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Operator: Good morning, and good evening. First of all, thank you all for joining this conference. And now we will begin the conference of the fiscal year 2025 fourth quarter earnings resulted by KEPCO. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2025 fourth quarter earnings resulted by KEPCO. Si-young Yang: [Interpreted] Good afternoon. This is Siyung Yang, Head of Finance Department of KEPCO. I'd like to thank you all for participating in today's conference call for the business results of the fourth quarter of 2025 despite your busy schedule. Today's call will be conducted in both Korean and English. We will begin with a brief presentation of the earnings results, which will be followed by a Q&A session. Please note that the financial information to be disclosed today is preliminary consolidated IFRS figures and all comparison is on a year-over-year basis unless stated otherwise. Also, business plans, targets, financial estimates and other forward-looking statements mentioned today are based on our current targets and forecasts. Please be noted that such statements may involve investment risks and uncertainties. Now we will begin with an overview of the earnings results for the fourth quarter of 2025 in Korean, which will be then consecutively translated into English. [Interpreted] I will first go over the operating items. The consolidated operating income in 2025 stood at KRW 13,524.8 billion. Revenue increased by 4.3% to KRW 97,434.5 billion. Power sales increased by 4.6% to KRW [indiscernible] billion. Overseas business and other revenue decreased by 1.8% to KRW 4,429.9 billion. Cost of goods sold and SG&A decreased by 1.3% to KRW 83,909.7 billion. Fuel costs decreased by 13.8% to KRW 19,036.4 billion and purchase power costs decreased by 1.8% to KRW 34,052.7 billion. Depreciation expense increased by 2.3% to KRW 11,667.8 billion. Next, I will go over the nonoperating items. Interest expense decreased by KRW 325.6 billion Y-o-Y to KRW 4,339.5 billion. As a result of the foregoing, the 2025 consolidated annual operating income stood at KRW 13,524.8 billion, and net income was KRW 8,007.2 billion. Taeseop Eom: [Interpreted] Good afternoon. I am Taeseop Eom, Head of IR team. Now I will go over the matters of interest. First, I will talk about the performance of power sales and its outlook for the remainder of the year. Annual power sales volume due to economic downturn and as a result of that, given the industrial demand has decreased. The total sales volume was 549.4 terawatt hour, which is a 0.1% decrease Y-o-Y. In 2026, the economic growth rate and number of operating days increase should lead to a slight increase in the total sales volume. [Interpreted] Next, I will go over the fuel price by fuel source and S&P trends. In 2025, if you look at the annual trend of the fuel prices for bituminous coal Australia, the price was around $105.7 per ton. For LNG, JKM was KRW 980,000 per ton and the S&P was around KRW 112.7 per kilowatt hour. [Interpreted] Next, I will go over the [indiscernible] company. If you look at the annual 2025 generation mix, the capacity factor of nuclear power increased and thus, its contribution to the mix increased as well. For coal, the capacity factor increased and thus, the contribution in the generation mix increased. For LNG, the installed capacity decreased. And due to the increase of baseload power generation, the contribution to the mix decreased. For 2026 on annual basis, we expect the contribution of nuclear power to increase, coal to decrease and LNG should largely remain flat. In 2026, the capacity factor for each fuel source should be as follows: nuclear power around mid- to high 80%, coal around mid-40% and LNG should be around early to mid-20%. [Interpreted] Next, I will go over the RPS cost. In 2025, annual RPS expense on a consolidated basis was KRW 3,989.7 billion. And on a stand-alone basis, it was KRW 4,818.8 billion. Last, I will go over the funding situation. As of 2025 Q4, consolidated total borrowings was KRW 129.8 trillion. And on a stand-alone basis, it was KRW 84.9 billion. [Interpreted] Now we will move on to the Q&A session. Since we will be conducting the Q&A session in both Korean and English, please make your questions and answers clear and brief. Operator: [Interpreted] [Operator Instructions] The first question will be given by Jong Hwa Sung from Securities. Jong Hwa Sung: [Interpreted] I am from LS Securities and my name is Jong Hwa Sung. Please understand my sore throat today. I have 2 questions. Number one, it's about the contribution of the nuclear power generation in the generation mix. So I think largely fuel cost and power purchase cost was in line with expectations. But nevertheless, the operating income was underperforming expectations by around KRW 1 trillion. I think this is largely because of other costs. I think other cost was around KRW 1.2 trillion higher than what we expected. I believe this is mainly coming from the recovery of nuclear power generation sites and costs associated to carbon and greenhouse gases. it seems that these cost items were concentrated in Q4 in 2025. However, if you look at other years, sometimes it's booked in Q2, sometimes it's booked in Q4. And so the seasonality is not stable. So on an annual basis, how much do you expect these other cost items to be generated or incurred every year? And then second is about the contribution of the nuclear power generation. So in Q4 2025, on a Y-o-Y basis, I think the nuclear power generation contribution went down by around 6%, which is unusual given that for the first 3 quarters of 2025, nuclear power generation contribution was higher than that. So when you say -- or you said in your keynote that the contribution of nuclear power will probably increase in 2026. Is it compared to Q4 2025? Or is it compared to the first 3 quarters of 2025? In other words, in Q4 2026, will nuclear power generation contribution be slightly higher or significantly higher than 2025 Q4? Unknown Executive: [Interpreted] Yes. So I will first address your first question regarding the other cost. So the provisions related to greenhouse gas emissions went up by around KRW 120.6 billion to KRW 340.6 billion. As for the provisions regarding the nuclear -- provisions regarding the recovery of the nuclear power generation sites, it went up by KRW 411.2 billion, resulting in a negative KRW 4.6 billion. So there was actually write-backs. As to the exact timing of when we book these type of provisions and costs, I think we will discuss internally, and I'll get back to you later on. Unknown Executive: [Interpreted] Yes. Regarding your second question, we mentioned that the capacity factor for nuclear power should be around mid- high 80% on an annual basis. So maybe towards the end or early part of the year, the capacity factor may seem lower than that. But on an annual basis, I believe that it will be higher, especially given that we have nuclear power plants who are going through and completing its preventive maintenance process, which should come back online. And also the addition of new power plants should add to the higher capacity factor of nuclear power in 2026. Operator: [Interpreted] The following question is by Kyeong Won Moon from Meritz Securities. Kyung-Won Moon: [Interpreted] My name is Kyeong Won Moon from Meritz Securities, and I have 3 questions today. One, if you compare the consolidated operating income of Q3 and Q4 and the stand-alone operating of the 2 quarters, I believe that the stand-alone operating income is relatively higher numbers or relatively better -- showed better performance. I believe this is largely driven by the adjustment coefficient. So is that the main reason? What is the main reason behind this? And what would be your expected adjustment coefficient for Q1 2026? My second question is regarding the before tax profit. So compared to the operating income, the before tax profit seemed to have performed quite strongly, both for consolidated and stand-alone numbers. What would be the reason behind this? Were there any one-off P&L items in other categories like the finance and other businesses? My third question is related to the dividends. So I believe that -- so the dividend was just announced. And if you look at the dividend payout on the stand-alone net income basis, it seems that it actually decreased compared to last year. So how did you come to this DPS number? What is the logic behind that? And what would be your expectation or outlook for the dividend payout of 2026? Do you think it will be higher than 2024 and 2025? Unknown Executive: [Interpreted] Yes. So regarding your first question, it may seem that the stand-alone profits are stronger than the consolidated numbers because there are some costs associated with our subsidiaries, which is booked under consolidated financial statements, but not on our stand-alone numbers. [Interpreted] Regarding the adjustment coefficient, in Q4 last year, the numbers were slightly higher than previous average quarters. [Interpreted] And the coefficient for 2026, we expect to be slightly higher than 2025. Unknown Executive: [Interpreted] And regarding your question comparing the operating income and the before tax income. So for our subsidiaries, there were some lease liabilities that could not be hedged due to the decrease in the FX rates. And so because of the FX -- in the process of the FX conversion, there were some valuation losses and gains that needed to be booked that impacted the numbers. Unknown Executive: [Interpreted] And regarding your question on dividends. So last year, the payout was 16.5%. And this year, it was 13.65%. So like you mentioned, it did decrease. However, I'd like to note that the size of the net income on a stand-alone basis increased significantly. So the absolute amount of dividends that were paid out will increase. And DPS also increased to around KRW 1,541 per share. As for 2026, as you know, we are subject -- we are a public corporation and subject to the relevant legislations, we need to discuss the dividend strategy with government departments. So at this point, unfortunately, we are not able to comment on the direction of 2026 dividends. Operator: [Interpreted] The following question is by Jaeseon Yoo from Hana Securities. Jaeseon Yoo: [Interpreted] I am Jaeseon Yoo from Hana Securities, and I have 4 questions. My first question is provisional liabilities related to used fuel -- used nuclear fuel. So in January, I read news that the unit price has gone up. And so maybe can you give us a little bit more color on this topic? And my second question is also related to this as well. What was the total amount of the used nuclear fuel-related provisional liabilities booked by KHNP in Q4 2025? And third, there was a 15% decrease -- price decrease that was subject to a grace period, and that grace period is coming to an end. I believe, therefore, the bituminous coal price can go up. So what would be the associated cost that you are expecting in regards to the end of the grace period? And fourth is related to the bond issuance limit. So what would be the outstanding amount of bonds issued? And how much room do you have in comparison to the cap? Unknown Executive: [Interpreted] I'll try to address your first 2 questions at once. So the provisional liabilities that were booked for the recovery of nuclear power sites was KRW 904.5 billion -- increased by KRW 904.5 billion to KRW 24,769 billion. As for the used nuclear fuel, it decreased by KRW 178.4 billion to KRW 2,745.3 billion. And as for the mid- and low level nuclear waste associated provisions and liabilities, it went up by KRW 10.2 billion to KRW 1,077.2 billion. Unknown Executive: [Interpreted] As for your third question regarding the grace period of the individual consumption tax coming to an end and how that would impact our cost. So we do have an internal estimate, but unfortunately, we are not able to disclose those numbers to the public in the market. So we ask for your understanding. Unknown Executive: [Interpreted] Yes. And regarding your final question on the bond issuance cap. So that can -- the final exact number can be calculated after the dividend is finalized at the Board and shareholders' meeting. But we believe that it will be something around just over 3x once all of those dividend-related activities are finalized. Operator: [Interpreted] Currently, there are no participants with questions. [Operator Instructions] The following question is by Jong Hwa Sung from LS Securities. Jong Hwa Sung: [Interpreted] I have 2 questions. First is regarding the nuclear power generation export strategy. So I believe that there is a process currently ongoing to streamline the Korean nuclear power generation export strategy. So maybe can you elaborate a little bit on how that is moving forward? And second, I believe that there is some court case in the international mediation courts by KHNP regarding the additional KRW 1.4 trillion construction cost that was incurred during the BNPP construction project. Has that been already reflected in the financial statement? And if so, if KHNP is able to recover the cost from the UAE government, will that have impact on the financial statements? Unknown Executive: [Interpreted] Yes. I will address your first question regarding the export of nuclear power plants of Korea. And so we are -- I believe that the research project has been outsourced by the Ministry of Industry, and they are currently waiting for the results. KEPCO, of course, will be closely cooperating with the government to ensure that high-quality nuclear power plant export strategy can be developed to maximize and satisfy the global customers. Unknown Executive: [Interpreted] Yes. And your second question regarding the dispute between KEPCO and KHNP. So we are currently in conversation and negotiation with them. And I think both parties are making utmost effort to resolve this conflict in a stable manner. However, please understand that we are not able to disclose any specific numbers. Operator: [Interpreted] The following question is by Yoon Cho from UBS. Yoon Cho: [Interpreted] I have 3 questions. One is regarding the tariff. So the press recently has reported that there may be some differentiated price scheme applied to industrial power. And currently, you are thinking of, for example, different pricing per time or offering weekend discounts for the industrial use. There are also talks about regional pricing schemes for the industrial power. And these elements have been mentioned by the Minister of Climate, Energy and Environment. So can you elaborate or give us a little bit more color on these schemes? How do you think it will impact the average unit price of power, overall? And when do you think that these new schemes can be introduced? My second question is regarding to your comments earlier today. You mentioned that in Q4, there were some cost associated subsidiaries that were booked. Were there any unusual one-offs that we should be aware of? And my third question is about the SG&A cost. What was the exact amount consolidated basis for Q4? Unknown Executive: [Interpreted] Regarding your first question, with the increase of the solar PV power generation, the overall load patterns are changing. And to reflect this change, we are currently developing seasonal and -- seasonal pricing schemes and also different pricing schemes for time period. We are also considering the balanced growth of the overall national economy and regions and also working to distribute or disperse the power demand nationwide. And these are the reasons why we are also developing a new pricing scheme that can better reflect the regional situations and regional demand. We are working closely with the central government to develop a reasonable and rationable new pricing scheme, reflecting all of these elements. However, as to its impact on unit price and the exact time line, I believe it's a little bit early. We are also listening to the opinion of the corporates and overall business and industry community as well. So once we have a better idea on the specifics of this matter, then I think we can disclose some other information. But currently, we are under close negotiation and discussion with the government. [Interpreted] And regarding your second question, I think all we can say at this point about the cost booked by subsidiary is that it is related to overseas businesses. Unknown Executive: And as for your final question regarding consolidated SG&A cost. So currently, we are in the process of closing the books. And so we do not have the final exact numbers right now. But once the audit report is released, the number will be included in the financial statements. Operator: [Interpreted] The following question is by [indiscernible] from JPMorgan. Unknown Analyst: [Interpreted] I only have one question. I believe that in the past, there were some discussions on reflecting the individual elements in the fuel cost of the ASP. So have you continued those discussions? Do you have any updates that you can share with us? Unknown Executive: [Interpreted] Can you please elaborate on that question, please? Unknown Analyst: [Interpreted] Yes, I believe currently, when the tariffs are determined, KEPCO would make a proposal to the government, maybe around plus/minus 51. And ultimately, the government would make the decision. However, I believe that there were some discussions on finding the legal mechanism to ensure that the cost pass-through system can work like other utility companies outside of Korea. And so if the fuel cost would go up, this would naturally be reflected in the tariffs through the cost pass-through mechanism. So I was wondering if there were any progress in those discussions with the government. Unknown Executive: [Interpreted] Yes. So currently, we have implemented -- we have in place the cost pass-through system. So on a quarterly basis, the fuel prices are reflected in the tariffs. But we are also working to improve how it is being implemented. We are discussing with the government and listening to the voices of the related parties and industries to find ways to further improve the cost pass-through system going forward. Operator: [Interpreted] Currently, there are no participants with questions. [Operator Instructions] [Interpreted] As there are no further questions, we will now end the Q&A session. If you have any questions -- additional inquiries, please contact our IR department. This concludes the fiscal year 2025 fourth quarter earnings resulted by KEPCO. Thanks for the participation. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good morning, and welcome to the conference call for Tate & Lyle's Q3 Trading Statement. Your speakers today are Nick Hampton, Chief Executive; and Sarah Kuijlaars, Chief Financial Officer. I will now hand you over to Nick Hampton for some opening remarks. Nick Hampton: Thank you, operator. Good morning, everyone, and thank you for joining this third-quarter conference call. I will start by making a few remarks on our performance and strategic progress, and then we'll open it up to Q&A. Trading in the third quarter was in line with our expectations and consistent with the first half. Our guidance for the full year remains unchanged. On a pro forma basis and in constant currency, revenue was 2% lower in the quarter, reflecting continued muted market demand with performance in all regions broadly in line with the first half. On a reported basis, which includes CP Kelco from the date of acquisition on the 15th of November 2024, group revenue was 15% higher. For the 9 months to the 31st of December 2025, on a pro forma basis, revenue in the Americas was 2% lower, with modestly higher pricing more than offset by lower volume. In Europe, Middle East, and Africa, lower pricing resulted in 5% lower revenue. While in Asia Pacific, revenue was up 1%, driven by higher volumes. Turning to the renewal of customer framework agreements for the 2026 calendar year, which is well advanced. With our #1 priority returning the business to top-line growth, we have selectively chosen to invest to drive volume and revenue growth. This is the right thing to do for the business, giving us a stronger platform for future growth, and we are pleased with the engagement from customers to our expanded offering. We are making good progress on the series of actions we set out at our interim results to drive top-line growth and improve performance. Let me give you 1 or 2 examples of progress. We continue to accelerate the rollout of our solutions chassis program with a focus on mouthfeel. We launched 2 new mouthfeel chassis in the quarter, one to improve the stability of portable salad dressings and another to support egg reduction. The level of customer engagement on our enlarged portfolio remains high, with the value of cross-selling opportunities in our new business pipeline increasing by more than 1/3 in the quarter. Revenue synergies from the CP Kelco combination are growing in line with our expectations, and we remain confident that run-rate cost synergies will exceed our target of $50 million by the end of the 2027 financial year. And finally, our 5-year $200 million productivity program continues to operate well, with further savings delivered in the quarter. Overall, then, I am pleased with the progress we are making. There is a real determination and focus across the business to deliver on the actions we are taking, and I am confident that in the near term, they will improve the top-line performance of the business. We will give you more detail of our progress when we announce our full-year results in May. At that time, as usual, we will also provide guidance for the 2027 financial year. To conclude, with our leading positions in sweetening, mouth and [indiscernible], we remain well placed to benefit from the global trends towards healthier and more nutritious food and drink. With the breadth of our portfolio, our formulation expertise, and the targeted investments we are making to accelerate customer wins in key growth areas, we are well-positioned to drive profitable revenue growth over time. With that, Sarah and I will be happy to take any questions. Operator: [Operator Instructions] We will now take our first question from Karel Zoete from Kepler Cheuvreux. Karel Zoete: I have 2 questions. The first one is in regards to the price investment you mentioned to sustain volume growth or to improve volume growth. Can you be a bit more specific which markets you decided to invest and what that might mean for pricing going forward? And the other question is around fiber. So I think more and more evidence or discussions in the public domain about fiber, fiber being the new protein, et cetera. What kind of engagement do you see with your customers on the fiber ingredients you sell? Nick Hampton: Okay. Karel, let me pick up on the fiber question first. I think it's an important one, and I'll let Sarah handle the selective view on pricing. But I mean, fiber clearly is a big global trend. In fact, there was an article yesterday in Bloomberg about fiber maxing. And we're seeing very encouraging progress with customers on our fiber portfolio, both products going into market, notably in the U.S. market, where in both beverages and dairy, we're seeing fiber fortification as a trend, and increasing the pipeline for fiber is growing. But it's a global trend as well, and we're seeing that trend across Europe and Asia, too. And I expect that to continue as we think about the continued desire to create more nutritious processed food, especially in a world where people have a significant shortfall of fiber in their diets, and all of the nutritional trends we're seeing point towards fiber addition as a strong growth opportunity for us going forward. Sarah Kuijlaars: Thanks, Nick. So when we think about our framework agreements, I think it's worth taking a step back, and we're all very aware that market demand remains muted. And as we stated, our #1 priority is to deliver the top-line growth. So that's volume and mix-driven top-line growth. So we've taken the decision to set our business up stronger for the future is that we're selectively investing to drive that volume momentum and the revenue growth. So we think about this is we're being very selective. So by product, by customer, by region, to ensure that we're setting ourselves up for that growth, given we now have the broader portfolio following the acquisition of [ Kelco ]. Operator: Our next question is from Ranulf Orr from Citi. Ranulf Orr: Just one for me. I mean you talked a bit in the past about the sort of 4Q improvement. Could you just provide a bit of an update on that? What's going well and where you have visibility on some of those sort of factors coming through? Nick Hampton: You mean in the fourth quarter? Ranulf Orr: Yes, yes. Nick Hampton: I just want to get clarity on the question. Look, so I mean, I think we're seeing encouraging signs of increased customer engagement on reformulation. It's very clear the sentiment in the market is our customers at least increasingly thinking about the need to put price back in to drive momentum. But we're not assuming any improvement in market outlook in the fourth quarter in our underlying guidance for this financial year. What we saw in the third quarter was consistent performance from the first half and very clearly in line with our expectations. And so far, as we've entered the fourth quarter, we'd say the same. Always as you go from Q3 to Q4 across the calendar year, you can get some kind of pluses and minuses between December and January from a phasing perspective. But we're seeing the kind of customer demand that we would be expecting, given the underlying guidance given for this year. Ranulf Orr: And just one more, if I may. On the price investments for the year ahead, can you give any kind of quantification or indication of the scale of those, maybe in relation to the current year? Nick Hampton: Look, I mean I think we haven't finished yet because we're still closing out the renewal agreements for this calendar year. And we'll give you a precise view on that when we get to our May results, as things have settled down. But I think it's fair to say that a little bit more this year than we did in this calendar year than we did in the last calendar year to ensure that we're really driving momentum with key customers. And you're obviously offsetting that with real focus on productivity and the benefits of the combination coming through in both cost synergies and the revenue synergies, of course, let's not forget, this is now the second year of the new business. And this is the first year we're entering as one combined business. Operator: We'll move to our next question from Joan Lim from BNP Paribas. Yuan Lim: Quite a few of my questions have been asked, but maybe just could you provide more color on trends by regions and category, like for example, which category has been doing well, or you're seeing more uptake with customers. So you mentioned a bit about fiber. Is that more driven by innovation in beverages, for example, and supported by GLP-1 users taking more fiber? My second question is, do you have any indication of how FX will be like for the next year? And lastly, maybe an update on CP Kelco's volume and margin recovery, please? Nick Hampton: Okay. So let me give you some headlines on the overall shape of what we're seeing in the market, and then maybe Sarah can pick up on the ForEx and the CPK question. I mean, overall, what we saw in the third quarter was quite consistent with the first half. In the Americas, we're seeing modestly higher pricing more than offset by lower volume. And that's very consistent with the Nielsen volume data that we saw in the first half, where you saw volume down and value driven by pricing, which was in part the pass-through of tariffs at the time, as you remember. And that's been pretty consistent. In Europe, volume pretty flattish volume mix with the pricing investment driving lower revenue. And then in Asia, encouragingly, some revenue growth driven by higher volumes, so some signs of momentum. I think underlying that, though, I think it's important to say what we're seeing with customers in terms of trends is some clear benefits of the combination flowing through. So in the quarter, the cross-selling pipeline was up over 1/3, having been strong at the first half. And we're seeing double-digit growth in our innovation pipeline to customers. And that's driven by some key themes. So as we've already talked on the call, we're clearly seeing a focus on fiber fortification across many categories. And I think it may well be driven by this need for nutritional density, driven by nutritional needs for processed food and the GLP-1 point you made. We're seeing that especially in beverages and dairy in the U.S. In EMEA, we're seeing dairy and beverages being more resilient, Baker and snacks a bit softer. And in Asia, actually, overall robust category performance. We talked about recovery in China at the half driven by CPK. Beyond fiber fortification, the other trends we're seeing is renovation for value. So cost efficiency and product renovation. We're also seeing continued focus on sugar reduction, and that linked to mouthfeel that we talked about at the half, where as you take sugar out, being able to control the texture mouthfeel of product is really important. And that's where the combination is really helping us build a stronger pipeline, which we expect to build as we go into next year. Sarah Kuijlaars: Thanks, Nick. And the next question is about ForEx. So indeed, we saw a headwind of -- given the U.S. in the first 9 months, which is approximately 2% to 3% of revenue, and that we expect to continue. That is partly offset by the strength in euro. Remember, with the acquisition of CPK, we have a broader footprint. So there's also some impact of the Danish krona, et cetera. But overall, you expect a headwind in the sort of the 2% to 3% on the top line. That's a slightly higher impact on EBITDA given the important contribution from the North American and the profitable North American business. Turning to CPK. So clearly, the integration continues to go well. cost synergies well in hand. And as Nick has spoken about now, obviously, the attention on the pipeline growth of those cross-sells. And it's been really powerful going into the conversations this year as a combined portfolio, punching up the combined commercial staff, really demonstrating the ability and the strengthening capability of the portfolio and the stronger [indiscernible]. Operator: Our next question is from [indiscernible] from Barclays. Unknown Analyst: So my question is on the selective investments. How should we think about the margin impact of these investments as we move into FY '27? Are you viewing this as a 1-year reset to drive volume recovery or a more structural change in pricing intensity? And my second question would be, regarding like to what extent can with the ongoing productivity program and CP Kelco cost and revenue synergies can offset the margin impact of these investments? Should we expect net margin pressure or stability as we bridge from FY '26 into FY '27? Nick Hampton: Okay. So I think let me start by saying we'll give very clear guidance on fiscal '27 when we get to full year results. So we need to complete our planning process for next year and see how trading evolves in quarter 1 of the calendar year. But the way I think about it is if you think about the building blocks going to next year, we're clearly because of the market demand remaining muted, putting some selective investments into price to drive the top line, both volume and revenue. Alongside that, we've got clear offsets from productivity delivery and accelerating the benefits of the CP Kelco combination. And different to last year, we've also got the benefits of the combination flowing through in terms of the pipeline and the cross-selling opportunities to support the framework agreement renewals. So we're confident that that builds a strong platform for growth. Where that leads us to on overall earnings delivery and margins, will be much clearer about when we get to our full year results. But the key here is the quality of the portfolio to build a growing pipeline of business with customers, as we see markets start to improve and the trends that are our friend from a positioning of the business perspective, we fully expect to drive growth going forward and into the medium term. And we'll give very clear guidance on the nearer term when we get to our results. Unknown Analyst: Just a follow-up on the fiber thing. Thanks for giving some color on that. So are you seeing a meaningful increase in customer briefs or RFP activity linked to high fiber formulations? And how does the current pipeline compare with the time last year? Nick Hampton: So if you think about our pipeline in the last quarter, it grew double-digit overall. And that is driven by a focus on things like fiber fortification. I think the question always is at what pace of those pipeline projects convert into innovation in the market. And as you know, we've probably seen -- we haven't really seen an increase in innovation pace yet, but we're anticipating that coming as these projects start to flow through. Sarah Kuijlaars: And Nick, maybe I'll just add, it's not simply just adding fiber to a product. With fiber, you really need the mouthfeel. And that's really where our sweet spot because you really need the appealing mouthfeel for the fortified product to be successful in the market. Operator: We'll now move to our next question from Samantha Lavishire from Goldman Sachs. Samantha Lavishire: I just kind of wanted to talk about some of the themes you're seeing in the market longer term. So we heard a lot of feedback at CAGNY last week about clean label reformulation, including away from artificial sweeteners like sucralose and several emulsifiers, some of which I think are in your portfolio. What proportion of products are being reformulated this way? And is the increased customer opportunity that you're seeing with CP Kelcos from fortification and protein and fiber, is that enough to offset this headwind? Are you still seeing structural growth in the way that customers are reformulating with your ingredients? Nick Hampton: So thanks for the question. I mean all of those trends that we talked about at CAGNY this month actually play to the reshaping of the portfolio. And I think it's important to say that sucralose clearly is an important part of our portfolio as an artificial sweetener of choice, but it's growing in demand. And we're selling every kilo sucralose that we can make because it's the best-tasting artificial sweetener out there. It is also important to say that if there was a shift away from artificial sweeteners, we've got lots of non-nutritive natural sweeteners in the portfolio, everything from stevia, we're the only company with an all-American supply chain for stevia, for example, through to monk fruit and allulose. So we're well placed for the reformulation to more natural and clean label. The emulsifiers actually are part of our portfolio. We do a lot of replacement of emulsifiers, and that's where the CP calc portfolio comes in as well. So one of the trends that we're seeing people talk about the trends we really believe the combination of our 3 core platforms can help customers win because that sugar replacement or artificial sweetener replacement that we talked about also comes with the need for modulation as Sarah just talked about. So the things that we heard from CAGNY are precisely the reason that we've repositioned the business the way we have done in the last 5 years. Operator: We'll now move to our next question from Matthew Abraham from Joh. Berenberg. Matthew Abraham: Just first one relates to the fiber fortification services you touched on. Just wondering if you can provide a sense of the margins from those services relative to the rest of the group. If fiber demand does accelerate meaningfully, could there be a broader impact on overall group margins? And then the second question just relates to the price investment commentary that you provided. Is that a reflection of a perception of improved demand elasticity? Or is it more a reflection that demand is such that it requires stimulation through price investment? Nick Hampton: So on your first question on fiber, our fiber portfolio generates very nice margins for us. And obviously, it depends on a customer-by-customer basis, how much fiber we're using, what other components we're putting in to help with that solution. But I think the key is the fiber fortification trend is driving a solutions model where typically that business is stickier business and good margin business. So it's certainly helpful in that regard. In terms of your question on price and price elasticity, we're clearly in a world where consumers are more challenged. Food is 20% to 30% more expensive than it was pre-pandemic because of all of the geopolitical challenges we've seen over the last 3 or 4 years. And there clearly is a requirement for some price stimulation to drive demand. But more importantly, for us, we're trying to balance the way we think about growing our business to make sure we're well-positioned for growth through the cycle. And in a cycle where demand is more muted, we want to make sure we're stimulating growth so that we're well positioned as markets start to grow. Operator: [Operator Instructions] The next question is from Lisa De Neve from Morgan Stanley. Lisa Hortense De Neve: I have 2. First, can we talk a little bit about what you're seeing in APAC? Various players in this reporting season have noted an improvement in China specifically. And I believe your sequential local currency growth is modestly better in APAC. So any color on that would be great. That's one. And secondly, can you provide us a little bit of color on how your raw materials are trending into this year on average? How should we think about the direction for cost input inflation or deflation? Nick Hampton: So maybe let me pick up the APAC question. Sarah can pick up the input cost one. Look, I mean, we're encouraged by the progress we're seeing in Asia. As you mentioned, we did see some improvement in China in the first half, and that continued through the third quarter. I mean it's difficult to talk about Asia as one region because it's such a vast area, but we're seeing good progress in China, solid demand in North Asia, across Japan and Korea. And that gives us some encouragement for the future. And if I look at APAC in the broader suite, we've grown that business significantly over the last 5 years. We're now a $500 million business revenue when we were around about $100 million 5 years ago. And it's a huge growth opportunity for us still because it's 60% of the world's population, and a lot of the trends we talked about on the call are true in Asia as well. So the opportunity there is very clear. And the fact that we're starting to see some stability and improvement is very encouraging as we go into the next 12 months. Sarah Kuijlaars: Thanks, Nick. And then Lisa, on the raw materials, I think it's worth reminding you that we've now got a much broader array of raw materials, CPK, it's not just corn, [indiscernible], et cetera. And broadly, it's a more benign environment. There's not a strong inflationary push coming through there. So it's more benign, and we're well diversified. Nick Hampton: I think it's fair to say we're seeing pretty flat year-on-year costs overall. I mean, with some ups and downs, but nothing significant. Operator: We have a follow-up question from Joan Lim from BNP Paribas. Yuan Lim: Sorry, just squeezing in one more question because everyone seems to be asking about margins. Nick, you've historically talked about how important it is to protect unit margins. Has this changed? Are you confident of maintaining unit margins this year? Nick Hampton: No, I think the focus on unit margins hasn't changed at all. I think in the near term, we're trying to balance all the levers we have to get the business back into top-line growth. And doing that in an environment where markets are more sluggish means we're having to make some choices about where we invest and what choices you make. But fundamentally, over time, we expect to focus on maintaining unit margins and using mix to improve margins to the quality of the portfolio. We're in a cycle at the moment where we're having to make some choices. Yuan Lim: It's reassuring to hear that you are confident of maintaining the margins. Operator: With this, I'd like to hand the call back over to Nick Hampton for any closing remarks. Nick Hampton: Thank you, operator, and thank you, everybody, for your questions. So just to summarize, trading in the third quarter was in line with our expectations and consistent with the first half. And importantly, our guidance for the full year remains unchanged. As we talked a lot about on the call, our #1 priority is returning the business to top-line growth. And we're clear on the actions we're going to take to improve top line performance of the business in the near term. We remain focused on top-line growth, execution, and delivering for our customers. So thank you for your time and questions, and I wish you all a very good day. Operator: Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.
Natalie Davis: Good morning, and welcome to Ramsay Healthcare's financial results for the 6 months to 31st of December 2025. My name is Natalie Davis, and I'm joined today by Anthony Neilson, our Group CFO, who commenced with Ramsay in late November. After 12 months in the role, I'm pleased to report that we're making good progress on our key priorities. The refresh of our group executive is now complete, strengthening capability and supporting the acceleration of our multiyear transformation program. We remain focused on delivery against the 3 priorities I first outlined this time last year that are shown on Slide 3. First, disciplined execution of the transformation of our market-leading Australian hospital business. In the half, we've improved patients, people and doctor NPS, grown admissions with a focus on higher acuity and have lifted our theater utilization. Our second priority is strengthening capital allocation and improving returns across the portfolio. You will have seen last week's announcement regarding the proposed distribution of Ramsay's investment in Ramsay Sante to Ramsay shareholders. Subject to obtaining the relevant approvals, we believe this will simplify the group and enable focus on the transformation of the core Australian hospital business. We have also progressed the turnaround of Elysium by rightsizing the business for the current environment through site closures and reducing available beds. With Joe O'Connor joining as CEO in January, we expect the turnaround to continue to gain traction. Our third priority is evolving our culture to innovate and accelerate delivery. I'm pleased to say that our group leadership team is in place, strengthening capability and our patient and people NPS scores remain high across the group, reflecting the commitment of our teams and clinicians and the quality of the care we provide. Turning to the half year results on Slide 5. We reported 7.3% growth in underlying EBIT and 8.1% growth in underlying NPAT and that was driven by Australia. The Board has determined a fully franked dividend of $0.425 per share, up 6.3% and representing a 60% payout ratio of underlying earnings. Slide 6 shows the underlying performance across each region and the contribution to the funding group and the consolidated group results. Australia was the key driver, reporting underlying EBIT growth of 7.1%, supported by good activity growth, higher acuity, improved PHI indexation and cost management, which together helped offset the impact of the new funding mechanism at Joondalup Health Campus. The team at Joondalup have progressed a range of operational programs, including a focus on reducing agency usage, which has also helped to partially mitigate this impact. A lower underlying net loss from Ramsay Sante supported the results, reflecting growth in Sweden and performance actions in France that partially offset the government funding pressures in that market. Turning to the performance of each region and starting with Australia. Slide 8 lays out our 2030 strategy, where our vision is to innovate to be Australia's most trusted leading health care provider and to deliver long-term value for our shareholders through the 5 pillars of our strategy. Our strategy will innovate Ramsay. We will lead in local catchments, growing our services, patient care and relationships with specialists and GPs in communities around our strategically located hospitals; differentiate ourselves in priority therapeutic areas, including cardiology, orthopedics and cancer care; create One Ramsay advantages powered by digital and AI to capture the synergies enabled by our market-leading scale; connect patient and doctor journeys from hospital care to community-based care and work with our communities and partners to shape Australia's leading health care system for the future. We will measure progress with clear financial and nonfinancial metrics and early indicators include our patient, doctor and people NPS metrics, growth in admissions, cost efficiencies through One Ramsay advantages and revenue indexation that better matches cumulative cost growth. Turning to Slide 9 and through all the change underway, it's important to reinforce that our patients, people and clinical excellence remain at the heart of what we do and how we operate. We've leveraged Ramsay's strong reputation in clinical trials to launch a national Ramsay research and development network, supporting 23% growth in clinical trials activity in the first half. Growth in admitting VMOs and strong theater utilization contributed to good activity and market share gains. The changing environment in the delivery of private health care is creating opportunities for us given our strong and stable reputation and portfolio of strategically located and owned facilities. The proposed acquisition of National Capital Private Hospital is a clear example of this, delivering us access to an attractive catchment area where we're not currently represented and a hospital with a strong reputation for clinical excellence. Our focus on utilization across catchment areas has also seen some development projects postponed or reshaped with development spend now expected to be below the bottom end of the guidance range. We continue to drive cost efficiencies and maintain capital discipline through our Big 5 hospital initiatives, supported by pilot programs across the business. Following last year's review, digital and data OpEx remains on track to be at or below FY '25 spend. Turning to the Australian results on Slide 10. The business delivered top line and profit growth despite the impact of the new funding mechanism at Joondalup. Revenue from customers increased 8.2%, driven by a 3.1% increase in hospital admissions and improved indexation. Revenue from our private hospital portfolio grew 8.7%. EBIT margins, excluding Joondalup, improved by 40 basis points on the prior period, driven by higher activity levels and case acuity, increased theater utilization and improved PHI indexation relative to wage inflation. Looking at activity in more detail on Slide 11. Our core surgical admissions grew 5.7% with day admissions growing more strongly than overnight admissions. However, a higher acuity mix resulted in inpatient IPDAs increasing at a faster rate than inpatient admissions. We remain disciplined with our CapEx spend in Australia, where it's focused on projects with good returns and strategic value. On Slide 12, the major development projects in the half were the completion of Ramsay Private at Joondalup campus and the final phase of the expansion of Warringal in Melbourne due to be completed in the second quarter of financial year '27. We have 23 new theaters and procedure rooms scheduled to open in financial year '26, concentrated in major hospitals in key catchment areas. Development CapEx for the full year is now expected to be in the range of $170 million to $190 million, below our previously guided range, reflecting our disciplined approach to utilization and capital allocation. Turning to the outlook for Australia on Slide 13. In the second half, we'll continue to advance our multiyear transformation program in Australia. We aim to finalize negotiations on the Victorian and Queensland nurse EBAs by the end of this financial year. We will continue to work with our payers to recover both the gap created by cumulative revenue indexation below cost indexation and future wage inflation as well as innovating our funding to better support innovation in care models. We have one major PHI contract renewal due in the second half. We expect EBIT growth momentum in Australia to continue in the second half, driven by growth in activity in our priority therapeutic areas, revenue indexation, cost focus and partial mitigation of the impact of the new funding mechanism at Joondalup. We will continue to progress the proposed acquisition of National Capital Hospital, which is expected to transition into the Ramsay portfolio in the first quarter of financial year '27 and be EPS accretive in the first 12 months of ownership. Turning to the U.K. region on Slide 14. Both businesses operating in challenging conditions. The U.K. acute hospital business was impacted by NHS budgetary restrictions towards the end of the period. This was mitigated by a focus on high acuity and private work as well as operational initiatives. Elysium continues to face weak market demand from local authorities. The turnaround plan is underway and beginning to gain traction, including central cost reduction, agency reductions, site optimization and fee negotiation. Turning to the acute hospital business results on Slide 15. The business delivered 3.5% revenue growth in constant currency, driven by a higher acuity case mix, increased private pay admissions and tariff indexation. NHS admissions slowed and declined in quarter 2 as NHS budgetary constraints began to impact activity. Our continued focus on managing complexity and consistent operational excellence helped to mitigate the impact of lower NHS volumes. The result included backdated indexation. Excluding this impact, underlying EBIT margins improved 30 basis points to 9.3%. Turning to the outlook for the acute business on Slide 16. NHS activity outlook for the third quarter financial year '26 is expected to remain negative compared to the prior period. The U.K. hospital business will continue to focus on growing private volumes and driving operational excellence to help offset the NHS funding uncertainty, which we expect to prevail until the new NHS fiscal year. As the leading private provider to the NHS, Ramsay U.K. remains well positioned to support the U.K. government's objective to reduce elective surgery, outpatient and diagnostic waitlist when additional funding is anticipated to be made available in the new NHS fiscal year from the 1st of April with a strong pipeline of patients through its outpatient clinics. On Slide 17, Elysium has remained focused on its turnaround program informed by the recommendations of the performance diagnostic completed in the second half of financial year '25. Key priorities include site optimization, cost reduction and fee negotiation that better reflects the complexity of services we provide. This resulted in the closure of 163 beds at underperforming sites in the first half with 5 sites expected to be closed in the second half. A number of these properties have been put to market for sale. Turning to the outlook on Slide 18. Elysium's new CEO, Joe O'Connor, commenced in January and is leading the performance improvement plan. We expect the ongoing focus on the plan and the initiatives already taken in 2025 will see the turnaround continue to gain traction. Turning to Ramsay Sante on Slide 19. As announced last week, we are progressing the proposed demerger of Ramsay Sante via an in-specie distribution of our 52.8% investment to Ramsay shareholders. While this process continues, we remain focused on the performance improvement programs across the European business and particularly in France, which continues to face funding headwinds and broader market uncertainty. In the Nordics, the focus remains on continuing the performance momentum of the Swedish business and the turnaround programs in Denmark and Norway. Turning to Ramsay Sante's results on Slide 20 and the business delivered a 4.4% increase in underlying EBIT in constant currency, driven by a strong result from the Nordics region, in particular, the performance in Sweden. This was partially offset by weaker results in France, where the reduction in subsidies of EUR 20 million compared to the prior period and the inadequacy of tariff indexation continue to pressure earnings. Turning to the outlook for Ramsay Sante on Slide 21. Across Europe, the focus remains on cost control, efficiency and cash generation as well as continuing the performance momentum of the Swedish business. Activity growth in Europe is expected to continue in the second half, driven by day admissions, partially offset by the impact of a 3-day French doctor strike in January. The new contract at St. Goran commenced 5th of January 2026 for 8 plus 4 additional years on improved terms, which will assist the Nordics results. As outlined in detail in last week's announcement on Slide 22, we believe that the proposed demerger of Ramsay Sante through in-specie distribution will simplify Ramsay and enable both organizations to focus on transforming their respective businesses. We will update the market as we work towards the release of the demerger booklet and subject to receiving necessary approvals, currently expect to complete the in-specie distribution in December 2026. I'll now hand you over to Anthony to run through the financials in more detail. Anthony Neilson: Thanks, Natalie. Good morning, everyone. Natalie has already covered much of Slide 24. So I'll just highlight a few points, noting currency translation has impacted some of the movements on the P&L and balance sheet for this half. In this result, we have focused on underlying numbers given the large nonrecurring items in the U.K. region and Ramsay Sante in the first half of last year. Items excluded from underlying profit this half were $11 million negative impact on net profit and primarily relates to transaction and restructuring costs. There is a detailed reconciliation shown in the appendix. Underlying NPAT showed strong growth for the half of 8.1%, driven by activity growth across Australia and Europe, combined with higher acuity across Australia and U.K. and revenue indexation in Australia. There continues to be a focus on operational efficiencies across all regions to mitigate cost pressures. The underlying NPAT tax rate was 36%, slightly higher than last year. This reflects the impact of CVAE taxes in France, which calculated on turnover despite France being in a pretax loss position in the first half. The full year tax rate is forecast to be approximately 35%, reflecting a higher rate in Ramsay Sante. Operating cash flow on Slide 25 improved 16.9% to $350 million for the period, driven by the performance of Australia and lower tax paid than the previous corresponding period, which included the sale of Ramsay Sime Darby. Improving our cash conversion is one of our key priorities in all regions and we are all investing in systems and processes to strengthen cash collection and drive cost out and efficiency programs across all businesses. CapEx cash outflow increased from prior period, mainly due to development projects in Australia. I will touch on CapEx in more detail on Slide 31. Dividends paid increased 20%, reflecting the suspension of the dividend reinvestment plan for fiscal year '25 final dividend. Turning to Slide 26. Currency translation had a significant impact on the face of the balance sheet for this period to the tune of $84 million. Movements in working capital primarily related to Ramsay Sante and the timing of periodic true-up payments with the French government with advances repaid, reducing payables. Consolidated net debt is $5.1 billion and I'll show a separate breakdown between the funding group and Ramsay Sante on the coming slides. 67% of the consolidated group's floating rate debt in the second half of this fiscal year '26 is hedged at an average base rate of 3%. We have provided both the funding group and Ramsay Sante summary balance sheets in the appendix, so you can see the group results, excluding Sante. Turning to the Funding Group performance on Slide 27. Underlying NPAT grew 5%, which was driven by good growth in Australia, partly offset by a lower contribution from the U.K. U.K. margins were impacted by higher costs and lower occupancy at Elysium. Elysium cost efficiency initiatives began to gain momentum late in the half with continued focus on these initiatives in the second half. Total financing costs, including lease costs, increased 1.3% in constant currency due to higher average base rates and a small increase in drawn debt during the half. Moving to the Funding Group debt and leverage on Slide 28. Given the separate funding arrangements of the Funding Group and Ramsay Sante, looking at the group's consolidated leverage is not a meaningful metric. The Funding Group shows leverage, excluding Sante and is 2.22x, within our target range of less than 2.5x and interest cover remains strong. Fitch has recently reaffirmed its BBB- investment-grade rating for the Funding Group. We have adequate liquidity in place for the purchase of the National Capital Hospital in FY '27 and leverage is expected to remain within our target range of less than 2.5x. During the period, we successfully refinanced our key syndicated debt facilities, extending tenure and reducing our margin by 30 basis points. While base rates are increasing, our weighted average cost of debt has declined 20 basis points since 30th of June 2025, reflecting the refinancing of our facilities at these lower margins. We remain reasonably well hedged with 65% of our debt hedged at an average base rate of 3.65%, which is below current spot rates for the second half of the year. Moving to Ramsay Sante's debt position on Slide 29 and it remains well supported by its own separate funding arrangements with tenure extended significantly over the last 12 months. The business has EUR 391 million of liquidity available with leverage of 5.3x and the company is focused on improving cash flows and driving cost out and efficiency programs to reduce leverage over time. Turning to Slide 30 and our focus is on improving capital management, cost discipline and cash flows across the group. First, we are improving capital allocation and returns. A range of programs are underway to recycle capital into higher returning projects of the business and lift utilization of existing facilities and assets. In the overseas business, we will drive capital discipline and focus on maintenance projects and the optimization of service and assets. Second, we need to strengthen both operating and investing cash flow. We have multiple initiatives in place to improve working capital with revenue cycle management, cost out and efficiency programs being a key focus. We are also reviewing capital spend and we'll be pushing all these initiatives harder. In the near term, our priority is maintaining our leverage and our credit rating at current levels. Looking at capital expenditure in more detail on Slide 31. Our focus is on capital discipline with CapEx modified for the current environment with both U.K. and Ramsay Sante spend lower in local currency. Group CapEx increased $27 million between periods in constant currency terms due to higher Australian development CapEx with focus on development projects increasing procedural capacity in Joondalup and Warringal. We have reduced the full year CapEx range to between $755 million to $795 million, which is $40 million below the previous range to reflect the lower spend. I will now hand you back to Natalie to talk about the outlook. Natalie Davis: Thanks, Anthony. So to recap briefly, our strategic priorities remain clear: transforming our market-leading Australian hospital business, strengthening our capital discipline and improving capital returns across the portfolio and evolving our culture of people caring for people to innovate and drive performance. Our financial year '26 full year results are expected to reflect the following: in Australia, we expect continued EBIT growth momentum, driven by increased activity in priority therapeutic areas, revenue indexation, cost focus and partial mitigation of the impact of the new Joondalup funding mechanism. In our U.K. hospital business, we expect NHS activity in the third quarter to remain negative compared to prior period due to NHS budget constraints for the remainder of the U.K. fiscal year ending 31st of March. Ramsay U.K. remains well positioned to support the U.K. government's objectives to reduce waiting list and has a strong pipeline of patients through its outpatient clinics when anticipated additional funding is made available in the new NHS fiscal year from the 1st of April. For Elysium, we'll remain focused on improving performance and expect the turnaround to continue to gain traction over the second half. In Europe, we expect activity growth to continue in the second half, driven by day admissions, partially offset by the impact of the French 3-day doctor strike in January. Our net financing costs are forecast to be $590 million to $610 million and our underlying effective tax rate is expected to be approximately 35%, given the higher tax rate in Ramsay Sante. Group CapEx guidance has been reduced with spend in the second half to be lower than the first half. Finally, the dividend payout ratio for the year is expected to be 60% to 70% of underlying net profit after tax and noncontrolling interest. Overall, I'm very proud of the progress we have made and the commitment of our team members to providing excellent care for our patients while we transform and strengthen the business for the future. And with that, I'll open up to questions. Operator: [Operator Instructions] Your first question comes from Lyanne Harrison of Bank of America. Lyanne Harrison: Congratulations on a very strong result for Australia. What we saw compared to the results, the first quarter results that you mentioned at the AGM, we certainly saw an acceleration of growth, both at revenue and EBIT in the second quarter. What are your expectations as we are in third quarter now and then for the fourth quarter as well? Can we expect that revenue growth and that EBIT growth to continue to grow at a faster rate? And what would be supporting those? Natalie Davis: Thank you, Lyanne, and thank you very much to the whole team in Australia for really focusing on growth and performance momentum over the half. I think what we've guided to today is really looking at year-on-year EBIT growth momentum continuing throughout the year. I think it's important to remember that there is seasonality in Australia in some of our businesses, it works the other way. So we do tend to have a lower EBIT result in the second half because of January when a lot of doctors are on holidays and we don't do as many surgeries in the business as well as Easter has a smaller effect. So what we're guiding to is the year-on-year EBIT growth momentum will continue and we're not saying anything more specific than that. Lyanne Harrison: Okay. And as a follow-up, you've renegotiated some of your PHI contracts over the last few months and with some good fee increases. Can you comment on -- we've seen PHI premium increases in the vicinity of -- it's going to be about 4% or a little bit more from April of this year. How will those increases be captured in the fee terms on the contracts you've already negotiated? Natalie Davis: Thank you for the question. And it's been very pleasing to see that Australians have kept up their private health insurance coverage even through significant cost of living pressures. I think the minister when he approved the latest round of premium increases acknowledged the very significant cost increases and cost pressures that the private hospital sector is facing. And we would expect those premium increases to be passed along to private hospitals to cover those cost pressures. And the minister has talked about the benefits payout ratio having decreased over time since COVID and his expectation that, that would increase. And so we will be talking to all our private health insurer partners to ensure that the revenue indexation we receive on an ongoing basis reflects our genuine cost pressures. And those pressures are real and they will continue into the medium term. Operator: The next question comes from Andrew Goodsall at MST Marquee. Andrew Goodsall: Just a focus on the U.K., if I may. I guess just with Elysium, just obviously, you're doing some performance improvement there. But just wondering whether you can see that as a permanent resolution to something that might be more structural? And then secondly, on U.K., just I saw that the NHS has got this idea of a sprint to the end of the financial year with additional elective surgery, but that's not reflected in your comments. So just wondering what your thoughts were there as well. Natalie Davis: Thank you for those questions. So focusing on the U.K. and I'll take each business separately. With Elysium, we completed last year a very significant performance diagnostic and the team has gone about implementing that under the, first of all, the leadership of Nick Costa and now Joe O'Connor since he joined in January. We see a very significant improvement potential for Elysium from the current performance, which is very weak. We have focused a lot over the last 6 months on cost reduction. So central cost reduction. We've now done 2 phases of reducing FTE in that business. We've focused on reducing agency costs. And importantly, we focused on decreasing the number of available beds. And the demand that I think we've experienced throughout the half has probably been weaker than we originally expected. And so you see we've closed 163 beds in the half and we will continue to look at potentially site closures and putting properties up for sale to make sure that the services we provide really match the demand from the sector. However, having said all that, we see significant potential for us to turn around the performance and to continue focusing on both the top line through providing high-quality services for very complex patients and making sure that our fees reflect the quality and the complexity of the service we provide, improving our conversion rates, which we have improved in the half, but there's more opportunities to do that when we get a referral to making sure that we convert all of those referrals and continuing to focus on costs and we continue to see more potential for that. So we continue to be confident that, that turnaround is continuing to gain traction and we saw an improvement in performance towards the end of the first half. On the U.K. and what's happening with the NHS, we're certainly seeing -- from the end of the first half, we're certainly seeing a step back in activity across our hospitals. A number of our hospitals have activity management plans in place. In some cases, where those plans have been in place, we have managed to get effectively separate contracts to fund further activity above that activity plan level. But overall, as we said, we expect negative NHS activity in quarter 3 and then we're well positioned when we anticipate there'll be more funding provided from April to grow our business over there. Andrew Goodsall: And just a quick one for Anthony. I appreciate you breaking up the Funding Group debt. But just with the refis, just if you had any sort of separate costs associated with that and if they were taken through the P&L? Anthony Neilson: Anything was small was in the nonrecurring items for that. And we did take some items capitalized into the balance sheet. Operator: The next question is from David Low at UBS. David Low: Natalie, if I could just start with Joondalup. So you're quite specific as to the headwind there. We can back calculate from the comment about 40 basis points better. But just wondering relative to your expectations there in terms of the headwind, whether anything has changed, whether you've been able to mitigate it more than expected. Natalie Davis: Yes. So last year, we talked about the new funding mechanism at Joondalup Public and the expected impact that would have. We also said we would partially mitigate that impact on the campus itself. And we have continued to do that. And I would say that the mitigation is in line with what we're expecting. And there's a number of things we've done there. We've worked to increase activity with the government. WA like many states across Australia, experienced a very strong flu season. And so we had additional capacity that has been funded at the beginning of the financial year in that flu season. But we're also continuing to work on our operational initiatives and there's been a big focus, in particular, on reducing agency at Joondalup, which we successfully at the end of the half, ran what we call a professional pathways program. And that program attracts nurses out of nonhospital sectors, so sectors like aged care into the hospital system. We had a very successful recruitment drive. And I think around 50 nurses have started with us at the hospital, which will enable us to reduce agency at that hospital. We also -- last week, we also had the pleasure of opening Joondalup Private. So that's the expansion of the private facilities. It's a very significant expansion. It creates for the first time, dedicated private theaters in that campus. And we're now focusing on ramping up the growth in the private part of that hospital. So overall, I'd say the mitigation that we expected is on track and as we thought. David Low: Okay. Perfect. Look, the other question I had was, I think certainly, the revenue growth in Australia was a positive surprise. Just wondering, we can see the activity that you've broken out there and back calculate price increase. But within the activity, is mix a positive driver there? And can that trend continue on into this calendar year? Natalie Davis: Yes. I think what we saw in the half was pleasingly a focus by our teams on higher acuity work. And you can see that in the activity numbers, so not just in admissions, but in EBITDA growth. And the fact that our EBITDA growth was in line with admissions growth, I think, has driven that positive mix benefit. It came through on both surgery, but it also came through on some of our medical admissions. And so that's something that continues to be a focus for us. We're very focused on utilizing our theaters as much as we can and thinking about our theater utilization in terms of catchments so that our major hospitals are very much focused on attracting high acuity work. And then some of our smaller day centers and smaller hospitals can then attract the lower acuity work. And so we're trying to really optimize the way we're thinking about our portfolio within catchments to focus on mix. David Low: Okay. Great. So it sounds like that can continue as a positive trend second half... Natalie Davis: It will continue to be a focus for us. Operator: The next question is from Craig Wong-Pan at RBC. Craig Wong-Pan: Just wanted to understand about the Australian CapEx. The guidance there has been revised and your comments about being disciplined on CapEx. Just wanted to see if you could provide any comments about how we should think about the run rate of CapEx going forward? Natalie Davis: Thank you. So what we're really doing and I just explained, I think the catchment thinking that Stuart Winters, in particular, who's our new Chief Operating Officer, is bringing to the business. We're continuing to really focus on existing theater utilization, but we're also really thinking through our portfolio and how do we -- for example, in Lake Macquarie catchments, we opened Charlestown, which is a day surgery that was operationally separately managed to Lake Macquarie, which is our big hospital there. They're now all under the same leadership, and we're now developing a catchment strategy across that. The other thing that Stuart is really focused on is thinking through how do we better use the physical infrastructure that we have in our existing hospitals to be able to add procedural capacity effectively and efficiently. And I think St. George is a good example of this where we're doing a development and we're effectively taking existing space within the hospital that's an ICU and converting that into theater space, which is linked to the existing theater complex. And we're moving ICU into an area that was full of beds that were not being utilized. So what we're trying to do is, as we've said over the last year is focus very much on procedural capacity, adding beds by exception and utilizing the existing assets that we have within a catchment fully before we're increasing procedural capacity. So you'll see very selective and strategic developments from us going forward. We're not yet guiding to next year on that. Craig Wong-Pan: Okay. And then I just wanted to move to the clinical trials research and development network that you talked about. Could you just provide some more details around that and specifically the benefits that the Ramsay Group gets from having that network? Natalie Davis: Yes. Thank you. It's a small part of our business, but it's one that we're all incredibly excited about. So with clinical trials, we have traditionally run a site-by-site model and we had around about 20 sites that were providing capacity to doctors who wanted to do research in our hospitals. To give you an example, it's very common and important in cancer care. So a lot of patients when they're coming for treatment to their doctors are looking for the latest chemotherapy drugs and treatment. And if we can provide access to clinical trials, we can provide actually leading treatment for patients. And we can also ensure that we're attracting doctors. And we can actually see that doctors who do clinical trials with us actually have a higher NPS with Ramsay. So it's a small part of the business at the moment. I think it has a significant potential and it's important to reinforcing our core hospital business because it does mean that we can provide leading care to patients and also attract more doctors to working with Ramsay. Craig Wong-Pan: Okay. Makes sense. And then just my last question, one for Anthony. The comments you made about improve or having cash conversion as a key priority. Just trying to understand what you're focused on here just about faster collections or something about like claims? Yes, could you just give some color on what you're trying to do there? Anthony Neilson: Yes. Thanks, Craig. Yes, look, definitely, receivables improvement is a big driver that we have there in the revenue cycle management, looking at all of our systems and processes, both from an Australia and an international perspective to get the days debtors down and the improvement through the billing cycle and cash collection, accuracy of billings, all of those sorts of things are a big driver that flows straight through to the bottom line if we can improve that working capital position. Operator: The next question comes from David Stanton at Jefferies. David Stanton: Impressive 5.7% growth in Australia in surgical admissions. Firstly, bottom line, what's driving that? Is it the market growth at that level? Or do you think you're taking share? And if so, how is that happening? Natalie Davis: Thank you, David, for the question. We think we're probably taking market share at the moment when we look at our growth relative to the market. I don't know if there's more market statistics coming out tomorrow, so we'll see how that goes. I've spoken previously about the focus we're doing on growth across our hospitals. So over the last 12 months, we've been providing to all of our hospital CEOs data that's very easy for them to use, which enables them to do a few things. First of all, it looks at every therapeutic area by doctor and it looks at theater utilization. It gives an indication of profitability of that work. It also gives an indication of to what extent is that doctor canceling lists and what period of time do they let us know if they are canceling a list because the more time we have, obviously, the more we can then fill that theater with other work with other doctors. The other data set that we're giving to our hospitals is around catchments and more data around the specialists in that catchment that do work with us and don't do work with us as well as the GPs and the ones that are referring to specialists who work in our hospitals and other GP practices that are not. So that's been new. It's all in one place and it enables our team, therefore, to go and have conversations with doctors where we know we need to increase their utilization. And it also enables us in terms of our business development managers and our GP liaison offices to be much more targeted around where they're spending their time to be able to attract new doctors to come and work with Ramsay. And I think the other thing that's been helping us over the last 6 months is obviously this very strong clinical reputation that we have, but also our stability as a very strong business with ownership of our hospitals. And I think that's also been helping in the current environment to attract more doctors to come and work with Ramsay. And we're continuing to really focus on how do we improve and strengthen our doctor proposition and our proposition in our therapeutic areas that we're focusing on. David Stanton: Understood. And is it fair to say, given your previous commentary that with these upcoming EBAs, you believe that they'll more than likely be covered by the increases in PHI premiums? Or what should we be thinking there? Natalie Davis: So we continue to see wage pressure out into the medium term and that's coming through from public sector nursing EBAs and we have to be competitive to be able to attract the nursing workforce that we need in every state. The one that we are negotiating at the moment is in Victoria and that's obviously against the backdrop of a very significant public sector EBA increase of 28% over 4 years, but significantly backdated to November, December 2027 calendar year. So we expect continued pressure on wages across Australia. And we will continue as we negotiate with private health insurers to cover that cost pressure and it's very genuine it's being experienced by the whole sector in terms of the revenue indexation that we're receiving. In some cases, we have now got dynamic -- what we call dynamic indexation in place. There's 3 contracts where we do this and we're talking to more health insurers about this. And what that basically does is once we agree the first year indexation, the second and the third year indexation in the contract are linked to externally referenced cost benchmarks. So that those cost pressures when they're genuine and they're sector-wide will be reflected in our revenue indexation. And the importance of that apart from ensuring that we're paid fairly is also freeing up management time to actually look at the structure of these funding agreements, the way we're providing care and innovating our care models and innovating the funding to support that. So that's the opportunity for us to work with our private health insurer partners to really innovate the proposition for Australians for private health care. David Stanton: Very clear. And finally from me, we've talked to -- or you talked -- or the company talked to digital upgrades. Can you give us sort of an update on spending options and timing potentially? Natalie Davis: Thank you. So we've been in a bit of a reset, I think, on digital and data transformation. And as we said last year, while we did that, we focused on effectively maintaining and even possibly reducing the spend in that team. We've now got Dr. John Doulis, who's joined us as our Chief Technology Officer. John comes from HCA hospitals in the U.S., which I would say is one of the leading hospital health systems when it comes to thinking through how to really use technology and digital technology to drive better patient experience, team experience and business outcomes. So John joined in early November. He's now at the point where he's got some very clear priorities for where he's going to work with the team on. And they're very much aligned with the Big 5 initiatives that we've been talking about in our hospitals. So they're very much linked to operational improvement. The top 3 are really around revenue cycle management and in particular, upgrading our patient admin system or PAS, which is very outdated. That will enable us to speed up our revenue cycle management system and also improve accuracy in that system. The second one is around workforce and introducing a smart rostering system. That's something that will free up a lot of time around nurse unit managers who spend a lot of time on rostering at the moment with 3 legacy systems. It's a pretty manual process. It will also give our team more flexibility. And the third one is thinking through how do we use technology to really track prosthesis and consumables as they're being sourced into our hospitals and used in our hospitals and then charged to private health insurers. So very clear priorities and we'll continue to keep everyone updated as to our technology road map. Operator: The next question comes from Davin Thillainathan at Goldman Sachs. Davinthra Thillainathan: Just wanted to think through the Australian business and your revenue growth that you're demonstrating there. I think in the first quarter, you did a growth that was about 6.5%. And then in the half, that stepped up to 8.2%. So clearly, some better momentum happening in that second quarter. Now my understanding was in the first quarter, you had benefited from some high flu admissions and I wouldn't have expected that to continue. So perhaps could you talk through any sort of material changes that occurred over the second quarter to allow that level of growth to step up, please? Natalie Davis: Yes. So that is true. So we do benefit in that July to August period from winter flu season and that was a particularly serious flu in terms of the impact it had on Australians right around the country. So we did see more medical admissions and longer length of stay associated with those admissions. But as I've said, we continue to experience good growth through the half. And I think that really was a continued focus by our hospital teams on recruiting doctors and utilizing theaters. And you also would have seen in the results, we also shared that our public work increased a little bit. Some of that was at Joondalup, but some of that also was in New South Wales. So that continues to also be an area of focus. So I don't think there was one thing I can point to, to say it was due to that. It's a focus for us and we really continue to focus on that going forward in every major hospital and catchment that we have. Davinthra Thillainathan: Great. And my next question is on your CapEx, which you have lowered in Australia. I understand part of that is clearly you're utilizing your existing facilities better. But just thinking about other changes you've made with CapEx delivery. As an example, I noticed that your Joondalup CapEx was also lower than your budget. Could you perhaps talk through any other changes you're making on the actual delivery of all these sort of growth initiatives? And perhaps is that what's sort of helping that CapEx lower as well? Natalie Davis: Yes. I think Joondalup was a very well-delivered project. We had a good delivery partner there and it was delivered on time and on budget, actually slightly earlier and that's hard to do. So I think that was a really good example of working well with a delivery partner. But most of the decrease in our guidance on CapEx is really about us as a leadership team, myself and Anthony, who are in the capital forum that we've described in the document, really stress testing with the teams around do we need to do this development proposal and do we need to do it right now and really encouraging the teams to, first of all, focus on utilization before bringing business cases to us. So it really is more that rigor around the way we're approving capital projects. Davinthra Thillainathan: Yes. And my last one, just trying to understand the sort of digital and data spend in your P&L. I think you had about $90 million in FY '25. Can you sort of help us understand what was spent in the first half and what the expectation is for FY '26, please? Natalie Davis: Yes. I think we've said before that digital and data spend will be at or below, if we can, that level of last year and we've said that we're on track. We're not going to split that between halves. Operator: The next question is from Laura Sutcliffe at Citi. Laura Sutcliffe: Firstly, on the U.K., is the volume headwind that you've seen in the third quarter enough that you could potentially end up with revenue in the second half being flat or going backwards versus the first half? Or do you still expect that revenue to grow in the second half over the first half in the U.K.? Natalie Davis: So we're not guiding to revenue in the U.K., but I will make a few comments. We do -- as we've said in the release, we do see NHS activity being negative in the third quarter. And then we're well prepared as we anticipate new funding to come in, in quarter 4 to grow NHS activity. But we're also focusing on acuity. So acuity EBIT, and that's supporting the results that you've seen in the first half. And the team is also focusing on growing private and that includes both self-pay and our agreements with private health insurers. So all of those factors we'll be focusing on. And of course, remembering seasonality in the U.K. is the opposite to Australia. So we see a weaker summer over there, which impacts the first half. Laura Sutcliffe: Are those activities you just mentioned the mitigation activities that you were mentioning earlier? Or is there a bit more to the mitigation piece? Natalie Davis: Yes. So the mitigation is around growing our private work. So we focus very much on NHS work in that business, but we are putting more and more focus on private work, which you can imagine is more profitable for us than NHS work. We are focusing on acuity of mix and we're also focusing on operational efficiencies and cost mitigation. We'll be stepping up the cost focus as well given the uncertainty on the NHS funding front. Laura Sutcliffe: Okay. That's clear. And then secondly, looking at some of Sante's reporting and the proposed distribution, could you tell us if any of the mechanics around change of control there would potentially leave you in a position where you had to make payments to Sante or others? Natalie Davis: So as Anthony explained today, the Sante debt is nonrecourse to Ramsay Health Care. And so the debt that we hold as the Funding Group relates to Australia and the U.K. businesses. So when you think about the separation of Ramsay Sante from Ramsay Health Care, in this case, Ramsay Sante is already a separate listed entity on the Euronext. It already has its own governance structure. It has its own debt structure. And so the approvals will be happening mostly in the Australian context around our shareholders and putting proposals to them through a scheme of arrangement around thinking through whether there's value to Ramsay Health Care shareholders from effectively holding these 2 entities separately. And we do think that there is a strategic logic and it's quite strong logic around effectively Ramsay Sante is an independent entity focusing on their strategy of integrated health care in European markets and Ramsay Health Care really focusing on the priorities that we've laid out today and in particular, the continued transformation of the Australian business. So I think it's important just to understand that there's -- the debt of Sante is nonrecourse and there's no guarantees from Ramsay Health Care. Laura Sutcliffe: Okay. I just thought I would clarify because the potential amount they mentioned in their documents is quite large. Operator: The next question is from Steve Wheen at Jarden. Steven Wheen: I just had a question with regards to the Victorian EBA. We've seen your offer that you've provided to the nurses. Just trying to understand what the reaction to that offer has been and whether or not you're getting recognition from the PHIs as to that step-up that happens sort of in the back end, I think, of '28, where you're mimicking what happened in the public EBA in Victoria? Natalie Davis: So we're in the process at the moment of negotiating the Victorian EBA with the unions and with our team. And so I won't be commenting today on how that negotiation is going. Steven Wheen: Okay. Then can I ask a bit of an extension of the EBA question, which is you've mentioned in your presentation from an outlook perspective that you're attempting to close the funding gap from payers from the cumulative gap from payers versus the cost inflation. Can you talk to how that is possible? I mean, I can see with the arrangements that you've got in place already that you're covering current inflationary pressures in FY '26, but how do you claw back some of those historical underpayments from the insurers? Natalie Davis: Yes. So I think the discussion that we have with our private health insurer partners and this is a discussion that's really happening, you can see at a sector level in regards to private hospital viability. But overall, the premium increases that have been approved for private health insurers over the last 5 years since COVID have not fully been passed through to private hospitals and that benefit payout ratio has decreased over time. Now we believe that those premiums that Australians pay should be passed on to hospitals and the hospital sector is experiencing very genuine cost pressures. And so that is the discussion that we have with our private health insurer partners. And we've experienced, as I've described, an improved level of revenue indexation, but we haven't yet managed to achieve that closure of that cumulative historic gap. And that is a challenging discussion, but we will continue to strive to achieve that. And quite often, as we're entering into new contract renewals for a number of years and looking at partnership opportunities and talking about dynamic indexation in the outer years, that is the opportunity for us to work through that cumulative gap because you can't really agree to dynamic indexation unless the base is correct or the base is corrected over time. So it's a challenging discussion, but it's one that we continue to have. Steven Wheen: Okay. Great. And just some points to confirm. The coverage that you're getting from the insurers at the moment in FY '26, how much line of sight do you have for that coverage to extend beyond FY '26 relative to the EBAs that you've put in place? Natalie Davis: So we always -- when we negotiate with private health insurers, we always look at the -- effectively the cost pressures that have been effectively locked in through EBA arrangements, but we also do forecast out what we expect EBA pressure to be. And if for some reason, the EBAs end up being at a higher level, we will always go back to the private health insurers to discuss that. I think the dynamic indexation that I was describing is a way that, that becomes a very fair discussion because it's referenced to external benchmarks, which really do show whether there is genuine industry-wide cost pressure in the system. Steven Wheen: Okay. So knowing what you know now, you can still say that your PHI coverage extends into FY '27? Natalie Davis: No, that's not what I'm saying. I'm saying there's a series of contracts that we have with private health insurer partners. We're in the process of negotiating one at the moment in the second half. And so it's a rolling process. In some cases, we have existing contracts in place, but the 3 examples I've given on dynamic indexation that's in place in the outer years. But in others, we have contracts that will come up for renewal in the next year or 2 and we'll have to renegotiate that as well. So it's a dynamic process. Steven Wheen: All right. Maybe could you indicate how many of the insurers are on these -- I mean, you said 3, but are they the big ones? Or are they the more smaller ones? Natalie Davis: Yes. We've said before that the 3 that we've got at the moment are not the major insurers. Steven Wheen: Okay. Last one for me. Just with regards to the Joondalup offsets, was there any evidence of that in first half? Or are we expecting that sort of more second half and beyond? And then in addition, is there any way we could sort of get a better understanding of the sequencing of data and digital because obviously, the key point for the stock at the moment is the turnaround in margins in Australia and that can be a bit distorting unless we know what that sequencing looks like between first half and second half? Natalie Davis: So the Joondalup mitigation, I've described in, I think, a previous question. So we're on track in terms of what we planned for Joondalup. In the first half, there was a benefit from public activity, which was due to the flu season and the pressure that was putting on the health system in WA. We then obviously, over the half, focused on putting in cost and operational initiatives, including that focus on agency reduction, which we recruited that group of nurses into Joondalup around November, December, takes a period of time, obviously, for them to be trained so that we can reduce agency spend. So we're continuing to focus on it and the flu impact won't be repeated in the second half, but you'll see other operational initiatives having more impacts like the one I've just described. The digital and data OpEx, I think what we've said is this year is really one of a reset. We're keeping that spend in line with the current year or less. We're very much -- John is really focused on his priorities and developing that road map going forward. We're on track overall for the year. And we really do understand as a management team that we're aiming here to get year-on-year margin growth in the Australian business. And so we will think about very much the digital and data investments we make, ensuring that they're connected to operational initiatives that have payoffs so that we can then reinvest in further digital investment as it's required. But understanding that over time we are all focused on improving the performance of the Australian business. Operator: The next question comes from Saul Hadassin at Barrenjoey. Saul Hadassin: I'll try and stick to 2 questions. First one, Natalie, just you mentioned, I think, at the AGM that theater utilization had improved by about 1% in the first quarter of fiscal '26. I'm just wondering if you had any comments about where that went in the second quarter of the fiscal year? Natalie Davis: Yes. I thought we had given you that number and it was -- we've given you a 12-month rolling number. 130%, so 1.3% in the last 12 months in terms of theater utilization. So that's on Slide 9. Saul Hadassin: Sure. So the assumption being that it's improved into the second quarter versus the first? Natalie Davis: So we're seeing overall improvement in theater utilization and that's including the impact of new theaters that we've opened over that time. So obviously, as we increase admissions and IPDAs, that fills the existing theaters, but then we open capacity and we have to fill up that new capacity as well. So the 1.3% improvement over the last 12 months, I think, was a very strong result given that there was a very large number of new theaters opened in that time, 16 new theaters. Saul Hadassin: Sure. And then just a follow-up. I note in the presentation of the wholly owned funding group result that labor costs and contracted costs on a constant currency basis was up 6%. I just wanted to see whether there was any disparate growth rates between the U.K. and Australia in that? Or is that reflective of sort of both regions in terms of their labor cost inflation? Natalie Davis: I'm going to pass that one to Anthony. Anthony Neilson: Yes. Thanks, Saul. Look, there's nothing materially different. It's largely reflected between both regions with similar numbers, give or take, in the wages. Operator: The next question comes from Sacha Krien at Evans & Partners. Sacha Krien: Just a bit of an extension to one of the earlier questions. It looks like you've removed the reference to revenue indexation being greater than or equal to labor cost inflation. I'm just wondering if anything has changed on that front. And I think your labor cost growth in Australia was circa 7.8 or something like that? Natalie Davis: Yes. So the 7.8, I think you're referring to is the growth in the total labor dollars. And so that includes both activity and wage inflation as well as any mix impact. And activity was in the region of 3.1, excluding the impact of Peel. So you can get a sense from that as to what's happened with wage inflation and similarly on the revenue line in terms of Australian revenue and that level of implied indexation, noting that there's always a mix impact as well. Sacha Krien: Yes. But does that previous statement around '26 and '27 still stand? Natalie Davis: So I think what we said in the last statement was saying is a leading indicator that the revenue indexation was in line with cost indexation and that continues to be the case in the half. So we're definitely experiencing improved revenue indexation relative to both what we paid historically and relative to cost indexation. But as I've described on the call, it's an ongoing focus for us and we need to continue to make sure as we renew contracts that we're taking that. Sacha Krien: Yes. I guess I'm just wondering, I think that statement previously applied to '27 and I can't see it unless I'm missing it. So I mean, are you suggesting it's maybe been a little bit harder to close the gap than expected? I'm just trying to [indiscernible] if anything has changed. Natalie Davis: I think you're reading into something that wasn't there in the first place. So that comment at the AGM was in relation to the performance in the first quarter. It wasn't an outlook statement into F '27. Sacha Krien: Okay. And then second question, just on the U.K. I'm just wondering the proposed NHS tariff increase, I'm just wondering if there's any scope for that to be increased as we've seen in previous years given some of the award wage increases that have come through? Natalie Davis: Yes. So I think that is a good question. So we saw effectively the tariffs being guided to 0%, 0.03% in the U.K. That reflected broadly speaking, a 2% assumption on wages in the U.K. in the health sector, offset by an efficiency assumption of about 2%. I think a few weeks ago, we've seen a wage number come out of the NHS that's more likely to be around 3%. And so historically, when that's happened, at least over the past 2 years, we have seen effectively a backdating tariff increase. It may not be the full amount of the difference. It's not guaranteed. So Nick Costa would say that there have been some years where that hasn't been played back and backdated. So we have to wait and see. But in the past 2 years, there has been an adjustment if wages have been higher than what has been assumed, but we don't know yet. Sacha Krien: Okay. Can I sneak one more quick one in on the U.K.? Just in terms of the NHS activity, are you expecting a full rebound into '27 given some of the -- I mean, I guess, the government's recommitment to sort of closing or reducing the waitlist and using private hospitals to do that? Natalie Davis: I think it's very hard for all of us to really know. It depends very much on the budget in the U.K., therefore, the budget that gets given to the NHS. As you know, this government has previously been very clear that their election priority is to reduce waitlist and that there's a very important role for the private sector to play in doing that. And we are the largest provider of NHS services in the U.K. So we are well positioned, but it's very hard for us at this point, I think as it is for everyone in the U.K. to be certain of what will happen. It really does depend on budget outcomes and political outcomes in the U.K. Operator: The next question comes from Andrew Paine at CLSA. Andrew Paine: Congrats on the results. Just wanted to circle back to Elysium. Really just wanting to know if you think the current performance there is leading to a shift in your longer-term plans for that business? Or do you think you continue to focus on adjusting cost base and keep things like growth CapEx on hold? Natalie Davis: So for the moment, the posture is that the focus is on performance improvement. So any growth CapEx is on hold, continues to be on hold. And the focus very much is on making sure that we're managing costs and managing the services we provide to the local levels of demand. There's also a focus in the turnaround around thinking through how we actually improve the offers that we're providing into the market. So we've previously called out neuro as an area where we think we need to reposition our services towards a slightly lower complexity, lower acuity cohort where there's a bigger demand pool. The team is also focused at the moment on bespoke packages. And this really is, I think, somewhat unique to Elysium because we have a very, very good reputation of providing care to very complex individuals. And so in a number of locations, we are talking to local authorities to take individual patients with very highly complex needs. And those packages are developed with pricing that's commensurate to the effort that we need to put and the care that we need to put around those individuals. So I think we have more work to do in the future around thinking through how do we strategically position our services in the market. But very much at the moment, the focus is on turning around the business and continuing to gain momentum from that in the results. Andrew Paine: That's great. Yes, that makes sense. And just another quick one. Just any numbers you can give us around the expected contribution of National Capital. I know you said it's expected to be EPS-accretive in the first 12 months, but if you can give us any numbers, that would help. Natalie Davis: Yes. At this point, we're not giving out any numbers. So we're very excited about welcoming the NatCap team to the Ramsay family. That will happen, we think, around the end of July. At the moment, we're in the transition planning period, but it's a very attractive catchment area with high rates of private health insurance. It has a great leadership team in place. They have a good reputation with doctors and they have -- they do work in the complex therapeutic areas that we do and they have a very strong relationship with the Canberra Health Service. And so NatCap is very much a hospital which is very akin to some of our major and very successful hospitals around the country. Operator: The next question comes from David Bailey at Morgan Stanley. David Bailey: The Joondalup headwind was about $14 million. So I'll just touch on an earlier question. How much was the benefit from lower digital and data spend in the first half? Natalie Davis: So as I've said, we're not giving any half guidance on our spend. So we're on track to basically maintain or slightly lower our spend on digital and data for the year, but we're not providing any specific guidance on the half. David Bailey: Okay. But it says in the pack that it was lower. How much lower was it? Natalie Davis: I'm not providing any specific numbers on digital and data. David Bailey: Okay. Fair enough. Okay. In terms of the commentary around PHI increases, it sounds like it's offsetting wage inflation at the moment. You made the comment that participation is still holding up, but there is a significant increase in the proportion of exclusionary policies, which looks to be a drag on utilization. If we think into fiscal '27, if price is matching your cost inflation and there is potential for lower utilization on the fact that people are downgrading their policies, do you see a situation whereby you can grow your EBIT margins at 60 basis points implied by guidance and potentially 100 basis points at the top end? Natalie Davis: Thank you for the very detailed question. I think when we look at private health insurance coverage in Australia, what we have seen is downgrading, as you've just mentioned, particularly from gold into silver and bronze policies. But the overall rate of hospital level coverage is staying at around about the 45% level. Now the significant impacts of that downgrading are being felt in particular in maternity and mental health that are only available on that gold level coverage. And that has probably a very significant impact, particularly for younger people looking at whether to take up private health insurance because those 2 features are important. And so we're very much a strong participant in the sector-wide discussion that is going on around how do we maintain the proposition for Australians around affordable private mental health and maternity level coverage. And I won't be going on specific -- any specific guidance on margin in the outer years apart from saying that it's our focus as a management team and we're making progress. The transformation is underway and we will continue to focus on lifting the performance in the Australian business with all the challenges that we're facing, but also the opportunities that we have as Australia's largest private health care company. David Bailey: And just one final one for me. Just the Fair Work Commission work value case, just the status of that and expectations around potential further wage increases duration and from when they could potentially be implemented as well? Natalie Davis: So that at the moment, the fair work value case is before the Fair Work Commission. So we're also waiting to see where that eventuates. We are expecting, I think, a level of phasing to any increase that is approved in there. So -- and I previously said at the moment, when you look at our wages, we are above award wages. And we, therefore, expect that and the combination of phasing really to mean that the pressure from that in terms of sector-wide and our wage pressure will be more in the outer years rather than in the short term. So I think that might be the last question. Operator: And it was the last question, if you'd like to make any closing remarks. Natalie Davis: Thank you. Well, I wanted to thank you all for joining the call and for a really great set of in-depth questions on our business. As you've seen in the results, I laid out 3 very clear priorities for Ramsay Health Care and we are well underway in terms of the work we're doing as new group executive leadership team to really capture the potential of Ramsay Health Care and we look forward to engaging with you all on that journey. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Hakon Volldal: Good morning, and welcome to Nel's Fourth Quarter and Full Year 2025 Results Presentation. My name is Hakon Volldal, I am the CEO. With me today, I have our CFO, Kjell Christian Bjornsen; and our Head of Investor Relations, Marketing and Communications, Wilhelm Flinder. Today, we have the following agenda. We will skip the Nel in brief section and go straight to the fourth quarter and fiscal financial year 2025 highlights. We will have a commercial update. We will talk about our new technology that we are about to launch, and we will, as usual, end with a Q&A session. Quarterly highlights. Revenue from contracts with customers came in at NOK 330 million in the quarter. We had an EBITDA of minus NOK 36 million. Solid order intake. I think it's the second best order intake in Nel's history of NOK 686 million. Order backlog increased to NOK 1.3 billion, and we ended the year with a cash balance of NOK 1.6 billion. In the quarter, we had several highlights. Among them, the PEM purchase orders from HyFuel and Kaupanes from hydrogen solutions in Norway, together with a combined value of more than $50 million. We were chosen as a technology provider for GreenH projects in Kristiansund and Slagentangen in Norway. And we received a third order for containerized PEM solutions from H2Energy in Switzerland. We also took a final investment decision on industrializing the Next Generation Pressurized Alkaline platform. Coming back to that a bit later in the presentation. Looking at the fourth quarter results. Revenue, as I said, came in at NOK 330 million. That's a 9% increase quarter-on-quarter and a 20% decline year-on-year from the fourth quarter last year. EBITDA flat versus last year and also flat quarter-on-quarter. The big difference versus last year is actually on the EBIT line with a negative EBIT in the fourth quarter of NOK 920 million compared to NOK 106 million minus in the fourth quarter last year. That is due to roughly NOK 800 million in impairment losses due to our next-generation technology influencing the value of the current platforms or the legacy platforms. I'll come back to the specifics a bit later. No cash effect, of course, on the impairment. That means we end the year and also the quarter with a solid cash balance of NOK 1.6 billion, slightly down from NOK 1.9 billion at the end of '24. In a historical context, 2025 came in below '23 and '24, but still higher than '22, '21 and '20. EBITDA losses came in at minus NOK 275 million, again, as a consequence of the reduced revenue. So not a year that we wanted. But still, in a historical context, around NOK 1 billion is decent. Alkaline was the main reason for the decline on the revenue side and also on the EBITDA side. We went from NOK 1 billion in '24 and a positive EBITDA of NOK 127 million down to NOK 562 million in '25 and a negative EBITDA of NOK 16 million. Again, this was partly due to canceled contracts or also the bankruptcy of one of our customers that was supposed to drive top line and EBITDA performance in '25. On the PEM side, we increased revenue slightly from 2024, and we also improved EBITDA slightly. More revenue is needed in order to bring the PEM business into black numbers on the bottom line. Order intake and backlog. That was a very positive development in the fourth quarter. As I mentioned, the fourth quarter was the second -- or is represented the second best order intake for Nel ever. I think we had one quarter in '22 that was better, but compared to what you can see here in '24, '25, it was a big, big step forward, of course, driven by the big contracts in Norway with HYDS. It also means that the backlog has increased from below NOK 1 billion to NOK 1.3 billion, and 2/3 or roughly 70% of the backlog is now related to our PEM technology. Order intake accumulated ended in line with previous years, below 2022, which was a very good year, but again, a big step forward from NOK 977 million in 2024. And as you can see here on this slide, most of the order intake in '25 came on the PEM side. Important for Nel is to protect our cash balance. And the cash burn rate historically has been high as the company has invested into R&D and also production assets. We have been cautious in '24 and '25 to bring down the cash burn rate. We continue to invest into technology, but there is not the same need to invest into assets as there was historically. Compared to '23, we reduced the cash burn by 35% in '24, and we have reduced it further by 41% in 2025. Again, there will be some investments into production assets, production equipment for manufacturing lines and also some investments on the technology side. But if you look at the operational losses and CapEx together, we will not go back to what we witnessed in '21, '22, '23 and '24. We will have a controlled burn rate going forward. This is driven by a reduction in, among other things, full-time employees. We have gone from 430 people in total in Nel to 346 at the end of '25. And as a consequence, we have also reduced personnel expenses from NOK 646 million in '24 to NOK 569 million in '25. That's a 12% decline. The impairments that we took in the fourth quarter actually reflect our optimism around next-generation technology platforms. We have developed a new technology that we believe in. We believe the new technology will be superior to the technology we have sold traditionally. And that means, as a consequence of this new technology, we expect demand to shift to the new platforms and there will be less demand for the old or existing products. And that means the value of those platforms will be reduced, and we have reduced also the book value of these assets. We took an impairment loss of NOK 361 million related to our atmospheric alkaline production assets, more specifically Line 1 at Heroya, and we've also taken NOK 439 million in impairment related to goodwill and intangible technology assets stemming from the acquisition of the PEM division back in 2016. Moving on to the commercial update. 2025 was not a lost year. We also had some good progress. Among the highlights, I would like to mention the partnership agreement with Samsung E&A. We became their preferred global partner for hydrogen. We received the third purchase order from a major U.S. steel producer, a nice big purchase order from Collins Aerospace for U.S. Navy stacks, where we equip submarine vessels with our PEM stacks. We sold a solution to the Aberdeen Hydrogen Hub in Scotland. As I mentioned, big orders from HYDS in Norway and a nice third order from H2Energy in Switzerland, and also the recognition of Nel as the technology provider for GreenH projects in Kristiansund and Slagentangen. Going a bit more into detail on the contracts that we signed in the quarter. This is a picture of an installation we have done in Switzerland together with H2Energy. It's in Kobel. It's close to hydrogen power station. This is not what we will develop based on the order that we received, but it shows what we have done with them. And now they have placed an order for a similar facility, and it represents the third such order to Nel from H2Energy and we take pride in that because it means that when somebody comes back to you and orders more equipment, they're happy with the performance. In the hydrogen industry, there have been lots of stories about equipment that doesn't work and suppliers that can't make plants run. This is a customer that has had the opportunity to check our equipment, test it, run it and they come back to us to buy more. I think that's a nice testimony of the quality of what we now deliver on the PEM side. The purchase order for 40 megawatts from HYDS was the highlight in the quarter. The 2 projects they will develop are the HyFuel project and Kaupanes, 20 megawatt each, and we plan to deliver the MC500 containerized PEM systems to these 2 projects. Both projects are funded partly by Enova and total contract value exceeds $50 million, and that represents the largest order for PEM equipment that Nel has received so far. And also the second largest contract we have signed in history. We will produce the solutions at our PEM manufacturing facility in Wallingford, Connecticut. We will deliver more than 20 megawatts to 2 projects in Norway that will be developed by GreenH. The minimum scope agreed for each of these projects is 10 megawatt of electrolyzer equipment plus engineering and technical support. The 2 sites are designed to supply clean hydrogen to industrial and maritime users, and they will form part of GreenH's network of distributed regional hydrogen production facilities. Again, these projects are partly supported by Enova with funding. And also size and delivery of the schedules for these 2 projects will be confirmed at a later date, exactly when they will produce it and what technology that has been chosen. If we sum up what is happening in Norway, on the maritime side is actually starting to look quite interesting. There are the 2 projects with HYDS, Floro and Egersund; there are the 2 projects with the GreenH, Slagentangen and Kristiansund; and then there's also the Rjukan project with the Norwegian Hydrogen, where they announced a maritime offtaker of the hydrogen they will produce at Rjukan. And altogether, this forms a quite interesting picture of what is happening in Norway and also the fact that you can supply now hydrogen from different sites, means that it becomes more attractive to invest in hydrogen vessels for ship owners, because you're not dependent on one site only, you have multiple sites available, and that redundancy of fueling options and bunkering options is important. In the fourth quarter -- actually, that's not correct, earlier this year, we launched the Electrolyzers for Europe initiative. It's an initiative consisting of 6 leading electrolyzer OEM manufacturers, all European, to promote electrolyzers made in Europe. Europe has more than 10 gigawatt of annual electrolyzer production capacity, but less than 1 gigawatt has actually been deployed, and that means we're lagging behind EU's target of having 40 gigawatt installed by 2030. This slow uptake is, among other things, due to unclear and/or to rigid regulations, insufficient offtake and cancellations across many early-stage hydrogen project developments. What we aim to do with this initiative is to unite the leading electrolyzer OEMs and help push for clearer frameworks, predictable demand signals, and faster policy execution. And by speaking with one voice, a unified industry voice, this initiative aims to protect Europe's technological leadership, strengthen competitiveness versus subsidized imports and accelerate large-scale hydrogen deployment. So that's a good initiative. Nel is one of the founding members of this body, and we hope more industry players in Europe will join this initiative going forward, so that we can help politicians shape the regulations that we need to drive the industry forward. Talking about or coming to the outlook section and offering somewhat a market perspective going forward, it's slightly challenging. But what we have seen is that order intake in 2025 increased by 15% versus 2024. And again, it was not evenly distributed throughout the year. We had low order intake in the first -- actually, first quarter was good, second and third quarter not so good, and then the fourth quarter was very strong. It accounted for almost 60% of the total order intake for the year. It's difficult to predict order variations between the quarters. But if we look at the long term or mid- to long-term trends, we are positive. What about the short-term trends? We continue to see several promising projects in the 20 megawatt to 150 megawatt range. And these projects are expected to take final investment decision over the next quarters. Especially on the PEM side, we see a lot of opportunities. And the reason why containerized PEM has strong momentum is that projects have indeed become smaller. They have been scaled down from maybe several hundred megawatts to something which is slightly smaller as the first phase. Developers had to start with 20, 40, 50 megawatt instead of going directly to hundreds of megawatts in order to phase in demand. And that means, with the first step of 10 to 50 megawatt, we are in the sweet spot for Nel's containerized PEM solutions. With a containerized PEM solution, you also get a proven, efficient and standardized alternative to customized solutions. And I think a lot of the customers have seen that designing a hydrogen production plant from scratch is expensive. The amount of engineering and planning that you need to put into it is quite substantial. And then having something ready to go arriving in containers simplifies overall project execution and also enables you to shorten the schedule to go to market with hydrogen. It also improves the redundancy, because you have access to multiple systems, and it's easy to build it out stepwise to scale it over time. Significant CapEx reductions on this particular solution, of course, also help. We have worked hard over the past couple of years to get the cost down. The market is price sensitive. So as a result of our cost reductions, we also see that we can enable more projects to move forward with a profitable business case. With respect to geographies, Europe is currently the most active and promising region for Nel, but we also have leads and opportunities in North America, the Middle East and Asia. Then we move on to the technology update. As I have said before, we have spent a long time developing a new generation of alkaline electrolyzers. We have spent more than 7 years developing a brand-new platform. It has taken a long time, but we really wanted to build it from scratch and build a product that is in fact better than what we have on many, many different dimensions. We wanted to be the best electrolyzer the world has ever seen. And now we are here. This is not a PowerPoint rendering, this is a picture of the prototype at Heroya. It's close to our production plant located inside the Heroya Industrial Park, where we for some time now have tested a real version of our pressurized electrolyzer. And what do we aim to accomplish with this solution? We hope that this new solution will set new industry benchmarks. We see that this solution is extremely compact. We can reduce system footprint by up to 80% if we compare it to our existing atmospheric alkaline solution. Why is that important? Well, especially in Europe where there is -- which is the most promising region at the moment, you don't have all the land that you would like to have. Land is expensive. And sometimes you need to locate your hydrogen production plant inside an industrial park or you need to develop a brownfield site. That means having a compact solution that can fit on the site that you have access to, the plot that you have available, it's important. Even more important, I would say, is to get the system CapEx down, the cost of building the entire plant, not just the electrolyzer itself, but everything that goes with it. It's the complete system cost that has to come down for our customers. With this solution, we believe we can bring the total system cost down by 40% to 60%. And that means we start to get close to a level where hydrogen becomes very attractive. Long term, of course, it's not only about the CapEx, it's more about the OpEx side. And OpEx is driven by electricity consumption. This solution will significantly improve the energy consumption for generating hydrogen. We believe that on a system level, we can get down below 50-kilowatt hours per kilogram of hydrogen. And that is a 10% to 20% improvement over most systems today. To add some color to why we are confident that we can deliver on this CapEx and OpEx improvements, I'll just touch briefly on some important points. OpEx, again, the electricity consumption, it's the design of the electrolyzer itself. We have improved the energy efficiency, so 0 gap electrode design, improved diaphragms. We have also spent a lot of time designing a smart system that limits the shunt currents that typically plague pressurized electrolyzer systems. We have a unique and patented solution for avoiding shunt currents. So all of that design work leads to improved energy efficiency in the stack itself. Also important is the fact that you can operate the electrolyzer at different loads. We have a wide operating range, meaning you can run the electrolyzer at the 100% or you can run it at 10%, 20%. So that wide operating range is important when you want to optimize the electricity cost and how much hydrogen you produce, at what hours during the day. We also had a quick ramp up and down. And that is important because it means you can respond to price changes in the market rapidly. If you spend hours bringing your electrolyzer load down, you will not benefit from the fluctuations in electricity prices. Our system has been designed to use as little electricity as possible and still give customers the opportunity to optimize the electricity consumption based on pricing in the markets and how you want to run your system. CapEx reductions are driven by the fact that our system now consists of fewer and cheaper modules. Because there is pressure generated inside the electrolyzer, gas is coming out at 15 bar pressure instead of coming out at atmospheric pressure, we can avoid modules such as scrubber and the gas holder. And we also, because of that pressure, can reduce the size of the modules. Our system has been designed for outdoor installation, which is rather unique. I'm not aware of any other pressurized alkaline electrolyzer technology that can be installed outdoor. Most are installed inside buildings. Having a separate building for your electrolyzer adds a lot of costs, because there are safety regulations linked to ATEX zones, et cetera, that drive up the cost of the building. So we avoid all of that cost. It can operate outside, even in Norwegian or Nordic climate, through the winter conditions. The footprint is small, as I commented on, and this helps reduce cabling, piping and site works linked to concrete, et cetera. It brings all of the construction costs down, because you don't need to prepare thousands of square meters. You get the small compact footprint with less work. And that means all in all, also because our system is standardized, modularized, everything comes inside 20-foot skids, we significantly reduce the engineering, construction and commissioning cost. Why is that important? Because the labor part sometimes account for more than 50% of the total CapEx for the customer. So it's not only about getting the hardware cost down, it's also about getting the labor cost down, and our system delivers on both of these things. We announced, I think right before Christmas, that we delivered first gas with solid results, confirming our anticipated business case. And that led to the Board of Directors giving us the green light for building 1 gigawatt of stack production capacity at Heroya. So very pleased with the results so far. And now it's full speed ahead to commercialize this technology. We have produced gas on the prototype plant, as we said, in 2025. We took final investment decision on the gigawatt production line in the fourth quarter. We will launch the product commercially in the first half of 2026. May 6 is the magical date when we will invite customers and partners to come observe this technology, and also share more technical data and commercial data with them for what this system can do. We aim to validate the full customer pilot in the second half of 2026 and be in position to deliver at scale. What does that mean? Well, it means hundreds of megawatts in 2027. This project is funded by the European Union. We have received EUR 135 million in grants for industrializing the concept. Doesn't mean that we will spend all of that, but we are lucky and very happy that we have a solid financial backing for building the production line and running the pilot tests from the European Union. Then we are done with the official presentation and move on to the Q&A part of the quarterly presentation. And then you have a script you need to go through first, Wilhelm. Wilhelm Flinder: Thank you, Hakon. Before we start the Q&A session, just a few practical points. [Operator Instructions]. To manage the time, we ask you limit yourself to, I think we can take 2 questions at a time. If there's room at the end, you are welcome to rejoin the queue. We will also take written questions submitted through the Q&A function if time allows. If we don't get your questions, feel free to reach out to us at ir@nelhydrogen.com. And as a reminder, we will not comment on outlook specific targets, detailed terms and conditions for individual contracts, or questions about specific markets. Modeling questions are also best handled offline. And with that, I think we can get started. Wilhelm Flinder: As of now, I see no one has actually raised their hand, but we have received some questions -- here, we have one. Anders Rosenlund, I'll bring you on the screen. Please go ahead. Anders Rosenlund: You talked about this new pressurized alkaline system with the energy reduction of some 10% to 20% compared with most systems today. And the indication of below 50 per kilo is a bit vague. But could you just give us an indication of what you think energy consumption is for alkaline today, or what the systems that you deliver are consuming? Hakon Volldal: I think the big -- if you look at PEM and atmospheric alkaline, it's usually in the 55 kilowatt hour to 60 kilowatt hour per kilogram range, depending on who the OEM is. And then there are lots of OEMs claiming to be at very low figures for pressurized alkaline. And the problem is, yes, you might be that on the stack itself, but you lose a lot of that electricity due to so-called shunt currents, so electricity spent on producing hydrogen where you don't want it, in the manifold system. So if you look at the real energy consumption, it might be 15% to 20% higher than what we stated in data sheets because of that effect. And that means you, in some cases, are well above 60 kilowatt hour per kilogram of hydrogen, which comes as a big surprise to customers when they turn on the plant and they compare the electricity consumed versus the hydrogen coming out of the plant. Anders Rosenlund: And the above 60, that applies for PEM or alkaline... Hakon Volldal: That above 60 is for pressurized alkaline technology with high shunt currents. PEM is typically around 55, I would say, on the system level. And then, of course, a lot of these systems degrade over time. So there's a degradation effect of 1% to 2% per year. And our system has been designed to minimize that degradation effect, so that you end -- after, say, 6, 7, 8 years, your energy efficiency is still okay and not just during the first couple of years. Anders Rosenlund: And just a follow-up there because you said -- you referred to the others out there with those electricity consumption levels. But I presume that also applies for your equipment, that your equipment is not materially different since this is an improvement compared to what you already are producing? Hakon Volldal: No, I would say, if you look at PEM, there were not those big variations. It's either 53, 54, 55, 56. I mean most OEMs are in that range. And then plus the annual degradation. The big unknown is on the alkaline side. We produce atmospheric stacks where you have very low shunt currents, but higher energy consumption than we will have with the new technology. The problem is related to the existing pressurized alkaline stacks on the market today. And without throwing specific companies under the bus, we can say that most of these technologies are plagued by high shunt currents, which means you might operate in the 55 to well above 60 kilowatt hours per kilogram range. So we don't have the problem with shunt currents because we don't deliver pressurized alkaline technology today. When we do, the whole product has been decided to avoid that problem, and that is the differentiating factor. Wilhelm Flinder: Thank you, Anders. I see no hands. So let's jump to some written questions. From Morten, will you sell your old alkaline stacks in the future when your new tech is available, or just deliver on placed orders and then switch to pressurized alkaline? Hakon Volldal: I think we will still sell some atmospheric electrolyzers. There are some use cases for atmospheric stacks that are quite good. But as we have said, we think the majority of the market will prefer our new technology, because it is cheaper. The levelized cost of hydrogen will be lower for many customers, and that is the reason we have done the impairment, but we will be in a position to supply customers with the old or existing products if they want them. So I think we will sell both, but over time, the majority of the demand will be related to the pressurized alkaline technology. Wilhelm Flinder: So another one from Morten, do you think there will be consolidation in the electrolyzer world? And do you think Nel will survive these initiatives? Hakon Volldal: I think we have -- I can start and then you follow up, Christian. I think that consolidation has already started. There are a couple of companies that have gone bankrupt or given up. And I think that is likely to continue. There will be fewer players out there. Nel aims to be one of the companies that remain when the dust settles. And then, of course, we are a publicly listed company. Anybody can buy us. If somebody wants to buy us and pay a very high price, I think it's up to the shareholders to consider that, but we plan to remain a leading company. We remain to be one of the key players in the industry. And with the launch of the new product, first, the pressurized alkaline product and, in a couple of years, the new PEM technology, we believe we are in a position to capture a significant share of what we believe will be a sizable hydrogen market. Anything to add here, Christian? Kjell Bjørnsen: No, nothing. Wilhelm Flinder: So will you need PEM in the future when you have pressurized alkaline solution? And if yes, why? Hakon Volldal: So we will -- PEM and alkaline technology have slightly different use cases. Some customers prefer PEM, some customers prefer alkaline. We are in a position to pick the one solution that fits the business case or the project the best. And then we are of the opinion that it's much better for Nel to disrupt itself than for somebody else to do it. That's why we continue to invest into the R&D side. The pressurized alkaline technology will cannibalize and over time, outcompete the atmospheric alkaline version. It might even cannibalize the PEM product. And then if we launch a new PEM product, it is because we believe that product either has some unique benefits that will drive demand from certain segments, or because it will even outcompete the pressurized alkaline technology. So Nel aims to bring the best technology to market that we can possibly come up with. And if that means cannibalizing the old technologies, so be it. Wilhelm Flinder: Good. Also a question from Thomas on here. And I don't think we can be very specific, of course, but maybe some general comments around it. Are there large EPC tenders where Samsung and Nel are currently jointly bidding on? Hakon Volldal: Yes. Wilhelm Flinder: Yes. Good. We've also got some questions from David Lopez on e-mail. Some of these are already taken, but will the new pressurized alkaline technology be able to compete on price for projects worldwide with electrolyzers made in China? Hakon Volldal: Yes. And especially outside China. If you go back to my comment earlier that when you look at the total cost of starting a project, if you look at the CapEx side, more than 50% could be related to labor costs. And that is engineering hours, construction, commissioning, testing, et cetera, happening on site. Whether you start with equipment coming from China or equipment coming from Europe, you need to perform that with local labor on site. So even if the hardware cost is cheap for Chinese equipment, that labor portion is still very, very high. And what we aim to do with our solution is to bring that labor cost down to a minimum. That means we can be a bit higher on the hardware side if we can be much better on the labor cost side. I believe that with our pressurized alkaline technology, we are competitive on the hardware cost side, and we are much better on the labor cost side. And that means we have a winning solution for CapEx. Over time, the Chinese will probably -- they learn fast, they move fast. We have to expect that they will have a lasting competitive advantage related to their supply chains that will enable them to beat us on CapEx. We will do as best as we can, but it's fair to say that they -- or assume that the electrolyzers coming out of China will have a lower production cost. What can we do then? Well, we can beat them on the OpEx side. The OpEx is still more important than CapEx. CapEx is the first hurdle, but for the levelized cost of hydrogen, energy consumption is key. And that's where we, with this technology, have taken a giant leap forward in terms of efficiency and where we still see opportunities to improve. And compared to what is there today coming out of China, we are many, many steps ahead on the actual performance on the electrical consumption. So I believe we have, with the pressurized alkaline system, a world-leading technology that will put Nel in a position to win projects globally. Wilhelm Flinder: Thank you. I'll do another one from David Lopez. Given the Trump administration's policies, have there been any advances in the Michigan plant project? And if the project has been halted, will we have to wait until the new U.S. election to see if the new administration is more supportive of green energy? Kjell Bjørnsen: So we've said before on this topic that we will not build an empty factory. And unfortunately, in a market situation as it is, there is no market for building that facility. So we are not actively doing anything on that side. We would have loved to, but we would need to wait until there is a market. Wilhelm Flinder: Thank you. I see we have another question from Anders Rosenlund. Please go ahead. Anders Rosenlund: Could you comment on working capital and possible efforts to bring down the very large inventories? Kjell Bjørnsen: Yes. So the key thing on the large inventory is inventory that we have because some of our customers basically stopped their projects. Some of them even went bankrupt. We are working very hard to get that over to a cash conversion, working with several concrete projects, but we are dependent on new project wins to sell that. We're not adding to the problem by producing more. Also for the PEM side, with the newly advanced orders, we are making sure that we hold back our commitments until we have money on the book. So you could say the larger than normal inventory we have is a result of some of the historical project cancellations. Anders Rosenlund: And the reason why it stays high for a couple of quarters in a row is because of lack of alkaline sales? Kjell Bjørnsen: Yes. So there's limited new large alkaline orders that are possible to both sign and then deliver on. That's one of the things we are working very hard with and it's a key priority to get that sold. Wilhelm Flinder: Thank you, Anders. It seems we are now out of questions, so I think we'll end the Q&A session here. If anything comes after the call, you're always welcome to reach out to us at ir@nelhydrogen.com. And I'll hand the word back to the management for any final remarks. Hakon Volldal: Yes. I think if we look isolated on the 2025 financials, we are, of course, not happy with the figures. We wish the performance would have been higher, but it became clear quite early that we would have a difficult 2025 in terms of top line and EBITDA. What I'm happy about is that 2025 has definitely not been a lost year. We have used 2025 to strengthen key partnerships with strategic EPC partners, Reliance, technology development partners. We have massively invested in our new technology platforms and successfully developed those platforms towards commercial launch. Because of the difficult markets and lack of demand for legacy products, we had to accelerate the R&D effort and bring the launch plans closer to us, and I am proud of the organization for its ability to deliver on that ambition. We go to market now with a new product in May. And I really, really believe in that product, because it has been designed from scratch based on the right set of, let's call it, guiding stars, so what is required to make hydrogen projects work. We have looked not only at our piece, the stack, but we have taken a system view and really tried to look at this from the customers' perspective, what can we do to bring total system costs down? What can we do to bring the cost of producing hydrogen down? And that makes me quite optimistic about 2026. Despite a difficult 2025, we had a good ending to the year with important contract wins in Norway. We still see demand for our PEM products. I think we are likely to sign more PEM contracts going forward. And then hopefully, we can get more momentum on the alkaline side through our efforts to get rid of the inventory of electrodes, but also start to build the order backlog for the pressurized technology going into '27 and '28. So with that, I think we will come back in April with even more news on the launch of the new product platform, and we look forward to maturing that.
