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Operator: Good afternoon, everyone, and welcome to the ACADIA Pharmaceuticals Inc. Red Robin Gourmet Burgers, Inc. Fourth Quarter 2025 Earnings Call. This conference is being recorded. During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and therefore, are subject to risks and uncertainties as described in the company's SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its fourth quarter 2025 earnings release on its website at ir.redrobin.com. Now I would like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace. David Pace: Good afternoon, everyone, and thank you for your interest in Red Robin. As we close out 2025, our fourth quarter results reflect the steady momentum we're building as we execute against our First Choice plan. We introduced this plan in the second quarter of 2025 to focus our priorities and outline how we intend to strengthen our competitive position and improve our overall performance. Today, I'll provide an update on our progress against its key pillars and how we intend to build on that progress in 2026. Before I get into the details, let me begin with some context around our full year and fourth quarter sales performance. For the full year, comp sales were down 0.3%, excluding the impact of deferred loyalty revenue. This included a 3.5% increase in average check, offset by a 3.8% decrease in traffic. Our traffic improved in the back half of the year as we rolled off 2024 pricing actions and saw traction with our Big Yummm value offering. For the fourth quarter, comp sales were down 3.3%, excluding deferred loyalty revenue. This included a 0.3% increase in average check and a 3.6% decline in traffic. Now like the broader industry, trends softened in October and November relative to where we exited the third quarter. In addition, we made the intentional decision to shift marketing spend into December to maximize reach during the holiday season. That strategy proved effective. increased support behind our Big Yummm value offering and our holiday promotions drove a notable inflection in December as we outpaced the Black Box Intelligence casual dining index in traffic for the first time since the third quarter of 2024. Encouragingly, momentum continued into January, where traffic was positive before weather events starting in late January with Winter Storm Fern have made results choppy in subsequent weeks. On profitability, we exceeded our expectations for both restaurant level margin and adjusted EBITDA in the fourth quarter. Full year adjusted EBITDA of $69.7 million represented a 53% growth over 2024, and RLOP margin grew by 190 basis points. Importantly, we achieved this result with only modest pricing in 2025. For perspective, in the fourth quarter, net pricing contributed just 1.6% to results, underscoring that our performance improvement is increasingly being driven by a stronger consumer proposition and improved operating efficiency. With that context, let me walk through our progress against each pillar of the First Choice plan and our strategic priorities for 2026. First, let's start with Hold Serve. Our Hold Serve pillar requires that we sustain the progress that we make each quarter and then extend that improvement even further as we move forward. During the fourth quarter, our labor efficiency initiatives contributed approximately 180 basis points to restaurant level margin. These gains were consistent throughout the year and were a primary driver of a 250 basis point reduction in total labor costs for 2025. Importantly, we achieved these efficiencies while maintaining our guest satisfaction scores, demonstrating that productivity and hospitality can coexist. These improvements also reflect the increased accountability and ownership embedded in our managing partner model, which rewards our partners for improvements that they drive in restaurant-level profitability. This leads me to our next pillar, which is our Drive Traffic initiative. As noted earlier, we saw industry outperformance in December. We believe this improvement is driven by 2 primary factors: one, the power of our Big Yummm burger offer; and two, our improvements in how we market and message to our guests. First, our $9.99 Big Yummm value offer continues to resonate. Within our dine-in channel, it delivered 10% guest mix in the fourth quarter, strengthening our relevance with value-seeking guests and supporting incremental traffic and trial. Building on this success, we expanded our platform with the January 26 launch of our new menu, integrating additional Big Yummm deals directly into our core offering. This expanded platform now features 6 meal options across a tiered price range of $9.99 to $16.99, extending beyond burgers into categories such as our hand-breaded classic crispy chicken sandwiches, Donatos Pizza and Whiskey River barbecue wraps. Importantly, each meal includes our signature bottomless sides and beverages, reinforcing value while preserving the full Red Robin experience. The