at the time when they mentioned that they would -- Qatar would have the ambition to go beyond the -- 140 sorry, MTPA of LNG per year. So that's about NFW. On capital allocation, I would say, no, there is no shortage. You should not read anything into the fact that we have decided to initiate, I would say, a reasonable amount of share buyback. When you look at Technip Energies, you are facing a company that is extremely financially healthy that is capable of returning to shareholders through increased dividends through a little bit of a reasonable amount of share buyback and through further capital allocation. So doing share buyback is not at all affecting our ability to invest nor is it the reflection of a lack of M&A targets for Technip Energies. We have, on the contrary, quite a few on the radar screen. So I can't say much more, as you can imagine, for now. But we're excited about the opportunity set outside, so inorganically, but we also wanted to demonstrate that we are very confident in our future. And hence, why we are combining this time a bit of buyback as well as an increased dividend by 18%. Operator: The next question is from Alejandra Magana of J.P. Morgan. Excuse me, Alejandra Magana withdrew the question. The next question is from Sebastian Erskine, Rothschild & Co. Sebastian Erskine: Congratulations on the announcement of the enhanced distribution. I'd like to start on the AM&C acquisition. So EUR 200 million revenue contribution in FY '26, that would imply kind of TPS at EUR 1.9 billion at the midpoint. So that's kind of in line with the commentary you gave at the third quarter. But on AMC specifically, can you give us -- a few questions. Can you give us an indication of the operational performance of that business in 2025? I think there have been some concern in the market around Catalyst Technologies given the sale of that business under Johnson Matney to Honeywell. There was some concern in that market. And potentially, any detail on the growth outlook? I think, Bruno, you mentioned that the growth of that business should be around a mid-single-digit revenue level per annum going forward. Is that still intact? Any color on that would be great. Bruno Vibert: Hello, Sebastian, I'll take the question. So yes, the deal for AM&C was completed at the end of the year and will start to contribute to our top line in TPS starting Jan 1. I think AM&C closed the year pretty much where we expected. They have 2 main businesses, one on advanced features -- and they are basically addressing hydrocracking and also polyolefins market. Of course, from a quarter, it's more product. So you can have one refill, which may slip by 1 month in 1 year and then it's transferred to the other year. But overall, I think the momentum and market share of this business was absolutely where we expected. And the initial signals we have for the beginning of the year is exactly at this level. Now of course, the teams have started. We started to engage with our joint venture partners on Zeolyst International, which is Shell. So this integration is working very well. We've also started to see how this business of AM&C can create cross-selling synergies with our businesses, because they have advanced materials expertise. So that can complement to our process technology portfolio. And their client proximity, our client proximity are somewhat complementary. So the teams are starting to engage on creating those bridges, which, of course, may take a bit longer than just one month or a couple of months to manifest or evidence in themselves. But we're quite confident that the trajectory we've given through the cycles will be absolutely there. Arnaud Pieton: Sebastian, I will also add something. There is one key attribute to AMNC that one must not forget. It's the quality of the portfolio and I would say the vitality of the portfolio in the sense that about 35% of AM&C's portfolio is less than 5 years old. Therefore, you're talking about solutions that are not solutions of the past, but solutions of today and into the future. So the field of applications for AM&C solutions is one that is actually well into its time and well into what's needed for the years to come. Sebastian Erskine: Super. Thank you very much for that. And if I can squeeze in a question unrelated, but Arnaud, you gave very insightful interview in upstream on the opportunities presented by FLNG and kind of other floating solutions in the E&C market. Can you maybe provide an update on that pipeline and when we might see some kind of related orders on FLNG? And of course, you have that partnership with SBM Offshore. So could we see you involved in some of the FPSOs that are up for tender in the coming years? Arnaud Pieton: Yes. There's an exciting set of opportunities for floating solutions, FPSOs or floating LNG. So first of all, we are -- and we announced a bit more clearly that we are progressing with Coral Norte at the moment for ENI in Mozambique. We very much love a little bit like for NFW, we love the Coral Norte floating LNG because it's a true replicate of Coral South. And I would say, an enhanced replicate to paraphrase our clients because it's not only a replication, but we'll be able to deliver it with a much shorter lead time than the first unit. So we like that. We have indications that there's interest for maybe more than 2 FLNGs in Mozambique. And floating LNG in Africa on the East or the West Coast seems to be gaining momentum. So it is a solution for some markets. And indeed, our presence for delivering floating solutions being gas or into floating LNG or gas FPSOs or oil FPSOs, I think, is enhanced by the associations that we have formed with SBM purely on FPSO and purely for Suriname at the moment. But as we -- this project is progressing really well. And at T.EN, we like replication. So if we are all having good experience, and most importantly, if our customer has a good experience with this JV and this association that we formed, why not replicating it? I think that will be pretty powerful. Operator: The next question is from Henri Patricot of UBS. Henri Patricot: I'll stick to 2 questions, please. The first one, following up on Qatar NFW. You mentioned your synergies with the existing projects. I was just wondering if you have any comment on how the margin on that project compared to the previous ones and the rest of the portfolio. I think you mentioned medium-term upside potential to the margin. Wondering to what extent NFW plays a role here. And then secondly, still on the margin, this time on TPS. So you're guiding to 2026 EBITDA margin, 14.5%, that's compared to last year, there was 14.3%, but you also mentioned AM&C at 25% margin. So that will imply a bit of a decline for the rest of the TPS business. Just wondering what's the driver of the lower TPS margin ex AM&C in '26 and the outlook beyond that? Arnaud Pieton: Okay. Henri, I'll start with Qatar, and then I know Bruno is burning to answer the TPS margin question. So Qatar NFW, right, we -- like I said, we like it very much because it is coming at the right timing, and it provides a lot of synergies with NFE and NFS, mostly NFS. And it is a true replication of the NFS LNG train. So limited engineering, and it's a unique opportunity. And very rarely in this industry, will you see basins or clients ready to invest this way. There's Qatar Energy onshore on LNG, the way they are doing it, you will have ExxonMobil in Guyana with a delivery model that an execution model that is a bit like a conveyor belt and therefore, very successful because there is replication and replica. We always, in our industry, including at Technip Energies, have a tendency to underestimate the power of replication. And so yes, I mean, we are entering into NFW starting the project with a level of margin at the start of the project that is absolutely in line with our margin trajectory at Technip Energies for the long-term. But you can trust us with having expressed a different type of ambition to our project execution team. And in particular, because it is replicate. So let's see what the future will provide. As a reminder, we have a very nonlinear margin recognition at Technip Energies. So the first couple of years are about early works, if I may say, or early part of the project. It's going to be slightly dilutive. You will only see the full breadth of NFW's margin contribution later, so into 2028, and 2030. That's where you will see the full contribution and I would say, the full power of the replication. But again, this is a -- it's a unique opportunity for T.EN, a unique opportunity in the industry, and we are extremely excited to continue with Qatar Energy on this partnership. I think it will yield some very interesting results for us. Bruno on the TPS? Bruno Vibert: Sure. Thanks, Arnaud. Good afternoon, Henri. So on TPS, it's true that we ended the year at 14.3% at a quite high position. Quite high, and we were, of course, very happy about that. Even that, as I said in my prepared remarks, in Q4, we made some provisions because of this very good performance of the year for increased payout and bonuses to our employees, which impacted Q4. So to some extent, Q4 would have been even higher without that. But when we started the year, we were at 13.5% as a guidance for TPS and 14.5% was actually the target for 2028 in our medium-term outlook. What happened in 2025 was really a good performance for tail end project of property equipment like furnaces, furnace islands and the delivery of that with slightly lesser revenues. Now for the organic portfolio, what we expected as new awards will come and some of them were unnamed, but highlighted and flagged by Arnaud in the prepared remarks, we would expect a bit of a normalization of this portfolio, not maybe going back to 13.5% EBITDA, but with somewhat of a normalization before being able to step up again. So you have a bit of a normalization, which was to be expected from the TTS portfolio. That's then you add on the accretive part of AM&C. And basically, that puts us around 14.5% as a guidance. Of course, then we'll want to accelerate and continue to step up as the full of the portfolio will continue