Caroline Thirifay: Good morning, everyone. Thank you for joining us today, both in person and virtually for the management presentation of our full year results 2025. I'm here with Marc Oursin, CEO; Thomas Oversberg, CFO; and Isabel Neumann, Chief Investment Officer and Chief Operating Officer. Before we begin, we want to remind you that all statements other than statements of historical fact included in this management presentation are forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected by the statements. These risks and other factors could adversely affect our business and future results that are described in our earnings release and in our publicly reported information. With that, I will hand over to Marc. Marc Oursin: Thank you, Caroline. Hello, good morning to all of you. Thank you for being here. So let's start with this page, Page #2. So you can see that we have, at the end of '25, close to 350 properties in Europe and reaching almost 1.8 million square meter of footage. Regarding the performance of the year, we have delivered another very strong one. Our revenues grew by almost 11%. We increased our NOI same-store margin by 40 bps with an EBITDA growth following the one from the revenue at 10.4%, and ending with an earnings per share growth of 1.7% versus last year despite the additional cost of debt and dilution from our scrip dividend. Meanwhile, we stay with a very solid balance sheet. We have a BBB+ rating, a leverage of 23% or 6.2x net debt over EBITDA and having an EPRA net tangible asset per share of EUR 53.3. So let's go to Page 4 for more details. So you can see on the right side of the page how the revenue growth full year of 10.8% has been achieved. We got the benefit of additional available square meters of 5% versus '24 coming from our development, renting them up by 8.8% versus '24, and combined with an increase of our in-place rent of 1.9%. When you combine all of that, you get the 10.8%. And as explained earlier, our cost management due to the efficiency of our platform allowed us to grow the EBITDA by 10.4%, therefore, in line with our revenue speed. And this performance is clearly putting us on an earnings per share growth trajectory, medium term. If you go to the next page, Page 5. So I think it is interesting to notice how the company has been able to grow physically, meaning in terms of footage and translating this square meter growth into revenue growth. So you can see on the left that we grew by almost 7% CAGR for the past 5 years in terms of number of stores, but also square meter-wise. At the same time, our revenue grew close to 11% CAGR and demonstrating that our strategy of growth delivers unique revenue increase. If we go to Page 6, and this slide is focusing on the NOI growth '25 versus '24 for the total company. It is also showing the importance of the margin generation from our so-called non-same stores, representing all the properties not yet matured and coming from organic development or M&A transactions. You can see that almost 2/3 of the incremental NOI value is delivered by our development engine, confirming our capacity to deliver profitable growth. So now let's go to Page 7. So on this page -- I think this page is really important to understand what we have achieved and how we will continue to use 2 major strengths that we have. I mean the scalability of our platform, allowing us to increase our same-store NOI margin and, at the same time, our development engine bringing profitable growth. And you can see that we got the benefit of both with a significant increase of our total NOI margin value since '21, with having the non-same-store taking the major share of this growth, 2/3 in '25, as you have seen on the previous slide, while having the same stores normalizing their NOI delivery. And Isabel, by the way, will come back later with details regarding our future pipeline. On this, I turn to Thomas. Thomas Oversberg: Thank you, Marc, and good morning, everyone. Let me now turn to the same-store performance for 2025 on Slide 8. Across our 251 same stores, we delivered a solid full year revenue growth of 3.2% at constant exchange rates, supported mainly by the continued in-place rent growth of 3.5%. Occupancy remained resilient at 89% despite the modest addition of rentable square meters during the year. Overall, demand remained steady across our markets. But as we highlighted, in several regions, market dynamics intensified during Q4, particularly in the U.K., the Netherlands, France and Germany, requiring selective pricing adjustments to protect occupancy while preserving our long-term growth. This Q4 NOI margin impact flowed through to EBITDA, as you will see later. That said, throughout the year, we were able to rely on our structural strength, disciplined pricing, the scalability of our platform and cost efficiencies delivered through clusterizations, helping us mitigating inflationary pressure, for example, of payroll and real estate taxes. As a result, full year same-store NOI grew by 3.8% and our same-store NOI margin expanded by 40 basis points, reaching 68.1% for the year. Moving to same-store NOI performance on Slide 9, where we break down the main components of our NOI growth for 2025. We delivered EUR 254.2 million of same-store NOI in 2025, up from EUR 244.8 million last year. As noted, key contributors were higher in-place rent, which added EUR 8.1 million and a EUR 1.4 million benefit from margin improvements. Rental square meters were broadly stable year-on-year, having only a marginal NOI impact. With same-store representing approximately 86% of our total NOI, this demonstrates our ability to sustain high profitability, allowing for predictable earnings growth. Slide 10 illustrates the normalization pattern, which we anticipated and communicated throughout 2025. After several years of exceptional post-COVID growth, 2025 showed the expected return to more typical revenue dynamics across our same stores. Revenue growth remained positive at 3.2%. And as mentioned, Q4 was clearly more challenging, in particular, against our very strong comps from 2024. The key message here is that the overall slowdown in revenue growth was expected. But importantly, the long-term fundamentals of our markets remain intact: urbanization, mobility and still significant undersupply. We remain convinced that our omnichannel and pricing capabilities position us well to manage through different market conditions as we have demonstrated in the past, most recently in Sweden. Turning to adjusted EPRA earnings per share on Slide 11. For 2025, adjusted EPRA earnings per share landed at EUR 1.74, fully in line with our expectations and market consensus. This performance was underpinned by a strong underlying EBITDA growth of 10.4%, reflecting the impact of our expanded portfolio and economies of scale. As noted, the performance in Q4 eventually did not allow us to expand our EBITDA margin as the Q4 slowdown flowed through to EBITDA, resulting in a decrease in EBITDA margin by 30 basis points. While interest and taxes grew in absolute amounts, we increased slightly less than what we initially estimated, resulting in a 1.7% adjusted EPRA earnings per share growth. I now hand over to Isabel, who will walk us through capital allocation and returns. Isabel Neumann: Thank you, Thomas, and let me add my good morning to all of you as well. In 2025, we have delivered exactly as guidance. We have opened about 90,000 new square meters of properties at an 8% to 9% yield for an investment of about EUR 210 million. By delivering this 90,000, yet again, we really show that we can consistently deliver this target that our development engine is working very well indeed. What I'm particularly pleased about is that we have delivered these 90,000 square meters through all the regions, across the regions and also using the different ways of growing we have. So through new developments, redevelopments and M&A. So it shows again the scalability of our platform, we can grow in all 3 ways across 7 countries. And you can really see how in 2025, this comes together quite nicely. This brings me to the next slide. We have a strong pipeline for '26 and '27 with 160,000 square meters already secured at a yield of 8% to 9%. Let me remind you that we buy our properties subject to building permit, and we don't land bank. For '26, we have 23 properties in the -- 23 projects in the pipeline for a total of 102 (sic) [ 102,000 ] square meters. And for '27, we already have 12 projects in the pipeline for a total of 56,000 square meter. We've also decided to increase the hurdle rate going forward from the current 8% to 9% to 9% to 10%, but we will come back to this later in the presentation. On the following slide, we show our strong track record in delivering the returns we set out. On the left graph, you can see how our organic projects have performed per vintage year. And on the right, you can see how our acquisition projects have performed. This is the second year we're showing these numbers. So the bars in red show the returns at the end of '25 and the bars in gray show the returns last year at the end of '24. Up to 2023, we had a hurdle rate of 7% to 8%. And since then, we have increased it to 8% to 9%. So now let's look at our track record. On the organic projects, we delivered very strong performance indeed. All vintages before 2021 already delivered a minimum hurdle rate and the younger vintages, as you can see, they continue to progress well. For the acquisitions, we generally delivered the hurdle rate with the exception of 2021, 2023 and 2024. And there are specific reasons for each of them, and let me go into that. In '21, we did the acquisition of the A&A portfolio. The A&A portfolio consisted of 4 stores in London, out of which 3 in the Kings Cross area. We have 2 topics that has impacted us on this acquisition. The first one is that we've seen a large increase of competition in the Kings Cross area in the years following our acquisition. In 2023, Big Yellow opened a very large store in the summer of '23. And in fall of '23, Access also opened a store exactly in the same area. Secondly, because of the very central location, we also -- it took us also a little bit longer to get the permits to do the work that we set out to do. So that has, I would say, caused a slight delay, but we remain confident that we will reach the hurdle rates as we have set out. Then for 2023, this is the year where we did the Top Box acquisition in Germany. But Top Box, I think, was very much like an organic project. We are 5 stores and -- 5 open stores and 2 pipeline stores, but the open stores effectively were at a very low occupancy, and we, of course, also had to build out 2 stores. So if you look at the occupancy at the time of acquisition versus the fully built-out square meters at the end, at maturity, we were only at an occupancy of 42%. So this is an organic project. This is not an M&A-type project. And therefore, if you look at the returns of 1.6% that compares in '23, that compares fairly nicely with the 1.8% on the organic side. So you can see this is just more a fact that it's an organic-type project. Then for 2024, this is the year we did Lok'nStore. We also did Pickens and Prime, and Pickens and Prime are very mature, fairly mature properties. But of course, Lok'nStore as well is a portfolio that's not mature yet. The occupancy for the existing store was about 70% at the time of acquisition, but we had quite an aggressive redevelopment program, and we also had a high number of pipeline stores. This year, effectively, we have delivered already 18,000 of the pipeline stores. And next year, we will deliver 26,000 of the pipeline stores. But if you take into account the redevelopment and the pipeline, at acquisition, we were about 50% occupancy. So you can see for 2004 Lok'nStore, it's a bit of a combination between mature and organic. This brings me to the Lok'nStore acquisition. And let me give you an update on where we stand. First of all, on the real estate side, I'm pleased to say we have fully completed the rebranding of all the Lok'nStore stores. We have installed access control, brought it up to our standard to reduce the energy consumption. So they are now, for all intents and purposes, fully Shurgard stores. Further on the real estate side, as I mentioned before, this year, we have added 18,000 square meters to the portfolio through a combination of redevelopments, remixes and the opening of 2 properties. And next year -- sorry, in this year, we will open the remainder of the stores from the L&S pipeline for a total of 26,000 square meters. So by the end of this year, the full FBO, as we had set out will be delivered. Now let me shift to the operational side. First and foremost, our occupancy is on track. We started the acquisition at 67% occupancy. And by December '25, we were at 80%, and we continue to expect to reach our target of 90% by the end of this year. Now we have said in the past that we will deliver a CAGR of about 2% of in-place rent, and you can really start to see how this is coming together, a, by an increase of the move-in rate; and two, by a decrease of the move-out rate. On the move-in rate, as we have a higher occupancy, we need less promotions and therefore, logically, the move-in rate goes up. On the move-out rate, you can really see the impact of our commercial policy of the Shurgard standardization. And therefore, you see normalization of the move-out ratio in line basically with our London portfolio. So the 2 of them together will make that our in-place rent is moving up. The last point I would like to mention is on the synergies. We have realized synergies at the high end of the range. At the time of the acquisition, we had guided towards between EUR 4 million and EUR 5 million, and you can see that we are delivering at EUR 5 million. This is through a combination of factors. First and foremost, as we put the Shurgard operating model in place, we've been able to lower the FTEs per store. All the assets have been folded under the U.K. REIT, and we have a reduction in G&A, Primarily, we have closed the former Lok'nStore headquarters. So in summary, we are delivering according to plan on the Lok'nStore acquisition. I will now hand it back over to Thomas to talk about the balance sheet. Thomas Oversberg: Thank you, Isabel. Let's now move on to our balance sheet and financing structure. Shurgard, as you know, is the only European self-storage operator with a BBB+ investment-grade rating. Our capital structure continues to be a source of competitive advantage, supporting our long-term low-cost funding. At the end of the year, our LTV stood at 23.2%, broadly stable year-on-year and comfortably below our 25% long-term target. Net debt to underlying EBITDA remained at 6.2x, fully within the boundaries of our rating. Our average cost of debt is 3.33% with a 7.2-year weighted average maturity. Liquidity remains strong with EUR 56 million cash on hand and a fully undrawn EUR 500 million revolving credit facility, giving us flexibility to fund our development pipeline. As you know, 100% of our mainly freehold portfolio is unencumbered. And this, with our commitment to our BBB+ rating, is a cornerstone of our decision-making process. On Slide 21, we outline the strategic decisions we are implementing to accelerate medium-term adjusted earnings per share growth. We have increased our investment hurdle rate by 100 basis points, as mentioned by Isabel. This means that all projects from -- approved from 2026 onwards will have to earn an NOI yield on cost at maturity of 9% to 10%. This reflects our focus on disciplined value-generating organic growth. It has no impact on the growth already embedded in our pipeline for 2026 and 2027. Further, we are discontinuing the scrip dividend options, moving to a cash-only dividend of EUR 1.17 per share. We remain fully committed to our BBB+ rating, as I mentioned. Therefore, we continue to target a long-term LTV target of 25% and below, refine our medium-term net debt-to-EBITDA target to 5x to 6x. And finally, we reiterate our commitment to continue applying a disciplined M&A framework, requiring acquisitions to be EPS-accretive in the first full year, ensuring value generating also on this front. These decisions collectively reinforce our ability to deliver sustained compounding earnings growth. Looking ahead and incorporating the current pricing and occupancy conditions and expectations, on Slide 22, we are guiding for 2026 to be a year of continuing growth. We expect all store revenue growth of 6% to 8%, driven primarily by the continued ramp-up of our properties opened or acquired in 2023 to 2025. Underlying EBITDA is expected to be in the range of EUR 278 million to EUR 289 million, reflecting our confidence in delivering operational efficiencies that offset ongoing cost pressures as the ones mentioned on the slide. As a consequence of the strategic decisions explained on the previous slide, we anticipate net interest expenses to be between EUR 57.5 million and EUR 59.5 million. Overall, resulting adjusted EPRA earnings growth will be between 1% and 6%, and is expected to translate into adjusted EPRA earnings per share between EUR 1.70 and EUR 1.81. We plan to add 100,000 to 125,000 square meters to our portfolio in 2026 with CapEx in the range of EUR 250 million to EUR 315 million. Our year-end leverage is expected to remain within the rating framework at 6.5 to 6.8 net debt to EBITDA. We expect to update the outlook throughout the year, where necessary, to ensure consistent and transparent communication. Finally, let me close with our medium-term guidance for 2027 through 2030 on Slide 23. We expect all store revenue, underlying EBITDA and adjusted EPRA earnings to reach a growth at 6% to 8% CAGR, reflecting the long-term compounding nature of our business. Our pipeline, approximately 90,000 square meter per year, will require around EUR 200 million of annual investment and continues to offer an attractive yield at maturity. We anticipate continuing to distribute EUR 1.17 dividend per share paid in cash and remain firmly committed to our BBB+ rating with landing in our target net debt-to-EBITDA range of 5x to 6x by 2030. Our model remains simple: disciplined capital allocation, a scalable platform, strong cost control and a structured demand that continues to support long-term value creation. With that, I hand back to Marc for his concluding comments. Marc Oursin: Thank you, Thomas. So in summary, Shurgard has a proven and resilient business model. If I show it, it's better. So yes, indeed, we have a proven and resilient business model, combined with a high-growth profile and, I would say, a development engine based on a real scalable platform. And that's why you've seen all these improvement in the same-store margin along the years. At the same time, as explained by Thomas, our balance sheet is solid with its BBB+ investment grade. And therefore, we have an attractive earnings growth perspective. So on that, I thank you for your attention, and I hand over to you, Caroline. Thank you. Caroline Thirifay: Thank you, Isabel, Marc and Thomas. As you can see, the next rendezvous will be the Q1 results on May 13, same day as the AGM. We are now available to take your questions. We will take first the question of the audience, followed by the question from the webcast. [Operator Instructions] We have the first question. Jonathan William Coubrough: Jonny Coubrough from Deutsche Bank. Could I ask firstly, please, on the medium-term guidance range? What is informing that current range and what's implied there for same-store growth rates? And also, whether the new guidance range reflects the new hurdle rate for yield on cost of new developments? And then secondly, on that new hurdle rate, how does that impact the opportunity set for potential new investments? Marc Oursin: Okay. So I will take the first part and you take the second part, Isabel. So regarding the -- and maybe we can share the slide of the medium term. So the medium term actually is taking into account the fact that on the same-store, we have said that many times, the normalized same-store growth should be, I would say, between 2% and 3%. That's what we have usually for this model. And then, of course, we took into account also, that's why you have a range this year. And we think it's -- we are not the only one, by the way, giving ranges. We've seen that in the U.S., and we think it's a good thing to do with the -- with you guys. So we have taken an assumption, which is on the low side, if it's not going into exactly what we are looking for. And if all the planets are globally aligned, you have the high side on the right. So that's what we are disclosing this. And the midpoint of this medium-term guidance is more or less the trajectory that we're looking for. That's for the -- I would say, the explanation to this. And regarding the hurdle rate, Isabel? Isabel Neumann: So on the hurdle rate -- so indeed, we've increased the hurdle rate to reflect our cost of capital, that is clear. With regards to the opportunities going forward, well, first and foremost, I would say 2026 and 2027 is largely already driven by the pipeline that has already been created. So there's, as such, not necessarily an immediate [Audio Gap]. We have, in the past, increased the hurdle rate from 7% to 8% to 8% to 9%, and we have still managed to find projects. However, we will only do them if they are -- they generate the returns. It means we will have to work together as a team. Our construction team will look at opportunities to lower our cost of construction, look at opportunities to lower our broker costs and so forth. So it will be a collective effort. And I would say there is a possibility that, in the first year, we will do slightly less project than we have done before, but we remain confident that we can continue to grow in an attractive way. Andres Toome: Andres Toome from Green Street. So a few questions. Firstly, on that same guidance for the medium term, and it seems it's come down in terms of what you're looking for in terms of underlying EBITDA growth, which was more in the double digits before. So maybe you can help to understand what's driving that because you -- I think you sort of alluded to the fact that your same-store guidance, implicit one, has not really changed. So is it just that the delivery on development pipeline, lease-up is under your expectations? Marc Oursin: Do you want to take this one, Thomas? Thomas Oversberg: I think we shouldn't take that conclusion from that. I think we have a very solid understanding of where we expect the markets to be. We have taken the current condition into account. And based on that, we do think that delivering in that range on a CAGR perspective is more or less in line with what we said before. I mean -- so from that perspective, we don't expect really a fundamental change in the dynamics. It's more a refinement where we see we're going to land. Andres Toome: Okay. And then I guess, looking back also on the slide with your 2024 acquisitions and the delivery there on the yield on cost so far, it looks to be lower compared to what you had, I think, when you announced Lok's acquisition in terms of just the day 1 unlevered yield on that. So I guess there are other sort of bits in that 2024 vintage as well. But just on the headline there, it looks maybe Lok'nStore is actually underdelivering on your expectations. Or is that the wrong read and there's something else included? Marc Oursin: Yes. I think it's the wrong read. If I remember, we said when we did Lok'nStore that we will deliver 8% yield on cost, '29, 2030. And that the, as explained, actually, by Isabel, when we took over, the portfolio was not at all matured because if you look at it, occupancy was 2/3, 67% of the current square meters. But with all the new ones that are coming in, especially this year, plus the expansion that we have done in the past year, the 67% is actually 40 -- less than that, 35% of the ending point of the square meters in '29, '30. So that's one. Secondly, in terms of return or let's call it, entry yield, the first year, we were saying that we were roughly below half of what we're targeting, so between 3% and 4%, which is the case shown on that slide, more or less. Andres Toome: Right. I guess from the prospectus or the sales, sort of, memorandum, I think the EV EBITDA multiple was sort of 27% on in-place income, which would be sort of at high 30% range, but... Marc Oursin: Okay. Knowing that in this, you have also other deals, you have the Pickens one, you have the Prime one plus another one we did the same year. Andres Toome: Okay. And then final question is just on your thinking around your cost of capital and how you think about net external growth because you keep on sort of plowing ahead, but your shares are trading at a pretty hefty discount. So do you have any thoughts around just because of that discount to actually sell some assets and capture any sort of private market arbitrage there might be? Marc Oursin: Well, we have said, especially in the case of Lok'nStore when we met with all of you because we had a question about the geography of Lok'nStore. And we said, we want to stick to London, the surroundings of London Southeast and therefore, Greater Manchester. So obviously, we said that we do a review of these properties. So we said, let's give us some time. It will take probably 1 to 2 years to see how the stores where Isabel has invested the money to put them up to speed are delivering. And also, are there better opportunities with this capital potentially? And you're right. So we are working on this. Valerie Jacob Guezi: I'm Valerie Jacob from Bernstein. I just have a follow-up question. If I look at your 2026 CapEx, I think you previously guided for EUR 320 million and now the number is a bit lower. And so I just wanted to understand the reason for that. And also, as a follow-up, what are you seeing in terms of your acquisition pipeline? And do you think you'll be able to offset that? Isabel Neumann: Sure. So indeed, we usually generate about 20,000 square meters in M&A. So the 102,000 that you're seeing here is organic pipeline. So M&A would kind of come on top of that. But of course, with M&A, it's always -- some years, there's lots and other years, there's less. So we never quite know where we're going to be ending up in terms of M&A in a given year. But so indeed, we have a good basis with 102,000 of organic pipeline and any M&A would effectively come on top of that. So we are expecting to kind of end up in this range that we have guided towards. Thomas Oversberg: Yes. Probably there, we always consistently have been saying we are expecting 90,000 overall, a certain amount of CapEx. And as we are not in full control of M&A, the mix might change between where we go, but the target of the square meters and the amount we are investing remains the same. Caroline Thirifay: Do we have any other questions from the audience? If not, we will take questions from the webcast. Unknown Attendee: We have our first raised hand from Vincent Koppmair. Vincent Koppmair: Congrats on the results. My first question is a little bit more information on the Q4 weakness you've seen in certain markets. Could you give a little bit more color on those, please? Marc Oursin: Okay. So thank you, Vincent. So we have seen -- as we also have said during the course of the year that the way we're looking at '25, and there's a slide actually showing this deceleration, we're anticipating the deceleration. If you remember, actually, Q1 was better in terms of results than anticipation. Q2, Q3 were in line and Q4 is not as we were expecting, to be frank. And we have seen this deceleration stronger in 4 markets: the U.K., the Netherlands, France and Germany. And I will come back to this. Meanwhile, at least 2 markets that are the Nordics, so Sweden and Denmark, did pretty well and very happy with that, of course. And back to the U.K., Netherlands and France and Germany, so the reasons are probably different. If you take Germany, for example, we have opened quite a number of stores, but especially one of our competitor called MyPlace did in Berlin, for example, in that city. And the situation in Berlin is much more -- we think, a kind of what we experienced in Stockholm some years ago. So suddenly an oversupply that the market has to digest. And therefore, in order to keep our occupancy where we want, it's what we did with Sweden, and you saw that the payoff is very good today. We are, I would say, putting more discounts. We don't see any lack of demand at all in all the 4 markets that I've mentioned to you for this deceleration. It's much more the fact that we have to do more discount to convert that demand into contracts. And why do we have to do more demand? Let's take Berlin, it's more supply and they want to fill up their properties, which is logical. And in other markets, I would say, like the U.K., for example, especially London, we have seen some competitors becoming more aggressive on their pricing, probably for different reasons. If you look at Access, for example, if you look at Safestore and the surroundings of London outside the M25, smaller players also became more aggressive. That's what we have seen. Will it last? We don't know. But what we can say is that when you start to look at the first 2 months of the year, Q1 in '26, we start to see a certain normalization on that. And the Netherlands, it's a bit the combination of both in the sense that if you go to Randstad, especially in Amsterdam area, there is openings and there is some cannibalization regarding certain properties and also some competitors being more aggressive. That's what we are experiencing. That's the answer, Vincent. Vincent Koppmair: Yes. I had one follow-up question on your 2026 guidance. I appreciate that you now give a range, so quite nice to have some more information. But should we understand, as you've mentioned that, of course, the high end of the range is the blue sky scenario, but would you, compared to the high range and the low range, aim for the middle? Or is your base case scenario a little bit closer to the higher end of the range? Marc Oursin: No, that's a good question. Thank you very much. So obviously, here, Vincent, the -- what we are looking at is to be within this range, obviously, first. Secondly, across the year that will come every quarter, and I think this is what our peers in the U.S. are doing and other companies not in real estate, you just adjust the -- where you're going to end within this range. So obviously, because year-to-date, quarter-over-quarter, you have actuals versus simply last year. So you know where you will end. So for us, we want to be in this range. And you can say that the midpoint of this range is probably where we would like to be. Unknown Attendee: Our next raised hand is from [ Stephane Afonso ]. Unknown Analyst: I'll ask them one by one. So first, regarding your 10% yield on cost, how many years does it take to reach this stabilized yield? And could you break that down between occupancy and ramp-up rents, please? Marc Oursin: Okay. So the 10% is related to maturity. So usually, this is taking more or less between 5 to 7 years, depending on the size of the property and the investment. But if you want to be on the safe side, take 7. That's one. Secondly, how do we get there between the volume effect, so occupancy first and then the rates? So occupancy to get to 90% will be between 2 to 3 years. And then the rates will start to kick in and especially the ECRI, so the increase that you do to your existing customers. And this would bring you the remaining years to this -- after 7 years to this level of targeted 10% return. Unknown Analyst: Okay. And has this time line changed, meaning does it take longer or not, no? Marc Oursin: No, no, no. Unknown Analyst: And regarding the 2% to 3% same-store annual growth that you expect, on what basis are you deriving this figure? And within the information that is publicly available, how can analysts challenge this figure? Marc Oursin: It depends on the talent of the analyst, obviously, and the knowledge of the analyst. And I think if you're the analyst, what you will do is you will look at the past first. We know that the past is not the future, but it gives you at least a good understanding how Shurgard has been able to go through the past 10 years, for example. So GFC, COVID, interest rates, high inflation. And you will see that if you are between 2% and 3%, it's, we think, reasonable. So if you want to take, [ Stephane ], something more conservative, you stick to 2%. If you are more aggressive, you go for 3%. But I think that if you are in this range, you are close to the truth as a run rate long term. Unknown Analyst: But just to understand, do you base it on inflation, for example, could be a threshold or -- just trying to... Marc Oursin: That's an interesting one because, usually, you're right, many analysts or people who are, let's say, looking at the company and this class of assets are looking at CPI. But we have demonstrated -- we have a couple of graphics in -- I think it's what we call the company presentation where we show that we have always overbeaten the CPI actually. I'm talking same-store revenue growth year-on-year. So I would say that usually, we are above CPI. And why? Because it's a need business. And that makes the whole thing very different, meaning that because you need space, and as soon as you got in, you need that space and the exit barrier to leave that space, people are sticky. So again, think about what it is, it's like having your attic or your basement in a remote location and think how you behave versus your attic and your basement when you want to leave it is because you are forced to do so. So that's why we have been able, I think, to beat the CPI for quite a long time. Unknown Analyst: And last question. If the right opportunity came up, would you be open to another... Marc Oursin: We didn't hear you at the beginning. Will you repeat, please? Unknown Analyst: Yes. Just asking one question about M&A. If the right opportunity came up, would you be open to another sizable acquisition in the short term? Or is the focus firmly on completing the Lok'nStore ramp-up? Isabel Neumann: Of course, we are very much focused on delivering the returns for Lok'nStore or any M&A that we have done. But clearly, as we have -- Thomas has also said, we are very cautious in the M&A that we do. It needs to deliver the returns that we have set out, and it needs to be accretive from the first year. So yes, of course, we will look at everything. But of course, the hurdle rate to move forward is very high. Thomas Oversberg: And let me clarify on that point also for the people in the room. We are really committed to 2 things, and that's our BBB+ rating, which defines and what we can do on the debt side and to our accretiveness in the first year. Those 2 points are not negotiable. So therefore, you will not see us coming out and saying, oh, there was this strategic opportunity and we throw everything overboard. Unknown Attendee: Our next raised hand is from Aakanksha Anand of Citi. Aakanksha Anand: I have 3 of them, and I'll go through them one by one. The first one, we're obviously speaking about increased competition and a higher level of discounts. Could you just give some color around what kind of incremental discounts are we talking about compared to previous years? That's the first one. Marc Oursin: Okay. Thank you for the question. So first, we do not disclose the intensity of discounts per market. What we can tell you is that, for example, if I would take Berlin as a reference, yes, we are increasing the discounts there. If you take usually the normalized level of discounts, we are close to 15% of the revenue. So it might go to 20%, for example, a certain period of time or less, depending -- actually, the pricing we do is per unit type in a given property. So it's very focused in terms of investing these discounts. And therefore, globally, you see this level. But it's hiding actually, very different situation per location and per type of size. Thomas Oversberg: And if I can add to that, the important part is, and Marc alluded to that, is self-storage is a need business. So what I need to make sure is that I get the people who have the need. And that means I want to give them as little hurdle to make the conversion as possible. So the prices and next to the location of convenience are the 2 really driving factors. As I don't know, who of you will stay longer than 1, 2 months, but we know that more than 60% stay with us very long, the only reasonable thing I can do is make sure I get all of you. And that's what we are trying to do. So we are always saying we want to get as many people as possible because it's a need business. It's a sticky business. So that allows us, while we are coming in at a lower price, to again increase thereafter on our ECRI. And that's really important to understand. When we are saying we're giving more discounts, this is not something which we are not expecting that is executing on our pricing strategy, which, as said, we want to have 90% occupancy because we know it's a sticky business, and we want to get as many of the customers as possible. Marc Oursin: And back to what you were saying, Thomas, with Sweden, it's exactly this is what happened. If you remember 3, 4 years ago, we had really a hard fight with one of our competitors in Stockholm mainly. And the payback today is that we were right to stick to this occupancy. Yes, it was painful in terms of revenue growth, same-store, because Sweden, the worst moment was minus 1% quarter-on-quarter, but never more than that. It's not like going to minus 5% or minus 10% -- minus 1%. And in the end, later on, you get the payback because the customer base is there, and you can apply the ECRI on it. What is your second question? Aakanksha Anand: The second one is just on the same-store revenue growth over the medium term. So which would be the top 4 geographies where you expect to see the highest, if you could rate them for us, please? Marc Oursin: Okay. So that's a -- I would say that if you look at medium term, so '27, 2030, which is the range that -- the time horizon that we have given, I would say that probably the Nordics will be on the top for -- that's one. At the bottom, I would say, probably Germany and maybe the U.K. And in the middle, I would say, Netherlands, France, Belgium. If I have to give you a ranking, I would see these 3 groups, the 3 tiers. Thomas Oversberg: If I can add some color to that, the reason why this is not an easy answer because how our pricing mechanism works is we are sort of like agnostic of where a customer is sitting because we know the customer behavior is the same in all of our markets. So what you can see is that our pricing algorithm, both on the initial pricing and on the increase to existing customers is really agnostic to that. So whenever we see dynamics which impact our occupancy, we will see that the pricing algorithms are acting on both fronts. So what Marc was therefore referring is to what you should see probably the lowest growth is where we see most of our new store own opening because we are competing with ourselves, obviously. That means we can -- we need to make investments to ramp that store up. Again, not a buck, it's a feature of our model and where we see unexpected short-term price competition by competitors. So that, I think, is the way of looking at it. But overall, because we are applying exactly the same everywhere, our model is not saying, oh, you're a U.K. customer, you're only getting X percent. That's not how we're looking at it. Aakanksha Anand: All right. And the third question, just on the investment hurdle. So the raised investment hurdle, I understand that applies to both acquisitions and the development pipeline. I think the question here is, does this mean -- I mean, are you able to find as many opportunities with that raised investment hurdle from the visibility that you have on the bolt-on acquisitions market at the moment? And if not, I guess it just basically means that the future external growth potential is going to be driven -- I mean, the share of future growth potential from the bolt-on acquisitions is going to be much lower. Marc Oursin: Do you want to take this, Isabel? Or do you want me to answer? Isabel Neumann: Well, I can start and you can add. I think the question was already kind of raised here in the room. But indeed, as we said, the pipeline for '26, '27 is kind of set, right? So there is no immediate change here for the next couple of years as, of course, we have a certain delay between the moment we do a deal and then we execute it. And our objective in terms of being accretive in day 1, this is not new. So to a certain extent, we're not necessarily changing the way we're doing it since we have done this year. M&A is always a situation whereby it's driven by effectively what is also available in the market, what is happening. And so part of it, of course, is where we want to act, but also it's what is the availability of opportunities. And that's the part we have not necessarily a control over. Marc Oursin: So to complete the answer from Isabel, I would say that you're right, the risk on the M&A is higher than on the development, organic, because as Isabel said previously, organic development, finding a piece of land, okay, dealing the land and then after that, being able to act on the cost of development are much higher in terms of capacity internally to work on than trying to negotiate a deal -- a price with a seller in order to reach your hurdle rate of 9% to 10%. So you get the deal, you don't get the deal because you are priced in at the level of the seller. That's it. So that's clear to me that probably you're right, if we are not able to satisfy the, let's say, will of the sellers, knowing that we want to be at 9% to 10% return on this M&A transaction, yes, it will diminish. But it's not a big deal to me. It's -- I prefer to be not on a bad deal than with several on a good deal -- sorry, on a bad deal. So here, organically, potentially, it might take over what we are missing on the M&A. And as said by Isabel also, in the past, we have already increased the hurdle rate. We were at 7%, 8% till '23. And as of '24, we went from 7%, 8% to 8% to 9%. So the -- let's say, the concern was the same. Would you be able to still do M&A? Would you be able to buy lands and to deliver organic at the same -- at this new hurdle rate? And the answer is yes. So I would say the coming quarters will give us a good sense of our capacity to continue to organically develop at this new level of requirement. And regarding the M&A, let's see. Isabel Neumann: And maybe one final point here is that it really shows the value of looking at our growth across M&A and organic. And there's been years whereby we've had much more organic and less M&A, and there's been years where we've had more M&A and less organic. Over the years, it all kind of levels out a little bit. But it's -- we are really depending on the opportunities, adjusting effectively how we combine the growth. Marc Oursin: Caroline? Caroline Thirifay: [indiscernible] conscious about the time. Marc Oursin: Thank you. See you in Miami. Unknown Attendee: Our next raised hand is from Ana Escalante from Morgan Stanley. Ana Taborga: My first question is also on the level of discounts. Just wanted to understand if these discounts are more focused on attracting new customers or are more focused on existing customers, meaning keeping existing customers in your properties to sustain that occupancy? And to the extent that you can comment, are you seeing those discounts being sustained into the first quarter of this year? Thomas Oversberg: Yes. So the discounts which we are talking about is indeed to attract new customers. As I said, what we are trying to achieve is that we get as many customers in and then increase their prices as long as they're staying with us. We don't see any changes in dynamics there. We are becoming, again, more sophisticated on increasing our existing customers. We're also having now machine learning tools on that running so that we are really having a risk-based approach there. But the main amount is always talking about the initial pricing, which a prospect gets to convert them into a customer. At the moment, I think we are seeing no major changes in there to what we saw in Q4. But again, that is not something which we are -- which we should have expected to see, because the dynamics -- market dynamics are not changing from one day to the other. If competitors are more competitive on pricing -- initial pricing, it's because they're obviously trying to fill up. And then it's more a question of what is the end goal. Are we dealing with a customer -- with a competitor who is happy to be at a certain occupancy and then manage the rates at that point in time? Or are we dealing with a competitor who is following our pricing strategy? We barely ever meet the ones in the second class. So at one point in time, this will naturally level out. As we also were saying, we are part of this pricing pressure ourselves because we're adding new spaces close to our existing store to enable us to plug the holes in our network and get from that the scalability effects. So again, we are obviously causing that to a certain extent as well. Ana Taborga: Okay. Very clear. Maybe also related to this, thinking medium term, do you think that there is a risk that artificial intelligence makes this sector or the price search by prospective customers a bit more transparent? Because I know that you are very clear with your first month, EUR 1 or GBP 1, but there are other competitors that are not that transparent, do you think there is a risk that AI increases the transparency here and therefore, customers become a little bit more opportunistic, not only for new customers but also existing ones trying to -- looking for cheaper alternatives and the search process being facilitated by AI advances? Marc Oursin: Okay. So Ana, here, I think, again, back to what Thomas just said and confirmed, the global revenue growth of the company is actually combining 2 engines. One engine, which is to attract new customers. That's one thing. It's where the discounts prices are public. They're on the website. The price you see is the price you pay and you have discounts after that. Discounts could be $1, EUR 1 the first month, can be additional discounts. That's one thing. And secondly, you have everything related to the ECRI, which is increasing your existing customer. And here, it's purely discretionary, it's private. So I will start with this, where AI -- actually, from a customer -- an existing customer perspective, I would say that the risk there to me are very limited because as we have said, people are sticky. You don't wake up in the morning and check every morning like a stock price if the price that you are paying for your unit can be cheaper with AI because you forget it. And that's the whole behavior of the customer. So that's very important because it's protecting actually our business, and that's key. I don't think AI will change that, to be very frank. I might be wrong. But today, with what I understood from this business after being 15 years in it, and by the way, being a customer of Shurgard before even working for Shurgard, I doubt. But where you are potentially right is on the first aspect is how, for new customers, people who are searching for a unit, how they can be, let's say, for themselves more efficient, more agile to pick up a location, a price which is closer to their home, and they can choose that. You would have told me, for example, in 2012 that in '25, 12 years later, more or less, or 13 years later, 95% of the search we have are gone through Internet and in Europe, because Google is almost a monopoly, the search engine used is Google for 95% of those, and that the people are doing that today for close to 80% with their mobile phone, when in 2012, it was 5%. I would have told you, well, I doubt. And I was wrong. So what will happen and that we have started to see is that people are using ChatGPT to search. And today, out of all the search that we have on the web within 1 year, it went from 0.1% to 0.6%. So 6x, still 0.6%. So it's a long way. And ChatGPT up to now is more than 80% of all this search in terms of tool used. So you remember, in the past, if you take the analogy with the web, you could say there was Google, there was [ Bling ] or Bing, there was -- I don't know what. And in the end, Google took over. So here, for the time being, what we see is this. So it's very early day. It will go probably quite fast. It might take also another 5 or 10 years to become more significant. There will be, I suppose, a fight between the search -- let's say, the different tools as we had with the search engine. And -- but in the end, I would say, already with the way we are pricing our products, I think that by being the cheapest in the area where we are, in the 15 minutes, that's what we are looking for, is probably the best protection. Thomas Oversberg: Yes. So probably to add just 2 sentence before Caroline stops me. So self-storage is a hyperlocal product, which means that the searches will be hyperlocal. And we are having the right network to be hyperlocal. So what is happening in the future -- in the foreseeable future is that customers are more informed making their decision. We have already pricing transparency on our website. So there's -- we are not hiding anything. So it's more difficult for the people who don't have pricing transparency. And overall, customers will have a much better understanding. It's like what does it mean? How does the contract work? How does a rating increase work? Because those are the information which you typically quest, and those are the question which AI will be able to help you. Caroline Thirifay: Do you have any additional question, Ana? Ana Taborga: Yes. Super quick, a final one. It is on your dividend, capital allocation. So you're guiding to 6% to 8% EPS CAGR in the next 4 years, but stable dividend. I understand that you want to retain cash to continue funding your expansion, right? But just wondering how do you balance that more immediate shareholder remuneration versus the long-term value creation through your growth initiatives? Thomas Oversberg: So I think that's an important point to look at. When we looked at the decisions which we took this year, we looked exactly at that conundrum of what is my cost of equity, what is my cost of debt and what are investors expecting as a return. And that led then, for example, into the fact that we're saying, okay, we need to increase our hurdle rates because the investors require a higher return there. So -- and that then, as I was saying, is we need to balance off with the earnings per share growth, which people are expecting going forward, which is obviously impacting, on the one hand, on the dilutive effect of more shares, which we have now eliminated. And on the other hand, which is then compensating is the additional interest expenses, which will reduce earnings as well. So long term, we are continuing to say, well, an investor should expect a total shareholder return, which is made of the dividend yield and the earnings growth of 10%, and we remain committed to that. Once we are seeing that there's really an imbalance where this is no longer happening, we always said and we haven't changed our opinion on that, but we are also going to change our dividend payout. But at the moment, we feel that to -- in order to deliver this growth and our strategy, we are comfortable with the dividend at the level where it is at the moment. Caroline Thirifay: So we are conscious of the time, then we will take the last question, and it's Roy Külter from ODDO - ABN AMRO. Roy Külter: It's just one from my side. I know it's a more operational real estate sector that you're operating in, but I do want to focus a little bit on property values. So we've seen the NAV per share has grown strongly, but valuation yields have remained flat. So it's basically operational performance. But we've also seen in the market some large transactions being pulled during 2025. So how comfortable are you today with your book values? And maybe secondly on that, can you give some comments on the investment market? Marc Oursin: Thomas? Thomas Oversberg: Yes. So the main increase, if you look at the value increase in our portfolio, which is around EUR 500 million, I can split that into 3 buckets. The first one is -- and they're not equal size, but for the sake of debate, let's assume they are almost. The first one is stores which we opened last year and the year before, which are ramping up. And therefore, this means that the valuation expert can reduce the discount and the risk because they are seeing that we're performing against our target. And therefore, this increases the value of our portfolio. The other part is where, indeed, we are talking about stores which we have added this year, which are under construction. So again, that results in value increases there. And the third part is, and this is not -- by far not the biggest, is the operational performance where we are delivering better performance than before. If you look now -- and on what we were saying, well, this part here, I'm talking about is mainly same stores. Same stores, as you saw in our slides, is actually performing still quite well. We're having a revenue growth there. So the NOI is growing. So everything is fine there. So we are not concerned about the operational performance that this would immediately impact our valuations. To speculate on why transaction in the M&A markets are not taking place is beyond my skill set, to be perfectly honest. And therefore, we are obviously aware of what is happening in the market. We are watching it with great interest and excitement. But in the end of the day, there's always 2, it's a buyer and a seller. And if those 2 cannot agree with each other, then the transaction's not happening. And that sounds very, very basic, but you see on the one hand, let's go to Australia where we have 2 transaction, potential transaction, which might have happened at the same time. The one was not going through because people thought the valuation was too high. And the other went through despite the fact that it's the same principle. So I think it's more a deal-specific one, but I'm surely having more experts on my left side here to deal with that. Marc Oursin: We can speak for a long time about that, but let's take it aside when we'll be with you, Roy. But I don't want to paraphrase what Thomas said in the end, it's like selling your house. I want EUR 1 million. I'm ready to pay EUR [ 700,000 ], it doesn't work. That's it. If someone is going to pay EUR 1 million for the house and taking a risk, it's a risk appetite story from the buyer. That's it. And we have precise -- and repeated what -- how we approach the risk. We have said we want the first full year to be accretive per share in terms of returns for an acquisition. So that's it. That's where we stand. Let's see how '26 will go with all these deals that have been put into the fridge. Are they coming to the microwave oven or not? Let's have a look. But thank you for the question. Caroline Thirifay: Thank you all for joining us today, and we look forward to reconnecting in this venue soon. Thank you.
Marissa Wong: Good afternoon. Welcome to CLP's 2025 Annual Results Briefing. My name is Marissa, Director of Investor Relations. And with me today is Chief Executive Officer, Mr. T.K. Chiang; and Chief Financial Officer, Mr. Alex Keisser. We lodged our 2025 annual results with the Exchange today. That announcement as well as this presentation is now available on the CLP IR website. This recording is also being recorded, and you can access that a little bit later on this evening. Before we begin, please read the disclaimer on Slide 2. And this year, we've got 2 languages available; one, English and one, Putonghua for you to choose from. And for today's briefing, we'll start with T.K providing the overview, followed by Alex with the financial results, and then T.K will return with the strategic outlook. We will then conclude on with a Q&A session, and we encourage your participation and your questions. So with that, I will now hand over to T.K to begin the briefing. Thanks, T.K. Tung Keung Chiang: Yes. Thank you, Marissa. So good afternoon, everyone. Thanks for joining us. In 2025, our core Hong Kong business performed strongly, providing stability that offset market headwinds on the Chinese Mainland and also Australia and kept our overall results resilient. The fundamentals of our business remain strong. Our operational excellence continues to drive value across the group, advancing critical projects that secure energy reliability and our transition to 0 carbon. In Hong Kong, we completed our smart meter rollout and maintained world-class supply reliability despite facing a record Black Rainstorms and 14 typhoons. On the Chinese Mainland, we brought our largest wind farm to date into commercial operation, launched our first independent battery energy storage system and commissioned our second centralized control center in Shandong. In India, Apraava Energy achieved full commissioning of its 251 megawatts Sidhpur wind farm, its biggest wind project to date. And in Australia, we completed outage programs at Yallourn and Mount Piper enhancing its flexibility and reliability. Our growth momentum is aligned with energy transition opportunities in our region. With a disciplined, value-driven approach, we are advancing a pipeline of low-carbon projects that will secure future earnings. At the same time, we have taken steps to drive cost efficiency and strengthen our foundations. We completed Phase 1 of our ERP rollout in Hong Kong, advanced and enterprise-wide transformation at EnergyAustralia and optimized head office operations. We closed 2025 with healthy cash flow and a strong balance sheet. This financial resilience, combined with our growth momentum, gave the Board the confidence to increase the dividend, continuing our track record of delivering shareholders' returns. Turning to the highlights. Financially, the group's operating earnings before fair value movements were down marginally by 2% to over HKD 10.6 billion. Total earnings were lower by 11% to HKD 11.5 billion, driven by coal plant-related items affecting comparability. So Alex will provide details shortly. The Board has recommended a final dividend, bringing total dividends for 2025 to HKD 3.20 per share, an increase of 1.6% from 2024. Operationally, we achieved strong performance in safety and reliability with a lower injury rates and reduced unplanned customer minute loss in Hong Kong. On the customer front, we added more accounts in Hong Kong, while competitive dynamics in Australia led to a decline in numbers. In terms of generation, electricity sendouts declined by 3% reflecting lower coal output. At the same time, non-carbon capacity rose by 3%, driven by renewables and battery investments across the group. I'll now hand over to Alex for the financial results. Alexandre Jean Keisser: Thank you, T.K, and good afternoon. A summary of the key metrics. Earnings before interest, taxes, depreciation, amortization and fair value movement or EBITDAF was stable year-on-year at HKD 25.7 billion. Operating earnings before fair value movements decreased slightly by 2% to nearly HKD 10.7 billion. Adjusted for the fair value movements and items affecting comparability, total earnings was close to HKD 10.5 billion, a decrease of 11%. Capital investment declined 13% to HKD 16.4 billion, with higher growth CapEx offset by the absence of the headquarters acquisition booked in 2024. Total dividends for financial year 2025 was HKD 3.20 per share, representing an increase of 1.6%. Let's go now into the details. The group's performance was anchored by a strong Hong Kong business performance. Elsewhere, earnings were impacted by market pressures, transformation costs and one-off items. Fair value movements on Energy Australia's forward energy contracts were less favorable compared to a year ago. Several nonrecurring items also affected comparability in '25. A HKD 680 million impairment on 2 minority-owned coal plants on the Chinese Mainland was taken due to lower demand and rising competition from renewables. A HKD 345 million redundancy for Yallourn plant closure was also provisioned. While a positive contribution of HKD 390 million was booked from EnergyAustralia's Wooreen battery following the formation of our 50% joint venture with Banpu. I'll now take you through the detailed performance and outlook for each business unit. All balances will exclude foreign exchange to reflect underlying performance of the business. Let's begin with Hong Kong. It was another solid year. Core earnings rose 7% to just over HKD 9.5 billion, driven by continued capital investment and high operational reliability. We also proactively refinanced debt in a favorable interest rate environment to lower interest costs. Capital expenditure was HKD 10.6 billion, focused on growth and decarbonization, supporting the northern metropolis development, data center expansion, grid upgrades and completing the smart meter rollout. Electricity sales dipped slightly, reflecting milder weather and a high base into '24. However, demand from data centers continue to grow, reinforcing their role as a key structural growth driver. We continue leading Hong Kong's low carbon transition, investing and partnering across sectors from transport and shipping to building. Looking ahead, our focus remains on 3 priorities: First, continue delivering safe, reliable electricity at a reasonable tariff. Second, delivered a HKD 52.9 billion development plan expanding infrastructure in growth areas and strengthening grid resilience to support Hong Kong's future. And third, support Hong Kong's 0 carbon goal by completing the clean energy transmission system and working closely with government to increase 0 carbon imports. Now turning to Chinese Mainland. It was a challenging year shaped by transitional supply demand imbalances, softer demand and resource variability. Earnings declined 12% to HKD 1.6 billion, mainly from Yangjiang Nuclear and renewables. Yangjiang's contribution fell due to a higher share of output sold at market tariffs where prices were lower. Renewables were impacted by historically low wind resources and higher curtailment of approximately 9% across the portfolio, particularly in Jilin and Gansu. Conditions improved as the year progress in key provinces like Shandong and Jiangsu with easing tariff pressure. Our minority coal portfolio saw reduced dispatch from lower demand. Nevertheless, operational performance continues to be strong. Energy sold increased across the portfolio with Daya Bay Nuclear delivering another standout year. We also commissioned 1 new win and 3 new solar projects adding to earnings, and we received a record amount of renewable energy subsidies, boosting our cash flow. While our annual contracting GEC and PPA volume with corporate customers increase, supporting short-term earnings visibility despite a softer pricing environment. And finally, on the development side, our pipeline remains healthy at over 1 gigawatt. Looking ahead, Daya Bay will remain a stable contributor, while Yangjiang will face increasing market tariff pressure. For our minority coal assets, earnings should remain stable. Higher capacity charges under Policy 114 are expected to offset the removal of the floor price. The outlook for renewables is sound. Market fundamentals are stabilizing and tariff pressure looks manageable. Importantly, we had success under Document 136. We secured full eligible mechanism tariff volume for 4 projects, locking in attractive rates for the next 10 to 12 years, providing solid long-term revenue visibility. Our capital strategy remains disciplined, and we're exploring efficient funding options, including onshore Panda Bond and strategic capital partnerships. Two, EnergyAustralia. Overall performance was impacted by tough retail conditions and a combined HKD 300 million impact from the one-off tax expenses and upfront transformation costs. In generation, the fleet performed well. Mount Piper run reliably and our fleet operated flexibly to capture optimal pricing outcomes in a period of less volatility, effectively offsetting the Yallourn's lower output and Mount Piper's higher coal cost. Retail remained challenging. Intense competition and cost of living pressures led to margin compression, loss of customer accounts and higher bad and doubtful debts. That said, we saw improvement in the second half with early benefits from cost initiatives and recontracting activities starting to materialize. We booked upfront cost under the enterprise segment, tied to the multiyear transformation program launched in 2025. This strategic investment includes our partnership with Tata to streamline IT operation and corporate functions. Separately, we are evaluating billing and [ CRM ] platforms to simplify and digitize the business. Earnings were also impacted by the one-off tax expense arising from changing law tax that limits the deductibility of interest expenses on shareholder loan. On the positive side, finance costs declined driven by lower average debt levels and reduced interest rates. We also settled the maturing shareholder loan and put in place a smaller, more flexible perpetual note, an equity classified instrument with no fixed repayment obligation to strengthen EA balance sheet. The net result was operating earnings to HKD 85 million, reflecting the combined weight of retail performance, transformation investment and the tax one-off. Looking ahead, EnergyAustralia is focused on 4 key actions: first, optimizing our generation portfolio, leveraging our flexible fleet to respond to demand and capture value in evolving NIM with high volatility. Second, building on second half momentum in retail to improve margins through targeted customer strategies, ongoing cost out and platform transformation. Third, executing our enterprise-wide transformation to deliver a leaner, more efficient operating model by 2028. And lastly, delivering new flexible capacity. We're advancing over a gigawatt of new batteries and pump hydro projects, with Wooreen on track for 2027, laying the foundation for stability and earnings growth. Moving to India. Our joint venture platform, Apraava Energy delivered solid underlying performance. However, reported earnings were impacted by one-offs. Headline results were down 29%, primarily new to HKD 82 million one-off impairment on KMTL transmission. This compares to 2024 results that including one-off gains totaling HKD 55 million. Excluding these one-offs, our underlying operating earnings improved. Renewables delivered higher output, thanks to higher wind generation and the full commissioning of the 251 megawatts Sidhpur wind farm. Solar remained stable, and we saw additional interest income from delayed payment. Transmission had solid availability and earnings from our 2 operating lines. Our smart meters portfolio is scaling up with more than 2.5 million meters installed and growing contributions as rollout accelerate with another 7.2 million meters to be installed. Jhajjar thermal output was lower. But the plan maintained high operational efficiency and reliability. We continue to drive an ambitious growth pipeline. 18 Projects won within 3 years across a diversified portfolio for an equivalent of close to 2 gigawatt capacity. Looking ahead, we remain focused on portfolio decarbonization and sustainable growth. A key milestone will be the sale of our Jhajjar coal plant, which is on track to complete in the first quarter. The sale will unlock capital for reinvestment and is expected to generate gain. With a clear path to decarbonize and a robust pipeline, Apraava is well positioned to capture India's significant energy transition opportunities and continue to deliver value to shareholders. Finally, to Taiwan region and Southeast Asia, earnings declined to HKD 179 million. Ho-Ping's contribution in Taiwan was lower due to lower recovery of coal cost while Lopburi solar in Taiwan remained stable. We also incurred higher development and corporate expenses as we explore new opportunities in the region. Looking ahead, Ho-Ping will focus on managing fuel cost. More broadly, we are assessing opportunities with long-term contracts across Taiwan region and Southeast Asia as part of our growth strategy. These targets benefit from strong economic growth, supportive policy settings and utility scale projects offer attractive potential. We are currently evaluating opportunities, including renewable energy projects in Taiwan and cross-border development linking Laos and Vietnam and we'll proceed with the right partners and funding structures in place. Turning to cash flow. Free cash flow generation was strong, up HKD 1.6 billion to HKD 22.6 billion driven by solid EBITDAF and fuel cost recovery from declining fuel prices from our Hong Kong SoC business, alongside receipt of renewable subsidies from the Mainland. With our new headquarter completed in 2024, overall capital spend came down. Total cash outflow was HKD 22.6 billion made up of HKD 14.6 billion of capital investment and HKD 8 billion of dividend payments. Of the HKD 14.6 billion of capital investment, HKD 11.2 billion was invested in our Hong Kong SoC business and HKD 3.4 billion was spent on renewables projects on the Chinese Mainland and Wooreen battery in Australia. Cash payment for dividends was higher as a result of the higher final dividends for financial year 2024. Finally, our financial structure remains strong with a slight increase in net debt. Our liquidity remains sound with around HKD 29 billion in available facilities to meet business needs and contingency. The team has successfully raised over HKD 17 billion debt for the Hong Kong SoC business in addition to the refinancing of the USD 500 million perpetual capital securities, all with competitive credit spread. Our prudent financial management continues to be recognized by rating agency, S&P and Moody's reaffirm our strong investment-grade ratings for CLP Holdings, CLP Power and CAPCO, all with stable outlooks. And finally, Moody's is upgrading EnergyAustralia outlook to positive on its investment-grade BAA2 rating. I'll pass it now over to TK for the strategy update. Tung Keung Chiang: Thanks, Alex. Energy security and decarbonization are the critical forces shaping our industry's future and CLP is committed to leading this transition. Our strategic priorities are clear and centered on balanced growth, decarbonization and financial discipline. Hong Kong remains our cornerstone. It's stable, regulated framework provides predictable returns and dependable earnings that are fundamental to our strength. We are executing the HKD 52.9 billion 5-year development plan to deliver safe, reliable and affordable power while supporting government's economic and infrastructure agenda and accelerating the city's energy transition. Our major focus is modernizing and expanding our power system to meet future demand from the northern metropolis, a 300 square kilometer development that will house 2.5 million people to the rising needs of data centers and electrified transport. This disciplined investment delivers for Hong Kong and builds a solid platform for sustainable growth. Now building on that foundation, we are targeting growth in fast-growing energy transition markets in our region and doing it with discipline. Our strategy is firmly value over volume. Each investment must meet our minimum return requirements. The goal is to build durable recurring earnings while ensuring diversification. China led global renewable energy in 2025, adding nearly 450 gigawatts of solar and wind and now reinforced by the government's landmark pledge to reduce emissions by 7% to 10% from peak levels. We are participating in that growth but selectively. In 2025, we added 0.5 gigawatt of renewable, which is modest compared with the national scale. Reflecting our calibration to ongoing market reforms, we have adjusted our development targets from 6 to 5 gigawatts of renewable energy by 2030. We are prioritizing quality opportunities with long-term earnings visibilities. This means focusing on high-demand regions with strong resources and great access, expanding at existing sites where we already have scale, and securing long-term green power contracts or GECs with corporate customers. Encouragingly, we've had success post Document 136 implementation with 4 projects across Hebei, Yunnan and Shandong, each securing full eligible mechanism tariff volumes totaling around 1 gigawatt at attractive prices and long tenors supporting long-term revenue stability. Importantly, our growth in China is being structured to be self-funded. From 2026, we plan to tap into onshore financing, like tender bonds and bringing strategic partners through a clean energy fund. It's a model we have already proven in Apraava, and we are applying that same capital discipline here. India's commitment to clean energy is clear, targeting 500 gigawatts of non-carbon capacity by 2030, alongside massive grid modernization, for greater efficiency. This creates a powerful backdrop for Apraava's growth. As our self-funding joint venture, Apraava is scaling up across a low carbon value chain, wind, solar, transmission and smart meters. In the last 3 years, Apraava secured 18 projects across a diversified portfolio, all backed by long-term contracts that lock in stable, attractive returns. Today, it has around 2 gigawatts of low-carbon projects underway, targeting 9 gigawatts by 2030. As part of a diversified portfolio, the business will begin to explore opportunities across commercial and industrial customers and battery storage. Apraava Energy is a capital-efficient growth platform, enhancing both our earnings and long-term growth profile to Australia. In 2025, solar and wind hit new milestones, supplying over 50% of the national electricity markets in quarter 4. This is a clear sign of where the market is heading. Our focus is on firming this increasingly renewable heavy grid. We are investing in flexible capacity that supports reliability and capture value as volatility grows through Australia's decarbonization. EnergyAustralia has over 1 gigawatt of new dispatchable and firming capacity slated to come online in the next 3 years. We have made strong progress on multiple fronts. Over the last 2 years, we have secured government support for 3 key battery projects; Wooreen, Hallett and Mount Piper under the federal government's capacity investment scheme. These projects benefit not just from policy tailwinds, but also from existing lands, grid connections, skilled local workforces and EnergyAustralia's growing development capability. Our partnership model is delivering results. We launched 2 major collaborations in 2025, the 351 megawatts Wooreen battery with Banpu, now under construction; and the 335-megawatt Lake Lyell pumped hydro projects with EDF in development. EnergyAustralia will remain self-funded using partnerships and project financing for large projects, EA's balance sheet for smaller ones and long-term contracts for projects outside our asset footprint. With a clear plan to reduce costs, a more flexible fleet and a strong pipeline of new capacity, EnergyAustralia is well positioned to deliver reliability, resilience and value in Australia's evolving energy markets. Let me touch on our capital allocation approach. It can be summarized as invest for growth, but within our means while protecting financial strength and delivering shareholder returns. Our foundation is solid, a strong cash generation profile and solid investment-grade credit rating give us the flexibility to fund both operations and growth. Hong Kong's sustained asset growth underpins stable and predictable cash flow, supporting our consistent dividend. Beyond Hong Kong, we apply a disciplined lens to every investment. We prioritize capital for projects that are strategically aligned and meet our return thresholds. We also run our established businesses with the objective of financial independence, maintaining stand-alone credit profiles and tapping diverse funding sources. We will leverage capital recycling and business model options, including partnerships, such as the clean energy funds on the Chinese Mainland for efficient use of capital. By adhering to these principles of discipline and diversification, we will drive steady long-term earnings growth. Now finally, our core capabilities are what enable everything I've described. For CLP, it starts with operational excellence. That means consistently delivering strong performance across the energy value chain through efficient operations, reliable networks and great customer experience. We've strengthened grid resilience, modernize our infrastructure and leverage technology to improve efficiency, all of which underpin our reliability, cost discipline and safety performance. Two critical enablers support our strategy, our people and our digital transformation. We are investing in our teams, reskilling and upskilling our workforce and fostering a culture that embraces change. At the same time, we are embedding digital solutions across the business, a key milestone was deploying our ERP system in Hong Kong alongside a digital literacy program that has reached thousands of employees, helping to improve efficiency and decision-making. These capabilities are interconnected and reinforcing. Together, they give us the competitive edge to meet the demands of a rapidly evolving energy sector. We faced the opportunities of energy security and decarbonization with discipline and purpose and with a clear focus on delivering sustainable long-term value for our shareholders. I'll now hand over to Marissa to facilitate our Q&A session. Marissa Wong: Thank you, T.K, and thank you, Alex. We will now begin the Q&A session. [Operator Instructions] Pierre Lau from Citi. Pierre Lau: Can you hear me? Marissa Wong: Yes, we can hear you well. Pierre Lau: I have 2 questions. The first one is for Alex. If you look at Page 12, regarding EnergyAustralia, I think 2025 EnergyAustralia earning below expectation. And I can see that the sharp increase in the enterprise or the corporate expenses and also increase in depreciation and amortization expense. I want to note that these 2 number, I mean, minus HKD 177 million and also minus HKD 190 million, how much of them are on a recurring basis? And how much of them on one off basis? And also, what will be the outlook for 2026? And the second question is on Page 15. Regarding your cash flow. So this is the question for T.K. So I can see that 2025, your CapEx -- for growth CapEx, mainly in Australia and China, still up year-on-year. But obviously, 2025 earnings from both Australia and China were not so good. So are we going to increase the CapEx further for these 2 countries in 2026. And also, we mentioned that we target something like double-digit IR for China and high single-digit for Australia. Are we too optimistic in terms of our return forecast? Tung Keung Chiang: Maybe Alex can answer. Alexandre Jean Keisser: Yes, I can start with the first one regarding EnergyAustralia. So -- and I will add one point, if you allow me. So if we look at the breakdown of the 3 points that you have raised, so the D&A increase depreciation and amortization is a recurrent up to [ HKD 228 million ]. That was linked to the increased CapEx that we did, mainly in Yallourn in order to increase its reliability and able to hedge more of its energy. The one which is linked to enterprise EBITDAF, this is more one-off linked to 2 activities. The first activity is the outsourcing of our IT and corporate services to Tata. So this has been done in order to prepare future reduction in our operating costs. It's an OpEx which is done in order to improve our operation. And the second type of expense that we had is for the contracting for a new platform for our customers that has been not yet set, but for which we already had some expense. The third element that I want to raise, which we have not raised is regarding taxation. This is also a reduction in our earnings linked to a one-off as we took the decision not to deduct from the taxes, the interest payment between EA and CLP for the shoulder loan that was in place. Marissa Wong: And Alex, just touching on the outlook on EA. Alexandre Jean Keisser: The outlook, I don't provide any outlook for that. So sorry for that. Tung Keung Chiang: Okay. Now regarding question 2, the CapEx for growth, as you can see on Slide 15, it's mainly for the Chinese RE projects and EnergyAustralia's Wooreen battery. Now for EnergyAustralia, Wooreen battery will only be commissioned next year. So the benefit actually will be coming. So there is always a kind of a time difference between CapEx and asset commissioning to bring in the benefits. Now regarding the -- but maybe one data point is that you -- last year, we have 4 projects commissioned in Chinese Mainland. Total is about 400 megawatts but right now, we have 5 projects under construction. The total capacity is about 900 megawatts. So we will see more asset coming online this year. Now regarding the expected return, that's our hurdle rate, and we have been very disciplined in ensuring that the investment that we're making can satisfy the hurdle rate. As I also mentioned previously, in Chinese Mainland, we have had 4 projects with total capacity of about 1 gigawatt that have been successful in the mechanism tariff bidding process last year. For those mechanism tariffs, the tariff level actually are quite attractive, and all of those projects after taking into account the future projections of the market tariff, we are quite confident that the IRR actually is higher than our hurdle rates. So we will now continue to focus on winning these kind of mechanism tariff in our markets because having the mechanism tariff with protection on the tariffs for tenure ranging between 10 to 12 years will give us profit stability. Marissa Wong: And maybe just touching on the fact that the target has reduced a little bit from... Tung Keung Chiang: Yes, because of the fact that we want to be more selective in the Chinese Mainland market. So we have adjusted down the target from 6 gigawatts to 5 gigawatts by 2030. And we want to be more selective in picking projects in markets or in regions that have relatively higher tariffs, greater demand lower risk of grid curtailment and also funding projects that are like extension projects that we have already had our existing asset, then we can leverage on the existing infrastructure to reduce the cost of those additional investments. Marissa Wong: And maybe Alex touching on the funding? Alexandre Jean Keisser: Yes, I'd like to provide 2 more information. The first one is regarding China, we financed our project with a 70% to 80% project finance, while when we do our evaluation on the return on equity, we don't assume full recontracting of this project finance, and we assume an average of 50% debt over the lifetime of the asset, so taking a conservative approach. Second information that I want to provide is when we look at our minimum return, we don't take into account potential gain on sell down in the future. So for example, when we took the Wooreen investment, we didn't take into account the gain that we did following this on the sale to Banpu, which was of HKD 390 million for the full 100% of equity. Marissa Wong: Thank you. Alex. Thanks, Pierre, for your question. Next on line is Yonghua -- Yonghua Park from HSBC. Yonghua Park: Can you hear me? Marissa Wong: Yes. Yonghua Park: Well I have about 3 questions. So in terms of long-term planning, India will add 9 gigawatt of non-carbon energy. So this seems to increase from last year's 8 gigawatt coal. Will you increase plan capital allocation from HKD 6 billion per annum to which number? And what's the reason behind this upgrade? Have you seen any improvement in terms of project return in India? Secondarily, in Mainland China, renewable target is [indiscernible] to 5 gigawatts. So can we assume capital allocation could be also trim from 4 billion per annum last year number? And lastly, Yallourn coal-fired plant will be shut down at a point or any other point after that? I saw some news previously indicated that EA will invest AUD 5 billion for their structuring. Can you just clarify? Tung Keung Chiang: Maybe I try to answer the first question. Second question on CapEx, maybe I'll ask Alex to supplement. Now for the first question about the long-term planning in India, actually, I think this 9 gigawatt target is consistent with our long-term planning since last year. Actually, our target is to have about 1 gigawatt a year, so if you look at our existing asset and those assets under construction, so by 2030, adding 1 gigawatt a year of commitment then we can achieve this 9 gigawatt of non-carbon projects. And the capital allocation basically is based on this 1 gigawatt per year to deduce this HKD 6 billion per annum. Marissa Wong: Just on the point that Yonghua, I think you were looking at the 8 gigawatt, it was a 2028 target. So now we've added 2030 an extra year, which is now 9 gigawatts. Tung Keung Chiang: Yes. So it's consistent, yes. Yes. And then on Yallourn, basically, we are maintaining this -- retiring Yallourn by middle of 2028. That's our current plan and actually the agreement with the government. Regarding the CapEx investment, I think it's longer term, after Yallourn closure. Marissa Wong: I think Yonghua, that's -- you're referring to the Yallourn precinct investment? I assume that he is, yes. Alexandre Jean Keisser: I can try to cover here. Tung Keung Chiang: Maybe you cover the CapEx. Alexandre Jean Keisser: Yes. So first of all, on China, yes, of course, the HKD 4 billion per year will be slightly reduced by a bit more than -- by a bit less than 20% in light of the reduction of the target. One incremental information that I want to provide on this, we have taken the decision that by end of 2026, renewable activity of BU China will be self-funded with the raise of up to HKD 3 billion of Panda Bond and also the creation of a clean energy fund, we will have some partners to that. So that's regarding China. Regarding Australia, maybe that was the question is we have a target to have by 2030, up to 3 gigawatt of flexible capacity or contracted or developed, and we are not looking at developing any renewable projects, and we also plan to do this on the balance sheet of EA with similar structure for the large project that what we have done for Wooreen, which is project finance and also we're seeking the right partners in order to reduce the funding needs and increase our return on these projects. Marissa Wong: Thank you, Alex. Next question from JPMorgan, Stephen Tsui. T. Tsui: [indiscernible] The first is, can you please give some guidance on the CapEx outlook this year in terms of growth CapEx, maintenance CapEx and SoC? And about the dividend [indiscernible] because you've raised dividend by more than [indiscernible] this year despite [indiscernible] decline in operating earnings. So how about dividend growth this year given the headwind Mainland China and the Australia [indiscernible]. Marissa Wong: CapEx. Tung Keung Chiang: So 2 questions. Yes, maybe I'll ask Alex to shed some lights on the CapEx. Now regarding the dividend outlook. So basically, our dividend policy is to target to maintain a steady and growing dividend supported by sustained growth in our business. So we'll -- based on the longer-term assessment on our sustainability of our business and then decide the appropriate dividend level. So we will not give any outlook for the moment and all the dividend will be approved by the board by year-end. And maybe Alex can touch on the CapEx? Alexandre Jean Keisser: Yes. On the CapEx, so regarding the SoC CapEx, so we have a total of HKD 10 billion to HKD 11 billion per year that will be spent. Regarding growth CapEx, the growth that we had in India has slowed down slightly this year versus 2023, 2024. It's not being consolidated in any case, and it's being self-funded. The growth in terms of CapEx in China will be linked to the project that we will be able to close and the growth of CapEx related to Australia will be depending when we'll be able to start our project of Mount Piper BESS and when we'll be able to close our partnership on this. Marissa Wong: Thank you, Alex. On the line is Cissy Guan from Bank of America. Cissy Guan: I have a few questions, all regarding to the future capital strategy. First of all, you mentioned the clean energy fund in China, when do [indiscernible] on this? And what kind of partners are we looking for? Are there going to be insurance money or any specific type of investor do you think that may be interested in collaboration with us in renewable energy in China? And also secondly, India, we saw that Apraava has sold the Jhajjar power plant. So will there be any special dividend be upstreamed to CLP? And thirdly, for EnergyAustralia, first of all, are we still looking for disposal of stakes? And also can you provide an outlook as regard to the wholesale power tariff in Australia going forward? And also how will the next [ CMO ] and video reset going to be? And how will the retail competition landscape going forward? Tung Keung Chiang: Okay. Maybe for the CF strategy, Alex can help address it. maybe also including the -- what happened after the Jhajjar sale. Now regarding the EA, the Australian market. Now we do see continued intense competition in the retail sector. So this will continue. So in order to address this, so we have taken steps to improve the business performance. First is to optimize our cost of operation. Secondly is that we are looking at upgrading and replacing our customer platform. We are in quite an advanced stage, and we hope that we can confirm the technology and start execution this year. So with a new platform, we target to further improve the efficiency as well as enhancing the customer experience so as to improve our competitiveness in Australia. Regarding the power price, I think in short term, if you look at the forward price curves, it softened slightly. So we will see, this will continue in the short term. But I think maybe starting from 2028, we do see the potential of forward price increase later because of some of the changes in supply situation. Now in Australia, because of the -- actually, the whole energy transition and decarbonization for CLP Group, the capital requirement is very significant. So we want to be focusing on our core markets, in particular, Hong Kong and China. So for EnergyAustralia, firstly, it will be self-funded. Secondly, that we want to have different kinds of partnership in order to have more efficient use of our capital. So one example is the partnership in the Wooreen battery, where we have sold 50% to Banpu. This is a good example that on one hand, we can have a more efficient use of capital and secondly, that actually, the overall return of the project can be enhanced. And we are open-minded about different forms of partnership, be it at project level or enterprise level. But more importantly, I think in the short term, we want to make sure that the business, actually, the performance is -- can be further improved, both in terms of the efficiency as well as how do we manage all the risks in the market. Maybe I ask Alex to address the first 2 questions. Alexandre Jean Keisser: Yes. So I'll start with India. So the plan is when the transaction will be closed to have Apraava Energy doing it full distribution of the proceeds to [indiscernible] and CLP 50-50% over the year 2026 and 2027. CLP, however, doesn't plan to have an extraordinary dividend distribution being done following this distribution. Regarding China, we have to recognize that the CLP brand is very well recognized. The first was when we had our RMB 3 billion bond being approved by the regulators, we started to do a road show with our underwriter, and we plan to have this first RMB 1 billion being drawn upon in H1, which have been quite well received. Regarding the clean energy fund, let me first explain you what the business model. The business model that we have is looking for the partners, bringing our full expertise in terms of development, in terms of operation, in terms of market sales, in terms of project finance and keeping our brand attached to this clean energy fund, meaning that we want to sell the project once they are being built. But we want also to stay into the fund being an LP with 50% in order to have aligned interest because this is not a one-off. This is a long-term strategy that we want to do, not only for Chinese Mainland, but also for other countries. Regarding who are the different investors. We are looking for a potential insurance company to be an anchor investor. And pending that, we will look for a few others, but a limited number for a fund, which will be around HKD 4 billion fund size with a total CapEx of HKD 20 million. Marissa Wong: Thanks, Alex. I'll just note one more point on EA retail. Yes, it has been challenging conditions. But if you look at first half versus second half retail results, second half was a turnaround, and that was based on the work around customer acquisition, recontracting and the cost-out initiatives. Okay. We've got a question from Huatai, Weijia Wang. Weijia Wang: [indiscernible] The first is on market to specific [indiscernible] energy. We have all anticipated nuclear products. [indiscernible] share and also onshore [indiscernible] the next CapEx on [indiscernible]. Marissa Wong: Okay. Weijia, you were cutting in and out there. So I'm just going to assume your question. Number one is on nuclear investments. And then the second one, how that might impact CapEx in Hong Kong? Tung Keung Chiang: Yes. Okay. Now I assume that you are talking about our so-called nuclear imports in the medium term because in -- for the Hong Kong market, the government has set a decarbonization targets. And by 2035, we have to have 60% to 70% of our generation mix being known or being 0 carbon energy. So in order to fulfill that target, the plan actually is to import 0 carbon energy, mainly nuclear from the region to Hong Kong by 2025. Now for that plan, we are now still in a very early stage because importing nuclear from, say, Guangdong to Hong Kong, we need to have central government supports. And actually, right now, the Hong Kong government is discussing with the central government on identifying the right location for the nuclear power station and then how the power can be delivered to Hong Kong. Now despite the fact that this is still in the early stage, if you look at the existing Daya Bay arrangement, actually, this is -- this could be a president arrangement in which CLP invests in the Daya Bay. Right now, the arrangement is we invest in 25%, and then we import 80% of the power from Daya Bay to Hong Kong through a dedicated transmission line, which can ensure that we are clear about the source of the power as well as ensuring reliability. So this is a good reference for the future import arrangement. But as I said, I think right now, it's still very early stage. Once the -- it's more kind of -- it's clearer about where the power will be coming. Then we will enter into more detailed discussion with the relevant stakeholders in the Chinese Mainland, about the design of the network, how to bring the power in and also the commercial arrangement of the investment. But again, another reference point is that for Daya Bay, the investment in the -- the equity investment in Daya Bay is not part of the SoC CapEx. Actually, it's invest at the CLP Holdings level. And through a PPA from Daya Bay to Hong Kong. So for the Hong Kong SoC, all this will be treated as OpEx and then the return on the investment in Daya Bay is based on an ROE approach. So again, this is a reference model. And whether this will be applied, it depends on the future discussion with the relevant stakeholders. Marissa Wong: Thank you, T.K. We are heading towards time. So I'll take this as a last question from Rob Koh, Morgan Stanley. Thanks, Rob for joining us at the late hour in Australia. Go ahead with your question. Robert Koh: My first question is in relation to the customer platform upgrade in Australia. Other companies down here when they do that, they obviously do that very carefully. They take 2 to 4 years. Is that comparable time frame for EnergyAustralia? And then the second question is on the performance of the wholesale Energy segment. which saw some lower prices, but I guess the volatility capture offset that. Just want to make sure that's the right way to think about the generation performance? Tung Keung Chiang: Yes okay. Thank you, Bob -- I think Rob, sorry. Yes. Now for the customer platform, our current plan is to take about 2 years or slightly more than 2 years. So by before end of 2028 would be our current targets. Now -- but we are still working on the detailed planning right now. And as I mentioned, we are in a very advanced stage of selecting the appropriate technology. So we are working very closely with the future potential vendor on this detailed plan. So there will be more details later in the year. But our current thinking is that we will complete this before end of 2028. Now for the wholesale market, as we mentioned, in the forward price, you can see lower price level. But actually, if you look at the intraday volatility, over the past few years, this volatility actually is increasing. So that's why for EnergyAustralia, we have been focusing on investing in storage -- energy storage projects so that we can capture the benefits of this volatility in the Australian market. Marissa Wong: Thank you, T.K. Thank you all for your very good questions. And thank you, T.K and Alex for the briefing and answering the questions. Before we wrap up, I just wanted to announce the winners of our closest estimates competition. There are 2 this year. The first goes to Qi Kang from Huatai Securities, again, for the closest operating earnings. And the second for the closest annual dividend goes to Evan Li from HSBC. So congratulations to you both. My team will reach out to you about your prizes. That brings today's briefing to a close. My team and I will be available for any follow-ups. And thank you all for joining us today. Take care and goodbye. Tung Keung Chiang: Thank you. Alexandre Jean Keisser: Thank you.