new menu also broadens our premium offerings, creating a deliberate barbell approach that balances compelling value with higher-priced indulgent options to expand guest choice across dayparts and occasions. Early results indicate that the menu is performing as expected and that average check has increased and remains healthy as guests engage across the menu. The second key driver of our fourth quarter traffic improvement was the deployment of incremental investment behind the data-driven First Choice marketing strategy we initially introduced in Q3. This strategy enables us to engage guests more personally and precisely than traditional broad-based campaigns. We've now mapped every restaurant across 6 to 8 competitive categories and clustered locations based on similar trade area dynamics and messaging needs. This analysis supports more focused and locally relevant messaging, allowing each restaurant to compete more effectively within its specific market. In short, we continue to transition from a broad one-size-fits-all approach to a marketing model that is more precise, more disciplined and more efficient by ensuring that the right message reaches the right guests at the right time, improving the overall return on our marketing spend. The third pillar of our First Choice strategy is Find Money. As discussed last quarter, our corporate efficiency actions have meaningfully reduced general and administrative expenses, and those savings will continue to benefit us in 2026. For perspective, excluding stock-based comp, we reduced G&A by over $4 million in 2025 and expect to have a similar step down in 2026, driven by the efficiency initiatives implemented in the middle of 2025. With respect to our work to strengthen our balance sheet and capital structure, we continue to progress on tactical refranchising as a key enabler to this initiative. As previously communicated, we plan to use proceeds from any completed transactions to reduce debt and further strengthen our balance sheet. We're encouraged by the interest level expressed and the progression of discussions to date. We remain confident that we will achieve our targeted capital structure objectives. Unrelated to our work to reduce debt, but that is further reflection of franchisee confidence in our system improvements, 3 of our current franchise groups have indicated that they are currently pursuing new unit development opportunities within their territories. With respect to overall refinancing efforts, our improved financial performance has strengthened our liquidity position and along with our progress on refranchising is expected to expand our options to improve our capital structure. We continue to work with our advisers to advance this process and expect to refinance our debt consistent with our previously outlined objectives. Additionally, as a result of improved business performance and further progress in our refranchising work, we no longer believe that we need to preserve the option to conduct an at-the-market equity offering, and so we have terminated the ATM program announced last November. No shares were issued under that program before it was terminated. Turning to our Fix Restaurants pillar. In 2025, we completed 20 light-touch refreshes to help our physical environment maintain competitive standards and reflects the quality of our food and service. Our 2026 capital plan allocates additional investment toward restaurant refreshes. We plan to resume refresh activity later in the first quarter, continuing a disciplined light touch approach designed to maximize guest impact. In addition to our facility refreshes, we begin to roll out replacement devices for our server handheld technology and we'll also introduce an upgraded version of our Ziosk tabletop devices. We believe that both of these actions will improve server efficiency, order accuracy and speed of service, returning the gift of time benefit that Red Robin has historically been known for. In the 10 months I've served as CEO, what stands out most for me is the growing sense of ownership and pride across our restaurants. Our team members are not simply executing initiatives. They are owning the challenge, putting guests at the front of everything we do and actively contributing ideas that have improved operations and enhanced the guest experience. It's also important that we continue to challenge the status quo and identify insights and potential competitive advantages that will enhance our ability to differentiate ourselves in the marketplace. With that in mind, in the fourth quarter, we launched an enterprise version of the ChatGPT AI platform. Since our launch, we're seeing expanding utilization across the organization with tangible results. We're now in the process of introducing it to our managing partners, along with custom GPT tools and are already seeing adoption and application that assist our managing partners in further optimizing labor costs, COGS and guest service. The overall impact of our investments in our teams is