to deliver. But at 14.5%, we are already ahead and already had the previously mentioned 2028 kind of target. Operator: The next question is from Victoria McCulloch of RBC. Victoria McCulloch: Can we just focus for a second on the commercial pipeline? Can you give us some color as to -- of that EUR 70 billion, how is decarbonization as a percentage of the commercial pipeline changed maybe over the last 12 months? We've seen calls for EU carbon market to be suspended. The latest of these has been from Italy today, which feels like a stark difference, I guess, to a couple of years ago. How have the conversations with your customers within this decarbonization portion of commercial pipeline, how have they been evolving over the last 6 months as the sentiment in the sector has changed significantly? Arnaud Pieton: Hello, Victoria. It's a very interesting topic. And I would say the past year have been a clear reminder that there will be no whatever, so-called energy transition or no decarbonization that is not an affordable one. And it needs to be a market-driven transition. And unfortunately, there are, I would say, areas and spaces and also domains in terms of being carbon capture, sometimes SAF, sometimes low carbon molecules such as the blue ammonia, et cetera, where things have slowed down for the lack of takers. So it's obviously disappointing that those projects could not find a path forward in the near term, ultimately due to the challenges with offtake and policy. And those projects, they need stable policies. They don't need moving goalposts. They also need a carbon price that is adapted to creating a market. One project alone is not sufficient to create a market. So I think there has been a bit of realization that we've reached the end of the fairy tail when it comes to some of those domains. But I'm going to look at the glass half full rather than half empty. There are areas and there are pockets of opportunities where those projects are viable in Spain, Southern Europe, in India, some in the Middle East. We just signed the SAF project in Netherlands. So we Technip Energies, we invested when we were created 5 years ago, we invested into carbon capture, SAF circularity and other blue molecules. But we also did that and green actually as well on green hydrogen. But we did that in -- without deploying too much capital. And so I am personally not so disappointed about the way the market is -- because we, as T.EN, we are present when those projects are happening. We are executing the large green ammonia project for -- I mean, in India. We are on SAF in Europe and elsewhere. We are on carbon capture in the U.S. and Northern Europe. So the important for us is to be present and to be winning in those spaces, and we are. The only, I would say, space for a slight disappointment is that, yes, we would have loved for the volume to be greater. But where it's happening, you will find Technip Energies, and that's the most important. And all this is happening while the rest of the business, the core business like LNG, like everything around gas continues to thrive and continues to grow and continues to decarbonize because let's not forget that our clients in the more traditional space are looking at solutions to lower the carbon intensity of their products. That's why you see large carbon capture being deployed on all LNG facilities in Qatar. But not only, that's why you see LNG facilities being electrified on Ruwais in UAE by ADNOC powered by nuclear electricity, therefore, decarbonized electricity. Same story for TotalEnergies in Oman for LNG as a shipping fuel, where associated solar plants are being built. So I think the train around towards lowering the carbon intensity of the product has left the station. We are onboard that train and it's fantastic. What is a bit slower than one could have dreamed or dream, sorry, it's really some of the blue molecule and around that space, yes, it's much slower. But the important is that to remember that the rest has not disappeared, it continues to grow and that Technip Energies is present where the blue or the green or the carbon capture or the sustainable aviation fuel is happening. And that plays to the strength of the portfolio. Victoria McCulloch: That's great. Thanks very much for that color. And just as a follow-up, maybe one for Bruno. Could you give us some color on what you expect working capital movements to look like through the year? Bruno Vibert: Sure. Hello, Victoria. So working capital, first, I'll start maybe with year-end because we had a bit of unusual working capital swings, a bit more, if you look at our balance sheet, a bit more accounts receivable because we had EUR 100 million, EUR 150 million plus of invoices, which were supposed to be paid just at the tail end and which were instead were received on the very, very early Jan. So as you know, always the lumpiness of having one invoice and a few days can present and also from an accounts payable side, as we migrated an ERP for our largest operations to be France, Middle East and so on, we decided to anticipate some payments to subcontractors and suppliers so that projects would go ahead despite any issues of ERP migration and as you ramp up. So you should expect this kind of accounts payables or working capital to unwind. Then you will have the more traditional aspect of working capital, which means the new generation of projects, so NFW with the advanced payment and the first milestones being reached plus all the rest of the projects that may constitute the EUR 12 billion plus order intake that Arnaud highlighted in the slide, this will positively contribute in terms of working capital. It will be dilutive from a P&L and bottom line perspective, but it will be accretive from a cash flow and working capital perspective. Then you will have the more tail end projects that which you may have a bit of an unwind. But I think with the momentum of the portfolio, you should expect somewhat of a positive movement on working capital overall because that of the portfolio plus the reversal of the somewhat specific end of the year '25 situation. Operator: The next question is from Jean-Luc Romain of CIC CIB. Jean-Luc Romain: I have 2 questions on LNG. The first is in the NFW contract you announced yesterday. Is there a TPS component, for instance, of part of the carbon capture? And the second is, in your incoming orders, I noticed there's nothing about Rovuma LNG. Is this a decision that ExxonMobil plans to take later in the year or maybe next year? Arnaud Pieton: Thank you, Jean-Luc. So first on NFW, short answer, no, there is no TPS content into NFW. In this case, the carbon capture is pre-combustion and not post combustion. We own and we deploy solutions that are part of TPS in the post-combustion world. That's why that is what is deployed on net zero T side and other applications. So -- but precombustion, we deploy someone else's solution as we have done it for now many years, so we master that one. We know how to scale it up, but it's not Technip Energies, and therefore, it doesn't provide for TPS content through NFW. So Rovuma, as you would have seen in the news flow, there is quite a positive momentum on this one, and that's -- we're very happy about that. We know the lifting of the force majeure on TotalEnergies, Mozambique LNG. This is a positive development. And we see increased momentum on Rovuma prospect from our conversations. So as always, a reminder, we do not control the timing of the FID. That's very much in Exxon's hands. This Rovuma project is absolutely very high on our radar screen, but it is competitive. And it is worth noting that we've been engaged on Rovuma for several years already. As you know, we've done the FEED, and we've been engaged with Exxon, assessing the project from different solutions and development perspectives. And this project will be modular and which is, as you know, our preferred solution. So FID 2026 or 2027, let's see, lots of engagement, lots of interest and a very good momentum, but it is competitive. Therefore, we're going to remain cautious with our comments, but it's a project with attributes and characteristics that are extremely interesting and attractive for us. And yes, we intend to be the fierce competitor on this race. Operator: The next question is from Bertrand Hodee of Kepler Cheuvreux. Bertrand Hodee: Yes. I have 2. The first one is on your prospect in TPS. Regarding either carbon capture or ethylene, especially ethylene in the Middle East. Do you see more momentum here? And then the second question, I was doing some very rough math, EUR 16 billion backlog end of year '25, your projection EUR 24 billion H1 '26. It looks to me that you are -- if you achieve that, you will be already above EUR 12 billion of order intake for H1? Or am I doing any mistake here? Arnaud Pieton: Hello, Bertrand, I mean, you rarely do mistakes. So -- but we like to have a bit of a cautious approach as always. And on our communication, we are providing a -- I would say, a number that is about what has been announced or what is known and what is supposed to be awarded in the very near term. So it's a very short, I would say, window that we are projecting. Of course, then there's the rest of the year, H2 in particular, with some opportunities. So the -- we always -- like I said, lumpiness is part of our life. And whether a project is awarded on the left side or the right side of the 31st of December, it doesn't change much for Technip Energies, except of course, that it does change -- it can change drastically the shape and form of an order intake for a year. But yes, the potential is the one you're describing. Let's see if it realizes. But there is -- it's a realistic scenario. But we've seen last year, a few things pushing to the right. And so -- and it wouldn't be the first time. So that's why we decided to report on, I would say, what is a shorter window. And we don't guide on order intake, as you know. And also just a reminder for everyone on the call, we don't reward on order intake. That's because we want the right orders to make it to our portfolio, we don't want to race to volume. We want to race on