Sam Wells: Good morning, everyone, and thanks for joining today's first half FY '26 results call for Cettire. My name is Sam Wells from NWR, and I'm pleased to have with me from the company today Cettire's Founder and Chief Executive Officer, Dean Mintz; as well as Chief Financial Officer, Tim Hume. Both Dean and Tim will spend some time reviewing the ASX results released this morning, including some notable financial and operational highlights. [Operator Instructions] We'll aim to have this call wrapped up within 30 minutes, including Q&A. And thank you, and over to you, Dean. Dean Mintz: Thanks, Sam. Good morning, everyone, and thank you for joining Cettire's interim results briefing for the 2026 financial year. Before we begin, I'd like to remind you of the disclaimer statement in our results presentation. That disclaimer also applies to this investor call. I'm joined today by our CFO, Tim Hume, and together, will take you through the company's results for the 6-month period ending 31 December 2025. Today's results are the outcome of our relentless focus on profitable growth with a clear bias towards profit in what remains a tough luxury market. Gross revenue was $505.7 million and sales revenue was $382.8 million, both were broadly stable year-on-year. Importantly, excluding the U.S., sales revenue grew 13% year-on-year to $225 million, which is a testament to our ability to grow our market share in newer markets. We had 613,000 active customers during the period, reflecting a deliberate reduction in paid marketing, combined with softer U.S. demand. Repeat customers continue to represent a growing share of gross revenues now at 69%. Our bias towards profitability saw adjusted EBITDA of $8.7 million and a half-on-half improvement of $20.5 million. This result clearly demonstrates the benefit of our agile and flexible business model. Our AOV increased 17% year-on-year to $961, reflecting the continued loyalty of our customers and the pass-through of our higher U.S. duties in our pricing. We closed the period with $61.4 million in cash and 0 financial debt. Against the backdrop of significant headwinds, our team executed exceptionally well. Our steadfast strategy to prioritize profitability, maintain cash and strengthen customer loyalty continued into H1 FY '26. This was executed in an environment where demand for luxury goods remains soft. The global personal luxury goods market declined approximately 2% in calendar year 2025, as a result of falling consumer demand globally, ongoing macroeconomic uncertainty and significant changes in U.S. trade policies. In the U.S. specifically, the elimination of the de minimis duty exemption from late August '25 resulted in price increases that further impacted U.S. demand. To address these challenges, we focused on growing market share outside of the U.S. This resulted in sales revenue ex U.S. growing by 13%. We also deliberately reduced paid marketing investment and turned our efforts towards enhancing engagement with our existing customers. This drove further growth in gross sales from repeat customers. On the supply side, engagement with brands and inventory holders has never been stronger. We exited H1 FY '26 with record available inventory levels, further strengthening our customer value proposition and minimizing supplier concentration. Localization remains a core strategic priority. Our efforts in the half delivered an uplift in sales from emerging markets representing 45% of gross revenue, up from 37% the same time last year. And from a balance sheet perspective, our capital-light model continued to deliver resilience with closing cash at $61.4 million and no financial debt. Turning to Slide 6. We finished the 6-month period with 613,000 active customers. New customer adds slowed, reflecting softer demand and a decision to lower marketing spend. We prioritize our investment towards quality engagement and conversion of the volume. Our average order value increased to $961 with repeat customers spending $1,050 per order on average compared to $811 for new customers. This increase largely reflects the incorporation of higher duties in our pricing. Repeat customers now account for 69% of gross revenues, up from 67%. This trend of increasing loyalty reflects the ongoing attractiveness of our business model to consumers. This loyalty is a key enabler as it helps sustain the business through cycles and underpins the long-term profitable growth. This chart once again reflects the benefits of having a strong cohort of loyal customers and our ability to increase our share of wallet over the long term. Our unit economics over the period strengthened with both customer -- with both customer acquisition costs and delivered margin improving compared to the preceding 6 months. Customer acquisition costs declined to $83, reflecting a reduction in paid marketing investment. While this comes at a cost to new customer adds, we believe it is prudent to manage marketing spend in line with achieving a reasonable return on investment. Delivered margin per active customer was $179, delivering a sequential improvement versus H2 FY '25 at $148. This reflects our deliberate reduction in promotional activity to prioritize profit. Our localization strategy continued to diversify our revenue base during the period with emerging markets, gross revenue increased by 21% year-on-year. These strategic markets now represent around 45% of Cettire's gross revenue. Established markets, including the U.S., U.K. and Australia contracted 13%, primarily driven by the challenges impacting the U.S. The U.S. now represents approximately 41% of gross revenues, the Australia at 6%, and U.K at 8%. We continue to focus on increasing market share in existing and new markets by focusing on enhancing our capabilities and driving localized initiatives. During the period, we launched our Arabic language capability to capitalize on the momentum we are seeing in the Middle East. We have also successfully launched Cettire's flagship store on the JD platform in China, and we'll continue to explore additional routes to market in that region. Our supply chain with hundreds of suppliers continued to grow strongly over the past 6 months. Engagement levels remain very high as inventory holders and luxury brands seek new routes to market in the challenging demand environment. Pleasingly, we exited the half with record levels of inventory and grew our published stock products by 60% year-on-year. To support our strategy, we continue to invest in our commercial team to support our increased levels of pipeline opportunities that includes luxury brands and third-party inventory holders. I'll now hand over to Tim. Timothy Hume: Thanks, Dean, and good morning, everybody. Sales revenue was $382.8 million, down 3% on the prior year. This reflects the impact of U.S. tariff changes and softer demand in the region. Excluding the U.S., sales revenue grew by 13% to $225 million. Gross revenue was $505.7 million, while refund rates remained relatively stable. Delivered margin at 14% of sales was impacted by higher U.S. duties costs being absorbed into our fulfillment cost base. This was partially offset by a decrease in overall promotional activity. The duties impact was more fulsome in the second quarter due to the end of the de minimis exemption in the U.S. from September onwards. Importantly, however, delivered margin percent improved compared with the second half of fiscal year '25. Paid acquisition expenses were 4.2% of sales revenue and brand investment was modest at $1.9 million. This reflected our deliberate strategy to prioritize profitability. Adjusted EBITDA was $8.7 million, delivering an EBITDA margin of 2.3%. Pleasingly, our focus on driving profit delivered a half-on-half adjusted EBITDA turnaround of $20.5 million. Moving on to the balance sheet. Closing cash was $61 million, and we continue to have 0 financial debt. The increase in cash since June was supported by operating profits combined with favorable working capital dynamics. The year-on-year increase in contract liabilities is reflective of lengthier delivery times that we saw in the period leading up to the end balance date. This has resulted in a deferral of revenue recognition until the subsequent period. We continue to invest in our technology platform to develop capability and reinforce our competitive advantage. This resulted in capitalized investments as a proportion of sales revenue being 2.2%. The other key call out relates to the receivables. As a reminder, we have receivables relating to credits for VAT paid on purchases in Europe. To be more specific, these are statutory receivables that are due and payable. They could be paid at any time. However, we're subject to the time line of the government to pay out these amounts. The government has been slow to pay and out of caution, we have conservatively re-classed an additional portion of this receivable to noncurrent. Short-term challenges in luxury are expected to persist, albeit there are some signs of improvement. Importantly, the long-term fundamentals of the sector remain robust. The most recent study on luxury by Bain-Altagamma estimates the personal luxury goods market for the '25 calendar year declined by 2%. They cited macroeconomic headwinds, trade disruption, shifting customer preferences and a deteriorating value proposition as the reasons for the slowdown. On the positive side, the research is forecasting 3% to 5% growth in the 2026 calendar year. Moving now to the outlook. In the short term, there continues to be uncertainty within the global luxury personal goods market with performance varying significantly across geographies. In the current quarter, Cettire is cycling a period of aggressive promotional activity and some pull forward of U.S. demand that occurred ahead of the Liberation Day tariffs being implemented in early April 2025. Promotional activity peaked in March 2025, whereas in the current year, Cettire has meaningfully reduced its level and frequency of promotion. In light of the above, the Q3 comparator from last year has made the current quarter a lot more challenging from a growth perspective. And as against this backdrop, that our quarter-to-date gross revenues have decreased by 13% versus the prior corresponding period. The U.S. policy and macroeconomic environment remain dynamic and will continue to influence our sales activity in that market. However, the company expects to achieve a significantly improved growth profile in the fourth quarter of fiscal year '26. I'll now hand you back to Dean to conclude. Dean Mintz: Thanks, Tim. In closing, the fundamentals of our business have not changed. We have a large and loyal customer base that has multiple growth pathways. We continue to grow our supply base, creating 1 of the world's largest online inventories of luxury goods. We have a capital-light, self-funded model built for profitable growth and have flexibility to adapt to changing market conditions quickly. And we have a fit-for-purpose strong balance sheet, leading proprietary tech stack and a first-class team with exceptional capabilities. With these foundations, Cettire is well positioned to navigate near-term challenges and deliver long-term profitable growth. On that note, I'll now hand back to Sam. Sam Wells: [Operator Instructions] The first question is on delivered margin. Can you talk to how delivered margin progressed through the half? And how much of this is structural versus cyclical changes? And sort of further looking from a medium- and longer-term perspective, how do you think about delivered margin... Timothy Hume: Thanks, Sam. Just in terms of the Q1 versus Q2 profile, first quarter, we were -- delivered margin 15%. Second quarter, we came in below that. I think, the key influence there on the Q1 versus Q2 is the impact of the de minimis changes in the U.S. was felt from September onwards. So we've seen a large step up in our fulfillment costs since that point. We now have a duties attachment rate in the U.S. of 100%. So every order into the U.S. attracts duty. Prior to the changes in the de minimis, the duties attachment rate in that market was a fraction of what it is today. And so if you think about the duties essentially as a pass-through, you might maintain the same amount of dollar delivered margin on an order, but that's off a higher revenue base. And so your percentage margin comes down. Now I think you had the second part of your question, Sam, was around structural versus cyclical. I think if you compare our margin today with a couple of years ago, the bulk of the decline that we have seen is cyclical in nature. The luxury market has been through a number of challenges in the last couple of years that have been well documented. And the market remains very competitive. So the bulk of the change that we've seen is cyclical. But more recently, the increased duties attachment rates in the U.S.A., which I referred to is dilutive to margin. Now looking forward, we certainly think there's room to grow that delivered margin over the medium term. So there's no reason why we can't get back to 20% plus over the medium term. I mean currently, the market remains promotional. The other thing we've seen in the recent period is that there has been some consolidation in online luxury. And other things equal, that should provide a more constructive backdrop looking forward. Sam Wells: And just in terms of the turnaround in EBITDA half-on-half, what are the main levers that have enabled that from negative $12 million approximately last half to positive $9 million... Timothy Hume: Look, Sam, obviously, it's been a challenging environment when you take into account a slowdown in the luxury market and the elimination of the de minimis in the U.S., which is our biggest market. Despite this, we've been able to hold revenue and improve EBITDA, as we said, by $20 million in just 2 quarters. I think in terms of how we are able to do this, from a tariff perspective, we increased -- we've increased our pricing to absorb the additional duties. And we've also moderated our promotional activity to really focus on improved revenue quality. Also drove a lot of efficiencies on the fulfillment side. And we continue to invest in marketing in a strategic and conservative way. There's still a lot more to be done, and we're targeting to have further improvements in the coming half. Sam Wells: And next question, your biggest market, the U.S. has had its challenges of late, many of which you've talked to in the presentation, what's driving the growth ex the U.S.A.? And can you specifically touch on margin expansion in regions like Middle East and China, and comment that on the time it takes for these markets to switch... Dean Mintz: I think in a lot of these markets, we're still relatively early. And they're very large luxury markets. We've put a lot of effort into our localization initiatives, which we spoke about previously. In the Middle East, we released localized language, Arabic language. And that's been very, very helpful. And at the same time in China, we're continuing our efforts there. And we launched our flagship store on the JD platform, which took a considerable amount of work from both sides, both JD and us. Sam Wells: And just a follow-up on the expansion strategy more broadly. How do you balance increasing sales and engagement in existing markets and with existing customers rather than expanding into new locations like you mentioned? Dean Mintz: Do you want to take that one, Tim? Timothy Hume: I think we're -- look, I mean, of course, we want both. There's no question. I think in the recent period we've been putting a little bit more weight on engagement with our existing customer base. And that's simply because the returns on marketing investment have been more challenging. And so we have had -- we've taken a very conservative approach to our marketing spend. You see that on our numbers in this half. You see that in effectively our net adds. And -- but the level of engagement that we have with our existing base continues to be very strong. And the customers that we do have are extremely attractive, right? You see that in the repeat customer AOV. And you see that in the repeat customer spend. So the returns on -- unsurprisingly, the returns on engagement are on existing customers, I should say, are very, very attractive in current market. The other thing that's interesting at the moment, which if you just kind of peel back the next layer of our -- the customer profile. We've seen in the last several months now a stabilization in our retention rates, which is very encouraging, notwithstanding some of the external pressures that we touched on through the course of the call. So that retention rate is very much stabilized and goes to the strength and engagement of the existing customer base. And -- but we have less gross adds coming into the funnel at the moment as a consequence of our more conservative investment profile. It won't always be like this. As the return profile improves, then we'll -- there will be an opportunity for us to be more outward facing in terms of that marketing investment. And you can expect that, that will be -- a good portion of that investment will be allocated to the markets where we're newer. And so -- but those markets at the moment are growing really encouragingly even at current investment levels. So that's certainly something to keep an eye on. Sam Wells: Great. Next question, your auditor has highlighted a material uncertainty in relation to going concern. Why is this? And do you expect any change in supply chain relationships or terms as a result of this? Timothy Hume: Well, I mean, let's -- I think, first of all, let's just be very clear that we have an unqualified set of accounts out today. And that's very clear from the report from the auditor. So I think that's very important for people to understand. I think, from my perspective, there's not really anything new here. If you look back at our accounts in June, there was a current asset shortfall in June and also a note in our annual report around going concern. Now I mentioned earlier on the call that we've taken a more conservative view around the timing of our -- of when our tax receivables will convert to cash naturally, and as a consequence of taking that more conservative view, we have re-classed some of the receivable from current assets to noncurrent assets. So naturally, this will impact the current asset balance, and that's why the auditor has commented in the way that they have. I think -- this is -- there's an element here of this being a technical accounting point. The auditor has flagged that the business has a current asset shortfall and accordingly directed readers to read the relevant note in the accounts. So I don't think there's too much more to say on that. With regards to supply chain, I think -- if I can refer back to our comments earlier in the presentation, the level of engagement that we have with the supply chain at the moment, both in terms of directly with brands as well as with third-party suppliers is the strongest it's ever been. Our supply chain has continued to grow very strongly over the last 6 months. And we're a very important partner to all of our suppliers, and it's business as usual on that front. Sam Wells: Great. And just maybe a follow-up there. Can you please explain why these Italian VAT receivables are still growing and getting larger and whether or not they can be collected? Timothy Hume: Sure. So the simple mechanics work that we make purchases in various markets around Europe. We pay VAT on those purchases. This is purchase of goods and services. We pay VAT. And in payment of that VAT, we generate an input VAT credit, no different to a business operating in Australia that pays GST, generates an input GST credit, same thing conceptually. The process of getting a refund though, is not necessarily the same. And so -- and we have a net receivable position in those markets because our purchases exceed our sales in the market. Why does it take so long? Well, look, certain governments in Europe are notorious for being slow around managing their own payables, if you will. And can be particularly slow for foreign companies. And so I think this is a very frustrating situation, but it's a major priority for us to convert it to cash. And we're working on broader improvements to our supply chain, which we expect to be implemented during this half, which should considerably improve our cash flow profile around European input VAT going forward. Sam Wells: And you might have just touched on that with your final comments to the answer, Tim, but can you just -- sorry, you flagged a few options to mitigate your current asset efficiency. Can you elaborate on these and whether or not they could possibly impact the business? Timothy Hume: Look, I think the initiatives that we have in place are very straightforward. We need to continue executing in the market and driving sales. And there remains considerable scope for us to improve the efficiency of our cost structure, both as it pertains to variable costs as well as fixed costs. And so we are -- commercially, our objective is to run with the leanest possible cost structure and ultimately translate that into profitability. I refer back to Dean's comments, we have had a $20 million-plus turnaround in profitability in the last 2 quarters. And we're very focused on continuing to drive improvements in profitability going forward. I think the business has faced some very significant disruptions in its major markets over the last couple of years. In the last 12 months, in particular, we think about some of the news flow out of the United States, which is our largest market. And we've absorbed those challenges. We've held revenue. And against that backdrop, not only if we held revenue, but we've significantly improved profitability. And I think that's a testament to the flexibility that our business model has. And that sets us up well to drive improvements in profit going forward. Sam Wells: Great. How should we think about marketing spend going into H2? Will spend be aggressively cut again in light of the Q3 '26 trading update that you provided and the ongoing volatility there? Timothy Hume: I don't think you should -- investors should expect any meaningful change in terms of current run rates. So we're investing at the moment at a level which is still achieving a good balance between generating a return on investment and overall growth. I think there are some funny comps that we're working through in this quarter from a growth perspective. But we're also -- if you look back at the fourth quarter of last year, where anyone who was operating cross-border of the -- against the backdrop of the changes in U.S. trade policy had a very difficult operating environment. We had a very challenging fourth quarter in fiscal year '25. And I think at this stage, our best current view is that the business will -- from a growth perspective, even if this is a challenging quarter that it will rebound strongly in the fourth quarter of this fiscal year. And you've -- we've indicated that in our trading update today where we're anticipating that revenues are going to be not too far off where they were last year. Sam Wells: Great. Do you have a rough sense of what gross profit dollar growth decline has been in the quarter to date? And what is the offset on delivered margin with lower promotional intensity? Timothy Hume: Sorry, I think the question is what is profit in the third quarter? Is that the question? Sam Wells: So do you have a rough sense of what gross profit dollar -- sorry, gross profit dollar growth or decline has been in the quarter? Timothy Hume: I don't think we're -- we've made any comment today about current quarter profitability in our trading update. And I don't think that it's appropriate to provide that on this call. Sam Wells: Okay. Next question, any prospects you might get a tax cash refund at some point given the NPAT losses over the last calendar year? Timothy Hume: Cash tax refund, is that the question? No, generally, the bulk of our business is resident in Australia for tax purpose. And so we tend not to get income tax refunds in Australia as a company, but you do have losses that you can offset in the future. So I think that's a consideration in the Australian market. But I don't think we can expect income tax refunds. But naturally, we work in -- we're operating in many markets around the world at this point. And whilst there are certain markets in Europe, which may not be as speedy at paying their -- their payables as we are, there are plenty of other markets around the world where we do have import tax credits, which are paid on a timely basis. Sam Wells: Great. And just another one, sticking with the financial statements. Why did you pay $5 million of cash taxes when you made a pretax loss last year? Timothy Hume: So the tax payment that we made would have been in relation to our tax position for the prior year, where we were profitable. Sam Wells: Okay. Are you able to break down the Q3 '26 sales performance by region, U.S.A. versus ex U.S.A.? Interested to understand if ex U.S.A sales growth is holding up in Q3. Timothy Hume: Yes. We haven't disclosed the numbers in terms of the Q3 to date regional splits. But the dynamic that we've described broadly around the company that we have, we have a 2-speed company this year, okay? We have the U.S., where we are cycling not only the -- if you think about this quarter last year, and tariffs were not something that people were talking about. And so we have 2 layers of this tariff issue in the U.S. One is the general discussion around which country has to pay what based on where something is made. And then there's a separate threat to that discussion around does the de minimis exemption apply or not. So both of those changes in the U.S. have been individually and collectively meaningful for us as has the corresponding uncertainty that, that's created for the consumer in the U.S. These are dynamics which have unquestionably had an impact on our business in recent quarters, and we are still cycling a world where that was not on the table. That's going to continue to present itself in year-on-year growth rates in coming quarters. If you think about it, the de minimis change was implemented at the end of August. So we're going to be seeing some strange things in the U.S. comps really until the December quarter in this calendar year. So that will continue to play out. The rest of the business, excluding the U.S., continues to grow very strongly. We talked on the call about the global luxury market down 2% year-on-year in calendar year '25, and our business has grown in the teens percent in the second half of the year. And that is again, in the context of much lower promotional activity from our business. So that's a very encouraging sign for us. We're continuing to take share. Our localization strategy is doing as it was intended to do. And I think we can expect this dynamic to play out for the foreseeable future. Sam Wells: Great. Thank you. That's all the time we have for questions today. If there are any unanswered still, please feel free to send them through or if there's any additional follow-ups, and we'll endeavor to get back to you. And that concludes the Q&A session and brings us to the end of today's first half earnings call for Cettire. Thank you all for joining, and have a...
Operator: Thank you for standing by, and welcome to the Cleanaway 1H FY '26 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mark Schubert, Managing Director and CEO. Please go ahead. Mark Schubert: Good morning, and welcome to everyone listening in today. Thank you for joining Cleanaway's financial results briefing for the first half of the 2026 financial year. I'm Mark Schubert, and I'm joined by Paul Binfield, Cleanaway's CFO; and Richie Farrell, General Manager, Investor Relations and Sustainability. Following the presentation, as usual, we will open the call for questions. So moving to Slide 7. I want to begin today by addressing health and safety. This is foundational to who we are and what we do at Cleanaway. Regretfully, we reported 2 fatal incidents at sites that we own in the first half of FY '26. Each occurred in different operational contexts. And in the case of MRL, it happened when a commercial customer was struck by one of their colleagues' vehicles in a back up area. We remain committed to learning from these tragic incidents and ensuring we have strong controls in place at our sites so that everyone goes home unharmed each day. I am pleased to report that we are seeing significant improvements in our safety performance. When compared to the first half of FY '25, our serious injury frequency rate was 64% lower, at 0.36 and our total recordable injury frequency rate was 35% lower, at 3.5. And we know that our TRIFR is significantly below domestic comparable companies and international industry peers. A Board-commissioned independent safety review has been completed over the last 3 months. There were 4 key findings from the review. Firstly and importantly, no systemic safety issues or failures were identified. The HSE strategy is fit for purpose, reflects contemporary safety thinking, and is aligned to the organization's most significant risks, that our implementation is well advanced at an enterprise level, but there is an opportunity to strengthen consistency and feedback loops closer to the front line given the variable but improving translation at branch level. And finally, our overall approach is aligned with contemporary good practice in comparable high-risk asset-intensive industries. The report also found that fatality reporting across peers is inconsistent and in some case, lacks transparency. And therefore, direct comparisons with Cleanaway are unreliable and should not be used to draw conclusions about relative safety performance. The external review confirmed our approach remains sound and that we should stay the course. The areas to work on are consistent with our stage of progress in the 5-year strategy journey. We also commenced 2 key programs of work during the half that represent tangible evidence of systematic risk reduction across the enterprise. By the middle of this calendar year, we will have completed the rollout of a yellow gear pedestrian detection system that uses latest Generation AI cameras to alert operators to human presence. And by December 2026, we will have rolled out in-vehicle monitoring systems or IVMS across our roughly 3,500 collections heavy vehicles. The cost for all these initiatives are included in our FY '26 CapEx guidance with approximately $21 million of capital spent on risk reduction in the first half. On the environment, we're proud to report 0 major or significant incidents. Moving now to the first half FY '26 financial results highlights. On behalf of the approximately 10,000 Cleanaway team, I'm pleased to report robust financial results for the half. Through our Blueprint 2030 strategy, we are creating a stronger, more stable Cleanaway. We have transformed the business by installing the foundations, the right people, the right standards, the right systems, the right network, and the right operating model. And you can see those benefits coming through in the underlying performance. We have continued our track record of delivering on the fundamentals that matter with 13% net revenue growth driven by a combination of disciplined pricing and strategic acquisitions. The acquisitions completed in July last year brought further scale and industry-leading capability to our operations. Again, our continued focus on operational efficiency has translated into margin expansion. We did this through better rostering, better workforce planning, and more efficient fleet R&M. Contract Resources performance this half with revenues up 19% and exceeding their 4-year CAGR of 13.5% validates what we discussed after the acquisition. Group ROCE improved by 80 basis points, to 9.4%. This reflects our disciplined approach to capital allocation and the improvements we are making to operational efficiency. Importantly, this says we are growing profitably and efficiently. EPSA was 18.2% higher and reflects our ability to convert operational performance into improved shareholder value. The Board declared an interim dividend of $0.0335** per share, an increase of 19.6%. This reflects the Board's confidence in our trading outlook, sustainable cash generation ability, and its commitment to providing attractive returns to shareholders while maintaining balance sheet strength. The free cash flow movement was driven by catch-up tax and acquisition integration costs and our strategic indirect cost program that permanently lowers our cost base. We expect a significantly stronger second half cash flow. Looking further forward to FY '27, we won't have any of those items repeating, and so we will see further acceleration of free cash flow growth. Looking ahead to the second half EBIT, we have a clear pathway to support the earnings step up. Our corporate costs were higher than usual in the first half. This was largely attributable to a planned project to upgrade our human resources systems with costs to revert to their traditional run rate in the second half. The second half outlook for our Solids business is positive, and our Environmental and Technical Solutions division is also well positioned to deliver improved performance. We're expecting strong organic growth across most lines of the OTS business. We expect to deliver $3 million in synergies from the Contract Resources acquisition and expect an initial $15 million in-year capture of structural efficiencies from our strategic indirect cost review. As part of our strategy refresh, we completed a comprehensive strategic review of our cost base and restructured our indirect labor to enable the strategy. We have restructured our solid SBU down key business lines. We centralized key functions such as sales, pricing, customer service, and fleet, removed duplication and created a leaner, more efficient, and more aligned organization. This has resulted in a reduction of approximately 250 FTAs with most of these changes already implemented. This supports continuing margin expansion, reinforces our market leadership, and sets us up to deliver our improved customer value proposition. We've also identified further opportunities for nonlabor cost rationalization, spanning corporate overhead reduction, shared services optimization, and increased procurement efficiency. Once fully implemented from FY '27, we expect at least $35 million in annualized recurring benefit embedded in our operating model. Based on a robust first half performance and our confidence in the outlook, we're pleased to be able to upgrade our full year EBIT guidance range to $480 million to $500 million. With that overview, I'll now move on to the segment results. Solid Waste Services delivered a strong performance in the first half. We grew net revenue by 7.5%, to $1.25 billion, and EBIT is 11% higher, at $196.7 million. We also demonstrated the operating leverage in the business by expanding EBIT margins by 50 basis points, to 15.7%. In Collections, we grew our C&I net revenue through price increases, strong regional volume growth, and the Citywide acquisition. We also expanded margins by improving labor and fleet efficiency. We delivered similar improvements in our municipal collections business, where, in addition to improving labor and fleet efficiency, we have remained focused on rigorous contract management to support improving profitability. We secured the Cairns municipal collections contract. This is a 7.5-year agreement starting in December 2026 and will contribute over $100 million of revenue over the life of the contract. It is a strategically important win that demonstrates our ability to compete successfully in the municipal tender market when the economics are right. Our Post Collections business delivered net revenue and a EBIT growth across our core landfill portfolio, driven primarily by higher project volumes and prices. As planned, we closed New Chum landfill on the 30th of November, which incurred a loss of approximately $3 million for the period. Our transfer station network delivered improved profitability. We optimized our network, improved payloads, and reduced R&M costs. Finally, we delivered strong earnings from our Resource Recovery business through continued growth in CDS volumes and improved cost efficiencies. We also grew our organic volumes, primarily through successful tendering for commercial and municipal processing off the back of the FOGO mandate in New South Wales. This represents a long-term structural growth opportunity as more New South Wales councils implement FOGO. Old corrugated cardboard or OCCC (sic) [ OCC ] prices softened through the half. This created a slight headwind in the first half where customers receive rebates using a lagged price, noting we expect this to be a relative tailwind in the second half. As part of the strategy refresh, we have made the decision to retire the construction and demolition SBU and rationalize our service offering to align with our C&I customers' needs. We will continue receiving C&D residuals for our post-collections network. The decision is based on focusing on our efforts in parts of the market where we can achieve an adequate return and illustrates our commitment to disciplined capital allocation. Overall, Solid Waste Services is achieving strong results. The scale, diversity, and integration of our network provide a competitive advantage and a growing earnings and margin trajectory. We expect this momentum to continue through the second half. Moving now to our Oil and Technical Services and Health Services. In aggregate, net revenue fell 5.1%, to $342 million and EBIT fell 12.6%, to $36 million. EBIT margin contracted 90 basis points, to 10.5% with the underperformance driven by Health Services. In OTS, we delivered EBIT growth and margin expansion despite some revenue headwinds due to capacity constraints at Christie St. We continue to perform strongly in packaged waste, with a high focus on high-margin work where our portfolio of total waste solutions, network, and safety standards provide a competitive advantage. We realized the initial integration benefits from the former LTS and Hydro business units and simplified the network as well as saw increases in volumes through our equipment services business. As expected in Health Services, our revenue declined following the competitive tender for the HealthShare Victoria work, where we retained 85% of the work. The disruption to our Yatala health facility in Queensland continued in the first half following ex-Cyclone Alfred. This resulted in approximately $2.4 million higher logistics costs. Repairs have now been completed and normal operations have resumed. Importantly, we are seeing the turnaround in Health Services, leading to a significantly stronger second half outlook. We are expecting higher revenue from increasing secure product destruction services, and we're using data analytics to reduce revenue leakage. Turning now to Slide 12. The performance of the Industrial Services segment is reflective of the outperformance from Contract Resources. At the overall segment level, we delivered 74% net revenue growth, to $339 million and 164% EBIT growth, to $28.8 million. EBIT margins increased 290 basis points, to 8.5%. Contract Resources increased revenue by 19.5%, to $157.8 million during the first 5 months of ownership. This compares favorably to its 4-year revenue CAGR of 13.5%. Contract Resources increased EBIT to $17.5 million and EBIT margin to 11.1%. This illustrates the quality and resilience of this production critical and turnaround services business. EBITA is a better reflection of CR's operating profit, given it adds back the noncash amortization of quality customer contracts recognized at acquisition. EBITA for the half was $20.1 million and converts to an EBITA margin of 12.7%. This is comparable to the overall group EBIT margin of 12.2%. The integration of CRs and our Industrial Services segment is on track and delivering synergies ahead of plan with our new structure in place since the 1st of January under the leadership of the Contract Resources CEO. We're beginning to realize synergies, particularly in shared customers, workforce planning, and greater asset utilization. And we expect these to build during FY '26 through cross-selling and operational leverage. We now have the leading industrial services platform that positions us to execute on the growing pipeline of significant decommissioning, decontamination, and remediation opportunities. In Cleanaway Industrial Services, we are undertaking a review of metro activities to align our operating and delivery models with the Contract Resources platform, improving consistency, scalability, and long-term performance. We also executed disciplined contract management and delivered on several fleet initiatives to offset the revenue headwinds. We will focus our IS work on activities where, like in CRs, we can earn appropriate risk-adjusted returns with less variable outcomes and as a result, transition towards a structurally higher-margin portfolio. And with that, I'll hand it over to Paul. Paul Binfield: Thank you, Mark. Cleanaway has a sustained track record of earnings improvement, having now delivered 6 consecutive hours of underlying EPS growth. This reflects the quality and resilience of our business model and shows the strength of our established integrated network of infrastructure. Looking at the underlying metrics on the left-hand side of the slide, net revenue for the first half came in at almost $1.9 billion, up 13%. EBIT was $228 million, up 16.9%, with EBIT margin improving 40 basis points to 12.2%, reflecting improving asset utilization, cost efficiency, and demonstrating operational leverage. EBITA was 17.4% higher, at $239 million. This metric excludes the noncash acquired amortization charges and offers a clearer view of the business' underlying cash-generating capability. Net finance costs increased to $73.4 million, reflecting higher debt levels following the Contract Resources acquisition. And at 2.3x leverage is reducing and well within our target and financial covenants. NPATA was 18.5% higher, at $117.3 million, with EPSA up 18.2%, to $5.2. Free cash flow was $74.2 million, $20 million lower than the prior period. Return on capital employed, or ROCE, is a metric that we're transitioning to as it's more commonly used by our peers and adjust for the noncash amortization of acquired customer contracts. ROCE improved 80 basis points, to 9.4%, proving that we're deploying capital more efficiently, generating better returns for our asset base. Similarly, ROIC increased 60 basis points, to 6.3%. So moving now to underlying adjustments. As Mark said in his overview, we're creating a stronger, more stable Cleanaway. The first phase is transforming the business by installing the foundations, the right people, the right standards, the right network, the right systems, and the right operating model. If we think about the underlying adjustments through that lens, the cash costs fall into 4 categories, but all but the first one aligned to our Blueprint 2030 strategy. So the first category relates to costs associated with issues identified as we layered in the strong foundations. In this case, it's treating legacy waste and remediating a legacy enterprise agreement, both dating back to 2018. OTS, post Christie St, we sought to increase the capacity of the network for our customers, and we reviewed the waste inventory at all of our sites. Retesting of legacy waste at one of our sites found that due to the nature of the waste, treatment and disposal costs would be significantly higher than expected. The subsequent independent review for the network -- of the network has confirmed that all waste inventories are adequately provided for. Similarly, with respect to the enterprise agreement, as we strengthened our capabilities to address the backlog of expired EAs, we identified inconsistencies between the evolved scope of work at certain branches and how the expired EA had been drafted. Expense in this half includes review costs to date and a provision for potential further employee compensation that may arise following review of EAs with similar characteristics. We expect to incur low single-digit million EA review costs in each of the next couple of years as we complete this assessment. In both cases, the costs being incurred in this period, don't relate to revenue generated in this or recent reporting periods. And therefore, we've excluded them from our underlying result to provide a true reflection of our continuing performance. The second category of adjustments relates to one-off strategy refresh costs associated with executing the strategy, including driving towards a leaner organization. This will be completed in the second half with a similar cost to the first half. The third category relates to the one-off modernization of our IT systems, where costs cannot be capitalized due to the nature of the software solution. This is foundational to the way that we were going forward and underpins the strategy. We again expect a similar cost in the second half. The last category, the costs associated with building the right network of leading waste infrastructure assets. In the past, that's been acquisitions like Suez, Sydney assets and GRL. And today, it's Contract Resources and Citywide. This has created the leading waste infrastructure network in Australia. We expect approximately $5 million of further integration costs in the second half. The strategy refresh has refined where we want to play with our focus on attractive returns and capital discipline. And you can see this with the rationalization of our C&D service offering and reducing certain [ IS ] metro activities. The outcome of the assessment of the future profitability of the C&D business has resulted in a noncash impairment of the associated assets. We also took a noncash impairment charge against our investment in the Circular Plastics Australia joint venture, where policy is lagging the desire to promote recycled HDPE, resulting in a softer market price outlook. Looking forward, we believe that underlying adjustments will reduce as a result of the foundations that we've installed to build a stronger and more stable Cleanaway. So now moving to free cash flow, just focusing on the material items in the bridge. We generated $56 million or 14.6% more underlying EBITDA. The cash impact of underlying adjustments was $40.2 million or $20.8 million higher than the prior corresponding period. This reflects the cash component of the underlying adjustments detailed in the earlier slide. We expect the full year cash impact of underlying adjustments to be about $30 million higher than the prior year. Working capital movements were adverse at $12.2 million, largely attributable to an increase in receivables related to a growth in the business. The interest paid was $9.2 million higher. And again, this reflected the higher average debt balances from fully debt funding $470 million in acquisitions. Tax paid was $16.5 million higher, and this reflects our higher taxable earnings and a $58.7 million catch-up tax payment. This is the final catch-up tax payment. Maintenance CapEx was $22.7 million higher and is largely timing in nature with the full year expected to be broadly in line with prior year. So the net movements resulted in $74.2 million free cash flow for the half. We expect significantly stronger free cash flow in the second half and importantly, into FY '27 as tax payments normalize, underlying adjustments reduce, and our relative capital intensity continues to decline. So now moving to capital expenditure. Our total FY '26 outlook stays unchanged at approximately $415 million. This includes $15 million allocated to Contract Resources. HS&E CapEx was $8 million higher for the half, but the full year is expected to be lower than FY '25. Our investment in energy from waste continues to be modest as we pursue our originator model. However, recently, we did enter into a joint development agreement for the Parkes Special Activation Precinct in New South Wales. Our 35% minority interest has not resulted in any material upfront capital outlay or binding capital commitment, and any future investment will need to meet our investment hurdles. We decided to pursue the Parkes location when it became clear that there were complex planning issues that [indiscernible]. So having largely built out our infrastructure network of scarce processing assets, our capital intensity is on a declining trajectory. This year, our CapEx guidance as a percentage of net revenue will be the lowest for 5 years. Furthermore, you will see the nature of our CapEx change. There will be fewer larger projects that have been - that have characterized our spend over the last 5 to 10 years and an increasing proportion of our spend on fleet. Fleet CapEx is, by its nature, lower risk, but still delivers good returns to reduce running costs, improved utilization, and more dependable customer service. So finally, I'll turn to net finance costs and dividends on Slide 18. Underlying net finance costs increased $14.5 million, to $73.4 million, driven by the debt financing of Citywide and Contract Resources acquisitions, which was only possible due to the strength of our balance sheet. FY '26 full year outlook for net finance costs is around $155 million. Our previous guidance, approximately $150 million was based on the forward curve in August when we provided our initial guidance. February rate rise is clearly outside of our control. What is in our control is delivering to or above operational expectations, which we're demonstrating today with our upgraded EBIT guidance. Moving to dividends. The Board has declared a fully franked interim dividend of $0.0335 per share, up 19.6%. This increase reflects the business' strong underlying growth, our confidence in future delivery, and strategy execution, including our ability to deliver strong free cash flow growth. With that, I'll hand back to Mark. Mark Schubert: All right. Thanks, Paul. As we look beyond FY '26, I want to provide a preview of how we are positioned for sustained value creation through to 2030. We have now completed a comprehensive refresh of our strategy that ensures we maintain the positive momentum generated over the last few years. The review of our cost base has always been part of our strategy. We have restructured our indirect labor, accelerating the realization of embedded operational efficiency created during the first phase of the Blueprint 2030 strategy. We've also identified further nonlabor cost reduction initiatives. At the heart of our refresh strategy is driving top line growth by delivering an improved, hard-to-replicate customer value proposition that combines 2 critical elements. Firstly, value for money. This means competitive pricing backed by reliable service, operational excellence, and scale and network advantages that our customers can't get elsewhere. And secondly, seamless customer experience. In today's digital world, this means customers expect easy and seamless experiences, transparency, responsiveness, and frictionless service. We're investing in systems and processes to deliver this. Our CustomerConnect investment positions us as Australia's most digitally enabled waste operator, creating barriers to entry that smaller competitors cannot replicate. Unlike fragmented regional players, Cleanaway's technology-enabled solutions will provide seamless customer experience across our unrivaled network. Our technology platform will increasingly leverage data analytics-led insights to understand customer behavior and optimize pricing by segment and route, allowing us to deliver personalized solutions to capture premium pricing where differentiated service is provided. We have the largest heavy vehicle fleet and the most extensive network of interconnected collections depots, transfer stations, processing facilities and landfills across Australia. Our scale creates operating leverage and strategic advantage that's hard to replicate. We will leverage our scale and lock it in, in 3 ways: Firstly, we'll use our digitally enabled sales and customer service teams to drive higher internalization and utilization of our integrated network. We capture a higher marginal contribution from every incremental ton of waste we handle through our existing network and through our powerful operating leverage. Secondly, we will extend our scale as an advantage by consistently executing best practices across our new national verticals in solid waste by flexibly reallocating resources based on demand patterns by cross-selling total waste services across our portfolio of customers and by ensuring we get value for money pricing. Third, we'll hardwire our branch-led operating model end-to-end, which ensures stability, creates transparency, drives local ownership and enables fast decision-making. Finally, our refresh strategy will deliver strong free cash flow growth from top line growth, margin expansion, and strong capital discipline. We are planning a dedicated strategy investor briefing on the 21st of April with further details to follow soon. Now let me provide you with an update on our FY '26 guidance and trading outlook. We are pleased to upgrade FY '26 EBIT guidance to between $480 million and $500 million. This is based on the robust first half performance and our confidence in the outlook for the rest of the year. I will walk you through the key drivers of second half performance that give me the confidence in providing that guidance today. We will continue to exercise price discipline in our Solids segment and expect positive organic growth. We're seeing supportive market conditions for project work in Post Collections in the second half. We also typically have a second half skew with higher CDS volumes across all states during the late summer months and the timing of our carbon benefit realization. Our Environmental and Technical Solutions division is well positioned to deliver improved performance. We are expecting strong organic growth across most lines of the OTS segment. We expect continued OTS integration benefits and a strong recovery in Health Services. And we will also begin to realize some of the synergies resulting from the Contract Resources acquisition. As I discussed earlier, we're expecting to capture approximately $15 million in-year savings from the organization restructuring completed over the last couple of months. Importantly, these savings are expected to deliver an annual continuing benefit of at least $35 million in FY '27. This all supports a stronger second half, which is reflected in our guidance. We have clear line of sight to these drivers, positive operational momentum, and confidence in our ability to deliver within this range, noting the midpoint of the range represents approximately 19% year-on-year EBIT growth. What's exciting is the trajectory continues beyond FY '26 with our refresh strategy unlocking many organic growth levers. Critically, our capital intensity is on a declining trajectory. The $415 million CapEx guidance will represent the lowest capital spend to revenue ratio in the last 5 years. This sets up accelerating free cash flow growth and improving returns beyond FY '27, which brings me to my final slide for today. As you can see, we now have a track record spanning multiple years of doing what we said we would do. Calling out a few highlights. We have grown the top line by 52.5% or $646 million over this 4.5-year period. We have demonstrated the powerful operating leverage we have in the business, growing underlying EBIT by 75.4% or $98 million across the same period. We are focused on both the returns from capital we spend and improving the base business, and this translates to the steadily improving return metrics you see here. What you cannot see on this graph is that we have done all of this by pulling sustainable handles. That is handles that will continue to be available and grow into the future. We are delivering resilient and dependable returns underpinned by our network of infrastructure assets with an enviable growth trajectory. Our expanding margins, improving returns, and strengthening free cash flow create compelling value. We are building a stronger, more stable, more capable, and more profitable Cleanaway. The exciting part is that with the refreshed strategy, we have line of sight and a laser focus to continuing this performance in the years ahead, and I'm really looking forward to discussing that with you soon. Before we hand over to questions, I do want to sincerely thank our employees for all their hard work. These strong results would not be possible without them. And with that, we will now take questions. Operator: [Operator Instructions] The first question today comes from Lee Power from JPMorgan. Lee Power: Just Mark, can you talk a little bit around the -- just the volume backdrop? I get there's a lot of moving parts which is better for Citywide. I think you're still calling out low metro volumes for C&I. I'm just trying to reconcile that volume piece with the pricing backdrop given that the commentary of the 2H around positive organic volume and price outlook. Mark Schubert: Yes. No worries, Lee. Thanks for the question. So I mean the first thing I'd say is sort of on metro C&I, we would say volume is flat, price is up. I think you should think about that as us also exiting some low-value C&I, which creates capacity for high-margin customers. I think, yes, the Citywide obviously coming through on a PCP basis is a positive. I think then on sort of other sort of volume areas, so landfill volumes -- just remember, landfill volumes is not just C&I. There's muni, there's civils, there's C&I, there's restricted waste, all those different things. What we're seeing particularly strongly in the landfill volumes is civil jobs coming through. So we've got a strong runway of civil jobs. The example to bring that to life would be, say, the M8 tunnel works in Sydney that we're seeing coming through. And then finally, just on price. While I've got the -- sort of the question on volume, I will also talk on price. I think price has been positive and importantly, well above inflation. Lee Power: Yes, that's really useful. And then maybe just when we think about into the second half, like if I just annualize your implied 2H guide at midpoint, you get $524 million EBIT. Is there any sort of color you can give us around the seasonality? I mean you've obviously called out a 2H skew in the Solids business. So help us think about updated thinking on the ramping profile of acquisitions through that period. I guess what I'm trying to get at is, what's an exit -- a sensible exit run rate? And how much of that's your initiatives versus just a normal skew in the business? Mark Schubert: Yes, sure. I mean let me try and bridge you the second half, which I think will answer your question. So like -- as you said, if you take the half 2 number implied by the midpoint of the guidance, that's how you get that number 260-odd that you just talked through. I think the drivers -- importantly, the drivers we've got good line of sight to. If I split them in 3 ways, if I talk about Solids firstly. So what we're seeing on Solids is strong Solids volumes coming through and price. We just talked through some of the drivers of that just a moment before. We are definitely seeing that Solid second half skew, and we talked about that previously, but just to go through it again, that's the CDS scheme is driven by volume in the late summer months. That's when the volume comes through, and that's obviously in that -- in the second half of the year. Carbon benefits also always come through in the second half. So that's kind of the Solids picture. If we go to ETS, we can see a good outlook of projects -- OTS projects in the outlook. We can see the Health business recovering. And just remember, that's -- we won't have the same issues that we had in the first half, which were related to the roof at the Yatala facility and having truck waste down to the South Coast. So that business will recover. We've got the OTS integration benefits coming through. So remember, that's the merger of Hydro and the LTS business, and we're talking about those benefits coming through. You get the first round of CR synergies, that's around sort of $3 million. And then the third bucket in the second half is you'll get the benefits of the indirect cost review. And remember, that's the $15 million in the second half that helps us step up those earnings. And just to kind of like recap and remember, so that $15 million is the number that then becomes more than $35 million as we go into FY '27. So $15 million in the second half, more than $35 million in FY '27. The difference is $20 million. Lee Power: And then maybe just one more, if I can. Just Paul, like you're obviously confident around the cash piece into the second half. I think in your comments, and correct me if I'm wrong, before, you said the full year cash impact of some of those adjustments will be $30 million higher than the prior year. Obviously, the first half is a pretty big part of that. So can you just remind me what that means on a second half basis in addition to the catch-up of the cash tax piece finishing? Paul Binfield: Sure. So Lee, if we look at prior year, the impact -- cash impact underlying adjustments is roughly about $50 million. So I'm calling out a $30 million step up on that. So roughly $80 million for the full year. We've taken $40 million in the first half. In terms of the tax catch-up, again, $58 million that we paid in December, that is the last catch-up tax payment. So we had back to normal installment payments into the second half. And you should think of a figure sort of in that region of about $48 million to $52 million, $53 million in terms of installments into H2. So if you look then beyond that into '27, again, hopefully fewer underlying adjustments, you're seeing no more catch-up tax payments. You're seeing a reduction in capital intensity in the business going forward and increased earnings and much of that increased earnings obviously coming through from higher margin type activity. So again, you don't have that nasty pinch in terms of the need to deploy additional capital to drive those earnings. So again, it gives us some confidence that the H2 will be better, but '27 will build on that further. Operator: The next question comes from Peter Steyn from Macquarie. Peter Steyn: Congrats on the upgrade. Just Paul, keen to just understand the underlying adjustments a little bit better and particularly the tax-free impact in the EBA issues. If you could just -- I mean, you've made the point that they were back in 2018 time lines. How far did they extend time line wise? Why is it that they've only become an issue now? Just keen to understand that and then your conviction at it being the -- you're drawing the line underneath those issues. Mark Schubert: I might have a go at that, Peter, if that's all right. By the way, I got my motorways wrong in the previous question. It should be the M12, not the M8. I am a bit confused on the motorways. All right. So just in terms of legacy waste. So let me start by saying today, we are fully aware of our waste inventories. We only accept waste where we understand the disposal pathway. We have clean waste acceptance matrices that drive that, and we make appropriate provisions at the time of acceptance. Let's go through the history. So the provision -- the original provision was made at the acquisition in 2018, but the adequacy wasn't checked because of manual systems. Since 2022, what we've been doing is installing the foundations into the company, and we talked about safe, stable, profitable Cleanaway, and like Paul said, right people, right standards, right systems. Post Christie St, as we sought to maintain the capacity of the network for customers, we did a review of waste inventory at one of our sites and found that the cost of treating and disposing that waste was significantly more expensive. We then had that validated by third parties. We also conducted further cross-Cleanaway auditing to ensure there was nothing else like this. We also confirmed that there's nothing for the CR's acquisition, and there's nothing from Citywide. And as Paul said, the costs are not related to the revenue received over the last 8 years, and that led to the decision to exclude it from the underlying -- to give you the best view of the ongoing performance of the business. If I run through the same summary for the enterprise agreements. So just remember, this has been flagged as a contingent liability for a couple of years now. Again, this is about we've been installing the foundations into Cleanaway, again, right people, right capability, those sorts of things. In the case of sort of industrial relations and enterprise agreements, we've been increasing the capacity and the capability of the function. We did that to initially clear the backlog of expired EAs, so we could get into the approach that we're in now, which is the proactive approach to negotiation. As we renegotiated this time, we identified a 2018 enterprise agreement where the work on the ground was different to that anticipated by the expired enterprise agreement. That led to a review of the enterprise agreement, and during the first half, the remediation of that enterprise agreement. We're now proactively looking at EAs with similar attributes. The underlying adjustment covers the 2018 EA, the remediation of the cost and a provision for other similar EAs. So I think that -- hopefully, that sort of like summarizes both those answers, Pete, for you. Peter Steyn: Yes. That's useful. And then just if you could give us a little bit of a sense of what you're seeing around ops excellence more generally, the margin improvement at solid waste was pretty handy in the half. If you could just shed a little bit more light on how the momentum in that program is going. Mark Schubert: It's going strongly. And I think what you should find is it will really -- it will accelerate. So we're pretty happy with the Solids performance and outlook. So in terms of the ops excellence, I mean, you saw us really focus on the branch operating model, labor and fleet efficiency. I think I say accelerate, Pete, because what we're seeing is we've got the branch-led operating model in now. But then what the switch now to the national verticals means that we've co-located all the like branches. So all the landfills are together, all the transfer stations are together, all the resource recovery facilities together. And so the value drivers are all the same. And the risks are all the same as well. And so it just means we're going to have experts running those plants, led by experts in those plants, and we will get much further operational excellence coming through. So I think the initial strong foundation has set the branch-led operating model, enabled us to do the restructure in a stable way, and now we get to really accelerate through the ops excellence. Operator: The next question comes from Jakob Cakarnis from Jarden Australia. Jakob Cakarnis: I just wanted to focus on the free cash flow, if we could, please. I appreciate the commentary about a stronger second half. It looks like you might best the first half somewhere between $40 million to $50 million based on the bridge items that you've got us. But it does look as though, at least from what I can see initial impressions, you'll be below the PCP. Can you just kind of calibrate those 2 things for me if that's the right way of thinking about it? Paul Binfield: Yes. I'm not going to give specific guidance in terms of free cash flow for the half. I guess the important thing I'm seeing here, Jakob, the key trends in terms of an improving outlook. So I think we've been pretty clear in terms of expectations about a further $40 million in the second half of underlying adjustment spend. We've been through the CapEx lines in terms of giving you an indication as to how we see that spend dropping out. Working capital, typically really well controlled in this business. We haven't seen any real deviation in terms of cash collections or credit risk. I don't have concerns on that front. I think importantly, too, you should look at the impact of the strong second half EBITDA performance as well, and that clearly has a beneficial impact in terms of the 2H cash flow. And as I said, if you look at '27, you have the additional benefits of lower cash outflow in terms of underlying adjustments and decreasing capital intensity as well. Jakob Cakarnis: And then just one for Mark. I mean, Contract Resources for a lot of people was a little bit of a surprise. It's good to see that it's doing a little bit stronger maybe than the business case and towards the margins that you thought it could do when you acquired it. Do you want to add just a little bit more color for how we think about that into '27 as well, just the scope of work that's coming down the pipe and I guess the integration more importantly with the existing business, please? Mark Schubert: Yes, sure. So I think maybe just in terms of the second half, I mean, what I'd say is we have a really strong first 5 months from the Contract Resources team. I think you should understand that, that includes sort of the peak Australian turnaround season, and that's just because really where winter falls. That's when the work gets done in those plants because it's the most comfortable time to do it. And so I think in terms of the sort of second -- or full year performance for Contract Resources, don't go and take 17.5 divided by 5 and multiply it by 11. That's not right. I think what you should estimate it to be -- for Contract Resource and Cleanaway, you should think -- sorry, Contract Resources and Citywide, you should think the number is about $35 million, excluding the $3 million of synergies. Again, that's a really strong outcome. If you think about where we were in August last year when we were talking about sort of circa $30 million. You're seeing the growth come through in all parts of CRs. They are continuing to gain customers and grow the share of wallet within their customer set, both here and the Middle East. So it's really positive performance, and it's pretty much exactly what we thought it would be as it's come across. Jakob Cakarnis: And then just into '27, sorry, Mark, like, is this -- Mark Schubert: Yes. Jakob Cakarnis: -- a more sustainable earnings base, do you think, like a representation of go forward? Mark Schubert: Well, I think we -- I mean, our expectation is CRs will continue to grow. I think there's real opportunities in -- we'll be more thinking about CRs plus IS going forward as opposed to CRs by itself. We've already -- we already see people dressed in red, driving blue trucks and all of that sort of thing. So that's well in hand. It's going to be really difficult to separate the 2 because the work is just being done by the most logical group and the assets are all starting to be shared. I think longer term, you should definitely think about that growing DD&R sort of vector, that is alive and well. The example there is Contract Resources today, we've got 3 groups on 3 different platforms in Bass Strait doing work for Exxon. So that is -- that's real DD&R. The nice part is Contract Resources doesn't even call it DD&R, they just call it work. And I think we should think that, that will continue to grow steadily into the future. Operator: The next question comes from Owen Birrell from RBC. Owen Birrell: Just a quick one on the financing cost. I think previously, it was 150, that's jumped up to 155. Just off that the leverage at 2.3x, is there a deleveraging time line? Or you guys are still pretty comfortable with where you sit in the headroom? And any refinancing risks looking into '27, '28? Paul Binfield: Yes. Thanks, Owen. In terms of delevering, again, expectation that we will continue to steadily delever. So if you look at -- if we take our long-term view into '27 and '28, we expect to see that to continue through that timeframe. And again, obviously, that's supported by the comments you've heard today about the lower capital intensity going forward. In terms of refinancing risk, we've done the heavy lifting on that front. So you'd have seen that we issued USPP notes for $500 million for tranches of 8, 10, 12, 15 years. So we pushed a really significant amount of debt out with some great tenure. So to be honest, I don't have any concerns about refinancing risk at all. And I'm very comfortable, frankly, with the leverage as well. Owen Birrell: Great. And just one other one. The MRL Southern expansion CapEx, is that just very much a one-off? Or could we expect more of that to come? Paul Binfield: No, that simply is now construction. So the bit of MRL that we moved into now, we call it the Southern expansion, and that is simply construction, one of the major sellers there. And that simply is ongoing. It tends to be a bit lumpy as you'd expect, but it is simply ongoing. Owen Birrell: Great. And just on associates, I noticed that was up $6 million. Is that a sustainable piece or [ bit of a question then ]? Paul Binfield: Yes. The primary driver there has been, we've seen the improved profitability of the CPA PET facilities, which has been good. Obviously, the continued weakness is in the HDPE facility. But the main driver was the Eastern Creek joint venture we have with Macquarie in terms of the org energy from waste property. So we had a block of land there. Clearly, we have no need for that land going forward, and we sold it at quite a significant profit, I think about an $8 million profit, and that would come through the JV result. That JV has been closed down now. Operator: The next question comes from Cameron McDonald from E&P. Cameron McDonald: Just 2 questions from me. Mark, just when you're talking about the visibility in the building blocks going into the second half and then into '27, can we -- can I just throw some numbers -- some items at you to get some granularity if we can. So the defense contract, please, like where -- what was sort of the benefit for that in the first half? And what's the expectation for the second, the Eastern Creek organics investment, and then the ramp-up in that, and then the Western Sydney MRF please, and then Tasmanian CDS? Mark Schubert: Yes. So I mean I think we're not necessarily commenting specifically on the profitability of sort of individual contracts. I'll talk around them. I mean, I think the defense contract is well established now. We obviously had the large -- Cameron McDonald: Talisman Sabre? Mark Schubert: -- Talisman Sabre exercise, but I think there's lots more opportunities to expand our offering with the defense contract. And obviously, we're working actively through that. Eco, which is the old GRL for sort of long-time listeners, that's the -- that's going well. You're definitely seeing us win muni contracts and the organic stream. So that's the tailwind that I talked about where there's 2 things going on. The government has mandated the shift to FOGO. That comes through muni where all councils need to have a FOGO offering by 2030. And we call it the COFO mandate, which is a commercial food organic, that basically is July of this year that large customers need to offer their -- will need to provide a food organics solution. That's all what that means, that's all good for us because we've got the infrastructure to process that. So we'll continue filling up Eco with those sorts of contracts and volumes. Western Sydney MRF is going really well. Again, the expectation was we would slowly build contracts into that. As you guys all know, that's a really well-located plant there and can intercept volume that would otherwise find its way coming further closer to town. So we've been successful there, winning a couple of council contracts. And Tas CDS is still in the ramp-up phase. Just remember that CDS schemes take about 18 months to ramp. Volumes there have been ahead of what we would have expected. And obviously, that program started up really strongly. There's a lot of pent-up, I think, storage of containers that surged through. And then we've seen the summer surge as well. So it's just really pleasing to see. Cameron McDonald: Okay. And then just is there any update on potential license and/or height extension in New South Wales on your landfills, please? Mark Schubert: Yes. So I mean, I guess the news there is we continue to work through the, we call it the extension -- extension or expansion -- I got to remember -- it's extension, Lucas Heights extension, which is the extension of the landfill to the area where the -- sort of the gun club was previously. That is a really active project. There's lots of work going on around the environmental approvals of that. And that's obviously a key project for Sydney and for New South Wales in terms of landfill air space. But I would say that is on track at the moment. I think in terms of other landfills, obviously, there's -- we're looking at the Eastern Creek -- sorry, the Kemps Creek, I guess that's the expansion. And of course, there's some work underway at Erskine Park in terms of hydros. So there's lots of sort of extension activities, all which I would classify as on track and in hand. Cameron McDonald: And so what would be the expectation around timing at this stage on getting approvals or some sort of decision? I mean, it's difficult with -- dealing with government, but best guess. Mark Schubert: Yes. I think what I would say there is we have significant airspace in Sydney until the early 2030s timeframe. What this project is trying to do is extend that forward for a long period of time and bridge into obviously, energy from waste, which then even extends it further. I think it's not something where we need approvals in some sort of rush, and we're just working through the long lead time type stuff and stepping that forward. So again, it's on track. The idea with these is to do a cost-driven project as opposed to a schedule-driven one, and we're on the cost-driven track at the moment. Operator: The next question comes from Robert Koh from Morgan Stanley. Robert Koh: First question is on HDPE, which I think you said that the small impairment on Circular Plastics was due to policy not being where you wanted. Could I maybe just ask what was the policy that you would have liked and what do we end up with? Mark Schubert: Yes. So I mean this is -- so just to recap for people. So in Circular Plastics, there's joint ventures, there's 3 plants. The easy way to remember it is the ones that start with A, which is Altona and Albury, they are the PET ones. They're performing well. And as Paul said before, that's because the plant is performing well and then the offtake is strong. And the offtake goes to, in Albury's case, to Asahi and to Altona's case, to Coke. And the joint venture there is the 4-way joint venture between Asahi, Coke, Pact and us. The challenge that we've had is at the Laverton plant, which is the HDPE or PP plant. If you remember what is that, that's milk bottles, ice cream containers, shampoo bottles, that sort of thing. This is a joint venture between Cleanaway and Pact. The good news is the plant itself is performing really well. The issue is that the federal government hasn't introduced a minimum domestic recycled content in milk bottles. And what that means is that dairies are unwilling to pay the extra price associated with recycled material. That would be like less than $0.01 per milk bottle. And instead, they're importing virgin material to make those milk bottles. I think at a headline level, this is the right plant at the wrong time. And so hence, with that sort of policy setting, we've taken the decision to write down the investment. Robert Koh: Just moving over to DD&R. Just -- and congrats on very encouraging early results there. Can you talk to any of the regulatory developments that are coming up in that space that might help or hinder you? You've got a Victorian parliamentary inquiry. Are we anticipating that NOPSEMA issues any more directions or anything like that? Mark Schubert: I think we're not really relying on sort of regulatory drivers. I mean what you see when you look at CR, is CR's top 8 customers are the #1 oil and gas companies in the country. They're at such a maturity level with those customers that they're virtually embedded into their operations, and they become the natural go-to to help out with that work, and help plan it, and then execute it. And that's what we see happening. Like I said before, Rob, like surprisingly, the CR's team doesn't even talk about DD&R, they just talk about as work as the natural work that follows on from being the incumbent. And so I think I know there's things like, we'll have to pull out the subsea pipelines and stuff like that. We don't really worry about that because there's enough work to do even if that's excluded, and we'll still be involved in the work of cleaning those pipelines before they get abandoned in any case, regardless of whether they come out of the ocean or not. Robert Koh: Okay. That sounds good. Final question for me. I'm just trying to think about this more than $35 million annualized cost saving that you're talking to. Is that incremental to the previously guided CustomerConnect benefit, which from memory was about $5 million in FY '27? Or is CustomerConnect part of this $35 million plus? Mark Schubert: No, it's incremental. Rob, good question. Yes. The way you should think about that, just to go back over the number so everybody listening can follow on. So we're saying it's $15 million in the second half of this year. That converts to more than $35 million in FY '27. It's mainly labor. It's around 250 FTAs. It represents about 10% of our indirect labor force, and it's mostly done. What we've said, when you say it to be greater than $35 million, you should think that what that means is there's further nonlabor opportunities that we've talked about, and we've listed them out in the voice over. But that seems like procurement efficiencies, further overheads rationalization. And when we talk about procurement, we're talking about both upstream and downstream procurement, where we've got a laser focus on some opportunities there. Operator: The next question comes from Nathan Lead from Morgans. Nathan Lead: Just interested in your comments there about the capital intensity and the declining trajectory. Can you put a bit more around that because obviously, you're quite a capital-intensive business. So if you can get the CapEx flat to declining, it's particularly strong value driver. So just how are you defining capital intensity? And where do you think that could end up? Mark Schubert: Well, I guess we're defining it as CapEx divided by net revenue. That's how we're defining it. So hopefully, that's right. I think you should think about the fact that over the last period of time, in the whole history of Cleanaway, Cleanaway has been evolving this fantastic network. Over the last 3 or 4, 5 years, we've been trying to complete that network. And we actually -- when we looked at the strategy work, the next phase of the strategy, we look back and we go, you know what, the network looks pretty good. It's basically complete. The only sort of outlier there is, obviously, we will upgrade Dynon Road in 2028, and you guys all know the numbers there. So therefore, the investment shifts towards smaller investments rather than the larger investments that we've been doing in the past. And the easy example there is fleet replacement, which has a very certain return. And obviously, we're really excited about modernizing the fleet. So when we look at CapEx as a percentage of net revenue, we see that number dropping. We see it has dropped and it will continue to drop as we look forward. So that's kind of what we mean. Hopefully, that's the color you were looking for. Nathan Lead: Yes. That's great. And second question is just in terms of the landfill remediation spend that goes through that cash flows. Can you give us a bit of an idea about what that looks like over the next 3 to 5 years? Paul Binfield: I'm not going to go out 3 to 5 years here, Nathan. But certainly, I think we've given you some indication that you should expect a slightly higher spend in the second half. And into '27 -- you should expect to see it step up a little bit in '27 and '28 as well. So importantly, you would have seen us obviously close the New Chum landfill and there's obviously a requirement to get on with the capping process there that will drive some of that remediation spend. And we've got some remediation activities, so capping activity at MRL and that as well. So again, you should expect to see the remediation spend a little higher in the second half and '27 and '28 a little bit higher than '26 as well. Operator: The next question comes from Nicole Penny from Rimor Equity Research. Nicole Penny: Referring to Slide 10 and the Solid Waste business splits, could you provide some guidance on which of the business lines see the greatest opportunity over the 3 to 5 years' timeframe, please? Mark Schubert: I'm just going to look at Slide 10. Okay. Interesting question. So I think my reaction to that initially would be, well then I would absolutely look at one of these sort of national verticals and think that any particular one has something special. Each has significant growth and improvement opportunities within it. So if you go back to what we're saying sort of -- I alluded to in the sort of strategy refresh sort of take there, there's a significant opportunity on margin expansion and efficiency that we have been setting up for in the first half of the strategy that now with the digitization layer coming in now will then be further enabled by just improving the way we work and also improving how we optimize the hard assets. I think if I look at -- we'll reduce -- the volume will obviously drive the equation. And one of the things there that you saw us talk about through the customer value proposition discussion also was we're not -- our plan is not to really add to the network. Our aim is to really drive the network like it's never been driven before in a really positive way and get increased internalization, increased utilization and those sorts of things. There's definitely tailwinds as well. There's tailwinds through the FOGO transition that we talked about before. There's tailwinds through the data analytics work into eventually AI and stuff like that. And that will drive volume and price through this network. Operator: The next question comes from Amit Kanwatia from Jefferies. Amit Kanwatia: Well done on the guidance increase. Congrats. Just a couple of quick questions. Similar to Kemps, if I unpack the second half EBIT a bit more, at the midpoint, it's -- sorry, $262 million at the midpoint in second half that's implied. And then if I think about the contribution from acquisitions, I mean, you've got LMS coming in. You've got the cost savings as well coming in. I'm just more interested in kind of understanding the growth in the base business into second half versus first half? Mark Schubert: Yes. So I mean we're not going to quite break it in that detail. I think what you should be thinking about is the business -- the base business is performing strongly. You can see that in the guidance upgrade that you just mentioned. You should be thinking that CRs and Citywide will deliver that number around sort of 35. And obviously, the base business progressed. That's obviously after some of those first half headwinds that we talked about probably around the AGM time, things like New Chum and stuff like that. So really, the underlying business is looking robust. And then I think it's back to kind of that bridge where you break it into Solids EPS and sort of indirect cost review benefits. It's -- in Solids, it's the price volume coming through. It's the Solid -- it's the second half skew driven by particularly CDS and carbon. In -- so ETS, it's the project outlooks; in OTS, it's health recovering, it's the OTS integration benefits and the CR synergies. And then at the group level, it's the indirect cost review, which is the sort of the $15 million. I think if you want to get to the one, which is like, what do you need to believe to get to the top of the range? Well, you just need to believe lots of small things. There's no one big thing that drives it to the top of the range. And that's a great thing about Cleanaway. Cleanaway is just a sum of lots of smaller moving parts. And so therefore, it's quite resilient. Amit Kanwatia: Sure. Yes, I think fair to say that second half growth will be more than first half. I mean if I can just move on to the capital allocation and then I mean, given the context of capital intensity, but maybe if you can speak to how are you thinking about capital allocation given your comments today over the next few years? Mark Schubert: Well, I think on capital allocation, you're seeing a few things. You saw us talk about the fact that we are -- what we're doing on construction demolition. So we're allocating -- we're strategically allocating capital to parts of the business that we think we can get the right returns for the risk that sits within them. In the case of C&D, we don't see that because the resource recovery activities moved to the demolition side. And so we will participate in that at the landfills and equip the tickets there. So that's absolutely fine. I think in terms of the capital allocation, you're seeing us be very thoughtful about muni where we've allocated capital to the Cairns contract. We see Cairns as a great location, regional location, where we can create a strong position there. And that's very consistent with the sort of the muni strategy. You can see us in Industrial Services reducing our capital allocation towards high-margin but low ad hoc metro work and instead shifting to contracted work using the sort of the CRs operating model. And then at a more macro level, you can see us saying, listen, the network looks pretty good now in terms of completeness. So therefore, you should expect us, therefore, to require less overall capital as a result, and our strong focus will be to fleet renewal and then just really driving our volume through our network using the advantage that we've built over the last 80 years. Amit Kanwatia: I mean it looks like the free cash flow seems to be improving, earnings strong. I mean, obviously, leverage is there. Is there a case for payout ratio to go up in the next couple of years given what you've said today? Do you think? Mark Schubert: You want to talk about payout ratio, Paul? Paul Binfield: Yes, payout ratio. It's not something we've given too much thought to at this stage, Amit. We think the ratio of 60% to 75% is -- it feels pretty sensible. We're obviously at the top end of that range. Obviously, we have significant franking credits, and therefore, that sort of encourages to be paying out perhaps more than less. But at this stage, we are focused on making sure that we get that balance right between capital and dividend and maintain that deleveraging profile as well. Amit Kanwatia: And just a final one. Maybe just the strategy around waste-to-energy in New South Wales and maybe if you can touch in the Victorian market as well. Mark Schubert: Yes. So I mean in New South Wales, I guess, sort of the statements that we sort of shared around that, which we haven't talked about in these calls, but it's not -- it's been sort of announced by others. So we've signed the JDA for the Parkes energy-from-waste with Tribe and Tadweer. That is just -- that's the capital-light originator model playing out. We end up with a 35% interest and the waste supply for the C&I tranche. So that's the low-cost access for customers that we've been driving for. We prefer the Parkes location now over Willawong, and that's just due to planning uncertainty and the Parkes has sort of more support from locationally from the government and from various stakeholders. So that's the sort of progress there. There's a long way to go with these sorts of projects. So there's nothing really much in the near term there in terms of investments. I think in terms of Melbourne; Melbourne, again, is just in long-term sort of progressing capital-light approvals. And so that's the status there. So I guess the main update was the one that Paul walked through on Parkes. Operator: At this time, we're showing no further questions. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Better Collective Annual Report 2025 Presentation Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Better Collective Co-Founder and Co-CEO, Jesper Sogaard. Please go ahead. Jesper Søgaard: Thanks a lot, and good morning, and welcome, everyone, to Better Collective's Full Year 2025 Webcast. My name is Jesper Jesper Sogaard, Co-Founder and Co-CEO of Better Collective. Normally, our VP of Investor Relations, Mikkel opens the call, but as he is currently out sick, I'll have the pleasure of doing so today. I'm joined today by our CFO, Flemming Pedersen, and I will provide today's business update in connection with our full year report that was disclosed yesterday. Please follow me to the next slide. We ask you to pay attention to this slide where we display our disclaimer regarding any forward-looking statements in today's webcast. Please turn to the next slide. Here you see today's agenda. I'll start by providing a business update, including some of the highlights for Q4 and full year 2025. Whereafter Flemming will take you through some of the financials before handing the word back to me for the key takeaways. As usual, we'll end the call with a Q&A session. Please turn to the next page. Let's dive into the highlights of report that for the first time is a combined Q4 report and a full annual report as we have moved the full year reporting forward by several weeks compared to earlier years. Please follow me to the next slide. Before turning to the details of Q4 and the full year of 2025, I would like to extraordinarily to take a step back. Over the past decade, we have successfully navigated multiple structural shifts across technology, regulation and market dynamics. Today, new themes such as AI and the emergence of prediction markets are increasingly shaping the industry landscape. Against that backdrop, it's relevant to provide a broader perspective on how Better Collective has evolved to reach its current position and what lies ahead. Better Collective has been built over more than 2 decades of continuous evolution in a fast-changing landscape. Our growth has come through a combination of organic growth and a series of acquisitions that have expanded our capabilities, strengthened our market presence and significantly increased our scale. Over time, this has enabled us to build a comprehensive ecosystem positioned at the intersection of sports media, sports betting and casino affiliation. The industry we operate in has never been static. I still remember the early shift from Yahoo being the leading search engine to Google gaining dominance, which was an early reminder of how quickly digital audience and traffic dynamics can change. Since then, regulation, technology and user behavior have continuously evolved and each structural shift has required us to adapt our model. We started as a small local affiliate business and quickly recognized that scale was essential to survive, which led to our transformation into a leading global aggregator. Over time, we also saw the strategic importance of owning stronger brands and direct audience relationships and gradually evolved into a global digital sports media group, while remaining anchored in affiliate marketing as our core monetization engine. Strategic acquisitions have played a key role in this journey, enabling us to establish strong positions in what are now some of the most important global markets, including North America, U.K. and Brazil, all while navigating changing regulatory environments. In parallel, we identified early that paid media would become an increasingly important acquisition and monetization channel, which led to the acquisition of Atemi and the subsequent significant scaling within the group. In essence, external change has consistently driven internal evolution at Better Collective. This long history of adapting to shifts in platforms, regulation and market structure has made adaptability a fundamental and embedded characteristic of the company. Importantly, we do not look back to anchor ourselves in the past, but to extract lessons from it. Experience across multiple market cycles provides perspective and informs how we prioritize investments, develop products and prepare for the next structural shift rather than the previous one. Today, we operate a scaled global platform with a very large audience reach, diversified monetization and strong positions across both sports betting and casino affiliation, supported by leading sports media brands and long-standing sportsbook relationships. Our positioning at the intersection of content, audience and iGaming is strategically relevant in an ecosystem that continues to converge and evolve. Looking ahead, the landscape will continue to evolve through AI, new wagering formats, regulatory developments and shifting user journeys. Our focus is, therefore, forward-looking. By learning from the past while preparing for what comes next, we believe we're strongly positioned for the next phase of industry development, supported by our scale, M&A track record, diversified business model and unique position at the intersection of sports media and iGaming. Moving back to 2025. The year has been defined by disciplined execution and structural strengthening of the business. We simplified our operating model, enhanced scalability across the organization and delivered on the full EUR 50 million efficiency program. This focus was about building a leaner, more focused and more scalable platform for long-term growth. We delivered on our full year guidance despite significant external headwinds, Brazil regulation, foreign exchange movements and sports win margin volatility all impacted reported performance during the year. Navigating through those factors while maintaining high profitability demonstrates the resilience of our diversified business. We are adding new layers to our ecosystem, strengthening engagement, data capabilities and partner value. The development within AI is on most companies and management's agendas these days. Let me also address this and its implications on Better Collective. AI is one of the most significant structural shifts in the digital landscape in decades. For Better Collective, it is first and foremost an enabler. We have embedded AI across product development, content optimization, data analysis and commercial optimization. Playbook is a clear external example, while internally AI is improving productivity, scalability and execution speed across the group. At the same time, we take a disciplined view on potential structural risks. We closely monitor AI-driven changes in search and discovery. Importantly, we remain unaffected by recent shifts and our traffic and commercial performance continue to demonstrate resilience, supported by strong brands and diversified acquisition channels. Most of our revenue base is structurally resilient. Within publishing, the existing recurring revenue share is not exposed once users have been referred to our partners. which provides a stable earnings foundation. Our advertising revenues are likewise not directly dependent on search dynamics as they are primarily driven by audience scale, engagement and direct commercial relationships. Paid media is also structurally robust. As a performance-driven, highly agile acquisition engine, we can dynamically allocate spend across channels and platforms if traffic patterns or user journeys shift. This flexibility significantly reduces platform dependency risk. [ esport ] in turn is built on strong direct community engagement and brand loyalty, making it inherently less reliant on traditional search and discovery channels. The area with the highest long-term exposure is future publishing growth, particularly related to new revenue share NDCs and CPA-driven NDC growth, where changes in search, discovery or user behavior could influence acquisition dynamics over time. We do not underestimate this risk. However, we have successfully navigated multiple structural shifts in the digital ecosystem over more than 2 decades and our diversified audience mix, strong brands and scalable platform give us confidence in our ability to adapt to future changes as well. My intention is not to suggest that AI does not introduce risks, but rather to emphasize that we are proactively addressing them and closely monitoring the development. Any potential impact is primarily concentrated in specific areas of our otherwise well-diversified revenue streams. which limits the overall exposure at group level. Another important emerging theme is prediction markets. During 2025, prediction markets have emerged as a structurally important addition to the broader sports and event-based wagering ecosystem. For us, this is an expansion of the total addressable market. Prediction markets introduce new product formats and attract incremental user segments while overlapping meaningfully with our existing sports and betting audience. Given our position at the intersection of sports content and wagering, we're structurally well positioned to support this evolution. We already have commercial relationships in place and are collaborating with relevant players. It's still early days with only a limited number of platforms live, and we expect increased competition in the coming year, which typically strengthens the aggregator position. Overall, we see prediction markets as a natural extension of our core business with the potential to diversify revenue streams and expand long-term growth opportunities. Lastly, we look forward both as shareholders and as sports enthusiasts to what is expected to be the largest World Cup in history. Importantly, for us, it will be played across some of Better Collective's core markets. Beyond its global appeal, the tournament represents a significant commercial opportunity. Historically, major football tournaments provide strong acquisition tailwinds, and we expect 2026 to be no different. The World Cup is likely to drive elevated user acquisition across our platforms as well as meaningful reactivation of dormant users and increased activity across our existing player base. This combination of new customer intake and high engagement levels supports both revenue growth and lifetime value expansion. Given our strengthened position with broader revenue mix and scalable platform, we believe we're well positioned to capture the incremental activity associated with the tournament. I'm extremely proud of the organization and my colleagues for navigating through another demanding period of change with focus and discipline. And I look forward to returning to a year of renewed growth in 2026. With that, let us move to the usual webcast. Please turn to the next slide. Overall, we are pleased to report a strong finish to the year with underlying growth and record profitability. Group revenue reached EUR 94 million in Q4, corresponding to minus 2% year-over-year and plus 2% in constant currencies. We were negatively impacted by a lower sports win margin compared to the year prior. Normalizing the sports win margin to a similar level as the year prior, revenue growth would have been 7%. Group costs were down 8% year-over-year, reflecting the disciplined execution and continued harvesting of synergies from acquisitions. We delivered record EBITDA before special items of EUR 37 million, translating into a 39% margin and growth of 10% year-over-year. In Brazil, we continue to see good activity levels in line with recent quarters with revenue above our expectations. However, the market remains affected by the marketing restrictions, which continues to dampen our ability to send new customers to our partners. In North America, revenue share amounted to EUR 7 million in Q4 as our revenue share database continues to ramp up, making it EUR 17 million pure revenue share for the year versus our own expectation of EUR 10 million to EUR 15 million. Value of deposits reached a record level of EUR 820 million in the quarter, up 6% year-over-year and 13% quarter-over-quarter. This was achieved despite being -- we continue to see strong momentum in Playbook, our AI betting solution, and I look forward to scaling the product across the U.S. and into additional geographies and platforms. Please turn to the next slide. Let me briefly put the 2025 financial performance into a longer-term perspective. Looking at the full year, revenue declined from EUR 371 million in 2024 to EUR 337 million in 2025, corresponding to minus 9% year-over-year. EBITDA before special items decreased from EUR 113 million to EUR 102 million or minus 10%. Since 2018, we have delivered a revenue CAGR of 35% and an EBITDA CAGR of 30% -- while 2024 and 2025 shows a temporary slowdown in organic growth, this must be seen in the context of significant headwinds from external factors such as foreign exchange headwinds on revenue of EUR 9 million as well as the regulatory transition in Brazil, which impacted EBITDA negatively by EUR 22 million and lower sports win margin volatility of EUR 17 million. These factors implied a combined headwind versus 2024 of more than EUR 40 million on EBITDA in 2025. Please turn to the next slide. Let me now turn to what we see as important part of the next chapter of growth journey driven by innovation with Playbook and FanReach. Starting with Playbook, we successfully introduced our AI-powered betting solution in 2025, just ahead of the NFL season. The product is designed to integrate naturally into how sports fans already consume content and make decisions. We have seen strong early engagement with millions of bets sent to our partners. Importantly, Playbook enhances user engagement and improves conversion strengthen the monetization of our existing audience while also opening new avenues for geographic expansion and product development. We will continue to invest in product refinement and international rollout to unlock further scalability. On the FanReach side, this is central to our advantage ecosystem. FanReach combines our proprietary first-party data with advanced audience segmentation, enabling more measurable, scalable and precise media solutions for advertising partners. FanReach was launched firstly in the U.S., utilizing data from selected brands, currently reaching more than 50 million sports fans across our network. We are moving beyond traditional performance marketing and adding a broader media monetization layer built on audience ownership and distribution strength. Together, Playbook and FanReach expand our monetization stack, deepen engagement and reinforce the structural scalability of the business. They are key building blocks for our next phase of profitable growth. Please turn to the next slide. On this slide, we show our new guidance for 2026 and the medium-term outlook. For 2026, we expect organic revenue growth in the range of 7% to 12%. On EBITDA before special items, we guide for growth of 8% to 18% or EUR 110 million to EUR 120 million. This reflects growth with lower cost base, continued focus on operational efficiencies and an expected stabilization of external factors compared to 2025. We also plan to execute an annual share buyback of EUR 40 million, in line with our capital allocation priorities and are confident in the long-term value creation potential of the business. At the same time, we remain committed to maintaining net debt-to-EBITDA below 3x, ensuring continued financial discipline and flexibility. Looking beyond 2026, for the 2027 to 2028 period, we expect continued positive organic revenue growth and target an EBITDA margin in the range of 35% to 40%. This margin ambition is supported by scalability in the business model, a maturing recurring revenue base, especially in the U.S. and increasing AI enablement across products and operations. Furthermore, we expect continued strong cash conversion and net debt-to-EBITDA to stay below 3x. With that, let us move to the next slide and over to Flemming. Flemming Pedersen: Thank you, Jesper, and good morning to you all. Please follow me to the next slide as we dive into the financials. Let me start by bridging the Q4 revenue development in more detail. We started from Q4 '24 revenue of EUR 96 million. During the quarter, foreign exchange negatively impacted revenue by EUR 4 million. Sports win margin volatility reduced revenue by a further EUR 5 million, reflecting more player-friendly results compared to last year. In addition, the regulatory transition in Brazil impacted revenue negatively by EUR 3 million. In total, these external factors reduced revenue by EUR 12 million year-over-year. This was partially offset by EUR 10 million of underlying operational growth across the business, mostly driven by paid media, talent-led media and sports media. As a result, Q4 2025, revenue landed at EUR 94 million, corresponding to a minus 2% year-over-year and positive growth of 2% in constant currencies. The key takeaway is that the underlying business continues to grow, but reported performance in the quarter was impacted by temporary external factors. As these headwinds normalize, the operational growth becomes more visible in the reported numbers. Please turn to the next slide. Let me briefly comment on recurring revenue as revenue share remains the backbone of our recurring earnings model and supports visibility and cash flow generation going forward. Revenue share continues to account for approximately 3/4 of our recurring revenue base. In Q4 '25, revenue share amounted to EUR 41 million out of total EUR 55 million of recurring revenue. Looking to the North American market, historically, a larger portion of the revenue share income has come from hybrid deals with a meaningful upfront component. Over the past 2 quarters, however, we see a clear transition towards predominantly pure revenue share agreements. This represents a meaningful improvement in earnings quality as pure revenue share provides stronger long-term visibility and cohort value. For the full year, we outperformed our expectations in North America. We expected EUR 10 million to EUR 15 million in revenue share, but delivered EUR 22 million. Out of this EUR 17 million was pure revenue share. Importantly, this number would have been even higher in constant currencies, highlighting the underlying strength of the region. In short, North America is scaling with an improved revenue mix, strengthening the recurring revenue and compounding nature of our earnings base. Please turn to the next page. Let me now bridge the EBITDA development in the quarter. Lower revenue year-over-year reduced EBITDA by EUR 2 million, as I just spoke to. In addition, we deliberately increased paid media investment, which impacted EBITDA by EUR 5 million downwards. This reflects continued confidence in the long-term return profile of our paid media activities, where we, to a large extent, spend to harvest the revenue later through revenue share agreements. However, these effects were more than offset by EUR 10 million in cost reductions, driven by the execution of the EUR 50 million efficiency program and broader structural improvements across the organization. And a lot of these cost savings relate to the synergies from previous acquisitions. As a result, EBITDA increased to EUR 37 million in Q4 '25, representing a 10% growth year-over-year and the highest quarterly EBITDA in our company history. This clearly illustrates the operational leverage in the model even in a quarter with slightly lower revenue, external headwinds and increased growth investments, disciplined cost execution enabled us to expand profitability and deliver record EBITDA. Please turn to the next slide. Let me now turn to 2 of our main KPIs, net depositing customers and value of deposits. As expected, NDC levels in '25 were impacted negatively by the regulatory transition we saw in Brazil. The marketing restrictions on welcome bonuses continue to deliver -- continue to limit our ability to send new customers to partners in that market, which is reflected in lower reported NDCs. However, and importantly, Q4 '25 did not show a return to growth quarter-over-quarter of 9%. Also in Q4, value of deposits reached an all-time high of EUR 820 million, showing growth year-over-year of 7%. This is a very strong outcome, especially considering the regulatory headwinds in Brazil during the year. Deposit values are reported quarterly and are not accumulated, meaning this represents actual quarterly activity. The fact that we reached a new record despite regulatory constraints clearly demonstrates the strength and loyalty of the users that we have in the revenue share databases. In combination, the graphs illustrates that while new customer intake has been temporarily impacted, existing cohorts remain highly engaged and continue to generate increasing deposit activity. Furthermore, it signals that we are -- that we continuously manage to send higher-value customers to our partners. This supports the durability of our revenue share accounts and underlines the quality of earnings. Please turn to the next slide. Now let's focus on our funding position and our considerations regarding capital allocation. From a financing perspective, we also took an important step in 2025 that further strengthens our financial position. During the year, we signed a new EUR 319 million 3-year committed club facility with our banking partners, including an EUR 80 million accordion option as well as a new EUR 50 million dedicated M&A facility. This extends our financing maturity profile through October 28 and significantly enhances our financial flexibility. Access to long-term committed financing on attractive terms has been a structural advantage for Better Collective since the IPO in 2018 and has been a strong facilitator in our M&A strategy. It has allowed us to act with speed and certainty when strategic opportunities arise while maintaining a balanced capital structure and disciplined leverage profile. In a fragmented and fast-evolving industry, the ability to combine strategic M&A with stable financing is a clear competitive advantage. Moving to 2025. We guided free cash flow at the low end to be EUR 55 million and landed at EUR 38 million. The deviation was driven by short-term working capital timing effects of EUR 15 million shifting into 2026. We also invested in new significant partnerships in Q4, where we'll see the most of the upside from 2026 and onwards. These deviations are mostly timing and growth related in nature and do not reflect any structural change in the underlying cash generation profile in the business. Cash conversion for the year ended at 92%. Board of Directors and executive management has formalized our capital allocation framework, which is as follows: First, we prioritize deleveraging when net debt-to-EBITDA exceeds 3x. Second, we invest in high-return organic initiatives and selective value-accretive acquisitions. Third, we return excess capital to shareholders, primarily through share buybacks and secondarily through dividends. Overall, we believe this balanced framework supports our focus through many years. For 2026, the Board of Directors has decided on an annual share buyback of EUR 40 million, in line with this framework. Please turn to the next page as I hand the word back to Jesper for the key takeaways. Thanks. Jesper Søgaard: Thanks, Flemming. Let me conclude with the key messages. 