tangible. Hourly turnover is now at its lowest level since 2017, and engagement scores continue to improve. This translates directly into how we serve our guests and support one another. As we look ahead, we'll remain focused on creating an environment where great people can build meaningful and rewarding long-term careers. To our entire Red Robin team, thank you for your continued commitment to our guests and to each other. The foundation we're building together positions us well to be able to capture the opportunities ahead. With that, I'll turn the call over to Chris to review our fourth quarter results. Christopher Meyer: Thanks, Dave, and good afternoon, everyone. I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2025. Total revenues in Q4 were $269 million, a decrease of $16.2 million from 2024. This change in revenue was primarily due to a decrease in comp sales and the impact of restaurant closures. Comp sales, excluding the impact of deferred loyalty revenue, were down 3.3% in Q4. Including deferred loyalty revenue, comp sales were down 3.1%. This result was in line with the expectations we discussed in our last earnings call. Q4 comp sales included a 0.3% increase in average check, offset by a 3.6% decline in traffic. As it relates to other aspects of our Q4 financial performance, restaurant level operating margin was 11.4%, a decrease of 10 basis points compared to the fourth quarter of 2024. The benefits of cost savings, restaurant closures and check average increases were offset by inflation and lower traffic. General and administrative costs were $14.9 million as compared to $18.4 million in the fourth quarter of 2024. The reduction is primarily due to reduced people costs from our corporate efficiency initiatives and lower stock-based compensation expense. Selling expenses were $8.8 million as compared to $5.7 million in the fourth quarter of 2024. Adjusted EBITDA was $11.8 million in the fourth quarter of 2025, a decrease of $2.6 million versus the fourth quarter of 2024. This result was ahead of expectations we discussed on our last earnings call. We finished 2025 with $69.7 million of adjusted EBITDA, which represented 53% growth over 2024. As it relates to our balance sheet and capital structure, we ended the fourth quarter with $19.9 million of cash and cash equivalents, $9.6 million of restricted cash and $37 million available borrowing capacity under our revolving line of credit. Our strong results in 2025 have improved our liquidity and position us well heading into 2026. Turning to our outlook. We will now provide the following guidance for 2026. First, we expect comparable restaurant revenues to be between 0.5% and 1.5%, excluding the impact of deferred loyalty revenue. Second, restaurant-level operating profit margin of approximately 13%. Third, we expect adjusted EBITDA of between $70 million and $73 million. And finally, we expect capital expenditures to be between $25 million and $30 million. Our financial guidance suggests that we expect to make progress in 2026 across all of our key financial metrics. In summary, we are pleased with our financial performance in 2025. We have made significant progress towards increasing restaurant level profitability, reducing debt and growing EBITDA. We will remain disciplined in executing against the First Choice plan in 2026 and continue strengthening the operational and financial foundation of the company. Dave, I will now turn the call back to you. David Pace: Thanks, Chris. As we look ahead to 2026, I'm confident that the progress we've made across each pillar of our First Choice plan positions us well for continued performance improvement. Our December results where we outpaced the Black Box casual dining traffic index reinforces that when we execute with precision, combining compelling value, targeted marketing and exceptional hospitality, we can compete effectively. Our menu enhancements launched in January and give our guests expanded options at both ends of the menu and across dayparts and occasions. And we have a robust new product pipeline that we will introduce throughout the year. Simultaneously, our ability to continually refine and focus our marketing messaging and spend means that we can confidently reach our guests where they are in the most efficient way possible. Our capital structure initiatives are progressing in line with our plan. We expect the combination of tactical refranchising and refinancing to strengthen our balance sheet and provide the flexibility needed to continue investing in our people, restaurants and technology. Further announcements will be made as we achieve significant milestones on that journey. While there's much work ahead, our team is focused and committed to building a Red Robin that guests choose first, team members are proud to work at and shareholders can rely on for sustainable returns. With that, we're happy to take your questions. So operator, please open the lines. Operator: [Operator Instructions] Our first question is from Todd