quality. In terms of the prospects for TPS, Yes, we do have -- and we -- I believe on the slide, we decided to call them undisclosed prospects, but we are very clear -- if they are on the slide, it's because we have a very clear line of sight for them, in particular, in ethylene and phosphates and others. So there's a bit of a restart on that front, and that should provide for a positive momentum ahead. Bertrand Hodee: Thank you very much. And congrats again for this new win in Qatar that resemble more of partnership than anything else. Arnaud Pieton: It is, thank you. Operator: The next question is from Paul Redman of BNP Paribas Exane. Paul Redman: My first one is just going back to TPS quickly. I just wanted to ask what gives you the confidence to guide to EUR 2 billion to EUR 2.2 billion of revenue in '26? The reason I ask is when I look back at last year, you have EUR 1.3 billion of buyback into backlog in 2025 and you guided to EUR 2 billion to EUR 2.2 billion. This year, it looks like you've only got EUR 1 billion in the backlog at the moment. And then secondly, just to touch on NFE. Just to touch on timing for when you expect start-up, interval between trains, kind of how is that project progressing? Arnaud Pieton: Hello, Paul. I'll start with NFE and then I'll hand over to the -- to our TPS expert, because Bruno has been diving on TPS quite a bit recently. So NFE, I was on site just earlier this month on NFE and on NFS. And I'm just happy to report that the project is progressing well with the first train being in a commissioning and pre-commissioning and commissioning phase. So construction on the first of the 4 NFE LNG trains is actually mostly completed. And we are progressing per plan on the ramp-up of -- when you start up the plant, you need to be -- to put everything under pressure, pressure test everything, everything makes a pre-commissioning and commissioning activity. A reminder as well of the fact that in order to start up the first train on NFE, we needed to have all of the utilities up and running. So the utilities for the totality of the 4 trains, right? So I would say the level of effort to reach Train 1 readiness is much higher than what has to be achieved for Train 2, 3, and 4 readiness. And the fact that we are in pre-commissioning and commissioning mode should signal to you that all the utilities are actually up and running and that we are capable of bringing the gradually the first train on stream. So it's -- and that construction is broadly over there. And I could see it in my own eyes just earlier this month. So I would say, let's not believe everything that we can read in the press. If the client was unhappy, I think we would have heard about it and probably we would not have been awarded NFW. We stay very close to them. And for any commissioning and pre-commissioning of that scale, this is -- it's an activity that is happening hand-in-hand with the client and the client's operations team to bring such a large facility on stream. It's not only with Technip Energies, it's hand-in-hand with the -- it's a teamwork with the clients' team. So there is really no reason to doubt the timing that you have heard from our clients. Bruno Vibert: Yes. So on the TPS momentum and backlog versus the projected revenues. So first, of course, as I said, AM&C will be consolidated from Jan 1. It's not a backlog business, so that will contribute despite that it's not really part of the backlog at the end of the year. So of course, that's the first element. Second, as I also said, you always have some PMC work, which was quite successful over the last couple of years, which are not recognized in backlog. But as the services are called off, then they are delivered. So they are absolutely representing kind of a book and burn element. But third and maybe most importantly, last year, we were having some tail end delivery of property equipment, so more technologies and products backlog, which pretty much have been completed during the year and represented a bit of a boost to the bottom line, as I said before. Now this is a bit of the reverse this year. And as mentioned by Arnaud to Bertrand's question, we have a clear line of sight in more meaningful awards in ethylene, in hydrogen and for instance fossil projects, which were not in the backlog of revenues in the prior years, that should complement. So that should give us some contribution this year, although not in the backlog. So that's why it's not exactly easy to compare last year's momentum with this year's momentum. Arnaud Pieton: Paul, it's good because we will be adding product content into the TPS backlog, and that's like putting more volume and also provides a bit of a longer cycle content into a short-cycle business. Operator: The last question is from Jamie Franklin of Jefferies. Jamie Franklin: So firstly, just on project delivery revenues. I know you typically don't give any quarterly guidance, but given the significant step change in revenues through 2026, could you help us think about the phasing this year? Should we assume kind of a slow ramp-up and more of a back half weighting? Or is it more evenly split than that? And then obviously, projects revenues are very well covered by backlog already, and you talked to the EUR 12 billion near-term order intake potential. In terms of NFW, how should we think about the revenue phasing for that particular contract? Could there be much of a contribution in 2026? Bruno Vibert: Hello, Jamie. So I can start and Arnaud may complement. So yes, in terms of there will be a ramp-up, and you would have -- you could have some cutoff and milestones and so on, but you would expect some ramp-up during the year. Now it's true also to your point, that NFW won't have a major contribution this year because it's early phase. It's going to be this year early phase since it's a replication, the detailed engineering and so on is, to some extent, already done. So that's why you would have a bit of low start for NFW in terms of P&L contribution and then you will ramp up as the orders are placed to the market. So for the ramp-up of revenue for project delivery, I think it would be fair to have a bit of a gradual step-up as we go throughout the year. Operator: Gentlemen, I turn the call back to you for any closing remarks. Phillip Lindsay: That concludes today's call. Please contact the IR team with any follow-up questions. Thank you, and goodbye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Welcome to TP 2025 Annual Results Conference Call. [Operator Instructions]. Now I will hand the conference over to Thomas Mackenbrock, Deputy CEO. Please go ahead. Thomas Mackenbrock: Good evening, everybody, and welcome to our 2025 results presentation. And as you have probably seen, we have a lot of news to share. As always, with me in the room is Olivier Rigaudy, my dear colleague and CFO of the group. And we have a special guest today, Jorge Amar, our incoming new CEO for the group who will present and introduce himself later today. But let's first have a look at the agenda for today's call and what we will cover in the next 50, 60 minutes or so. First, I will give you an update on the key highlights of 2025, provide a strategy update of where we stand today with the implementation of our future forward plan and an outlook for the future. Olivier, as always, will cover in detail the financial results. And at the end, we have ample space for Q&A. Let's look at the key highlights, and let's focus first on the financial aspect and then talk about in a second step about some of the strategy and governance changes we're seeing. 2025 has been a turbulent year for the world and for our industry, but we as TP have delivered solid results. And as you have seen in our press release, we have met all our updated 2025 objectives. If you see on the group revenue, we are reporting again a bit over EUR 10 billion in net revenue, and we have grown on a like-for-like basis, excluding the hyperinflation effect of 1.3%. If you exclude that 1% on a reported basis, given the weak U.S. dollar minus 0.7%. It's particularly noteworthy, and we talked about this in our Q3, our H1 and our Q1 presentation that our Core Services are a stable growth momentum and a stable growth anchor for the group, with reported 2.7% like-for-like growth, which is remarkable in this environment, while at the same time, our Specialized Services division faced some unique challenges last year. On the profitability, again, we delivered our updated 2025 guidance. We have reported an EBITDA of almost EUR 1.5 billion, with a margin of 14.8%, excluding the currency effect, which means on a reported basis, 14.6% and this also translates into a very healthy net free cash flow. If you exclude the nonrecurrence of over EUR 900 million, and we had a record cash flow generation in the second half of the year with more than EUR 640 million. So we are quite proud about the results in 2025. And when we look at 2026, we provide the following guidance. For this year, we expect a growth rate again between 0% and 2%. But given how we started into the year and how we ended last year and given some of the uncertainty, in particular, in the core onshore market, the U.S. and Continental Europe, we anticipate for Q1 a revenue development, which will below the annual guidance. Secondly, and you will see later in detail some of the measures we are implementing. We also expect a stable EBITDA margin, which means 14.6% on a reported basis that assumes a dollar of $1.20. The net free cash flow generation is expected to be this year slightly below last year, given the strong euro. And so we see here a range between EUR 800 million and EUR 850 million excluding the nonrecurring items. In our proposal, we just had the Board meeting this afternoon to the annual shareholders assembly at the end of May is to increase the dividend from EUR 4.20 to EUR 4.50 per share. That's on the financial side. Let's take a look at some of the governance and strategy updates. So we are very happy sort of to announce the long-awaited process of our governance change. The Chairman Moulay Hafid, Daniel the founder and CEO and myself has recommended to