2025 was a year of disciplined execution and structural strengthening of the business. We delivered on our full year guidance despite significant external headwinds. In North America, revenue share ramp-up exceeded expectations. Innovation accelerated with Playbook and the continued build-out of FanReach. Looking ahead, 2026 marks a return to growth. We expect the World Cup in men's soccer to be the largest in history and played across some of our core markets to act as a big catalyst. Lastly, prediction markets is expanding our total addressable market and is becoming a clear tailwind despite it being early days. I'm proud of the organization for navigating a demanding period, and we look forward to delivering renewed growth in 2026. With that, we are happy to take your questions. Jesper Søgaard: [Operator Instructions] Our first question comes from the line of Sebastian Grave of Nordea. Peter Grave: Congrats on a strong result. And also thank you for a very comprehensive presentation. Now it's encouraging to see that you expect to return to growth here in '26 and with further top line expansion beyond that. I know you don't provide concrete numbers on the midterm target, but I'm going to try to push my luck anyway here. So the 7% to 12% growth in '26 is led by, easy comparisons in Brazil and from sports margins. And you also see significant tailwinds from a strong sports calendar here in '26 and prediction markets, as you highlight, Jesper. So I guess my question is, is this, i.e., 7% to 12% growth, is this as good as it gets? Or do you also believe that you're able to reach similar growth levels beyond '26? Jesper Søgaard: Yes, it's a bit boring, but obviously, we will not sort of comment further on the targets for '26 and 2028. But looking at the coming years and also a bit to the second half of '25, where we have seen the underlying growth in the business, we really feel we are on track to deliver this growth. And we're sort of further out feeling confident about continued organic growth. But for us, it's too early to start to put numbers to the outer years. Peter Grave: I guess it's not a big surprise, but I tried at least. My second question is on the midterm margin guidance, which you also reiterate here, 35% minimum from '27 kind of big leap from the implied margin here in '26. So how do we get to that number? And I mean, if this is just a question about scalability, well, then I guess the implied growth rates you give here for '27 is quite upbeat? Flemming Pedersen: Yes. I think the guidance, Flemming here, I can try to answer that. The guidance that we give 35% to 40%, you can say, reflects, of course, the scale that we see in the business, mentioning Jesper touched upon some of the growth areas that we see with Playbook, the AI bot that we have launched, FanReach speaking into the advantage and increased CPM revenue. And then you can say the scale from that is, of course, also reflects our opportunities for investing further to mention one is paid media, where we also can, you can say, invest part of the increased revenue into further growth when we see opportunities and of course, also in other growth areas such as talent-led media, which comes with a bit lower margin. So I think the scale is one thing. And with these, you can say examples, we see a higher margin. Actually, in Q4, we saw a 39% margin. So it's a scale that will drive this on a much lower cost base that we have seen in past years. Peter Grave: Okay. And just the last question from my side on the EUR 8 million tax effects you bake into the guidance in '26. I guess it's fair to assume a similar effect on top in '27, given the delayed impact on sports betting taxes in the U.K. Now I guess my question is, is this a gross or a net number that you provide? Meaning do you assume any mitigating actions from operators such as lower odds, et cetera? Or this is just sort of a mechanic gross impact from higher taxes? Flemming Pedersen: It's a number that we have, I would say, tried to assess as a net number also with mitigating factors because there will likely also be market factors such as lower bidding prices within paid media in the Google auctions. And you can say, in general, likely, you can say, lower competition. So there are also counteracting factors where we have a good position. So this is a net number that we have tried to assess and also continue that into the outer year guidance. Jesper Søgaard: [Operator Instructions] Our next question comes from the line of Hjalmar Ahlberg of Redeye. Hjalmar Ahlberg: Just wanted to check a bit on -- if you look at the Q4 numbers here, we see that CPM and sponsorship saw good growth at least what I could see initially here. Just wanted to hear if for the CPM part, if you already see kind of positive impact from Advantage there or what drives the CPM improvement? Flemming Pedersen: Yes. So on the sort of CPM and overall advertising developments, yes, we are starting to see effects of optimized ad campaigns and formats that is sort of part of the Advantage ecosystem. And as we already -- as I alluded to in the speak, is that we now have launched here in '26, the FanReach part of Advantage. So yes, we are gradually incrementally seeing the effect of Advantage, which we also expected that, that would be the way we could tell it in the numbers, incremental and gradual development. Hjalmar Ahlberg: Okay. And also listening to the Playbook here, it sounds like you are getting ready to expand the product internationally here. Is this something you will do during the World Cup? Or is it a broad expansion or is it more gradual expansion in new markets? Flemming Pedersen: So the view we take on this is that we obviously look at core markets and where the product would be most relevant and have the biggest impact. And that guides decisions for the launch. And yes, we have obviously in mind that the World Cup is a good event to have a product like a Playbook out. So yes, we are assessing where we will see the biggest effect from launching Playbook and have the World Cup in mind. Hjalmar Ahlberg: And then just a question on your efficiencies here. So really strong progress in cost savings during the year. Do you see more efficiency from here? Or is it more that you have the new cost base now and then the next step is maybe more to invest in growth? Flemming Pedersen: I think we are, of course, constantly driving efficiencies throughout the business, and now we have a new framework. So this is what we will go with. And you can say the primary focus is now to scale revenue from here on that lower cost base. So hence, also why the higher margin guidance for the outer years. So it's -- yes, it's a constant work in progress, but I think the big chunk we have behind us. Hjalmar Ahlberg: And then just a final one. I don't know if you have a comment on that, but looking at the kind of seasonality for the year, I guess, World Cup means that Q2, Q3 could be a bit more seasonally stronger than normal. But if you have any flavor on the seasonal effect over the year, it would be interesting to hear. Flemming Pedersen: No, you're correct on that, that the World Cup will sort of support Q2 and Q3. And then as usual, Q4 will be the quarter with the highest activity for our business. Jesper Søgaard: I will now pass to the speakers for questions via the webcast. All right. And I'll be taking those. So yes, there in Danish, I'll try and just sort of get to the essence of the questions and read that out loud. Yes. And it has always been already been answered to some extent because it relates to the margin profile in '27 and '28 and the structural drivers. And essentially, I think we will not -- like Flemming covered that just before. So I'll move to the next question, which relates to the continued buildup of our revenue share database, in particular in North America, whether we can quantify how big a part of the future EBITDA growth in '26 to '28, which is expected to come from already existing users rather than new depositing customers. And no, we are not quantifying that. But I think as the value of deposits show, there is a very high quality in the database and players already there. So in general, a significant part of the revenue and earnings generated are stemming from our databases, existing databases. And then a last question. Elon Musk implemented a new policy on X, which limited gambling affiliation marketing. Please comment if you noticed any impact on your partnership with X for Playbook. And we have seen no changes. And with that, I think we are at the end. So thank you very much for showing interest in Better Collective, and we wish all of you a very nice day. Thank you. Bye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, and welcome to the investor and analyst call for LSEG's 2025 Full Year Results. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to David Schwimmer, Chief Executive Officer, to open the presentation. Please go ahead. David Schwimmer: Good morning and welcome to our 2025 full year results. I'm joined by our CFO, MAP; and our Head of IR, Peregrine Riviere. We have delivered another year of strong performance and rapid strategic transformation for the group. Revenues grew 7.6% with all businesses contributing positively and Data & Analytics accelerating. Our focus on driving efficient and scalable growth delivered 210 basis points of margin expansion, a little over half of that organic, taking full year EBITDA margins north of 50% for the first time. Adjusted EPS grew 16%, reflecting our disciplined execution throughout the P&L. We continue to invest in future growth with the Post Trade Solutions transaction in Q4. We continue to deliver strong cash conversion with GBP 2.8 billion of dividends and buybacks in the year. And today, we've announced our plan to execute a further GBP 3 billion of buybacks over the next 12 months. We see a great opportunity to invest in our own shares during this market dislocation. This strong performance is a direct result of the strong execution of our long-term strategy and the rapid transformation we're driving across our business. November's Innovation Forum provided insight into how we are innovating across LSEG as we deliver on our AI strategy. We are already seeing the fruits of that innovation. Our LSEG Everywhere AI data strategy is embedding our trusted data into the AI tooling of financial services. It's only been a few months since we launched our MCP server, but early demand has been very strong. I'll give you some numbers on that later. We're also innovating to capitalize on the accelerating pace of change in capital markets, building new platforms for growth in digital assets. We launched our digital markets platform last year and, at the start of this year, successfully piloted tokenized cash settlement via our new Digital Settlement House. The strategic partnership with 11 leading banks we announced at our Q3 results is accelerating growth and helping us unlock the multiyear opportunity in Post Trade Solutions, a great example of our strong customer relationships and partnership-led approach, creating unique opportunities for growth. Let's take a step back and look at our 2025 performance in the context of the multiyear delivery of our strategy. We have achieved a lot over the last 5 years. Financial performance has been very strong with organic growth [Technical Difficulty] improving significantly. [Technical Difficulty] all of our businesses. Across the whole group, we've driven significant revenue and cost synergies, built better products and better infrastructure, integrated the operations and unified the brand and culture. This is all still work in progress. And every day, we discover new ways to transform our business. But right now, I can see more growth opportunity in front of us [Technical Difficulty] trading, settlement and depository have huge potential for future growth. But let me take a step back. Right now, the market seems to be taking a view on the impact of AI on our business. We do not agree with it, and all fact-based evidence would indicate the negative market narrative is wrong. We feel as confident today about our products, our partnerships and our prospects as we ever have. [Technical Difficulty] entering into enterprise agreements, run some of the most rigorous procurement, risk and technology processes in any industry. They understand exactly what our products do, they know how their own workflow needs are evolving with AI, and they know the role of our data, analytics and infrastructure in their operations. [Technical Difficulty] heavily regulated and risk-averse customers are going to rely on outputs compiled from the public Internet. That is how much you should be worried about. But more importantly, let's look at the 98% of group revenues that are not from public data. I'll cover the rest of D&A in detail later. But in a nutshell, these revenues are derived from [Technical Difficulty] that are proprietary, used in regulated environments [Technical Difficulty] intelligence and particularly World-Check is an industry leader. Two things that are not well understood about this business. First, its value goes far beyond the thousands of official sources. Our customers make 200 billion checks a year across 700 million of their own end customers. And once anonymized and aggregated, we can use the decision data to improve our own detection and matching capabilities in a huge and constantly evolving content set. World-Check is the leading product in this space and we are able to continue to improve the product to extend that lead through what is in effect a massive and constant flow of customer contributions. Second, history is important. Customers need to justify decisions they made about counterparties going back decades, for example, in high-profile tax or fraud cases. We have all that history with the information that was available at the time. AI cannot create that past record for customers. And moving to Markets, 40% of our business. AI is a tailwind here, too, as more data consumption drives more insights, leading to more trading volumes and ever-growing demand for risk management. So our positioning is strong, and our strategy is working. I'll say more in a moment about our strong commercial and strategic progress and the opportunities we are seeing with AI. But first, I'll hand over to MAP to discuss our financial performance in more detail. Michel-Alain Proch: Thank you, David, and good morning, everyone. It has been a very strong year of financial execution for LSEG. So first, some headlines, and then I will unpack this all in more detail. Organic growth was 7.1%, slightly above the midpoint of our guidance and another year of organic growth above 7%. EBITDA margin improved by 110 basis points underlying plus another 100 from the Post Trade Solutions transaction. We delivered this performance through a significant improvement in our labor cost ratio. And this strong growth, combined with operational leverage, translated into EPS growth of over 15%. So that was the P&L. Now moving on to cash and capital allocation headlines. Capital intensity continues to trend down, as guided, but do note that we are still investing in our business at least twice the rate of our peers. The dividend is increasing by 15%, in line with EPS, and we doubled the rate of share buybacks in 2025. With the growth in cash flow and the reduction in share count, this translates into 14% growth in free cash flow per share, which is actually 60% over the last 2 years. In summary, we are growing our business strongly. We are investing in our future growth, we are generating significant free cash flow, and we are being very decisive and agile in our capital allocation. So let's cover revenue over the next few slides. On this slide, you can see that our growth is very broad-based with Risk Intelligence continuing its double-digit momentum and Markets growing high single digits against a huge year in 2024. FTSE Russell continues its revenue trajectory and D&A accelerated on 2024. As you know, I like to look at our subscription businesses as a whole, and here, we have achieved 6% of growth for the year, as we guided to. We will start with D&A in more detail on the next slide. We achieved good growth across all lines in D&A. In Workflows, we completed the migration from Eikon, the largest ever of its kind in financial markets. As a result, clients are using the platform more frequently, and we continue to innovate and improve it. In Data & Feeds, we maintain our strong momentum. We are adding significant new data sets, particularly in private markets, and we have launched our LSEG Everywhere strategy for AI-ready data. As David will cover, the initial uptake here is very strong. Our Analytics business is well advanced on its acceleration journey. In partnership with Microsoft, we have driven a strong acceleration through the Analytics API and have just launched the Model-as-a-Service platform with our first partner bank, Societe Generale, onboarding its own models. Overall, D&A is posting a 5% organic growth, accelerating versus 2024, as communicated during our half year results. Turning to the other subscription businesses, we continue to see strong momentum and healthy demand. In FTSE Russell, we have seen balanced growth between subscription and asset-based fees, and we expect the growth rate to improve again in 2026. Risk Intelligence had another very strong year. World-Check, which represent the bulk of its revenue, continues to innovate from its position as market leader, launching World-Check On Demand for real-time updates. This platform is increasingly deeply embedded in customers' regulated workflow. Our Digital Identity & Fraud business accelerated in 2025 with transaction volumes up 16%, and the launch of our global account verification platform. I will spend a little longer on this slide to talk about some new KPIs we are introducing for 2026, there will be an addition to ASV. And from 2027, we will report only these new KPIs and we will be retiring ASV. We are doing this to give investors more insight into our commercial progress and with measures that are less volatile than ASV. But let's come back to ASV. As you remember, I previously guided to 5.8% growth at the end of Q4, and we achieved a bit better than this at 5.9%. This reflects a very strong end to the year, which set up well for 2026. And now on the new measures. Before beginning, I shall tell you that they cover exclusively our 3 subscription businesses: D&A, FTSE and Risk Intelligence. We have given you the baseline here. Gross sales represents the annualized total amount of new business over the last 12 months, so not contract value but more annual recurring revenue across our subscription businesses. We performed strongly in H2 2025 with a rolling figure increasing around 11% over H1. On revenue retention, we already mentioned that this typically sits in the low to mid-90s depending on the product. We are formalizing that today at 92.4% on a consolidated basis, you can see that it's pretty much stable on H1. And finally, we are introducing a KPI that measures the level of innovation or newness in our product set, the new product vitality index, or NPVI. This measures the proportion of revenue from products that are new or enhanced in the last 5 years, giving you insight into how our investment into product is translating into revenues. Taken across our subscription businesses, this figure sits at a very healthy 24%, growing strongly against 2024 and H1 2025. A significant proportion of this relates to Workspace, as you would expect, and reflects the substantial enhancements to the customer experience that the new product gives to customer. In other business lines, this index sits more in the mid- to high single-digit range, which we expect to increase over time. Finally, we plan to give these KPIs, including ASV for 2026, twice a year as we see little benefit in reporting them quarter-to-quarter. Turning now to our Markets businesses. These are incredible strong franchise, which I believe do not get the attention they deserve, and they continue to deliver exceptional performance year in, year out. In Fixed Income, as I have already reported, Tradeweb had another very strong year with continued high levels of activity across all main asset classes backed up by great execution. And in Foreign Exchange, we recorded our best performance in recent years with 7.5% growth. In OTC Derivatives, our Post Trade businesses went from strength to strength, and David will detail them in a few minutes. Finally, and for ease of presentation, we have shown Equities on this slide with some other lines from Post Trade. Our Equities business had a solid year with revenue up 5.1%. We launched our Private Securities Markets with the first transaction taking place right now, and we also went live with our Digital Markets Infrastructure, built in partnership with Microsoft. So now on to EBITDA and the rest of the income statement. We translated the 7.1% organic top line growth into 11.8% growth in adjusted EBITDA, 14.3% growth in AOP and, finally, 15.7% growth in EPS. And as you can see from the main table, EPS growth was 19.4% on a constant currency basis. This is truly operating leverage at work, plus very good control in financing, tax and our share count. Let's take each of those levers to improve earnings in turn. Number one is cost control with total OpEx up only 3.5%, half the rate of revenue growth. Within this, you can see that we have really managed third-party services very effectively, down 11.6% year-on-year. This is a core part of our labor strategy. Total headcount is roughly stable, a small decrease of 700, with ratio of internal employees rising to 75%, driven mostly by engineering. As previously mentioned, this is not just about cost. We have seen significant upskilling and improvements to productivity as we build a true engineering culture. As usual, we show the margin improvement graphically on this slide. Once you adjust for FX at either end, the improvement year-on-year is 210 bps. 100 of this relates to the SwapClear revenue surplus agreement, and that leaves 110 bps of underlying. Actually, the real underlying improvement was 140 bps, taking into account the minus 30 bps of the disposal of our Euroclear stake and its related dividend income stream that ceased. On net financial expense, we saw a slight reduction year-on-year. The underlying position was broadly similar. But as reported at H1, the numbers include a GBP 23 million credit from the bond tender offer we completed in March and a one-off gain of GBP 12 million following the discontinuance of a U.S. dollar net investment hedge. We currently expect net financial expense to be in the GBP 260 million to GBP 270 million range for 2026, reflecting the effect of refinancing existing low coupon debt in 2025 by higher rates in 2026 and, obviously, the new buybacks announced today. On the next slide. Our tax rate came in at the lower end of our guidance range, and we expect the same range for 2026. So if you take all of those lines together, this is giving 15.7% growth in AEPS for the year, more than double the rate of organic revenue growth. Over the last 4 years, we smoothed out some FX impacts along the way. That's a steady compound growth rate of 11.5%. And as I said last year, we expected nonunderlying costs to come down in 2025, and they did. Integration costs fell by 41% as we came to the end of the formal Refinitiv process, and we expect them to come down again in 2026 as the other areas of restructuring continue to reduce. Now turning to cash flow. This continues to be another highlight of the business model. We posted a record free cash flow of GBP 2.45 billion. As I'm sure you remember, we guided at, at least GBP 2.4 billion at constant rates. And we beat that at current rates, absorbing the current weakness of the dollar. We are posting this very strong result despite a negative variation of working capital of GBP 400 million. There are three main reasons for that. First, a reduction of around GBP 90 million of the pay accrual for our SwapClear partners following the reduction of the revenue share; second, an GBP 80 million reduction in creditors related to the net treasury income, reflecting lower balances and interest rates; and third, we triggered around GBP 150 million of payments that we've made earlier than usual to suppliers to crystallize better procurement conditions before year-end. Anyhow, going forward, typically a working capital outflow of GBP 100 million to GBP 150 million is a safe assumption to model. Given the ongoing buybacks, this 12% growth in free cash flow translates into 13.6% growth in free cash flow per share. Turning now to capital allocation on the next slide. Against the GBP 2.4 billion of free cash flow, we deployed GBP 3.5 billion across shareholder returns and M&A activity. Total dividends were just over GBP 700 million, and we are proposing a final dividend of 103p today, up 15.7%, in line with our EPS growth. We have deployed a net GBP 700 million on the Post Trade Solutions transaction that I already mentioned. And finally, we have had a record year for share buybacks with GBP 2.1 billion completed in the year. This demonstrates our very active approach to capital allocation and reflects our strong view of the deep value inherent in our own shares. Even with this very active year, we ended 2025 with leverage at 1.8x net debt-to-EBITDA, still slightly below the midpoint of our target range. So now let's look forward to 2026 and beyond. We are very well positioned as we enter 2026 with a record fourth quarter for gross sales in our subscription businesses and very healthy volume growth already at Tradeweb and our Post Trade businesses. We are guiding to organic revenue growth of 6.5% to 7.5%, the same as in 2025, but importantly, with a steady acceleration in our subscription businesses as I have mentioned before. Within this, we also expect our D&A business to accelerate. On margin, we expect 80 to 100 bps of improvement on a constant currency basis. So if you take the midpoint, 90 bps, you will find 60 bps to complete the 250 bps improvement that we committed to for '24, '25, '26 and an extra 30 bps, which comes from the further decrease in revenue surplus share terms at SwapClear. For CapEx, the steady downward trajectory in intensity will continue, and we are targeting around 9.5% for 2026. And finally, we see this all translating into at least GBP 2.7 billion of free cash flow. And as I mentioned earlier, the tax guidance remains unchanged at 24% to 25%. On this slide, I want to take a slightly longer-term view on how our cash generation and capital allocation has developed over the last 4 years and into 2026. The most important message here is how purposeful and consistent we have been in deploying capital to build a better business. We have maintained high levels of capital intensity to invest organically in the business. We have grown the dividend strongly. We have done regular bolt-on M&A to strengthen our offering to customers. And then, when appropriate, we have returned surplus capital through share buybacks. This approach has supported strong top line growth, more innovation, improving margin and strong shareholder returns. Our plan for 2026 continue that consistency. CapEx will be pretty consistent as an amount, but reducing to around 9.5% of revenue in terms of intensity. Free cash flow will grow strongly to at least GBP 2.7 billion. Dividends will continue to go up in line with earnings. And we remain active in our search for good M&A targets depending on fit and value. And then today, we announced a further GBP 3 billion buyback over the next 12 months. So you can assume, given we have already done over GBP 400 million this year, that there will be a total of around GBP 3 billion in 2026, and then we will complete the new commitment in early 2027. And finally, we are updating our medium-term guidance today, so I mean from 2027 to 2029, after several years of strong growth and margin delivery. On revenue, we are confident of mid- to high single-digit growth, including acceleration in our subscription businesses. So after the 6% reported in 2025, you can think of it at around 6.5% for 2026, heading to 7% for 2027, as I mentioned last year. On EBITDA margin, we will carry on improving our productivity, and we are now guiding to a cumulative improvement of circa 150 bps over the period 2027 to 2029. We will drive this through continued strong revenue growth, investment in technology and other ongoing operational efficiencies, but while allowing room to reinvest in future sustained growth. On CapEx, we expect intensity to come down to circa 8% in 2029. So think of that as the absolute CapEx figure staying relatively steady at GBP 900 million, GBP 950 million while revenue continues to grow. And then finally, on cash flow, we are moving to a free cash flow per share metric, and we are guiding to double-digit compound annual growth in this important figure for the years to come. And now I will hand over to David to take you through our strong strategic progress. David Schwimmer: Thank you, MAP. Let's start with the obvious topic, AI. As we discussed at the Q3 results and the Innovation Forum, we're benefiting from our unique position at the forefront of AI-driven change, and we are excited about what that means for our customers, our people and our future growth. You've seen these three pillars before: trusted data, transformative products and intelligent enterprise. Over the next few slides, I'll update you on how we're bringing this to life today for our customers and our organization. We have a great starting point, and everything we are doing is only making us stronger. As a reminder, roughly 90% of our Data & Feeds revenues come from proprietary data and solutions. Our customers are using this data to power business-critical activities in highly regulated environments where accurate, timely, trusted data is nonnegotiable. It is often deeply embedded in transactional workflows. Our breadth and depth are unmatched. Alongside proprietary data sources and exclusive licenses, we also have a network of more than 40,000 contributors proactively contributing data, continuing to enhance the value of our products through strong network effects. The result is comprehensive industry standard data that we are constantly updating. That puts us in pole position to take share and drive growth as customers are able to interrogate and analyze more data at speed using AI. As I said at the beginning of the call, our customers can see that our solutions are more valuable in an AI world. In the fourth quarter of last year, global investment banks and asset managers, all highly sophisticated institutions like Citi, Bank of America and Standard Chartered, signed GBP 1.9 billion of long-term data agreements with LSEG. These organizations are securing their access to our data for up to 7 years invariably in contracts that step up in value over time. And they span a range of different segments: global investment banks, commercial banks, alternative investment firms. We meet their needs and they are confident we will continue to do so across Workflows, Data & Feeds, Risk Intelligence and FTSE Russell. Only LSEG has this breadth of offering. It is a perfect demonstration of why these businesses are so valuable together. The demand for and consumption of data is accelerating, and we are facilitating that growth. The history of data consumption growth is the history of technological advancement, the Internet, fiber networks, mobile, the cloud and now AI. The chart on the left-hand side shows how the amount of data or messages coming through our real-time data feed continues to grow at pace, exceeding 15 million new data points a second in December. This represents a 4x increase in real-time data over our network in the past 10 years, a trend that we expect to continue. With our direct connection to nearly 600 exchanges and venues, and our ongoing investment in technology and capacity, we are strengthening our market leadership. I often call this business the market infrastructure for all market infrastructure. It is live data delivered over our own infrastructure. AI does not and cannot replicate or replace this. If anything, it creates more demand for this data. On the right, you can see the demand for our Tick History data, an evolving data set currently spanning 100 million instruments over 30 years. It's proprietary data that links today's price moves with those of the past. This is a critical point that people often don't get. This data is valuable because it ties 30 years of market moves to the present day. And with hundreds of billions of new data points added each day, without constant updating, this Tick History becomes less and less useful. We have the past, and we have the present. That is what creates the value. No one else has the past like us, and we are the leading provider of the present. Customers find this combination highly valuable with over 5 million customer requests a month. I'll say it again, AI does not and cannot replicate or replace this. It will just drive more demand, customer demand for data that is accurate, up-to-date and comprehensive, verified and auditable is significant. That is where LSEG sets the standard. And by making it easier for customers to access and consume this data through new cloud distribution channels or AI partnerships, we're likely to sell much more of it. And we are only at the beginning of that journey. Increasingly, customers want to use our data in AI applications, opening up a new distribution channel. We're embracing that through our LSEG Everywhere strategy, delivering AI-ready data to any environment in which our customers want to work. Since we last showed you this slide, we've added a new partnership with OpenAI, becoming the first financial data provider to enable customers to access their data through ChatGPT. You should expect us to enter into further partnerships in 2026 and beyond where there is customer demand and strategic logic. These channels have only recently become available, and we are seeing very strong customer interest and engagement. Over 60 financial institutions have connected to our MCP servers directly or via one of our AI partners, connecting hundreds of users. And we have a strong pipeline of customers awaiting connection. Many of these users are new users at existing customers, by which I mean the bank or asset manager already had an LSEG data license, but these particular teams or individuals were not users of our data, proof that our AI partnerships are increasing reach within existing customers. Our AI partnerships are also expanding our distribution footprint, attracting new customers through the accessibility and ease of natural language. Already hundreds of prospective customers have attempted to access our data via our AI partners. Since no one can access our data without an LSEG license, this is creating valuable sales leads. Once connected, customers are engaging with our data and content on an ongoing basis, driving rapid growth in data consumption through our AI partnerships. This is a great start to what we expect to be an important distribution channel for our data and also a natural mechanism for cross-selling. As we make more of our data available via MCP, the user, whether that is a human, a model or an agent, will naturally discover the full breadth and depth of our data across Data & Analytics, Markets, FTSE Russell and Risk Intelligence. We're moving quickly down this path, investing in our AI-ready data and making more of it available through MCP connectors and multi-cloud environments. We have a large pipeline of data coming to MCP, as you can see on the left. We're also supporting customers in their migration to cloud-based alternatives, and that is driving meaningful new sales and displacements. Platforms like Databricks and Snowflake are helping us close big new contracts and drive increased sales of some of our most popular products like DataScope. And we keep investing in expanding the data we offer, whether that's in low latency feeds, ETF data or private markets. Turning to the second pillar of our AI strategy, transformative products. The success of the migration to Workspace means our customers are now in a modern, modular, customizable platform where we enhance functionality week in and week out. That gives us a strong foundation from which to launch transformative AI-enabled products that bring speed, accuracy and conviction to customers' workflows. As a reminder, 70% of Workflows revenue comes from trader licenses and activity. These users, humans today, maybe agents tomorrow, need real-time data, a network community and integration with a range of pre- and post-trade tools. This is regulated workflow with transactional features embedded. And to address a question that comes up from time to time, what if the number of human traders is significantly reduced by AI, could that hurt our Workflows business? We don't see that happening. But also remember that over many years, our Workflows business has been moving away from a per seat model towards one focused more on data consumption or enterprise agreements. And also if the scenario is that human traders are replaced by AI agents, then each agent will effectively be a licensed LSEG customer. In an AI world of agent-driven workflows, we will have more users consuming more data. Workspace is getting better and better with hundreds of updates every year. To name a few recent enhancements, we extended trading capabilities through the expansion of Advanced Dealing. We streamlined banker workflows with the integration of DealWatch. And we enhanced our leadership in news with a dedicated app for Wall Street Journal and Dow Jones News. This is driving real, measurable improvements in engagement. As you can see on the right-hand side, investment management and trading users are accessing roughly 25% more applications than a year ago. Let's turn now to the Microsoft partnership. We made a lot of progress in 2025, and that pace of delivery continues to accelerate. On Workflows, to continue from the previous slide, our Teams-based collaboration tool, Open Directory, is live with accounts across 3 customer communities: FX, commodities and execution. And we have more than 50 accounts in our onboarding pipeline. We're also piloting natural language functionality in Workspace interoperable with Teams and other Microsoft products. And Workspace Deep Research provides extensive AI-driven research and analysis, leveraging the full power of Workspace data. We expect to roll out both AI tools in the first half. In Analytics, we've seen great traction and revenue growth since launching the API with over 50 customers adopting the platform. And just a few days ago, we launched Model-as-a-Service with Societe Generale as the launch partner distributing its own models through our API. We're seeing great progress in Data-as-a-Service or DaaS. We are accelerating the migration of data into the new integrated architecture and expect to have almost all data sets onboarded by the end of the year. This is increasing our speed to market for new products and driving significant customer demand to access these data sets, whether via Fabric or other platforms like Snowflake and Databricks. And last point, we have launched our Digital Markets Infrastructure powered by Microsoft Azure, another growth opportunity as tokenization takes off. Turning now to the final pillar of our AI strategy, deploying AI across our own business, accelerating innovation and improving customer outcomes. I've mentioned before that we are resolving customer queries much more quickly and efficiently through our adoption of an AI-powered question-and-answer application. In December, we made that tool available directly to customers and has had significant traction already, and it will only get better. Adoption of AI-powered workflows is also driving improvements in efficiency, quality and timeliness of data ingestion. We spoke about this at November's Innovation Forum, 9x faster content extraction, 52% reduction in data quality issues and 11% increase in productivity of our engineering teams. This all contributes to the ongoing margin expansion that MAP highlighted earlier. I'm going to turn now to our Markets businesses. You've heard me say this before, but the whole premise of LSEG is this. In financial markets, data has become infrastructure. Access to data is just as essential as access to trading infrastructure. That's why these businesses belong together. Electronification of markets, growth in data-driven decision-making and more sophisticated risk management are all blurring the lines between markets and data activities, deepening their interdependency. This is driving multiyear structural growth in our transactional businesses, delivering a 5-year CAGR of over 13%. The Markets business delivered further strong growth in 2025 with double-digit growth in clearing revenues across interest rate swaps, FX, CDS and repos. Tradeweb also extended its leadership in trading of interest rate swaps, increasing its share by 180 basis points. Our FX venues saw their strongest volumes ever. There's sometimes a misconception that growth across our Markets platforms just happens. Nothing could be further from the truth. The growth we're delivering today is the result of innovation and customer partnership going back years, often decades. We build solutions that solve customer pain points and meet their critical needs, and we become deeply embedded in their core businesses. In that vein of innovation and customer partnership, we're innovating rapidly in digital markets, building the transaction and settlement infrastructure our customers will need as they increasingly adopt digital assets and tokenize traditional asset classes. As you can see in the lower right quadrant of the slide, we are doing a lot in this space. But it is a big topic, so we will tell you more about it later in the year. Another good example of our innovation and partnership in Markets is our success in the clearing of OTC products. The growth in this business over the last 15 years is extraordinary, a threefold increase in member banks, a 200-fold increase in clients and tenfold growth in notional value cleared each year to roughly $2,000 trillion. We have become the global clearing destination of choice for interest rate swaps, FX and CDS. Now in partnership with 11 global banks, we're going after the opportunity in uncleared derivatives, which is roughly the same size as the cleared space. Our members and clients want to manage their whole book in one place, bringing efficiency to their capital and margin requirements and materially simplifying and standardizing processes. We are uniquely placed to do that given the assets we have built and brought together under one roof, and we're entering 2026 with really good momentum. Revenue in Post Trade Solutions is growing double digits, we're adding new customers and the network is expanding. We're driving strong growth and building platforms for the future across our business. We've also integrated our products and platforms for our customers' benefit. This dynamic exists clearly in our data flywheel. The data we generate from our own markets infrastructure feeds into our D&A business. helping customers make better informed decisions when they trade, therefore, creating more data. Second, Workspace is becoming the fully integrated workflow through which customers can access many of our services, not only for all D&A data but now also for FTSE Russell tools, FX trading, LCH data and, in the next few months, Tradeweb. And we've established a powerful end-to-end ecosystem in FX, providing a front end in Workspace linking to the execution venues and straight through to our clearing business with FX hedging capability for Tradeweb and our data and benchmarking content adding incremental value along that trade life cycle. We have similar connectivity in swaps given the customer trust in the Tradeweb and SwapClear franchises. I spoke earlier about the strong demand we've seen for our multiyear data access arrangements. Those integrate services from across our business, from Data & Feeds, Workflows, FTSE Russell, Risk Intelligence and Analytics. And they demonstrate the competitive advantage provided by our full-service business model. As we've said before, big, sophisticated institutions want to do more with fewer partners. You can see that in the success of our LDA agreements. Through our unique model, we've positioned our business to have deep moats and highly recurring revenues in areas of growth. Our diversification across products, customers and geographies gives our business model an attractive combination of growth and stability that performs well in environments like this. Despite big swings in capital markets and the global economy in 2025, we continue to deliver strong and consistent growth, and we expect more of the same in 2026. So to wrap up, we have achieved another year of very strong financial performance, driving continued top line growth through significant investment in our products and a consistent focus on partnership with our customers. LSEG Everywhere and other innovations like Open Directory, Post Trade Solutions and our Digital Settlement House are establishing platforms for future growth. Through the transformation of our systems and the use of AI and other technologies across LSEG, we continue to deliver material operating leverage. And we are allocating capital in a thoughtful way to grow the business, drive innovation and return surplus capital to shareholders. We're very excited about the opportunities ahead of us. With our leading trusted data, ongoing investment in product and the strength of our customer relationships, we are very well positioned for continued growth. And with that, I'll pass to Peregrine for Q&A. Peregrine Riviere: Thank you, David. Before we start the Q&A, can I please ask you to restrict yourself to one question. We plan to wrap up at about 11:30. Hopefully, we'll get through them all. But if we don't, please follow up directly with me or Chris later today. Thanks. Operator: [Operator Instructions] And your first question comes from the line of Tom Mills from Jefferies. Thomas Mills: Thanks for the helpful new disclosures, and that's my question. At a recent conference, the CEO of S&P said of the AI LLM platform, I'd say that our clients are getting additional value by being able to use our data in more ways, more ways they use it, the more value it creates and the better opportunity for value-based conversation at renewal. And we talk to those customers. We've also seen really nice uptick in demand for add-ons and that's something that's helped with net new revenue. I think that ties in well with the content you provided on Slides 31, 32. But I'd be curious to hear, you touched on the point about improving the opportunity for value-based discussions at renewal. And any uptick in demand for add-ons that you're seeing via the partnership so far? David Schwimmer: Sure, Tom. Thanks. So for now, as you would expect, we are focused on adoption and just seeing the customers sign up and get access to this and seeing the usage grow. And that, as we mentioned on that Page 31, is growing very quickly, and we're really seeing a pretty significant and intense engagement there and, frankly, kind of day by day. So I think, over time, the really significant opportunity here is in the context of consumption-based pricing and really charging the customers over time for usage. And for now, we're continuing to focus on our, I'll say, traditional subscription model. But as we move over the course of the next year plus to more of a hybrid model, which is keeping the subscription, we think the subscription model is very attractive and very important, but incorporating into that the consumption-based pricing as well, that will be a very attractive way of capturing that kind of dynamic. And I mentioned this earlier in my prepared remarks, but the fact that you have a combination of humans, models and agents consuming this data, it's, I think, pretty intuitive for you all to recognize that when an agent or a model is consuming the data, they tend to consume a lot more of that data than a human might. And we've said in the past that humans barely scratch the surface of the amount of data that we have. So that's another angle here just in terms of as usage shifts to more AI-driven consumption, as we shift our model to more consumption-based pricing, we see that as a very, very attractive trajectory. Maybe actually just... Peregrine Riviere: Sorry, hold on a second. David Schwimmer: Just one other point I want to add, and I touched on this earlier, but I think it also answers your question, kind of captures this dynamic, which is I've described the AI models combined with the MCP server as a very effective cross-selling machine. And the model is not asking for data from a particular data set. The model is asking for answers to a question. And if that question can be answered by extracting data from multiple different data sets that we are making available through the MCP server, that is a great angle as well just for additional access, additional sales of additional data sets that the customer might not have originally known that we even had. So that's another aspect of this. Now on to the next question. Thank you. Operator: And your next question comes from the line of Hubert Lam of Bank of America. Hubert Lam: I just got one of them. So how should we think about pricing and ability to keep your customers? Will we expect more competition in the future from MCP? I assume MCP makes it easier for users to switch between different data providers. So would it be harder to raise pricing in the future? And would there be more risk on bundling data contracts now that users have more choice, more flexibility as to who they want to consume with? David Schwimmer: Hubert, so we see a very consistent pricing environment this year relative to last year. And I think it's about the quality of the data. If you think about the new AI channels and MCP as just another way of accessing the data, that's great for us. That doesn't mean that it is an environment where we're seeing incremental pressure on the pricing. The quality of the data remains the same. The, in some cases, proprietary nature of the data means that no one else has access to it. And so we see this as a way of accessing more users within existing customers and accessing new customers as well. And as I mentioned, from a pricing perspective, we're seeing a very consistent dynamic this year as we have seen last year and the year before. Operator: And your next question comes from the line of Arnaud Giblat of BNP Paribas. Arnaud Giblat: So my question is on capital returns. So you've announced a GBP 3 billion buyback. That pushes up your leverage ratio perhaps towards the end of the year towards 2.0x, 2.1x net debt to EBITDA. So how should we read into this? Are you still -- I suppose you are leaving yourself the opportunity to step in and do further bolt-on acquisitions. My question is just how are you seeing any potential dislocation in valuations in private markets? We've seen some significant shifts in public markets with data and software companies coming up quite a lot. Are we seeing the same thing in private markets? And perhaps does that create opportunities for you to step in, in the near term and add some more content inorganically to your platform? David Schwimmer: Thanks, Arnaud. Maybe MAP will touch on the first part of your question. I'm happy to take the second part. Michel-Alain Proch: Yes, sure. On the buyback, you're absolutely right. We have coined GBP 3 billion in order to do two things. First, having a true increase into the return to our shareholders on the basis of the inherent value that we see in our share. Remember, 2 years ago, we did GBP 1 billion; 2025, GBP 2.1 billion. And here, we're talking about GBP 3 billion. And by doing this GBP 3 billion, and you've made the calculation right, taking into account the dividend and the second part of the Post Trade Solutions, okay, altogether, this will bring us to 2x net debt-to-EBITDA by the end of 2026, so which will allow us to keep firepower for M&A that fit in terms of strategic alignment, obviously, and value. David Schwimmer: And Arnaud, to your question about sort of the state of the markets. Yes, there's obviously been some dislocation. There's clearly some stress amongst some of the private equity holders out there. And you should expect us to always be evaluating opportunities. And nothing to talk about near term, but as MAP mentioned, we are always evaluating opportunities that could make sense in terms of our both strategic fit and then attractive financial returns. And I think the buyback balances that appropriately in terms of an appropriate return to our shareholders while landing at that 2x net debt to EBITDA and maintaining the right kind of flexibility going forward. Operator: [Operator Instructions] And your next question comes from the line of Enrico Bolzoni of JPMorgan. Enrico Bolzoni: I had one on EBITDA margin, please. So it looks like you're clearly doing more than what you initially thought. I remember from calls 1 year ago or so saying that, at some point, EBITDA margin would reach a ceiling because, clearly, there's a need to reinvest in the business. And here we are with a new set of targets that actually guides us towards further improvement. So I was keen to hear your thoughts on whether you think this is just driven by the operating leverage and revenue accelerating, or you found more ways to cut cost. And perhaps, does this new target include any meaningful benefit from the deployment of AI within the organization? David Schwimmer: Thanks, Enrico. I don't think we've ever said that we were planning to hit a ceiling, but I'll let MAP address that. Michel-Alain Proch: No, no, but I understand what Enrico is saying. So just a reminder for everybody, we committed ourselves in November 2023 of an increase of margin of 250 bps. 2026 is the third year of this plan. We are delivering the 250 bps. And on top of that, we have 130 coming from our Post Trade Solutions. So 380 that we will have delivered for the period '24 to '26. Now what we've said is, going forward, because there was some question about what about after '26, that going forward, due to the operating leverage that the group has, I mean, building once and distributing many, obviously, this operating leverage, we can crystallize it into the margin or having a balance between the margin and reinvesting into future growth. And what you see, Enrico, is 150 bps by 2029 is exactly that. It's the balance between operational efficiencies that we are harvesting, our natural operating leverage, so plus-plus, okay, and the investment we make into talent and technology for future growth. And to answer the second part of your question, the answer is yes, you're right. We will crystallize in this 150 bps, you have indeed the financial consequences of what we do with AI within the company, particularly on our backbone and our -- and the ingestion of data. Operator: Your next question comes from the line of Andrew Lowe of Citi. Andrew Lowe: I have one on Tradeweb, please. Would you be willing to give an indication of how much the Tradeweb-generated data sets account for your Data & Feeds revenues? And then whether any of those data sets are exclusively distributed by LSE? David Schwimmer: Andrew, I don't think we have broken out and I don't think we intend to break out the amount of the Data & Feeds revenue that comes from Tradeweb. I can tell you that some of it is exclusive and some of it is nonexclusive. But I would also mention that, that is one of several different areas across the group, where we have very strong linkages between Tradeweb and the rest of LSEG. We've talked in the past about the benefits both to Tradeweb and to FTSE Russell from the usage in FTSE Russell indices of Tradeweb pricing, and that flows both ways. We've used -- I'm not sure we've talked about this in the past, but Tradeweb has benefited from some of our middle and back office functionality in India and in other places. We, of course, have the straight-through processing, if you will, from the Tradeweb swap execution facility into SwapClear. We've got the FX execution into Tradeweb. So a number of different areas. And then maybe the last thing I should just touch on is that over the course of the next few months, we will be plugging Tradeweb access into Workspace, which is yet another significant opportunity that should be particularly attractive for Tradeweb users. Operator: Your next question comes from the line of Ben Bathurst of RBC Capital Markets. Benjamin Bathurst: My question is on the new medium-term guidance where you're pointing to subscription business acceleration, which I think is like perimeter change versus the D&A revenue growth acceleration you've previously called out and are, in fact, restating again for FY '26. I just wondered, could you elaborate a bit on the decision to make that change and perhaps make a comment on expectations for D&A growth contribution to that total subscription business acceleration you're talking about? Michel-Alain Proch: Sure. So I mean, the reason why we're looking at the subscription business altogether is mainly for 2 main reasons. The first one is it's the same subscription model, okay, which are governing the 3 divisions. And the second, as it was presented in the slide, they are more and more intertwined. And we have true synergies in between the 3. LDA that David was mentioning at the beginning of the call is the obvious example. So now on the medium-term guidance and for the subscription business, I hope you got it from my remarks. What we expect in there is we posted 6% in '25, circa 6.5% in '26, going to 7% in 2027. And on this, obviously, D&A will be accelerating, too. I mean, just to be clear, due to the size of it, it's the main lever for this acceleration, for sure. And if I may just add one more thing, which is you see this slide, I don't remember it was 31 or 32, with this adoption of MCP. So you see that it's extremely strong and we are concentrating of usage. So for sure, AI can be an accelerator of this trajectory that I just mentioned. You see what I mean. But I mean, it is still the early days. We just switched on the MCP just before Christmas. So you see it's not a long time ago. So it's a bit early to size it. But for sure, it's in the plus category, if you want. Operator: Your next question comes from the line of Julian Dobtovolschi of ABN AMRO. Julian Dobrovolschi: You've mentioned that a large portion of your data sets are already available now via the LLMs such as Anthropic, Databricks and OpenAI and a bunch of others. I was just curious to know, what percentage of LSEG's total data universe will ultimately be available through the AI-native channels? And if there is a view to keep some of this fully in-house for various reasons? David Schwimmer: So I would expect that we are going to be making, and we've got a slide in here that touches on this, I would expect that we're going to be making as much of our data as possible available through these distribution channels and through MCP. And just to be really clear, the implication of your question is that we might keep some away to somehow protect it. But again, to be really clear, providing access to a model through MCP does not mean that the model then can get that data and never need it again. And so we can provide access through to MCP to a model and continue to protect and maintain the value and the integrity and the proprietary nature of that data. This seems to be kind of a common misunderstanding that people have. So we view this as a great channel to distribute our data, whether that's proprietary data, whether that's a linkage of multiple different data sets. And the fact that we are making it available through MCP, think of it as a very structured, disciplined gateway, and we can actually put our usage meter on top of that as well. So again, I understand your question, but I just want to make sure that I'm clarifying. There should be no misinterpretation of making data available to a model through MCP as somehow vitiating the value of that data or the proprietary nature of that data. Operator: Your next question comes from the line of Benjamin Goy of Deutsche Bank. Benjamin Goy: One question, please, on your LSEG data access agreements. You mentioned almost GBP 2 billion signed in Q4. But can you give a bit more qualitative color on these agreements, whether it was Q4 or more recently signed? Do you see any change in customer dynamics? Do you see put options or breakup clauses in those contracts now or basically same contracts as you had a year or 2 years ago? David Schwimmer: Yes. No sort of structural changes in these. We've talked in the past about how they can take a couple of years to put in place because of the way that we and our customers set them up. It takes some real top-down focus in organization and coordination and planning. But no, we view this as an increasing recognition by our big important customers of the value of the integrated offering that we are providing. They do have a line of sight not only into what we are providing today, but what we are building for them in the next couple of months and in the next couple of years. They are multiyear in nature. And I believe the ones that we have announced most recently tend to be out to 7 years. They all have extensions built into them as well. So I think it's just what you see is what you're getting here in terms of our customers really understanding the quality of our offerings and wanting to commit to that for many, many years to come. And I think just it's worth reiterating this. I understand some people might have had a little trouble hearing at the very beginning of the call. We have the most sophisticated financial institutions on the planet who have very rigorous risk management processes, very rigorous analysis of what their technology needs are, very clear understanding of their requirements. And they, after extensive work -- and I said, in some cases, these take up to 2 years. After extensive work, they are making decisions to, I used this phrase earlier, they're voting with their wallets to commit to consuming our data through our channels for the next, in many cases, up to 7 years. And so we think that is a pretty clear indication that these highly sophisticated institutions recognize the value of the content, the data, the workflow that we provide and recognize that, that is increasing in an AI world as opposed to decreasing. Operator: Your next question is from the line of Oliver Carruthers of Goldman Sachs. Oliver Carruthers: Oliver Carruthers from Goldman Sachs. Thanks for the very detailed presentation and the incremental disclosure. Very helpful. I think Slide 31 is really interesting around the growth in customers you're highlighting. In terms of those customers connecting to your MCP server, so that 67 number, I appreciate it's moving a lot, but can you give us a flavor of the types of institutions, investment banks, hedge funds, asset managers, who is using this? And any steer on the use cases would be really, really helpful. David Schwimmer: Sure. So it's lots of different kinds of institutions. Typically, we see smaller institutions moving more quickly. But in this case, we're seeing smaller institutions and large institutions. I'll give you one example. There's one very large institution that is using this service to evaluate, I'm not going to go into specific names, but to evaluate one AI functionality against another AI functionality. And the constant they are using is our data because they know the quality of our data and they know what to expect from us. So they are using us as the baseline and they are using that to make a decision as to which of the AI distribution channels they want to actually use. But that's just one example. And Oliver, as you mentioned, this is changing literally day by day. And we're kind of getting a running commentary from the team on how this is growing and how we're seeing increasing and expanding desire to access through this as well as incremental sales leads. Oliver Carruthers: As a very quick follow-up. You still own these customer relationships, even when it's not your own MCP, but even when it's a third party? This is a query tool they come to you, but you still own these customer relationships. Is that the correct way to think about it? David Schwimmer: Yes, it is. Thank you for asking that question. Let me be really, really clear about this. The way this works is that if you have a license with LSEG, you can then turn on access to LSEG via, for example, Claude or via ChatGPT. There's a little connector button when you pull up a certain window in these. And you have to flick that on to get access to LSEG data. You can only do that if you have a license with LSEG directly. And therefore, we maintain the ownership of the customer relationship we're contracting with the customers. Now when we talk on that Page 31 about over 300 prospective users, what we mean by that is that there are a number of prospective users who are using these channels to try to get access to our data. They're effectively knocking on our door through MCP. And they don't have an existing license. But the way this is designed is that we are informed of their interest. And so it's a great origination channel, it's a great sales channel for us. We then take those leads. Our sales team directly receives those leads and we follow up with those customers. Does that help? Oliver Carruthers: Yes. Very helpful. Operator: Your next question is from the line of Marina Massuti of Morgan Stanley. Marina Massuti: I have a question on the AI adoption given some of your peers have given numbers around the efficiency opportunity from internal AI implementation. Can you also provide a bit more color or be a bit more specific on how much of the current and future AI deployments contributes towards the 150 basis points margin expansion targeted in the medium-term guidance? David Schwimmer: Yes. Thanks, Marina. So we haven't put any specific guidance out there in terms of the efficiencies that we're seeing from AI. I did mention in my remarks, and on Page 36 you can see some of the stats, we are seeing meaningful improvement in productivity, in efficiency. We're seeing this in customer service. And then we are also seeing improved efficiency in terms of our engineers and our software development. We've seen up to this point, and this number is going up pretty regularly, but we've seen at this point, I think I can comfortably say, 11% efficiency in our engineers. So I would bake that into the numbers that MAP was referring to earlier in terms of continuing margin improvement in the business. But we haven't given anything specific around that. Operator: Your next question is from the line of Michael Werner of UBS. Michael Werner: Thank you for the long-term targets in particular. A question on LDAs. I was just wondering with regards to, a, the step-ups that you mentioned in terms of pricing, are they contingent upon certain deliverables? And ultimately, are these step-ups typically higher than what you see in kind of the base rate? And then also, how does MCP servers fit into those enterprise agreements? Is that already included? Or is that potential upside from a revenue generation or a client wallet share perspective going forward? David Schwimmer: Thanks, Michael. So every LDA is a little bit different. And some of the step-ups are a little bit higher than what the regular price rises would be. Some of the step-ups might be a little bit lower. They are all typically in the same general range unless there are, for example, commitments that we have made to add a specific new product or new capability. Or sometimes in these LDAs, the customer may be locked into another competitor product for a year or 2, and it takes them a year or 2 to get out of those and migrate on to ours. And there may be a step-up associated with that kind of migration. So everyone is a little bit different, but that gives you a sense of some of the different variables. To your second question, there is a defined perimeter around the LDA agreements in terms of effectively focusing on existing product, and it's well defined perimeter. And in the context of these MCP capabilities and this distribution and AI model consumption, that is, I think I can say with certainly, not included in the data access agreements that we have struck at this point. Michel-Alain Proch: Yes, yes. For none of them. David Schwimmer: Yes. So that is all incremental usage that's coming through these channels, that is upside. Operator: And this concludes questions on the conference line. I will now hand the presentation back to David Schwimmer, Chief Executive Officer, for closing remarks. David Schwimmer: Well, thank you all for your questions. Thanks for spending time with us this morning. I know it's a little bit longer than usual in terms of the presentation. We did feel there was a lot to get through. And to the extent you have any additional questions, please do not hesitate to get in touch with Peregrine or Chris. Thanks again.
Operator: Welcome to Perpetual's Half Year 2026 Market Briefing. [Operator Instructions]. Press the documents icon to see today's files. Select the document to open it. You can still listen to the meeting while you read. The audio queue is now open. I'll now hand over to Suzanne Evans, Chief Financial Officer. Suzanne Evans: Fantastic. Thanks, Michelle. Good morning, everyone, and good afternoon or evening to those who are joining us from other parts of the world. Welcome to Perpetual's half year briefing for 2026. Before we begin today, I would like to acknowledge the traditional owners and custodians of the land on which we present from for today. Here in Sydney, that is the Gadigal people of the Eora Nation. We recognize their continuing connection to land, waters and community. We pay our respects to Australia's first peoples and to their elders, past and present. We would also like to extend our respect and welcome to any Aboriginal or Torres Strait Islander people who are listening to this briefing. We acknowledge the traditional custodians of the various lands on which all of you work today. Presenting our results today will be our Chief Executive Officer and Managing Director, Bernard Reilly; and myself, the Chief Financial Officer, Suzanne Evans. There will be an opportunity, as you've heard, to ask questions at the end of the presentation. Can we please ask that we start with just 2 questions per person to ensure that we have time for everybody who would like to participate today. Before I hand over to Bern, we'd just like to also draw your attention to the disclaimer that's contained on Page 2 of the presentation. Bern, over to you. Bernard Reilly: Thank you, Suzanne. Good morning, everyone, and thanks for joining us today for Perpetual's First half '26 results briefing. Reflecting on the overall group performance this half, we delivered a solid result, achieving both revenue growth and underlying profit growth as well as making good progress on our strategic objectives. As you'll see from the table below, our headline results showed total operating revenue of $697.9 million for the first half, up 2% underlying profit after tax of $112.7 million, up 12%. We reported a statutory profit after tax of $53.9 million. The Board has determined to pay an interim dividend of $0.59 per share unfranked, and diluted EPS on NPAT was $0.971 per share, 9% higher than the first half of 2025. We maintained disciplined cost management, resulting in an improvement in our expense guidance for the full-year. We continue to make strong progress on our simplification program. To-date, we have now delivered $60 million in annualized savings, and we remain on track to achieve the targeted $70 million to $80 million by FY '27. In Asset Management, earnings growth was supported by improved market conditions and cost management, partially offset by currency and net outflows, primarily in global, international and U.S. equity strategies. Importantly, over the period, our Australian boutique performed well and Barrow Hanley's contribution improved. Corporate Trust continued to perform consistently, delivering strong growth across all 3 business segments and reinforcing its importance as a diversified earnings engine for the group. The business benefited from strong securitization markets and client growth throughout the half. Wealth Management showed resilience during the half by maintaining focus on delivering for clients as the sale progress -- has continued to progress. While we've made good progress with Bain Capital and are progressing documentation, there is no certainty that a binding agreement with Bain will be reached or that a transaction will proceed. Turning to the next slide. I want to now spend some time framing our asset management business in the broader industry environment. Quality asset managers come into their own during down markets and periods of heightened volatility. We continue to expect more flows between active managers. As you can see on the chart on the bottom right-hand side of the slide, flows between core active funds still dwarf flows from active to passive funds. The line between public and private markets is blurring with private capital increasingly accessed through mainstream vehicles across wealth, retirement and insurance. McKinsey also know the convergence of traditional alternative assets. For Perpetual, this underscores a clear path to growth. High conviction, differentiated active capabilities and increasingly ETF wrapped strategies aligned to new distribution channels. With that context, let me now turn to performance and flows across our boutiques. Our multi-boutique model provides earnings diversification across capabilities, client segments and importantly, regions. As you can see in some of the points on this slide, we saw pockets of strong performance across a variety of our capabilities in the first half, with 54% of strategies delivering outperformance over the important 3-year time frame, reinforcing our relevance in an environment where active flows increasingly reward demonstrated performance. During the half, we saw $22 billion of gross inflows and $32 billion of gross outflows, resulting in a net $10 billion of outflows. While collectively, we saw outflows in U.S. global and international equity capabilities, emerging markets and Australian equity strategies saw areas of investor inflows. This was supported by a strong half for fixed income capabilities, highlighting the benefits of a diversified asset management platform. Net outflows in the half were offset by stronger equity markets and foreign exchange movements, supporting earnings growth and increased AUM over the half. We remain focused on active client retention and delivering strong investment performance, which together underpin improvements in our flow profile over time. Turning to the next slide for some more detail on our Australian asset management business. The integration of our Australian distribution capabilities has materially strengthened our local platform. We now have a large and diversified footprint across both the intermediary and retail channel, which I'll refer to as wholesale and the institutional channel with $71 billion of AUM across Australia. If we look more closely at the wholesale channel, we managed $32 billion of AUM. Of the over 15,000 ASIC registered financial advisors, nearly 11,000 have holdings in Perpetual Group products. We also have key sales and distribution team members working closely with asset consultants and subchannels, including high net worth researchers and brokers. Wholesale delivered $1.5 billion in net inflows for the half. In our institutional channel, we managed $25 billion of AUM across superannuation funds, government clients, insurers, endowments and foundations. We did see outflows for the institutional channel in the half. However, we saw an improvement on the second half of 2025, and we've secured several wins in the first half. These flows include a $250 million contribution from a super client into Australian equities, $110 million contribution from a large institutional client in J O Hambro's emerging markets capability and $100 million new multi-asset mandate from a large superannuation client. Important to note, we also manage $14 billion of AUM in the cash channel. Importantly, our Australian distribution is now a unified platform with strong expertise in distributing across asset classes and boutique brands through a single coordinated team. Our team of 46 includes sales, marketing and client services and is one of the largest local distribution teams in the industry. We're also seeing the benefits of strong product development, including the launch of contemporary investment solutions, and I'll touch on them in more detail on the next slide. A key priority for asset management is ensuring our product range is aligned to evolving distribution channels and strategies where we see sustained client appetite, particularly in fixed income. During the half, we launched the Perpetual Diversified Income Active ETF, which performed well relative to other ETF launches in the period and held over $215 million in AUM as at the 31st of December. We also successfully raised $268 million for the Perpetual Credit Income Trust with assets now in excess of $800 million. In working with our client base globally, we were able to successfully launch Barrow Hanley's U.S. Mid-Cap Value Fund into the U.K. market in June with the fund reaching over AUD 165 million in assets in or $110 million by the end of December 2025. This represents a significant achievement, especially given Broadridge's global market intelligence data, which indicates that fewer than 1% of newly launched funds surpassed the $100 million of assets in AUM. Looking ahead, we have an active pipeline of strategies under development and where appropriate, we will support them through seed investments to target attractive growth areas. Suzanne will talk further about our seed capital program shortly. We expect the continued convergence between traditional and alternative capabilities to remain a feature of the industry globally, driving a forecasted $6 trillion to $10 trillion of capital reallocation over the next 5 years. To that end, our discussions with Partners Group have advanced and an early-stage product design is now being introduced to the market to assess interest. We're also looking at the launching of a direct bond SMA in Australia to expand our suite of fixed income solutions for advisers and platforms. Turning to ETFs. The U.S. active ETF market represents a significant opportunity. While active ETFs remain a relatively small portion of overall AUM, they are becoming an increasingly important channel, capturing a high share of industry flows and revenues. We will continue to build on our established ETF platform here in Australia, and we're going to apply some of these learnings to the U.S. market. We've decided to enter the U.S. ETF market in a risk-managed basis by a third-party provider of multi-series trust structures. This structure is lower in cost and offers quicker speed to market, helping us to bring scale before we need to invest more heavily. If we now turn to the work we're doing with J O Hambro. I've spoken previously about restoring J O Hambro to its heritage strength, and it remains a key priority for us. We've made progress on revitalizing the business, and this will continue through the second half and beyond. In September last year, we announced the appointment of Bill Street as CEO. Building off the work we've already started with J O Hambro, Bill has quickly commenced implementing a clear strategic direction, beginning with the simplification of J O Hambro's operating model to create J O Hambro International an aligned platform that better positions the business for growth. The future success of J O Hambro is an important component of our global offering, and we look forward to updating you on its progress over time. Turning now to Corporate Trust. On the next slide, please. Thanks. The business experienced another strong half and continues to deliver steady growth across all 3 of its business segments. The Australian securitization market remains robust, supporting continued growth in debt market services. Importantly, we continue to see growth across the non-bank lenders, contributing to a more favorable mix of mandates for us. Managed Fund Services growth was driven by custody and our Singapore business, benefiting from both new and existing client growth. Digital and Markets also delivered a 5% uplift in assets under administration compared to the second half of 2025, reflecting continued investment and expansion of our client offerings. Highlighting its strength in the market more broadly for the 10th straight year, Corporate Trust was awarded the KangaNews Australian Trustee of the Year. Looking forward, the business remains focused on executing its 5-year growth strategy, including investing in its core business and digital markets. Corporate Trust has proven time and again to be a highly resilient and growing business. UPBT has grown steadily at a CAGR of 11% from around $22.4 million in first half of '19 to approximately $49 million in the first half of 2026. The cost-to-income ratio has remained broadly stable in the mid-50s range, underscoring our disciplined investment in the business as revenue has continued to grow. This slide also illustrates what is driving that growth across each of our business segments. Notably, Corporate Trust's service-led operating model is aligned both to the credit-linked and equity market growth, which provides a stable, diversified earnings base that is less exposed to equity market volatility. That diversification is particularly relevant in the context of asset management's market sensitivity, reinforcing Corporate Trust's role as a consistent and resilient earnings business within the group. Moving now to Wealth Management. In the half, the business remained focused on delivering for its clients while the sale process continued. Underlying profit before tax was lower, reflecting expense growth. However, wealth management was resilient. Funds under advice grew by 6% over the half, supported by institutional flows and strong equity markets. It was also pleasing to see the strength of this business recognized externally. Five of our advisers were recognized in the Barron's Top 150 financial adviser list, reinforcing our position as a trusted provider of high-quality client-focused financial advice. We were again recognized as a finalist in 2 categories of the 2025 IMAP Managed Account Awards, marking our third straight year of distinction. Wealth Management is at the core of Perpetual's 139-year history and has all the hallmarks of a successful business. Strong funds under advice, 12.5 years of consecutive net inflows as well as being one of Australia's largest managers of philanthropic funds with a very strong client advocacy measure, as you can see here. In relation to the sale process more specifically, I'd like to reiterate that while we have made good progress with Bain and are progressing documentation, there is no certainty that a binding agreement will be reached or that a transaction will proceed. In parallel, we are establishing a clear stand-alone operating perimeter for the business to support a potential sale and ensure continuity with minimal disruption for our clients and for our teams. Our Wealth Management business is a high-quality profitable business with growing funds under advice, and the Board and I are focused on ensuring that any transaction that Perpetual may ultimately enter into is in the best interest of our shareholders. Turning to the next slide. Our simplification program remains on track to deliver our overall target of $70 million to $80 million in annualized savings by June 2027. Importantly, the benefits are now flowing through into reported earnings alongside a simpler, more streamlined operating model. The chart on the right-hand side of the page highlights our planned program of work, which, as you can see, is well advanced. As at 31, December, we have delivered $60 million in annualized savings, of that $26.9 million of actual savings was reflected in the first half '26 results. The majority of savings to-date have come through workforce-related efficiencies, supported by ongoing rightsizing across the global business and the removal of duplication as we simplify structures and reinforce organizational or reduce organizational complexity. We incurred $4.4 million of additional cost savings in additional costs to achieve these savings during the half, and they are recorded as significant items. Looking ahead, the areas of focus for the second half of FY '26 remain finance systems transformation, back-office simplification and the ongoing rightsizing of functions across the group. Total costs to achieve the program are expected to remain at approximately $55 million. In summary, we are pleased with the progress we've made so far, acknowledging we still have more work to do. I'll now hand over to Suzanne to walk through the financials in more detail. Suzanne Evans: Fantastic. Thanks, Bern. It's great to be able to present a little bit more detail around Perpetual's half year results for the period ended 31, December 2025. We'll start by moving just to the next slide, Slide 15, that has a summary of our results. Operating revenue of $697.9 million was 2% higher than the 6 months ended 31, December 2024 or the prior corresponding period, driven by continued AUM and further growth across the group. As noted in our recent second quarter update, revenue included performance fees of $10 million, mainly generated by our Perpetual and J O Hambro boutiques. Total expenses of $547.8 million were within our guidance of 2% to 3% growth for the financial year 2026. I'll step through some of the drivers of our expense growth and also the basis for our improved expense guidance range shortly. Underlying profit after tax was $112.7 million, 12% higher than the prior corresponding period, supported by improved contributions from asset management, continued momentum in Corporate Trust and reduced funding costs following the refinancing of our debt facilities in the last financial year. The effective tax rate on UPBT was lower at 24.9% compared with the prior corresponding period. Now this was a combination across the halves due to a write-off of a deferred tax asset in the prior corresponding period and in the current half and unrelated prior period adjustments lowering the effective tax rate. If I look forward in the medium-term, we would expect the effective tax rate to normalize around the 27% to 28% range. Significant items for the half year were predominantly non-cash in nature, and I'll cover those in more detail later. Earnings per share on UPAT was 9% higher. Finally, on the summary slide, the Board has declared an interim dividend of $0.59 per share, unfranked and to be paid on the 7th of April 2026. Now if I move to the next slide. On here, we've just got a high-level visual snapshot of performance across our divisions. I'll step through each division in slightly more detail, beginning with Asset Management. Asset Management underlying profit before tax increased 4% to $106.9 million, demonstrating top line growth, but also how our cost discipline is beginning to translate into an improved cost-to-income ratio when compared to the prior corresponding period. Higher average AUM drove higher management fees. However, performance fees were slightly lower than the prior corresponding period. Total expenses declined 2%, reflecting some of the early benefits from the simplification program that Vern has outlined. These were partly offset by foreign currency movements and continued investment in upgrades to our fund technology platforms. Now moving on to Corporate Trust. Corporate Trust experienced steady UPBT growth in the half, up $5 million on the prior corresponding period across all 3 of its business lines. Increased volumes in Debt Market Services, along with new client flows, further supported underlying FUA growth in the securitization portfolio. The result was 10% growth on the prior corresponding period revenue. Managed Fund Services revenue increase was driven by growth in custody services and continued momentum in our Singapore operations, both from new and existing clients. Digital Market Services experienced particularly strong growth with revenue up 20%. Some of that reflected an elevated level of implementation fees for Perpetual's intelligence SaaS offerings as well as continued growth in markets and the fixed income platform management solution. Operating expenses were higher, supporting growth and increased client volumes as well as continued investment to enhance digital capabilities across the business lines. Moving now to Wealth Management. Wealth Management's UPBT decreased by $5.5 million. Given the backdrop of the ongoing sale process, the business remained resilient. Revenue was broadly flat at $118.8 million. Market-related revenue increased modestly, supported by stronger equity markets, while non-market revenue declined slightly, mainly due to lower fiduciary and risk advisory income. Total expenses were up 6% with increases across staff, technology and premises costs. Funds under advice were up 6% on the first half to $21.9 billion with positive market movements and net inflows from new institutional clients. Moving now to the final division, our Group Support Services. Underlying loss before tax decreased by $3.3 million, with higher revenue over the half compared to the prior corresponding period. Revenue was supported by higher income from seed investments, interest received on cash balances and some foreign currency revaluations. Compared to the prior corresponding period, interest expense declined, reflecting the benefit of the refinanced debt facilities in May last year that I referenced earlier. Moving now to the next slide with a reconciliation between underlying profit after tax to net profit after tax. Significant items for the half were $58.8 million and were predominantly non-cash in nature. During the period, we undertook a review of significant items and began developing a clearer policy around classification, which resulted in some age projects being closed or where appropriate, moved back above the line. If I step through our results from UPAT to NPAT, the main drivers were costs relating to the Pendal transaction, the proposed sale of the Wealth Management business and our simplification program. I will call out on Pendal, these are the final costs associated with the transaction, and we're expecting no more to occur by the end of financial year 2026. The simplification program and any associated costs with Wealth Management are expected to continue into the financial year 2027. The remaining significant items are non-cash in nature and include revaluation adjustments. Reflecting the impact of these significant items, we reported a net profit after tax of $53.9 million. Now if I move to a bit more detail around our expenses. Controllable cost growth was 1%, largely attributable to expenses in Corporate Trust and Wealth Management as well as variable remuneration linked to improved contributions from Barrow Hanley and also our Australian boutiques. Now this was partially offset by simplification program benefits, which also helped to mitigate inflation-related cost pressures. Cost growth was also impacted by foreign exchange movements, albeit not as negatively as the prior 6 months. Looking ahead, we've improved our FY '26 expense guidance, and it's now reduced to between 1% to 2%, down 100 to 200 basis points on the prior guidance provided. It is important to note, however, included in this guidance is that expenses will continue to fluctuate depending on FX movements and interest rates. We've provided our currency assumptions in the footnotes to this slide. Moving now to cash flow. Free cash flow of $33.8 million for the half included $82.9 million in net cash receipts in the course of operations. There was a net increase in free cash flows in the half compared to the prior corresponding period. Borrowings did increase by $10 million over the period, but that was predominantly due to timing differences in drawings on our working capital facility relative to the upstreaming of dividends across our global operations. After paying dividends totaling $60.3 million and adjusting for timing on seed repayments and foreign currency movements, total cash at 31, December 2025 was $325.6 million. Moving now to the balance sheet. The balance sheet at 31, December 2025 remains robust and is supported by operating activities across our diverse sources of earnings. The majority of our cash is held for working capital, but also for regulatory capital purposes and predominantly in the United Kingdom. For greater clarity, we have also disaggregated the other financial assets in the balance sheet into 3 segments: seed capital, IIP balances and a loan receivable. By way of background, the IIP units is where Perpetual is hedging employee incentive obligations. Of course, there is an offsetting item in the liability side of the balance sheet. Importantly, we have $150 million of surplus liquid funds available, of which the majority relates to undrawn lines of credit. Now moving on to one of these categories, seed capital. Our seed capital is deployed to support organic growth and product development. Capital is deployed selectively, recycled actively and governed through a formal committee oversight process. The average holding period is approximately 3 years. We've included some case studies here to illustrate how seed capital can be used, whether it's to build early scale, launch strategies, develop track record and then recycle capital once external demand is established or the sometimes difficult and more challenging part to exit where scale is not achieved or commercialization does not occur. Now finally, turning to dividends. The Board has declared an interim dividend of $0.59 per share for the half, which will be unfranked and paid on the 7th of April 2026. The interim dividend represents a UPAT payout ratio of 60% for the half, which is lower than the prior corresponding period where the payout ratio was set at 70%. Dividends are expected to remain unfranked in the second half of this financial year. We will, of course, continue to assess the appropriate payout levels within our stated range, taking into a number of factors into account, including our ability to frank. I'll now pass back to Bern for some comments on the outlook. Bernard Reilly: Thanks, Suzanne. Before we move to questions, I want to spend some time talking about the progress that we've made on our strategy over the half. Thanks. Next slide. Great. Our strategy is aligned to 3 pillars, as you can see here on the page, simplifying our business, delivering operational excellence and investing for growth. We've made progress within each of these pillars over the half. Firstly, with Simplify, as I've already spoken to today, our simplification program has streamlined the group's operating model and delivered an additional $16 million in annualized savings for the half. Progress has also been made on our finance and transformation projects. Delivering on operational excellence. Our 3 businesses are now established as focused, largely decentralized business lines with greater accountability for delivery and financial outcomes, supported by continued group oversight and governance. Additionally, we have delivered on our cost commitments, resulting in an improved expense guidance for 2026. Finally, as we discussed earlier today in investing for growth, we have supported the launch of new product innovation in asset management with an example being the Perpetual Diversified Income Active ETF. Our Corporate Trust business also completed the acquisition of IAM's term deposit broking business, increasing scale in markets, broking and fixed income areas. Corporate Trust will continue to look for additional capabilities that will help drive business growth. We have also progressed AI transformation initiatives, embedding AI into core workflows to enhance decision-making, productivity and scalability across the business. These 3 pillars will remain the platform for execution for our business activity for the remainder of 2026. Now looking ahead, we have a clear and focused set of priorities. We'll continue to deliver on our cost reduction commitments. We'll retain our leadership position in Corporate Trust by investing in capability to drive further growth for that business. We'll continue to target investment in new products and capabilities across our asset management business, and we'll work to remove complexity to create a leaner, more efficient structure for the group. Thank you for listening this morning. Suzanne and I are now happy to take questions that you may have. I'll hand back over to Michelle, our operator, to manage these questions. Thanks, Michelle. Operator: [Operator Instructions]. Our first question comes from Elizabeth Miliatis from Macquarie. Elizabeth Miliatis: The first one is just on the sale of the Wealth division. If you could give a little more color on why things are taking a little longer than perhaps we'd expected. There's also been press reports that the brand is potentially up for sale as part of that transaction. Yes, just a little more color would be much appreciated. Bernard Reilly: Sure, Liz. I'll start and maybe Suzanne can add in. The process for the sale of the wealth has taken longer than I think the market would have liked. I think to put it into context, I think it's important. Firstly, this is a business that we've owned -- Perpetual's owned for 139 years, and it is intertwined in particular with the other businesses that we have, in particular, Corporate Trust. If you think about the prior transaction that we had contemplated, we were selling 2 businesses together to one buyer. Now we are selling one business to -- potential progressing selling one business to one buyer. We need to untangle that business from the broader organization to be able to do that. There's an element here of negotiating a sale while also untangling the business to be able to do that. It's actually quite a complex process to be able to do. I think the one point that I'd like to reiterate that I have said in my formal remarks, was that the Board and I are very focused on delivering the best outcome for our shareholders. So we're very focused on that, and so understanding the complexity that's in front of us, we're driving to get to an outcome of clarity for the market, but also for our team and our clients as quickly as we can. I was focused on the first bit. Really, we don't comment on media speculation, but when we thought about the sale process, brand was an important part of the consideration for us. I'll probably leave it at that. Elizabeth Miliatis: Then just the upgrade to the guidance for OpEx, so now 1% to 2% from 2% to 3%. It seems like most of that change is currency. Can I just confirm that? Then also secondly, I mean, just the rates in there look pretty conservative. Obviously, we'll see how things progress over the next 4 months or so, but potential upside risk to that number as well just because of currency? Suzanne Evans: Yes. Liz, you're spot on. In fact, that was probably one of the big swing factors in the full-year last year. Fair to say that probably has made me quite conservative as the CFO. Yes, I mean, FX is a big swing factor for us, and we've tried to capture that when we've provided the guidance. What I would say, though, is we're already 2 months into the second half, and there's a lot of things there which are still controllable costs. I think that's given us the confidence to tighten the range. Obviously, the combination of us staying quite vigilant on the expense base and also some of the benefits coming through from the simplification program, I'd like to think that we can comfortably deliver within the guidance we've given. Operator: Our next question comes from Nigel Pittaway from Citi. Nigel Pittaway: Just first question on -- just on J O Hambro. It seems as if your aims there to restore it to its heritage strength is still being somewhat hampered by the net outflows from the international and global select strategies. I was just wondering, do you feel you're any closer to be able to extend those outflows? Or is that something that we can expect unfortunately to go on for some time? Bernard Reilly: Nigel, yes, with J O Hambro, the select strategies have still -- you're right, still experienced outflows. You're 100% correct there. What we are seeing is a real focus on client retention, in particular with a lot of the wholesale clients in the U.S. The team are very focused on that. I think what drives investment outflows or inflows is performance, right? Performance there has still remained soft, and that makes that challenge a little bit harder. What I would say on the other side of that, our other global strategies and our emerging market strategies in J O Hambro have actually been receiving inflows as well. They do -- you do see some of the offset there as well. It remains a focus... Nigel Pittaway: Then just, I mean, following up, those 2 strategies, the outflows from there seem to be the main explanation as to why the revenue margin in asset management ex-performance fees dipped quite a bit in the second half last year. There seems to have been some partial recovery in that this half despite those outflows continuing. Is there anything going -- else going on within that revenue margin for asset management? I say stripping out performance fees that made it improve this half? Bernard Reilly: You're right. The margin compression that we saw in the prior half was related to the outflows in Select. You're also seeing at the margin, you're seeing the asset mix is changing. We touched on some of the strategies that we launched in the most recent half, and we've seen those fixed income strategies, which are a lower basis point average relative to equities where we've seen the inflow. You do see some of it is in that. It's not in all in outflow. We've also seen a pickup in some of the Barrow strategies as well. Suzanne Evans: Yes. I think as Nigel just called out, the way we report it includes performance fees. Operator: The next question is from Andrei Stadnik from Morgan Stanley. Andrei Stadnik: Can I ask my first question around distribution efforts in U.S. and U.K.? Are you pleased with the progress there as you are in Australia? Or what's the update on U.S. and U.K. European distribution? Bernard Reilly: Sure, Andre. We highlighted the Australian distribution in this half because we've actually spoken about the global in the prior half or the half before. I can't remember now. I thought it was an opportunity given a lot of the work in the Australian -- bringing the Australian teams together was really finalized. I wanted to highlight that and the fact I think they've done a great job in delivery on coming together as a unified team and delivering positive flows for the business. I suppose that's the first point, I suppose to explain why we put it in there for you to give you some context. I also think the size of that team and our footprint is something that we don't always talk about, and I think it's actually a great asset for the business. Reflecting that, I think, is important. It is far -- that team is far more advanced than our international distribution footprint would be a fair assessment to make. The work that we're doing with the team is continuing to drive that. Am I happy where it's at? I'm probably never going to be happy enough with where it's at from a distribution perspective. I might say the Australian team, some of them are listening have done a good job. There's still more that they can do. I suppose we're focused on continuing to drive what we can on both on -- I think the market segment piece is important. If I think about the U.S. and the U.K., I think a great example of some of the work that we've done was launching the Barrow Hanley strategy in the U.K., which was effectively a strategy we have in the U.S. that there was a real appetite for that opportunity in the U.K. The multi-boutique model allowed us to actually offer that in a different market that the Barrow team never would have been able to access had we not had they not been part of the group. I think a good fact point around the business strategy and structure that we have. An example of that. I think there's more we need to do in the intermediary space, wholesale space in the U.S. It is a little bit hampered, to be honest, by some of the outflows we're seeing in the select strategy, but that's an area of focus that I can assure you the team are clearly focused on that. The other part to, I think, think about in the U.S., given you raised the U.S. is how that market is changing. Active ETFs are clearly -- while it's a small start, right, but active ETFs garnering an outsized share of flow. We've talked about it in the past, us having a footprint in the active ETF space in the U.S. is going to be important for the future. As I mentioned in my remarks, we've made some steps there to go down the path of actually using a third-party provider. The reason we're doing that is a couple of fold. I think from a risk of execution perspective, we're taking some of the risk off the table by using someone who is using a multi-series fund. We're effectively using their scale to help us launch. It's quicker to market for us. We don't have to spend all the time building and getting approvals. We can get to market more quickly. Then we can assess the success of that and the progress of that before we look to invest more heavily. I hope that answers. Andrei Stadnik: I can ask the second question. Just on the seed capital, $183 million of seed capital. Can you talk a little bit about how that's shaped evolved over time, where you would like to see that number? How many strategies might be behind that $183 million of seed capital? Suzanne Evans: Yes to take that one. Thanks, Andre. Bernard Reilly: Suzanne is the Chair of the Committee, so she can take that. Suzanne Evans: Look, the thing is to deal with one of your questions, it is very diversified. We've got a lot of strategies that only required a relatively small amount of seed either to build the initial portfolio construction to build a track record. We've got quite a few bets in there. There'd be more than 20 capabilities that we've got ceded today. Also included in that number is investments in our CLO business via Barrow Hanley. Now those are obviously longer-term structures, so not liquid. Those ones have more duration to them. I think the important thing there is we're quite focused on, I think the size that we have deployed at the moment is appropriate. Obviously, the discipline that we're very focused on is how do we recycle. It's quite easy putting money into funds. It's sometimes a lot harder at recycling or as I sort of called out, if something isn't working, and that may just be that the market demand wasn't where you expected it to be. You have the discipline around closure and bringing that capital back. I wouldn't see us looking to materially increase the pool that we have today. I think with what we've got and with some of the recycling we're starting to think about, we'll be able to continue to support some of the innovation and product development that has spoken about. Operator: The next question is from Lafitani Sotiriou from MST. Lafitani Sotiriou: Can I start off with the wealth management business and sale process? $14 million spent in the last half is quite a lot of money for a business you may not sell in addition to the $5 million odd you spent the half before. Can you talk us through exactly what that money is being spent on? Have you got a better idea on potential stranded group costs and further separation costs if you are successful? Bernard Reilly: Sure, Laf. If you look at the $14 million pretax number, that is spent in -- there's obviously legal and other costs in there, but I think the larger part of that is around actually the separation of the business, which, to be honest, as part of our simplification strategy, we would do anyway. There's a part there where we are creating -- bringing the team into a separate perimeter and systems and other sorts of things that we are -- the technology that we're implementing that's in that number. You're right, $14 million is not an insignificant number, and it's one that we are keeping a very close eye on in addition to the $5 million you mentioned from the prior half. Suzanne Evans: I think it's a good point, Laf, because I think it's -- some of that is obviously cost that we may otherwise have incurred, but maybe in a slightly more accelerated time frame with some of the work we're doing around putting more autonomy into each of our business lines. The stranded cost, obviously, is something I'm very focused on. I would say we've already had a mind to that through the simplification program. Wherever we end up with the sale process, I'm pretty confident that those will be relatively immaterial. Now that does require us to do some more work just as we've done across the rest of the organization, but that's not something that probably touches my mind that much. The other part that around what will it cost if we are successful with the sale. I think we're going to have to progress a little bit further with that process to be able to articulate that in a way that I wouldn't be giving you a misleading number. I guess it's fair to say we have had a reasonable amount of spend already. That's some cost, which we can leverage if there is a sale that proceeds. Lafitani Sotiriou: Can I clarify? I understand that there are costs that you can move around, but one of the criticisms has been you had the strategic review and simplification cost program previously, that was over $130 million. Now you've got a new simplification program, which is $60 million. This is even separate to that, right? This wealth management $20 million spend is another one-off program that is being kept off and separated from the underlying cost. There seems to be a lack of consistency. On the one hand, you've got one-off costs for your tax you've reduced your tax cost in the underlying number this period, but it's from one-off capital gains losses that you would typically strip out, but you've then stripped out a lot of costs from your wealth business, which you still have, and you've also stripped out still $6 million from your Pendal business. I'm just not sure how we should reconcile and think about one-off costs going forward? Suzanne Evans: Yes. Thanks, Laf. Just one point of clarity and sorry if I wasn't clear before. Some of the impact that we've had in the prior period around the deferred tax asset wasn't actually a capital gain loss. We had a deferred tax asset that was sitting there, which was a timing part. We took a view around our Singapore business, and that was reversed. It's just slightly different and sorry if I didn't clarify it. I think we've definitely heard from the market views around significant items, and I made a commitment at the last half that we would start to look at that. I can't change some of the history, but I think I have been very focused on working with both the executive team and the Board around how we do have more discipline as to what gets classified as a significant item. I think there will be items from time-to-time and the potential sale of the wealth business is one of them, which I think if we don't break that out and provide some clarity around it, it is going to be very hard for people to think about the ongoing expense base. I will say we've heard you. We've heard what the market has given us this feedback, and we're starting that process. I think by the time we come back at 30, June, I think we can be much clearer as to what you should expect on a go forward in terms of the classifications for significant items. Lafitani Sotiriou: Just to be clear, so the wealth management business, some of that is actually BAU that's in that perimeter that's been separated. The teams -- that's people headcount that are part of the wealth business that are being excluded from the underlying number. That tax piece, that Singaporean thing still, whether it's a CGT thing or not, that's one-off in nature. Suzanne Evans: Yes, you're correct on the one-off. That's right. It's not people in the wealth business. We do have a team at the moment that are assisting us with the separation process. That separate team makes up some of that cost. I wouldn't categorize this as BAU spend. It is something that we're doing over and above. Obviously, if this was a BAU process, we would take a lot longer around some of these separation activities. The fact is, as Bern said, we're trying to separate 2 businesses that have operated together quite closely for close to 140 years. There's a lot of unwinding to do. Some of that's quite technical in nature around the co-sharing of licenses and operations that have existed for a long time. Lafitani Sotiriou: Just finally, so can you just clarify why the one-off tax gain is included in underlying the one-off BT Pendal-related expenses still being excluded from underlying? Suzanne Evans: The Pendal one, I think -- and forgive me if I haven't got a little of the history, but I understand at the time the Pendal transaction occurred, it was indicated that it would take approximately 3 years for those costs. In that program, as I'm aware, all of the integration work is completed, but there is still a bit of a tail around some of the incentive arrangements that is still coming through in that number. That won't be there from FY '27, which is what I called out. As with the tax, I guess what we're trying to do is mirror both above and below the line. In terms of the one-offs, those were highlighted previously in significant items. I guess it's an open call as to whether you think they're material enough to call out. Given the movement that also pushed us below what we would expect our effective tax rate to be on a medium-term basis, which, as I said, is around the 27% to 28%, we wanted to call it out. Operator: There are no further questions. I'll now hand back to Bernard Reilly. Bernard Reilly: Thank you, Michelle, and thank you, everyone, for joining us on the call today for our update on our first half '26 results. Thank you.