Brooks with Benchmark StoneX. Todd Brooks: Congrats on the inflection of the business in the second half of last year, guys. Two quick questions. One, kind of a block and tackle. But within the 50-basis point to up 150 basis point same-store sales guidance for '26, thoughts on pricing. I think you said you were running about 1.6% price in Q4. What kind of pricing assumption is baked into that guidance for same-store sales? Christopher Meyer: Yes. Todd, it's Chris. So we took a 3.2% menu price increase when we rolled out our new menu at the end of January. We didn't have a whole lot of carryover from last year. So we're expecting that to carry through for the full year. So the full year pricing impact this year will probably be about 3.2% as well. Todd Brooks: Perfect. And then more of a strategic question, but it sounds like the micro-targeted marketing has been a real revelation for you all. Can you -- I know we're a couple of quarters into that, but can you walk us through how far through the process of really implementing that with kind of a full year plan behind it? And any thoughts -- I know selling expense was up in Q4 versus prior year. But for the full year, there was some efficiency around selling expense. So any color you can give on the selling expense plan needed in '26 to support the micro-targeted marketing efforts? David Pace: Yes. Thanks, Todd. It's a pretty holistic shift in the way we're approaching marketing. So not only is it a change in the absolute spend, but it's been a change in the efficiency of it and the allocation of working versus nonworking dollars. So we're able to put a lot more working dollars to work to just that point. I'd say we are probably -- I'm saying 2/3 of the way through the implementation of this. I mean the stuff that I referenced in the remarks around clustering, identifying competitive groups, understanding trade area dynamics and then allocating messaging priorities to each of those, we've got those in place. We're kind of putting them in action and trying to understand then what's the response. So as we see these responses, we'll continue to reallocate among those clusters. So if we see something that's not showing the elasticity that we think it should, we'll try it and move it to another cluster. So I'd say we're 2/3 into the implementation, but we still have a little bit to go. Christopher Meyer: Yes. And the only thing I would add as it relates to 2026 is if we continue to see success that we've seen, we have the agility to deploy more dollars against the full year thought. And I think right now, the expectation is that we will be up in selling expense in 2026 relative to 2025. And I think I can go so far as to say that we would expect to be up in each quarter, particularly given the success that we've seen here late in Q4 and early in Q1. Operator: Our next question is from Jeremy Hamblin with Craig-Hallum. Jeremy Hamblin: And I'll add my congratulations on the improved profitability last year. I wanted to start with thinking about the same-store sales guidance for the year. And Q1, by far, your toughest compare for the year. I wanted to get a sense for how you expect things to flow given what you saw in January. I don't know if in February, you've seen some bounce back post weather, although there's obviously been a couple of storms and impacting a wide swath of the country. But how do you expect kind of that cadence to play out during the year? I mean, are you thinking that Q1 is like a negative comp quarter and then improvement from there? David Pace: Yes. I think as we kind of map it out, I'll let Chris talk about this as well. But I think we see it kind of strengthening in the back half of the year more than the front for the points that you raised, given where we're lapping and then the introduction of Big Yummm and how that plays out. But I think your assumption is right, Jeremy. Christopher Meyer: Yes. And I'll just add a little color as it relates to Q1. We're not going to give a guide, obviously, for Q1, but we do have some perspective. So quarter-to-date comps are down in Q1 about 1%, but it's important to provide context around that because we talk about -- we took very limited pricing in 2025. We did take that 3.2% increase that I mentioned. But that pricing as well as some of the indulgent offerings that we added to the new menu, that we think is going to offset the negative mix associated with taking our Big Yummm burger deal and putting it on our core menu. So I think if you think about check average, it's probably going to be positive, marginally positive in Q1. In terms of traffic, before Winter Storm Fern hit, traffic was positive in January. And since that winter storm hit traffic trends have been negative, mostly due to weather, right? So we think we'll end up -- the weather impact will cost us maybe 50 basis points as it relates to Q1 in total comp. We lost about 179 operating days quarter-to-date. We even had some restaurants still closed as of yesterday, so from this most recent