the Board and the Board sort of followed that recommendation to appoint Jorge Amar, who is a very world-renowned AI expert and leader of McKinsey's global customer service practice, to be the new CEO of the group. He will start officially March 16. I've known Jorge for quite some time, and I'm very excited that he steps into this role. This also means naturally that Daniel, myself and Olivier will step down a day before. Daniel will also step down from the Board of Directors. And we also, at the same moment to really make sort of the governance renewal complete also co-opting to the Board for new members. One will be Jorge starting middle of March, sort of stepping into the role of Daniel. Myself, also, I will continue to support the group that is very close to my heart but then in a different role as a Board member and 2 very exciting new Board members who have been co-opted and are then up for the approval by the shareholders' assembly at the end of May, one lady from Qatar and one lady from South Africa, which I'll explain later her qualifications. So that's really, I think, quite exciting news. I have been many discussions over the last years, when will this happen? I do believe we have there the right team on the start, and I'm excited sort of to support this group in this new role and particularly Jorge in his new task. Then Future Forward. We launched this initiative last summer, you saw in Q3 a quick update. We are now in full swing and 2026 will be the first full year of implementation. We have really mobilized the organization with hundreds of different initiatives. And as I explained and hinted towards in our Q3 presentation, we are working strong on essentially 3 levers. We want to accelerate the growth. We want to drive efficiency also leveraging AI, and we want to transform the company and we are making sort of good steps on all 3 elements. And on the internal AI efficiency, we are starting a program as we speak that will drive efficiency savings for the group targeted to be over EUR 100 million in 2026. We have launched more than 500 AI projects last year and expected to scale further with our TP.ai strategy, and we are also happy to share that also under the new governance, we are launching a comprehensive strategic portfolio review of the group. So a lot to be discussed. Let's quickly look at the highlight numbers. I think no surprises here for the audience, of course, happy to answer more questions, but we see the strong Core Services that we saw throughout the year. There has been a little bit of weaker momentum in Q4 that we anticipated in our November presentation what for me particular positive is to see the momentum in the Americas. As you remember, it was a bit negative before, but we have seen an excellent development in India as well as Latin America. And given the strong momentum, we are reporting growth of 1.4% like-for-like in the Americas. In EMEA, again, very strong with close to 4% in 2025. We have seen great momentum in the U.K., South Africa, Egypt, APAC as well, sub-Saharan countries. So they're across the Board a very strong momentum, while also a bit subdued in Q4. Specialized Services, on the other hand, you know the challenges on the nonrenewable of the significant Visa contract and the market environment for our Specialized Services in the U.S. So from that perspective, minus -- a bit more than minus 9% like-for-like growth. If you adjust for the effect of the Visa services contract, we have as indicated and as expected, a slight positive like-for-like growth for Specialized Services. But important to note, yes, the momentum has been reduced but given all the measures we have taken last year, we have proven to maintain a strong profitability. There's only a slight decrease of this highly attractive business. Second comment, again, in times of uncertainty, having a broad client portfolio is key and giving our broad exposure to multiple different industries has been and will be a strength of TP. For 2025, we continue to see strong momentum in public sector, fast-moving consumer goods and strategically very important, the strong sector of financial services and insurance. This is really has been sort of supporting the growth last year, we saw a bit of lower activity, automotive and energy utilities last year. Also, the portfolio we talked about a lot, TP is not a company that stands still. Over the years, always have been able to develop new business lines and build out -- building on its capabilities, new services line, along with our articulated future forward plan. And you remember the presentations last year, we have seen strong growth momentum in AI data services, and we call this out for the first time. We have seen very strong high single-digit growth in sales, which is 7% of the group and which is a critical factor to provide Revenue as a Service for our clients. And also very strong momentum, double digit actually in our back office and BPO-related task, which is important to sort of have an end-to-end service chain for our clients. Trust and safety. As indicated, we saw some revenue decrease. There is some automation happen on our client side. And care overall, broadly in line with the overall Core Services growth, so also a healthy development but changing the way we operate for our clients. Now a quick update to our 2 new executive managers. Jorge Amar, as I said, very happy, I got to know him very closely really now for quite some time. He has been working with the group for quite some time. But Jorge, why don't you introduce yourself to the audience and to our investors. Jorge Amar: Thank you very much, Thomas, and thank you for the warm welcome into the group. Today is not the day to speak at length as I will officially become the group CEO starting March 16. But as a quick introduction, Jorge Amar, I was born in Argentina, but most of my professional career has been in the U.S. where I worked with some of the largest companies in topics around customer experience and service operations. And in particular, over the last few years on the topic of artificial intelligence. Not only from a technology perspective, but also how to think about consumer and employee adoption. So all these feels like the right combination of things that are leading me now to be very proud in joining the group. So again, more to come starting March 16, but very, very excited to join the group. Thomas Mackenbrock: So I think not just Jorge is excited, the entire group is excited. I think it will be a great addition for the company. And as he indicated, he brings 3 key components that are critical for the group; first, a deep understanding how AI works in enterprise environments which is absolutely critical for our journey ahead; secondly, he has a strong proximity to existing and potential clients of TP, understanding their needs, understanding their environment, having these relationships, which I think is super critical also for our path in the future; and thirdly, obviously, given his background, he has a strong analytical mind and sort of will shape the strategic path for TP in the years ahead. I can also -- he's not with us today, but also can only praise our new interim CFO, Benoît Gabelle, has been a Deputy CFO for TP for some years now. Before he was advising the group, he was a partner at EY, is an absolutely excellent person. We are very excited that he will sort of step up into this new role and will support Jorge from the financial side. Also, as I said, it's not just the executive management team, but also the Board has renewed and has co-opted today for new members, 3 of them immediately. Sheikha Hanadi bint Nasser Al Thani, a very renowned Qatari entrepreneur, investor and business leader. We are very excited that she brings her expertise, her network into the board realm for TP. She has strong expertise when it comes to investment and the investment in capital markets. Secondly, Ingrid Johnson, she's South African lady, also with a broad understanding about capital markets investment but also the banking insurance space where she led several companies. So quite excited for that sort of additional expertise on the Board as well. Jorge Amar will join middle of March. And as I said, I'm very dedicated to the group, and I'm excited to continue the journey with the group in this new role as well. Of course, all of these cooptations are subject to the shareholders' approval at the meeting at the end of May. Now let's look at the numbers, and Olivier will guide us through. Olivier Rigaudy: Thank you, Thomas. Good evening, everyone. I'm happy to present to you the 2025 figure. As mentioned by Thomas, I do believe that -- we do believe that we have delivered a very good year despite this global challenging business environment. As you can see here, you have the full P&L. But before commenting in detail, I just wanted to highlight 3 topics. The first one that was unexpected when the year started. The macro environment has been difficult all along the year and the growth at different market was probably lower than we expected. Secondly, we have the FX environment that was not really exactly what was supposed to be to happen. For you -- I remember that we start the year with a dollar that was at EUR 1.03 and finish it at EUR 1.17. So it has been a global wash all along the year, especially in the H2, we will come back in a minute to that. That was not exactly the plan. And lastly, the impact of the Trump administration policy on our major business of Specialized Services, I was thinking, of course, of LLS has also an expected impact on the growth that we were supposed to deliver this year. But beyond that, beyond -- despite that, we have been able to post a sales figure of EUR 10.2 billion, 1.3% like-for-like growth, excluding impair inflation. And EBITDA, which is above EUR 2 billion and EBIT before nonrecurring items close to EUR 1.5 billion, EUR 1.485 billion aiming to 14.6% growth rate -- sorry, to sales versus 15% last year. I'll come back to explain where I come from the difference. Finally, the net profit -- the operating profit is roughly equal to last year. We will see why. We have been able to reduce