Andrew Livingston: Good morning, everyone, and welcome to Howden's 2025 Results Presentation. So I'll begin by introducing our performance for the year. Jackie Callaway, our CFO, will then review our financial results for the period. And then I'll share my perspectives on our 2025 performance and our plans for this year and then we'll take your questions. The business advanced on all fronts in as we anticipated a challenging U.K. marketplace. The results were at the top end of our expectations and we've made an encouraging start to 2026. Group sales were up 4% year-on-year, with the business continuing to perform well in the final two periods of the year. In the U.K., we gained kitchen market share, which helped us mitigate a small single-digit decline in the overall market size. Our kitchen volumes rose which helped us consolidate the significant market share gains that we've made over the past 5 years or so with our longest established depots making a substantial contribution to the share gains that we've made over this period. We delivered an industry-leading gross margin with gross profit up on last year, and we balanced recovery of cost rises with our commitment to providing competitive pricing for our customers. Reported profit was 5% ahead of last year, increasing at a higher rate than sales. We progressed our strategic initiatives for the U.K. and total sales of our international operations increased significantly. At the year-end, we had a total of 970 depots trading, including 891 in the U.K. The business delivered strong operating cash flow, and we maintained a robust balance sheet. This gives us flexibility to continue to invest in our growth plans for the business and provide shareholders with an increased total dividend for the year. For 2026, we've also announced today a new GBP 100 million share buyback program. Our full year results demonstrate the strength of our local trade-only, in-stock model, a strong product lineup, high stock availability, industry-leading service levels and a very engaged team have all contributed to our performance which benefits from the ongoing investments in our strategic initiatives. In the U.K., the number of customer accounts as at the year-end and the number of accounts trading during the year were similar to last year's record levels with customers and average spending more. So far this year, our performance has been in line with our expectations. And whilst it's early in the year, we are on track to meet current market expectations for 2026, what remains a competitive marketplace. For 2026, our planning assumptions that the overall size of the kitchen market will be about level year-on-year following several years of decline. We are well prepared for the challenges and opportunities ahead with our customers who are typically self-employed. People are highly adept at winning business in all market conditions. And delivered by our highly entrepreneurial and well-incentivized depot teams, I believe, are service-orientated, trade-only, in-stock local model is the right one to deliver sustainable market share gains. Our model is hard to replicate, difficult to compete with, and we have initiatives in place to make it even more so. In 2025, we believe the value of our principal U.K. markets totaled some GBP 11 billion. versus our U.K. sales of GBP 2.3 billion, which also includes the contribution from our fitted bedroom initiative, bedrooms being a significant market in its own right. Our markets remain relatively unconsolidated and there are significant long-term opportunities for us. We will invest in the business on this basis. So I'm going to update you on our strategic initiatives, which are key to our longer-term development of the business after Jackie takes you through our financial results for the year. So Jackie, thank you. Jacqueline Callaway: Thanks, Andrew, and good morning, everyone. I'm pleased to present Howden's financial results for 2025, and I'll begin by summarizing the key highlights. The business performed well against all financial metrics in a challenging marketplace. In the second half, we continued the positive trading momentum achieved in the first half and following our last trading update, the business continued to perform well in the final two periods of the year. Group sales increased by 4.1% to GBP 2.4 billion. Gross margin was 110 basis points ahead of last year. We benefited from the price increase implemented at the start of the year and from effectively managing price and volume as we continue to take market share. We maintained our focus on productivity and delivered further sourcing and manufacturing efficiencies in the year. Operating expenses were tightly controlled, and we delivered an EBIT margin of 14.7% with profit growth ahead of sales while continuing to invest in our strategic initiatives. Profit before tax is up 5.1% to GBP 345 million. The effective tax rate was 22.4%, down from 24% in 2024 as we refined the patent box claim. And finally, we delivered an EPS growth of 8%, and this reflected the profit growth achieved in the year, a lower tax rate and the lower share count as a result of the share buyback program. Now let's look at sales growth in a bit more detail. In challenging market conditions, we maintained a disciplined approach to pricing and volume through delivery of a differentiated business model by a highly entrepreneurial depot teams, we also gained share in a market we estimate fell by around 3%. Overall, U.K. revenue increased by 3.8% to GBP 2.3 billion, was up 2.6% on a same depot basis. The price increase implemented at the start of the year had an impact of around 2%. And our international depots, revenue was EUR 99 million, 12% ahead of 2024 and 9% higher on a same depot basis. In France, the new senior leadership team focused on strengthening depot capabilities. Our Irish depots have traded well since we entered the market 3 years ago, and we expect to expand the footprint further this year. Andrew will talk through these initiatives in more detail shortly. Now turning to profit before tax. Starting from profit before tax of GBP 328 million in 2024. Gross profit was GBP 84 million higher. The price increase delivered a GBP 41 million benefit with volumes and mix contributing GBP 29 million and sourcing and manufacturing benefits a further GBP 14 million. Kitchen volumes increased, and we grew our share of sales in each of the three price bands we follow as we continue to invest in new kitchens and associated kitchen products. We believe there are significant longer-term growth opportunities across all three price bands. Our in-house manufacturing and strategic sourcing capabilities remain a key competitive advantage for us. We are progressing plans to develop the Runcorn site, which will increase capacity there by around 1 million rigid cabinets, supporting our longer-term ambition for the business while preserving the low-cost manufacturing advantage. Total operating cost increases were held to GBP 68 million, balancing tight cost control with investment in our strategic initiatives. This disciplined approach supported an increase in EBIT margin and a profit before tax of GBP 345 million for the year. Now let's look at operating costs in a bit more detail. Ongoing investment in our strategic initiatives was GBP 28 million in the year. This included the incremental costs of the new U.K. depots, which totaled GBP 12 million and included the cost of the 52 depots opened this year and in the prior year. We invested a further GBP 13 million in other strategic initiatives, predominantly digital. We invested in our international businesses, for example, by expanding our presence in the Republic of Ireland. And our existing U.K. depots, additional costs of GBP 11 million related predominantly to volume increases, we also incurred GBP 11 million of additional labor costs arising from the government's changes to the employees, national insurance and the minimum wage, which came into effect last April. And other costs, this mainly related to variable pay and incentives, which were higher this year given the strong trading performance and the actions we are taking to optimize the depot network in France. I would also highlight that we offset around GBP 27 million of inflationary cost increases with productivity and efficiency actions taken in the year. In 2026, we expect continuing inflationary headwinds of around GBP 30 million in the total cost base, in areas such as commodities, labor and additional property costs. And as in previous years, we will offset these where practicable with further productivity and efficiency savings. We will also continue to invest in our strategic initiatives to fund future growth, and Andrew will take you through our plans for 2026, shortly. Next, our cash flow. Cash generation was strong, and we ended the year with GBP 345 million of cash. In total, we invested around GBP 26 million in working capital in the year to support our growth. Capital expenditure for the year totaled GBP 125 million as planned before the GBP 31 million for the purchase of the Runcorn site. Our normalized CapEx spend will continue to be around GBP 125 million a year and aside from maintenance CapEx, which is around GBP 30 million a year, within this total, there are three major investment categories that we are prioritizing to support our growth. First, manufacturing. We continue to make investments in our U.K. manufacturing base to enhance productivity and increase capacity and broaden our capabilities. Second, depot reformats and openings. Our updated format provides the best environment to do business with our trade customers, and we continue to see attractive investment returns when we convert a depot. And finally, digital, we will continue to support our trade customers for upgrades to our digital capabilities to make them more productive and to raise brand awareness. We are also using technology to support new services and ways to trade while delivering productivity benefits to the depots. Moving on to cash tax. We benefited from the prior year tax credit arising from our patent box claim. And looking forward into 2026, we expect cash tax to be around GBP 60 million, with an effective tax rate of around 23% to 24%. And finally, you can see that in the year, we returned over GBP 216 million to shareholders through ordinary dividends and share buybacks, and we'd expect to have a similar approach in 2026. Moving on to the pension scheme. Over the last 9 months, we have worked with the trustees to review the strategy of the defined pension scheme. The scheme is well funded with a surplus on an ongoing funding basis, meaning that, no contributions are currently payable by the company. The current funding arrangement is in place to the end of May 2027, while we undertake the next triannual valuation, which is due at the 31st of March this year. We are now actively engaging with the trustee to manage and reduce pension risk over time through a collaborative joint working party framework. This will look to reduce and manage pension risk proactively in areas such as investment strategy, data and benefits and scheme funding. Howdens is a strongly cash-generative business, and we have a robust balance sheet, which gives us the opportunity to invest in future growth as well as rewarding shareholders with attractive cash returns over a long period of time. In total, we have generated GBP 3.8 billion in operating cash flows in the last 10 years. We've invested over GBP 900 million in the business. This high returning capital investment has been across both strategic organic growth initiatives and bolt-on opportunities like the investment in the solid work surfaces business 3 years ago, alongside our maintenance CapEx programs. Howdens remains disciplined in the returns we achieved from our capital allocation and investment. This discipline is unchanged over many years and has driven our overall return on capital employed which in 2025 is a healthy 25% -- sorry, 23%, well ahead of our cost of capital. Over the same time frame, we've returned over GBP 1.5 billion to shareholders in dividends and buybacks. In 2025, we grew earnings per share by 8% as a result of our earnings growth, a lower tax rate and the buyback we completed in the year. Now moving on to capital allocation. Our capital allocation policy is unchanged with the principles set out on the slide. We continue to operate within our clear capital allocation framework. And for several years, we have operated with a policy where year-end surplus cash defined as amounts in excess of GBP 250 million is returned to shareholders. This is unchanged and appropriate for Howdens despite the significant growth in the business over time. This still provides sufficient headroom to accommodate our seasonal working capital requirements, support CapEx into organic growth and ongoing investment into our strategic initiatives and opportunities whilst maintaining our strong balance sheet. We also recognize the importance of the dividend and dividend growth to shareholders. The Board is recommending a final dividend for 2025 of 16.9p an increase of 3.7% and resulting in a total dividend of 21.9p per ordinary share. And the final dividend will be paid on the 22nd of May 2026. Taking all of this into consideration and reflecting the group's continued strong financial position, the Board is also announcing today a new GBP 100 million share buyback program for 2026. So to summarize, we have performed well this year in a challenging marketplace. Our trade model is different -- differentiated, and our strategy is well defined, and we are executing well. For 2026, our planning assumption is that the overall size of the U.K. kitchen market will be level year-on-year after several years of decline. We continue to be proactive in delivering productivity and efficiency savings to deliver profit growth and offset inflationary headwinds. Our robust balance sheet and cash generation support our continued investment in the business. And we remain confident of delivering growth ahead of our markets while generating strong cash flow and attractive returns for shareholders. While it's early in the new financial year, we're on track to meet current market expectations for 2026 and what remains a competitive market. Thank you, and I'll now hand back to Andrew. Andrew Livingston: Thank you, Jackie. As I mentioned earlier, we believe that our markets give us significant long-term growth opportunities. Our strategic initiatives are key to capitalizing on these. And I'm going to use those as a framework to review our 2025 performance and our plans for this year. They are based around our key -- the key features of our business model, such as industry-leading levels of service and convenience, trade value, product leadership, but they're all delivered by highly entrepreneurial teams who, in turn, build long-term relationships with local tradespeople. So our initiatives are to evolve our depot network, to improve our range in supply management, to develop our digital capabilities and services and to expand our international operations. So first, depot evolution. And high service levels, including local proximity and immediate availability are very important to our customers. And we continue to see profitable opportunities to open up depots. Overall, we have a line of sight to around 1,000 depots in the U.K. In 2025, we opened up 23 U.K. depots, including 18 in the two final periods with a total of 891 trading at the year-end. This year, we expect to open around 25 more depots, and we continue to take a highly disciplined approach to the location of our depots. Our updated format enables us to provide the best working environment for our depot teams and to make productivity and space utilization gains in a cost-effective way. We will now show you a short video that takes you around our Stockport depot, which we opened last year, and whose layout is very typical of the latest situations of our formats. The kitchen displays show most of our kitchen families, including paint-to-order options and solid surface. Our trade counter stocks many of our everyday products and provides a chance for a chat and a brew. Our open plan business area makes it easy for our trade customers to easily access advice from our teams. We have space for our designers to plan kitchens for trade customers and a full wall of our kitchen collection known in our depots as the Wall of Fame. And we have a new selection area for customers to view our kitchen door and work top combinations, including our solid surface proposition. And our presentation rooms are private and have high-definition screens to bring to life customers' kitchen choices in 3D. Our sales conversions here are extremely high. Our restructured warehousing and racking is a vital Howdens USP and enables us to serve the trade with stock reliably and often instantly. The updated format has strengthened our competitive proposition and our program to convert older depots to this format is well advanced. Last year, we completed a further 60 revamps, including nine relocations, taking the total so completed to 410. These principally comprise conversions of our larger and longest established depos. Now this year, including relocations, we plan to convert another 45 depots. And by the end of this year, we'll have revamped around 68% of all depots, which opened in the old format, and we'll have around 77% of all U.K. depots trading in the updated one. As I mentioned earlier, the latest iteration of the format has a separate area for customers to view kitchens, doors and worktop combinations. And over the next 2 years or so, we will also be making the minor layered modifications necessary to include this area in the depots that were prior to the 2025 refits. Next, range and supply management. Investment in service, product and availability helps us develop long-term customer relationships and build competitive advantage. Sales of new products are a significant contributor to our performance. Sales of product introduced in 2025 and the prior 2 calendar years represent around 29% of U.K. product sales, with product launch in 2023 being the largest contributor. Value for money is a constant feature of our purchaser's buying decisions, and we are committed to providing our customers with market-leading, easy-to-fit and fairly priced product. And given pressures on high sale budgets, price featured predominantly in 2025, and we expected to do so again this year. With an emphasis on value for money and choice at all price points, our offering is well positioned to take advantage of this. Our kitchen NPI for 2026 makes more colors, styles and finishes available to more budgets, including at entry and mid-level price points. We are innovating in other long-established product categories and adding more colors and styles to our fitted bedroom offering launched 2 years ago. As we continue to invest in product innovation to capitalize on the significant growth opportunities we have, efficient management of our kitchen range is crucial to balancing customer choice and availability with our profitability. Our rigid kitchen platform is shared across all our families, which helps us introduce new kitchen options at more price points cost effectively. And our stock management and replenishment enhancements, including our XDC network, enabled us to provide best availability on a broader offering at a lower cost. More efficient new product testing enables us to bring more proven new styles to market more quickly. Our increased presence in the premium end market, which is where range innovations are usually made is also forming -- informing and accelerating our ranging decisions at other price points. Excluding paint-to-order, we have 24 new kitchens confirmed for 2026 as compared to 23 last year and 11 in the prior year. We will enter the second half with our entire offering of such kitchens organized into 11 families with a similar total count to last year. In 2025, sales of our entry-level and mid-level kitchen families represented, respectively, the highest number of kitchens we sold and the most kitchen sales by value. Last year, we brought to market 13 new kitchens for our established entry and mid-level families and launched Frome in four colors, a new family whose styling updated that of our long-standing Chelford family. This year, we have 15 new kitchens for these families. For our entry-level families are Heartland -- our traditional Heartland, we have five new kitchens in colors, which are popular elsewhere in our offering, including Greenwich, and Witney in porcelain and Allendale, shown there in Reed Green. At mid-level, we have discontinued Chelford, and we will add six colors to our most modern and shaker range Frome, including Mist and Pebble. Elsewhere, we've introduced some more emerging colors and finishes to our best-performing mid-level families, including Clerkenwell in Super Matt Mist and Halesworth in Ash Green. We've upscaled our higher-priced kitchen portfolios in recent years, utilizing Howden's scale, supply and manufacturing capabilities to offer the bespoke look most associated with high street independents at competitive pricing. Our offering now comprises four families including three shaker-style Timber families, which are closely marketed as Classic Timber Kitchens. In 2025, our Classic Timber Kitchen families performed particularly well with the paint-to-order options growing in popularity. The number of our Chilcomb and Elmbridge kitchen sold and paint-to-order colors, which are priced at the premium to stocked colors increased significantly in 2025. This year, we are refreshing our paint-to-order pallet with four new colors with two of the leading paint colors becoming Chilcomb and Elmbridge stocked colors. Last year, we extended the reach of our timber offering with the launch of a new family called Ilfracombe, an in-framed timber kitchen of classic design. Precision above Chilcomb and Elmbridge families, Ilfracombe is exclusively available in 24 paint-to-order colors. Solid surface worktops, which are often but not exclusively associated with the sale of higher-priced kitchens continue to represent significant opportunities for the group. In recent years, we have increased the number of decors we offer in this service. And for this year, we've introduced clearer and simpler ranging and more delineated pricing to demonstrate the value we offer at all price points. Ahead of peak trading later this year, our total offering will comprise a similar number of options to last year with increased space available to display worktops in more of our depots. We continue to upgrade our offering in other categories, including our own category, specifically own label brands, which complement the third-party branding product we sell. So our Lamona branding is one of the leading integrated appliance brands in the U.K. And for this year, we have a major refresh of our brands offering. We've modified the design, lowered the prices of a suite of high-volume products without compromising these products functionality. Elsewhere, we've updated the design and specification of a number of high-priced products, including washing machines, fridge, freezers and cookers. Launched in 2023, our own label flooring brand, Oake & Gray now represents a substantial portion of the category sales, having introduced water-resistant laminates last year. New product for this year includes sustainably sourced engineered wood flooring with market-leading standing water resistance. In Ironmongery, we launched our own label called Fuller & Forge. Fuller & Forge product has landed well and has significantly improved this offering in our category. For this year, we have new finishes and new designs, and we'll be adding new subcategories. As well as being substantial businesses, Doors and Joinery remain a key footfall building product for us in our depots. Last year, we launched our more colors and bolder styles at all price points to our door lineup. A new product this year includes a new premium range of Howden branded solid engineered doors. In Joinery, we will continue to develop the subcategory extensions into wall paneling, stair parts and lost spaces that we initiated in 2025. Fitted bedrooms were well ahead of the previous year. Bedrooms represent a growing source of incremental sales and profit and help us foster customer relationships. Installing fitted bedroom suits the skills of our customers who fit kitchens. And last year, a substantial portion of our total bedroom sales represented purchases either by new customers or by customers who bought from us relatively infrequently. We developed our bedroom ranges in house, utilizing our existing design and supply infrastructure, and they have a high cabinetry content, which, of course, matches our manufacturing capabilities. In 2025 -- our 2025 offering comprised bedrooms in five leading family designs drawn from our kitchen portfolio, including new family Clerkenwell launched during the year. This year, we will continue to target entry and mid price points with five new bedrooms, including new colors for Bridgemere and Halesworth. Our product offering is underpinned by our dedicated sourcing operations, which manufacture or source the right product in complex categories and distribute it efficiently across our depot network. Howdens is an in-stock business and the trade tell us that high levels of stock availability is one of the key reasons that they buy from us. The investment in our XDC network, which enables us to offer next day delivery service and other recent initiatives, including Daily Traders facilitate exceptional levels of service to our depots. In 2025, deliveries totaled some 73 million pieces, and our service level from primary to our depots was at 99.98%. Now that is a world-class performance by any standard. Our in-house manufacturing capability has a source of competitive advantage for us. And we always keep under review what we believe is best to make or buy by balancing cost and overall supply chain availability, resilience and flexibility. Recent investments in manufacturing have strengthened our competitive position by increasing our manufacturing capacity and by adding broader and new capabilities. So our Runcorn factory with its high volume, low-cost making capability has always been an integral part of our manufacturing and logistics strategy. With planning permissions in place, our development program for Runcorn site is now underway. And at the end of last year, we also acquired the freehold of this site. We expect the works will take about 3 years to complete in line with our long-term ambitions for the business. And the program will give us at Runcorn more capacity, more flexibility and broader capabilities to deliver lower cost of goods sold than might otherwise have been the case. Now turning to our digital platform, and we use digital to reinforce our model of strong local relationships between our depots and their customers. And we do this by raising brand awareness to support the business model with new services and ways to trade with us and to deliver productivity benefits and more leads into our depots and into our depot teams. Usage of our online account facilities, which provide efficient -- which provide efficiencies and benefits for our customers and depots alike has continued to increase. New registrations have totaled some 59,000, around 61% of our customers had an online account at the year-end. Total users viewing our trade platform has increased by 45%, with around 80% of users regularly looking at their individual and confidential pricing. Customers with online accounts have on average continue to trade more frequently and spend more than non-users. We generated high levels of engagement with our web platform and grew our social media presence, which also stimulates interest in viewing our products and services online. Total visits totaled some -- site visits totaled some 24 million in the year. Amongst kitchen specialist, we continue to have the highest number of fitted kitchen site visits in the U.K. The time spent viewing pages and the number of sessions were consistently at high levels. Across the leading social media channels, our follower base at around 720,000 was up 18%, and with around 6.8 million engagements in a month. Usage of our upgraded Click & Collect service for everyday products increased and the new depot account management tool introduced last year is helping depots manage their customer relationships more efficiently and more productively. We have also recently introduced a new depot pricing and margin tool, which we call PAM, and its now operational in all our U.K. depots. We designed this in-house and PAM makes depot price management easier and more effective. It provides comprehensive data for depots to make more informed pricing decisions with a higher degree of confidence and enables depots to access quickly and see the impact that it has on their margin. Depot feedback has been very positive, and we are seeing both more bespoke local pricing and improvements in depot margins on products, which we incorporate in the system. And finally, international. In 2025, year-on-year sales of our international operations based in France increased at a higher rate than in the previous 2 years. In tough market conditions, the business responded positively to the measures taken to improve existing depot sales performance. We now have in place a highly experienced leadership team adept at depot management and have invested in enhancing offerings of footfall promoting products alongside a number of other initiatives. In 2026, we will continue to build out our depot teams capabilities, particularly account management, and actively manage our depot estate, including by closures and relocations where necessary as we look to build on the progress that we've made there. We are also trialing a more compact version of our format initially at a test depot in Reims in France, to the west of Paris. At around 500 square meters, this version is under half the average size of a current U.K. depot has a lower rental cost and the layout incorporates all the latest U.K. format innovations that you saw in the video earlier. We expect to maintain the aggregate number of depots trading at around the current number as we actively manage our depot estate to optimize its performance. Sales in the Republic of Ireland, we're well ahead of last year, and we will be opening more depots there in 2026. The Irish market suits our differentiated model and one which sets us apart from the competition there. We opened for business in the Republic of Ireland in 2022, and we used a similar depot location strategy to that in France with the local team supported by our U.K. infrastructure and also our digital platform. By the end of 2025, we had 16 depots trading, including nine clustered around Dublin, with three serving Cork. This year, we expect to open around five more depots, which would increase the number trading to 21 by the year-end. So for 2026, we are well planned, including on our strategic initiatives. These are aimed at increasing our market share profitably as day-to-day, we deliver value to customers across all price points and product categories. We have 24 new kitchens in stock well ahead of peak autumn trading plus a very competitively priced paint-to-order kitchen offering. And overall, our lineup in all product categories is the best that we've had in my time at Howdens. We have a program of Rooster promotions in place to keep Howdens at the front of the trades minds together with other price initiatives. We will continue to improve service and availability and increase the range of services and functionality we offer online to the benefit of our depot teams, customers and end users alike. During 2026, we plan to open around 25 depots in the U.K. and refurbish around another 45 existing depots to the updated format. In total, we expect to end the year with around 85 depots trading in the Republic of Ireland, France and Belgium together. So lastly, before we take questions, outlook. So far this year, our performance has been in line with our expectations. And whilst it's early in our financial year, we are on track to meet current market expectations for 2026 in what remains a competitive marketplace. We are planning for the size of the kitchen mark to be level year-on-year following several years of decline, and we are well prepared for challenges and opportunities ahead. We aim to retain a profitable balance between price and volume as we continue to maintain competitive pricing whilst aligning operating costs and working with suppliers to keep product and input costs controlled. We are confident that our business model is the right one to address the opportunities of our markets. And in summary, we're well placed to outperform our competitors again in 2026 as we both continue to invest in our strategic initiatives and return GBP 100 million to shareholders through the new buyback program that we've announced today. So thank you very much for listening to me and to Jackie, and we will now both take your questions. Allison Sun: Allison Sun, from Bank of America. Congratulations. It's very good results. Two questions from my side. So first is what makes you confident that 2026 overall kitchen market will be flattish instead of another decline? And second is, can you give us a bit more color in terms of the sales rate for P12, P13 last year and year-to-date? Andrew Livingston: Yes. We do a really incredible job in our business of listening to our depot managers and we highly value our day-to-day trading and the rhythm that we feel out of that comes a lot from our meeting with depot managers. And I go to -- we have 70 regional boards where we have about 90 managers coming to meetings, that happen 70 times a year. I get to 92% of those meetings this year with Austin, who sat with us today. So you feel it. You can see the numbers online. You can feel the rhythm of the business. Last Tuesday, Austin, and I had some of our top managers to dinner in London. They come from different parts of the U.K. and Austin, I wanted to talk about a number of issues in front. All of them are feeling pretty good about the market. They say it's tough. They say it's competitive. There's no doubt, we're out fighting. And the retailers who go out with their false sales in my mind of establishing prices in December and giving you a half-price dishwasher and interest-free and all that nonsense. That's what we're fighting against at the minute, but we are making good progress against it all. And I would say our feeling and our knowledge of the market would lead us to believe that we've got a decent year from a market perspective in us. Things like interest rates moving down and we would, of course, help. Do we feel that on a day-to-day basis? I don't know. But I think a combination of our initiatives, the product that we're landing this year and I have not chosen to show you all the product we've got coming this year because I just feel it's too sensitive now to be sharing in this forum to the market. So what James McKenzie has done and brought to this business is brilliant. We've got so much product coming through in the second half of this year, and it will -- I think it's sensational what's happening. So I think it's a combination of the market is going to be a bit better. We are so well placed to take more of it. Look, the back end of the year was good. There were different days of trading. We tend to trade pretty well towards the back end of the year, because we were the only guys in time with stock on the ground. And if somebody wants to get a job done pre-Christmas, they come to us. And so we have a sort of rhythm in our business where we closed out our accounts. We've done Trade Fest, which was a great success for a new sort of branded proposition of our peak trading, honoring the trades and supporting the trades, great Trade Fest, delivered it all out, closed out the year, get the price increase prepared for, bedded in, in January and then come out fighting in January. And all of that, we would say it's gone very well to plan. So not really going to comment on individual figures. We used to give out periods one and two at these events. And actually, if you look at it, it doesn't give you any indication as to whether the year is going to be good or bad, but we're just saying we're comfortable right now. Aynsley Lammin: Aynsley Lammin from Investec. Just two for me, please. Maybe just elaborating on the kind of early trade in terms of timing and scale of price rises you expect this year? And within the 2.6% same depot sales last year, how much of that was price? And then secondly, I guess just coming back again a bit more on the market share. You've obviously outperformed the market for, I think you said the market was down 3% last year, do you expect to continue to grow market share as much as you have been over the last couple of years in '26? Andrew Livingston: Yes. Look, we've probably become more and more sophisticated in our price increases as we've put them in and mentioned the PAM tool, which is mostly outside of kitchens where the depot managers will be flexing more prices as they go through the year, you'll see us do more dynamic prices as more and more customers go online, see their confidential pricing. But we want them to see pricing that our managers are completely comfortable with on a local level, and we've been making progress on that side. On kitchens, we typically go out with the sort of 4%. We hope to retain about 2% of it type of thing, but it's too early to say that we've done that at this point in the year, given the depots are out fighting in the market. So -- but we're pleased with how that's all sort of laying out in terms of the like-for-like for last year. I think you can read a sensible mix between half price, half volume. I think that's what we are pleased about what happened last year. I would continue to say that the market this year will be competitive, there's no doubt. We love the scrap. And our customers are so well placed because they're running their own businesses. And when the market is tough, our customers go out and win the business, there's more at stake for them. And the depots that really perform like the depot managers, that Austin and I had in the room on Tuesday night, they're incredibly close relationships with their customers. It's like here, it is like -- and people say they know their customers in the business. We know our customers and our business. And when I say we know them, they really are very close to their customer base. And one of the depots had 1,600 customers there. One had 800 customers there. The depot with 800 customers happens to be our highest-performing depot in the whole estate. And they don't change and they come back and they're regular and they just spend more and more with them. So I would say the proposition is well placed with what we've got from a sort of a product point of view. We believe interest rates, I think, I say that, I'm not leaning on that as a thing for this year, but this is self-help, and it's the model really working incredibly well with the initiatives and our very strong day-to-day trading. The thing I would add to it also for last year, people and our teams, I think they feel well. Morale in the business is high. And people have had a good taste of making money. And we don't turn up for the dental plan in this business. We turn up to grow profitable volume and I'm excited to see our depots earning well with the opportunity to earn even more in the coming years. They're a formidable bunch. Christen Hjorth: Christen Hjorth from Deutsche Bank. Two for me. First one, just for Jackie. So your first full year will be in 2026. Just an idea of the sort of areas that you'll be looking to focus on, is relatively new to the business. And the second one, just for Andrew. You point there's a lot more to go for in terms of strategic growth. I mean, how should we think about that? Is that sort of leveraging the investment that you've done to date in XDC and range, et cetera? Or are there more new areas to invest in to drive growth? That's the two. Andrew Livingston: Do you want me to start? Jacqueline Callaway: Yes, let me make a start. So look, it's been -- it's 9 months here at Howden's. It's been an absolutely fantastic first 9 months. It's an amazing business. And you don't really know till you get in. Having got in, it's well invested, very well invested. We've invested through what has been a difficult cycle, I think, in the industry. We're well set up for growth going forward. And we've got highly motivation teams to support us. So from a -- is there things that I think I need to come in and massively fix, I think the answer to that is no. Because the business is well placed. There's a few areas that I am focusing on. I think pensions would be a good example of one that we talked about. I think there's some good opportunities around our pension scheme and how we might derisk it. So that would be an area. And I think it's around just within finance is just driving the finance team to be a good business partners to the business and to support what we're doing strategically. Those would probably be my two key areas. Andrew Livingston: And in answer to your second question, I think one of the things that we've got really right here is actually our strategic plan, which we call raised ambition internally is well understood right up and down the organization. And we tie together our business design with trusted trade relationships right at the center, and we constantly think about product innovation at value and making sure it's really convenient for customers to buy. But then, of course, we're always developing new things. You'll see in our depot format, we're moving on the iterations. I'll never let this get as bad as it was when I sort of turned up. The depots were retired, and I don't think they did represent the right environment for us to do business with our customers. And I remember my first presentation, Geoff Lowery gave me a knock and said, sort of, isn't it about time? And that has been a very, very successful program. We continue to do that and take lessons into France and just think about sizing as well to make them more profitable quickly. From a ranging point of view, there is always more you can do, and we are very keen to stay on the front foot of a high proportion of innovation brought in as a big portion. So we measure it. We're incentivized on it, and the teams are incentivized it from bonus and LTIP point of view. So we do it because it's the right thing. It drives interest for customers. It drives margin accretion. It helps us deal with old stock. So we are obsessive. We spend an extraordinary amount of time on ranging. We're very good at testing it. And I say these things because we're a kitchen and a joinery business. And we think in our heads about joinery driving footfall, joinery being the place where customers start working, they do flooring, they do doors, they do skirting, they do wall paneling and then they start creeping into doing kitchens. And we've got to keep on getting people into doing these trades. And there is a bit of a thing here about AI is going to change jobs and markets and so on. AI is not yet fitting kitchens in my mind. So we are keen on doing a lot of great work about how you build your business. We've got to build a business builder program on in Howdens at the minute where we want to encourage people to go and start their own businesses in this trade space, and you can make a fantastic living out of the fit and out of the product on margin. We feel we're comfortable with the categories. And each one of those categories, we feel we can grow in. So we're only 24% of the kitchen market by value. 75% of the market that we're not having right now, we've got a significant opportunity. And I think we're upsetting our competitors as we progress forward with that. And out there, you've got a number of competitors who are either clearing what they're doing and they're lashing out on price or they're trying to make it work and you've got some people under new ownership. And just chasing down a price rate is not the way to win in this market. I'm also excited about what we're doing digitally and in preparation for the future, and people will think about how they design and plan and do thing -- different things on kitchens in the future. And then I suppose the final part of it is the international piece of the business, and we are making progress in France, and I'm excited about the work that we've been doing on the estate there. And we've got two divisions that are flying. We had 1/3 of the depots that performed incredibly well there last year. Fortunately, we've got a 1/3 that need work. So we adjusted some of them and we're going through manager-by-manager and under SEB's leadership, we will get to a good place. And Ireland, we've gone in. We don't offer trade credit accounts in Ireland interestingly. We just have gone in and done cash. It's not held us back in any way because the proposition is so fresh to the market and where it gets right. So I was explaining to the teams I've been down to Wexford to see the opening of our Wexford depot, right, the most beautiful plum site right in the middle of Wexford, and we will dominate the market. The depot only just opened. It had 150 accounts already opened. It opened three when I was stood there. The manager and the team were exceptional. So we're really making a difference and understanding more and more how this model lands well because we're able to give new depot managers to our business tools and kits that help them run the business a bit more that we may not have been able to do before. So they get daily traders and they get a better stock management system, and they can do livestock. They're supported with online activity. They've got PAM now. They're well supported from an availability point of view. And I think we've become better and better at doing that. And I think overall in the business, we've become strong at sort of pairing up, used to feel like a sort of supply and a trade division that feels very much like one business where we think right up and down. And even in France, Seb sits on the exec, he's part of the team. He -- we've even done a thing where we're twinning depots in France with U.K. depots and the way you sort of towns are twin. We're doing that. So U.K. manager, will work with a French manager plus an interpreter and build a relationship together. So a bit of a long answer, apologies. Benjamin Pfannes-Varrow: Ben Varrow from RBC. I'll do two as well, please. First one on the market share, in the U.K. Could you provide some more detail on how that's developing at the different price points? And the second question is building on the France topic. What do you need to see there to start accelerating the depot rollout again? Andrew Livingston: Yes. I think one of the things on the market share and you're right on price points because sometimes you think of families as you go up and down the architecture and what is brilliant about our offering is it all sits on a common carcass platform. So it's a bit like the chassis of a car business, and you can move your way up and down. And if you want to hit your price point by putting a lower-priced door standard carcass and then invest in the solid surface work surface. That might be what you want to do. We've seen growth at all price points. We've seen growth at opening price points all the way through difficult times because we're sort of untouchable down at that bottom end. Many of our kitchens will not even make it into customers' homes, because you'll find them in universities and council houses and whether it's genuine churn. And we brought some innovation at opening price. Mid-price, we've grown. It's been tougher because everybody is at that mid-price thing and some people throw on credit, consumer credit and that type of thing. But we have stayed ahead by innovating and being faster than others to market and bringing things like metallics in into some ranges that might be sort of needing that kind of innovation. And the best end of the market for us has been a combination of just beautifully styled product that I think is better quality than the independents. You'd expect me to have a Howden's kitchen, but it's what I've put in my house, the paint-to-order offering is just beautiful. And with a solid surface, good lighting, walk to any one of the independents around where I live in London, and I'm thinking it ain't as good as what I've put in my home. And I think more and more people are discovering that do I go to an independent and I spend GBP 60,000, GBP 80,000 or do I go to Howden's, I've got a really strong relationship with my builder, and I'm doing it for considerably less. And I think you'll just see us continue to grow in that space of the market, and you'll see us doing work like this that just makes people reassess the brand and people sniff at value. So we've done well at all price points. And we think we wouldn't particularly pull out one over another. We're just pleased with how we're doing. What do we want to see in France? I want to see more consistent delivery across all of the regions and we're very clear with that. More depots in profit. And we've got and had to put some fixed cost in France that will only be covered when the depots gets to -- the depot estate gets to a certain level of turnover. But we're pleased with how it's progressing. And we've made some choices about depots that perhaps we opened too quickly post-COVID, when we were growing very, very fast. And we got all our eyes with attention on this new smaller format that we're doing there. But I'm very pleased with the team and the level of energy in that business is fantastic. Jackie and I went over to do their year-end celebration, and it was electric. Yes. Shane Carberry: Shane Carberry from Goodbody. Just two for me. Firstly, you've mentioned a couple of times the competitive markets. Could you just expand on that a little bit more? Is it the pricing point that you made earlier? Or is there some kind of shift in industry dynamics we should be aware of? And then second, just kind of a longer-term one. When I think about this business in kind of 5 years' time and I think about the mix of products obviously doing a lot more in the bedrooms, doors, other joinery components. How big a portion of the pie could that be going forward? Andrew Livingston: Yes. I think when we say competitive market, we think about -- I suppose we think about price and we think about availability of product and we think about product innovation. And if I split it down like that and I think about product innovation, nobody is anywhere near us from a product point of view. And I think 8 years ago, when I turned up in the business, I think people were ahead of us. And what we've done with innovation and find the gap and testing products and bringing more products to market, we're leading. We're not following at all. And with that and with our availability, the combination of those two, it's very, very tough combination to fight against. But of course, if you've got people trying to get any kind of volume to put over their fixed costs, they're going to come out fighting on. January is the time. It's a very, very difficult period for a retailer. They don't have a bit of success in January. It's a long, long journey up until the summer for them. So I say competitive in that context. But when we think of our depot managers, Austin's language is no kitchen left behind. And we're very, very clear about that. I think if you think forward to this business, we're pretty good at sticking to our knitting. And we're pretty good at realizing the customer first and in our case, trade customer, trade customer all the way. And the stronger you are with your trade relationships, the stronger the business will become. They do well, we do well, and we appreciate entrepreneurialism deeply. We appreciate it in the depots, and we appreciate it amongst our supply base as well, those who come first to market. We -- James has got a suppliers conference in about a month, and that will be a big topic for all of us to talk about. So I think the business will always be kitchen-centric, kitchen dominant. And I think you'll see innovation and new ways of shopping online and AI and scanning the room with your phone to help develop plans. But we see these as opportunities to help our design consultants or help customers get an image of where they want to go to, but we think it's important that we keep going with our business model. Charlie Campbell: Charlie Campbell at Stifel. I've got sort of two. The first one was on the efficiency gains. So sort of GBP 41 million in the year, GBP 14 million of that is from suppliers. Just does that not get harder and harder as the more to get out of that bucket? The GBP 27 million from kind of manufacturing efficiency, does that get more difficult as you're moving towards the new Runcorn? And then the other question, just want to detail really, there's a GBP 6 million sort of exceptional around France, is that the end of that? Or does that kind of run on for a bit more as you further kind of arrange the branches? Jacqueline Callaway: So let me take the -- both of those. The efficiency gains, we've had a good result last year, to say GBP 14 million and cost of goods sold and GBP 27 million in OpEX. I think as we go into the budget, we see that there were inflationary headwinds coming again this year. We've guided that at around GBP 30 million, and it's across a number of areas, a little bit of timber inflation, a little bit of -- we see people inflation and also some property inflation, particularly around London rents. We will always look to offset inflation with efficiency projects. And I think one of the things that positive with Howden's has got a very strong muscle in this space. And it's one that we already have a track on the costs, and we already have all the projects that -- a lot of the projects identified. So I feel confident that we can make a good dent in the inflationary amount again this year. And it's across multiple projects. I look to Julian here. So across manufacturing, it will be things like waste reduction, more efficient use of labor, good examples across logistics, it could be thinking about how we can optimize deliveries out to depots. It's another area that's a big project for this year. So I think we've got good confidence that we'll certainly dent a lot of that inflationary pressure this year. And then on the cost for the French depots that we were looking to close over the next 2 years. It's a GBP 6 million charge in OpEx, and we don't see any further any further amount coming through at this point. Ami Galla: Ami Galla from Citi. A couple of questions from me. The first one was just understanding the bundles that typically a customer takes in. Can you talk about some of the attachment rates of flooring currently? And is this scope to penetrate that further? The second question was on the pricing model that you are talking about today. What sort of information do you think does the depot manager now have it handy, which you previously did not have? I mean, just understanding more in detail as to what is different today with the model that we have in place? And the last question was just on the maturity of the existing network in the U.K. Often, you've talked about the potential of the younger branches to kind of come up to the mature level. Can you give us the range as we sit here today of what the mature U.K. depot looks like? And where is the opportunity as we think over the next couple of years? Andrew Livingston: Yes. I'm sort of rethinking what maturity is for our business. Because when I wrapped up here, people said, they all mature in 7 years, then we thought of all these initiatives that we've brought into the business, like solid work servicing better kitchens, you grow your account base, we've been more efficient in the warehouse. I was telling Matthew Ingle about our best depot there last year and where it had got to, and he nearly fell off his chair because it was about twice the level that he's seen before. And he offered the manager, if he hits his number here of GBP 10 million this year, he's offering a case of champagne, which he is very thoughtful about. So I think we've just got such a long way to go even at our first depot hitting a big milestone like that. And so I don't know where the top end of maturity is. We've got a lot of work. If you think of the range between sort of GBP 10 million down to a depot at GBP 1 million, you've got a wide range there. And a lot of it's down to the capabilities of the manager and making sure the manager is empowered to develop the local relationships. Of course, there's area and all the rest, but one of our depots we talk a bit about in Great Yarmouth is a very big job in our peak trading period. It's his sort of thing that he does each year. Half of his catchment in the sea, but he's the biggest depot. So I would say we've just got really significant opportunity. And even when this business runs out of space and depots and we hit the 1,000, we will still grow and the like-for-like will still grow because we see so many opportunities in that. Your question about the pricing model is a good one, because our range count has grown, given XDC -- and we put in XDC to make sure that product is available, and we've become very clear with Richie's leadership from supply chain about what's right to hold in stock in a depot and what's right not to hold in stock in a depot, because it might have high value, it might create a long discontinued problem later on. So we've -- our shape of our stock in our depot is brilliant. And we gave the depots tools to develop that, and we call the system TED. Those of you who have been around some of our visits and depots, we often demonstrate it. And then through meetings that I've taken with some of our managers, some of the managers then said, well, can we not use the same sort of thinking where we can look by SKU, balance it out and bring the same thinking into pricing, and we went back and built PAM. And what it gives our depot managers is understanding of where their price volume mix per SKU, per range, sort it all out and they can see where they're at versus their region. And then we feed in local pricing data. And it gives them real confidence that they're not only too cheap on some stuff or they're not too expensive on some stuff. When we've got promotions going in that we do from a group from a sort of Rooster point of view, they can press a button and accept them. They're going to override them and not do it. All of this is to empower our depot managers not take power away from them because it's our managers operating locally. But it's using tech to make sure they're better enabled to make the right pricing decisions for customers and confidence levels go up with it as well. Hopefully, that explains that. You did ask about flooring and attachment rates. We've got loads of room. We're only fourth in the U.K. on flooring. We're #1 in kitchens. We're #1 in doors. We've done some great work on own brand and own ranges. It's a priority for Austin to sell more flooring this year. Our attachment rate is not bad with kitchens, but there's lots more to do. Geoff Lowery: Geoff Lowery, Rothschild & Co Redburn. A question really around your supply business. If you had to rank what it really does for you across those buckets of product exclusivity, flexibility, resilience, sheer cost advantage, what would that ranking really look like? And I guess the second question is you've obviously invested considerable amounts in that back-end infrastructure and transformed this in a wonderfully positive way. But we haven't really seen it at this scale, at this efficiency in an upmarket. So in a theoretical scenario where your volumes were plus 20%, say, would we see a meaningful leverage of a fixed cost component there? Different issue what you did with it, but the maths of that, would it be a kicker on your margin? Andrew Livingston: Yes. I think when I was looking at from Howdens from the outside, and I was running Screwfix at the time I was going around all the U.K. depots, I remember in the conversation with the guy that I taken over running Screwfix from and he said, businesses often have strengths. And it's clear to me that Howden's strength is in its manufacturing capability because you've got some incredible front-end implementation in the depots. But the strength -- I think the big strength of this model is our vertical integration, our supply, our exclusivity, the cost advantage it gives us, our nimbleness around us, our ability to keep raw materials untouched and then flex in. We do things that I have never seen other businesses be able to do because of our agility. And that's at scale on big product, but also when we go and do a testing, a small testing thing, we've got -- James has got in his capabilities, a small batch production unit. And the amount of work that batch production unit does for us around building out extra doors, flexing up and flexing down, making small batches that we can go and test in markets. It gives us an agility of [ Azara. ] And I think there is -- it gives us fundamental lower cost base where we can take higher margins in the market. If -- I think we probably demonstrated our strength when we came out of COVID and we were able to flex up so quickly, and we hardly missed a beat. I mean, our service levels weren't at 99.98%, but they weren't very far off even though volumes dramatically lifted. And you saw the business started making 20% on sales. So it's a cash machine when you push volume through it. I mean, there isn't anybody who could manufacture this level of volume for us and need another 1 million cabinets, hence, the investment in Runcorn. But I suppose we think about panel manufacturing where we're making -- we're moving beyond raw materials, but we're leaving stuff as work in progress. And then we build those items up to deliver to customers through our peak trading period. But I think it's absolutely fundamental and it's incredibly hard to replicate what we've done. And I just sort of add just a wee bit of color to it. We -- I went to our Runcorn Christmas party and took my wife, which was an eye-opener for -- I can tell you. She -- but the feeling of our 1,000 manufacturing personnel at Runcorn at that party because we had purchased the site, made very clear what our plans were that this is a big future, and I stood up in front of them and said, you do a fantastic job for us. You make 3 million cabinets. The trouble is, I need another 1 million. And I think they are -- it's very common to meet people in our Runcorn site that have got 20, 30, 40 years' experience working for us. You don't -- you can't just -- one of our suppliers, Egger -- Michael Egger, Senior, who makes most of our chipboard for us. He said to me, Andrew, you can buy the assets, but you can't buy the people. And I think it's that sort of combination of that is very powerful for a business. I don't know if I've answered you well enough, Geoff, but it's fundamental to us. Zaim Beekawa: Zaim Beekawa, from JPMorgan. The first is on the new product sales. I think you said 29% in recent years, but quite excited about what's to come. So is that a number that you feel will pick up in the coming years? And then secondly, obviously, very strong on the gross profit margin in '25? Can I think about the moving parts into '26, please? Andrew Livingston: Yes. I sort of feel comfortable that 2025, it will move up and down depending on what we do. I feel comfortable with where we're at. When you bring new range into a business, you've got to make sure people understand it. The depot teams understand it. We do have a big exercise in James' team. We build an expo. Some of you have been up to the expo at the factory, and we've got an expert Runcorn, and we're opening up our first expert, Watford next month worth going and having a look at. And we use these spaces to show off our product offering, and you've got to train it into the team. So there's only so much a business can consume. You don't want to throw too much range in and not land well. And I think our cadence of about 2024 feels pretty good on the kitchens where the majority of the profitability is. You will see us do more on own labels. You'll see us do more innovation on outside kitchen areas. Kitchen is a fashion business. We've got to stay up on the front foot on it. Colors change, styles change very rapidly. I think we were pleased with the margins, but margins, we've got to leave enough room for the managers to flex it. We did well last year. I think Austin incentivized the teams incredibly well last year to deliver margin and volume. We all understand the rules on it, but if the kitchen comes out and it's cheaper, we will always take it, and we will develop the margins on the other side. But we're comfortable with our industry-leading margins. We don't chase the percent. We chase cash. We like cash. And I would say probably more of the same this year would be my guess, yes. Jacqueline Callaway: So we've got time for one more. Christian, do we? Priyal Mulji: It's Priyal Woolf here from Jefferies. I've just got two questions on the International division. I appreciate you said that in the U.K., you're rethinking what maturity even means. But can you give us any sense of what maturity time line looks like in France, just in the context that, obviously, you're slowing down on the depot openings, focusing more on getting to profitability there. And then the second one is just a quick one. Obviously, you're expanding in Ireland, you will be again at some point in France, is finding the correct sort of sites, any sort of obstacle yet at this point in time? Andrew Livingston: I think the quick answer on the second is no. We're always looking at -- we've been able to find the right sort of price location mix and very similar type of setup on trading estates in Ireland. And when we go into these secondary towns, we're getting good value, and we're getting prominent locations. So -- we've said around about 40. I don't know, it might be more, but a business of 40 in Southern Ireland would feel pretty good to us, and we'll be about halfway there by the back of this year, lots of growth to put on it. In France, yes, we were very clear. We're putting the foot in the ball. We're going to get the operations absolutely where they want to be. This year is an important year for the French team. And next year, the one after will be the same, but we want to see that business getting to breakeven in a sensible time frame. And we understand that happens when you push more depots on top to cover the fixed cost, but we want every depot in profitability in France in the near term. There's one question that we have to take because you've tried about 15 times now. Charlie Campbell: My arm is so tired from going up and down. I've got loads, but I'll keep it to two. Wren has bought Moores, it takes them into the trade bar, the kitchen market. Do you think that changes the way about how they attempt to broaden their addressable market in the U.K. at all? That was the first one. The second one was on the small branch depot formats you're going to start opening in France. Should we be looking to see those pop up in the U.K. anytime soon? Andrew Livingston: Yes. Yes, I don't -- it's interesting. The Wren business have tried several times to open up a trade business to be like us. Often, they've opened up a specific site, and we get wind of it and we release margin criteria to our depot managers and extinguish any potential flame coming out. On the contracts piece, we like routine, repetitive, repeating sort of maintenance type of businesses that we would sort of consider contract. The housebuilding stuff, we're happy to leave that to somebody else. I don't want large, long production runs that disturb high-margin supply to trade customers. And I think it could distract us. We're very happy to take local, smaller regional house builders if the margin is right for us. But I'm not looking to chase after big house builders. Symphony Group is better at doing that than us, they're better set up to do that than us. And the market is big. I don't know what their plans are, but I don't think it's going to change anything in the near future. Small depots in the U.K., I think we just -- it's more important for us to be in the catchment than not be in the catchment. So sometimes we go in and we will take a site that's a bit bigger or a bit smaller. You'd certainly see us doing a wee bit being a bit -- wee bit more curious in London. And of course, we've got the capabilities to do it. We've become much better at how we merchandise depots, built all that skill, and we're amazing at how we fulfill and supply depots, and we know what to put in the depots. It's the right type of product. So you can cope on smaller spaces. We're just about to open up in the arches at Waterloo, and that would be worth popping down having a wee look there. Limited parking, we think it's going to be a flyer. I think we'll call it quits there, if that's okay. So thanks very much for your time.
Operator: Good morning and thank you for standing by. Welcome to the Worley Half Year 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chief Executive Officer, Chris Ashton. Robert Ashton: Good morning, everybody, and welcome to the call today, and thanks for joining the half year results presentation for Worley for 2026 financial year. The results are defined by a solid revenue growth and resilient earnings outcome, once again showing our adaptability in the face of dynamic markets. As I start my seventh year as CEO, these results continue a pattern of consistent growth. Despite market disruptions, Worley continues to deliver. Our performance reflects deliberate decisions about portfolio, capability, where we compete and the agility with which we can adjust. And we have a dedicated team around the world who work to deliver the outcomes that our customers trust. Let me now give you an overview of our business performance for the period before our CFO, Justine Travers, takes you through the financial results in more detail. I'm pleased to share an early look into how we're positioning for the next phase of growth as we go through this presentation today with the strategy focused on increasing our total addressable markets and generating value for shareholders. Today, we reconfirm the outlook we provided to the market at our full year results in August last year. We continue to expect a year of moderated growth, but calendar '26 has started with renewed momentum. Some big wins recently include being provisionally named as EPCM partner on Glenfarne's Alaska LNG pipeline and appointed marine and port infrastructure technical adviser for the WA Westport program in Western Australia. We're already delivering Phase 1 of Venture Global CP2 LNG project in the U.S. and are continuing our partnership to deliver Phase 2. These wins on some of the largest projects in the world demonstrate the confidence customers have in our capability to execute major complex projects, and we continue to scale across a growing pipeline of these opportunities. Given this momentum, we're encouraged by the visible signs of growth for Worley beyond this financial year. Turning to Slide 2. I remind you to review the disclaimer shown here. I'd also like to take the time to acknowledge the Gadigal people of the Eora Nation, the traditional custodians of the land from which I'm calling today, and I pay my respects to the elders past, present and as well to the emerging leaders. Turning to Slide 3. Let me now turn to our business performance for the first half of the financial year. And so let's turn to Slide 4. As I said, revenue has grown even while navigating challenging market conditions and earnings have been resilient. The last 6 months, we've seen solid revenue growth of 5.4% over the prior corresponding period. A number of major projects in execution phase contributed to steady earnings and bookings are up 63% on the prior period. Venture Global CP2 Phase 1 was a major contributor, but I want to highlight some of the other significant wins across the sectors and regions, like the EPC for ConocoPhillips Scandinavia for their Norwegian Continental Shelf project, the FEED for OQ Refineries and Petroleum Industries decarbonization project for the Sohar refinery in Oman, and construction for ExxonMobil's major reconfiguration project of its integrated complex in Baytown, Texas. Momentum through increased wins in the first few months of this calendar year reinforce our confidence we can deliver a stronger second half. We've taken deliberate actions to enhance earnings quality. Our cost out and business restructuring initiatives are well advanced, and we're targeting more than $100 million of annualized savings from 2027 onwards, resetting our cost base and positioning the business for our next phase of growth. We acknowledge there's been $82 million of transformation and business restructuring costs this half, and Justine will talk to this later. And finally, our balance sheet remains strong. Disciplined working capital management drove strong first half cash performance, giving us the capacity to keep investing in growth. Turning to Slide 5. Our highest priority remains the safety of our people. Our safety performance has been maintained with a total recordable frequency rate of 0.10. At Rio Tinto's Rincon project in Argentina, for instance, we recently marked more than 1 million work hours with 0 safety accidents incidents. Visiting last year, I witnessed the discipline, care and pride the team brings to their work, and it's milestones like this that reflect the safety leadership on the ground and the commitment to looking out for one another each and every day. Positive ESG progress continues too. We've maintained leading external ESG ratings, and we've strengthened our approach to preventing modern slavery. And we remain on track with our own Scope 1 and Scope 2 emissions reduction targets. We're also well prepared for the new Australian sustainability reporting requirements. Bookings are up 63% compared to the prior 6-month period. And in the first half, bookings totaled $9.8 billion, including Venture Global CP2 Phase 1, which achieved FID last July. Sole source wins also increased, reinforcing customer confidence in Worley's capability and delivery. And as I've mentioned, a number of significant project awards already this calendar year build on this momentum. Energy and resource have both grown with the Americas continue to deliver wins for our portfolio and the mix of bookings reflect increased construction, fabrication and procurement activity as these projects move into the execution phase. The quality of these bookings remains high. As noted, large complex projects where Worley is supporting customers across the full project life cycle underpin backlog quality and forward earnings visibility. Turning to Slide 7. I'll now turn to leading indicators. Backlog remained resilient at $6.7 billion (sic) [ $16.7 billion ], providing good visibility of revenue into the second half of FY '26 and into '27. Backlog is slightly lower than the reported period for June '25, and this reflects the delivery timing rather than a drop-off in demand. $6.3 billion has been added to backlog through scope increases and project wins during this period. And while work on the Baytown Blue project has paused, we've retained in the project backlog and continue to work closely with ExxonMobil on that. Project wins already in the first few weeks of calendar year '26 will add more than $3.5 billion to backlog. Our factored sales pipeline remains robust, and we continue to convert opportunities into backlog as we secure contract wins, and the pipeline keeps replenishing. Around 46% of these opportunities are expected to be awarded in the next 12 months, reflecting the extended project delivery time frame for major projects. As we target more of these projects, we're focused on opportunities in the early-stage consulting phase with potential for pull-through and consulting opportunities increased by 24% in our pipeline over the past 6 months. Turning to Slide 8. The slide shows the diversification and competitive strength underpinning our business model and earnings resilience. Our broad exposure across sectors, geographies and services reduces reliance on any single market or customer decision and revenue is well balanced across energy, chemicals and resource. It's geographically diversified with meaningful scale across the Americas, EMEA and APAC. Our services mix across professional services, construction and fabrication and procurement shows our increasing relevance to customers across the full project life cycle. And we're attracting a greater share of project capital with expanded capabilities. We also continue to differentiate through our use of digital and AI. Enterprise efficiency is a non-negotiable. Technology is transforming project delivery. Our digital and AI initiatives will reshape how we deliver projects and strengthen our competitive advantage. For customers, intelligent solutions will bring their assets into operation sooner and accelerate returns on capital. I'd now like to give an update on each of our sectors and turning to Slide 9. Aggregated revenue from energy work increased 8.8% over the prior corresponding half, and growth was driven by major projects moving into the execution phase, lifting construction, fabrication and procurement activity, particularly in the Americas. Integrated gas continues to be a growth driver. Demand for gas is supporting ongoing LNG import and export terminal developments and integrated gas work represented 25% of Worley's total revenue during the period. The variety of LNG projects we're working on around the world is notable in places like Germany, Indonesia and Australia as well as the U.S. While the outlook remains softer overall in oil, activity is increasingly concentrated in higher-margin offshore projects and selected onshore developments, particularly shale. And power is an important growth market. Structural change is driving energy demand and investment across gas-fired power generation, renewables and nuclear. Turning to Slide 10. The global chemicals market remains important to us. Near-term conditions are challenging, reflecting regional [Technical Difficulty]. Aggregated revenue declined 9% over the period with project cancellations in Western Europe and lower professional services activity across APAC and EMEA. This was partially offset by ongoing major project execution in the Americas, where construction and fabrication activity continues. Looking at specific subsectors, refined fuels remains promising, and it continues to attract investment in product slate optimization, decarbonization and asset life extension. Petrochemicals remain a major contributor to our chemicals revenue, although Western European plant closures related to global overcapacity have had an impact. Low carbon fuels present more selective opportunities where projects are commercially viable. Turning to Slide 11. Finally, resource have delivered growth for Worley in the first half and aggregated revenue has increased 12.3% over the prior corresponding period. Resources now represents 29% of our business. Population growth, urbanization and the energy transition are demand fundamentals, which will continue long term. Fertilizers remains our largest subsector. Here, demand is supported by population growth and food security. Demand for copper is driven by the need for energy transition materials and an increasing demand from data centers, cloud and AI infrastructure. In battery materials, there's been a resurgence in activity and sentiment with a focus on front-end work and commercialization of technology. And we're confident resources will make an important contribution to second half growth, and we expect this to continue beyond the next year. I'm now going to hand over to Justine for further details on the financial results. Justine? Justine Travers: Thanks, Chris, and good morning, everyone. Turning to Slide 13. Our half-year performance and execution of strategic priorities such as cost management and earnings quality, coupled with strong capital management positions us well to deliver moderate growth this year. I want to reemphasize 3 points in relation to the results we are delivering today. First, we continue to deliver aggregated revenue growth and solid earnings, supported by our global operations and strategic focus on major project delivery. Second, targeted actions to reset the cost base are underway and aim to strengthen earnings quality and resilience. And finally, we remain in a strong financial position to support growth and return capital to shareholders. Aggregated revenue for the half was $6.3 billion, up 5.4% on the prior corresponding period. We continue to see an increase in construction and fabrication revenue as we execute on major projects as well as an increase in procurement revenue. Supported by the contribution from our global operations and our major projects, underlying EBITA was steady at $377 million. Underlying NPATA was $207 million. A lower statutory NPATA at $152 million reflects the inclusion of transformation and business restructuring costs. While business as usual costs are included in underlying EBITA, these transformation and business structuring costs were beyond the scope of the normal course of business. Normalized cash conversion was 95.5%, a fantastic achievement. This continues to be an important focus for our business. Our balance sheet strength and strong cash position provide capacity to invest in growth and return capital to shareholders through our ongoing buyback and payment of dividends. Leverage at the end of the half was 1.5x, comfortably within our target range, reinforcing the strength of our financial position. Turning to Slide 14. Our aggregated revenue growth has supported steady earnings despite the challenging market backdrop. As I've highlighted, a driver of revenue growth this half was major project activity with increased volumes flowing through construction, fabrication and procurement, particularly across the Americas. This work is delivered under a lower risk contracting model and has supported a stable earnings outcome, reflecting both project delivery stage and disciplined delivery across the portfolio. As a reminder, we don't do competitively bid lump sum turnkey projects. On the right-hand side, the EBITA and margin walk highlights our continued focus on rate improvement. Margins reflect the combined impact of volume, mix and pricing with rate improvement partially offsetting mix impacts in the period. Importantly, this demonstrates an ongoing focus on margin discipline. While near-term earnings reflect project phasing, the underlying drivers of margin improvement continue to build through backlog, the cost-out program and disciplined execution. Turning to Slide 15. As communicated at the full year results in August, we're transforming the way we work by removing complexity, improving efficiency and driving consistency. This work is well underway. We acted proactively to reposition the business in response to softer conditions in chemicals and some project cancellations in Western Europe to strengthen margins and ensure ongoing business resilience. We've accelerated actions aligned with our strategic priorities, specifically resetting the cost base, scaling GID and expanding margins. During half one, we incurred $82 million of costs associated with these actions, much of this being severance and related costs, predominantly in Western Europe, where we have seen high restructuring costs due to local labor protections. We expect further costs in the second half as the program continues. However, we do anticipate these costs being lower than those already incurred in half one. The actions we've taken include repositioning capability to areas of higher demand and rightsizing where demand has softened. These restructuring actions together with our efforts to transform the way we work are setting the foundation for stronger earnings and margin quality. Our business will be supported by a leaner, more scalable operating model, supported by global integrated delivery, GID. In delivering this transformation, we are progressing at pace. With a disciplined cost-out program, we're targeting over $100 million annualized savings from FY '27 onwards. Our cost management efforts are focused on and include repositioning capability to areas of higher demand, increasing enterprise service center utilization, rationalizing our third-party contracts and adjusting our office network to reduce costs while supporting global delivery. We're also deploying digital solutions to simplify processes and improve productivity. Embedding AI across our business will be an ongoing part of our broader strategy to leverage technology and new ways of working to create sustainable value. I have been working closely with the business on this program, and it is clear to me that steps that we are taking strengthen our cost discipline and will enhance our earnings quality. We will ensure we retain the capability and capacity required to support growth and deliver for our customers with greater cost discipline, commercial agility and technology focus. Turning to Slide 17. Finally, I'd like to take you through our capital management position. Operating cash flow is strong. Normalized cash conversion of 95.5% is above our target range and continues to reflect strong underlying cash generation and a disciplined approach to working capital management. Day sales outstanding of 46.2 days remains well controlled and comfortably within our target. We have been consistently delivering returns to our investors through dividends and our buyback program. The Worley Board has determined to pay an interim dividend of $0.25 per share, which is unfranked. We continue to execute our share buyback program of up to $500 million, reflecting the confidence we have in our business. As at 31st of December, 2025, we had purchased over 24 million shares for a total consideration of $324 million. We will continue to execute on this program. During the half, we continued to invest in the business in a measured way while prudently managing debt and maintaining flexibility to invest in growth with capital directed towards initiatives aligned with our strategic priorities. Our balance sheet remains strong with leverage at 1.5x, comfortably within our target. We continue to use free cash flow to manage liquidity and support growth. We remain committed to maintaining a diversified funding base and proactively manage our debt maturity profile. We are looking at a variety of options for the group's euro medium-term note debt as it matures at the end of the year. I am getting to know our debt investors and we are confident and well placed to manage this upcoming maturity in June. Our weighted average cost of debt remains stable and our effective tax rate continues to track within our expected range. Overall, our disciplined approach to capital management remains a key differentiator and supports long-term value creation. I'd like to make a final comment on foreign exchange rates. The Australian dollar has moved over the past few weeks and we note the possibility of FX being a headwind in the second half if it remains at these levels. In summary, our solid half year performance and execution of strategic priorities, including cost management and earnings quality, coupled with consistent and strong cash conversion and balance sheet strength positions us well to scale for growth. I'll now hand back to Chris to take you through strategy and outlook. Robert Ashton: Thanks, Justine. Just moving straight on to Slide 19. But before I share the outlook for '26, I want to step through some of the fundamentals underpinning growth, and then I'll turn to our growth strategy. Worley is a diversified, resilient business with a robust foundation and demonstrated agility to adapt to market changes. And this foundation and agility gives us the confidence as we move into our next phase of growth. Our end markets are supported by strong structural tailwinds. Energy security, affordability, electrification, energy transition and decarbonization, along with the rapid progress of AI and digitalization are long-term demand drivers. And Worley's growth should be viewed independently of cyclical factors. Our growth has been secured across commodity cycles, not dependent on oil prices and continues to outpace customer capital expenditure. Turning to Slide 20. Our strategy has 3 pillars supported by disciplined capital management and operational excellence. One, we're strengthening leadership in our core markets; two, we're expanding into growth markets and along the value chain, including expanding EPC and EPCM capability; and three, we're innovating to differentiate delivery with technology. This strategy supports sustainable growth and resilient earnings. Moving to Slide 21. We remain committed to our purpose of delivering a more sustainable world, and Worley's next phase builds on our strengthen, expand and innovate strategy to secure both within and beyond our core markets. We've built a leading position across energy, chemicals and resources with sustainability solutions embedded now in the business. And now we'll grow our total addressable market by extending our project delivery capabilities to capture a greater share of spend across the customer asset life cycle. This positions us for more EPC and EPCM scopes with continued growth in consulting and value-added services from concept to completion. These capabilities mean we can target high-growth adjacent markets beyond ECR. We'll selectively expand into adjacent complex critical infrastructure where our skills are transferable. And the next phase of growth is supported by disciplined capital allocation, margin focus, which will ensure accretive and resilient growth. Turning to Slide 22. We're expanding our total addressable market by accessing a greater share of our customers' capital expenditure. The graphic on the left represents a typical customer capital program for an asset. As projects progress into execution, customer spend scales significantly. And by extending our EPC and EPCM delivery capability enabled by technology, we're positioning Worley to capture a larger share of this overall capital investment. And you can see the results of this focus as we turn to Slide 23. The major projects shown here in LNG, cement decarbonization and iron ore demonstrate our execution capability at scale and reward our deliberate shift to more EPC and EPCM scopes. And while major projects are reinforcing our confidence in this strategy, extending our ability to support customers across the asset life cycle is not just about project size. It's an evolution as we expand the services we offer all customers globally, deepening and broadening the capability of our workforce. EPC and EPCM have always been part of Worley. Consulting and other services along the value chain enabled by digital and AI differentiate how we deliver. And now we're leaning into scaling this full project delivery with intent, and we're excited by the early success shown in major projects. Turning to Slide 24. Backed by the capabilities I've described, our growth strategy seeks to strengthen our leadership in existing markets by growing market share and expanding into high-growth adjacencies. LNG and energy transition materials are areas where Worley has an established presence and a strong track record in execution, and we can further grow market share with more major projects. We're also expanding into new growth opportunities in complex critical infrastructure markets such as data center infrastructure, power, ports and marine terminals, and industrial water. These are capital-intensive markets where we have an existing or an emerging presence and can leverage transferable engineering services, EPC, EPCM and digital delivery capability. Importantly, these markets offer a clear pathway to scale. Together, these existing and new market opportunities reflect a balanced but deliberate approach, and they build on what we do well today while selectively expanding into adjacent areas of growth. And more detail of this will be shared at our Investor Day in May. Turning to Slide 25. Before I present the group outlook, I'd like to give a brief update on key focus areas. Our first is full project delivery, a key enabler for our growth strategy. And as I've outlined today, we're winning and delivering more of this work within a disciplined risk appetite. As Justine said, we will not do lump sum turnkey EPC. We'll seek to balance the portfolio with high value early-stage consulting, study, FEED and scale as we pull through to more execution phase construction and procurement work. Alongside this, we're resetting the cost base to build a more efficient technology-enabled business, targeting $100 million plus exit run rate annualized savings. We continue to focus on margin growth by targeting higher quality work and delivery excellence, scaling global integrated delivery and deploying digital, embedding AI across the business to drive capability efficiency and differentiation. And together, these deliberate efforts set us up for the next phase of our growth. Turning to Slide 26. Geopolitical uncertainty and shifting market dynamics are a reality of today's market. Nevertheless, we've continued to deliver growth in revenue and steady earnings in the first half. This speaks to our business model resilience, portfolio diversification and disciplined execution strategy. We reconfirm our moderate growth outlook for the current financial year on a constant currency basis. We're targeting higher growth in aggregated revenue than FY '25 and growth in underlying EBITA and expect the underlying EBITA margin, excluding procurement, to be within the range of 9% to 9.5%. We continue to benefit from favorable long-term macro tailwinds, and these support demand in our existing end markets with high-growth adjacent markets also identified to support Worley's growth beyond FY '26. A diversified business model, increased cost focus, commercial and financial discipline and a strong balance sheet positions us well for both the short and the long term. That concludes the formal presentation today. Justine and I are now happy to take any questions from those on the call. Operator: [Operator Instructions] And our first question comes from the line of Scott Ryall of Rimor Equity Research. Scott Ryall: Chris, thanks for the presentation and some of the color. I just wanted to follow up on your comments on Slide 24 and the energy and power slide that you were talking about before. And I'm just wondering, you've moved into new markets historically and you've had to invest money a couple of years ago. You did that across a range of different industries. Are there investments you need to make in terms of expanding into some of these new areas? How long do you think it will take? And can you just remind us on -- you mentioned nuclear in the presentation. What's Worley's nuclear capability or experience, please? Robert Ashton: Well, let's start with the nuclear first. So Worley is the engineer of record for 15% of the U.S.'s nuclear commercial power generation capacity. We're currently doing a nuclear project for -- in Egypt, the El Dabaa project, that's over 2 gigawatt nuclear facility where we own as engineer. We're currently doing nuclear work for Canada OPG. So we have a long track record of doing nuclear. So it's expanding into that. In terms of investing, we invested -- when we did the transition or the push into sustainability, we committed $100 million of investment over 3 years to support that transition. And look, and where we have -- we've got effectively there's 3 growth pathways: organic, strategic partnering and M&A. And where we need to develop -- invest in ourselves then, we're actually going to -- we're absolutely going to make sure that we commit to building the incremental capability. The reality is when it comes to power, just even look at the thermal power, we're currently doing the U.S.'s largest thermal -- in construction, the largest thermal power generation facility, over 2 gigawatts, that happens to be in the CP 2. So we've got a long history in power out of our Reading office in Pennsylvania. So power, nuclear, long history. Industrial water, we do a lot of industrial water. It's integrated part of the offering to our customers, but we see that is going to be an increasingly important part of our future. And so it's about putting focus on it. And our data center infrastructure, if you look at this really through the lens of data factories, these are becoming increasingly complex in terms of needing independent power generation and also cooling. So you look at the water and the power needs for some of these multi-gigawatt data factories, that's in the sweet spot. So we've got capability in these areas. It's about expanding them. And certainly, should it require organic investment for organic growth, we'll do that. And more will come in Investor Day. Operator: Our next question comes from the line of John Purtell of Macquarie. John Purtell: Look, just in terms of what you're seeing from customers, Chris, obviously tariffs impacted decision-making through calendar '25. What are you seeing on the ground? And maybe if you could just provide some commentary on the different segments there for you as far as Energy Resources and Chemicals. Robert Ashton: Yes. Look, I would say in the latter part of '25 calendar year and now coming into '26, we're seeing a different tone of voice coming from our customers. Clearly not across every sector, every geography, but certainly on the resources side. We're seeing a lot of interest in the major project delivery capability. But our customers in the Middle East, North Africa, definitely a sense of, I guess, stability. Last year was a lot of uncertainty around the tariffs and the customers working through that. And we did say we thought by the end of the calendar year '25, things would have settled down. I would say that's occurred. Look, the single area of softness continues to be the conventional chemical side in Western Europe and just generally as a result of overcapacity. But on the energy side, integrated gas, power, oil, that that continues -- certainly seeing a renewed interest and a renewed, I would say, buoyancy in that. On the resource side, whether it's on iron ore, copper, lithium, on the [Technical Difficulty] materials, we're seeing a return in interest or a continued buoyancy there. So I think generally, John, the tone has shifted with our customer base, from last year where everybody was thrust into a period of uncertainty as a result of what was happening in the U.S. But that seems to have [Technical Difficulty] been normalized with the decisions that our customers are making. Operator: The next question comes from the line of Nathan Reilly of UBS. Nathan Reilly: Just a few questions in relation to the restructuring activity. The number came in probably a little bit higher than what I was expecting. Was there a decision made to maybe accelerate/even increase the level of restructuring activity when you sort of previously flagged that back at the AGM? And can I just get a little bit of an update [indiscernible], I guess, the nature of some of that restructuring activity in the first half, but also what you're expecting to undertake in the second half? Justine Travers: Sure. Yes. And Nathan, you're right. The amount of work that we've done around restructuring is greater than we had anticipated. And I would say the cost of both the cost and scale is higher than what we would have initially thought we would have incurred for the first half. It is really driven by predominantly severance and associated costs that we've seen in Western Europe as we've looked to restructure that workforce and move into areas of higher demand. And so what we've seen is the scale and duration that it's taken to actually move on that restructuring was longer than anticipated. We've also taken the opportunity, though, as we looked at this, it was a real catalyst to take deliberate decisions around accelerating that shift of moving from higher cost location to areas where we would see higher demand. You'd note within a number of our priorities, we talk about scaling GID. This has really been an opportunity to say how do we accelerate in doing that and actually driving a lower cost base through the business. In terms of what we would expect for the second half of this year, we do expect continued restructuring costs in the second half. We're doing work looking across our enterprise services as part of that restructuring. We do, however, expect those costs to be lower than what we've incurred in the first half. And what we want to do is not continue to have a multiyear program of restructuring. We're really saying what can we do in FY '26 to reset the cost base and reposition ourselves strongly as we go into FY '27. Operator: Our next question comes from the line of Gordon Ramsay from RBC Capital Markets. Gordon Ramsay: Chris, just wanted to ask you about where you stand in terms of project cancellations or scope reductions. I know there were none in the second half of FY '25. Is there anything you can comment on in the first half for FY '26? Robert Ashton: I mean the only one as we talked about before was the Shell Red Green project in Europe, but that was announced at the time. So we've not seen a continuation or any sort of trend around cancellations other than the ones that we've talked about previously. And I think that's just -- that reflects a shifting confidence in the market. But yes, we've not -- there's no trend of continued cancellations. Gordon Ramsay: Just on deferrals, are you seeing companies, especially in what I call the green energy or renewable transition area, it looks like a lot of companies are kind of slowing down investment there. Are you seeing that in your work at all? Robert Ashton: I think it depends on which region you're talking about. Certainly, in the U.S., the extreme green has slowed down, but not in Europe. You saw just this week, we announced a hydrogen backbone pipeline project in Europe. So it just depends by region. But certainly, in the U.S., the more extreme green has seen a slowdown in that. And that's reflected in our future factored sales pipeline. We've actually reflected the slowing down of that. But again, no material trend around cancellations. Now there's always deferrals. And I would say the deferrals are no more or less material than they are historically at this point, yes. Certainly, in '25, as what was happening in the U.S. with the U.S. changing its position, you saw a ripple effect, but I would say that's really dropped off now. And I think we're probably in a much more -- well, we are in a much more stable environment. Operator: And our next question comes from the line of Megan Kirby-Lewis of Barrenjoey. Megan Kirby-Lewis: My question is just on the margins and by activity. So it just looks like professional services and construction dipped slightly year-on-year, but procurement has held steady. So I guess just keen for you to talk through the dynamics for each of those areas and how we should be thinking about them going forward? Justine Travers: Yes. Thanks, Megan. We don't see a structural issue with margins. And we don't see a decline in the quality of work that we're being engaged to do. I think what we are seeing is, as you said, procurement margins have hold relatively steady. Construction and fabrication, we see that more as a phasing around the execution stage of the projects that we're undertaking at this point in time. And with the portfolio of major projects, we expect to see that really normalize over a period. In terms of professional services, again it's largely driven by how we would see in terms of the stage of the projects that we're undertaking. But we're not seeing anything structural within that margin profile that gives us a cause for concern. And I think on top of that, the actions that we're doing around cost management, the efficiency within the organization, removing some of that legacy complexity that we've had is really all in service of ensuring that we maintain that margin resilience as we go through and over the next 12 to 18 months. Megan Kirby-Lewis: And I guess just as a follow-up on that, like more focused on the construction piece, but you are continually talking about moving more into EPCM and EPC. I guess just how like that will start to flow through to margin. Is there anything sort of to think about in terms of risk sharing between customer and contract -- customer and Worley and how that might impact the margins there? Robert Ashton: Well, as we grow the EPC business, the mix of what we do across, the phasing of those, the phasing of engineering against another major being in the procurement phase or in the construction phase. So it's the mix that will -- the mix of the phase of projects that will drive the margin rather than EPC alone. I think you've got to look at it as always a portfolio of projects, which, yes, we'll do more engineering procurement and construction. But it's just driven by mix, Megan. I mean, yes, I mean, I'm not sure what more. Justine Travers: No. And I'd say, Megan, we're holding our outlook position on the margin, excluding procurement, between 9% and 9.5%. So looking at that from a mix perspective, we think that's able to be maintained. I know you've covered Worley for a long time, and you will have seen over the course of the last few years that we've really gone from strength to strength in terms of our margin profile across the portfolio. So something absolutely that we're mindful of in terms of that composition of volume, mix and rate. And so we need to be doing the things that we can proactively manage around quality of what we bring into our pipeline and then through to backlog, and we need to be resilient around the work we're doing on cost discipline and margin expansion. So yes. Operator: Our next question comes from the line of Cameron Needham of Bank of America. Cameron Needham: Just one quick question for me, just on Baytown. Could you talk me through the logic of leaving that in your backlog, please? And then just more generally, could you talk through the process that you guys go through internally in terms of deciding if a project meets requirements to actually stay in the backlog versus what comes out as a cancellation? Robert Ashton: Yes. Baytown Blue has not been canceled. So it remains in the backlog. If you look at Exxon's announcement, it's been paused. And until it's been canceled, it will remain in backlog. So we have a very rigorous process of what goes in or comes out of backlog, and we consistently apply that. But Baytown Blue, if you read ExxonMobil's announcement, has been paused, not canceled. Operator: And our next question comes from the line of Tom Wallington of Citi. Tom Wallington: A quick question on customer mix and growth adjacencies. So just noting 28% of the backlog is associated with traditional work, including oil and gas. And I appreciate you've highlighted these complex critical infrastructure scalable opportunities in your priority markets. Can I just get a bit of color as to how these early customer engagements have been and how we should think about the mix of Worley customers evolving over time? Robert Ashton: I would say that the early engagement has been very, very positive. And the customer mix, I think it's an important point because we often, in conversations, have the conversation pivots around capital expenditure of customer base is shrinking or dropping off or may not be as big as the previous year. And I'm speaking generally. And it may be for the majors. But if you look at the number of customers that we're working with that are outside of that analysis, it's significant. You look at Glenfarne, Venture Global as 2 examples. These are not necessarily companies that attract when the overall market or the overall capital spend is being considered. So look, early phase conversations are fantastic and certainly a lot of interest in what we're offering, whether it's in the full project delivery side or on the power ports or marines or industrial water or even on the data factory infrastructure side. So good early engagement, very positive early engagement, I would say. And in terms of opportunity to grow, I think that there's significant opportunity to grow outside of the addressable market that are traditionally sort of assessed and associated with Worley. So we do a lot of work for customers that are -- that is outside of the majors, outside of the Rios, outside of the BHPs, outside of the ExxonMobils or Chevrons, outside of the BASFs. And we see increased opportunity for growth in that space. Tom Wallington: That's very helpful. And potentially a second question, if I can, a follow-up to Nathan's question around the restructuring costs. Noting that the scale and the scope of these costs has likely exceeded initial expectations. Just curious, going into the result, we thought that these costs would be taken above the line, noting that they are taken below the line now given they have exceeded those initial expectations. Can you give us, I guess, any color as to why the change of thinking as to how this would be treated for from an accounting purpose and potentially what this might have implied if all of these costs were taken above the line? Robert Ashton: I don't think the -- in terms of -- well, I'm going to let Justine answer the technical side. But look, there's a lot of things that go into the decision-making around this and clearly, and I have communicated, we've communicated that the cost will be taken above the line. What changed was as we got into the -- toward the end of the year, as we got into the detail of the restructuring costs, we saw an opportunity to restructure parts of the business more deeply than we initially assessed with an objective of relocating that work when the markets -- when the opportunities and the projects present themselves, repositioning and relocating it to India. So rather than keep people on the bench and do a moderate restructure, we took a strategic decision to do a deeper restructure with the intent of moving the work to a higher profit location such as India or Bogota at our GID center there. So it was a strategic decision. Now in terms of the accounting side, I think I'm going to hand over to Justine. Justine Travers: Thanks, Chris. And Tom, clearly, the costs that we've seen in the first half of the year around this transformation and restructuring are outside the normal course of business. And putting them below the line for us really and hopefully for the market provides a much clearer and more transparent view of our underlying operating performance. It also makes it much easier to look at the comparability of our results across periods. And it is a very typical treatment of costs of this nature for Worley historically, but also if we looked at our customers and/or other peers that are undertaking similar programs of work to have treated them in this way. So we believe that is very comparable to what the industry would do, what we have done historically. And it is important that it does provide a more transparent view around our underlying operating performance of the business. Operator: Our next question comes from the line of Rohan Sundram of MST Financial. Rohan Sundram: Just one for me. Following on from John's questions around the tone of customer discussions. Take on board, there's a renewed buoyancy in the market. But Chris, just can you hear your thoughts on how that's translating into higher sole sourcing on the back of all of that? Robert Ashton: Well, it is. I mean what it is, is the customers that we have strong deep relationships with and have historically looked at sole sourcing is their capital -- is their confidence around investment returns, then it's leading to an increased level of sole-source work. And sole-source work is now up to 48% of what we do. And so we actually look at this very closely. And so you look at the percentage of sole-source work, it's increased compared to the prior corresponding period. And I think that's a great sign that the customer confidence is returning and the confidence they have in Worley in terms of supporting them. Operator: Our next question comes from the line of Ramoun Bazar of Jefferies. Ramoun Lazar: Just a couple from me for Justine. Just in terms of the treatment of the restructuring costs now below the line, how should we think about the seasonality in the business in the second half? Is that going to look more like what it did last year now? Justine Travers: Yes. Ramoun, we do expect the phasing to be broadly similar with what we've seen in FY '25. We know and traditionally have seen a strengthening in the second half. And so you can assume that that would be a similar profile to what we've had if you're looking at the underlying result, just consider that phasing broadly similar. Ramoun Lazar: Yes. Got it. And within that, are you assuming any benefits from the restructuring coming through in the second half out of that $100 million annualized number? Justine Travers: The $100 million, really we see as an exit run rate, and we see the real benefit of that coming through into FY '27. We will see a little bit into the second half as we start to see the translation of that cost come through that resetting of the cost base. But the $100 million is really a reset for FY '27 and should be considered in that way. Operator: I'm showing no further questions at this time. I would now like to turn the call back over to Chris Ashton, CEO, for any closing remarks. Robert Ashton: I just want to thank everyone for joining today. And I know over the next 4 days, 5 days, we've got a number of meetings with yourselves and others on the call or on the -- dialing in on the Internet. So look, we look forward to having the conversations, answering further questions after you've had an opportunity to digest what we presented today. Look, I do think that it is a strong first half result. And look, I look forward to -- Justine and I look forward to talking to you and hopefully being able to answer the questions that you've got. So we'll be connecting with you over the next few days and today as well. So thanks, everyone, for your time and look forward to meeting. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Oleg Vornik: Welcome to those joining the DroneShield investor call covering our 2025 annual results. I'm Oleg Vornik, the CEO and Managing Director of DroneShield. And joining me today are Carla Balanco, our Chief Financial Officer, on my right; and Josh Bolot, our Head of Investor Relations, on my left. Angus Bean, our Chief Product Officer, is unfortunately unable to join us today due to customer travel commitments overseas. We will aim to speak for approximately 15, 20 minutes presenting the results, followed by questions. Please submit your questions well in advance so we can start immediately with the questions following completion of the presentation. 2025 has seen a record revenue of about $260 million, about a 4x increase on the previous year. Importantly, it has been a profitable year for us of about $3.5 million profit being also $33 million of underlying profit before tax. And importantly, having $15.9 million of net cash from operations. This reinforces our aim to have rapid growth as well as being profitable and operating cash flow positive moving forward. The pipeline has slightly increased from $2.1 billion to $2.3 billion in the last month since we presented the 4Q results, and a lot of it was due to our increase in the Asia Pacific pipeline specifically. The pipeline corresponds to about 295 deals. Great diversity of deals is how we have certainty of ongoing business where there's diversification across the stages of maturity, geography, products, customers and other factors. Some of those deals are significant. There is about 18 deals over $30 million each and our largest deal being about $750 million. Previously, we advertised this deal is about $800 million, but with being European deal and the Australian dollar continuing to strengthen, the Australian dollar value of the deal has slightly reduced. DroneShield continues to be significantly well positioned to win in the exploding counter-drone market. We have 460 employees in about 7 countries around the world, and that includes over 350 engineers. We continue to invest significantly in R&D in this rapidly evolving landscape, and it's about $70 million plus of R&D that we spend every year. And we continue to have significant cash balance of over $200 million to support our growth. To recap on top of what I was saying earlier about the record revenues, the SaaS is continuing to grow, and our goal is to continue to ramp it up to the eventual aim of over 30% a year over the next 5 years. And the growth in SaaS will be reached through having multiple streams of SaaS over increasing amount of hardware in our space. We're familiar with some of the recent market commentary about some of the software companies that have been sold off. And the big difference in the DroneShield case is we have an integrated hardware and software solution, where a lot of our IP is really deeply inside the hardware as well as software. And the data we use for our software is not something you can easily just scrub off the Internet. So when you're looking at the drone signal data, you have to collect it in a number of countries, often very sensitive situations. So very high IP that cannot be easily disrupted by the likes of ChatGPT. Along with the record revenue growth, we're seeing significant matching growth in customer cash receipts and big increase also in the committed and also recognized year-to-date revenues and cash receipts already going in, into 2026. So a very strong start of the year. We talked briefly about the profit where the underlying profit before tax for 2025 has been about $33 million and then showing the significant operating leverage going forward. What I mean by that is with the roughly 65% gross profit margin as the revenues grow, that is going to outpace the growth in costs, resulting in what we're aiming to be increasingly profitable position. And the bottom right-hand chart is the NPAT to EBITDA bridge. I'll leave it as read, essentially $36 million in underlying EBITDA with $3.5 million statutory NPAT. If there are any questions on that, happy to answer that. The sales pipeline, this has largely been covered when we presented about a month ago. So one change, as I mentioned, is the increase in our Asia Pacific position where a number of countries bordering China are significantly concerned about the Chinese drone threat, and we're continuing to see increase in demand there. But overall, to recap on the key themes, U.S., we believe, will have a number of growth factors. So in addition to the military, where there is a $1 trillion record defense budget for '26 and $1.5 trillion defense budget proposed for '27, we're expecting to see significant public safety market, not just with the Safer Skies legislation enabling police to take down drones, but also significant funding applied ahead of the FIFA World Cup in June, July, and we expect to see meaningful sales between now and that time and also going forward. Importantly, we believe that police will be a bridge towards the counter-drone being seen less so strictly military type of solutions and more into the civilian solution. So then increasingly deployed by critical infrastructure operators, airports and corporates. In Europe and U.K., we have opened our sales office in Amsterdam, managing our local distributors around Europe. And both Europe and U.K. are driving our momentum significantly at the moment, underpinned by everything you read in the news about Ukraine and the general instability there. Europeans realizing they cannot rely on U.S. for their security. And being Australian is a great neutral position in terms of appealing for sales for both the European and the U.S. markets. In Australia, DroneShield has been selected on the panel for LAND 156, which is the rollout across defense spaces nationally and we anticipate for there to be a significant amount of business for us even starting from this year in this $1.3 billion program. We have approximately $79 million in inventory as of 31st of December. That combines $26 million in finished goods as well as $53 million in raw inventory, which is largely the long lead items to ensure that we can deliver to our customers in a short amount of time. We have moved to an enterprise ERP system, which enables us to really push out on our goal of moving production from $500 million a year to $2.4 billion by the end of the year, which is underpinned by the new 3,000 square meter facility in Sydney as well as our manufacturing hubs in the U.S. and Europe, which are being finalized as we speak. 2025 has seen inventory impairment of about $10.3 million, constituting 2 factors, the $8.5 million in finished goods, which substantively relates to DroneGun Mk4 out selling DroneGun Tactical. We believe it's a one-off situation because we essentially introduced 2 product lines with the Mk4 being the success to tactical within a couple of years of each other. And we do not intend to introduce successor versions to the DroneGun Mk4 and RF controllers, we believe that at the hardware level, those are essentially as best as the technology can get within those form factors and the future versions of those technologies will look entirely different. And therefore, we do not believe that similar sort of impairment is likely going forward. And the $1.8 million in raw materials, so a lot of it was linked to us moving to the new ERP, and it's in line with FY '24 impairment of $0.6 million. On the manufacturing, as I mentioned earlier, we are expanding from $500 million a year to $2.4 billion, and that includes the European and the U.S. assemblies. For those relatively new to our story, we have essentially 2 streams of products. You have the dismounted being the RfPatrol, body-worn drone detector. It's a hardware that has AI on the edge. So SaaS software that lives inside of it that we do quarterly software updates on. And then there's DroneGun, which is what we've historically been most well known for. In fact, those observing our news probably would have seen with electronic arts major game adopting DroneGun as one of its key weapons. But in fact, DroneGun has only been just under 20%, 19% of our revenues in FY '25. And in fact, the business is fundamentally moving towards being a diversified company with our on the move and fixed site DroneSentry system constituting just under 40% and RfPatrol being just over 40% of our revenues. And SentryCiv, the civilians specific subscription-based product that we launched last year, I think will start ramping up as the civilian sector grows as well. Our SaaS strategy is separated into 3 streams. You have the device level SaaS. So today, when you buy RfPatrol, DroneSentry-X that comes with RFAI detection software. And then we're currently trialing the RFAI attack, which is AI-enabled defeat software that will be a paid product from about middle of the year. Then we do AI that sits inside the cameras and then also utilize third-party AI for radars and of course, SentryCiv, which is our own SaaS as well. And then the site SaaS, so when you have a base or generally maybe critical infrastructure facility, you'll be having a number of sensors, DroneShield and third parties stitched together by our DroneSentry-C2, or perhaps commanders with tablets with our Sentry-C2 Tactical. And then our latest product that we introduced at the end of last year being our DroneSentry-C2 Enterprise when you have entire region or a country looking for patterns of drone incursions, drone attacks. So the idea when I was saying earlier about the SaaS getting to 30% of the revenues over the next 5 years being our goal. For example, you might be buying DroneSentry-X and on that, you might have our RFAI detection software and then RFAI defeat, you'll probably be pairing DroneSentry-X with a camera that will come with our DroneOptID SaaS, probably a radar as well, which will have its own SaaS. It will probably sit on a base underpinned by DroneSentry-C2 and potentially even in the region overseen by DroneSentry-C2 Enterprise. So this is an example of how multiple SaaS packages can apply to a single piece of hardware. Sometimes we get asked what's a small company at the end of the world in Sydney able to do to compete against large defense players. And historically, when you think about defense, you think about perhaps U.S., Europe, Israel, maybe South Korea, you don't think about Australia. And we have been lucky to an extent of being in this game right from the start and deploying significant engineering force on this. And also being in Australia, we knew that we cannot sustain ourselves just for the Australian market. So we became an export business from day 1. In fact, today, about 95% of our revenues are export, and I'm expecting the trend to be similar going forward. And so as a result of this truly global threat being the drone attacks, we developed distributors in about 70 countries around the world and now we have active customers in dozens of countries around the world. And with that, over time, Australia also being very good base for engineering, we developed solutions which are smaller, lighter, more effective for both detection and defeat and also those relationships with end users around the world, Australia being a great country again in terms of the relationships with these Western and Western allied countries that feed us honestly, probably more information that we can do with in terms of rapidly changing our technology roadmap to adapt to the latest drone threat. So a number of commercial and technical differentiators. In terms of specific competitors, what we generally say is that within the niches of counter-drone that we choose to compete in, we are the dominant player. So if you think about body-worn drone detection, our RfPatrol is, we believe, the leading product by number of units sold around the world. There are a couple of others. So MyDefence has a product and DZYNE has a product, but we believe that we significantly outsell them based on what we're seeing. And similarly, for handheld defeat, we believe DroneGun is the best-selling product of its nature around the world. In the on-the-move detection and defeat, the closest product to DroneSentry-X will be a product that AeroVironment has, but it's a pretty small part of their business. And if anything, in the long term, this potentially be a cooperative relationship. In terms of the C2 solutions, there are a couple of competitors. So we're listing Dedrone and Anduril, but I think we have a number of unique differentiators on both of them, and we don't necessarily compete with Anduril being a much higher cost and strictly military solution compared to DroneSentry-C2. Last thing to add here is that the traditional defense primes are not competitors and really more customers because they are not really moving at the speed and the cost base that is required to be successful in this cost asymmetric market. Cost asymmetric, meaning if you've got a $500 drone, you can't really be fielding a $10 million solution. So with that, we see the traditional primes as customers. On the corporate governance, many of you will be familiar with a lot of the media scrutiny we had at the end of last year. We have engaged Freehills, a Tier 1 legal advisor, to give us essentially gold standard in corporate governance. And with that, we have yesterday revealed a number of updates of our policies, the trading policy, disclosure policy, the minimum shareholding policy, and others. And in my view, what has actually happened is the business has been growing incredibly quickly. So on the indices front, for example, we joined the All Ords in March '24, ASX 300 in September '24, ASX 200 in September '25, and now, depending on how fast we grow, we might be knocking on the door of ASX 100. So as a result, when you grow so quickly, policies, procedures can sometimes fall behind, and this was an opportunity for us to establish gold standard for this particular area, much like we are running really quickly, recapping our -- changing our policies for a much larger business right across the company. We made a number of hires, so Head of People & Performance at the end of last year. Josh joined us in January this year, and also Chief Operating Officer, who joined us from a similar position from Thales, where he brings a wealth of that high-end operational experience. The last slide, then we'll turn to questions, and I encourage everybody again to please be asking us questions. So as we stand today, we are excited to be starting to launch the next generation of hardware across our product family, so this will be towards the second half of the year and into '27. The counter-drone market continues to have very low saturation because you think about drones, they only really came into people's minds about 10 years ago, really started having negative that sort of nefarious impact from the start of the Ukraine war. So thinking about only 5 years ago, and counter-drone is a derivative of the drone market, so military started to buy or looking to buy in any meaningful quantities only in the last 5 years, and when you're selling to the government market, the wheels can grind slowly, right? And so as a result, I would say militaries have probably sub 5% market saturation, civilian market has close to zero, and therefore, we have significant opportunity in front of us. The SaaS revenue we talked about are going from about 5% current to about 30% and continuing to expand our market share. So in addition to selling hardware and software, we'll be looking to expand into training solutions, support, counter-drone as a service, and other related initiatives to maximize, I guess, that ownership of the customer and providing the services to them. We talked about establishing of the European manufacturing facility, and also in the U.S., and we believe that the next 12 to 18 months, we'll start seeing additional -- initial material sales in the civilian space, such as data centers, potentially airports, and other key customers. We're continuing to work on our processes and systems due to our rapid growth and in a very disciplined manner, looking at the opportunistic M&A. Now, there are no competitors that we would like to buy, but we're always interested to look at emerging counter-drone technologies, in addition to what we may be doing in-house, and we're really well-positioned to assess what makes sense due to our understanding of the sector. And as we look over the next 5 years, we're looking to get to the target revenue of over $1 billion a year. This may sound like a lot, but then we quadrupled our revenues last year alone, so that will hopefully give you some sense of our ambition. And also, just the fact that the maturity of the market is still so early, and the customers are going to be putting increasing orders, hopefully. Most of our revenues are from repeat customers, right? So people placing increasing orders as they get more comfortable with the idea of having counter-drone solutions and more budgets to go with it. And continuing to have that global focus is probably the last point to say. So with that, we'll conclude the presentation part of that session and turn to any questions. Oleg Vornik: The first question is: How likely do we think is it to sign a $750 million deal with Europe, and do we have production to deliver on the deal timely? So it's not going to be trivial, we think that we're well-positioned, and it's the same customer who gave us a $62 million order in the middle of last year, and smaller orders in addition to that. So we have an existing, really good relationship with that customer. And the production capacity, so depending on how fast the customer wants to execute on the deal, if they say to us, "Go as fast as you can", I believe we should be able to deliver it in batches over perhaps under 9 months. If the customer wants to stagger it, which is entirely possible, in stages, it might be, say, over 2 years or so. So that's my best estimate at this stage. I think the next question, I'm trying to rephrase it. What is our announcement level for deals? So we continue our approach as of the past, where approximately 10% of last year's revenue has been our announcement threshold. For '26, it'll be $20 million, unless there is a strategic element to announce a smaller deal. So there's a question about $18 million of the $30 million deals. When are we going to be announcing them? Well, hopefully, once we win them, we will be announcing them. The next question is about, does DroneShield have plans to expand its drone technology into different domains, such as naval drones, used in Ukraine conflict? And do we see it as an area we could pivot to? Absolutely. So when you see us talking in our announcements about counter-drone, we actually refer to it often as C-UxS, not C-UAS, A being aerial. We consider drones being all domains, whether it's ground, naval, or flying machines. And the good news is that the technology that we use is equally valid for flying machines, swimming machines, and crawling machines, and we can be effective on all of those. The only time when the technology stops working is for the underwater drones, so UUVs, where our command and control is still effective, but for the detection, for example, you'll be most likely looking to use a sonar. If we see more of that being where the market is heading, we would simply focus on integration of most sonars and lead with our C2. But the vast majority, we believe, for the foreseeable future, will be aerial, ground, and what we see in Ukraine, as you said, being the swimming drones. So I think the next question I might pass to Carla, our CFO. The January update referenced gross margin of 65%. The statutory FY '25 number was 61% after the inventory impairment. Should we think of 65% as the normalized run rate? Carla Balanco: Thanks, Oleg. Yes, our average normalized run rate for the gross profit margin should be seen as 65%. There's obviously items that will affect this margin. And those items will be the percentage of system sales versus dismounted sales. Our systems carry a lower gross profit margin. And the reason for that is because of the external third-party componentry that is incorporated in the system, such as the cameras and the radars. Those items carry gross profit margins between 15% and 30%. Therefore, we do think a 65% average moving forward for our gross profit margin is our aim. Thanks, Oleg. Oleg Vornik: Thanks, Carla. The next question is about Bundeswehr, the German army. Are they a customer of our products, and do we have plans to supply the Bundeswehr? Yes, Bundeswehr is a key focus for us, and in fact, if you follow the German defense market, there's a high-profile defense exhibition in Germany that is just concluding now that we were at. So yes, it's very much focus for us. Germany is a key European market. The next question is, what is our current penetration of Ukraine and neighboring NATO markets? So we have hundreds of detection and defeat systems deployed in Ukraine and continuing to add more. We have systems deployed in Poland and a number of other areas. So yes, absolutely, we are deployed, I want to say probably with about 10 or 12 European NATO countries, plus obviously U.S. and Canada, as far as NATO is concerned. The next question is: Is there a goal for the stock price? I mean, as high as possible, but unfortunately, I only get to influence it so much. How much revenue do we estimate currently comes from civilian buyers? Do we estimate a shift? So today, almost all of the revenue comes from military, border security and intelligence community with a bit of public safety being police. I think the question was referring more to customers like airports and data centers. So today, those are minimal, but we're starting to see green shoots of demand. And if you looked at our total addressable market, we're estimating about $30 billion TAM, total addressable market for the military and another roughly $30 billion for the civilian market. And we think over the next 5 years, our revenues will truly become more 50-50. And once the civilian market gets going, I think it can evolve potentially much faster than the military market has. Next question, given the continuous innovation in the industry, what gives us confidence that the inventory is sound? And are we able to reduce the inventory risk in terms of moving to just-in-time manufacturing? So as I briefly mentioned, the inventory write-down this year was a bit of a unique situation, where we introduced 2 DroneGuns within several years of each other and essentially, our newer DroneGun ended up cannibalizing some of the older DroneGun sales. And by the way, we continue to sell DroneGun Tacticals, we just decided together with our Board to take a prudent approach and do the inventory write-down. Going forward, we don't expect to launch superseding versions of any of our product lines today, but rather really different product form factors. So I don't expect for there to be cannibalization, meaning if you want to have a jammer in a shape of a gun that you hold in your hand, I believe DroneGun Mk4 is kind of as good as it will get. So there will be better jammers, but there'll be backpacks, they'll need more space and so on. I don't believe that just-in-time manufacturing really works for this industry because some of our longest lead circuitry has a 25-week lead time. And I don't believe it will change much because, again, of just complexity of the technologies that we're dealing with and our buyers want to be able to fulfill small orders quickly, right? So our goal, which is largely in consultation with our sales force and customer expectations is to be able to deliver orders in single digits of millions instantly. So you probably would have seen, we did an announcement at the end of last year. We received an order about $5 million on the 30th of December, delivered it by the 31st of December, which was pretty incredible. Then the $62 million order we had in the middle of last year, we delivered within 2 months and then the $750 million order I talked about fulfillment in under 9 months. So for that, you need to hold inventory. But we're pretty happy with the raw and finished inventory we're holding. And please remember that raw, as I was saying, is largely long lead time items as well. They're not finished goods. And also keep in mind that, for example, RfPatrol and DroneGun and some other products we have, have interchangeable parts that you can use in between the products. And we're trying to have as many interchangeable parts between product families as possible. What are our plans for increasing effective range and distance of our products? I guess it's the same thing, range and distance. So my first comment somewhat flippantly is that more is not always better. So for example, for the detection, more range you get often more false alarms you get. And our customers don't necessarily want to be able to see 20, 30 kilometers out. And at some point, physics kicks in as well, right? So a lot of our work with customers if they're very new to counter-drone is saying, okay, well, if you come with an expectation of detecting a proper missile 200 kilometers away, there's nothing that will detect a small drone 200 kilometers away. So explaining that there is natural physics limitation to range. But a lot of it is just pushing the envelope of physics, right? So you're saying, okay, there's noise floor in radio frequency, how do you see through the noise floor, how do you reduce the false alarms. There are quite a lot of parameters that you want to optimize how you detect never seen before drones, how do you deal with the Chinese drones, which are hiding behind other bits of noise, which are running away from you when you're trying to disrupt it. So there are a number of challenges in addition to distance, but that is ultimately why you have 350-plus engineers working on that problem with a lot of drone signal data and just continue to get information from their customers. The next question is about, can we provide some more detail about the types of drone deployments by China, which are behind the concerns that our Asia Pacific customers have? So a well-publicized example, this is a bit dated about 2 years ago, has been of a Chinese drone landing on the deck of a Japanese naval ship. Now you imagine massive embarrassment, loss of faith -- loss of face. And so that's an example, right? So small drones are buzzing over military facilities and just generally harassing both the civilian and the military targets. So this is what our Asia Pacific customers are looking to protect against. Has DroneShield considered underwater drones and drone capabilities -- anti-drone capabilities and detection? Yes. So we actually first came upon the concept of underwater drones and what to do about them about 5 years ago. Those who have been following us for a while would have seen we introduced a partnership with a sonar company. And our job there is our command and control. So DroneSentry-C2. Again, remember, we're not a drone gun company. We are much more than that. So we make a command and control solution that various modalities of sensors plug into. And so we had a sonar compatible with our command and control system, started marketing it those 5 years ago, not a single person bought one. Now the conclusion we reached is that the market just wasn't ready for it. And my view is that the market is still not ready for underwater drones, but the threat is there. And underwater is significantly different, as I was just saying 5 minutes ago, to every other types of drones. So drones that crawl on the ground or the surface of the water that fly in the air because traditional physics of radio frequency in the air doesn't propagate well under water. So you need sonar for the detection and something else, be it nets, torpedoes, it depends really on the customer in there, the ability to deploy countermeasures for the defeat. But our role in all of this will be providing a command/control solution, which also will protect against drones from the air and the ground and so on. Can we quantify the current order backlog and how much of the revenue is expected to be awarded in this financial year? So if you look at the chart, we are sitting at a bit over $100 million in committed revenue this year, and we recognize roughly about 20-ish or so. So that means the backlog of about 80 and virtually all orders for this year, plus obviously, the revenue that we will actually secure. Now my controversial view is that I don't like backlog, backlog means a customer has placed an order and is patiently waiting or sometimes impatiently waiting on delivery from us. My goal is to deliver goods under order as soon as possible to customers. So you find that big defense primes often advertise their backlog. So they say, "Hey, I've got a 5-year contract, I'm going to deliver this and that over the next 5 years, and that is seen as a positive, great. But in our industry, it's actually negative in a sense that you want to be rapidly delivering to customers and not making them wait. So vast majority of the revenue I anticipate for '26 is not inside of that $80 or so million current backlog, but the new revenue that we will earn and deliver and recognize from now before the end of the year. What likely drone threats exist or may exist that DroneShield does not have solutions for, for example, cable drones? So I think the person is referring to the fiber optic drones. So there's a slide in our presentation, which talks specifically about why fiber optic drones are not a threat. So for example, we are effective against fiber optic drones because we offer a command and control solution that integrates with radars, which can detect anything that flies, including fiber optic drones and also depending on the customer solutions like HPM that can take down those drones. But my view is, I think I said to many of you before is that radio frequency is the backbone of drones. And fiber optics exists very much around the edges with significant limitations. You think about flying a drone with 10 kilometers of fishing line attached to it, wrapping around trees, buildings, you fly a bit too quickly, you snag the cable. It's really very much an edge case. And RF to drones, I believe, will be a bit like wheels and cars, like whatever cars will look like in 50 years, they'll probably have wheels on them because we're flat in our world and built a lot of roads. So similarly, for how much was invested in the radio frequency. Now that's not to say there will be new types of RF, which is like I was saying, the Chinese are now putting what was 5 years ago, sensitive electronic warfare techniques into $5,000 drones designed to avoid detection and defeat. We're starting to see slow rise of cellular control drones. But tethered drones, I don't believe, have that much future and our existing on-to-move and fixed site solutions already have a way of dealing with them. The next question is $28 million of our FY '26 committed revenue is the SaaS pipeline tracking 2x of '25. So about 7% of SaaS for FY '26, how are we going to get an uplift to get to 30% by 2030? Great question. So I talked before about the 3 strands of SaaS, the device level SaaS, which has a bunch of elements to it, like the detection, defeat for the radio frequency to separate SaaS, our RFAI, RFAI attack, talked about DroneOptID SaaS, the radar SaaS, the SentryCiv SaaS and then the DroneSentry-C2 and the C2 Enterprise. So today, out of the roughly 4,500 pieces of hardware deployed around the world, maybe only half actually receive SaaS, the other half being DroneGuns, which don't require SaaS by design. Going forward, as the technology continues to rapidly iterate, so hardware probably has a 3-, 4-year cycle, I would expect over the next 5 years for us to have tens of thousands of pieces of hardware, almost all of them receiving SaaS. And not just one piece of SaaS on every piece of hardware, but having like an example I was giving with DroneSentry-X, you have one piece of hardware, but then you might have RFAI, RFAI attack. It's part of the system. So it has a radar SaaS, camera SaaS and the C2 SaaS. So having multiple pieces of SaaS maximizing that SaaS element as part of the total revenue. But then also on top of that, I talked about the wallet share, right? So talking about the training and counter-drone as a service. So there's quite a lot of elements that we are actively exploring with customers at the moment. The next question is about how do we see ourselves in terms of the World Cup this year in the U.S.? So we talked about the Safer Skies Act, which enables police and public safety officers more generally to use jammers take drones down going forward. This, we believe, will really drive adoption of counter-drone technologies within public safety system that will protect those stadium venues. So we have a public safety team inside of our U.S. office run by Tom Adams, an ex-FBI guy. And we are actively engaging with a number of police agencies around the world -- sorry, around the U.S. at the moment and believe we'll have meaningful sales from that between now and the World Cup. What countries or theaters of war are considered no go for DroneShield? So pretty common sense, right? We would not work with Russia, China, North Korea, Iran. I mean, essentially, any country which is either prohibited or gray zone list by the Australian government because we do need export licenses to sell. And well clear what those are. We've been working with Department of Export Controls now since the beginning, and we have a very close relationship with them. We basically would never ship to those countries. And the processes are very strict, right? I mean, even though our products are entirely safe for humans, so none of our products can hurt human being or even the drone for that matter, the strictness of export controls is comparable to a proper weapon. So for example, a guy who runs our shipping department is an Italian guy who used to be shipping torpedoes around the world on behalf of a Italian defense prime. And so it's the same strictness of the process in terms of end users entering into paperwork not to share our equipment with anybody else. And ultimately, this is not just between us and them, but also involving Australian government. So exceptionally strict control processes. What are some of the drone-related verticals that look interesting to us from an M&A perspective? So we'll always stick with counter-drone as we want to continue playing in what we know. There are technologies like high-power microwave, which I find really interesting, and it fits in our nonlethal but complementary to drones, for example. I think there will be new methods of detection potentially relating to shock and vibration coming from drones. So essentially, the way I see this is the equipment needs to be cost effective. It's hard to justify having a $10 million piece of equipment against $200 drones. It needs to ideally protect an area, not just 200 sort of meter range around it, unless it's super cheap, so you can have mass volume of these things. And ideally non-ITAR because we want to have the market of all of the NATO and NATO allied countries. And the current AUKUS process in terms of Pillar 2 is streamlining a lot of that ITAR stuff between Australia, U.K. and the U.S. But ideally, we want to be continuing to focus on non-ITAR technologies. The next question talks about how was our exhibition at Enforce Tac in Nuremberg. So I wasn't there myself, Angus, our Chief Product Officer, was leading our delegation. We have a number of European team members who were in Enforce Tac and the download I had so far is that it's been an exceptionally positive meeting and helpful for our folks on Germany with Bundeswehr as well as the rest of the European market. So the next question is, why has DroneShield not introduced Phantom shares to attract and retain talent and not put pressure on the share price? So the Board regularly revisits what are the most appropriate structures. In my opinion, phantom shares are not an optimal structure. And so we haven't been introducing it, but the -- this is something the Board does review regularly what makes most sense. There are increasing reports of hybrid attacks at airports throughout Europe, what are our plans in that space? So we have had equipment deployed at the airports. For example, you might have seen news articles with the DroneSentry-X at Copenhagen Airport a few months ago. I think airports more generally struggle bureaucratically. So in some countries like in Germany, actually, Bundeswehr has technically a lot of influence over what gets deployed at the airport. So it just becomes of kind of too many cooks problem where you have airport, you have the military, you have government more generally kind of all coming up with what's the most appropriate solution. But I think you're right in that the pressure continues to escalate on airports to deploy counter-drone measures. As today, you imagine you stop all flights for 15 minutes, 30 minutes, an hour, and that's a significant disruption. And the alternative is even worse, plane taking off and a drone blowing out an engine, right? So we are talking to some of regulators. We're talking to airports directly. We're talking to military. So the idea is that you just keep pushing, chipping away of the stakeholders until eventually you kind of break through and start deploying gear. The next question about viewers saying they watched a terrifying video on Chinese robot advancement moving to RF control. So I mean, robots can be seen as UGVs and ground vehicles, and this is very much part of our market. So UGVs, ground vehicles, UAVs, aerial vehicles or fly drones and USVs, so unmanned surface vehicles, both essentially on the surface of the water. And the physics is exactly the same in terms of how radio frequency radars. Radars work a bit not so well close to the ground because you get a lot of ground clutter coming up, but radio frequency is generally pretty good. Have any shipping companies expressed interest in DroneShield to protect ships through conflict areas in Red Sea and Iran? Yes, we have some shipping companies using our kit already. This normally needs to be a bit of a layered arrangement of government forces being on those ships and them having our kit, which ultimately links to if you -- who can own -- possess jammers. So the law of the high seas essentially says, well, anybody can do anything. But then, of course, those ships need to come to harbor eventually. So usually, the arrangement that we're seeing at the moment is if the ship has government security on it, they'll be able to use our kit and some of them do. I'll pass the next question to Carla as it deals with the net profit margin. So I'll read out the question. I understand we're investing heavily to scale, which is importing reported net profit, but net margin is low. When do we expect net profit margin to materially improve? And what level of margin do we believe -- what level of margin do we believe is achievable in FY '26 as we continue to scale? Carla Balanco: Thank you, Oleg. So right now, our focus is, obviously, we want to grow the business and we want to increase our revenues. We know that profitability is important as well. And we are focusing on trying to improve our profitability position, taking into account that we were in an operating loss, a net loss a couple of years ago, and we've only now really started to focus on improving our net profit position. However, as you mentioned, we are scaling really rapidly. So balancing that rapid scale in terms of implementing a new enterprise risk system that we'll be doing this year, also our ERP system, opening a European office, focusing on U.S. manufacturing, European manufacturing, all of these items add costs to the P&L. And so we are focusing on trying to control costs, but focusing on increasing those revenues. And by doing those 2 things, naturally, our net profit will increase. I cannot provide any details at this stage in terms of what I forecast our net profit margin to be. But what I can say is our fixed cash costs for this year is looking at around $150 million. We have capitalized R&D and so we're looking to capitalize between $25 million and $30 million on R&D. Our gross profit margin, we spoke about already, which is 65% in terms of normalized average gross profit margin. And that is about as much as I can provide at this time. Thank you. Oleg Vornik: Thanks, Carla. Does DroneShield see Asia, excluding China and Central South America as big potential markets than European Union as they quickly adopt drones, as seen in the Thai-Cambodian conflict? And are there any difficulty selling into those regions, countries not seen as Australian allies? So I'm not sure about these becoming bigger than EU. EU is a huge driver for us, but becoming big, yes. So the key countries in Asia we're focusing on is Japan, Singapore, Thailand, Vietnam, Taiwan, and there are a couple of others as well. None of those markets have an issue with export permits with the Australian government. So we've been working there. And in Central and South America, so Mexico and Colombia both have issues with drug cartels and past that, there's Brazil, Argentina and others. So again, growing markets, especially Mexico and Colombia. And we haven't had issues in terms of export permits working with Department of Export Controls. The next question talks about competitive landscape across product lines. We're seeing new entrants and are we increasingly having to compete on price? No, we don't compete on price. It's interesting. So when we started 10, 11 years ago, there was really maybe us and 1 or 2 other companies. And then roughly maybe 5 years ago, the amount of competition really blew out. You go to defense show and every single stand is suddenly a counter-drone company, all kinds of stuff. Now we're seeing the market consolidate significantly. So some get merged or acquired, for example, DZYNE, which is a compilation of 3 or 4 companies or BlueHalo that got absorbed into AeroVironment and some go out of business just because customers basically don't buy from them because the products don't make sense. So we don't really see new entrants just because the industry is so high barrier now. We talk, for example, about drone signal data, right? Like you try to go around dozens of countries collecting drone signals in various environments. Some of these drones are very sophisticated restricted government drones, very, very difficult to build up and maintain that database, deal with relationships with military, government and customers, looking at radio frequency at the edge of physics, like, say, maybe 5, 7 years ago, the aim is to take an existing technology that has been successfully deployed in electronic warfare and cost effectively adapt it to counter-drone. Today, you are truly at the edge of like stuff that we are using is often a lot more sophisticated than any electronic warfare solution just again because we've been at it for so long and you just keep getting better and better. So it's very hard for new entrants. If anything, I would say our products will become more expensive, but also with more capability. So some of our new product lines will be launching from end of the year will be triple the cost of the existing products, but roughly keeping the same gross margin. But then the capability will be significantly higher as well. So if anything, I see our pricing trending higher rather than lower. How do we keep captured equipment from being used by the enemy? So it depends on the equipment. Most of our equipment and increasingly more and more are software-enabled. So obviously, we have ability to deny any changes in software. And then if you don't do changes in software, then the software quickly becomes obsolete. Can it be linked with laser beam technology? Can be in terms of our command and control DroneSentry-C2. But I actually have a pretty dim view on the laser. It makes for cool news headlines. But remember, right? So lasers have their place, right? So you always see militaries deploying some laser solutions. But think about mass deployments. You have systems that often cost $10 million plus that have obviously kinetic impact. You don't want to be blinding people if you're using it for stadiums. So I would consider laser in the same bucket as say, high-power microwave; an exquisite, very useful but very specific use case rather than what we are targeting most of our technologies being mass deployment to as much of the customer base around the world as possible, which has to be no collateral impact. But then if a customer comes to us and says, can you provide a laser solution? We have our great friends in AIM Defence based in Melbourne. They do amazing laser solutions. So that's what we'll be putting forward, assuming it works from an export compliance point of view. Have we considered drone protection with the making of other drones? I think anti-jamming, I'm trying to rephrase the question. So no, we don't really do things on the drones that stop other counter-drone systems being able to detect or defeat them. It's very different technology. I mean it's a bit like saying Boeing doesn't do anti-aircraft missiles, even though Boeing is great at planes, like you kind of have to stick to what you're good at. So drones and counter-drone are actually very different technologies, even though they are obviously on the opposite ends of the same battle. Are we prepared for threats to the business such as cyber attacks, theft for facilities or threats to executives or employees? So this is something we take very seriously. And also, there are government standards across physical cyber and other classes of security that we follow. So we have a team led by an experienced executive that deals specifically with cyber threats. And thankfully, knock wood, we haven't had a single successful cyber attempt, but we're continuing to see a ton, and this is something we take extremely seriously. In terms of insider threat, there is a very thorough employee vetting and also employee vetting program. We use a dedicated defense software in terms of monitoring employee actions, for example, ensuring the person doesn't download a whole bunch of stuff they're not supposed to. There is natural segregation on a need-to-know basis. So for example, I don't actually write code, so I don't have access to the code database because why should I? And a number of other kind of standard defense industry things. We don't need to reinvent the wheel here. So similar things to what the likes of Lockheed Martin or Thales or Raytheon doing, I mean, we do largely all the same stuff, gold standard and continuing to revise that as the technology evolves. In terms of threats to the executives, so yes, look, I mean, it's something that we looked at a lot. So for example, about a week or 2 ago, to give you a recent one, there was a case of somebody, I believe it was a Ukrainian guy, who got deported from Dubai, where he was based, forcefully to Russia as he was accused by Russia of killing a Russian general involved in Ukraine war. So for example, my directive internally was if you happen to be on the Russian sanctions list, which I personally am, for example, then you don't transit through Dubai. You don't stop in Dubai. And so this is something that we take very seriously. Do we have a capability to detect and neutralize drones swarms? Yes. So our detection and defeat is what you call volumetric, meaning you're scanning not just a little area at a time, but a whole wide area and you're basically staring at the sky and you can detect multiple drones at the same time, essentially, I don't want to say limited, but exceptionally large number of drones. And similar for the defeat, jamming and its advantage of jamming versus some other technologies like cyber can affect multiple drones at the same time. Next one. What do we see as the main threats to our growth and profitability going forward? Is it emerging competitors, for example? It's a great question. So I don't believe there are major blocks, right? But generally, you want to be on top of technology. So you always live in fear that our friends in China will invent something that's entirely immune to anything that we do, detection and defeat wise. But the reality is that physics are physics and as smart as engineers in China are, they still have to follow the laws of physics. So that nature limits to what parts of the bands you use and how you hide behind noise and so on. So we think we're pretty well positioned. And again, we've been in this space for 11 years. We understand the industry, and we continue to be on the bleeding edge of it. But you need to keep at it, right? Like you can't rest on your laurels. That's why you have 350 engineers out of the 460 people because you just have to keep innovating on a weekly, monthly, quarterly basis. I'm super excited about the next gen of hardware that we're releasing, the next gen of software, our RFAI version 3 that will go on top of the new gen of hardware when we release it at the end of the year. So this is all part of -- all part of that. And also, there is just general growth, right? So the organizational theory is that as you get past 30, 50, 100, 300, 500 employees, you almost have to break and remake organization. So how you follow your processes, how you communicate, all of that needs to be entirely changed so the organization doesn't sort of collapse onto itself. So that's what a lot of our focus is on at the moment. Do we need to work with CASA to certify our solutions to use in the Australian airports? So there is no such thing really I wish there was as a certification to be deployed at Australian airports. So first of all, it's not CASA. CASA used to be in charge of counter-drone security, and then it was transitioned to Airservices Australia several years ago. And Airservices ran a limited trial, we were involved in it. And since then, nothing really happened, unfortunately. And I mean, I get it. I don't want to blame Australian government. To be honest, U.S. government and all the other Western governments are doing exactly the same, meaning not doing much. But I think as drones continue to pose a threat to airports, this will just continue to become more and more a pressing issue. And I think once a few airports start deploying it, you'll be seeing more and more continue to do it because today, it's kind of easy to say, well, nobody else is deploying, no other airports are deploying counter-drones. So I just won't do anything. But I think that excuse will start going away. And so we're really excited about that eventually starting to snowball, but we're continuing to push. So in Australia, this ultimately sits with the transport minister. So we're continuing to push at the government level to have counter-drone deployed at airports. Next one. Are we seeing increasing pricing pressure with Anduril and other primes pushing into the space? So I think if anything, anything to do with primes will probably mean we're increasing our margins, not reducing given the cost structure of the primes and Anduril would be in the same bucket. I wouldn't call them the cheapest by any measure. So no, as I was saying, Anduril is really only overlapping with us on Lattice, the C2. And I don't want to say it's a competitor to DroneSentry-C2 Enterprise. It's just a different product. So there will be customers like the U.S. military where Lattice will be competing with Northrop Grumman and their environment and other dedicated C2s. And for example, the countries where we are deployed, they for various reasons, wouldn't be using Anduril C2. So I'd say -- and also, by the way, in the civilian space, Anduril doesn't really go into that space either. So I think -- or public safety, for that matter. So I think it's not really competitors, but if anything, our customers. Anduril is our customer, too, by the way, as they are the SIP, administrator essentially on the U.S. SOCOM program. We -- next question is we just released the $21 million contract. Can we elaborate? So we've been working with this Western customer for a number of years. If you read the announcement, the details are all there, had a number of contracts with them, and now they're just ramping up in terms of the deployment. And we're really excited in that particular country, we are the only counter-drone system of any significance. And it's actually a very large Western country in terms of defense budget. So now it's just a matter of continuing to sell more. We talked about low market situation to really kind of assist the customer into high situation with our equipment. Okay. Last question I'm seeing here. If there are any more, please ask or otherwise, you can e-mail your questions to us later. Are there any plans to integrate counter-drone tools directly into drones or other mobile platforms? What are the challenges of this? So not drones, but if you look at programs like AIR6500, which is Australia's mission -- sorry, missile protection system operated by Lockheed Martin. So those likes of programs where you have complete airspace awareness, so you are protecting against missile threats, but also you want to be able to protect your lower airspace against drone threats. So for example, attacks locally from drones taking out your jet fighters at Amberley or Williamtown airbases. So it's the likes of those, so call it like the larger air defense programs that we'll be looking to integrate with over time. And our DroneSentry-C2 has pretty standard APIs. So that makes the integration pretty streamlined. But ultimately, the government and customers will be driving a lot of this. The next one I'll leave to Carla. Can we talk to income tax benefit in the second half versus tax expense in the first half, what to expect going forward? Carla Balanco: Thanks, Oleg. So with regards to our taxes, you would have seen in the annual report that we have a complicated tax structure. We are tax residents in the U.S. as well as in Australia. What that means is that obviously, our tax profit and accounting profit are very different and there's items that were deductible in the second half of the year versus the first half, resulting in a tax benefit versus the tax expense for the first half of the year. Currently, we have about AUD 11 million in carryforward losses to be used against future tax profits. Oleg Vornik: Thanks, Carla. How does selling through resales impact margins? So our margins are already after the use of resellers. So essentially, the way you should think about the customer cash flow is our revenue is what we get from the reseller and the reseller would have their own margin on top. Now what we do is in the U.S. and Australia, we would influence the customer directly. But in the U.S., when you sell, you often sell through vehicles like DLA, TLS, it's just how you do defense procurement there. So there is a degree of clipping the ticket. And when you say, sell in many European countries or Asia Pacific, you have to go through distributors because these are people that have local relationships, obviously, understand the customers, the language and it saves us from trying to hire people in 70 countries around the world. So even despite the resellers, we're able to achieve very attractive 65% gross margins, but then we don't have to employ people in every country. And to be honest, some of the best guys who are resellers in terms of their relationships with the end customers, you can't employ them. They'll have their own little shops where they would sell maybe a dozen different product lines, we would often be their only counter-drone brand, but then they will be, for example, selling radars, electronic warfare, maybe drones themselves to the customers, and we tap into those unique relationships. A lot of the recent contracts are with existing customers, how we're going with converting prospects into customers, what's been experienced like bringing in new customers into DroneShield? So this is the whole art of selling to governments, right? So we lean on our distributors, but also we try to own as much of the customer relationship as possible. So you're not entirely dependent on the distributor. There is this complex web of the government budgets, which are often competing with different priorities and counter-drone is a priority. But for example, sometimes the customer may choose to buy drones rather than counter-drone equipment as that happens to get the priority. I mean, usually, customer gets a bit of both. Then you often have -- is it us or is it going to be another competitor, you normally try and ensure that the tenders are written with advantage to DroneShield in mind. Often if you see tender for the first time when it comes out, that means that it's been shaped by a competitor. So you want to be involved in the earlier stage. But generally speaking, you really want to ensure you're servicing the customer, right? You're providing that quarterly software updates is an important touch points. If there is an issue, you attend to that. And that's also expanding our fee wallet as well, as I was saying, in terms of having those support fees that we plan going forward. In terms of the new customers, so we continue to gradually expand to new customers. And so every once in a while, we -- like, for example, there was a new customer in South Africa about a year ago that we got and there are smaller customers in Asia Pacific that we would get in the last couple of months. But the goal really is to say there are -- in terms of what moves the dial, right? So there are probably 20 government customers around the world like U.S. Army that move the needle. And so the best bet for us is to focus on programmatic levels, so large-scale deployments while opportunistically going at the tactical level, so unit level to get those purchases. So it's less about kind of scrubbing and ensuring you get all the little fish. I mean you do that kind of in your spare time as best as you can of going around the elephant opportunities. And also once you have product deployed with customer, often they'll come back to you anyways for the top-up. So it's a pretty sticky position. I think that's all the questions we had, and we are over an hour. So we'll stop here. Thank you for your time. And if there are any questions, please e-mail them to us at investors@droneshield.com. Thanks for your time.
Amelia Lee: Good morning, everyone. Thank you for joining us at Seatrium's Full Year 2025 Results Briefing. My name is Amelia, and I take care of Investor Relations for Seatrium. This morning, we have with us our CEO, Mr. Chris Ong; CFO, Dr. Stephen Lu. Chris and Stephen will bring us through a short presentation before we open the floor to questions. Chris, please? Leng Yeow Ong: Thank you, Amelia. Good morning, and thank you for joining us today at Seatrium's Full Year 2025 Results Briefing. Before I start, I'd like to wish everybody a very happy and a healthy Lunar New Year, good year ahead. I'm pleased to report a strong set of results in our second full year since merger with robust revenue growth driven by strong project progress and doubled the net profit that is an undeniable reflection of our laser-sharp focus on driving margin efficiencies and execution. For the first time, we have recorded a positive 1-year total shareholder return of 5.2% as we strive to continue driving lasting value for all shareholders on strengthened fundamentals. Our strong performance also comes on the back of heightened geopolitical and macroeconomic uncertainties that companies around the world had to grapple with. Despite some delays in investment decisions in several markets in the first half of 2025, we still secured over $4 billion of new orders in FY 2025. This replenished our net order book that stands strongly at $17.8 billion as at 31st of December 2025. Meanwhile, we are actively pursuing more than $32 billion in pipeline deals, which reflects sustained investments by our customers to meet growing energy demand that is fueled by technological advancements, including AI. Third, we are today stronger and leaner than before. We have spent the last few years transforming our business and cost model, the way we work and the way we do business. 95% of our net order book today is made up of Series-Build projects that offer lower execution risk for both ourselves and our customers. Non-FPSO legacy projects, which are relatively lower margin and higher risk compared to post-merger contracts now constitute just over 1% of our net order book. We have also achieved our synergy and cost saving targets, accelerated noncore divestment to reduce overheads and importantly, brought closure to Operation Car Wash in FY 2025. This allowed us to move forward with greater clarity and step forward with larger strides as we leave legacy issues behind us. Today, these achievements reflect the merits of our strategy and that we are ready to build real sustainable momentum for the future. Turning to our financial performance. We delivered a second consecutive year of strong top line growth with revenue growing 24% to $11.5 billion from $9.2 billion a year ago. This reflects the strength of our order book and the disciplined execution that continues to drive reliable delivery to our customers. Net profit came in at $324 million, more than double of $157 million in FY 2024, outpacing revenue growth and underscoring the strong progress that we are making in expanding margins, which Stephen will talk about in greater detail. Our progress is best reflected in how we execute for our customers. Let me now highlight 2 projects that showcase the power of our One Seatrium global delivery model. First, FPSO P-78. We have achieved first oil in record time on 31st of December 2025, and first gas is expected in first Q 2026. Being built across our yards in Brazil, China and integrated in Singapore, this accelerated progress is a strong testament of our One Seatrium global delivery model and also showcases the expansion of our end-to-end delivery capabilities from engineering to offshore commissioning. P-78 is the first of 6 advanced greener P-Series FPSOs and it sets a strong benchmark for subsequent units. Next, on Empire Wind. The project is now over 97% complete and is situated on site in U.S., on track for delivery this year. Once operational, it will deliver 810 megawatts of clean energy to New York, enough power to power more than 500,000 homes. Both the topsides and jacket were built across our Singapore and Batam yards, demonstrating our integrated delivery capability. The remaining exposure in our net order book to the U.S. offshore wind has reduced to less than $10 million with Empire Wind and offshore substation for [indiscernible] very close to completion. The WTIV for Maersk Offshore targeted to complete end of the month. In fact, we are in discussion to deliver her within the next few days. Our future is taking shape with clarity, strong order book today for near-term earnings visibility and a resilient pipeline that sets us up for sustained growth tomorrow. We have been disciplined in ensuring we win high-quality contracts with world-class customers, with mid-teens risk-adjusted project margins and progressive milestone payments. Our ability to win these projects reflect the strong trust customers place in us across conventional energy and renewables. Amidst a tough macro environment, we secured over $4 billion of new orders, supported by returning customers and new partnerships. This include our first collaboration with Penta Ocean Construction, marking our entry into Japanese offshore wind market and DolWin 5, our fourth 2-gigawatt HVDC project with TenneT and our first for Germany under the 2-gigawatt program. Next, our net order book of over $17 billion is equivalent to over 1.5x of our very strong FY 2025 revenue. 6 P-Series FPSOs, 3 U.S.-bound FPUs and major HVDC and HVAC platforms are all progressing well, demonstrating the strength and depth of global delivery model. We have been transparent about the challenges we face from non-FPSO legacy projects, which now constitute just over 1% of our net order book. In the same spirit of transparency, we also like to share that the delivery of Naval project NApAnt has been delayed to 2027 instead of the original 2026 schedule. We are working closely with the customer to navigate this specialized shipbuilding project to manage execution risk. With a declining proportion of lower-margin non-FPSO legacy projects, we expect an improving mix of higher-margin post-merger contracts and a reducing trend of provisions moving ahead. Moving ahead, we still see ample market opportunities as we actively pursue $32 billion in the pipeline deals. Despite the lower oil price environment, it is widely established that the breakeven price of deepwater fields remain well below prevailing oil prices. Alongside strong demand for energy, the ongoing energy transition and the need for energy security, especially in Europe, where we are seeing some favorable wind developments for offshore wind, this gives us a long runway to capture high-value work across the full energy spectrum. We have been asked how are we positioned competitively to capture a good share of these pipeline opportunities. Despite being just formed 3 years ago during the merger, we have under our belt 60 years of proven track record and a unique ability to deliver projects with consistent safety standards and quality across a large global manufacturing footprint that presents scalability, geopolitical diversity and some cost arbitrage opportunities. These are not competitive levers that many players around the world have, but we do not ever stop evolving. We have been in business for over 60 years. We are not new to change. We are still standing strong today because we have successfully evolved alongside the industry, which is essentially critical now as the whole world is in transition towards cleaner energy sources. This is only possible with robust capabilities in technology development, where we take a practical market-led approach to innovation, to stay ahead and maintain our long-term competitive edge. Today, we own proprietary designs such as FlexHull that we are already using in active FPSO tenders to sharpen our competitive edge where proposed designs are evaluated as part of the bid. We also developed our own designs for FLNG and offshore substation, which has recently attained AIP. Longer term, we are also developing solutions for floating wind and other emerging energies to ensure we remain ahead of the curve. Our Series-Build approach, design once do many reduces execution risk, short-term schedules and improve margins, ensuring projects are delivered safely, on time, on quality and within budget. Today, about 95% of our net order book comprises Series-Build projects, underscoring the strength and scalability of this approach. On top of the existing franchises in gray, where we established the Series-Build strategy, we're expanding this to powerships where we see strong potential as well as applying the same principle to FSU FSRU conversion, especially since we already done 90% of the world's FSU FSRU conversion, which is an unparalleled track record worldwide. Last August, we signed an LOI with a long-term partner, Karpowership for the integration of 4 new generation powerships plus the option for 2 more, a strong endorsement of our capability and scalability in this adjacent segment. Integration works will start 1Q 2027. The LOI also includes conversion, life extension and repairs of 3 LNG carriers into FSRUs. These are examples of higher value work that we are refocusing our repair and upgrade business on. These capabilities and high-value franchises will position us well for the next wave of opportunities. Our $32 billion opportunity pipeline over the next 24 months is diversified across segments, geography and asset types, some of which offer distinct market cycles for business resilience. Many of these opportunities are also aligned to our Series-Build franchises. Over the next 24 months, we are pursuing $23 billion in oil and gas opportunities, driven mainly by Americas region. We still see strong opportunities in Brazil where our long-term customer has disclosed its pipeline for the next 5 years. This is also where we have strong leadership for local content through our 3 established yards. We are also well positioned in Guyana for high-value integration work and topside fabrication, where we have participated in all of the FPSO work for the Stabroek Block so far. Apart from the usual opportunities that the market expects, we are also pursuing opportunities in FLNGs and fixed platform in the Middle East and Africa region, and to a smaller extent in Europe and Asia Pacific. For offshore wind, Europe remains the largest and the most developed market, driven by its energy security needs. TenneT continues to be an important customer for us as we pursue opportunities in both Netherlands and Germany. With the award of DolWin 5, it demonstrates TenneT's confidence in our ability to deliver, and we are ready to scale up and take on more HVDC projects when the opportunity arises. Meanwhile, we will also continue to pursue opportunities from other European TSOs as well as HVAC deals in Asia. We have also identified $2 billion in conversion opportunities such as those with Karpowership that I mentioned earlier. All in all, we are well positioned and confident in our ability to capture a healthy share of these pipeline opportunities that will fuel our ability to deliver consistent performance. I shall now hand over to Stephen to bring you through the financial review. Hsueh-Jeng Lu: Thanks, Chris. Next, I will dive deeper into our financial performance for FY 2025 and highlight the progress that we have made to shape a stronger, leaner and more competitive Seatrium. We delivered a set of solid numbers for 2025. The 25% rise in revenue was driven by a steadfast execution of a healthy, well-diversified order book, which provides strong visibility and resilience amid the evolving market conditions. Our gross margin, which I think is a reflection of the true operational performance has more than doubled to 7.4% in FY 2025 from 3.1% last year. We've continued to make significant progress in streamlining G&A expenses and lowering finance costs. As a result, net profit has also doubled to $324 million in FY 2025, up from $157 million in FY 2024. We also saw operating cash flow grow by about 4.5x to $440 million from $97 million, excluding one-off payments relating to legacy issues. And on the same basis, FCF doubled to $443 million. After taking into account these one-off payments, we still generated almost 46% more cash from operations year-on-year of $142 million from $97 million a year ago. We have also taken decisive steps to streamline our asset base by divesting noncore assets. This disciplined approach sharpens our focus, enhances operational and cost efficiencies. Diving straight into the key revenue growth drivers. The 24% growth year-on-year was mainly driven by a strong progress registered by both the offshore wind -- the oil and gas and offshore wind segments. Revenue from Oil & Gas Solutions grew 24% to $8.1 billion, underpinned by steady execution, progressive revenue recognition of the 6 new build Petrobras FPSOs. Notably, P-84 and P-85, which commenced work in the second half of '24. Offshore Wind Solutions also increased its revenue to $2.1 billion, driven by our 3 TenneT 2-gigawatt HVDC platform projects. The repairs and upgrade business registered lower volume and revenue due mainly to trade-related uncertainties and weaknesses in the LNGC market. We are, however, continuing to focus the business towards higher value projects, such as FSRU conversions and the integration of powerships that Chris mentioned earlier. In the meantime, our 23 long-standing strategic partnerships with large global customers continue to provide a steady baseload revenue of a more recurring nature. In the other segments, increased contributions from specialized shipbuilding, chartering as well as rig kit sales and MRO projects delivered through Seatrium offshore technology or SOT led to a 55% jump in revenue. While this business is small today, SOT capitalizes on our unparalleled track record and rigs expertise to monetize proven design IPs. It delivers a healthy margin, and we see growth potential ahead. Next, let's take a look at gross margin. Year-on-year, gross profit increased to $848 million in FY 2025 from $291 million, and gross margin increased sharply by 430 bps to 7.4%, driven by an improved mix of higher-margin projects, higher asset utilization, improved productivity as well as cost discipline. This was partially offset by provisions to the U.S. projects, where the final project was delivered subsequent to year-end and a little bit from a NApAnt, which Chris mentioned earlier. Other operating income was lower in FY 2025, mainly due to a one-off provision relating to the Admiralty Yard restoration before its return to authorities in 2028, net FX movement, lower scrap sales and a nonrecurring settlement gains that was recognized in 2024. G&A expenses as a percentage of revenue declined by 50 basis points to 3% compared to 3.5% in FY 2024 as we benefited from the continued cost optimization activities. Net finance costs also dropped by 18%, driven by debt repayment and lower financing costs, offset by a decreased interest and dividend income from equity investments such as the Golar Hilli, which we divested in 2024. Overall, net profit more than doubled to $324 million in FY 2025 from $157 million in FY 2024, underscoring the significant uplift in our core performance powered by revenue growth, stronger margins, sustained cost optimization and disciplined execution. As mentioned, we also reported much stronger cash flows in FY 2025, which is the reflection of the discipline that goes into ensuring that all our projects on our progressive milestone payment terms and robust project cash flow management throughout each project. Consequently, operating cash flow increased to $142 million in FY 2025 from $97 million. Excluding the effect of one-off legacy payments, operating cash flow rose 4.5x to $440 million, reflecting the level of cash generation that we expect moving forward. Investing cash flow was largely neutral with $122 million of project and safety-related CapEx, such as that for Batam yard to prepare for the 2-gigawatt HVDC projects, balanced by asset divestment proceeds. We will continue to be measured in our capital expenditure, which is mostly focused on investments that will enable growth. All in all, we generated $443 million in free cash flow excluding one-off legacy payments. This is more than double that of FY 2024. And we are confident in the execution and the cash flow of our post-merger contracts. Moving on to capital structure. We continue to adopt a prudent and disciplined approach to enhance resilience and afford us the financial agility to position for growth. Our gross debt decreased 5% year-on-year to $2.5 billion as at end December 2025. And through active refinancing, our cost of debt has declined from 4.9% at end December 2024 to 3.4% at end December 2025, driven both by lower base rates and tighter margins. We continue to broaden our funding sources and leverage our improved credit profile to secure favorable refinancing outcomes. Our liquidity position remains strong with $3.1 billion in cash and undrawn committed facilities, giving us ample headroom to support operations, pursue growth opportunities and other capital allocation requirements. In summary, our balance sheet remains robust with a low net leverage ratio of 0.8x and a net gearing of 0.1x as at 31st December 2025. With the FY 2025 performance covered, I'd like to touch on the efforts that we've been taking to transform our cost and margin profiles that will have lasting impact into the future. If we take a step back in FY 2023, when both companies first came together, Seatrium have focused on integration and harmonization. And so the new company can start on a clean slate. In FY 2024, our full financial year since merger, we quantified the benefits and scale of coming together, providing market guidance on 2 targets, $300 million on synergies, on cost savings and $200 million in procurement savings. These targets reflect the efforts that started from the moment the 2 companies came together. We looked at our cost items line by line removing what we didn't need and leveraging our combined scale for economic benefits. These changes have fundamentally reduced our cost levels and will continue to have a lasting impact moving forward. We are today in year 3, and we are pleased to share that we have exceeded those targets and the proof is in the numbers. Gross margins has turned from negative 2.9% at FY 2023 to 7.4% in FY 2025, alongside an improved mix of higher-margin Series-Build projects. G&A expenses as a percentage of revenue has also declined from 5% in FY 2023 to 3% in FY 2025. And as mentioned earlier, the cost of debt has also significantly declined from 5.7% to 3.4%. And we are not done yet. Initiatives implemented late last year have not seen its benefits fully baked into our financial numbers yet, and we also continue to drive greater cost discipline and internal efficiencies by embedding digitalization, AI and machine learning meaningfully into the way we work across our global business. We believe this will greatly improve visibility, control, risk management and operational efficiencies that will reflect in our margins and financial performance in the time to come. As I've alluded earlier, gross margin is an indication of our operational performance. And we are starting to see the fruits of our labor in FY 2025, and our reported gross margin of 7.4% is a vast improvement from where we started. But it is a reflection of what Seatrium is capable of. We are just getting started. As we continue to streamline operations and tighten overheads, we see accelerated pathways to further expansion through our ongoing divestments of noncore assets. This is an important lever to really reshape our cost structure to unlock efficiencies that will strengthen our long-term resilience and competitiveness. Since 2023, we started divesting assets on our books that are not really required for our global operations. And these assets are broadly categorized into yards and other assets such as vessels and floating cranes. We've accelerated the pace of these divestments in FY 2025, including Amfels and Karimun yards, GNL, our PSV vessel fleet of tugboats, floating docks and the Crescent yard that is expected to complete very soon. The sale of the Amfels yard and GNL vessels have already been completed and the rest are expected to complete by first half 2026. These transactions will deliver more than $50 million in annualized cost savings. These assets would have otherwise laid idle on our books are also expected to unlock more than $230 million in gross gains and over $330 million in cash proceeds, of which $110 million was received in FY 2025. We plan to do more, having identified more than $200 million additional noncore assets to divest by 2028, alongside the scheduled return of Admiralty Yard. Together, the transactions already -- with the transactions already announced, we expected the cumulative to generate cost savings over $100 million by FY 2028. As our business needs evolve, we will continue to review and evaluate opportunities to drive greater efficiencies. These structural improvements will enable us to reduce overheads and drive operating efficiencies, which will, in turn, bring us closer to our target margins, enhancing our business resilience and offering stronger fundamentals, which will deliver sustainable long-term returns. With that, let me now pass back the time back to Chris. Leng Yeow Ong: Thanks, Stephen. To reiterate, Seatrium is at an inflection point today, and we are now ready to commit to creating tangible lasting value for our customers, shareholders and other stakeholders. This year, we are proposing to double the dividend to $0.03 per share, in line with doubling of our net profit in FY 2025. We also plan to continue our share buyback under our existing $100 million program, reflecting our confidence in the business and in the momentum ahead. You can clearly see the fruits of our labor. Total shareholder returns have turned positive at 5.2% and ROE has nearly doubled to 4.9% in FY 2025. These are early signs of the value we are unlocking as our strategy takes hold and we believe that there's further room for growth. Most importantly, we are balancing reinvestment for growth with consistent capital returns. This is how we will drive long-term durable value creation for our shareholders. Let me close by bringing this all together. Our strategy has always been clear and consistent from driving organic growth to executing strongly and transforming our cost structure for margin expansion, ongoing financial discipline and allocating capital prudently to enable sustainable long-term returns. Our value creation framework captures all of this, aligning everything we do from the way we deliver projects for our customers to how we manage costs to how we plan to deploy capital for sustainable return. On capital allocation, our priorities are disciplined and focused, investing for growth in areas where we have clear competitive advantage, optimizing our balance sheet, ensuring the right debt structure to support long-term value creation, returning capital through dividends on share buyback as we grow and exploring strategic M&As that strengthen our long-term position and business resilience. This framework keeps us focused with clear progression towards our FY 2028 steady-state financial targets, we are on the right trajectory to building a stronger Seatrium designed to outperform for the longer term. Thank you. Amelia Lee: Thank you, Chris. We'll now open the floor to questions. For those of you in the room with us, please raise your hand to ask a question. Zhiwei please. Zhiwei Foo: Zhiwei from Macquarie. Congrats on a wonderful set of results. Two questions from me. The first one is regarding your order book, right? I think you're roughly about $17 billion of order book and you have a revenue run rate of about $11 billion this year. So how do we think about your revenue run rate and your order replacement rate? Because from the looks of it you'll run down this by if you don't have a similar amount of order intake? The second question is more on your margins. Now your gross margin is what -- I think you reported 7.4%. And then if you were to just look at second half and net out the provision on onerous contracts to get to about 9%. Then assuming you execute on all your cost savings, that's another $100 million. And then if I'm generous, that adds another 1% of gross margin, which takes us to 10%. So assuming that your cost saving programs work through, you don't -- have no recurrence of provisions. Does that mean that we can start to anchor our thinking of 10% gross margins going forward? Leng Yeow Ong: I think I'll take the order book question. I think you asked the same question the last half, I remember. And I think that the key thing is about getting close to the customers and home running the opportunities that are out there. This is order book business. And the key thing is about how do we take a look at getting quality -- balance between quality projects that we can get and get it in. The $11 billion, I will say that it will roughly be around there moving forward. This shows that the capacity -- our capacity management has been very sharp because I believe that about 2 years ago, the question from all of you was that, are you sure you can consistently produce $10 billion. So that's out of question. But it will basically hover around there. We think that the capacity would allow us to do that. And if you look at the burn rate, it's not linear. The $17 billion doesn't burn down just like that. So technically, it's also a mix of building up to the order book. And as mentioned last year, even as a very challenging year, we're almost half a year or more than that, that are quiet because of obvious reasons. We still manage the home run quite a bit towards the end of the year. So technically, there are good pipelines in the market. And again, I always said I can't control the FID timing. But we are quite confident that based on the diverse product line that we have now and the franchises that we have seen, we will continue to be the go-to person for some of these more complex projects. So it is a zero-sum game. You have mentioned that we are confident that we are able to maintain that resilience when the projects -- I guess the real answer is that when the projects come into the order book. Hsueh-Jeng Lu: So on the second question, let me take this. I think if you look at FY 2025, your calculation is correct, right? But I think the bigger picture is this. There are a few factors that we are -- that move in our favor, right? One is you would have seen the legacy projects, the proportion of that is coming down. The contracts that we secured post merger with risk-adjusted mid-teen returns are becoming more important, two. Three, the cost and productivity measures, I think you talked about with the divestment of the yards and all that, that will take out costs directly from overheads. I think the other factor that you have to consider is as projects move along. I think we mentioned this before, when you hit critical milestones, the contingencies that we -- which are costs that we've set aside for certain risks that we anticipated, if they don't materialize, then that will also be released. So I think the margins will continue to improve from where we have achieved today. I think it will -- we've guided towards a project margin of mid-teens. But as you know, there are some overheads in production side, which is related to basically underutilized capacity. So there will -- the number will move towards 15%, but it won't hit 15%. So I think that's the -- that's where we're looking at right now. Leng Yeow Ong: And just to touch -- come back to the point on order book. At $17 billion, if we've taken a look back in history, it is still one of the highest for the last 10 to 12 years, both combined. But what is different today is that I think you all will appreciate that it's not based on one product. And it is based on milestone payment that it basically is a high-quality order book right now for us to execute. The other thing -- the other point is that we have also been sharing that getting on to the franchise when we signed the very first or the second FPSO or HVDC, there were also a lot of doubts and question whether is it -- are we capable to build on that? I think today, that should put it to rest. What we are -- what I hope everybody sees that the ability to actually deliver a very complex product straight to Brazil field and start operating in 2 months, that actually builds on the reputation and our ability to get the customers on the table in a very short time. Zhiwei Foo: If I have 2 follow-up questions. You mentioned the contingencies. I understand that they are significant. Could you share some color about how big it may be so that we can appreciate what that actual underlying margin is? Otherwise, the second question is, what would your underlying gross margin be if we were to just look at your project and take out all your other inefficiencies right now? Hsueh-Jeng Lu: Contingency is commercially sensitive, because -- but there are risks. So each contingency item is tagged to amount, right? And so when the risk goes away, it will be released. Amelia Lee: Next question from Mayank, please. Mayank Maheshwari: Yes. Chris, a question -- more subjective question here. There has been a lot of commentary by your largest customer around how they are tightening their screws at their end. Like in terms of conversations you had and considering you were showing the order book being a large part still sitting in LatAm. How do you think about the path going forward? And what are the kind of conversations you're having with them around their objectives and how you are aligning to it? So that was the first question. And the second one, to the CFO, I think congratulations on reducing the interest cost quite a bit. But if you think about it, your interest cost and the finance cost still has a reasonable gap. I think there are lease liabilities and a few other things in there, which are still quite chunky. Can you just give us a bit of an outlook of how you're kind of tightening your screws there? Leng Yeow Ong: I will take the part on customer conversations. I think tightening of screw whether it is a challenging environment, my customers always tell them that their screws are very tight with us. The key thing is about how then do we sit across the table and determine the work value because it's a balance for them also. There's no lack of competitors and especially after we have proven that our formula worked and we are able to deliver a functioning FPSO directly to the field and startup, and that's a very powerful signal. If you talk about LatAm, obviously, you're talking about mainly Brazil. Of course, they have various different formula now. One is the build, operate and transfer. And it is now mixed with eventual EPC projects coming online. The key thing is about it has different risks, it has different approach. But the fundamental is the ability to execute because all these projects takes many years to execute. And you can see that from their ambition, they have printed out the 5 years of ambition. To be very honest, one of the biggest questions that they had to ask themselves is that can I expect the FPSO to arrive because right now, especially so when you talked about the challenges of the market is very unpredictable and oil prices it can fluctuate and volatility is quite high. But they have their investment case all set up. So I think that you will come online. But the key question is that when will the cash flow be realized, and that is really around the assets that's going to flow there. So I think we have proven ourselves that we are able to execute right on time and able to deliver compared to our competitors deliver something that operates directly with them. The key right now is of course strategy around who we partner up for BOT, the strategy around how can we also make sure that it's seamless. And then for EPC, of course, it's all about cost and price. So I think that, that part itself, I'm happy that we are not starting from ground zero. I think that we have now a very clear database and the organization is very clear on how to execute these type projects. So that is the type of conversations. And even with or out of LatAm, it's the same conversation with majors like Exxon, for Guyana, even new prospects in Africa is basically down to certainty, the ability to provide solution because mega projects, you will have excitement of technology hiccups and all this, how do you then help them to overcome that and still be able to maintain the predictability at the end of the day. That, I think, is a huge value. Hsueh-Jeng Lu: Mayank, on the second question, look, I think if you look at our finance costs, the largest component is still interest costs, right, to banks and et cetera. I think the key focus for us here is actually around deleveraging. I think we've done a substantial amount of refinancing with the support of our banking partners, but we have to delever. I think you would have seen the operating cash flow significantly improve so then we had to think about where we can allocate capital. Do we use that for growth because we're returning capital to shareholders, but it's also important to delever over time because I think the leverage on a gross level is still relatively high. Amelia Lee: Next question from Pei Hwa. Pei Hwa Ho: This is Pei Hwa from DBS. Congrats on the strong results. Just 2 questions from me. One is for Stephen, it's on the provision for your onerous contracts, this is amounted to $96.5 million. Could you give us a bit more color on the breakdown of all this, especially for legacy contracts, it was so close to completion that we didn't expect to have this much. I think second is on the project pipeline, especially from Petrobras and TenneT. Maybe you could give us a bit more color and how based on a conversation with our customer is TenneT on track? Or they still as per plan, will continue to award some contract this year? And also maybe some -- also, I mean, in general, how we think about your order pipeline and the conversion from the $32 billion pipeline to this year? Hsueh-Jeng Lu: Chris, maybe I'll take the first question first. I think the provisions of our $96 million that relates principally to 3 projects. That's the 2 U.S. projects, which we have since delivered. So you can think of that risk as have gone away, right? I think the reason for additional provisions is because the project took a little bit longer than we wanted, and so there were additional costs associated with that. On the third project, which I mentioned in my speech earlier, was around NApAnt, which was a legacy specialized ship building project that we're delivering in Brazil. And so there were -- the project has delayed and so there are some provisions relating to that. But it's a relatively small project. I think its our initial contract value was about $200 million. And so we're working very closely with the customer to sort of manage that risk going forward. Pei Hwa Ho: When is this project going to be delivered? Hsueh-Jeng Lu: 2027. So initially, it was supposed to be end 2026. Now it looks like 2027. Leng Yeow Ong: I guess for Petrobras, TenneT, and you mentioned about conversion pipeline I wouldn't repeat what I said for Petrobras. I think that's very clear on their development plan and what's going to come online. For TenneT, your question was around whether they are still on track. And the short answer is that as far as we know, yes, because as promised they have gone through the same allocation and competition end of last year. We're quite happy that we are able to land DolWin 5 for -- that's the first Germany unit that we are getting. So that also sets up our potential and production line for both the Netherlands projects and the Germany projects. This year, if my memory serves me correct, and please check and don't quote me because there will be projects coming online for tender in Germany and also followed by Netherlands. When they were FID that when they will start engaging us, that depends on when they are ready. But those projects are real through our conversation. Now on conversion pipeline. As mentioned, the team has worked very hard to deliver value to the customer. We have proven that when we said that we will deliver this way and when we have proven to the customer as One Seatrium, we are able to do that. Customers are also seeing that they are able to assess the different capabilities of different facilities and different teams within the group. So in a very short time within 3 years, we have come together and delivered very differentiating value in terms of being able to provide solutions to the customer. And that's not all talk, and we have delivered that to them. The key thing around conversion of cost is also the -- because of this ability to prove that we are able to do this. There are many people that are trying to come online as competition. So that segment actually is -- but as mentioned in my speech, there are certain segments that we have a very commanding track record. Again, there's no difference from the new build because it's complex, because it requires capability, it requires safety, basically practices within and quality, ability to deliver quality products. We think that this is an exciting area every year. As mentioned, Powership, if you take a look at this segment, why we highlight that, if we believe that the world is starved of power and also digital, AI, the growth of it, I think the floating assets is something that is very sound. The concept is sound. We just have to make sure that our customers are able to take a look at the financial ability around the economics around that. There's also a floating data center. There's many things that in the market that may be too premature for us to say. But all this $2 billion of conversion prospects, I think it ties into the whole energy type of products. And why conversion is because the speed to market is very important. So again, the ability to execute, the ability to engineer on the go and deliver them safely with quality is our hallmark and customers know why they come to Seatrium and why we're able to build on that will be then a track record in the convergence space. Amelia Lee: Thanks, Chris. Pei Hwa, I hope that answers your question. Next, we will take a question from online. Luis from Citi. Luis Hilado: Congrats on the good set of results. I just had -- most of everything has been asked. Just 2 housekeeping questions, please. Just to clarify on the $50 million annualized cost savings. Since most of the -- it will conclude in the first half. So it's essentially $25 million savings in the second half. So -- at least in the second half. Is that the way to look at it? And the second question is just I know it's difficult to discuss arbitration cases in terms of timing, but we have a feel for amongst those, which ones can resolve sooner, not when, but which would resolve sooner? And are your legal fees material at all on an annual basis? Hsueh-Jeng Lu: Luis, you had 2 questions, right? Okay. On the first question on -- sorry, what was that? Leng Yeow Ong: $50 million. Hsueh-Jeng Lu: $50 million. Yes, $50 million. A part of that divestments were completed towards the end of '25, right? So that -- a portion of that will be fully baked in from the 1st of January. The MFLs you would have seen we completed in January, and so that will be another component. So I think if you're looking at it over the full year period, it's probably -- if we can complete everything this month, it will be closer to the $50 million than the $25 million. Leng Yeow Ong: Arbitration, depends, but if you want to ask for which one would probably be settled first. It is all basically time based, right? P-52 will probably be the first one. that will be settled, and we hope that we will have a conclusion this year. You asked whether the legal fees is material? It depends on material against what. But it's never -- of course, that's not always the first avenue that we will go for. But I just want to impress upon that. Actually, arbitration is a professional way of basically settling differences. And usually in this industry, we are able to differentiate what we need to settle while we professionally advance on our both interests on ongoing projects. So yes, P-52 will probably be the first one that we are targeting. Amelia Lee: Thanks, Luis. Next question, also online from Amanda. Amanda Battersby: Yes, I'm here. Great. Amanda Battersby from Upstream. Thank you very much for the frank results, statements and sharing as always, Chris and Stephen. A couple of questions, if I may, please. You mentioned that the potential for BOT FPSO contracts, specifically in Latin America and one would think with Petrobras. Are you actively bidding for any BOT work for floaters? And if so, would you be looking for a partner on a project-by-project basis or perhaps a more formal arrangement to allow you to tender to go forwards, please? And the other 2 shorter questions, if I may, do you foresee any more sort of legacy arbitration contracts lurking in the wood work after sometimes more than a decade? And thirdly, please any more plans to rightsize the headcount as some of your projects come to completion? Leng Yeow Ong: Well, I'll take those questions. Thanks, Amanda. We are missing you here. Well, for BOT contracts, we will definitely need to have a partner and bidding strategy. Whether you'll be project-by-project basis or whether there is a long-term type of tie-up, we have both strategies in place. And it depends on time and space also, right? We have to look at -- I guess the fundamental is that we are in for the bid, and our focus is to win. So it's likewise for partners. Our operating partner would also have the same driver. So it will depend because timing of the tender and potential on both sides on the tender really decides how we choose our partners. Whether we will partner somebody for long term and across all projects, it depends whether the interests align at a point where we are signing up. So I can't have a clear answer, but we are in on the BOT bid for the BOT projects and definitely with an operating partner. On arbitration legacy, I think what I can promise you is transparency. As of now, as mentioned, we do not see that there are any that are lurking. But like what we mentioned, when there are any disagreement that we need to settle is always professionally been elevated to settle an arbitration if we cannot come to terms. So it's very hard for us to actually forecast. But all I can say is as of now, we don't see any. Now about rightsizing I would actually approach the rightsizing question as less of a manpower issue than I think more on the operational excellence angle. I think we have always mentioned about what is our strategy going forward. And I remember 3 years ago, when we talked about integration topic and we talked about how we optimize and during the first year, we did not even remove any headcount. And I think that all of that has basically actually worked out. Our first stance is always to make sure that we take care of our people. When projects are completed or when we get more efficient and our processes get more efficient, retraining has always been the first one, all right? So we are not approaching from a headcount and hire fire approach. But of course, when we look at our yards and our future footprint, which we have always been very transparent in sharing, that is strategic, right? That's strategic. And it's about trimming down the noncore, building on the core and, of course, have an eye of capability building, depending on what products that we are looking at. As we have mentioned, we further invested in the Batam yard to make sure that we have lines ready for offloading -- building and offloading 30,000 tonnes of topsides, which is mainly our HVDC today. We expect to eagerly contest to build a more stronger pipeline behind each of them. So there are a lot of ways that we are looking at rightsizing. The other thing is that one of the actions that we are taking, of course, is in the national news that Admiralty Yard is going to be redeveloped. And we knew that even way before Seatrium was formed. So we are taking that proactive step to actually rechannel resources. And that's the strength of the One Seatrium delivery model. We actually rechannel resources not only to Tuas Boulevard, but also a lot of our high ports and young managers are now in Batam, helping to build up the capabilities over there. So there's many dimensions to that. But I guess the main driver of this question is, I guess, about cost efficiency. And I think that has been the top line strategy that we have always said. We are very sensitive to cost but we are also very sensitive to capabilities, retaining capabilities, retraining capabilities and getting ahead of the curve to be able to service our customers. I think that will differentiate us very strongly. Amelia Lee: Next question, Siew Khee, please? Lim Siew Khee: Can I just follow up on the onerous contracts? So given that the U.S. projects have been delivered, can we expect a significant drop in the overall provision for onerous contract? Hsueh-Jeng Lu: Yes. Lim Siew Khee: Will it be lower than 2024 because 2023 was high and in 2024, it was not? Hsueh-Jeng Lu: As I explained earlier, I think there were 3 projects, right? So the remaining risk around NApAnt, but as far as we can see today, there is no need for additional provisions. Lim Siew Khee: Okay. So within your order book, there's nothing that is looking that you think could delay? So therefore, that would actually help to pave the way for better margins as you execute. Leng Yeow Ong: Yes. So as I explained earlier, right, I think the key risk was always around the premerger contracts, I think that portion has come down significantly. Lim Siew Khee: Okay. And just wanted to just check, you mentioned that you hope to all settle the arbitration. Is there a need for any provisions if it's concluded this year? Leng Yeow Ong: No. Lim Siew Khee: Is there any need for provisions for any other litigation that you might see be in negotiation? Leng Yeow Ong: No. Usually, when we talk about provisions, it's about legal opinion on the chances, right? So as of now, whatever that we reported that there's no need for further provision. Lim Siew Khee: And then just on your order pipeline target. Why did you raise from $30 billion to $32 billion so specific? What's that $2 billion? Leng Yeow Ong: Well, the other pipeline depends on what projects come into the market. We didn't raise it. It's a customer wanting in the market to basically look at development. These are real projects that are out there. Lim Siew Khee: Is there anything significantly different or new from compared to when you told us vessels of $30 billion now arriving to $32 billion. So what is the optimism coming from? Hsueh-Jeng Lu: Maybe I'll take that. So in that... Leng Yeow Ong: Hang on. It's not optimism. Again, I say that it is the projects that are out there and the real targets that we are going after. So when you talk about what are there any difference, of course, there is no secret that there are a lot more production assets, contracts that are foreseeable in the market and that is basically public. The other point that we are trying to make is, of course, there are also conversion projects. As we mentioned, they are out there in the market. So as we get knowledge and those are the projects that we are going after, we actually actively put it in the pipeline and say that, okay, these are all the go get, but that's to convert into order book. Hsueh-Jeng Lu: If I may add, the number there is we have an internal pipeline that we track and our commercial teams update very regularly. And so we just summed up that total and then gave that to the market. So these are all actual projects that we are chasing, right? So I think if you were talking about the change, I think, between the $30 billion and the $32 billion, there were some projects that we won, DolWin and then the BP project. And then those were replaced by other projects that customers have now inquired with us on, we want you to submit a bid or we're in bilateral negotiations with them. So it's our actual projects that we are chasing and not managed up, that's what we were trying to say earlier. Lim Siew Khee: Okay. Just last 2 questions, just on housekeeping wise. So the $50 million cost savings you mentioned, where can we actually see it more significantly, in G&A or of sales? Hsueh-Jeng Lu: It is in a different -- some of it will be in cost of sales, some of it will be in G&A and some of it will be other operating income. So it's actually in different areas. Lim Siew Khee: Is there any -- is there one that is like maybe higher, perhaps in cost of sales? Hsueh-Jeng Lu: It's mostly in the cost of sales because if it's relating to the yard, all of that goes into the COGS line. Lim Siew Khee: And my last question is, so the divestment gain that you actually guided. $160 million, if it is completed in 2026 will be recognized in 2026, is that right? Hsueh-Jeng Lu: $150 million. Lim Siew Khee: $150 milliion will be recognized in 2026. Hsueh-Jeng Lu: Yes. So $70 million was recognized in FY 2025, another 50 -- and $150 million in 2026. Amelia Lee: Thanks, Siew Khee. With that, we've come to the end of the briefing. Unfortunately, we've run out of time. For the 2 questions that we received online, we will reach out to you directly on e-mail. For further questions, if you require any further clarifications, please feel free to contact us at our Investor Relations e-mail address. Thank you very much for joining us this morning, and we wish you a very pleasant day ahead. Thank you. Bye.