storm over the weekend. It's also important as you think about Q1 and the construct of Q1, we had less media weight in February versus what we expect in March or April. So there's a lot going on, but we feel really good about the underlying business and the progress we've made. And so that kind of sets up Q1. And then as you sort of shift towards the back half of the year, that price increase, we start to lap the Big Yummm burger deal in July of this year, and you'll start to see more of that pricing that we took start to flow through. So PPA is going to be higher in the second half than it was in the first half. And then I think in terms of traffic, just for the reasons I laid out, it's a little bit of the opposite. Traffic will probably be a little higher in Q1 and in Q2. Again, it's a product of lapping the Big Yummm burger deal. We're getting some traffic momentum. But given the media weight and the strong LTO calendar we have in 2026, we feel like it's going to be a better year overall in same-store sales with a stronger second half comp than first half. Jeremy Hamblin: Switching gears and looking on the expense side, we know that there's been some pressure from commodity cost, beef pricing, but wanted to get a sense for your expectation on that is basically flat year-over-year in '25 as a whole. But you did note on the November call that there had been a little bit of pressure. So I wanted to get an update on what you're seeing on that end? David Pace: Yes. I think, again, look, I think we're going to continue to see beef prices rise. We're factoring that in. We'll see some offsets, obviously, with that. I think Chris can give you more of the specifics as we -- in terms of percentage shift between the 2, but we are expecting those to continue. We'll still see some headwinds on the COGS side. Christopher Meyer: Yes, I think that's right. We were up roughly 4% in commodities in 2025. We're looking at basically the same number in 2026. Beef inflation is still expected to be high. But the other major categories are going to be kind of plus or minus 1% or 2%. Really beef is the outlier for 2026. Jeremy Hamblin: Got it. And then I wanted to ask about your refranchising efforts. It's something where my sense is that there's some engagement there and interest. You'd outlined 25 to 75 units. Any update you might be able to share on progress on that initiative? I noted, obviously, you must feel pretty good about where the balance sheet is. No need to raise capital in the near term. Given that you're going through kind of the debt refinancing process as well, I wanted to see if you could update us on refranchising. David Pace: Yes. I mean the truth is, Jeremy, I can't say a whole lot about where we are specifically, but your tone and your assumptions are accurate. We feel better about the overall liquidity of the business. We feel good about the process that we're in. We feel good about the interest that we saw in the franchising exercise, and we feel good about the progression of discussions that we've had. Beyond that, I can't say a whole lot right now, but your kind of underlying tone is accurate. Jeremy Hamblin: Great. Last one for me. You made remarkable progress in labor last year. And just to follow up on the other question. In terms of how much more you feel like you can squeeze there, you noted that your satisfaction scores remain strong. Clearly, you're seeing a little bit of a turn here in traffic. Do you look to drive additional labor savings through comp improvement? Or do you feel like there's a little bit more to squeeze out there? David Pace: I think it's going to be both. I think we think comp improvement certainly will give us some air cover. But I also think that there is room in the middle of the P&L in the labor spend. And I think our operators feel the same way. I've been extremely pleased with their bullishness on this. This is not just us pushing from the top. They're looking at it saying, yes, we have better tools than we've ever had to be able to understand where our opportunities are. We have better visibility into who our outliers are and how we have to work with them and coach them and kind of make progress there. And I don't want to underestimate it, and we're just in the very early stages of this, but we've introduced the AI tool and our ops team has grabbed that and run with it and created some custom GPTs that they've introduced at the restaurant level that give us the ability or give our managing partners the ability to understand labor spend on a daily basis, forecasting more effectively and then allocation. There's been a great adaptation or adoption of that tool at the restaurant level. So we think the combination of all of those things is going to give us room to kind of go even further than we have so far. Operator: Our next question is from Mark Smith with Lake Street Capital. Mark Smith: First, just wanted to ask a little bit about G&A outlook, Dave, you talked about in your commentary. I think that you said kind of