tax charge significantly, and our net profit is roughly the same than last year. As you can see, this is a 40 basis point difference in EBITDA margin, which -- of which 20% -- half of it is coming from the FX. Let's have a look to the figure of sales first. The first thing to tell is that, of course, when you start to have a look to the figure of last year, you start with 10 -- also EUR 10.3 billion and you have a currency effect of EUR 362 million, of which EUR 240 million came in the second part of the year. So you had a 50% increase of the negative impact in the second part of the year that was significant. So when you start to look at the precise figure the way they have been built, you have also, of course, a change in scope of consolidation which is a consolidation of ZP better together. You remember that we bought this company last year, and we consolidated early February 2025. And we are also a small company called Agents Only that came on board early July 2025. So you have a positive impact of scope of EUR 196 million covering the decrease of Specialized Service, EUR 132 million that was mentioned by Thomas a minute ago, of which most of it is coming from this U.K. contracts that we have not been able to renew last year. That has a big impact on our sales, EUR 140 million to be precise. And beyond that, the Core Service business -- the Core Service activity have been able to grow by close to 3%, 2.7%, which I believe is beyond the market figures that we will get in some weeks from now, showing that this group has been able to continue to deliver significant growth in different markets. It was mentioned by Thomas in U.K., in different sector, in public sector, in banking where we are able to match the demand of the client. Let's have a look to what happened specifically in this year. When you look the FX environment, things are clear. You have all our currency in which the group operates have been degraded versus last year. So it has an impact. Of course, the dollar, but not only the dollar, the Indian rupee, the Philippine pesos, Sterling, everywhere. So we are facing a situation where we have been able -- we have not been able to cover, of course, all the translation effect that has a final impact on our mix of margin. This is an adverse FX environment in 2025. That was effectively significantly higher than people who are waiting. If we look now to the result by, I would say, by sector or by zone and by activity. I would say -- I would -- I'll add 2 points. The first one is a strong EBITDA margin improvement that we have been able to do in Specialized Services in H2. You remember that in Q1, specifically, but also in H1, LLS has been hit by this Trump effect, if I may say. But the group has been able to react quickly and to adjust this cost quickly to match the global demand. So the demand is flat versus the volume is flat in Specialized Services, notably in LLS but we have been able to recover significantly the margin, and we have just a small negative effect for the full year that is going to be positive next year, again with LLS given the measures that has been taken all along the year 2025. When it comes to Core Service, there are 2 issues to be -- to have in mind. Of course, the FX impact, which is -- I just mentioned it very significant. And the group decided to put some money, some investment in AI and IT technology that has been, I would say, spend notably in holding, as we can see on this table to support the future growth that was absolutely needed for the future. So all in all, the result in margin are not dramatic if you look at it. They are much more -- they're positive. If you look what happened, you have versus last year, an impact of Specialized Services that is roughly neutral. Of course, we have lost 70 basis points with the TLScontact impact, notably the UKVI -- the U.K. contract, sorry. That has been covered by 2 things. One is the acquisition of ZP that came on time, and that has been made on time accordingly and also by the mix effect linked to the work that has been done all along the year with LLS to improve the margin. So all of that, meaning that the cost on the Specialized Services impact on the margin is neutral and has been -- and we have been able to swallow all the impact of the TLScontact that we lost. Beyond that, you have the 20 basis points that are linked to the FX roughly. And you have the 15 basis points, which are the costs related to AI, notably spend in holding, as I mentioned earlier on. So I do believe this delivery of EBITDA margin is really good and shows how the group has been able to adapt to this global environment, either in terms of demand for LLS or either in terms of adverse FX condition across the board. If we now move to the other part of the result, what we can say is that the amortization of intangible assets are flat versus last year and the nonrecurring items are a little bit better than last year. You remember that last year, we had a significant amount of money that was spent to deliver the synergy from Majorel. Of course, this year is significantly less. But we have been able to -- we have been obliged to get out of some country, of course, Russia, that was one of the actions that we did all along the year, but also 2 other countries like Guyana and Trinidad, where we wanted to get out. Besides that, we have been careful on the impairment of some assets, notably on PSG which is recruiting activity that we bought 4 years ago. And where we are really, I would say, cautious on the future market for 2026. And we thought it was clear, better to be cautious and to impair at least EUR 60 million -- EUR 67 million for this business. It doesn't that mean that the business is not good, but we are very, very careful here. I remind you that this impairment of goodwill has, of course, no impact on cash. So the operating profit is roughly flat, EUR 1.55 billion versus EUR 1.82 billion last year. And when you look what's happening on the final part of the P&L, we have been able to maintain our net financial charge at the same level despite the fact that we have an outstanding debt that was increased in the year. But of course, last year, you remember, we had a very, very positive hedge impact coming from the devaluation of the Egyptian pound that didn't happen again this year. The impact of this hedge was EUR 50 million that is not happening again. So besides that, we are flat in finance cost. What is interesting is that we have now finished -- mostly finished the integration of Majorel, and we have been able to reduce significantly the tax rate -- the accounting tax rate. The impact is EUR 56 million improvement in 2025 versus '24. And we are still more things to come and the full year effect of the decisions that we took and implement in 2024 and 2026. That's the reason why we believe that in 2026, our tax rate will be below 30%. Beyond that, very few things to tell that we are roughly at EUR 500 million at net profit level versus EUR 523 million last year. Remember, we impaired EUR 67 million from PSG, that has a big impact on the net profit. More interestingly, and it as was mentioned by Thomas a minute ago, is a strong free cash flow generation. You remember that was a question about our ability to deliver free cash flow for the full year following the performance of H1 that was hit by some one-offs that were, I would say, exceptional. We have been able to deliver the best cash flows that we ever had in the H2 -- in the second part of the year in 2025, EUR 642 million versus EUR 636 million for the following year -- for the previous year, sorry. We did that because we manage strongly the working capital management or strongly working capital as expected. But we did that without cutting in the CapEx. And that is absolutely key. We continue to invest reasonably, but clearly, in some place where the demand is rising, notably India, South Africa, where the market is asking for size and for volume. So we increased our CapEx to 2.4% sales -- to the sales this year. So at the end of the day, the free cash flow is at EUR 900 million, EUR 901 million. Keeping in mind that we have to pay, of course, remember that we have the French restructuring plan, voluntary restructuring plan that was partially paid in 2025 for EUR 25 million out of the EUR 31 million that are shown here. And of course, will continue to be paid in 2026. So as a whole, strong free cash flow generation, I know it was a concern about the market, but the company continued to deliver strong free cash flow, and will continue to deliver strong free cash flow. If we now move to the situation of the group in terms of balance sheet. As you can see, we have been able to stabilize the debt roughly at 2x -- below 2x net debt to EBITDA while returning to the shareholder 42% of the free cash flow through dividend and share buyback and continuing to invest in business. I just mentioned it a minute ago, but also acquiring ZP and establishing some AI partnerships that are going to be promised -- promise for the future. So all in all, we continue to have a strong balance sheet while continuing to develop the business. And when you look at the indebtness, there is no reason to be afraid. We are BBB rating -- Standards -- S&P. We are the -- we have launched -- I remember you that we launched early last year, a bond of EUR 500 million that has been easily covered by the market. And we have a debt that is, I would say, balanced between the financing source and by nature of rate. To be clear, the group has the ability to reach -- to have access to lately between EUR 3 billion and EUR 4 billion easily through commercial paper, through some medium-term bond or banking facility. So the average cost of the debt is below 4%. We have an average maturity, which is around 3 years and we are absolutely confident about the ability to continue to finance and support the business and the growth of the business in the future. That's what I wanted to tell you. I'm holding back to Thomas for the strategic part. Thomas Mackenbrock: Thanks, Olivier, and thank you also because this will be your last presentation to present in your results after 16 years