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Wendel's Full Year 2025 Results Conference Call and Webcast. [Operator Instructions] Olivier Allot, Director of Financial Communication and Data Intelligence will read them. I must advise you that this conference is being recorded today. I would now like to hand the conference over to Mr. David Darmon, member of the Supervisory Board and Deputy CEO. Please go ahead, sir. David Darmon: Thank you, and good morning, everyone, for this 2025 full year results presentation. As always, we're going to make this presentation with several speakers today, including Jérôme Michiels, Benoit Drillaud, Cyril Marie and later, Laurent Mignon. So to start, let me comment the Slide #4 in the presentation, which is a recap of the 2030 ambitions that we present to you in last December. We showed you that we have a pretty ambitious portfolio rotation plan and the capital allocation plan. We do intend to get EUR 7 billion of committed cash flows through 2030 through asset rotation and FRE generation and to reinvest this amount and returning EUR 1.6 billion to the shareholders in the meantime. We also announced to you back in December some good organic growth target with a 15% growth organically for the asset management platform. And we mentioned to you that we intend to create value in the portfolio investment of our principal investment from 12% to 16% per annum with the new mandate that we have given to the IK Partners team, and we'll get back to that later in the presentation. So this is the background on which we are all working at Wendel, and I will give you more details on what we achieved in 2025 and in early 2026 to achieve those ambitions. I'm moving now to Page #5. And as you can see in 2025, we made progress on our 2 legs, I will start with the asset management, where you can see that the platform really ramped up in 2025. We did close the acquisition of Monroe Capital in March 2025. The 2 platforms that we had during the years, Monroe Capital and IK Partners had a very successful fundraising cycle. They both raised a combined EUR 11 billion in a market which you know was not so easy. In 2025, we also signed the acquisition of Committed Advisors. We announced the signing in October 2025, and we do intend to close this acquisition end of Q1 2026. We believe that we now have a platform at scale, we manage close to EUR 47 billion of assets under management, including pro forma creation of Committed Advisors. And we have a target for the year of over EUR 200 million of fee-related earnings with this platform. So in less than 3 years, you can see that we have built something of scale and pretty attractive and pretty unique. Now talking about the principal investments. 2025 was also a year of transformation. We've been very active in the portfolio. We are going to come back on the various divestitures that we made recently, the various bolt-on we did in the portfolio and the change in management that has happened. But the most important information is probably this IK Partners advisory mandate that I mentioned earlier, which is changing significantly the way we operate, and we believe it is going to create much more value in the future, but I will get back to that later in the presentation. Turning on Page 6. You can see that we had a pretty busy early 2026 with the announcements of the disposals of both Stahl and IHS. Those are investments that we had in the portfolio for quite a long time. You remember that we initially invested in Stahl in 2006. IHS was a 2013 investment. So they've been in the portfolio for quite a long time. And we're happy that in this pretty tough market, we managed to secure those liquidity options. For Stahl, we signed an acquisition with Henkel, and I will give more details later on. And with IHS, we did support the tender offer that MTN announced a couple of weeks ago. Those 2 divestitures should bring EUR 1.65 billion of proceeds for Wendel, so it's pretty significant. You will see later on that, that takes our leverage down quite significantly. So it brings us some strong capability to execute on our shareholder returns policy and also to deploy capital towards the both legs, I mentioned earlier, WPI and WIM. So those sales are pretty important in that we're going to execute our strategy. Moving to Slide 7 and a few numbers on our 2025 results. First, you can see on the left side of this slide for Wendel Investment Managers, some pretty strong growth. There is organic growth. You see the plus 13% organic growth in fee-paying AUM. And obviously, with the consolidation of Monroe Capital over the period, which we didn't have in 2024, we also have a scope effect. And so the increase of 200% is due to this scope change. But beyond the M&A, you can see that organically, the platforms are growing very, very nicely. On the right side, you can see that Wendel Principal Investments today account for over EUR 5.5 billion of gross asset value. It's growing with a positive impact of listed assets and which as of today is mainly -- is going to be mainly Bureau Veritas because we secured the public to private in December for Tarkett. And as I mentioned earlier, IHS should not be in this bucket by the end of 2026. The unlisted assets have been impacted by the market multiples, and I'll come back to that later on. We did value in those numbers and in 2025 Stahl at the Henkel offer price. We did not take into account the -- our share of cash flow between signing and closing, which are due to be paid to us. But as this amount is quite uncertain at this stage, we cautiously ignore this amount in our NAV. IHS is valued at the average share price in -- before the year-end and not at the MTN offer price. So we published a NAV per share of EUR 164.20 as of December 31, 2025, which is up 0.7% over the previous quarter and up 1.17% if you include the interim dividend that we paid in Q4 last year. I'm coming back to -- I'm moving now to Slide 8 and coming back to the performance over the last quarter of this fully diluted NAV, which has been growing 1.7%, as I mentioned, so EUR 2.7. So how did we grow this NAV? First, we had a negative impact on the investment manager side, the asset management part. We had some negative impact from the market multiples of our peers despite the positive growth of the aggregates that I mentioned earlier. The Wendel Principal Investments saw some growth in terms of NAV per share, EUR 4.9. This is obviously mainly Stahl because we sold Stahl above our NAV value, and I will get back to that later on. We -- as I mentioned, IHS was valued at the share price as of December 31. And last Tarkett is now in our bucket of private assets and not anymore in our listed assets bucket. You can see that the ForEx has been negligible over this quarter, which is very different from the first 3 quarters of 2025, where the impact was pretty strong in Q4, it was pretty remote. So plus EUR 2.7 over the quarter, fully diluted and plus EUR 1.2 when you take into account the interim dividend that we introduced last year, and we paid in November '25, EUR 1.5, which has already been paid to our shareholders. I'm moving now to Page 9 and give you a bit more details on the 2 earlier divestitures I mentioned, namely Stahl and IHS. The sale of Stahl is going to bring $1.2 billion of net proceeds to Wendel and the expected tender offer on IHS should bring $575 million for the shares that we own in IHS. The combined proceeds from those 2 divestitures should bring our pro forma loan-to-value under 10%. We should also note that this EUR 1.6 billion of proceeds account for over 27% of the portfolio rotation that we announced just a few weeks ago. So quite a strong start on this program. I'm moving now to Page 10 to give you a bit more insight on the return to shareholders. We do intend to distribute around EUR 500 million to our -- sorry, to return EUR 500 million to our shareholders, both through dividends and through buyback. In terms of dividends, we are raising our 2025 dividend to EUR 5.10, up 8.5% compared to last year. As we already paid an interim dividend in November, the additional dividend to be paid in May 2026 is going to be EUR 3.6. Those combined amounts of EUR 5.10 compared to the current share price generate a yield of 5.8% based on the spot price of February 25. So a strong dividend policy and yield, combined with the share buyback program that we mentioned end of December that we are going to launch, which is going to be around EUR 340 million in terms of size that we're going to return to shareholders. So above -- around EUR 0.5 billion to be returned to our shareholders during this year. I'm going to turn now the mic to Cyril Marie to present to you the development for the Wendel Investment Managers division. Cyril Marie: Thank you, David. So I will not comment on Page 12 because the key highlights have been presented by David already. Let's move directly to Page 13 where you have the roll forward of the assets under management. So here in this chart, you have at the extreme left and right, the AUM. As you know, the way we monitor our activity, we have the AUM and the fee-paying AUM. So let's start with the AUM. In '24, as David said, we had only IK with EUR 13.8 billion of AUM composed of the NAV of our fund plus the dry powder or the money available for new investment and the co-investment. Now at the end of '25, we are at EUR 41.2 billion. So it's EUR 15 billion for IK, plus 11% and $30 billion for Monroe, up 22%, which is, I think, a strong achievement in the current environment. And in the AUM, the last information is that the Wendel Sponsor money represents EUR 500 million. So it's around 1% of the total AUM. I think it's an important information. In the middle of this chart, what you have is the dynamic of the fee-paying AUM. So it means that the fees that are paying AUM that will have an impact in '25 on our P&L. So we started the year at EUR 10 billion. Then we had the impact of Monroe. But then what is very important is the EUR 9.2 billion and the minus EUR 5.2 billion. With this, you have the new fee-paying AUM. So for IK, it's the money raised over the year, so EUR 1.3 billion and the money invested because it's not the same business model for our 2 important GP, IK and Monroe, so close to EUR 8 billion for Monroe. So with that, you have the new fee-paying AUM. And then you have the exit and the payoff so because you know what is very important for these LPs also is to return capital. So if you sum the EUR 9.2 billion and the minus EUR 5.2 billion you get the 13%, and we believe it's a good indicator of the organic evolution of our business for '25. Then let's go on the following page, Page 14. Here, the idea is to give you really the more detail on the evolution of our business with 2 things: growth -- organic growth and two, diversification. I think that are the 2 key messages here. So let's start with private equity, IK Partners. In terms of fundraising first, it was the last part of their fundraising vintage started in '23, '24. As you know, already, they have reached the up cap in all their strategies, the mid-cap, the small cap, the partnership fund. And so the fundraising was at the beginning of '25 for EUR 1.3 billion. Now their priority is to invest the money raise and also to return capital to shareholders. In '25, it was a good year. As you can see, as always, they have returned more capital than they have invested for the LPs. It's very important. The dynamic of AUM plus 11% in '25. What is also very important for us is to maintain the organic growth of the businesses. And I will present to you later on that we have reached the target in terms of FRE. But despite this, we are still investing in the business and the FTE have grown by 8% because in private equity, as you know, it's very important to have local team to understand the businesses, to invest in the operating partner. So we maintain a high level of investment in order to pursue the growth of the business. Another very important point for IK, it's the development of the retail. As you know, in the development of a private asset platform, the retail is a new engine of growth for us, and it's still ahead of us. And we are -- we have now created the first evergreen vehicle for IK called IK Private Equity Solutions. It's now available for subscription. So if you want, you can get it through all the life insurance platform. '26 for private equity priority. Now the revenue are secured because we have raised the money. I think the priority is now to deploy and to return capital to shareholders. We have a strong ambition for '26. And also, we want to pursue the implementation of IK. As you know, IK is a pan-European private equity manager. They are very close to each of their markets. They have 7 implementation, and they have in mind to open a new office in Spain in '26. I think it's very important in order to maintain the quality of the deal flows for our LPs. So that's for private equity. Private credit, here also a very strong organic dynamic. Equity raised EUR 3.8 billion. As you know, post acquisition, it's always very important to see how the LPs will react and the signal was very positive with a lot of free-up, we have maintained the client base, and it's very positive for Monroe Capital. They have raised capital also with their retail evergreen vehicles during the year '25. And if we talk about the first 2 months of '26, the flows remain positive. So we are still gathering money on our retail evergreen vehicle for Monroe. Deployment, money invested EUR 8.3 billion, a very high level of investment. It's a record year for them. They remain relatively selective in terms of deployment. If you look at all the key KPIs of the private credit, LTV, leverage, diversification, Monroe is very well positioned. And also, if we -- just to give you one figure, if we look at the performance of the underlying companies of Monroe, the growth of the EBITDA is 12%. So private credit remains a very good asset class. And it's with Monroe, they invest, as you know, they lend money mainly to small and mid companies in the U.S. and the U.S. economy is still very strong. AUM grew 22%. Here, the same message regarding the workforce. We are still investing in the business to reinforce the diversification. And the last comment on Monroe, probably '26, 2 important message. The first one, we want to develop organically Monroe in Europe. So we are working on it. We hope to be in a position to execute something in '26. And also, we are pursuing the diversification with the launch of new strategies and evergreen strategies for Monroe Capital. Last strategy for us, even if it's not closed so far, as David said, it's Committed Advisors. We expect to close it in Q1 '26. They have started the new round of fundraising with their Vintage VI, and I can tell you the dynamic is very positive. The feedback from clients is positive. The cornerstone investors are there. So the dynamic is very good, and we hope that it will contribute to our growth in '26. Now if we turn to profitability, we have 2 slides. The first one, Page 15, it's the actual profitability. So here, you have, as David said, a very important scope effect because last year, you had only 8 months of IK in '24 and in '25, you have 12 months of IK and only 9 months of Monroe. So you have -- the growth rates are very high, 177% for the revenues, 150% for the profitability. What is important is to show you here that the profit contribution to Wendel is increasing significantly, and it shows you the execution of the strategy. But what is more important probably is to go to the next page on Page 16, just to have a more analytic view of the P&L. So let's take the second column, the pro forma. What pro forma means here? It's 12 months of IK and 12 months of Monroe. And for that, so if you look at the first line, the revenues, the recurring revenues, so excluding carrying interest, the revenues tied to the FRE. So above EUR 400 million for EUR 30 billion of fee-paying AUM on average, it means an average fee rate of 135 basis points. I think it's a very good level with our mix of business as of today. So IK is closer to 180 and Monroe remains above 100 basis points because, as you know, Monroe is really focused on Alpha. So they are not chasing AUM. The idea is really to focus on fees and performance for the LPs. Then the second indicator I would like to comment here is the margin, 38%. So it's a good margin because it's a good balance between our objective of profitability. But at the same time, we maintain investment in the business in order to have a sustainable growth. And the last comment on this slide for me is the EUR 159 million. When we have announced the Monroe acquisition last year in October '24, we gave you this objective of EUR 160 million. We have reached this objective despite the dollar effect. It means that IK and Monroe have been in a position to compensate the negative dollar effect. And we are today able to announce you that we have reached this target for the full 25 years. Then last page, so '26, it's a summary of what we said previously with David. So the organic growth is there. We have now also Committed Advisors part of the platform. We have reached EUR 47 billion. As said in December, we have a good level of diversification in terms of clients, geographic areas and products. So we can maintain this pace of growth. And as you can see, it will have a significant impact also in terms of FRE growth because we have in mind to reach EUR 200 million for '26. David Darmon: Thank you, Cyril. Now I'm going to turn to Slide 19 to talk about the activity during 2025 in our Wendel Principal Investments area. I will first cover the key highlights in 2025 and with this IK Partners mandate I mentioned earlier, which went effectively in operations on January 1, 2026. So from now on, all the past controlled private investments and the future investments in the controlled private equity made on Wendel balance sheet will be managed by the IK Partners team, which sits in the IK Partners ecosystem, and so we'll benefit from the expertise and resources of IK Partners, which we believe is going to be very helpful to create more value for the group. We also have been very active in 2025, including some leadership changes at Scalian, William Rozé joined us from Capgemini with a very strong experience in the industry. And we had as well a new CFO during the year. So a strong change of leadership at Scalian. At CPI, the long tenure CEO, Tony Jace, retired during the year, and Andee Harris joined as well during the summer. She's bringing a very strong tech and commercial background, which is exactly what CPI needs today. In 2025, we also invested roughly EUR 100 million in Scalian, both to support the M&A strategy and to strengthen the balance sheet. As I mentioned earlier, in 2025, we secured the public to private of Tarkett and Tarkett became a private company in late December 2025. We've been very active in our portfolio companies and financed 16 bolt-on acquisitions, 1 at Scalian, Tarkett and CPI each and 4 for Globeducate, which has been pretty active and 9 at Bureau Veritas. So a very active year for our portfolio companies. Last, I remind you the 2 disposals of shares that happened at Bureau Veritas in 2025 in March and September. And those gains flow through our balance sheet and not in our P&L, and Benoit will come back to that later in the presentation. I'm turning now to Page 20, where we are going to come back to the sales of Stahl and IHS and give you more details. So as I mentioned, the Stahl sale is expected to bring EUR 1.2 billion of proceeds to Wendel. This sale at EUR 2.1 billion enterprise value was secured with a 20% premium above the latest NAV published in Q3 2025. And it did generate a return above 15% per annum over the last 20 years. So a strong 6.6% cash-on-cash return when you include the previous dividends that we had over the years. So a very good return over a very long period. Beyond the financial results, on the right side, we wanted to give you a bit more insight on the value creation that happened on this investment. You can see that the revenues grew nicely over this period. The EBITDA grew actually at a higher pace because we increased the margin quite significantly over the years with a strong control of cost and some operational leverage, which was combined with an upscaling of our product portfolio where we moved to higher-margin products over the years. It has been a very thoughtful process to reposition Stahl to a more attractive asset under the leadership of Maarten Heijbroek. We -- over the last few years, we made some strategic acquisition in the specialty coatings business to make the company more attractive with the higher growth prospects. And at the same time, we worked on the carve-out of the wet-end business, now which is called Muno that is going to stay under our Wendel portfolio, which is having different market dynamics, and we thought will be not as attractive as the rest of the portfolio to potential buyers. So we've been quite active, and we are very pleased with the results that you can see here. I'm moving now to Slide 21 to give you some insight as well on our investment in IHS, which has been a long-term hold as well, slightly shorter because the initial investment was in 2013, but still 13 years is quite a long investment. This is our last investment in Africa. So we are closing this chapter with this sale. We expect $535 million of net proceeds, which is around 21% above the NAV that we used for this stake in Q3 2025. It is a 0.7 cash-on-cash net multiples for this investment. The financial return is not showing the actual operating performance that you can see on the right side because IHS has been a very strong organic growth and M&A growth success. We multiply by 10 the sales and by 21 the EBITDA. But this is not showing up in terms of financial return because we did suffer both from a volatile FX environment in naira, which is the main currency in Nigeria, was devaluated over 8x over that period. So that did impact us quite significantly. And the Towers business industry did suffer some strong derating as well. So the combination of an industry derating and FX actually made this growth story in terms of operational success, less attractive in terms of financial outcome, as you can see on the left side. I'm now going to cover on Page 22 and 23 the results of our listed assets and private asset portfolio. In the listed assets, I'm only going to comment on Bureau Veritas because once again, Tarkett is now in private assets, and we don't consolidate IHS. Bureau Veritas just announced its results yesterday. They published some strong results. You can see with some good organic growth, plus 6.5% and some improvement in the margin. So we are quite happy with those results. In terms of 2026 guidelines, we expect the results to be fully in line with the LEAP 21 -- sorry, the LEAP28 strategic plan. You can also see here that Bureau Veritas did announce a new EUR 200 million share buyback program yesterday as well, which is going to be completed over the year. Moving to Slide 23 to give you more details on the performance of our private assets, and I will be starting with ACAMS. ACAMS had a very good year last year. As you remember, in 2024, we made some significant investments, both in terms of talent, in terms of technology, and we can see that in 2025, we can see some early results of those changes. Both the top line were very strong. The margins were strong as well. And we did a refinancing as well of ACAMS at the end of the year. So we secured a longer maturity for the debt and a lower financial interest expenses as well. So across the board, it was a very good year for ACAMS. CPI had a soft year in 2025. We were used to much higher growth rate in the past, plus 2% in terms of sales, plus 2% in terms of EBITDA. It's mainly in the U.S. where we saw some softness. The rest of the portfolio had some good growth. But in the U.S., there was a lot of uncertainty in the federal budget, both for health care and education customers, and that did impact the company growth profile. Regarding Globeducate, you can see that the company has grew nicely in 2025. It's a combination of both on organic growth, the enrollment in terms of students and pricing, but also in terms of M&A, as I mentioned earlier, we did some acquisition in Cyprus, in the U.K. during the year. And so the company is on track to deliver some good growth in 2026 as well. Scalian had a tough year in 2025. It's a tale of 2 stories. We had some good resilience for the large accounts and for the core markets where Scalian is a very strong niche player, namely the aerospace, defense, energy and financial service industries. But at the same time, we did had a lot of softness in our smaller accounts and IT accounts, which did suffer from a market pullback. And so the combination is this minus 5.1% in terms of sales. The company had some fixed cost basis. So the EBITDA reduced by 8.2%. In 2026, we believe we're going to see a stronger growth from those large accounts and in our core markets. We are going to work to have those IT customers to decline at a lower level. So we expect some sort of stability. And we have some strong program to reorganize the business to improve our margins. So we expect to have a different trend in 2026. You can see that Tarkett had a year with some margin improvement, and we were happy to see a plus 4% growth in terms of EBITDA. On Slide 24 and 25, we wanted to quickly show you how the portfolio of Principal Investments is changing if we include the pro forma sale of IHS and Stahl, which are ongoing. So on 24, you can see the -- what we showed you at the Investor Day actualized with December 31, 2025. So this is a slide that you know. But interestingly, on Slide 25, we did the same description of our portfolio, assuming IHS and Scalian are sold and with the newcomer Muno, which is the name of the wet-end business of Stahl that we're going to keep. What you can see is that the industrial part of our portfolio is shrinking down to 5% and the business services part of our portfolio, Scalian and Bureau Veritas is growing in due proportion. So the principal investments, including those 2 asset disposals is down to EUR 3.9 billion in terms of gross asset values and with a more balanced education, training and tech on one side and business services sector exposure on the other side. So we thought it will be an interesting view for you. I'm going to turn the mic now to Benoit Drillaud to present you the financial results of 2025. Benoit Drillaud: Good morning. I'll start the presentation of the P&L with 2 significant profits that are not booked in the P&L. The first one relates to 2 significant events of 2025 in the development of our strategy, the forward sale of Bureau Veritas shares and the block sale of Bureau Veritas shares in September. They have translated in a profit of EUR 980 million booked in the equity, close to EUR 1 billion booked in the equity. And the second profit is the change in fair value of IHS. The share price of this company has doubled over the year and it has been booked in the equity. So EUR 1.2 billion booked directly in the equity in accordance with the applicable accounting principle. If we go through the detail of our P&L, you can see that Monroe has strongly contributed to the asset management platform from EUR 42 million that was 8 months of IK to EUR 127 million, 12 months of IK plus 9 months of Monroe. The contribution from the WPI portfolio is decreasing a little bit with the earnings of Stahl and Scalian. The operating expenses and taxes have decreased by 9%, demonstrating the good cost control. Last year, we benefited from a very exceptional level of income from cash and cash equivalent because the money market rates were close to 4%. And in 2025, they were a little bit above 2%. So this explained the level of the financial income in 2024. In 2025, it's more balanced. So globally, the net income from operations that is the most meaningful aggregate for Wendel is stable at EUR 753 million. Same in group share is lower because of the earnings of Stahl and Scalian and because the percentage of interest in the net income of Bureau Veritas is lower at the beginning of 2024, the percentage of interest was close to 35%. And at the end of 2025, this percentage was 15% with the 2 block sales we made in 2024 and 2025 and the forward sale. The nonrecurring cost mainly come from the portfolio companies with restructuring costs, M&A cost, the cost of the disposal project of Stahl, the carve-out cost of Muno. And last year, we had the very significant capital gain on Constantia. The impact from the acquisition entries have increased because we had the acquisition of IK last year. We had the acquisition of Globeducate of Monroe. So these acquisitions explain why this cost -- this accounting expenses have increased. And concerning the impairment, we have in 2025, the loss that Scalian booked in June. And we also have the reversal of the depreciation we had on Tarkett because the share price went from EUR 14, if I remember well, to the squeeze out price that was EUR 17. So the total net income is EUR 345 million. The net income group share is a loss of EUR 152 million, but if we take into account the 2 significant positive entries in the equity, we have a level of equity group shares that increased from EUR 3.2 billion to EUR 3.5 billion in 2025. If we turn to the following page, the Page 28, you have here the 3 main components of our very strong financial structure. First, liquidity with EUR 2.2 billion of cash and the undrawn credit line. You have, of course, the LTV ratio that is below 10%, well below the S&P ceiling for our current rating. And you have a very long maturity profile of our bonds after we'll have repaid in the next weeks, the exchangeable bonds and the 2026 bonds that are coming to maturity. So I now leave the floor to our CEO, Laurent Mignon, for the conclusion. Laurent Mignon: Thank you, [ Michiels ]. Thank you, Benoit. Thank you, David and Cyril. Just one point to add on that and then I'll make the conclusion. The LTV, the 9.6% include the pro forma of the share buyback that we have announced today. So it's a fully -- it's full. So what can we take away from this presentation? A very strong and tangible execution of what we have announced in December for the Investor Day. We've said at that time that we will do EUR 7 billion of asset sale and cash flow generation cumulated by 2030. We already have made 27% of that through the sale of Stahl and IHS in February this year. We've said that WIM will represent 50% -- more than 50% of the Wendel GAV, excluding cash by 2030. We are already at 38%, including the acquisition, obviously, of Committed Advisors. And we've said that we will return EUR 1.6 billion to shareholders. We're going to return in '26 more than EUR 500 million to our shareholders through the dividend and the share buyback. So I think that we have strong headroom for new investment and continue to move on our strategy, create some value by creating capital appreciation through WPI and create long-term value and recurring cash flow through the development of WIM, where we think we have a good way forward with a 15% potential growth per year, and a good development altogether, and that will be in line exactly with what we said, I think, in December, and that's it. So I think we are all here to answer your question, and I pass over to the moderator or to Olivier in order to decide how to organize the Q&A session. Thank you. Operator: [Operator Instructions] We will now take the first question from the line of Geoffroy Michalet from ODDO BHF. Geoffroy Michalet: I have one question is what is -- what will be your criteria of your, let's say, [indiscernible] before deciding any new investment in WPI or in WIM? What will be the trigger? Laurent Mignon: Well, thank you for the question. Well, first of all, we have a lot of headroom as we mentioned and as evidenced by our LTV. So the criteria, we would say that we will be investing, and I think that was presented during the Investor Day, the equivalent of, let's say, EUR 300 million plus per year in the WPI, and then we will make potentially more -- some investment in the WIM. So we're -- together with the mandate that we've given with IK, so with the IK teams, we're constantly looking to opportunity to invest in WPI. Our objective when we do this type of transaction is to make a transaction that we can generate 12% to 15%, let's say, 15% of targeted return on those investments with a view of investing it at least for 5 years and potentially for more if the asset is great and we want to keep it longer, which is a little bit of our characteristic. So we're reviewing the different thing. My priority in 2026 concerning WIM is to continue building the platform. We've done a lot already, but we are working on building the platform more. And we have, as was, I think, clearly explained by Cyril, we have a lot of internal growth objectives being product, being geography, for example, for Monroe, being a product for IK. And we've got for Monroe also of being the fundraising activity of Committed Advisors that is starting a new fundraising activity has already started a new fundraising activity. So our priority is to do that, create more -- a little bit more of the sales organization, develop that, develop the -- as was said by Cyril, the retail development. So that's really our top priority. However, if we see a good opportunity, we'll look at it. We have the headroom to do it. But my priority is the one I mentioned to you. So on WPI, to make it simple, we constantly look to opportunities and we'll take benefit of the ability of the IT teams to bring us good opportunities to make some investment. And on the other side, we'll first give the priority to internal development. If we see a great opportunity that fill the expertise needs that we have, we'll look at it. Operator: [Operator Instructions] We will now take the next question from the line of Alexandre Gerard from CIC CIB. Alexandre Gérard: I have 3 questions. So the first one is related to ACAMS and CPI. I just wanted to know to what extent AI might be a threat for the business model of these 2 companies. So that's my first question. Second question, it's a question related to the Scalian and the valuation of Scalian in your latest NAV. There are similar top-notch listed assets trading on 5 or 4x -- 4x EBITDA and Scalian is also very leveraged. So I just wanted to know to what extent you've been very conservative on the valuation of that asset. And the last question is related to private credit, of course, regarding the current bad buzz around that asset class. How can you be so confident that the bad buzz will not have any short-term impact on fundraisings or withdrawals? Laurent Mignon: Well, thank you for the 3 questions. I will start and Cyril will help me complement the last one. I will take the second one also. And probably, David, you will take the one on ACAMS and CPI. So I mean, those questions are absolutely relevant and crucial question. I'll start with the easiest one because it's the most factual, which is the Scalian valuation. Scalian is, as you can see on page whatever it is, Page 24, Scalian is based on listed peers multiple. So I think the fact that listed peer multiples are trading at lower multiple, we've taken that into account in valuing Scalian. I think that the profit we've been making on -- I mean, the up value in -- we've been making by selling Stahl show you that we have a conservative approach to the valuation. And we take comparable and when the comparable move down, that affects the thing. So Scalian, the value of Scalian since we bought it has had 2 negative impact, the negative impact linked to the EBITDA, which went down and two, obviously, the multiple. So yes, we take that -- we think that there is -- this is a period of the cycle. We think that the future is much brighter. But yes, we are working on the underlying asset, and we're pretty sure that the actions we're taking are the right one in order to valuate in long term. So -- but we are taking not a long-term value. It's listed peers value, if I answer well to that. The second one is private credit. A lot of noise about private credit. By the way, let me remind you something, which I think I said during the Investor Day, but I want to say it again, is credit is not a free lunch. I mean, doing credit means risk and everybody knows about it. You're getting a return for the credit, so you need to have some risk, and it's the next banker that talks to you. So we know that. However, we feel that the way Monroe do it business is a relatively good risk/return reward way to do the credit. They're doing that to lower middle market companies in the U.S., very much linked to the U.S. economy. I don't think they're doing so -- and the way they process, I think I already said that here in this audience about the way they do origination, underwriting and so on is a way to have the most professional approach to private credit. They've been in the market for 20 years. And their performance today are good. We see some element of -- you've got -- sometimes you've got bad news. But overall, the performance of the private credit sales is good because it's a portfolio. It's a very diversified portfolio also. They're doing more than per fund. Cyril, correct me if I'm wrong, but it's more than 100 lines per fund... Cyril Marie: Exactly. Laurent Mignon: That they have. So this is the basic. They have no concentration in sectors. They've got no concentration in lines in -- so they are diversifying, which I think is a very important element of the performance. The only element of concentration that they have is that they are on the lower middle market part of the U.S. industry, which, in fact, reflect the health of the U.S. industry, which is good, in fact. So that's why we are confident. There is bad buzz. So it is true that we see less natural inflows on the retail part because people are reading press and say, well, can we -- but we first see a lot of confidence and gaining new mandates on the institutional part with very sophisticated investors that do understand the business and are very confident in the skills of Monroe and are putting more Monroe to be managed by -- more money to be managed by Monroe. And on the retail side, we think that as long as the performance will be correct, we see less strong inflows, but we still see inflows. So it is -- I think it's -- we have to just go through that period of bad buzz, as you mentioned. And then it goes from bad buzz to specific. And whenever you go to specific, then it's fine. Cyril, do I have to -- do you want to add something to what I said on that? Cyril Marie: No, no, it's, okay to me. Laurent Mignon: I was clear. Okay. AI, and then I will leave the floor to David on that because we've worked a lot. I mean, AI is a big disruption in the market everywhere. Everybody is starting to say how much AI is impacting our business model. And obviously, we have the discussion with all our investment company. This is specifically the case for ACAMS and CPI. You want to say a word, David? David Darmon: Yes. Alexandre, before I answer directly your question on the threats from AI, just a quick word on the opportunities from AI because we do believe we -- there's a lot of upside on specifically on those 2 companies. We are working quite actively, especially on ACAMS to develop a new product, a new AI product, which we believe it could be very valuable to our customers, producing and giving access to the 150,000 pieces of proprietary content that we have in a very attractive way. So we are developing a very strong and attractive product. It's probably going to have an impact on the cost base to produce our content in terms of translation, delivery, organizing the travels for the trainers, for instance, for CPI. So there is still a lot of good positives to come from AI. But back to your question on the threats and how we believe that we have some boots here and to protect those businesses. I would say both of them have -- are regulated businesses and in most places, are mandatory by the regulators, it could be the state for CPI. It could be the financial supervisors for ACAMS. That's not something that you can shift, and if the regulator is asking you to have some CAM certified people or to have people trained by CPI. You can't answer, well, I pay like a Copilot license to my team. This is not going to work for the regulators. Two, the importance of the brand, ACAMS and CPI by far are the leaders in their industry with very, very strong market share and they are the references, and that's a very strong moat. Then each of them have some specific barriers. And ACAMS, remember, this is a certification business and a body which deliver a CAM certification. So that's pretty unique. And ACAMS is really based on assemblies and community, those anti-money laundering specialists. They gather together, obviously, in trade shows, but also in local assemblies that ACAMS organize and that's really unique. And CPI has a different barrier, which is the physical part of the training for roughly half of the sales of CPI. You need to have a physical presence to deliver the training. So there will no way to get understanding on how to restrain an agitated patient or students purely online. You need to have the physical training. So I know it's a long answer, and we're really, as Laurent was saying, putting a lot of efforts to understand the implication and there will be implication. But so far, we believe that the positive are going to be above the negative on those 2 assets. Operator: There are no further questions on the phone at this time. I would like to hand back over to Olivier Allot for webcast questions. Olivier Allot: We have 2 questions about shareholder return. Will the shares repurchased through the share buyback be canceled? Laurent Mignon: For the time being, we've said that we will allocate those shares to potentially pay the potential further paid of the puts and calls that we have in IK or be in front of the long-term incentive plan that is regularly given to the management, but it can be canceled. It's not a decision taken for the time being. We just announced before we do that late December that we've canceled how much -- how many shares did we cancel in late December, Benoit, I think 3.5%, 4% of the company. Benoit Drillaud: Yes. Laurent Mignon: 4%? Benoit Drillaud: Yes. Laurent Mignon: So we'll review. We do the share buyback, we see and then we'll make cancellation of shares whenever we need in order to give us more headroom to do share buybacks. Olivier Allot: Thank you. A question about the dividend. Just for the sake of clarity, should we expect EUR 3.6 of dividend to be paid in May and EUR 2.55 of interim dividend in November? Laurent Mignon: Well, this -- the EUR 3.6, everything will be related to the approval by the shareholder meeting, which is in May. I don't expect to have non approval. But should it agree with the EUR 5.1 dividend that we have announced that we're proposing, out of the EUR 5.1, EUR 1.5 has been paid. So the remaining EUR 3.6 will be paid then just after the AGM. And as I announced, we will pay 50% as an account interim dividend we will pay in November 50% of the dividend of 2025, which is EUR 5.1, which effectively make EUR 2.55, which then will be in payment somewhere in November. So the answer is -- long answer to say yes. Olivier Allot: Question about WPI. For how long time, do you expect to keep your shares in Bureau Veritas and the other larger unlisted assets? Laurent Mignon: Well, thank you. The question is when we invest in companies is because we want to create some value, and once we feel that our -- I mean, we have created the value we wanted and that we have to pass the company needs other means to do it, we pass it. So that's what happened for Stahl, for example. We've been Stahl for many years. So if I take the other unlisted assets, the -- as I mentioned, we always have an objective at 5 years. And after 5 years, we reassess the position to know whether we want to keep it or we want to sell it depending on what we see as a perspective. Bureau Veritas is a bit of a -- so it's really what we will do for the same for Scalian, for CPI, for ACAMS, for Globeducate or for Tarkett. The situation is for Bureau Veritas. We've been a shareholder for now 30 years. We've listed the company. Now the company is listed, and we have sold some of our shares during the last 2 or 3 years -- the last 3 years based on the fact that the exposure that we had not based on the fact that we didn't like the value creation potential of Bureau Veritas but the fact that the size of the concentration of Bureau Veritas was too high compared to their own portfolio and that we need to rebalance and use that to develop our new strategy, which is to develop the asset management strategy. Today, we've done more or so. So the question is only to know do we -- are we confident or not in the perspective of Bureau Veritas. And we are confident. So for time being, we are a happy shareholder of Bureau Veritas. And we will only reduce our shares into it. Whenever we feel that the value we have in mind is achieved. But for the same being, we think that the LEAP28 plan has a strong tailwind and that the team is doing a great job and that we can create more value with Bureau Veritas than the current share price today. Olivier Allot: A technical question about Stahl consolidation. Was it 100% consolidated into Wendel's account in 2025? Can you share the 2025 sales EBITDA and usual information you publish about the company? And can you do the same about Muno? Laurent Mignon: I think it's -- Benoit, you will confirm, we are on IFRS 5 now, So it's a discontinued activities? Benoit Drillaud: Yes. So it's consolidated, but classified under a specific account, but it's consolidated. Olivier Allot: What is Monroe exposure to software investment? Have you seen any drop off in flows into private credit focused wealth product, which has been quite clearly among the scaled U.S. players? Laurent Mignon: Well, I can leave Cyril to say that. I think I already answered partially to that. But Cyril, if you want to take that? Cyril Marie: No, no. Yes, for sure. Monroe is exposed to the software industry. If you look at -- it depends on the strategies and the various vehicles. But keep in mind that what they do, it's -- they do -- they are focused on the lower mid-market. So their companies are between EUR 20 million and EUR 50 million maximum of EBITDA. So most of their exposure to the digitalization of the U.S. economy is tied to businesses close to the firm to support the digitalization of the industry, the health segment. So for sure, as David said, in AI, you have challenges and opportunities, but we do believe that Monroe is very well positioned to go through that. And there is a risk and opportunities and the team, the underwriting team is really focused on that. They are always reassessing their exposure to software in order to be sure that they monitor their exposure. And the second question regarding the inflows, as I said, there was some reduction of the inflows on the BDCs, MCIP, the main one, but it's still -- we are still seeing inflows. And we do believe that over the long term, the allocation of private market for retirees and the 401(k), et cetera, will increase. For sure, it's a bumpy road because there was some noise now. But over the long term, we do believe that the potential is there in Europe and in the U.S. Laurent Mignon: But to rephrase what Cyril said, they don't have a specific tweaks to software and so on. So they have software, not more or less globally the market. Am I right saying so, Cyril? Cyril Marie: Yes, yes, for sure. Yes. Laurent Mignon: Yes. Just to be clear on that. Olivier Allot: We have a question about the execution of the share buyback. How the share buyback program will be executed, is there a certain percentage of traded volume that will be bought every day on the market? Or will it be more opportunistic? Laurent Mignon: I think -- I don't know what I can say. We will give a mandate to a bank that will execute that. And I think they will have -- they will execute that on a daily basis based on the mandate. So once we've given the mandate, it's not us doing it. They have a time frame, which is the end of the year. They have the amount, and they will execute that by respecting the rules of the AMF and whatever are the rules to be respected. So that's how it will be done. So it's -- am I saying it the right way, Benoit? Benoit Drillaud: Absolutely. Laurent Mignon: Good. Good. But basically, it's an everyday business. It's not like buying one day and be off the market. It's -- they have -- but again, we will not be interfering into that. We've given a mandate to buy that to a bank, and that will be executed by the bank following the rules as a mandate from us. The mandate will be starting tomorrow morning. Olivier Allot: A question about the discount to NAV. How do you explain the wide discount on the NAV? Is there any specific reaction to Wendel management and track record? Laurent Mignon: Sorry, I don't understand. Is there any -- you mean -- do we do well our job? I don't know. We're trying to change the company, make it evolve. I think there are severe discount to NAV to any other investment capital heavy firms that is publishing an NAV. Is the NAV the right way to look at us? Probably not because we are becoming more and more an asset management company. So we have to think about whether this is the right way to think about us because now the asset management is representing 38% of our total business, and it's not here up to sell. So it's a different approach. It's a long-term business and should be valued on the flows. So we have to think about the way we do it. Now -- each time I see somebody, he gives me a different reason from the discount to NAV, too much concentration on one stock, then it's too much listed assets, then it's too much nonlisted assets. So the other one is the value of listed, nonlisted assets is unclear, so people make discounts. So the others -- again, what we are trying is not to focus on that. We focus on long term. We focus on value creation. We want to demonstrate that we will create value through the WPI strategy and for sure that we are creating a lot of value by the WIM strategy. The growth will be there, return will be there. Return to shareholders through dividend will be there, again, and through share buyback. So we've been very clear about where we want to go during the Investor Day, and we'll execute on what we say. And I think that the first 1.5 months of this year '26 show that when we say we will execute is that we are doing it. Olivier Allot: No more question on the web, but we turn back to question by phone. Operator, please? Operator: We have 1 more question on the line from Alexandre Gerard from CIC CIB. Alexandre Gérard: Yes, 2 follow-up questions, please. The first one on Tarkett. I mean, can you remind us what are your liquidity options on that investment? Could you trigger any put option? Or are you stuck with that stake for the long term. Second question also, it's on the FX impact on your NAV year-on-year. What was -- can you remind us what was the negative impact linked to the depreciation of the USD on your NAV? Laurent Mignon: So I'll leave that last one to Benoit. I think the impact of dollar because it's a dollar depreciation was quite [ null ] on the fourth quarter, but the full year, Benoit will give you the answer. For Tarkett, well, we are a minority investor in Tarkett alongside a family. So we're working with the family on improving the company making better developing the sports business in the U.S. -- well, not only in the U.S., but globally, improving the metrics of the company in terms of efficiency and a lot of work has been done in 2025. So we feel that Tarkett and the company and the family together with us is doing a good job. We have -- it is clear for them that we are here for -- to be on their side and to help them developing the thing and that one day we will need to find an exit, there is a clear agreement with them. I don't have to comment the legal environment to that, but I'm pretty sure that everybody, once we finalize the value creation plan that is ongoing and ongoing, we will be in a position to exit our participation in good conditions. Benoit, you have... Benoit Drillaud: Yes. The depreciation of the dollar resulted in a decrease of EUR 6.9 per share between the end of 2024 and the end of 2025, EUR 6.9. Operator: There are no further questions at this time. I would like to hand back over to the speakers for closing remarks. Laurent Mignon: Well, no, thank you very much. Not much in fact, in this. Most of what we're saying was already there. But the point I want to really stress is that we are on the move, and we're doing what we -- we are saying what we do and we're doing what we say. That's very important. And we have a lot of further things to do in '26. We're very optimistic about creating value there. And thank you for being with us today, and we'll meet you soon. David Darmon: Thank you, everyone. Laurent Mignon: Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, and thank you for standing by. Welcome to Soleno Therapeutics Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call and Webcast. [Operator Instructions] As a reminder, today's webcast is being recorded. I would now like to introduce Brian Ritchie of LifeSci Advisors. Please go ahead. Brian Ritchie: Thank you. Good afternoon, everyone, and thank you for joining us to discuss Soleno Therapeutics' Fourth Quarter and Full Year 2025 financial and operating results. Please note we'll be making certain forward-looking statements today. We refer you to Soleno's SEC filings for a discussion of the risks that may cause actual results to differ from the forward-looking statements. On the call with me today for Soleno are Anish Bhatnagar, Soleno's Chairman and Chief Executive Officer; Meredith Manning, Soleno's Chief Commercial Officer; and Jim MacKaness, Soleno's Chief Financial Officer. With that, I will now turn the call over to Anish. Anish Bhatnagar: Thank you, Brian, and thank you, everyone, for joining us for our fourth quarter and year-end results call this afternoon. As has been our practice, following my brief opening remarks, Meredith will review the company's commercialization progress to date, and Jim will cover the company's financial statements for the fourth quarter and for the year. Then I will spend a few minutes outlining our thoughts and plans on expanding beyond Prader-Willi Syndrome, after which we will open the call for questions. We finished 2025 on a very strong note, driven by a continuation of many of the positive trends that we have seen since VYKAT XR was commercially launched in the second quarter of last year. Consistent with our preannouncement press release from January 12, total net revenue for the fourth quarter was $91.7 million, which brings our total net revenue for the full year, which was less than 9 months of sales to $190.4 million. We achieved profitability with positive net income for the year of $20.9 million, became cash flow positive including generating $48.7 million of cash from operating activities in the fourth quarter and ended the year with over $500 million of cash, cash equivalents and marketable securities. All of these are outstanding results. This has been an incredibly successful launch made possible by the entire team at Soleno who come to work each to help fulfill our mission of improving the lives of people with serious rare diseases. We are very pleased to see such durable and exciting growth 9 months post launch. Looking ahead, our leading indicators are strong. Since launch through December 31, 2025, we received 1,250 patient start forms, which represents approximately 12.5% of the U.S. VYKAT XR addressable market. And as of December 31, there were 859 people on active treatment. We believe we can sustain our current momentum and capture an additional approximately 1,000 start forms over the next 9 to 12 months. This bodes well not only for the thousands of people with PWS and their caregivers who struggle with the significant daily burden of hyperphagia, but also for our company, which is poised to generate significant long-term value. Importantly, the real-world safety profile of VYKAT XR continues to mirror our expectations and the clinical long-term safety profile of the drug. This is significant when you reflect on the complexity of PWS and also serious comorbidities of the very vulnerable and fragile patient population. The cumulative launch to date discontinuation rate of VYKAT XR related to adverse events was approximately 12% as of the end of the fourth quarter and the total discontinuation rate was about 15%. As stated earlier, we expect a long-term discontinuation rate of 15% to 20%. We are now seeing more and more success stories emerge as individuals with PWS related to hyperphagia have been on therapy for multiple months, and we are seeing interest spread across all stakeholders, particularly among caregivers we endure a very significant burden in caring for someone with PWS who exhibits hyperphagia. We believe this dynamic will build as we progress through 2026. I would now like to provide a brief update on our activities and support of potential approval of DCCR in the EU. Last May, we announced the submission and EMA validation of our marketing authorization application. We subsequently received Day 120 questions, and all responses were submitted before the end of the year. As we've indicated before, the nature of the key questions centered around the adequacy of the data to improve efficacy based primarily on our randomized withdrawal study. The next step is for us to receive Day 180 questions from the EMA around the end of February. We continue to anticipate a decision in the midyear 2026 time frame, and we are considering a range of commercialization options in the EU and have continued to develop our own team and capabilities on the ground. It is a significant market opportunity. We have said previously that we believe that there are about 9,500 people living with PWS in the U.K. and EU. Further, perhaps more [indiscernible] in the U.S., it is a concentrated market driven by centers of excellence, and there is strong thought leader support for VYKAT XR. We look forward to keeping you apprised of our progress over the next few months as we approach the regulatory decision and potential commercial launch. Now I'd like to turn the call over to Meredith for a detailed commercial update. Meredith? Meredith Manning: Thank you, Anish, and good afternoon, everyone. As Anish mentioned, 2025 was an important year for the PWS community and Soleno as we brought to market the first FDA-approved medicine for the treatment of hyperphagia in adults and children 4 years of age and older living with Prader-Willi Syndrome. We are encouraged that 1,250 new patient start forms were submitted for VYKAT XR from launch on March 26 through year-end, which included 207 in the fourth quarter. This represents approximately 12.5% of the total U.S. VYKAT XR addressable market. At the end of the fourth quarter, 859 individuals were being actively treated with VYKAT XR, up from 764 at the end of Q3, indicating that VYKAT XR is being adopted into clinical practice and reflecting our ability to convert start forms into treated patients. On the prescriber side, our efforts to raise awareness of VYKAT XR's availability and clinical profile have driven strong engagement. In Q4, we added 136 new prescribers, bringing the total unique prescribers to 630 as of December 31. We continue to hear that VYKAT XR delivers meaningful clinical benefits and physicians plan to proactively discuss the first-to-market therapy with caregivers and patients as they consider treatment options. Our field teams are not only educating but also activating the prescriber base by providing comprehensive support on therapeutic expectations, monitoring and dose modification where necessary. These are critical elements that give physicians the confidence to initiate and maintain patients on VYKAT XR and to integrate our medicine into routine clinical practice. A few things stand out when we look at who is being treated and who is prescribing. While most patients are between 4 and 26 years of age, we are also seeing meaningful utilization in adults particularly those 27 to 45 years old. This speaks to VYKAT's relevance across the PWS population. Side effects reported in the real-world study have been consistent with those observed in our clinical trials and with the FDA-approved label. And as patients settle into their optimal target dose, adherence has remained high, with a launch-to-date discontinuation rate related to adverse events of approximately 12% at the end of the quarter. We are also leaning into a real-world experience to support demand. We are systematically capturing success stories with VYKAT XR to highlight its impact on hyperphagia and to support more proactive treatment discussions. Through community outreach, including patient webinars and live events, where families hear directly from others treated with VYKAT XR, we are sustaining strong interest and supporting ongoing launch momentum. Our January patient webinar attracted over 200 registrants, nearly 60 more than our November event, underscoring growing interest in VYKAT XR. We are also collecting feedback from families who have attended these programs. And while still early, we have already heard of families who after attending these events have proactively asked their physicians about VYKAT XR, encouraging signals that our education efforts are helping to drive appropriate demand and convert interest into active treatment. Looking ahead to 2026, our priority is to deepen experience and adoption across leading academic and endocrine centers, specifically among PWS experts who shape practice patterns, while further broadening the prescriber base in the community where many people with PWS are treated. We are seeing growing confidence among these key experts in utilizing VYKAT XR, and we have made important strides in creating champions among both HCPs and PWS families, which we believe will continue to support wider uptake over time and advance our goal of making VYKAT XR the standard of care for appropriate patients with PWS-related hyperphagia. We continue to secure broad coverage for VYKAT XR across all channels: commercial, Medicaid and Medicare, resulting in policies that covered over 180 million lives at the end of the fourth quarter. Additionally, we have strong coverage of reimbursed claims from approximately 45 state Medicaid programs through Q4. Payers continue to recognize the seriousness of PWS, understand the true unmet need in treating hyperphagia and appreciate the meaningful value VYKAT XR can deliver. And we are seeing this clearly play out in the reauthorization process. As a reminder, payers typically require reauthorization every 6 to 12 months for rare disease medicines. And we are pleased to see the overwhelming majority of claims for patients have been quickly processed and continued on paid products. In summary, we believe 2025 has established a solid foundation with patients, prescribers and payers for VYKAT XR. Looking ahead, we are committed to deepening adoption and expanding our prescriber base in both the KOLs and community settings, while keeping families and individuals with PWS experiencing hyperphagia at the forefront as we realize the full potential of the first approved treatment for this condition. I will now turn the call over to Jim for a review of the company's financial statement for the fourth quarter. James MacKaness: Thanks, Meredith. Total net revenue for the fourth quarter ended December 31, 2025 was $91.7 million, representing sequential growth of nearly 40% from $66 million in Q3. For the full year 2025, which, as a reminder, represents less than 9 months of commercial availability, total net revenue was $190.4 million. VYKAT XR was approved in March of this year, and therefore, the company generated no revenue for the 3 or 12 months ended December 31, 2024. We generated $48.7 million of cash from operating activities for the fourth quarter and achieved profitability with positive net income of $20.9 million for the full year 2025. At the end of the year, we had $506.1 million of cash, cash equivalents and marketable securities. Please note, this is after our investment of $100 million in the accelerated share repurchase program that we announced in November. Our strong balance sheet ensures that we are sufficiently capitalized to continue to execute an effective U.S. launch of VYKAT XR while in parallel progressing towards regulatory approvals and commercialization either on a stand-alone basis or with partners in the EU and other geographies and to begin investments in possible new indications. Cost of goods sold was $0.9 million for the fourth quarter and $2.7 million for the full year. As a reminder, prior to FDA approval, costs associated with manufacturing VYKAT XR were expensed as research and development expenses. As such, a portion of the cost of goods sold during these periods included inventory at 0 cost. Going forward, as we continue to sell VYKAT XR, we will deplete our 0 cost inventory and replenish it with at-cost inventory consequently, cost of goods sold as a percentage of revenue will increase. Research and development expense for the fourth quarter was $9.6 million, which included $2.8 million of noncash stock-based compensation compared to $21.5 million, which includes $10.1 million of noncash stock-based compensation for the same period of 2024. The cadence of our research and development expenditures fluctuates depending upon the state of our research activities, clinical programs and the timing of manufacturing and other projects necessary to support submission of regulatory filings. For the full year 2025, research and development expenses were $40.6 million as compared to $78.6 million for the full year 2024. Selling, general and administrative expense for the fourth quarter ended December 31, 2025 was $40.9 million, which includes $8.7 million of noncash stock-based compensation compared to $37.3 million, which includes $19.7 million of noncash stock-based compensation for the same period of 2024. The increase in expense after removing stock-based compensation reflects our ongoing investment in additional personnel and new programs to support the VYKAT XR commercial launch and in support of our increased business activities. For the full year 2025, SG&A expense were $132.1 million as compared to $105.9 million for the full year 2024. Total other income net was $3.8 million for the 3 months ended December 31, 2025 compared to total other income net of $3.1 million in the same period of 2024. For the full year 2025, total other income net was $11.5 million as compared to $11.8 million for the full year 2024. Net income for the fourth quarter was approximately $43.4 million or $0.82 per basic and $0.80 per diluted share compared to a net loss of $56.0 million or $1.27 per basic and diluted share for the same period in 2024. For the full year 2025, net income was $20.9 million or $0.40 per basic and $0.39 per diluted share as compared to a net loss of $175.9 million or $4.38 per basic and diluted share for 2024. Please note, with regards to KPIs, we intend to share patient start forms, a number of unique prescribers and lives covered in our Q1 2026 earnings call, which will mark 12 months of results. And our intention is to retire these metrics at that time. And this concludes the financial overview. But on a personal note, I would like to let everyone know that I am retiring at the end of March. It has been my great pleasure to work with Anish and the team over the last 6 years. It's been a fantastic journey. We've accomplished so much, and I feel the company is in an excellent position to ensure future success. We have an outstanding replacement, [ Jennifer Volk ] who will take over as CFO in the coming weeks and I will move into a consulting role to ensure a smooth transition. And now I'll turn the call back over to Anish for additional thoughts, Anish. Anish Bhatnagar: Thank you, Jim, for the incredible work over the last 6 years to get us to where we are today. With the launch of VYKAT XR well underway, we turn our attention to what's next for the company and to begin with what's next for DCCR. We continue to pursue additional metabolic rare disease indications with high unmet need where the probability of success is high and the mechanism of action directly applies. The first of these indications is glycogen storage disease type 1 or GSD 1, which is a rare metabolic condition characterized by the accumulation of fat in the liver and kidney, resulting in extremely low levels of blood glucose. It impacts approximately 1 in every 100,000 live births, resulting in a prevalence of greater than 7,000 patients globally and approximately 3,000 to 4,000 of the patients residing in the U.S. There are currently no FDA-approved therapies. GSD 1 represents a natural and logical extension of our VYKAT XR franchise beyond PWS. The predominant physician call point for GSD 1, namely pediatric endocrinologists is the same for PWS. The mechanism of action of VYKAT XR uniquely addresses the severe clinical manifestations of GSD 1. People affected by GSD 1 lack the ability to convert stored glycogen into glucose and live at the constant risk of life-threatening hypoglycemia. They are dependent upon external sources of glucose, in this case, daily consumption of cornstarch multiple times a day in order to survive. However, the precise timing of cornstarch consumption is critical, especially during periods of fastening between meals and during the night, as missed doses can lead to potentially fatal hypoglycemia. In addition, long-term use of cornstarch can lead to severe GI issues, metabolic dysfunction and very poor quality of life. VYKAT XR's ability to innovate insulin secretion with its fast onset and repeatable and tailored dosing could maintain proper levels of glucose throughout the day and night and reduce the person's dependency on cornstarch. DCCR has orphan designation for GSD 1 in the U.S. as well as in the EU. Our plan is to file an IND in the first half of this year and to initiate a clinical program later in 2026. More details will be provided during the year as we approach the start of the trial. We look forward to sharing future updates on these programs as they merge. In closing, we are very pleased with the success and trajectory of VYKAT XR and we will continue to work tirelessly to make the safe and effective therapy available to as many patients living with PWS-related hyperphagia as possible. We're excited about expanding into new indications, leveraging our existing knowledge and skills. And with that, we'll now open the call for your questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Paul Choi from Goldman Sachs. Khalil Fenina: This is Khalil calling in for Paul. Congrats on the quarter. I suppose I just wanted to start a quick one with us on the 1,000 patient start forms that you guided for the next 9 to 12 months. Can you remind us what the cadence of that is expected to look like? Is there going to be a bolus at the start of the year? Is it going to be -- is that going to be late in the year due to the adjustment -- seasonal adjustment in 1Q. Just help us understand the cadence there. Anish Bhatnagar: Thanks for the question, Kai. I think it's fair to say that we want you to think of this as over the 9 to 12 months, not necessarily on a quarter-to-quarter basis. So it's hard to think of a bolus at this time. I think it's fair to say that the start forms will come in over the year. I'll let Meredith address it further in terms of how she thinks the cadence is likely to be. Meredith Manning: Yes. Thank you, Anish. I agree with Anish, that obviously, we're looking at 1,000 over the next 9 to 12 months. That's our goal in order to continue the sustained momentum of the very strong launch. And as I mentioned in the script, we're really doubling down on broadening our experience with KOLs, getting out into the community setting and also activating the caregiver population. Khalil Fenina: Got it. And Jim, congrats on your retirement. We're sorry to see you go. James MacKaness: Thank you very much. Appreciate it. Operator: Your next question comes from the line of Moritz Reiterer from Guggenheim Securities. Moritz Reiterer: This is Moritz for Debjit. I got first a question on PWS. At peak, what percent of the market do you think could be accessible in the U.S. at this point? And then the second one about GSD 1. What do you think about dosing in GSD 1? Do you think the dose will be similar or lower? And how do you think tolerability of the drug would impact adoption in that disease? Anish Bhatnagar: Sure. So your first question was about what is the likely peak penetration in PWS. It's a good question. And I think you have to put it in the context of the fact that no other treatments exist today. So many of these treatments, you look at 40%, 50% penetration in these larger rare diseases. But I think if we are 3, 4 years out and the competitive landscape looks like the way it does today, I don't think it's unreasonable to expect a higher penetration than that. In terms of GSD, your question around dosing, we have to -- so part of our first trial is going to be looking at dosing in these patients. We do know that it's a pretty sensitive -- insulin is pretty sensitive to diazoxide. So we expect the dosing to be likely in the range of where we are today. It is important to know though that even though the unmet need is really great here, it's really about the precise dosing to increase blood glucose levels enough. And these patients don't have the sort of comorbidities that you see in PWS patients. So they're unlikely to be significantly obese, they're unlikely to be significantly diabetic, et cetera. So I think there will be more room to dose in that patient population, but that remains to be seen [indiscernible] the subject of the first trial. Operator: Your next question comes from the line of Yasmeen Rahimi from Piper Sandler. Unknown Analyst: This is Shannon on for Yas. Congrats on the progress, guys, and thank you so much for taking our question. Just two from us. Could you help us understand a little bit more about the refill rates that you're seeing now that you have a larger proportion of patients who've been on the drug for several months? And then the second question is, how do you expect the average weight of new patients coming in to change over time? If you're seeing more older patients, do you expect the average rate to increase? Anish Bhatnagar: Sure. Shannon, I'll take the second question, Meredith will take the first one. In terms of the weight over time, as you know, our clinical trial average weight was 61 kilograms. The age was about 13 years. What we have said more recently is that the predominant number of patients coming in are in the 4- to 26-year age group and in general, likely heavier than what we are seeing in the clinical trial population. So the average WACC for a clinical trial patient would be about 488. We have said publicly that we're looking at averages in the higher than 500 range. We are also seeing more older patients coming on at this time, and we expect that over time, therefore, the total weight will be going up as well. So again, these are not likely to be large step-wise inflections, but think of it more as sort of gentle increases over time. Meredith do you want to talk about refill rates realizing that it's early, and we don't really have that much data. Meredith Manning: Yes. Thank you. And similar to what I said in my prepared remarks, if you look at as the patients are settling into their optimal dose, we're very pleased with the high adherence rates and seeing that we are 9 months in at the end of Q4, we're seeing patients who are able to stay on therapy and reach a longer time frame. So we're very pleased with the refill rates. Operator: Your next question comes from the line of Kristen Kluska from Cantor. Kristen Kluska: Congrats, Jim. It's been an absolute pleasure working with you and always wishing you the best. So you talked about longer term maybe factoring in a 15% to 20% discontinuation rate, I'm wondering how you're thinking how efficacy will ultimately play into this? At what point in the launch do you think you'll have a good sense of percent of patients that are dropping out due to lack of efficacy. And then I'm curious, as you are collecting some of these real-world anecdotes, if the efficacy looks similar or different amongst patients, meaning are there some that are responding to hyperphagia? Are there some that are responding on behavior? And what's really the factor that will keep somebody on the therapy longer term from an efficacy standpoint? Anish Bhatnagar: Thanks, Kristen. I think it's fair to say that when you look at our experience in the clinical trial, which as you know, lasted for many years, if you stay on therapy, you are likely to see benefits. And as you can imagine, you're unlikely to stay on therapy if you have significant adverse events. So what we have seen to date is that patients who have stayed on drug for some time are seeing efficacy. I think it's fair to say that discontinuations for lack of efficacy are few at this time. And I would not expect that to change too much because if you stay on drug, we expect you to have some levels of efficacy. Kristen Kluska: Okay. And then just on what that efficacy actually is in the real world? Is it looking different in patients, meaning are some responding to hyperphagia or some responding to behavior? Or is it like a mix? Anish Bhatnagar: Yes, it's a good question. And as you know, we don't have the same precise gauge on efficacy in the real world as we do in the clinical trial. So we're not doing efficacy analyses per se. But the anecdotes that we're hearing certainly primarily relate to changes in hyperphagia and the downstream effects of it. So as you know, hyperphagia itself gets mixed up with anxiety related to food, behaviors, aggressive behaviors around food. So as long as we are targeting something around hyperphagia, we think that is the primary effect. I think the other effects will -- time will tell. It's hard for us to measure those even in the trials. But we do hear anecdotes that talk about being more calm, having better social interactions, having less anxiety and things like that. So yes, there is an element of that as well. Operator: Your next question comes from the line of Tyler Van Buren from TD Cowen. Tyler Van Buren: I'll add my congratulations to you, Jim, on your retirement and the success you've experienced at Soleno. You'll be missed. Wanted to just follow up on the 1,000 start forms over the next 9 to 12 months that you guys reiterated, which is, of course, encouraging. And earlier, you spoke about the cadence in response to the question. But wanted to maybe hear you elaborate specifically on what has been observed so far during January and February in the New Year with the launch? And then as a follow-up, are you expecting any meaningful level of Q1 seasonality? Anish Bhatnagar: So Tyler, as you know, we were not able to comment on Q1, but we can tell you that it is interesting to launch a drug into a completely new indication, and we are learning as we go. Thanksgiving, Christmas was interesting. It was interesting to see some of the summer camp related things that happen, people going away to camp. So we'll have to see what the cadence is like. I'm going to let Meredith answer the rest of the question. Meredith Manning: Yes. Thanks, Anish. And I concur 100% with you that it is interesting to launch. This is the first ever FDA-approved medicine for the treatment of hyperphagia and so we're learning a lot around some of the aspects in the home or the family or what will bring them into the office to get seen by the practitioner. Also, I think I've mentioned several times on our last earnings calls that we also are looking at some of the physicians who are increasingly more interested and excited to treat PWS, because there actually is a treatment for hyperphagia now. And so they're opening up clinical practices or PWS-specific clinics. So we're hoping to see some of the availability of clinicians, improving as we go forward and really strengthening the care that's being delivered out there. So it's exciting. We'll hopefully be able to provide you more details as we go along, but strong interest out there. Anish Bhatnagar: I will say that on the seasonality front, Jim, would you like to add something? James MacKaness: Sure. Tyler, thank you for the good wishes. Yes, I'd never like to miss an opportunity on the revenue side of Q1 to point out seasonality that impacts all commercial drugs. And it shows up in the gross to net. So Tyler, as you're aware, but just to communicate again, what tends to happen with folks on, particularly on commercial plans is they'll reset their co-pays. So that means that's more out-of-pocket that they would incur except that we offer Soleno ONE, and we will effectively reimburse them for those co-pays. So that increases the discount, if you like, on the gross to net. And then the other phenomenon that can happen is in the disruption of changing plans, your employer might change plans, you may choose a different plan. There's an opportunity where you may move from what we would call our paid bucket of active patients into the free bucket of active patients. So maybe you'll receive 4 to 6 weeks of free drug before you move back to paid. It's a seasonality. It doesn't change the underlying growth in active patients, but it's just something that does impact the revenue because it will impact the gross to net discount for Q1. And we'll obviously be able to give you better color once we get through Q1, and we'll be able to cite it at that stage. Operator: Your next question comes from the line of Leland Gershell from Oppenheimer. Leland Gershell: Thanks for this update. And Jim, just wanted to add my sentiments as well. Wish you all the best as you move on. I wanted to ask at the time of approval, as you were entering the initial launch, I guess, this is a question directed at Meredith. You had said, I think, that you'd identified that there are about 300 physicians who were direct treaters of about 20% of PWS patients and who also influence the care of another 20%. And I think there were about 80% of pediatric endocrinologists who had expressed willingness to prescribe VYKAT XR. Just wondering if you could provide us a picture of where that landscape is today with respect to physicians uptake of VYKAT in their practices? Meredith Manning: Yes. Thank you very much for the question. I appreciate that. The phenomena is still there. As we look at the top 300, we think that's the best way to focus on the market and target where we can have deeper penetration. We are seeing strong uptake among the top 300, and the majority of them have more than one patient, so they're repeat writers, which is very exciting to see. And we're continuing to see that those individuals are influencing the treatment patterns across the country. I've mentioned before that we have peer-to-peer programs, so we're doubling down on that. We also have an expert on demand, where many community physicians can reach out to those top practitioners and get guidance on patient selection and what to look for with regard to setting expectations on efficacy and dosing and monitoring, et cetera. So that's been very exciting. And then as we look at moving forward on focusing in on the caregiver aspect, as I mentioned, we're doubling down on webinars and live events and hoping to see that, that will drive caregivers to come in and ask for VYKAT XR. Leland Gershell: That's very helpful. And then just kind of a higher-level question on company's philosophy going forward in terms of the expansion maybe with through business development and the like, you obviously have a continuing and growing stream of cash coming in. It may cost you some to commercialize elsewhere and also advance your next program. But it seems like you'll have firepower to do beyond that. Just wondering if you could give us initial thoughts as Soleno continues to evolve and develop its footprint. Anish Bhatnagar: Yes. Thanks, Leland. I think the most important thing remains successful commercialization of VYKAT. And I think it starts with the U.S., but the next step is outside the U.S., EU, other geographies, et cetera. And then the next thing is, I'd say, the lower-hanging fruit of using VYKAT itself or other things, which are high likelihood of success, situations like GSD1. So those are our primary targets. And we obviously continue to look at things on the outside. I don't expect imminent activity on that front, but we certainly will in the longer term, look at doing that, too. Operator: Your next question comes from the line of Brian Skorney from Barnett. Brian Skorney: Jim, congrats on the retirement as well. Sorry to see you go. You have six patents listed in the Orange Book for VYKAT with the four longest duration ones going out to 2035. I think when you got approval last year, we talked a little bit in vagaries about the label creating some opportunity for even longer dated IP. So just wondering if you could give us your current thoughts on exclusivity of VYKAT based on where you are across patent prosecution. And just real quick on COGS. I just wanted to get guidance of what we're seeing is product that was already expensed through R&D and if there will be sort of a true-up this year in terms of the gross margin? Anish Bhatnagar: Sure. Let me take the first part, and Jim can take the second part of it. So on the exclusivity front, you're right, when we got approved, we had talked about the possibility of extension of IP beyond where we are today. And I think what you saw with the listing of the 2035 patent is a step in that direction. So it's a patent that's specific to methods of treating hyperphagia and food-related behaviors. That particular family, the related patents have the ability to be extended into the late 2030s. We have also stated that we have filed additional IP, although we have not discussed the details of that. So stay tuned on that. So yes, that's the plan on exclusivity. Jim? James MacKaness: Yes. So Brian, to your point -- and thanks for your wishes. To your specific point, we still do have a little bit of, if you like, the zero cost inventory flowing through. So inventory that was in the supply chain prior to approval. So anticipate that COGS will just generally nudge up. They should stay in mid-single digits. So they'll just nudge up as we get full cost through the supply chain. Operator: Your next question comes from the line of James Condulis from Stifel. Unknown Analyst: It's Mark on for James. Yes, I guess, as it relates to the EU side of things, I think it's interesting, we've now seen SKYCLARYS get approval and trofinetide trending in the negative direction with the vote. I guess in the context of that, how are you thinking about these as potential analogues and EMA's overall comfort with perhaps maybe imperfect clinical data in the rare disease space and just kind of your overall broader comfort with the EU approval? And then the second question also on EU is when do you think you'll kind of have the 180-day questions in hand for the filing? Anish Bhatnagar: Yes. On the EU approval, you're right. I think it's fair to say that decisions on the rare disease side go in one direction or the other. And we've seen other examples. Translarna is another example, which was approved in Europe for a long time, did not see an approval here. So these things are always custom rare disease data sets are never perfect. So we have to just play out the process and see. So we have day 120 questions. We responded to day 120 questions in a timely manner. Expecting the day 120 questions by the end of this month, so imminently. And we'll see what they say. So I think as we have said in the past, the nature of the key questions were around the proof-of-efficacy using randomized withdrawal as the key trial, the fact that the same patients were in the early as well as the late part of the study, and does that create potential for bias, et cetera. So clearly, these are questions that the FDA asked us as well, and we were able to prevail. So we will attempt to do the same here. Hard to predict the outcome, though. In terms of timing of the 180 day, I would say imminently, I think they're supposed to be February '26. Operator: Next question comes from the line of Katherine Dellorusso from LifeSci Capital. Katherine Kaiser-Dellorusso: Congrats on the strong quarter. And congrats, Jim, on the retirement. Yes, I guess just a few more follow-ups on Europe, just given that it's possibly around the corner. Yes, just thinking about just the potential launch trajectory in Europe versus U.S., are there anything key learnings that can be had from the U.S. experience that could accelerate the uptake? And I guess if you were to commercialize on your own, any comments on the sales force that you think you would need there? Anish Bhatnagar: Meredith, would you like to take that? Meredith Manning: Sure. Happy to take that. So we're still looking at what the size of the field force would look like. Most specifically, we're focusing in on potentially Germany and Austria, the first to launch. So we're looking at what the marketplace looks like there. Additionally, I think... Anish Bhatnagar: U.S. launch experience. Meredith Manning: Yes, U.S. launch experience. Yes, I think the one other thing that Anish had mentioned in his comments about Europe is one of the phenomena is that there are more centers of excellence and tighter treatment over in Europe. And so that's a little bit different than here in the U.S. But with regard to launch success, obviously, it's making sure that there's strong education of the treaters and making sure that they understand exactly the patient population that they'll be treating and the selection of that patient population has been really key in the United States. Operator: Next question comes from the line of Yale Jen from Laidlaw & Company. Yale Jen: First, Jim, congratulations on your retirement, and hopefully, you can enjoy the good life going forward. So my first question is that given that the drug has a great start for the first year. And do you guys feel that for the next to -- getting the next wave of patients, is that more difficult or just a different approach to accomplish that? Then I have a follow-up. Anish Bhatnagar: Sure. Meredith, do you want to take that? Meredith Manning: Yes. I'm happy to take that. Yes. So I think what we're pleased to see is that we're getting a spectrum across the patient population. I mentioned that the majority of patients are coming in ages 4 to 26, but we're also really pleased that we've reached greater penetration in the younger adults, I'll say, even up to 45. That population definitely has more comorbidities, if you will, as they get older. But we're seeing a broad spectrum. And so we continue to see a broad -- we believe we'll see a broad spectrum as we move into 2026.. Yale Jen: Okay. Great. That's very helpful. Maybe just one in the product development or life cycle management questions which is that -- are you guys also thinking about maybe the next-gen product follow the DCCR? And if so, what sort of attribute you think that may you want to have? Anish Bhatnagar: That's a good question, Yale. As you know, what we are doing is a once-a-day pill. So there are limits to what you can do with regards to improving upon that. That said, we do have some internal programs on life cycle management, which I'm not able to discuss today, but we do hope to discuss later this year. Yale Jen: Okay. Maybe last question here. In terms of DCCR, the mechanism of actions for GSD, could you elaborate a little more? Anish Bhatnagar: Yes. As you know, the critical problem in GSD is life-threatening hypoglycemia. And we know that when you target certain channels on the beta cells of the pancreas, you can suppress the secretion of insulin, which means that you can elevate levels of glucose. So the problem that occurs in GSD is that in order to keep glucose levels higher, these patients are required to take very regular feedings of cornstarch all day, including through the night. And what is very desirable is to be able to elevate those blood glucose levels enough that they don't get hypoglycemic. So there is actually interesting information in published data using the parent molecule, and we've spoken with KOLs who have tried it. It works. But as we know in situations like CHI as well, the side effect profile is such that it's difficult to tolerate. But when we are looking at VYKAT XR, DCCR and the low stable level that we will have in the blood, we expect a very different side effect profile and should have the ability to elevate levels of glucose very precisely. Operator: Your next question comes from the line of Derek Archila from Wells Fargo. Derek Archila: Jim, congrats, wishing you well and great working with you. So yes, just two brief ones. I just wanted to clarify. So on the seasonality component, you talked about kind of impact to price and kind of free drug rate, but how much of an impact do you expect in terms of the patient visits and scripts in the first quarter? Anish Bhatnagar: Meredith? Meredith Manning: Yes. I think what we were saying is that we're not really commenting on the first quarter numbers as of right now. But with regard to seasonality in the gross-to-net, I think Jim talked about it. As you know, a lot of patients are coming in. So what we didn't see we launched in March of last year. Now we're going into January where the co-pay will re-up for a lot of the commercial patients. And so as Jim mentioned, with Soleno ONE, we offer co-pay support for commercial patients, and we pay down to 0 on the co-pay. So that's a potential what we'll see in the gross-to-net. Derek Archila: So yes, let me ask this a different way. So I guess for typical Prader-Willi patients, do they tend to have seasonality in terms of their patient visits with their physicians? Anish Bhatnagar: So Derek, I think, again, I'll point you back to the fact that we're launching the first hyperphagia drug in the space. And we're learning as we go. What we know about visits that patients have based on claims data is that the younger patient population, which is a 4- to 26-year-old age group, has about 4 to 6 touch points with healthcare providers over the year. And what we know from conversations with KOLs, people who run these top 300 practices or top 10 practices is that their practices are pretty crowded and you schedule your appointments a year out or more. So the visits do happen, and there is this particular cadence of visits, whether it's different in the first quarter or not, we'll find out. Derek Archila: Got it. And then just a follow-up, just wanted to know in terms of inventory and stocking in 4Q, if there's any comments there? Anish Bhatnagar: Yes, we work with Panther, as you know, one specialty pharmacy. They just went through the holiday period. We'll have to sort of do a deep dive to really understand anything, but nothing untoward that we're aware of. Operator: Your next question comes from the line of Kalpit Patel from Wolfe Research. Kalpit Patel: Just on the active patients number that you gave, the growth in quarter-over-quarter is not keeping pace with the growth in new patient start forms. Is that mainly driven by insurance-related delays? Or is that more of a function of the discontinuation rate? Or is it a mix of both factors? And how should we think about this gap moving forward? Anish Bhatnagar: I think a very important consideration is the time it takes for benefits assessment. So when we get a start form, you don't instantly start somewhere on drug. So they go into a benefits assessment time, which will take 30-ish days give or take. And we don't think there is any issues with reimbursement that have been encountered that are significant. And there will always be a lag between the number of new patient start forms and the number of patients who will be active for that quarter. So Meredith, anything to add to that? Meredith Manning: No, I think that was perfect answer. I think that we're looking at a little bit of a mix of all of the above, but we're pleased with, as I mentioned, the ability to convert start forms into patients and reimburse claims. So we're going to continue to do that and double down on that in 2026 and believe that we'll be very successful. Kalpit Patel: Got it. And one more on our end. I know you mentioned the long-term discontinuation rate. But do you forecast the discontinuation rate meaningfully fluctuating between now and the end of the year? And how might that affect the active patient growth in 2026? Anish Bhatnagar: Good question. We have to see -- I mean, what we have seen so far, I think, is very acceptable for a drug that's treating such a significantly comorbid condition. So if we remain in this zone of 15 to 20 thereabouts, I think that's a really good outcome. It's difficult for us to predict if it changes between now and the end of the year. I'm sure it will go up and down, it will fluctuate. But I don't see a reason why there would be major changes during the year. I'm not sure if that answers your question. Kalpit Patel: Yes, that answers it. And congrats, Jim, on the retirement. James MacKaness: Thank you. Operator: [Operator Instructions] Your next question comes from the line of Ram Selvaraju from H.C. Wainright. Raghuram Selvaraju: I just wanted to ask about whether you are evaluating other disease indications in which to explore VYKAT XR beyond glycogen storage disease? And if so, what some of these indications might be if, for example, there's any plan to potentially revisit the utility of the drug in Smith-Magenis syndrome or other conditions of that ilk? Secondly, I just wanted to clarify whether you anticipate any potential pricing flexibility impact if you were to launch the drug yourself in Europe or through a partner if there might potentially be any spillover to the U.S. pricing paradigm? Or if ultimately this is a non-factor given the rarity of Prader-Willi Syndrome? And lastly, I don't know if you can comment on any underlying dynamics with respect to the discontinuation rate that you are seeing, if it's plateauing, if you are seeing any evidence that it is, in fact, declining as there is more experience with the drug over time in the PWS population or if you're seeing the actual percentage rate increase. And if it is increasing, by how much? Anish Bhatnagar: Lots of questions, Ram. Okay. I think I got those. So the first one is other indications. And what we've said in the past, just to remind you, is that there's two categories of rare diseases that we think DCCR could be useful. One is conditions like PWS, where things like hyperphagia and food-related behaviors are a problem. You're right, Smith-Magenis syndrome is one of them, Fragile X. About 10% of Fragile has the PWS phenotype. Some patients with Angelman have it. They're SM-1 obesity. So there's various other indications where we definitely continue to think that it could be useful, and we are continuing to evaluate it. In terms of the pricing impact of self-launch versus not, I think the challenge is right now is that it's a moving target. I think if we had to make a decision today, it would probably say that pricing flexibility is optimal if we control it both here as well as in Europe or outside the country. I'm not sure that it's a non-factor due to the rarity, because even though there has been some conversation about an orphan exclusion, in MFN. We haven't seen that actually become reality yet. In terms of the discontinuation rates and are they plateauing? The one phenomenon that we're following very closely is to see if the cadence of discontinuation is going to be like what we saw in the clinical trials, which is to say that if you stay on drug through titration and some period of time after you are very likely to stay on drug. And I would say that the early indicators are that, that is indeed the case. So we think that's very encouraging, but it's something that we are following very carefully and we'll continue to update you on. Operator: We have no further questions at this time. So I'm going to turn the call over back to Anish Bhatnagar for closing comments. Sir, please go ahead. Anish Bhatnagar: Well, thank you all for dialing in today, and we look forward to continuing the conversation with you all. Have a good evening. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to IMAX's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Horsley. Please go ahead. Jennifer Horsley: Good afternoon, and thank you for joining us for IMAX's Fourth Quarter 2025 Earnings Conference Call. On the call today to review the financial results are Rich Gelfond, Chief Executive Officer; and Natasha Fernandes, our Chief Financial Officer. Rob Lister, Chief Legal Officer, is also joining us today. Today's conference call is being webcast in its entirety on our website. A replay of the webcast will be made available shortly after the call. In addition, the full text of our earnings press release and the slide presentation have been posted on the Investor Relations section of our site. Our historical Excel model is posted to the website as well. I would like to remind you of the following information regarding forward-looking statements. Today's call as well as the accompanying slide deck may include statements that are forward-looking and that pertain to future results or outcomes. These forward-looking statements are subject to risks and uncertainties that could cause our actual future results to not occur or occurrences to differ. Please refer to our SEC filings for a more detailed discussion of some of the factors that could affect our future results and outcomes. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information, future events or otherwise. During today's call, references may be made to certain non-GAAP financial measures. Discussion of management's use of these measures and the definition of these measures as well as a reconciliation to non-GAAP financial measures are contained in this afternoon's press release and our earnings materials, which are available on the Investor Relations page of our website at imax.com. With that, let me now turn the call over to Mr. Richard Gelfond. Rich? Richard L. Gelfond: Thanks, Jennifer, and thanks, everyone, for joining us today as we review our results for a record-breaking year and look ahead to a very promising 2026. 2025 was a truly transformational year for the company in which we firmly established IMAX as a premier global platform for entertainment and events with a powerful position among out-of-home experiences and a content pipeline that continues to grow richer and more diverse. We finished with a record $1.28 billion in global box office, up 40% year-over-year. We captured our biggest share of the global box office ever, up 700 basis points year-over-year. We achieved our highest grossing year ever for local language films with $405 million worldwide with 67 international releases from 14 countries, including 2 of our top 5 in Ne Zha 2 and Demon Slayer: Infinity Castle. And we drove significant network growth with agreements for 166 new and upgraded IMAX systems and 160 systems installed worldwide, including 8% network growth in the rest of the world. We are an unqualified winner in a complex entertainment landscape. Signs of our impact are everywhere. Studios put IMAX front and center in their marketing campaigns, driving record indexing and enormous media value for our brand. The New York Times, Wall Street Journal and Los Angeles Times have all published features highlighting our unique success. Our stock is among the best performers in global media and entertainment, up over 44% in 2025. And IMAX releases earned 58 Academy Award nominations, including 5 of the 10 best picture nominees. Every one of Warner Bros.' 30 nominations was for a film that played in IMAX, including Sinners, which was shot with IMAX film cameras and One Battle After Another, which received an IMAX 70-millimeter film run. We delivered at least 20% of the domestic opening for Sinners, One Battle After Another and F1. Our financial results reflect our progress and the strength and incrementality in our model. We beat projections across almost every key financial metrics, setting several company records. We delivered a record $410 million in total revenue in 2025. We achieved double-digit percentage beats on original consensus estimates for adjusted EBITDA and EPS with $185 million and $1.45, respectively, for the full year. We delivered a 45% EBITDA margin, a record and our first time breaking 40% since 2019, record operating cash flow of $127 million for the full year. And in the fourth quarter, we delivered record box office and over 50% growth in adjusted EBITDA and adjusted EPS. We expect another outstanding year in 2026 with a projected $1.4 billion in global box office, 160 to 175 system installations worldwide and total adjusted EBITDA margin in the mid-40s range with a floor of 45%. And through 2028, we aim to drive revenue growth at high single to low double-digit compound annual growth rate, adjusted EBITDA margin of over 50% by 2028, adjusted EPS growth at twice the rate of revenue and free cash flow conversion of approximately 50% in 2026 and growing. We believe we are far from our peak, but rather in a period of evolution and growth. With superior immersive technology and unmatched scale, IMAX is the premier global platform for blockbuster content and blockbuster content continues to grow in importance across the global ecosystem. The world's greatest filmmakers, studios and even streamers are leaning into blockbuster theatrical releases as drivers of IP and value throughout the chain. As this trend accelerates, IMAX becomes an increasingly valuable player. We're the only game in town with a global platform, content portfolio and well-recognized brand. We're able to leverage the shift to premium and consumer demand for great out-of-home experiences. And with a very strong slate booking all the way into 2029 and an expanding total addressable market for IMAX systems, we are capitalizing on our strong position and delivering for our shareholders. The slate for '26 is arguably the strongest we've ever seen, highlighted by massive films for IMAX tentpoles, headlining a record of at least 12 films for IMAX releases worldwide, including Christopher Nolan's The Odyssey, the first theatrical feature shot entirely with IMAX film cameras. Tickets for select IMAX 70-millimeter showings sold out a full year in advance, and we will have 40 film locations for Odyssey's debut in July. The Mandalorian and Grogu, the big screen debut of the massively popular Disney+ former TV series from Director John Favreau, who crafted the film with cutting-edge technology specifically for IMAX screens. Dune Part Three, the next installment in Denis Villeneuve's franchise and the first of the series shot with IMAX film cameras. And next month's Project Hail Mary, a film for IMAX space adventure that is earning excellent buzz and will screen in IMAX 70-millimeter across 16 locations, an indicator of strong indexing for recent releases. Highly anticipated family releases in a time when family films are leading the box office and IMAX is capturing a greater box office share of family films than ever before, including Super Mario Galaxy Movie, which we're hearing is testing extremely well, Minions 3 and Toy Story 5. The previous installments of these films all gross near or above $1 billion, a diverse collection of distinctive and filmmaker-driven releases that we believe hold real upside from Michael to Zach Cregger's Resident Evil, another strong offering of local language films from around the world, including the eagerly awaited sequel Godzilla Minus Zero from Japan and the Indian epic, Ramayana. And finally, Barbie Director Greta Gerwig's Narnia, a pioneering partnership with Netflix that we believe will deliver greater value to our exhibition partners. Furthermore, we are already 60% booked for 2027 with blockbusters, including Top Gun: Maverick and F1 Director Joe Kosinski's Miami Vice, which will be filmed for IMAX; Star Wars: Starfighter from Deadpool and Wolverine Director Shawn Levy. The film looks to be a throwback to the galaxy-spanning adventure of the original trilogy; the Thomas Crown Affair from Academy Award nominee, Michael B. Jordan; Avengers Secret Wars and the Batman 2. And for '28, we look forward to being involved in Sam Mendes' groundbreaking Beatles, a 4-film event. With 2 months down in '26, we feel good about our projected box office for the year as we enter one of the most promising periods. Our global box office in January was up 16% year-over-year. Avatar: Fire and Ash extended our success with that franchise, earning more than $188 million in IMAX, our sixth highest grossing release of all time and our highest indexing of the series with 13% worldwide. The Chinese New Year holiday delivered $28 million on the strength of Pegasus 3, our biggest Chinese title since Ne Zha 2 and we continue to diversify our content slate, securing an agreement with Apple to stream live broadcast of Formula 1 World Championship races to IMAX locations this season and delivering a very successful exclusive opening of Baz Luhrmann's Elvis Doc EPiC. We also continue to drive strong system sales and network growth worldwide, particularly in underpenetrated high-value rest of the world markets, where we installed a record 118 systems in 2025. We now work with more exhibition partners globally than ever before, 257 in total last year, up 28% over 2019. Surging demand for IMAX supported an expansion of our total addressable market to nearly 4,500 total zones worldwide, double our current systems in operation and backlog. To capture that opportunity, we're executing against a 4-pronged strategy: One, focusing on high-growth underserved markets. We've had tremendous success here, driving our biggest year ever for sales and installations in Japan in 2025, tripling our network in Australia since 2023 and making strong progress in France and Germany. Second, continuing to unlock new opportunities in North America. Domestic is an engine of growth for us with new and existing partners alike, dispelling the notion that this is a fully mature market. In 2025 alone, we struck agreements with each of the biggest exhibitors in the U.S., AMC, Cinemark and Regal, that advance key strategic priorities, including new locations in Los Angeles and New York with Regal and 3 new IMAX 70-millimeter film locations with Cinemark. Third, identifying opportunities to add a second IMAX location in high-performing zones. For all our success with marquee locations in major metropolitan areas, we are still deeply underpenetrated in many, presenting an opportunity to grow within our best market centers. For instance, we have only 5 IMAX locations serving a population of 1.6 million people in Manhattan, including our first new location in 15 years set to open in Battery Park. And we see a lot of opportunities in metropolitan areas, including Chicago, Boston, San Antonio and San Jose, among others. And lastly, finally, we continue to explore innovative deal structures that leverage our liquidity. Given our strong balance sheet and momentum, we can help our partners get more IMAX into their circuits quickly through upfront capital expenditures that pay for themselves given our strong market share gains and the impressive film slate lying ahead. In sum, 2025 was a transformational record-breaking year for IMAX. We exceeded our targets for financial performance and finished with a strong fourth quarter. We drove great results for our exhibition partners, breaking box office records as fans, filmmakers and studios clamor for more of the IMAX experience. We continued network expansion with significant runway to grow further even as we capture a record share of the global box office. In every way, we've leveled up our performance. With an incredibly promising slate locked in for the next several years, we continue to believe the best is yet to come. We're focused on strengthening our position, executing with financial discipline, providing the most immersive entertainment experience on the planet and delivering for our shareholders. Thank you all. And now I'll turn it over to Natasha. Natasha Fernandes: Thanks, Rich, and good afternoon, everyone. In a time of limitless entertainment options and more discerning global audiences, IMAX delivered record fourth quarter and full year results, exceeding our guidance and Street expectations across key measures. Fourth quarter box office was $336 million, up 16% versus the prior Q4 record, driving full year box office to $1.28 billion. We captured a record 3.8% of global box office, up 700 basis points year-over-year, underscoring the increasing value the IMAX platform delivers to exhibitors and to the broader industry. Strong demand for the IMAX experience also drove us to the high end of our installation guidance with 160 systems installed in 2025, up 10% year-over-year. As we keep our focus on delivering value for shareholders from a profitability perspective, our operating leverage resulted in an adjusted EBITDA margin of 45% for full year 2025, above our guidance of low 40s percent. And adjusted EPS reached a new full year record of $1.45, an increase of $0.50 year-over-year. Importantly, these results translated into our highest ever cash from operations of $127 million with cash conversion directly benefiting from the margin expansion. Our standout 2025 financial results once again illustrate the uniqueness of IMAX's operating model and position as a leading entertainment platform. And we believe the momentum is carrying into 2026 as we look toward the exceptional slate. With all the major tentpole Hollywood releases still in front of us, many with breakout potential, we believe we are well positioned to achieve another year of strong performance. We expect IMAX box office will build through the year with Q1 representing the lowest box office quarter. Specifically in China, we expect a more balanced year as opposed to 2025, where 46% of China's box office was in Q1 as 2 of the largest local language titles Once Upon a Time in the Middle East and Penghu did not make it into Chinese New Year and will likely release mid- to late this year, along with there being a more balanced and compelling Hollywood release setup for Greater China. Taking a closer look at our Q4 and full year 2025 results. We had a strong close to 2025 with fourth quarter revenues up 35% year-over-year, which drove us to a full year revenue record of $410 million, an increase of 16% over 2024's full year revenue of $352 million. Gross margin continues to grow faster than revenues, clearly demonstrating the value proposition of our business model, which enables a high level of incremental profit flow-through as we scale our platform and box office growth. Q4 gross margin was at a 58% margin, a 540 basis point improvement over the prior year period, while full year gross margin was $246 million at a 60% margin, up 600 basis points year-over-year. Looking at our results at the segment level, Content Solutions revenues grew significantly, driven by higher box office with fourth quarter revenues of $38 million or 50% growth over the prior year comparative period and full year content revenue growth of 21%. We have continuously focused on diversifying our content offerings and sought to outperform expectations and 2025 displayed the success of our strategies. Every quarter of 2025 had a different content storyline enabled by our diverse programming strategy. Q1 box office was local language driven. Q2 into Q3, our Filmed for IMAX program delivered some of our highest indexing levels in our history. Q3 benefited from a diverse mix of local language, horror titles and alternative content, and Q4 anchored the year with large Hollywood tentpoles. Fourth quarter Content Solutions gross profit was $22 million, while full year Content Solutions gross profit of $100 million grew 50% year-over-year, more than twice the rate of revenue, actualizing a proof point of the significant operating leverage in our model. As a result, we delivered a 66% gross margin for 2025, a substantial increase of 1,260 basis points from the 53% in 2024. Turning to our Technology Products and Services segment. Fourth quarter revenues were up 32% year-over-year with a gross profit margin of 58%, up approximately 500 basis points year-over-year, while full year revenues for this segment grew 16% with a gross profit margin of 57% up approximately 400 basis points year-over-year, driven by higher systems installed under sales arrangements, growth in box office driving a higher level of rental revenues and increasing maintenance revenue associated with the growing network. In the fourth quarter, we installed 65 systems, up from 58 last year. For the full year, installations reached 160 systems at the high end of our guidance, driving 3.5% growth in our commercial footprint, led by 4% growth in our domestic network and just over 8% in the rest of world, a very strong result, reflecting our growth prioritization. We're expanding in the strongest box office markets, including in the U.S., Japan, France and Australia. Japan grew almost 20%, while Australia more than doubled its footprint. We believe growing in our strongest markets will both scale our platform and meaningfully increase our network productivity. And the engine for future growth remains strong as we completed 166 system signings in 2025, an increase of 28% year-over-year. More than 25% of the signings were signed and installed in the same year, reflecting the demand by our exhibitor partners to get IMAX locations quickly up and running to capitalize on the strengthening IMAX slate. We expect the same dynamic in 2026, given the outstanding film slate in front of us. Turning to operating expenditures, defined as research and development and selling, general and administrative expenses, excluding stock-based compensation, was $29 million in the fourth quarter and $118 million for full year 2025. Full year operating expenses increased only 1% year-over-year, a much lower rate than the 16% growth rate in revenues, reflecting continued expense and cost discipline that helped to offset the impact of inflation and continued investment in the business. We will continue in 2026 to focus on optimizing our uses of technology and evaluating work processes to enhance productivity across our business as we aim to crystallize a high level of flow-through to gross profit and to the bottom line. Included in Q4 results is $22 million of onetime charges, $15 million for the strategic repurchase of over 99% of the convertible notes due 2026 and $7 million resulting from a noncash goodwill impairment of the legacy SSIMWAVE business associated with the monitoring of content quality. We continue to lean in on our core business where we see tremendous opportunity to gain share and expand the network. We have been repositioning our streaming and consumer technology business to enhance our differentiation, particularly in support of live streaming content across the IMAX platform as well as the evolution of our core DMR and system technologies. With this shift in strategy, we have also been reviewing and optimizing the cost structure of the SSIMWAVE business. Overall, our strong operational performance led to record full year total consolidated adjusted EBITDA of $185 million. Adjusted EBITDA grew 33% for the full year, more than twice the rate of revenue growth, reflecting the operating leverage stemming from higher revenues coming from both box office and system sales. This resulted in an above-expectation full year adjusted EBITDA margin of 45%, up approximately 570 basis points year-over-year and placing us above our full year guidance of low 40s percent. Full year adjusted EPS was $1.45, up $0.50, driven by the strong profit growth. 