similar decline in dollars year-over-year. Correct me if I'm wrong on that. And then maybe walk us through kind of what's driving some savings there? Christopher Meyer: Yes, I'll start with the numbers, and then I think Dave can add the color. So we finished -- if you exclude stock-based comp, we finished last year G&A at $71 million. I would say in 2026, we're looking at somewhere between $65 million and $67 million range for the year. So that would incorporate the $4 million that Dave talked about, and there's potentially opportunity for a little bit more than that. David Pace: Yes. I think just to build on that, we think this is, again, the combination of figuring out efficiencies. We're going to be looking at this every day, every month, every quarter to see how do we build efficiencies into the business further and get smarter about how we operate. So I don't think that's a one-and-done process. That's something that we will continue. Mark Smith: Perfect. And then I just want to ask kind of about the restaurant base. It sounds like some positive movement and thoughts from franchisees around maybe some expansion and opening new restaurants. Curious on the company-operated side, maybe what's built in as far as closures and then any appetite to begin opening some company-operated restaurants? David Pace: Yes. Look, I think in terms of the restaurant size, we're still trying to optimize the portfolio. Going back a ways, we found we've made improvements on about 20 restaurants that we had previously identified as potential problems for us or potential closures. We've moved them off the closure list to where we think we can operate them and are hopeful that we can get them back to a performance level that equals the rest of the system. I think there's still probably -- if you're thinking about it, Mark, I would assume $20 million for this year is the number that we're thinking about. So that's kind of what do we still have that's out there that we need to get to kind of work our way through the system. So we're trying to kind of clean up the portfolio, figure out a way. The significance of this is if you go back to when this was first brought up, I think we identified $6 million of headwind against the business from these potential closures. That number is now down to about a $1.5 million headwind and shrinking as leases expire and we roll off. So I think we've made huge progress on that and feel good about the state of the portfolio that's moving ahead. Operator: There are no further questions at this time. I'd like to hand the floor back over to Dave Pace for any closing remarks. David Pace: Okay. Just quickly, look, thanks. Really appreciate folks for dialing in and hearing our story. We feel good about the progress that we're making, and we look forward to talking to you again in May. So thanks for coming on, and we'll talk to you soon. Thank you. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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. My name is Rob, and I will be your conference operator today. I would like to welcome everyone to the call. [Operator Instructions] I'd now like to introduce Beth DelGiacco, Vice President of Corporate Affairs. You may now begin your conference. Beth DelGiacco: Thank you. Two press releases were issued earlier today, one sharing the positive results from our Phase III ADAPT OCULUS study and the other, which outlines our fourth quarter and full year 2025 financial results and business update. These can be found on our website along with the presentation for today's webcast. Before we begin on Slide 2, I'd like to remind you that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical developments, regulatory time lines, the potential success of our product candidates, financial projections and upcoming milestones. Actual results may differ materially from those indicated by these statements. argenx is not under any obligation to update statements regarding the future or to conform those statements in relation to actual results unless required by law. I'm joined on the call today by Karen Massey, Chief Operating Officer; Karl Gubitz, Chief Financial Officer; Luc Truyen, Chief Medical Officer; Sandrine Piret-Gerard, Chief Commercialization Officer; and Tim Van Hauwermeiren, Chief Executive Officer. I'll now turn the call over to Karen. Karen Massey: Thank you, Beth, and welcome, everyone. I'll begin on Slide 3. 