with the company. So a big thank you on behalf, I think, of the entire Board, the entire organization for these wonderful sort of decisive action over the last 16 years. Olivier Rigaudy: Thank you. Thomas Mackenbrock: Let's look, and -- I'm in the interest of time, quickly as an update on Future Forward that you see where we stand and what will be continued. So as I said, the value creation office for Future Forward is in place, hundreds of initiatives activating. I brought for today's presentation, as promised last time, 4 examples, to give you a little bit of a flavor where do we stand and what is happening and to have a little bit more tangible view on these growth levers, transformation levers as well as efficiency levers. Internal AI, we talked about, we see 3 big levers on driving change in the organization, of course, leveraging AI in everything we do internally when it comes to recruiting, training, workforce management, supervisor quality, but all corporate function, if you will, and AI adoption allows us to reach another level of quality, but also efficiency. Hand-in-hand with this internal AI transformation goes the cost optimization addressing structural changes through delayering automation on our SG&A and our overhead parts as well as on our direct costs as well. There are many, many plans in place now that are being implemented and they allow us to drive the savings that you see below. And thirdly, that is part obviously of the new leadership role with Jorge to find a simplified organizational redesign and to choose some lever there to have a more agile, leaner organization. Overall, for all of these 3 levers, the current expectation is that this will be delivered above EUR 100 million run rate savings, and we expect a onetime cost this year, of course, on depending negotiation of some of the levers between EUR 70 million and EUR 90 million. These plans are already in action. If you look at our annual results, you see that in January, February, we have the first measures amount with a corresponding cost of EUR 56 million. So it is happening. It's being implemented, and it will be continued seamlessly also by Jorge in the future. So this is on track and in execution. Second one, transformation. All of you remember this chart what I presented in Q3 that we as TP, believe AI is not a piece of software that is being sold. It is an incremental part of our operating fabric to drive outcomes for our clients. This is true on the functional side, so industry agnostic, and we have made good progress on some of our functional solutions, as you see later, as well as of the industry solution side. You need to orchestrate like we do today with TOPS and BEST, the human dimension, you need to orchestrate the AI dimension as well that it really can unfold this ROI and impact for our enterprise clients because otherwise, it's just a nice demo, but not really something delivering value. For this, we have started, as you remember, at our Capital Markets Day, our Q3 presentation TPI fab, our foundational backbone, we've launched more than 500 AI projects this year, integrating what we have done in the past into our new solutions suite in really driving impact for our clients. The biggest impact because there we had a head start in the past is augmenting with AI, our existing human delivery engine. There, we have seen more than 270 projects last year of doing this human augmentation but we also started to see some traction on FAB Connect, which is basically orchestrating human and agentic AI; FAB Growth, enabling with AI revenue as a service for our client; and FAB Collect, agentic AI collection where we see a lot of potential. This is a journey that will basically carry on the next years ahead but the foundation is laid, we are continued to developing. And the examples are real. Wherever you look, whatever new proposal you have, whatever new win you have for a client, AI is part of our offering is attached and ingrained what we do today, whether this is for a leading health care insurance company in the U.S. where we build an AI-based tool that allows faster access to the knowledge base. We won a client last year in Asia, it's a large bank, where we integrated human customer support with agentic AI customers on board to manage high-volume cases. And at the same times, this orchestration between human AI and agentic AI was the winning case that the client entrusted their most treasured valuable resource, their clients to us with our FAB Connect solution. We have won a large telco company in Latin America, where we do agentic AI collection. So we can be earlier on in the building cycle, reach out with an agentic collection tool and then hand over in complex cases to a human. And this is an example, again, where is the value add for TP. We are knowing which AI technology is available in the market, depending on the situation, depending on the client need to plug it in our processes. But as we work with dozens of different telcos in different countries, we work on many different debt collection services. We have the data now how do you orchestrate the process to unfold the power of the AI. And we've seen great results after the implementation actually quite recently when I visited the client. And lastly, FAB Growth. 7% of our business today is sales. There, we are not a cost center, but a revenue engine for our clients, and it's obvious, but it's hard to implement how AI augments our humans to drive better sales for our clients. We have started working for many high-tech companies in that felt with really incredible success. And I see there's really a great momentum combining the human power of sales with the tools of AI. Maybe in the interest of time, just a quick sneak preview, and I'm sure you will see in the next years more from Jorge and the team. I really believe if you think about and sort of cut through all the noise in AI, finding the right recipe, how you orchestrate in a world where AI is ubiquitous, the human power with the AI power is key. It's not just about load balancing. This call is done by AI, this by a human. It's about understanding where hallucination happen, how do you design the data flow, where does AI play a role for better outcomes and maybe a human how do you manage this handover. We're investing quite a lot right now of building this tool, including in a responsible control center that can detect hallucination, accuracy problems, false answers, defines the right guardrails and really configures outcomes for the client. TP is not a company that is selling AI solution. We are a company that drives outcomes for our clients and managing the orchestration of an operating machine. And the operating machine has a human hand and an AI hand or AI leg and doing this orchestration in the right way is key in the future because our clients don't want to see a demo or buy a tool like in a software, they want to see an enterprise process managed with a measurable impact. And that's, I think, the role for TP, you will see more in the future, but it's on the move. It's being developed, it's being deployed in client places, and I think we're all around the table are quite excited about it. Then many of you asked what is happening? How -- can you show us more concrete examples for sales? I talked about it, 7% of the group, EUR 700 million in sales. We do B2B2C and B2B2B sales. Starting with high-tech clients. We invested last year and the team built it out to not just focus on high-tech block, fast-moving consumer goods, banking, telco with really some good traction. We've seen high single-digit growth last year. We expect nothing less this year from the team, and you see it's again, this blend of human talent with AI. And the same is true with data services for AI. We called it out now it's 2% of the group. I think we all wish it will be a higher number but we see double-digit growth with the team. It's a market that is growing. It has moved from general data labeling and notation based on general knowledge to way more specific needs, way more specific expertise for clients, really combining domain expertise on certain subject area experts and bring it again for enterprises to life and having enterprise solution for medical companies, for car companies, for banking companies and combining on our know-how is quite critical. We won their 5 new clients. And again, the expectation for this year is at least to continue the growth momentum we've seen in 2025. And with this, I think these 2 examples, it shows you how the portfolio of TP is changing over time. Last but not least, outlook. As you all know, the world is uncertain. Our market is uncertain. If you look at last year numbers, we expect a growth more or less in the same range, 0% to 2%. Based on how the year ended and started into the year, we expect Q1 to be a bit softer and to be below that guidance range. EBITDA margin with all the measures remained stable at 14.6%. Of course, assuming no major fluctuation on the FX side. Cash flow, again, EUR 800 million to EUR 850 million, excluding the nonrecurring cash-outs. This is due to if you look at this year's numbers, which is a bit higher, due to the stronger euro versus the dollar and dollar correlated currencies because if you think about India, Philippines, LatAm, the U.S., of course, where cash is generated and translated to euro, the amounts might be lower given the current FX environment and the AI efficiency program that I talked before. Overall, I would say TP is in a position of strength. We'll remain in a position of strength but needs to transform. Olivier, myself and I know also, Daniel, are quite excited about the future. We're stepping down, knowing the company in good sense with Jorge and are looking forward to any questions from the group. I think you have seen this. This is the proposal for the dividend. Of course, for our investors is important it's being up for approval. May 21 in the general assembly. It's an increase of 7%, if I remember well, to EUR 4.50 the share, which is an increase and in line, obviously, obviously, with the position of TP wherein -- and the midterm guidance, there's no change there. With this -- sorry, for that, open for Q&A, and I'm sure there are many. Operator: [Operator Instructions] The next question comes from Suhasini Varanasi from Goldman Sachs. Suhasini Varanasi: First of all, a lot of changes, just trying to make my way through all of that. But maybe 3 questions, just to keep it short. When we think about the guidance for 2026, especially on the top line, can you help us understand your assumptions in Core Services and Specialized Services here and the implications that you're seeing on margins as well? The second question is on the strategic portfolio review that you have announced. I see that you've taken a few impairments below the line in the last couple of years. Is that mainly in Specialized Services that you are directing with portfolio review? Or does it also encompass Core Services? And it's interesting to see some of the color that you have talked about on Fab deployment. And it's good to see the benefits as well. Is it possible to help us understand the impact on contracted revenues and profits, margins, et cetera, as a result of deploying all of these AI solutions? Thomas Mackenbrock: Okay. Let me start and then I hand over to Olivier for some of the impairment and financial topics. First one on FAB AI. If you look at the markets, Suhasini, I can -- I think it's too early to say what is the impact for the group. We are there in the beginning. It's part of the solutioning more and more. The question of, of course, how do you price some of these AI solution, how do you price some of the benefits. As we move forward, as we said in the past, there are some ideas to make this more tangible, but it's too early to tell what is the impact because we are also investing in the solution at the same time in terms of margin or not and in terms of pricing model in the future. But you see there is traction, there's interest from the client. Every new offer that we have has a Fab solution inside. And let's say, I would be positive to see in the next 9 months, some more traction granularity that provides you also some facts that you can put in the model what the impact might be. Strategic portfolio review, as also discussed in the past, of course, there's always the question on certain Specialized Services assets, but there is a clean sheet. Jorge Amar has the mandate for the Board to review the entire portfolio of the group. To be very clear, and as we put in the press release, including divestitures as well as including M&A. So both options are open. As I said here, he has a very strategic mind. I think many of our analysts has looked at the group, and he has a blank sheet from the Board also today to do a thorough review on the portfolio of the group. Guidance, 0% to 2%. What was the question? We see a weakness -- we don't -- as you know, we don't give a guidance for Specialized Services and Core. I think the story of 2 tails that we have seen in the past that the Core shows higher growth momentum than Specialized Service is also true for 2026. I think that's fair to say. We have invested, as you know, in business development and AI capabilities on our Core Services, and we do expect a successive increasing momentum on our Core Services throughout the year, but we don't give different guidance. Maybe on the impairment, Olivier? Olivier Rigaudy: On the impairment, so of course, we are going to continue to look at business plan for all the business. There is no, I would say, decision that has been made for 2026, as you can imagine. So we are going to look that very precisely. We will be very, very careful as we have always been in our business. But so far today, we have no specific reason to change what we have done in 2025. What we've done in 2025 was just to be on the safe side on PSG and to a lesser extent, on Health Advocate. That's it. It's not a big amount compared to the balance sheet of the group where we have EUR 4 billion of goodwill and EUR 2 billion of intangible assets. But we saw that in accordance with auditor, it was more careful to take this stance. Suhasini Varanasi: It was great working with you, Thomas and Olivier over the years. Wish you all the best for the future. Operator: The next question comes from Remi Grenu from Morgan Stanley. Remi Grenu: A few questions on my side as well. So the first one is on the organic growth guidance. Can you help us understand what you mean with a softer performance expected in Q1 based on any details on current trading discussion with clients? How should we expect that organic growth in Q1 versus the 0% to 2% for the full year? The second one is on your cost saving plan. So EUR 70 million to EUR 90 million of restructuring costs this year. But can you help us understand the net impact if we integrate the savings that you expect to generate as soon as 2026? And overall, a discussion on the payback that you expect on the EUR 70 million to EUR 90 million you're investing in restructuring? And the last one is probably a bit of a broader question, a lot to impact from the announcement tonight. So what do you think are the top priority for the group? Is it about first setting the right perimeter to do the divestment and potential M&A of delivering on the cost saving program, detailing the capital allocation, there's still a little bit of an uncertainty there? So just want to understand in your mind, what's the top priority in which order to understand when things are going to materialize? Thomas Mackenbrock: So I would start and hand over to Olivier, but I would ask for forgiveness that as we speak today, Jorge is still employed by McKinsey & Company. He will start with the group on March 16. We will be then available, myself and him, to go and talk to investors, obviously. But till then, he cannot speak for the group. And so I try to cover your question. First, guidance, yes, as we indicated in the press release, we expect based on the start of the year, we see, in particular, weakness in onshore markets. There is an increasing momentum for offshore and certain uncertainty with some clients to be below the guidance range, meaning below 0% for Q1. To be very clear, there's also the weakness with Specialized Services, but we expect for the group to be below 1% and then in continued and sustained improvement throughout the year to reach the guidance range. Second, on cost impact, we do -- I think we also stipulate this in the press release, of course, subject to negotiation with the employee representations subject to the implementation of some of our internal initiative measures, D&I deployment, et cetera. But we expect from the EUR 100 million plus savings this year, around EUR 50 million to materialize. And Olivier can give you more details what's the net effect will be for this year also on the cash side. But we expect from the EUR 100 million plus EUR 50 million to realize this year. And then you talked about capital allocation. I think also there, we had the discussion today in the Board. It is noted very well the request from our shareholders or for some shareholders who reached out to have an increased capital allocation by the group, and it will be considered going forward, obviously in strong collaboration with the management. And in terms of priorities, the good thing with TP, as you know, all of the things that you mentioned at the same time. So yes, of course, there is a strong focus on the existing business. There will be a strong focus on the transformation of the group. There will be, at the same time, that's why articulate a strong focus on the portfolio review. I do believe we act from a position of strength giving the situation we are in, but there is a moment of transformation for the group that is clear, and there will be not the luxury to focus only on one thing. Olivier? Olivier Rigaudy: Just to comment on the saving plan. Of course, the impact in 2026 will at best neutral. We have launched all these savings plan early this year, notably in domestic market in Europe. And we do believe that depending on what size at what speed this plan will be developing. We do believe that it will be neutral at best in 2026. And I'm sure you have noticed that we have announced flat margin in 2026 versus last -- versus 2025. That shows that we are reasonably confident that to deliver these savings. Of course, the main positive impact will be seen much more in '27 and onwards in 2026. All the job of the team today is just to make sure that we have no negative impact in 2026, which I believe we will be able to do. Thomas Mackenbrock: Next question, please. Operator: The next question comes from Karl Green from RBC. Karl Green: I appreciate Jorge can't speak on behalf of the company or anything to do with Teleperformance, but would it be possible for him to give any kind of broad view around the market potentially just in terms of how he potentially thinks about outsourcing unfolding organic consolidation in the market? That would be the first potential question. And then just in terms of more sort of technical questions. I think, Olivier, that you mentioned that the margin guidance does include an assumed negative impact from further U.S. dollar depreciation year-on-year. I just wondered if you could very simply just quantify roughly how many basis points of FX headwind are embedded in that flat margin guidance or stable margin guidance? And then a final, again, margin question would be just, again, you've indicated that you would expect the specialized services margin to improve further in '26. Any kind of quantification around that would be really helpful? Thomas Mackenbrock: Let's start with the market, Jorge. Jorge Amar: Excellent. I'll start with the market with just an overall expert view, not at all speaking on behalf of Teleperformance, as I mentioned before, and Thomas reiterated, I will be officially with the company starting March 16. But if I look at the market and what we are seeing today in terms of trends, there's definitely a component of the rise of the hybrid workforce. And this means just having AI and humans interacting together. Sometimes AI managing end-to-end interactions and many times AI augmenting the humans to deliver a better customer