2025's results reflect a 28% tax rate compared to 13% in 2024 or a year-over-year headwind of $0.16 per share. No tax benefits were recognized for the onetime charges in 2025, while 2024's tax rate was unusually low, having benefited from an internal asset sale to more closely align intellectual property rights with its global operations. Turning to cash flow and the balance sheet. Cash flow from operations of $127 million set a new full year record, exceeding the previous high of $110 million in 2018. And full year free cash flow, which includes $28 million of investment in the IMAX network through joint revenue sharing systems, was $85 million, which equates to a record adjusted EBITDA conversion of 46% or a conversion of 61%, excluding this investment in network growth CapEx. We believe these results reflect the positive incrementality in our model as well as improvements in working capital, which we expect to continue as box office and our network expands. Turning to investing cash flows. We continue to prioritize use of our available capital to invest in the business, including partnering with exhibitor customers to grow and upgrade the IMAX network through joint revenue sharing arrangements, allowing us to benefit from the rising demand for IMAX and the stellar IMAX slate in 2026, '27, '28 and beyond. Our capital-light model and execution have resulted in a strong capital structure. As of year-end 2025, we held $151 million in cash, an increase of 50% from year-end 2024 and $289 million in debt with a net leverage of 0.7x. During 2025, we strengthened our liquidity and reduced dilution risk through strategic transactions. We renewed and expanded our 5-year revolving credit facility to $375 million, adding $75 million of liquidity. And in November, we refinanced our 2021 convertible notes with $250 million of new convertible notes at a very attractive 0.75% interest rate. And through this transaction, we simultaneously retired the vast majority of the 2021 notes with cash of $46 million to minimize dilution. Importantly, we also entered into a capped call on the new notes, raising the effective conversion price from a company dilution standpoint to $57 per share. Together, the cash payment for the outperformance in the 2021 notes and the new capped call equates to approximately $70 million, strategically spent to maximize the opportunity for shareholders to benefit from the growth we expect in the coming years and in our view, is akin in some respects to that of a share repurchase. To sum up, we aim to build on the momentum in 2025. And as Rich shared, the table is set for '26 and '27 with mega titles like Odyssey, 2 Star Wars movies, Narnia, Dune and Avengers; beloved proven family content, including Toy Story, Moana, Minions, Shrek and Frozen; large fan-based video game IP such as Super Mario, Mortal Kombat, Zelda and Minecraft; Tier 1 Superhero franchise films around Spider-Man, Batman and Superman as well as potential for new breakout IP like the upcoming Project Hail Mary film, music-centered content like the Twenty One Pilots concert and Michael and new sports ventures such as recently announced with Apple TV for live F1 races. As we highlighted at our recent Investor Day, we believe we have a clear strategy to continue to expand our entertainment platform in 2026 and beyond to bring the IMAX experience to more audiences. We are focused on deepening our relationships with leading filmmakers and building new connections with a diverse array of content creators and studios. At the same time, we are aiming to grow our footprint, box office and productivity of our network along with the value we can bring to our exhibitor partners. As we have shown, the growth in box office and our increasing network scale will positively impact our bottom line and cash flows given the incrementality in our financial model and our laser focus on keeping operating expenses as flat as possible. Given these dynamics, we expect to drive total adjusted EBITDA margin to over 50% in the coming years. That's why we believe IMAX's position has never been as strong. We are focused on executing on the significant opportunity in front of us to deliver on our guidance and expectations for 2026 and beyond and to drive ever-increasing shareholder returns. With that, I will turn the call over to the operator for Q&A. Operator: [Operator Instructions] Our first question comes from Omar Mejias with Wells Fargo. Omar Mejias Santiago: Rich or Natasha, can you give us an update on the state of the Chinese box office and the early start to the Chinese New Year? We saw Pegasus 3 start very strong and outperform initial expectations. But just curious on how is the overall health of the market and the slate ahead. Richard L. Gelfond: So Omar, I don't think you could take 10 days and talk about the state of the Chinese box office. I think when you look at China, Chinese New Year was kind of, I'd call it a B slate this year and very similar to the slate in '24. And what happened was there were a number of titles that were supposed to open for Chinese New Year, and they slipped and they weren't done in production, and they moved them to this summer. So I think that's what accounted for kind of modest results during that period of time. But I think in -- the summer will be better than we thought it would be because we thought those movies will have played earlier. So I think the result is more a matter of timing than it's the result of any trends in the Chinese box office. Omar Mejias Santiago: That's very helpful. And maybe my second question on local language and alternative content. You guys had a record year in 2025 with over $400 million in box office, recently announced a new deal with Apple to air F1 races. And based on your investor presentation, it looks like you have a big slate ahead. So how much runway does IMAX has to drive local language and alternative content box office alongside Hollywood content? Is there a certain limit to the growth of non-Hollywood content box office? Richard L. Gelfond: Well, I don't think we think about it in that way, Omar. I think we try and program the best content for a particular market throughout the year. So I think one thing you're asking is, are you too stocked with Hollywood films where you can't do a lot of foreign language films. But again, it depends when things are scheduled, how they're performing. We might slide something in if something is underperforming or move something if it's overperforming. But there are a couple of very big international films this year. One is called Ramayana, which is an Indian film that the director and producer are preparing for global release later this year. And again, I don't think anybody said, well, we have Ne Zha this year last year. So you just don't know how they're going to break out. But I believe there's enough runway and enough space to accommodate more in number of international films -- local language films than we had last year. And we're pretty comfortable with how they look at the moment going out. I think that's going to continue to be an important part of our business. Operator: Our next question comes from Eric Wold with Texas Capital Securities. Eric Wold: A couple of questions on kind of just pricing. I know it's kind of come up in the past, Rich or Natasha. I know you can't directly control ticket pricing with your exhibitor partners. But can you talk about what you've seen maybe over the past year, kind of maybe an average ticket price increase for IMAX showings as exhibitors look to take advantage of kind of this shift in moviegoer demand? And does any expectation for additional increases play into your box office outlook for '26? Or could that be an incremental upside driver if they do kind of play into that demand with additional price hikes? Richard L. Gelfond: So I'm not sure what the numbers were for '25, Eric. But I do know that for '26, we've been -- again, we can't tell the exhibitors what price to charge. That's their decision. But I think given the strength of the slate and especially the number of event films coming out this year, like Mandalorian, like Dune 3, like Odyssey, that there is potential to -- for price increases in there. And I think, especially if you also look at the film releases coming out, I mean, historically, the exhibitors charge the same for film as they charge for digital and even coming out soon is Hail Mary in about 16 film locations. So I think there are definitely instances where I think you could push the price higher. And if we ran theaters, we would certainly do that. And I'm hoping that at least where there are films in great demand, of which there are a lot this year, that the exhibitors would choose to test that. Eric Wold: And then just a follow-up on that. As you build out some of these emerging markets that are maybe a little bit newer to IMAX screens and build them out, can you talk about what you typically see with the exhibitor partners there on their pricing? Do they tend to be a little more conservative given the consumer may not be fully aware of the IMAX product as much as more developed markets and then kind of ramp pricing from there? Or do they tend to be, I don't want to say aggressive, but maybe as aggressive as other developed markets at the get-go? Richard L. Gelfond: Well, we provide them as part of the sales process with what the IMAX premium is in different countries around the world. So I mean, they're aware, and that's one reason they buy in because they understand the price premium. And they understand it more as a percentage than an absolute number because obviously, in India, the premium -- the ticket price could be different than it's going to be in Japan. So they have the tools to do that. And I think the trend we've noticed is depending on the country, they charge a similar premium than they would somewhere else. So that's not really an issue. I think they understand how to maximize their profit. Operator: Our next question comes from Michael Hickey with StoneX. Michael Hickey: Rich, Natasha, Jennifer, congrats, guys, on amazing development. First question, Rich, just on your film cameras, really remarkable run here you've had with centers in '25 and getting 16 Oscar nominations is really remarkable and one battle for another as well, which I think was on your digital cameras... Richard L. Gelfond: Sorry, Mike. We got like over 50 Oscar nominations overall. Michael Hickey: Totally. I just focused on centers, but you're right. I mean it's truly incredible. And '23 was Oppenheimer. This year, you've got Odyssey, you got your next-gen cameras with Odyssey, which are quieter and lighter. One, I guess, how do you know -- I'm curious how you're going to answer this, Rich. How do you know the right films to pick? Because some are obvious, but when you look at something like centers, I mean, that was not obvious. And obviously, that's been an incredible success. How are you -- and I'm sure it's an ecosystem thing, but how are you approaching and finding the right films to pick? When you have this consistent level of success, obviously durable, what opportunities? Obviously, we see a lot of them, but I imagine your phone is ringing more than ever, there's installations, maybe a better opportunity to scale more of the 70-millimeter film opportunities or just relationships with filmmakers, talent and your competitive moat overall? Just sort of curious how this builds your overall opportunity over time. Richard L. Gelfond: So Mike, it's a perfect time to ask you that question because I've been out in L.A. for over a month right now. And I've been meeting with filmmakers, I've been meeting with studios. I've been meeting with producers, and you're quite right, the demand is very elevated from over it was before. So I'll give you a couple of categories of answer, like something that never would have happened years ago. But like well-known filmmakers who you know will approach us and will say, I want to do an IMAX film and they'll actually do like a pitch and they'll come in and they'll tell us why -- what it's about and why they want to do it in IMAX and why it's important to them. And that's a category -- obviously, I can't say who. But last week, we got pitched by some very well-known filmmakers, and it's a little bit off the beaten track. So if someone had sent in a script, we might not have been interested, but we are interested because it was very unusual. It doesn't fit in a box. Another way, which I think is really important is the relationships we have with existing filmmakers. So one example would be we've done a lot of films with Joe Kosinski over the years. And then he did Top Gun: Maverick and obviously, it was a huge success and a huge success in IMAX. And then we did F1 with him, which is not as well-known IP, obviously, and it became one of our top films of the year. So Joe is working on his next project, which is Miami Vice. And he came to us and then we started talking to him about the different opportunities to shoot in IMAX and different tools, and we're still working our way through that. And then it will be studios who will say, by way of example, Warner knows they've got 30 Oscar nominations. So they're looking at their slate, the people who run the studio, and they're going a filmmaker and they're saying, hey, have you thought of shooting this with either IMAX film or IMAX digital cameras? So there's a lot of opportunities that come in. And I think maybe the most promising one is the filmmakers who worked with us before and film for IMAX and their desire to use IMAX technology. So there are a lot of ways, but having spent the last month with a level of meetings that I've never seen before and the types of talent coming in and executives, there's lots of projects coming in. And without spending much more time on this, if you don't know the filmmaker that well, you look at their reputation, you look at other things that they've shot and what it looks like. A big thing for us is -- the filmmakers is also leaning into the IMAX of it all. And a great recent example of that was Ryan Coogler and Sinners, as you probably remember, he made a pamphlet about aspect ratios. He talked a lot about IMAX everywhere he went, and that really helped a lot. So it's all of the above. Michael Hickey: The second question, big film for you, Narnia, very important film, very important partner. And I think if anyone you sort of crack here, it seems like [indiscernible]. Just curious, as you continue to [indiscernible] or whoever on the team you're talking with, do you get the sense that they're more motivated, Rich, to make this movie. Do you also feel like that there's a bigger opportunity maybe in the future with this model that you've created here, which obviously was smart or maybe your normal model, you use your cameras. I think just to I guess, sort of your excitement for Narnia, the input from Netflix and the future opportunity you would see with that really for yourself and the broader. Richard L. Gelfond: So the first point, Mike, is that we make movies with filmmakers and studios or streamers are part of the system. So Greta, as you know, came to us because she was excited about releasing it in IMAX. And together, we planned to talk this through with Netflix and brought Netflix into the fold. So the most important thing is that Greta is incredibly excited. And when she thinks about how to make the movie and she thinks about the sets and she thinks about the magnitude and scale, she really leans in. And it's too early to see a rough cut. But from conversations with her, I believe she's making a movie that's going to look fantastic in IMAX. And that's the thing that probably makes me the most confident. In terms of the business model, I mean, Netflix has approached us about a number of projects since we did that deal with Greta. And some of them we did under different sorts of models like Frankenstein with Guillermo del Toro and a number of other things over time. And we're always talking to them about different ideas. My hope when I did this deal was this model is going to work so well, and I'm not talking about only the box office. But remember, the point of it is to create a buzz and a cultural event. And I think when Greta releases this in IMAX, it will be a cultural event. And I think they're going to get the benefit from that of increased streaming hits after that. Remember, it's a series of books. It's not a one-off, and it's going to help build an event. And I think that's what we really do. So I'm very optimistic that when the IMAX audience sees that movie, there's going to be the kind of reaction, which is going to lead to a number of good things. Operator: [Operator Instructions] Our next question comes from Chad Beynon wit Macquarie Capital. Chad Beynon: You guys at the Investor Day and reiterated today, talked about the high single-digit, low double-digit growth through '28 and hopefully beyond. I think a big component of that is that underpenetrated rest of world opportunity that you've spoken about. So Rich, what do you think the main catalyst is at this point? The business model makes more sense every year for these exhibitors. You're clearly putting up the results, local language is working. So what's the next inflection point to grow the pipeline for that rest of world? Richard L. Gelfond: So when you look at the slate going ahead this year, and I believe the financial returns that follow for the exhibitors. For us, we've talked a lot about that. But for the exhibitors, I think it just makes so much sense. And obviously, exhibition has had its challenge in its traditional industry. And I think it's certainly looking for growth opportunities for its network and its strategy. And I think they look at their box or someone else's box next door that's selling out and is getting very attractive paybacks. I think that's going to have a big influence. And using some examples for markets in Japan in 2025, the per screen average was up an enormous amount from 2024. So the returns to the exhibitors are much more attractive. So it probably doesn't surprise you that there's a lot of activity coming out of Japan in '26, and our team was over there and there's a fairly large number of deals under discussion. Also, Avatar really did extremely well in certain areas like France and Germany, where it was among the leading markets in the world and numbers that were a step change over the previous year. So there's a lot of activity this year, inquiries coming out of France and Germany. So I think in general, it's looking at performance and trying to replicate it and bring it forward. But then you add some kind of obvious things like the slate this year, and there's lots of movies, as I said in my prepared remarks, whether it's Mandalorian or whether it's Odyssey or whether it's Dune: Part Two. And I think people want to get open in advance of that. The people who opened before Avatar, we looked at the number, I don't recall, but I think we opened like 27 theaters right before Avatar opened. And you look at the performance of those theaters by being open for Avatar, their ROI and their payback period were far superior to what would have been if they waited. And our team around the world is using that data and sharing it. And I think that's what's helping create a catalyst. We're also being a little bit more flexible, as we talked about in our prepared remarks, in using some of our capital in different places in the world where we know the results are really terrific. So I'll use Japan again as an example. But the numbers were so strong and compelling. The payback periods are fairly short and the economics is very good. So we're seeding some of those markets by using a small amount of our capital to help jump start them. So I'd say all of that. Operator: Our next question comes from Steve Frankel with Rosenblatt Securities. Steven Frankel: Rich, you had a big install quarter in Q4. Given the demand situation, how much more can you ramp your team and to take that to another level? Richard L. Gelfond: Yes. It's just a question of timing, Steve. So if you ask me how many we could install in the fourth quarter? The answer is an awful lot because it's like -- analyze it like a supply chain. So can you order the parts in advance? Can you do the designs? Can you deploy the teams? So sort of in any given year, it's a much larger number than we're doing now. If you said to me, people want to open for Hail Mary in 3 weeks, it's more difficult to do that. But over the longer term, I never used the word infinite, but you certainly could open a lot more if you wanted to. There's not much constraint on that. Operator: Our next question comes from David Joyce with Seaport Research Partners. David Joyce: Given that you've got a lot of cash on your balance sheet now, how are you seeing your mix of sales versus JRSAs this year? Given that you've got more of that cash and it's a strong box office here, how are you thinking of the relative ROI between those approaches? Natasha Fernandes: David, we see it as a lots of opportunity for us to use our balance sheet, and we talked about it at Investor Day as well, but the opportunity to look at those top-performing zones and could we help the installation go faster by essentially seeding the money, as Rich was just talking about and in return, getting some sort of change in our deal type as well or change in our economic -- our standard economics so that we could get that return as well, but have the theaters open earlier. And I think that, that's the opportunity that we have with a strong balance sheet with our liquidity position sitting at $550 million. It is a significant opportunity in front of us to roll out our backlog at a faster pace and also look at more opportunities. And we talked about it at Investor Day of second screens or top-performing locations, flagships. And so we think that while we look at not only investing in our business with respect to our own technology and the way that we operate in the Filmed for IMAX program, and we invested in cameras. There's also the opportunity to look at expanding the network. And I think what's been great is this past year, we expanded our domestic network by 4%, and we expanded our rest of world by over 8%. And so we are using our capital in the right way right now, and we see the ability to ramp that up. Operator: Our next question comes from David Karnovsky with JPMorgan. Kiscada Hastings: This is Kiscada Hastings on for David Karnovsky. I just want to ask on STL installs and upgrades this year. Is there any insight you can give us on expectations regarding market mix? You've been talking about more opportunities in the U.S. and whatnot. Should we expect revenue per install and revenue per upgrade to be relatively stable year-over-year? Natasha Fernandes: So generally, yes, I think that we have a standard sort of selling price. Now the opportunity is that the box office grows, and you would have seen it in the incrementality in our model in 2025, the JV systems, we have the ability to capture more box office there and as our box office grows. And so I think that as you look at the mix, we did guide towards 160 to 175 systems with a mix of 45% to 55% sales to JV mix. So I think we're still tracking towards that. That's what we've guided publicly, and we'll keep working towards that. I think the opportunity, though, is looking at how do we capture more from those JV locations as the box office grows there as well. And that was one of the significant contributors to us not only having the over 45% adjusted EBITDA margin, but also our cash flows that came in at a record level. Operator: Our next question comes from Eric Handler with ROTH Capital. Eric Handler: Just sort of a follow-up to that last question. Wonder if you could talk about how you're thinking about capital allocation at this point. You don't have debt due until 2030. You should have more free cash flow than last year. How are you thinking about buybacks? You've had good luck -- you've had good returns with the JRSAs. Where else can you sort of invest internally that you think would get high returns as well? Richard L. Gelfond: So Eric, I think the best place we can invest is in our network growth. And that's because when you look at PSAs this year compared to last year, when you look at the films that we have in '26 to slate, but maybe more importantly, you look at the backlog of films in '27 and '28, like we have an insight that most operators around the world don't have, which is we know what our slate is going to be going forward. And we have kind of a unique perspective on how it's going to perform. And we have a perspective also on how IMAX fits into the ecosystem. So if we have an opportunity to leverage our network growth or leverage our returns through maybe steering a deal one way or the other way. We think the releveling of IMAX is probably the best opportunity there is in terms of where to put our money. Now I would also add that people didn't think of it this way, but Natasha mentioned it briefly in her remarks. But when we issued our new convert and we took out the old convert, we could have taken out the shares that were in the money in 2 ways. One, we could have given people shares; or two, we could have used cash. And we took them out with cash, which effectively lowered dilution and was analogous to a share buyback. So obviously, we're open to being opportunistic in various ways, but we're very focused on how to capitalize on our growth. Operator: Our next question comes from Patrick Sholl with Barrington Research. Patrick Sholl: Just in terms of installing into like a second screen in a zone versus entering a new market, is there sort of any difference in the return profile or the speed of getting to sort of like, I guess, a steady state of PSAs? Richard L. Gelfond: There doesn't appear to be a difference because if we're putting a second theater in a zone where the exhibitor is, it's -- you see a very successful zone and the brand is well known there. So you're leveraging off of your previous success. And I know we've been saying for a while that we're going to do more of that. But we've actually taken some concrete steps with different exhibitors and identified specific locations where we would put a second screen in and are discussing with exhibitors. And seemingly, they have a more open mind to it than they did in prior years, especially coming off the strong results in '25. So I think you should model it as a similar return profile, but I'd be surprised if you didn't see some of that materialize this year. Natasha Fernandes: Pat, the other thing to consider is that we have a very experienced team who is involved in the analysis of the returns on locations and really assessing what is best for the IMAX business. And I think that's one thing we've proven over the years is that as we continue to expand, we're expanding in locations that are returning to our bottom line as well. And we do analyze each of our locations as we look through signing new deals, signing upgrades, signing whether it's second screens or flagships and assessing to make sure that it hits our ROI hurdles. Richard L. Gelfond: Yes. And I think I'd also like to remind you that the converts we issued, the interest rate is 75 basis points. So this is a well-priced capital for us. Operator: Our last question comes from Drew Crum with B. Riley Securities. Andrew Crum: Rich, I want to go back to the discussion around alternative content and the partnership with Apple TV for Formula 1. It looks like the initial launch is U.S. only. Do you have the ability to add international screens? And more broadly speaking, how are you thinking about bringing more live sports into your programming mix? With 2026 being a World Cup year, is that a consideration? Richard L. Gelfond: Sure. So the answer is the international -- your first part of your question with F1, Apple only controls the North American rights. So we made the maximum deal we could have made with Apple. But we are exploring the possibility of looking at international races, and we are following up on that. But again, that wouldn't be through Apple. That would be through others, and we announced this in the last 2 days. So it's a little premature to expand on it yet. But yes, we would be interested in finding a way to expand that. In sports, we've been offered a lot of opportunities in all kinds of different sports. But sports is complicated. It's got to be the right formula. It's got to be the right match with the IMAX experience. These rights issues, as you know, are very complicated and expensive. So you've got to model it through and see which sports have a good return and which don't. We have had some discussions about the World Cup. But again, there's interesting issues there because the finals of the World Cup are on the same weekend that Odyssey opens. So it's not -- you can't just stick your finger in the air and say, "Oh, that would be a good idea." There's complicated issues around all of these. But again, there's a lot of interesting things going on and stay tuned. I think some of them will come to fruition. Operator: I'm not showing any further questions. I'd like to turn the call back to Rich for any further remarks. Richard L. Gelfond: Yes. So thank you very much, operator, and thank you all for joining us. I really appreciate people who have invested in us for a period of time because 2025 really brought the pieces together. And as a management team, we had high hopes and we always believe that all the pieces could come together and put us in a new place. And I've tried -- the quantitative results are evident in what we reported. And the qualitative ones are less evident to you. But if you were living my last month in L.A., they would be equally obvious to you. And it's very gratifying to be seen as a different company in such an important position, not only in Hollywood, but around the world. And I think our job is to make sure that we use that place and we use our momentum to continue the growth rate and maybe even make it higher and really capitalize on where we've come into and making sure that we take full advantage of that opportunity. And thank you all for joining us. Operator: Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.
Marissa Wong: Good afternoon. Welcome to CLP's 2025 Annual Results Briefing. My name is Marissa, Director of Investor Relations. And with me today is Chief Executive Officer, Mr. T.K. Chiang; and Chief Financial Officer, Mr. Alex Keisser. We lodged our 2025 annual results with the Exchange today. That announcement as well as this presentation is now available on the CLP IR website. This recording is also being recorded, and you can access that a little bit later on this evening. Before we begin, please read the disclaimer on Slide 2. And this year, we've got 2 languages available; one, English and one, Putonghua for you to choose from. And for today's briefing, we'll start with T.K providing the overview, followed by Alex with the financial results, and then T.K will return with the strategic outlook. We will then conclude on with a Q&A session, and we encourage your participation and your questions. So with that, I will now hand over to T.K to begin the briefing. Thanks, T.K. Tung Keung Chiang: Yes. Thank you, Marissa. So good afternoon, everyone. Thanks for joining us. In 2025, our core Hong Kong business performed strongly, providing stability that offset market headwinds on the Chinese Mainland and also Australia and kept our overall results resilient. The fundamentals of our business remain strong. Our operational excellence continues to drive value across the group, advancing critical projects that secure energy reliability and our transition to 0 carbon. In Hong Kong, we completed our smart meter rollout and maintained world-class supply reliability despite facing a record Black Rainstorms and 14 typhoons. On the Chinese Mainland, we brought our largest wind farm to date into commercial operation, launched our first independent battery energy storage system and commissioned our second centralized control center in Shandong. In India, Apraava Energy achieved full commissioning of its 251 megawatts Sidhpur wind farm, its biggest wind project to date. And in Australia, we completed outage programs at Yallourn and Mount Piper enhancing its flexibility and reliability. Our growth momentum is aligned with energy transition opportunities in our region. With a disciplined, value-driven approach, we are advancing a pipeline of low-carbon projects that will secure future earnings. At the same time, we have taken steps to drive cost efficiency and strengthen our foundations. We completed Phase 1 of our ERP rollout in Hong Kong, advanced and enterprise-wide transformation at EnergyAustralia and optimized head office operations. We closed 2025 with healthy cash flow and a strong balance sheet. This financial resilience, combined with our growth momentum, gave the Board the confidence to increase the dividend, continuing our track record of delivering shareholders' returns. Turning to the highlights. Financially, the group's operating earnings before fair value movements were down marginally by 2% to over HKD 10.6 billion. Total earnings were lower by 11% to HKD 11.5 billion, driven by coal plant-related items affecting comparability. So Alex will provide details shortly. The Board has recommended a final dividend, bringing total dividends for 2025 to HKD 3.20 per share, an increase of 1.6% from 2024. Operationally, we achieved strong performance in safety and reliability with a lower injury rates and reduced unplanned customer minute loss in Hong Kong. On the customer front, we added more accounts in Hong Kong, while competitive dynamics in Australia led to a decline in numbers. In terms of generation, electricity sendouts declined by 3% reflecting lower coal output. At the same time, non-carbon capacity rose by 3%, driven by renewables and battery investments across the group. I'll now hand over to Alex for the financial results. Alexandre Jean Keisser: Thank you, T.K, and good afternoon. A summary of the key metrics. Earnings before interest, taxes, depreciation, amortization and fair value movement or EBITDAF was stable year-on-year at HKD 25.7 billion. Operating earnings before fair value movements decreased slightly by 2% to nearly HKD 10.7 billion. Adjusted for the fair value movements and items affecting comparability, total earnings was close to HKD 10.5 billion, a decrease of 11%. Capital investment declined 13% to HKD 16.4 billion, with higher growth CapEx offset by the absence of the headquarters acquisition booked in 2024. Total dividends for financial year 2025 was HKD 3.20 per share, representing an increase of 1.6%. Let's go now into the details. The group's performance was anchored by a strong Hong Kong business performance. Elsewhere, earnings were impacted by market pressures, transformation costs and one-off items. Fair value movements on Energy Australia's forward energy contracts were less favorable compared to a year ago. Several nonrecurring items also affected comparability in '25. A HKD 680 million impairment on 2 minority-owned coal plants on the Chinese Mainland was taken due to lower demand and rising competition from renewables. A HKD 345 million redundancy for Yallourn plant closure was also provisioned. While a positive contribution of HKD 390 million was booked from EnergyAustralia's Wooreen battery following the formation of our 50% joint venture with Banpu. I'll now take you through the detailed performance and outlook for each business unit. All balances will exclude foreign exchange to reflect underlying performance of the business. Let's begin with Hong Kong. It was another solid year. Core earnings rose 7% to just over HKD 9.5 billion, driven by continued capital investment and high operational reliability. We also proactively refinanced debt in a favorable interest rate environment to lower interest costs. Capital expenditure was HKD 10.6 billion, focused on growth and decarbonization, supporting the northern metropolis development, data center expansion, grid upgrades and completing the smart meter rollout. Electricity sales dipped slightly, reflecting milder weather and a high base into '24. However, demand from data centers continue to grow, reinforcing their role as a key structural growth driver. We continue leading Hong Kong's low carbon transition, investing and partnering across sectors from transport and shipping to building. Looking ahead, our focus remains on 3 priorities: First, continue delivering safe, reliable electricity at a reasonable tariff. Second, delivered a HKD 52.9 billion development plan expanding infrastructure in growth areas and strengthening grid resilience to support Hong Kong's future. And third, support Hong Kong's 0 carbon goal by completing the clean energy transmission system and working closely with government to increase 0 carbon imports. Now turning to Chinese Mainland. It was a challenging year shaped by transitional supply demand imbalances, softer demand and resource variability. Earnings declined 12% to HKD 1.6 billion, mainly from Yangjiang Nuclear and renewables. Yangjiang's contribution fell due to a higher share of output sold at market tariffs where prices were lower. Renewables were impacted by historically low wind resources and higher curtailment of approximately 9% across the portfolio, particularly in Jilin and Gansu. Conditions improved as the year progress in key provinces like Shandong and Jiangsu with easing tariff pressure. Our minority coal portfolio saw reduced dispatch from lower demand. Nevertheless, operational performance continues to be strong. Energy sold increased across the portfolio with Daya Bay Nuclear delivering another standout year. We also commissioned 1 new win and 3 new solar projects adding to earnings, and we received a record amount of renewable energy subsidies, boosting our cash flow. While our annual contracting GEC and PPA volume with corporate customers increase, supporting short-term earnings visibility despite a softer pricing environment. And finally, on the development side, our pipeline remains healthy at over 1 gigawatt. Looking ahead, Daya Bay will remain a stable contributor, while Yangjiang will face increasing market tariff pressure. For our minority coal assets, earnings should remain stable. Higher capacity charges under Policy 114 are expected to offset the removal of the floor price. The outlook for renewables is sound. Market fundamentals are stabilizing and tariff pressure looks manageable. Importantly, we had success under Document 136. We secured full eligible mechanism tariff volume for 4 projects, locking in attractive rates for the next 10 to 12 years, providing solid long-term revenue visibility. Our capital strategy remains disciplined, and we're exploring efficient funding options, including onshore Panda Bond and strategic capital partnerships. Two, EnergyAustralia. Overall performance was impacted by tough retail conditions and a combined HKD 300 million impact from the one-off tax expenses and upfront transformation costs. In generation, the fleet performed well. Mount Piper run reliably and our fleet operated flexibly to capture optimal pricing outcomes in a period of less volatility, effectively offsetting the Yallourn's lower output and Mount Piper's higher coal cost. Retail remained challenging. Intense competition and cost of living pressures led to margin compression, loss of customer accounts and higher bad and doubtful debts. That said, we saw improvement in the second half with early benefits from cost initiatives and recontracting activities starting to materialize. We booked upfront cost under the enterprise segment, tied to the multiyear transformation program launched in 2025. This strategic investment includes our partnership with Tata to streamline IT operation and corporate functions. Separately, we are evaluating billing and [ CRM ] platforms to simplify and digitize the business. Earnings were also impacted by the one-off tax expense arising from changing law tax that limits the deductibility of interest expenses on shareholder loan. On the positive side, finance costs declined driven by lower average debt levels and reduced interest rates. We also settled the maturing shareholder loan and put in place a smaller, more flexible perpetual note, an equity classified instrument with no fixed repayment obligation to strengthen EA balance sheet. The net result was operating earnings to HKD 85 million, reflecting the combined weight of retail performance, transformation investment and the tax one-off. Looking ahead, EnergyAustralia is focused on 4 key actions: first, optimizing our generation portfolio, leveraging our flexible fleet to respond to demand and capture value in evolving NIM with high volatility. Second, building on second half momentum in retail to improve margins through targeted customer strategies, ongoing cost out and platform transformation. Third, executing our enterprise-wide transformation to deliver a leaner, more efficient operating model by 2028. And lastly, delivering new flexible capacity. We're advancing over a gigawatt of new batteries and pump hydro projects, with Wooreen on track for 2027, laying the foundation for stability and earnings growth. Moving to India. Our joint venture platform, Apraava Energy delivered solid underlying performance. However, reported earnings were impacted by one-offs. Headline results were down 29%, primarily new to HKD 82 million one-off impairment on KMTL transmission. This compares to 2024 results that including one-off gains totaling HKD 55 million. Excluding these one-offs, our underlying operating earnings improved. Renewables delivered higher output, thanks to higher wind generation and the full commissioning of the 251 megawatts Sidhpur wind farm. Solar remained stable, and we saw additional interest income from delayed payment. Transmission had solid availability and earnings from our 2 operating lines. Our smart meters portfolio is scaling up with more than 2.5 million meters installed and growing contributions as rollout accelerate with another 7.2 million meters to be installed. Jhajjar thermal output was lower. But the plan maintained high operational efficiency and reliability. We continue to drive an ambitious growth pipeline. 18 Projects won within 3 years across a diversified portfolio for an equivalent of close to 2 gigawatt capacity. Looking ahead, we remain focused on portfolio decarbonization and sustainable growth. A key milestone will be the sale of our Jhajjar coal plant, which is on track to complete in the first quarter. The sale will unlock capital for reinvestment and is expected to generate gain. With a clear path to decarbonize and a robust pipeline, Apraava is well positioned to capture India's significant energy transition opportunities and continue to deliver value to shareholders. Finally, to Taiwan region and Southeast Asia, earnings declined to HKD 179 million. Ho-Ping's contribution in Taiwan was lower due to lower recovery of coal cost while Lopburi solar in Taiwan remained stable. We also incurred higher development and corporate expenses as we explore new opportunities in the region. Looking ahead, Ho-Ping will focus on managing fuel cost. More broadly, we are assessing opportunities with long-term contracts across Taiwan region and Southeast Asia as part of our growth strategy. These targets benefit from strong economic growth, supportive policy settings and utility scale projects offer attractive potential. We are currently evaluating opportunities, including renewable energy projects in Taiwan and cross-border development linking Laos and Vietnam and we'll proceed with the right partners and funding structures in place. Turning to cash flow. Free cash flow generation was strong, up HKD 1.6 billion to HKD 22.6 billion driven by solid EBITDAF and fuel cost recovery from declining fuel prices from our Hong Kong SoC business, alongside receipt of renewable subsidies from the Mainland. With our new headquarter completed in 2024, overall capital spend came down. Total cash outflow was HKD 22.6 billion made up of HKD 14.6 billion of capital investment and HKD 8 billion of dividend payments. Of the HKD 14.6 billion of capital investment, HKD 11.2 billion was invested in our Hong Kong SoC business and HKD 3.4 billion was spent on renewables projects on the Chinese Mainland and Wooreen battery in Australia. Cash payment for dividends was higher as a result of the higher final dividends for financial year 2024. Finally, our financial structure remains strong with a slight increase in net debt. Our liquidity remains sound with around HKD 29 billion in available facilities to meet business needs and contingency. The team has successfully raised over HKD 17 billion debt for the Hong Kong SoC business in addition to the refinancing of the USD 500 million perpetual capital securities, all with competitive credit spread. Our prudent financial management continues to be recognized by rating agency, S&P and Moody's reaffirm our strong investment-grade ratings for CLP Holdings, CLP Power and CAPCO, all with stable outlooks. And finally, Moody's is upgrading EnergyAustralia outlook to positive on its investment-grade BAA2 rating. I'll pass it now over to TK for the strategy update. Tung Keung Chiang: Thanks, Alex. Energy security and decarbonization are the critical forces shaping our industry's future and CLP is committed to leading this transition. Our strategic priorities are clear and centered on balanced growth, decarbonization and financial discipline. Hong Kong remains our cornerstone. It's stable, regulated framework provides predictable returns and dependable earnings that are fundamental to our strength. We are executing the HKD 52.9 billion 5-year development plan to deliver safe, reliable and affordable power while supporting government's economic and infrastructure agenda and accelerating the city's energy transition. Our major focus is modernizing and expanding our power system to meet future demand from the northern metropolis, a 300 square kilometer development that will house 2.5 million people to the rising needs of data centers and electrified transport. This disciplined investment delivers for Hong Kong and builds a solid platform for sustainable growth. Now building on that foundation, we are targeting growth in fast-growing energy transition markets in our region and doing it with discipline. Our strategy is firmly value over volume. Each investment must meet our minimum return requirements. The goal is to build durable recurring earnings while ensuring diversification. China led global renewable energy in 2025, adding nearly 450 gigawatts of solar and wind and now reinforced by the government's landmark pledge to reduce emissions by 7% to 10% from peak levels. We are participating in that growth but selectively. In 2025, we added 0.5 gigawatt of renewable, which is modest compared with the national scale. Reflecting our calibration to ongoing market reforms, we have adjusted our development targets from 6 to 5 gigawatts of renewable energy by 2030. We are prioritizing quality opportunities with long-term earnings visibilities. This means focusing on high-demand regions with strong resources and great access, expanding at existing sites where we already have scale, and securing long-term green power contracts or GECs with corporate customers. Encouragingly, we've had success post Document 136 implementation with 4 projects across Hebei, Yunnan and Shandong, each securing full eligible mechanism tariff volumes totaling around 1 gigawatt at attractive prices and long tenors supporting long-term revenue stability. Importantly, our growth in China is being structured to be self-funded. From 2026, we plan to tap into onshore financing, like tender bonds and bringing strategic partners through a clean energy fund. It's a model we have already proven in Apraava, and we are applying that same capital discipline here. India's commitment to clean energy is clear, targeting 500 gigawatts of non-carbon capacity by 2030, alongside massive grid modernization, for greater efficiency. This creates a powerful backdrop for Apraava's growth. As our self-funding joint venture, Apraava is scaling up across a low carbon value chain, wind, solar, transmission and smart meters. In the last 3 years, Apraava secured 18 projects across a diversified portfolio, all backed by long-term contracts that lock in stable, attractive returns. Today, it has around 2 gigawatts of low-carbon projects underway, targeting 9 gigawatts by 2030. As part of a diversified portfolio, the business will begin to explore opportunities across commercial and industrial customers and battery storage. Apraava Energy is a capital-efficient growth platform, enhancing both our earnings and long-term growth profile to Australia. In 2025, solar and wind hit new milestones, supplying over 50% of the national electricity markets in quarter 4. This is a clear sign of where the market is heading. Our focus is on firming this increasingly renewable heavy grid. We are investing in flexible capacity that supports reliability and capture value as volatility grows through Australia's decarbonization. EnergyAustralia has over 1 gigawatt of new dispatchable and firming capacity slated to come online in the next 3 years. We have made strong progress on multiple fronts. Over the last 2 years, we have secured government support for 3 key battery projects; Wooreen, Hallett and Mount Piper under the federal government's capacity investment scheme. These projects benefit not just from policy tailwinds, but also from existing lands, grid connections, skilled local workforces and EnergyAustralia's growing development capability. Our partnership model is delivering results. We launched 2 major collaborations in 2025, the 351 megawatts Wooreen battery with Banpu, now under construction; and the 335-megawatt Lake Lyell pumped hydro projects with EDF in development. EnergyAustralia will remain self-funded using partnerships and project financing for large projects, EA's balance sheet for smaller ones and long-term contracts for projects outside our asset footprint. With a clear plan to reduce costs, a more flexible fleet and a strong pipeline of new capacity, EnergyAustralia is well positioned to deliver reliability, resilience and value in Australia's evolving energy markets. Let me touch on our capital allocation approach. It can be summarized as invest for growth, but within our means while protecting financial strength and delivering shareholder returns. Our foundation is solid, a strong cash generation profile and solid investment-grade credit rating give us the flexibility to fund both operations and growth. Hong Kong's sustained asset growth underpins stable and predictable cash flow, supporting our consistent dividend. Beyond Hong Kong, we apply a disciplined lens to every investment. We prioritize capital for projects that are strategically aligned and meet our return thresholds. We also run our established businesses with the objective of financial independence, maintaining stand-alone credit profiles and tapping diverse funding sources. We will leverage capital recycling and business model options, including partnerships, such as the clean energy funds on the Chinese Mainland for efficient use of capital. By adhering to these principles of discipline and diversification, we will drive steady long-term earnings growth. Now finally, our core capabilities are what enable everything I've described. For CLP, it starts with operational excellence. That means consistently delivering strong performance across the energy value chain through efficient operations, reliable networks and great customer experience. We've strengthened grid resilience, modernize our infrastructure and leverage technology to improve efficiency, all of which underpin our reliability, cost discipline and safety performance. Two critical enablers support our strategy, our people and our digital transformation. We are investing in our teams, reskilling and upskilling our workforce and fostering a culture that embraces change. At the same time, we are embedding digital solutions across the business, a key milestone was deploying our ERP system in Hong Kong alongside a digital literacy program that has reached thousands of employees, helping to improve efficiency and decision-making. These capabilities are interconnected and reinforcing. Together, they give us the competitive edge to meet the demands of a rapidly evolving energy sector. We faced the opportunities of energy security and decarbonization with discipline and purpose and with a clear focus on delivering sustainable long-term value for our shareholders. I'll now hand over to Marissa to facilitate our Q&A session. Marissa Wong: Thank you, T.K, and thank you, Alex. We will now begin the Q&A session. [Operator Instructions] Pierre Lau from Citi. Pierre Lau: Can you hear me? Marissa Wong: Yes, we can hear you well. Pierre Lau: I have 2 questions. The first one is for Alex. If you look at Page 12, regarding EnergyAustralia, I think 2025 EnergyAustralia earning below expectation. And I can see that the sharp increase in the enterprise or the corporate expenses and also increase in depreciation and amortization expense. I want to note that these 2 number, I mean, minus HKD 177 million and also minus HKD 190 million, how much of them are on a recurring basis? And how much of them on one off basis? And also, what will be the outlook for 2026? And the second question is on Page 15. Regarding your cash flow. So this is the question for T.K. So I can see that 2025, your CapEx -- for growth CapEx, mainly in Australia and China, still up year-on-year. But obviously, 2025 earnings from both Australia and China were not so good. So are we going to increase the CapEx further for these 2 countries in 2026. And also, we mentioned that we target something like double-digit IR for China and high single-digit for Australia. Are we too optimistic in terms of our return forecast? Tung Keung Chiang: Maybe Alex can answer. Alexandre Jean Keisser: Yes, I can start with the first one regarding EnergyAustralia. So -- and I will add one point, if you allow me. So if we look at the breakdown of the 3 points that you have raised, so the D&A increase depreciation and amortization is a recurrent up to [ HKD 228 million ]. That was linked to the increased CapEx that we did, mainly in Yallourn in order to increase its reliability and able to hedge more of its energy. The one which is linked to enterprise EBITDAF, this is more one-off linked to 2 activities. The first activity is the outsourcing of our IT and corporate services to Tata. So this has been done in order to prepare future reduction in our operating costs. It's an OpEx which is done in order to improve our operation. And the second type of expense that we had is for the contracting for a new platform for our customers that has been not yet set, but for which we already had some expense. The third element that I want to raise, which we have not raised is regarding taxation. This is also a reduction in our earnings linked to a one-off as we took the decision not to deduct from the taxes, the interest payment between EA and CLP for the shoulder loan that was in place. Marissa Wong: And Alex, just touching on the outlook on EA. Alexandre Jean Keisser: The outlook, I don't provide any outlook for that. So sorry for that. Tung Keung Chiang: Okay. Now regarding question 2, the CapEx for growth, as you can see on Slide 15, it's mainly for the Chinese RE projects and EnergyAustralia's Wooreen battery. Now for EnergyAustralia, Wooreen battery will only be commissioned next year. So the benefit actually will be coming. So there is always a kind of a time difference between CapEx and asset commissioning to bring in the benefits. Now regarding the -- but maybe one data point is that you -- last year, we have 4 projects commissioned in Chinese Mainland. Total is about 400 megawatts but right now, we have 5 projects under construction. The total capacity is about 900 megawatts. So we will see more asset coming online this year. Now regarding the expected return, that's our hurdle rate, and we have been very disciplined in ensuring that the investment that we're making can satisfy the hurdle rate. As I also mentioned previously, in Chinese Mainland, we have had 4 projects with total capacity of about 1 gigawatt that have been successful in the mechanism tariff bidding process last year. For those mechanism tariffs, the tariff level actually are quite attractive, and all of those projects after taking into account the future projections of the market tariff, we are quite confident that the IRR actually is higher than our hurdle rates. So we will now continue to focus on winning these kind of mechanism tariff in our markets because having the mechanism tariff with protection on the tariffs for tenure ranging between 10 to 12 years will give us profit stability. Marissa Wong: And maybe just touching on the fact that the target has reduced a little bit from... Tung Keung Chiang: Yes, because of the fact that we want to be more selective in the Chinese Mainland market. So we have adjusted down the target from 6 gigawatts to 5 gigawatts by 2030. And we want to be more selective in picking projects in markets or in regions that have relatively higher tariffs, greater demand lower risk of grid curtailment and also funding projects that are like extension projects that we have already had our existing asset, then we can leverage on the existing infrastructure to reduce the cost of those additional investments. Marissa Wong: And maybe Alex touching on the funding? Alexandre Jean Keisser: Yes, I'd like to provide 2 more information. The first one is regarding China, we financed our project with a 70% to 80% project finance, while when we do our evaluation on the return on equity, we don't assume full recontracting of this project finance, and we assume an average of 50% debt over the lifetime of the asset, so taking a conservative approach. Second information that I want to provide is when we look at our minimum return, we don't take into account potential gain on sell down in the future. So for example, when we took the Wooreen investment, we didn't take into account the gain that we did following this on the sale to Banpu, which was of HKD 390 million for the full 100% of equity. Marissa Wong: Thank you. Alex. Thanks, Pierre, for your question. Next on line is Yonghua -- Yonghua Park from HSBC. Yonghua Park: Can you hear me? Marissa Wong: Yes. Yonghua Park: Well I have about 3 questions. So in terms of long-term planning, India will add 9 gigawatt of non-carbon energy. So this seems to increase from last year's 8 gigawatt coal. Will you increase plan capital allocation from HKD 6 billion per annum to which number? And what's the reason behind this upgrade? Have you seen any improvement in terms of project return in India? Secondarily, in Mainland China, renewable target is [indiscernible] to 5 gigawatts. So can we assume capital allocation could be also trim from 4 billion per annum last year number? And lastly, Yallourn coal-fired plant will be shut down at a point or any other point after that? I saw some news previously indicated that EA will invest AUD 5 billion for their structuring. Can you just clarify? Tung Keung Chiang: Maybe I try to answer the first question. Second question on CapEx, maybe I'll ask Alex to supplement. Now for the first question about the long-term planning in India, actually, I think this 9 gigawatt target is consistent with our long-term planning since last year. Actually, our target is to have about 1 gigawatt a year, so if you look at our existing asset and those assets under construction, so by 2030, adding 1 gigawatt a year of commitment then we can achieve this 9 gigawatt of non-carbon projects. And the capital allocation basically is based on this 1 gigawatt per year to deduce this HKD 6 billion per annum. Marissa Wong: Just on the point that Yonghua, I think you were looking at the 8 gigawatt, it was a 2028 target. So now we've added 2030 an extra year, which is now 9 gigawatts. Tung Keung Chiang: Yes. So it's consistent, yes. Yes. And then on Yallourn, basically, we are maintaining this -- retiring Yallourn by middle of 2028. That's our current plan and actually the agreement with the government. Regarding the CapEx investment, I think it's longer term, after Yallourn closure. Marissa Wong: I think Yonghua, that's -- you're referring to the Yallourn precinct investment? I assume that he is, yes. Alexandre Jean Keisser: I can try to cover here. Tung Keung Chiang: Maybe you cover the CapEx. Alexandre Jean Keisser: Yes. So first of all, on China, yes, of course, the HKD 4 billion per year will be slightly reduced by a bit more than -- by a bit less than 20% in light of the reduction of the target. One incremental information that I want to provide on this, we have taken the decision that by end of 2026, renewable activity of BU China will be self-funded with the raise of up to HKD 3 billion of Panda Bond and also the creation of a clean energy fund, we will have some partners to that. So that's regarding China. Regarding Australia, maybe that was the question is we have a target to have by 2030, up to 3 gigawatt of flexible capacity or contracted or developed, and we are not looking at developing any renewable projects, and we also plan to do this on the balance sheet of EA with similar structure for the large project that what we have done for Wooreen, which is project finance and also we're seeking the right partners in order to reduce the funding needs and increase our return on these projects. Marissa Wong: Thank you, Alex. Next question from JPMorgan, Stephen Tsui. T. Tsui: [indiscernible] The first is, can you please give some guidance on the CapEx outlook this year in terms of growth CapEx, maintenance CapEx and SoC? And about the dividend [indiscernible] because you've raised dividend by more than [indiscernible] this year despite [indiscernible] decline in operating earnings. So how about dividend growth this year given the headwind Mainland China and the Australia [indiscernible]. Marissa Wong: CapEx. Tung Keung Chiang: So 2 questions. Yes, maybe I'll ask Alex to shed some lights on the CapEx. Now regarding the dividend outlook. So basically, our dividend policy is to target to maintain a steady and growing dividend supported by sustained growth in our business. So we'll -- based on the longer-term assessment on our sustainability of our business and then decide the appropriate dividend level. So we will not give any outlook for the moment and all the dividend will be approved by the board by year-end. And maybe Alex can touch on the CapEx? Alexandre Jean Keisser: Yes. On the CapEx, so regarding the SoC CapEx, so we have a total of HKD 10 billion to HKD 11 billion per year that will be spent. Regarding growth CapEx, the growth that we had in India has slowed down slightly this year versus 2023, 2024. It's not being consolidated in any case, and it's being self-funded. The growth in terms of CapEx in China will be linked to the project that we will be able to close and the growth of CapEx related to Australia will be depending when we'll be able to start our project of Mount Piper BESS and when we'll be able to close our partnership on this. Marissa Wong: Thank you, Alex. On the line is Cissy Guan from Bank of America. Cissy Guan: I have a few questions, all regarding to the future capital strategy. First of all, you mentioned the clean energy fund in China, when do [indiscernible] on this? And what kind of partners are we looking for? Are there going to be insurance money or any specific type of investor do you think that may be interested in collaboration with us in renewable energy in China? And also secondly, India, we saw that Apraava has sold the Jhajjar power plant. So will there be any special dividend be upstreamed to CLP? And thirdly, for EnergyAustralia, first of all, are we still looking for disposal of stakes? And also can you provide an outlook as regard to the wholesale power tariff in Australia going forward? And also how will the next [ CMO ] and video reset going to be? And how will the retail competition landscape going forward? Tung Keung Chiang: Okay. Maybe for the CF strategy, Alex can help address it. maybe also including the -- what happened after the Jhajjar sale. Now regarding the EA, the Australian market. Now we do see continued intense competition in the retail sector. So this will continue. So in order to address this, so we have taken steps to improve the business performance. First is to optimize our cost of operation. Secondly is that we are looking at upgrading and replacing our customer platform. We are in quite an advanced stage, and we hope that we can confirm the technology and start execution this year. So with a new platform, we target to further improve the efficiency as well as enhancing the customer experience so as to improve our competitiveness in Australia. Regarding the power price, I think in short term, if you look at the forward price curves, it softened slightly. So we will see, this will continue in the short term. But I think maybe starting from 2028, we do see the potential of forward price increase later because of some of the changes in supply situation. Now in Australia, because of the -- actually, the whole energy transition and decarbonization for CLP Group, the capital requirement is very significant. So we want to be focusing on our core markets, in particular, Hong Kong and China. So for EnergyAustralia, firstly, it will be self-funded. Secondly, that we want to have different kinds of partnership in order to have more efficient use of our capital. So one example is the partnership in the Wooreen battery, where we have sold 50% to Banpu. This is a good example that on one hand, we can have a more efficient use of capital and secondly, that actually, the overall return of the project can be enhanced. And we are open-minded about different forms of partnership, be it at project level or enterprise level. But more importantly, I think in the short term, we want to make sure that the business, actually, the performance is -- can be further improved, both in terms of the efficiency as well as how do we manage all the risks in the market. Maybe I ask Alex to address the first 2 questions. Alexandre Jean Keisser: Yes. So I'll start with India. So the plan is when the transaction will be closed to have Apraava Energy doing it full distribution of the proceeds to [indiscernible] and CLP 50-50% over the year 2026 and 2027. CLP, however, doesn't plan to have an extraordinary dividend distribution being done following this distribution. Regarding China, we have to recognize that the CLP brand is very well recognized. The first was when we had our RMB 3 billion bond being approved by the regulators, we started to do a road show with our underwriter, and we plan to have this first RMB 1 billion being drawn upon in H1, which have been quite well received. Regarding the clean energy fund, let me first explain you what the business model. The business model that we have is looking for the partners, bringing our full expertise in terms of development, in terms of operation, in terms of market sales, in terms of project finance and keeping our brand attached to this clean energy fund, meaning that we want to sell the project once they are being built. But we want also to stay into the fund being an LP with 50% in order to have aligned interest because this is not a one-off. This is a long-term strategy that we want to do, not only for Chinese Mainland, but also for other countries. Regarding who are the different investors. We are looking for a potential insurance company to be an anchor investor. And pending that, we will look for a few others, but a limited number for a fund, which will be around HKD 4 billion fund size with a total CapEx of HKD 20 million. Marissa Wong: Thanks, Alex. I'll just note one more point on EA retail. Yes, it has been challenging conditions. But if you look at first half versus second half retail results, second half was a turnaround, and that was based on the work around customer acquisition, recontracting and the cost-out initiatives. Okay. We've got a question from Huatai, Weijia Wang. Weijia Wang: [indiscernible] The first is on market to specific [indiscernible] energy. We have all anticipated nuclear products. [indiscernible] share and also onshore [indiscernible] the next CapEx on [indiscernible]. Marissa Wong: Okay. Weijia, you were cutting in and out there. So I'm just going to assume your question. Number one is on nuclear investments. And then the second one, how that might impact CapEx in Hong Kong? Tung Keung Chiang: Yes. Okay. Now I assume that you are talking about our so-called nuclear imports in the medium term because in -- for the Hong Kong market, the government has set a decarbonization targets. And by 2035, we have to have 60% to 70% of our generation mix being known or being 0 carbon energy. So in order to fulfill that target, the plan actually is to import 0 carbon energy, mainly nuclear from the region to Hong Kong by 2025. Now for that plan, we are now still in a very early stage because importing nuclear from, say, Guangdong to Hong Kong, we need to have central government supports. And actually, right now, the Hong Kong government is discussing with the central government on identifying the right location for the nuclear power station and then how the power can be delivered to Hong Kong. Now despite the fact that this is still in the early stage, if you look at the existing Daya Bay arrangement, actually, this is -- this could be a president arrangement in which CLP invests in the Daya Bay. Right now, the arrangement is we invest in 25%, and then we import 80% of the power from Daya Bay to Hong Kong through a dedicated transmission line, which can ensure that we are clear about the source of the power as well as ensuring reliability. So this is a good reference for the future import arrangement. But as I said, I think right now, it's still very early stage. Once the -- it's more kind of -- it's clearer about where the power will be coming. Then we will enter into more detailed discussion with the relevant stakeholders in the Chinese Mainland, about the design of the network, how to bring the power in and also the commercial arrangement of the investment. But again, another reference point is that for Daya Bay, the investment in the -- the equity investment in Daya Bay is not part of the SoC CapEx. Actually, it's invest at the CLP Holdings level. And through a PPA from Daya Bay to Hong Kong. So for the Hong Kong SoC, all this will be treated as OpEx and then the return on the investment in Daya Bay is based on an ROE approach. So again, this is a reference model. And whether this will be applied, it depends on the future discussion with the relevant stakeholders. Marissa Wong: Thank you, T.K. We are heading towards time. So I'll take this as a last question from Rob Koh, Morgan Stanley. Thanks, Rob for joining us at the late hour in Australia. Go ahead with your question. Robert Koh: My first question is in relation to the customer platform upgrade in Australia. Other companies down here when they do that, they obviously do that very carefully. They take 2 to 4 years. Is that comparable time frame for EnergyAustralia? And then the second question is on the performance of the wholesale Energy segment. which saw some lower prices, but I guess the volatility capture offset that. Just want to make sure that's the right way to think about the generation performance? Tung Keung Chiang: Yes okay. Thank you, Bob -- I think Rob, sorry. Yes. Now for the customer platform, our current plan is to take about 2 years or slightly more than 2 years. So by before end of 2028 would be our current targets. Now -- but we are still working on the detailed planning right now. And as I mentioned, we are in a very advanced stage of selecting the appropriate technology. So we are working very closely with the future potential vendor on this detailed plan. So there will be more details later in the year. But our current thinking is that we will complete this before end of 2028. Now for the wholesale market, as we mentioned, in the forward price, you can see lower price level. But actually, if you look at the intraday volatility, over the past few years, this volatility actually is increasing. So that's why for EnergyAustralia, we have been focusing on investing in storage -- energy storage projects so that we can capture the benefits of this volatility in the Australian market. Marissa Wong: Thank you, T.K. Thank you all for your very good questions. And thank you, T.K and Alex for the briefing and answering the questions. Before we wrap up, I just wanted to announce the winners of our closest estimates competition. There are 2 this year. The first goes to Qi Kang from Huatai Securities, again, for the closest operating earnings. And the second for the closest annual dividend goes to Evan Li from HSBC. So congratulations to you both. My team will reach out to you about your prizes. That brings today's briefing to a close. My team and I will be available for any follow-ups. And thank you all for joining us today. Take care and goodbye. Tung Keung Chiang: Thank you. Alexandre Jean Keisser: Thank you.
Operator: Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to ZipRecruiter Q4 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Emilio Sartori, Head of Investor Relations. Please go ahead. Emilio Sartori: Thank you, operator, and good afternoon. Thank you for joining us for our earnings conference call, during which we will discuss ZipRecruiter's performance for the fourth quarter and full year ended December 31, 2025, and our guidance for the first quarter of 2026. Joining me on the call today are Ian Siegel, Co-Founder and CEO; David Travers, President; and Tim Yarbrough, CFO. Before we begin, please be reminded that forward-looking statements made today are subject to risks and uncertainties related to future events and/or the future financial performance of ZipRecruiter. Actual results could differ materially from those anticipated in these forward-looking statements. A discussion of some of the risk factors that could cause actual results to differ materially from any forward-looking statements can be found in ZipRecruiter's annual report on Form 10-K for the year ended December 31, 2025, which is available on our investor website and the SEC's website. The forward-looking statements in this conference call are based on the current expectations as of today, and ZipRecruiter assumes no obligation to update or revise them, whether as a result of new developments or otherwise. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, GAAP results. Reconciliations of the non-GAAP metrics to the nearest GAAP metrics are included in ZipRecruiter's shareholder letter and in our Form 10-K. And now I will turn the call over to Ian. Ian Siegel: Thank you. Good afternoon to everyone joining us today. 2025 was a year of stabilization and strategic execution for ZipRecruiter. After multiple quarters of sequential growth, I'm pleased to share that we achieved year-over-year revenue growth in Q4 '25, the first time a quarter has grown year-over-year since Q3 of 2022. Throughout 2025, we remain focused on our mission to actively connect people to their next great opportunity by delivering high-impact product enhancements. We upgraded ZipIntro and our resume database to drive faster connections, deployed new AI-powered suggested screening questions to decrease the time it takes employers to vet the candidates they receive, and optimized our automated campaigns to deliver better performance for our enterprise clients. In January of 2026, we took another leap forward with the launch of Be Seen First, a product which enables job seekers to jump to the top of an employer's candidate list. Job seekers earn this advantage when they tell the employer why they are excited about the role and what skills they bring to the table. The results are promising. Be Seen First candidates are nearly 2x more likely to have a conversation with an employer. Following the sequential growth in Q2 and Q3 of 2025, Q4 '25 marked a return to year-over-year revenue growth. We achieved this milestone despite a challenging macroeconomic backdrop. That said, hiring demand in Q4 '25 was soft. Hiring demand dropped below what normal seasonality would have predicted and job openings declined 10% year-over-year. As a result, Q1 '26 started from a lower base of paid employers. Our Q1 '26 revenue guidance of $106 million at the midpoint reflects this lower holiday baseline. However, in Q1 of '26, paid employer trends have rebounded year-to-date. Those trends are, in fact, stronger than the trends we called out as noteworthy in Q1 of '25. We are encouraged by the momentum we see in performance marketing revenue. Year-over-year performance marketing revenue increased 5% in Q3 of '25 and 9% in Q4 of '25. Our go-to-market motion and product offerings continue to resonate with and drive value for our larger enterprise customers. This performance gives us confidence that our product improvements and technology investments are driving us forward in this environment with our underlying momentum intact. For the full year 2026, we expect hiring demand to follow a typical seasonal cadence, albeit at subdued levels given the lower starting point post holidays. We believe a likely result in this scenario is for us to achieve flat year-over-year revenue in 2026 compared to the 5% decline in 2025. Further, in this scenario, we expect adjusted EBITDA margins to expand by 5 percentage points from 9% in 2025 to 14% in 2026. This improvement reflects our rigorous cost discipline alongside targeted investments aimed at capturing growth. In addition to addressing our business specifically, we have been receiving many questions about AI and its impact on the labor market. While some attribute the current hiring slowdown to AI displacement, ZipRecruiter employer survey data tells a different story. According to ZipRecruiter customer responses in our Q4 2025 Annual Employer Survey, the current labor market trends are primarily driven by economic factors, such as lower customer spending or cost-cutting mandates rather than technology-driven automation. AI is currently having little to no impact on our customers' hiring plans. This matches the sentiment from a large number of economists on the topic. Over the long term, we expect AI to be a substantial boon to the labor market. History shows that major technological shifts display specific roles, but ultimately unlock productivity and enhance labor demand. We believe AI will follow a similar trajectory. We further believe ZipRecruiter is uniquely positioned to lead this next wave of AI-driven acceleration. Since our inception, we have invested over $1 billion to build an enduring brand that resonates with both employers and job seekers. Our proprietary AI matching technology trained on billions of interactions continuously learns to surface the right roles and deliver qualified candidates faster. Our team and our technology investments are laser-focused on continuously improving the process of finding a great job or a great employee. ZipRecruiter remains committed to its mission of actively connecting people to the next great opportunity through every economic cycle. We believe we will continue to lead the shift in recruiting from offline to online, and we are prepared for this new wave of AI-driven innovation. Before I turn the call over to Dave, as you read in our shareholder letter, our CFO, Tim Yarbrough, has decided to pursue a new opportunity and will be departing ZipRecruiter. On behalf of the Board and the entire ZipRecruiter team, I want to thank Tim for his over a decade of dedicated service. We wish him continued success in his next opportunity. Dave Travers, our current President and previous CFO of 6 years, is stepping in as Interim Chief Financial Officer effective February '26. Dave's deep familiarity with our business, financial operations and history will ensure a seamless transition during this interim period. We've also initiated a comprehensive search for a permanent CFO. And with that, I'll turn the call over to Dave to share some business highlights. David Travers: Thanks, Ian, and good afternoon. Our performance in the fourth quarter reflects the continued success of our product-led strategy. Even in a complex hiring environment, our investments in matching technology and seamless integrations are delivering clear value to both employers and job seekers. I'm excited to share several highlights with you. Q4 '25 revenue reached $112 million, representing 1% year-over-year growth. This is a significant milestone, marking our first quarter of year-over-year growth since the market decline began in Q3 of '22. This performance is consistent with the scenario we outlined over the course of 2025, and we believe our execution, brand resilience and strong market position overcame what continues to be a challenging macroeconomic backdrop. We finished the year with over 59,000 quarterly paid employers in Q4, up 2% year-over-year and down 12% sequentially, consistent with historical seasonal patterns. This is our second consecutive quarter of year-over-year expansion, signaling the long-term health of our employer base. This January, we launched Be Seen First, a new product designed to help job seekers break through the application black hole and turn one-way applications into real 2-way conversations. By adding a short note to their application, job seekers moved to the top of an employer's applicant list, highlighting essential skills and enthusiasm that resumes often missed. This provides recruiters with critical context and surfaces the most engaged talent. Employers are prioritizing these high-intent applicants and Be Seen First candidates are nearly 2x more likely to have a conversation with the employer. In response to the shifting SEO landscape, we optimized our marketplace for generative AI discovery. This drove a significant increase in engagement with site visits from AI engines more than doubling year-over-year in Q4. Additionally, ZipRecruiter's job seeker traffic outperformed our largest competitors throughout 2025, validating our ongoing product improvements. By reaching job seekers regardless of where they begin their search, we believe we are uniquely positioned to capitalize on the eventual acceleration of U.S. hiring. Since its U.S. launch in 2025, Breakroom has published over 16,000 employer profiles, powered by 1.6 million employee ratings. We recently integrated these ratings directly into ZipRecruiter, enhancing 8.7 million job postings and over 9,000 company pages with transparent workplace insights, providing job seekers with transparency to better evaluate potential employers and increasing the likelihood of a strong long-term match. In 2024, we launched ZipIntro, an AI-powered solution that speeds up hiring by rapidly connecting employers and job seekers for face-to-face conversations. Enterprise adoption of ZipIntro grew consistently throughout 2025. In Q4 alone, scheduled sessions increased 17% sequentially and expanded by more than 5x year-over-year. To further optimize the platform, we recently made a number of targeting improvements that drove a 32% increase in sessions that met or exceeded RSVP targets, delivering a more predictable candidate flow for employers. We've enhanced our resume database to allow employers to filter by recent platform activity, such as whether they are new to the ZipRecruiter marketplace or if the candidate recently updated their profile. Employers are finding these real-time insights incredibly valuable. The resume unlock rate for candidates with these activity labels is 66% higher than those without. When thinking through specific questions to ask candidates, employers often struggle when starting from the blank page. In Q4, we launched an AI-driven tool that automatically generates tailored screening questions. Employers have quickly embraced this upgrade with 93% of new employers using our AI recommended screening questions in Q4. By automating this key step, we drive higher quality connections faster. ZipRecruiter's enterprise-focused strategy is gaining significant traction, fueled by high demand for automated tools. In Q4, adoption of our automated campaign performance solution increased 32% year-over-year. This and other enterprise enhancements led to a 9% year-over-year increase in performance marketing revenue in Q4, an increase from 5% growth seen in Q3. Despite a complex hiring landscape, these results demonstrate that our programmatic tools are successfully delivering the efficiency and candidate quality that large employers prioritize. For over a decade, ZipRecruiter has invested in building a network of over 180 ATS integrations to streamline the enterprise hiring process. This momentum continued in Q4 with the launch of an enhanced Workday integration and a new Bullhorn partnership. By connecting with these major ATS platforms, recruiters can now source talent from our resume database and export candidates to their preferred system with a single click, drastically reducing applicant friction and accelerating time to hire. With that, I'll now turn the call over to Tim to run through the financial results. Tim? Timothy Yarbrough: Thank you, Dave, and good afternoon, everyone. Our fourth quarter revenue of $111.7 million represents 1% growth year-over-year and a 3% decline quarter-over-quarter. Our first year-over-year increase since Q3 of 2022 was primarily driven by higher performance-based revenue from enterprise employers, which grew to 25% of total revenue. The sequential decline is consistent with seasonal hiring patterns in the fourth quarter. We finished the year with over 59,000 quarterly paid employers, representing a 2% increase year-over-year and a 12% decrease sequentially. This marks our second consecutive quarter of year-over-year growth, demonstrating the stability of our employer base despite macroeconomic volatility. The sequential decline is consistent with our historical seasonal patterns and reflects the typical slowdown of hiring during the holiday period. Revenue per paid employer was $1,889, down 2% year-over-year and up 10% sequentially. The year-over-year decrease reflects continued softness in hiring demand, particularly among SMB customers. The sequential increase is primarily driven by the seasonal reduction in the number of paid employers in the fourth quarter. Our net loss in the fourth quarter was $0.8 million. Adjusted EBITDA in Q4 '25 was $16.2 million, equating to a margin of 15%. This is higher compared to 13% in Q4 '24 and 8% in Q3 '25, with increases driven by a return to revenue growth and continued expense discipline. Our full year adjusted EBITDA margin of 9% exceeded the mid-single-digit expectations we shared at the beginning of the last year. Cash, cash equivalents and marketable securities was $409.1 million as of December 31, 2025. During Q4 '25, we repurchased 1.8 million shares totaling $8 million. As Ian mentioned, after more than 10 incredible years at ZipRecruiter, I'll be stepping down from my role as CFO to pursue a new opportunity. I'm deeply grateful for the growth and experiences that have shaped both my career and me personally. Thank you to our amazing employees for your dedication and partnership. It's been an honor to be a part of this team, and I'm excited to see how ZipRecruiter will continue to transform how hiring is done. With that, I'll pass it back to Dave to discuss our guidance. David Travers: Thanks, Tim. I echo Ian's comments, and we wish you luck in your future endeavors. Moving on to quarterly guidance. Our Q1 2026 revenue guidance of $106 million at the midpoint, down 4% year-over-year and 5% sequentially, reflects the lower baseline of paid employers as we started Q1. Our adjusted EBITDA guidance midpoint of $5 million represents a 5% margin, which is flat year-over-year and demonstrates our financial flexibility as we navigate the current labor market backdrop. Looking beyond Q1, we expect hiring demand to follow a typical seasonal cadence over 2026, albeit at subdued levels given the lower starting point post holidays. We believe a likely result in this scenario is for us to achieve flat year-over-year revenue in 2026, which is a 5 percentage point improvement over last year. In this scenario, we expect adjusted EBITDA margins to expand by 5 percentage points from 9% in 2025 to 14% in 2026. This improvement reflects our continued cost discipline alongside targeted investments to ensure ZipRecruiter emerges from this cycle in a position of strength. The stabilization in the business we've seen despite a weak hiring environment is encouraging, and we remain confident in our long-term growth opportunity. We believe our flexible operating model and healthy balance sheet position ZipRecruiter to take advantage of growth opportunities and position us to outperform the broader hiring category over time. With that, we can now open the line for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Eric Sheridan from Goldman Sachs. Eric Sheridan: Tim, thanks for all the help over the years, wishing you the best of luck. Maybe 2, if I can. First, if you look at the demand environment you're facing right now, any different characterizations you would give on the employer side from what you're seeing from large enterprises relative to SMB? And any indications how that might change as we progress into Q1 and deeper into the year? David Travers: Eric, this is Dave. Great question. Yes. So what we saw last quarter was in the latter half of the quarter over the holiday period a -- after a strong start to the quarter was a slowdown in SMB demand, particularly. And we've been encouraged since the beginning of the year, as we said, that SMB demand looks as good or actually slightly better than last year and better than we've seen in several years. So our expectation is that from a lower baseline, given the weak latter half of holiday period of last quarter, from that lower baseline, we'll see a stable overall macro environment and that our ongoing investments and continued operational improvements as we just detailed, ZipIntro, resume database and most importantly, perhaps our execution in enterprise, where we see a similarly -- forecasting as the most likely scenario, a similarly stable demand environment but where our execution and obsession with hitting customers' targets, defining clearly for them what their target is and what their definition of success is and then making sure we hit it and are having our -- both our product and our go-to-market teams work relentlessly to make sure that happens. That's paying off, and we see it -- for the first time in 4 years, seeing slight sequential growth in performance marketing revenue in Q4 versus Q3. So what we foresee is -- we're ready for a wide range of scenarios as always, but the most likely scenario being the overall demand environment for both SMB and enterprise being flat from this lower start and that our investments allow us despite a weak starting point for -- to start the year in Q1 that we get to flat this year and are able to expand margins as we do it so that we're increasing revenue by 5 percentage points versus last year and increasing margin by 5 percentage points at the same time. Operator: Your next question comes from the line of Ralph Schackart from William Blair. Ralph Schackart: Maybe just a follow-up on Eric's question. Just trying to square a little bit, I guess, some of the more soft conditions you saw in Q4 after a strong start compared with, I guess, a stronger rebound in Q1, particularly I think you called out SMB. Anything that you sort of call out there for the, I guess, the dramatic or pretty sharp rebound there? And then two, just in terms of the traffic you're seeing from the LLMs, can you maybe sort of walk us through how that traffic is behaving, performing, perhaps converting? And then is it at a level perhaps in 2026 when it could start to impact the results? Just any other color on the LLM traffic would be great. David Travers: Thanks, Ralph. This is Dave. I'll take the first one and let Ian take the second one. So on the soft Q4, I think it very much -- what we saw in Q4 very much mapped to what the job openings numbers from the government look like where we saw that 10% decline. And each -- even when you seasonally adjust it, December is always the hardest month of the year to forecast and is always the seasonally weakest month. But even when you adjust for seasonality as the government does in their official data, there was a month-over-month decline each month in Q4 in terms of job openings, and that's very consistent with what we saw. And as we look at it, as we always say, our employer base looks like the whole U.S. economy. But when we look at particular areas of weakness and strength, health care remained resilient as it has for several years now and demographic changes and other structural reasons for that in the U.S. economy. But on the flip side, retail, food service, education were all areas of weak spots during the quarter, and we saw those degrade. And then to the point I said earlier, starting January 1, we saw a different story where we've seen a nice pickup in activity. And so that gives us the confidence to say the most likely scenario of those that we prepare for is that we will be flat from that lower baseline for the year. Ian Siegel: And speaking to the LLM question, to give context, ZipRecruiter gets traffic from a wide array of different media sources and sites, and that includes everything from other job sites to organic traffic to SEM to response advertising and LLMs are just one part of the mix. What makes them interesting is they are the fastest growing in terms of both they themselves as a category as well as the traffic that we are getting from them. However, in the overall mix of traffic that ZipRecruiter gets, overwhelmingly still traffic that is highly engaged and active on the site is still coming from the variety of traditional sources. The difference between LLM traffic and those sources is not much. They are active job seekers who are eager and engaged. They are still continuing to grow at a healthy pace, and we are excited about the momentum that we see with LLMs. Operator: Your next question comes from the line of Trevor Young from Barclays. Trevor Young: First one, just as we think about the cadence of growth throughout the year, it would kind of suggest that 1Q is maybe the low point for the year and you would exit the year at low single-digit territory or something like that, such that you're flat overall even with tough compares. What kind of informs that view that growth will accelerate from here given that backdrop? Particularly because you are seeing EBITDA margin expansion, so that maybe suggests not leaning in on marketing meaningfully. And then second one, just on capital allocation. You have about $200 million in cash on hand, Guide implies free cash flow maybe improves a bit here in '26. Clearly, a willingness to buy back stock in the last year. Should we expect opportunistic repurchases of the stock given a bit of an uptick in the outlook here? And then relatedly, any thoughts on the trade-off of stock versus debt repurchases because I know a lot of folks on the credit side also care on that. David Travers: Great. Thanks, Trevor. So in terms of the cadence throughout the year, I think what gives us confidence is, a, what we've seen year-to-date since January 1; and b, going back longer than year-to-date, the momentum we have with enterprise. And to the point you made, which is astute that margins going up while we see the cadence of improvement over the course of the year being the most likely scenario is consistent with enterprise continuing to outperform where we're not as -- the demand generation is much more sales-led and much less marketing led on the enterprise side of things. And so those teams are more -- the expense line on those teams is more stable and preexisting, and we see a lot of investments that we've made over the past couple of years starting to pay off and is less dependent on same quarter sales and marketing. Obviously, we remain flexible to and we'll adapt based on changing environments we see, but that's the most likely thing we see, and we see more than just dating back to January 1 in terms of momentum there with that part of the business. And then to your question on capital allocation, so our sort of strategic framework remains the same. The top priority always is organic growth. We were not just EBITDA profitable last year, but free cash flow profitable as well and obviously talked about seeing expanding margins this year. So in terms of organic growth, we're well covered, but we'll always prioritize that first. The second priority is M&A opportunities. You saw us take action there in terms of Breakroom where there's a really strong value proposition to both job seekers and employers about how our entire marketplace gets stronger with better employer branding and giving job seekers the real straight dope on what it's like to work -- in frontline workers, in particular, what it's like to work at a particular employer. The third priority is return of capital. And so as you pointed out, we've been a consistent returner of capital last quarter, about $8 million for about 1.8 million shares. And every single time we have an opportunity to allocate capital, we think about what are our resources. We currently have a very robust balance sheet and lots of liquidity, as you mentioned. And we look at the different opportunity set of different opportunities to repurchase shares or bonds or whatever, as you mentioned, and look at the ROI there, and we'll take action accordingly. You've seen us do that before. We will continue to evaluate that as we see opportunities to do so. Operator: Your next question comes from the line of Josh Chan from UBS. Joshua Chan: Good luck, Tim. I guess maybe just 2 questions. So I guess, first, what do you make of the Q4 slowdown and then Q1 recovery? And relatedly, why doesn't the Q1 recovery get you back to the same spot? Is it just like not enough of a recovery in magnitude? And then the second question would be, are you seeing meaningful changes in terms of how employers are trying to find candidates as in moving away from the traditional resume? I mean you launched this Be Seen First feature, which allows people to feature different things other than their resume. So just curious if something like that is starting to happen in the environment? Ian Siegel: Yes, go ahead. David Travers: So on the first one, your question is a good one. So the way we think about it in terms of the cadence in Q1, it is very typical in Q1, given the seasonality, as I mentioned or we mentioned before, that the holiday period is the weakest period of the year seasonally, then Q1 can look fairly flat to Q4 in a typical year, plus or minus a couple of points. But it's really a story of building throughout the quarter from a lower starting point given what happens, the slowdown over the holidays, especially in the SMB part of the business. And so what we see here is just a steeper climb. And the starting point was lower. The trend line within the quarter looks good, but we're just starting from a lower point where the SMB part of the business was a little bit weaker over the course of late November and December, which is what causes that cadence. Ian Siegel: And then on Be Seen First, without question, the world of recruiting is experiencing a renaissance as it relates to both the way candidates are sourced and the way -- the opportunities they have to communicate with the employers and the hiring managers. Resumes are very much still in play. They are a necessary part of a comfortable expected process that employers are not willing to let go of. What Be Seen First is, it's really a mechanism for job seekers to show their enthusiasm, to stand out when they apply to a job in a novel way, and job seekers are using it exactly as we intended. They are not spamming employers with Be Seen First. They're being selective about which jobs that they express their enthusiasm for and employers are responding as we would expect, which is in a sea of candidates, many of whom resumes look highly qualified for the role in which they are applying. They are looking for other signals that will allow certain candidates to stand out from the rest of the pack. A candidate participating in Be Seen First, showing their enthusiasm and getting pushed to the top is not only advantaging themselves, they're actually doing the employer a favor by giving them one more method from which to assess the pool of candidates they received to decide who were the very best that they want to bring in for an interview. Operator: Your next question comes from the line of Kishan Patel from Raymond James. Kishan Patel: This is Kishan Patel on for Josh Beck. You mentioned in the shareholder letter that you're optimizing the platform for Gen AI discovery. How do you think about optimizing the ZipRecruiter platform for agentic search or engagement by job seekers? Ian Siegel: Well, this is certainly a topic that we are spending a lot of time thinking about. And we are excited about the potential and opportunities that is represented by AI. There are so many different directions we could choose to take this in. And certainly, already AI is permeating our site. I mean you can go all the way back to our S-1 when we first went public where we described ourselves as an AI-powered marketplace long before there was ever an LLM and everyone was talking about AI. And when we talked about AI, we were really talking about the matching engines that we built that are powered by those billions and billions of interactions between employers and job seekers, which is what allows us to not only do an exceptional job of matching keywords and resumes to the keywords and job descriptions, but also to benefit from what's known as the wisdom of the crowd, where insights can be gleaned by the different AI methodologies that we were applying in order to find the very best jobs for job seekers and the very best candidates for employers. As we look at our own service today, already, you can see AI making its way in. We talked about suggested screening questions in our shareholder letter. That is a product that has reached massive levels of adoption on our product. It's skyrocketed with the launch of suggested screening questions. The difference between putting a blank page in front of an employer and saying, come up with screening questions versus putting a set of AI-created pre-written screening questions in front of them, has been fundamentally night and day. It has been a sea change in how our product works and how applications are processed, and it's fantastic for employers because again, employers are always looking for signal, how can I differentiate between the seemingly equally qualified candidates who I have received, screening questions is a fantastic tool for that. I would expect you will hear many more AI-driven features coming through the ZipRecruiter development team and entering into our platform over the coming years. And I think you will see that AI becomes a fundamental tool and a fundamental advantage for ZipRecruiter to enhance the marketplace that we have already created. Operator: There are no further questions. That concludes the question-and-answer session. That also concludes today's meeting. You may now disconnect.