2025 was an incredible year of execution for argenx. We reached 19,000 patients globally, driven in part by the successful launch of our prefilled syringe for self-injection. We also continue to advance our deep and differentiated immunology pipeline, including 4 new molecules from our IIP, positioning us for sustained long-term growth. This progress is grounded in our commitment to patients to innovate in ways that don't just improve care, but meaningfully change what patients can expect from their treatment. I'm speaking to you today from our U.S. national team meeting, where hearing directly from patients is a powerful reminder of why our work matters. One moment in particular, stayed with me. We recently received a handwritten note from a patient, thanking the team for the impact VYVGART has had on her life. We later learned that before starting treatment, she had been living with very severe MG symptoms that significantly limited her day-to-day activities. Today, at the meeting, we saw a video of the patient about a year into treatment with VYVGART Hytrulo, sharing an update from a hype she was on. She is thriving. It's one individual story, but it reinforces the real-world difference VYVGART can make. Slide 4. At the start of the year, we outlined our strategic priorities for 2026 that will guide our next chapter of growth towards Vision 2030. We want to impact more patients globally with VYVGART through broader patient adoption and label expansion. We're shaping the future of FcRn medicines with next-generation molecules, delivery modalities and combination approaches and delivering the next wave of immunology innovation, supported by a strong late-stage portfolio and a goal of at least one new pipeline candidate per year. Slide 5. VYVGART is leading the growth of biologics in both MG and CIDP, and we're confident that we have the right strategies and milestones ahead to sustain this momentum. Today marks an exciting moment for ocular MG patients with the positive ADAPT OCULUS results, which Luc will discuss shortly. Together with our progress in seronegative MG, we see a meaningful opportunity to broaden VYVGART's reach to patients who have historically had limited or no targeted treatment options. What's guided us here is a long-standing commitment to the MG community and to advancing our understanding of the underlying biology of the diseases we treat. Across MG populations, our data confirm that disease is driven by pathogenic IgGs regardless of antibody status. In seronegative MG, we demonstrated a clinically meaningful improvement in MG-ADL in the overall population with responses becoming more pronounced with subsequent treatment cycles across all subtypes. In ocular MG, we're seeing that same biology extend to another patient population with VYVGART meeting its primary endpoint and driving clear improvements in ptosis and diplopia. Our seronegative PDUFA date is May 10. And based on today's results, we see a clear path to expanding our label into ocular MG as well, positioning VYVGART to have the broadest MG label and to reach our target addressable population of approximately 60,000 patients in the U.S. In CIDP, we're also having a meaningful impact on patients with clinical data showing functional improvement and these benefits increasingly reflected in real-world experience. VYVGART is driving a paradigm shift in CIDP. While there remains significant opportunity within the initial 12,000 addressable patient population, we're also beginning to see expansion beyond that population, a core focus as we build leadership in CIDP. Sandrine will speak more to this later in the call. Slide 6. Over the next 12 to 18 months, we have multiple avenues for expansion beyond MG and CIDP, including autoimmune myositis and Sjogren's disease, which broaden VYVGART's footprint into rheumatology. In particular, our work in IMNM highlights a significant unmet need with an estimated 20,000 patients and no approved treatment options today. Meanwhile, our upcoming Q4 readout for empasiprubart in MMN marks an important milestone, positioning us to advance a second medicine to patients and extending our neurology footprint with a first-in-class C2 inhibitor. We have an opportunity to address a clear unmet need in MMN with IVIg as the only approved treatment and symptom progression in 60% of patients. Slide 7. Lastly, we continue to strengthen the pipeline that will shape our long-term future. VYVGART is just the beginning of FcRn leadership that we aim to establish for decades to come. As part of this, we're advancing 2 next-generation assets, ARGX-213 and ARGX-124. We're investing in efgartigimod anchored combination approaches and new delivery modalities like the auto-injector and oral peptide capabilities. At the same time, we're seeing real momentum across our broader innovation platform, progressing first-in-class molecules like ARGX-121 targeting IgA and ARGX-118 targeting Galectin-10. We are deliberately source agnostic in how we identify new biology drawing from both leading academic research and opportunities emerging within biopharma. In 2026, we expect to progress 3 Phase I programs, including a program from our Tensegrity collaboration, reinforcing our ability to bring forward high-quality science wherever it originates. We have an exciting year ahead of us with a strong foundation in place and exciting progress across the pipeline. Let's turn to the data that's shaping our next steps. Luc? Luc Truyen: Thank you, Karen. I'm excited to share the positive outcome of our Phase III ADAPT OCULUS study. Our second MG expansion milestone to hit just months after we shared positive seronegative data. Let's turn to Slide 8. Together with leading global experts, our team designed the first registrational study in ocular myasthenia gravis, filling a long-standing gap for the patient population that has historically been excluded from clinical trials. We leveraged the screening period to ensure patients had a confirmed diagnosis of ocular MG, defined as MGFA Class I, meaning patients had meaningful measurable eye symptoms without evidence of generalized disease. Patients were also required to be on stable background therapy. 