experience. So I would put that on the table as one big element that we're seeing because it informs some of the other implications. The second one that I see is, there are many companies out there right now offering their AI solutions. And some people talk about an AI bubble. Some people talk about like, hey, what is going to happen with all these companies. And I am confident that the companies that will win in that space will be the companies that have some sort of differentiation, not only from a technology perspective but also from a data perspective and the ability to integrate the solution vis-a-vis the humans. If we play forward the movie and we believe that in the doomsday scenario, customer care will become just a bunch of models that are owned by a software company. That is highly unlikely, and we would see then many companies returning to some sort of differentiation in their customer experience strategy that involves a combination of both AI and human. And I think that, that part is something that we will need to continue tracking and seeing how it unfolds. And then I think a little bit over your question was going is in this space, in this market, how do we see outsourcing versus moving more operations in-house? And look, right now, the market, the data that we have from external analysts is showing a slight increase in terms of outsourcing. We still believe roughly that 65%, 66% of the capacity is still in-house. So there is still ample space for growth when it comes to outsourcing. And I think that companies will be looking more and more for partners that can deliver not only on the geographic footprint but also on some of the technology solutions, the risk and compliance, the data security as they continue to do that. So that's hopefully as much as I can share right now, but a little bit on the perspective on the market. Olivier Rigaudy: Coming on the margin and the impact on dollar on 2026. I must confess it's a little more complex than the pure dollar because as mentioned by Thomas a minute ago, it's not only the dollar, it's dollar linked -- currently linked to the dollar, including Indian rupee, Philippine pesos and the mix of this currency versus the previous year. So what is difficult today is to predict this mix. So today, we have not a huge impact on the dollar, on the guidance on the dollar and linked -- currency linked to dollar impact in 2026 margin. There is a limited impact depending, of course, of the mix that might change. So we will update you. Probably people will be after me will update you about that because it's too early to tell. On the margin on Specialized Service, what we can say is that I'm not waiting a big change versus 2025, except that we'll probably be better in Q1 versus last year. You remember that in Q1 last year, we have been, I must say, amazed by the impact of the reduction of the growth that we were waiting for. So now we are absolutely ready to do that. So we will be able to pass on this Q1 that was difficult last year in terms of margin. So probably a little bit better in margin in Specialized Service, everything equal, which is not going to happen, I'm sure. Thomas Mackenbrock: But maybe as a reference, as we also indicated in our press release and the presentation, the EBITDA margin or the stable EBITDA margin guidance assumes a EUR 1.20 dollar exchange rate. Olivier Rigaudy: What I would say is that, of course, there are uncertainties, and you understood that. But what I would draw as a lesson from 2025 is the ability of this group across the board across a different division, across a different country to adjust quickly. Of course, it's not -- it's easier in some geographies than in others. We have been able to adjust it of course, easily in U.S., easily in India, easily in Philippines. It's more complex in domestic European market than other markets. But what you have to keep in mind that decisions are taken quickly. They are made thoroughly quickly and implement quickly in the country, and I'm convinced that the company will continue to deliver such a reaction in case of issues or specific topic. This is something that I want to highlight because we have systems that enable us to detect quickly what's happening on the field and to react if needed, as quick as possible. Of course, there are limits to adjust, but the company is able to do so. Thomas Mackenbrock: Maybe one last quick question in the interest of time, if there's any. Operator: The next question comes from Nicole Manion from UBS. Nicole Manion: I do have a few, but I'll try to be quick. The first one is just on the revenue outlook actually. So sorry to kind of go back there. But given the Visa exit should be fully annualized at least for the most part and your comments about Q1 and the growth outlook in general, the implication there is probably that the LLS situation is still deteriorating. So any kind of detail on that you can give will be great. Secondly, just on Trust & Safety, which I think was 8% of group revenue this year. That's down from, I think, 10% in the presentation last year, which obviously is a bit of a significant drop year-over-year. I know we've all seen the headlines about some of the companies in that space maybe scaling back some of the services. But I wonder if you could maybe talk about whether it is that that's driving the step down in your numbers or whether it's AI disruption or anything else? And then finally, just a very quick one on the onetime costs. You've indicated EUR 70 million to EUR 90 million for '26. But then you've talked about EUR 56 million of costs so far from measures that were launched starting January. Is that correct to think about that EUR 56 million as sort of relative to that EUR 70 million to EUR 90 million guide? Because obviously, that's already quite a significant chunk of that budget. So it's quite front-end weighted, if that's the case. Thomas Mackenbrock: Okay. Let's get started. So yes, the announcement and as you see in our annual results of the EUR 56 million, all the announced social plans already today. So these are sort of earmarked in our annual results and is part of the EUR 70 million to EUR 90 million. On second question, Trust & Safety, we do see effects, as you rightly said, for some of our clients, and it's also linked to increased automation and NI improvements in that space. So as I indicated before, there is some automation happening with this we called out a bit now what is really data services in that category. Remember, it was split between other and Trust & Safety, but it is also automation that we see in the Trust & Safety space, and that's why it's reducing. On revenue development and LLS. So we don't call out, in particular, the development on LLS or revenue. But if you look in the news and the situation in the U.S., I think you have an idea that it was not such an easy start for LLS this year. Anything to add, Olivier? Olivier Rigaudy: No, no. But it's far from being a collapse. Just to be clear. Of course, what's happening on the political stuff doesn't help. On top of that, the weather did help as well, but we are not in a disaster mode far from it. I just wanted to mention it. Thomas Mackenbrock: I see there is one last question. Maybe we squeeze that in, even though we are a little bit over the time. Olivier Rigaudy: From Deutsche Bank. Operator: The next question comes from Ben Wild from Deutsche Bank. Ben Wild: I've got 2 questions, please. The first is on the guidance and particularly the gap between your adjusted EBIT and your FCF guide. So the guide obviously implies adjusted EBIT close to flat or modestly up before FX and your FCF guide implies free cash flow down 9% year-on-year. Can you help us understand what's going on in '26 that the results in that differential? Is there working capital reversal or any other one-off effect in '25 that reverses next year on the free cash flow? The second question, just very, very broadly, your valuation is implying an existential trajectory for the group over the midterm. I suppose, very simply, you talked about the investment opportunities and potential divestments. But more broadly, how do you think about the relative returns of deploying capital organically in the group through OpEx and CapEx, inorganically through M&A versus returning the significant cash that you generate to your shareholders? Thomas Mackenbrock: So I'll start with the second part and then hand over to Olivier. Olivier Rigaudy: No, there is nothing either in terms of working cap or CapEx or tax to be paid. I just wanted to say that we know that a significant part of our cash flow is coming from Americas. Of course, there is a lag between the EBIT and the cash items. So this is mostly the lag between the working cap that is balance sheet as of today that will be paid in 2026. So the same for the tax. But there is no specific impact we might say that we are careful as always and there is uncertainties that lead us to -- just to be on the safe side on top of that. Thomas Mackenbrock: And the question was on... Olivier Rigaudy: Valuation. Thomas Mackenbrock: So as we -- I think, at this point in time, with the new CEO coming in, I cannot say more than what we have written in the press release. The Board has acknowledged the request from shareholders also for an increased return, and we look into this. So at this point, I've asked for your understanding, I don't want to preempt any decisions being made by the new management on that front. Ben Wild: Olivier, if I may just quickly follow up on the FCF as a clarification point. Does the adjusted FCF include the nonrecurring restructuring costs that you've talked about in the release today or? Olivier Rigaudy: Yes, of course. Thomas Mackenbrock: And then I thank you also, everybody, for your attention and your interest. I'm sure there are more questions in the weeks ahead. We're looking forward to answer them. Again, welcome to the group, Jorge. It's a pleasure to have you on board, and thank you, Olivier, for all the time, and thank you for your interest and continued support of the company. Thank you very much. Olivier Rigaudy: Thank you to all. Thomas Mackenbrock: Thank you.