141 patients were randomized 1:1 to VYVGART Hytrulo versus placebo. And in Part A, they received 4 weekly injections. In Part B, participants received multiple cycles of VYVGART Hytrulo. The primary endpoint of the study was a change in MGII patient-reported ocular score from baseline to day 29, a measure focused on the key ocular symptoms of myasthenia gravis, diplopia and ptosis. Slide 9. The study met its primary endpoints. Treatment with VYVGART Hytrulo led to a statistically significant improvement in MGII patient-reported ocular score at week 4 compared to placebo with a p-value of 0.012. VYVGART-treated patients experienced a mean 4.04 point improvement compared to a 1.99 point improvement on placebo, including clear improvements on diplopia and ptosis. VYVGART was well tolerated, upholding its consistently strong safety profile with no new safety signals. We will present a broader data set at an upcoming medical meeting. This is a big day for patients. Ocular MG strips people of independence. Many suffer from headaches and the persistent double vision and drooping eyelids don't just affect eyesight, they can take away the ability to drive, work and confidently engage in daily life, often with a heavy psychological burden and stigma. And today, too many patients are still relying on chronic steroids and symptomatic therapy, which comes with an unacceptable treatment burden over time. For the first time, we are bringing forward a therapy that specifically addresses the underlying pathological mechanism of ocular MG, and that is something we should all be excited about. Based on these results, we plan to file an sBLA with the FDA. Now before I turn the call over to Karl, I want to sincerely thank the investigator site teams and most importantly, the patients and families who made this study possible. Karl? Karl Gubitz: Thank you, Luc. Slide 10. The fourth quarter and full year 2025 financial results are detailed in this morning's press release. Product net sales are consistent with our preannouncement in January at $1.3 billion for the fourth quarter and $4.2 billion for the full year, which represents a year-over-year growth of 90%. Regional breakdown of product revenue in Q4 2025 reflects $1.1 billion in the U.S., $63 million in Japan, $110 million in the rest of the world and $26 million in product supplied to Zai Lab in China. The product net sales in the U.S. grew by 68% from the fourth quarter of the prior year, reflecting solid patient demand and prescriber confidence driven by PFS. The gross to net adjustments and the net pricing in the U.S. are in line with the prior quarter. Next slide, Slide 11. Total operating expenses in the fourth quarter are $955 million, representing an increase of $149 million compared to the third quarter. Cost of sales for the quarter is $150 million as our year-to-date gross margin remains consistent at 11%. The combined R&D and SG&A expenses totaled $2.7 billion for the full year, which is in line with our financial guidance for 2025 discussed in our most recent earnings call. Looking ahead into 2026, operating expenses will continue to grow at a similar percentage as in prior years. SG&A growth will support the significant revenue growth in our current markets as well as expansion into new patient populations. R&D expenses will increase due to our continued commitment to execute on our pipeline. Our operating profit for the quarter is $367 million and $1.1 billion for the year, which marks our first year of annual operating profitability. Tax for the quarter and full year reflects a net benefit. This is largely due to nonrecurring tax items and favorable foreign exchange movements. Going forward, you should continue to expect an effective tax rate in the low to mid-teens. This brings us to the profit for the fourth quarter of $533 million and $1.3 billion for the full year, respectively. Our cash balance represented by cash, cash equivalents and current financial assets is $4.4 billion at the end of the fourth quarter, which represents a more than $1 billion increase over the year. The strength of our balance sheet allows us to invest with confidence in growing our commercial business as well as our pipeline. I will now turn the call over to Sandrine, who will provide details on the commercial front. Sandrine Piret-Gerard: Thank you, Karl. Slide 12. I'm thrilled to be joining argenx at such a pivotal moment. What excites me most is the combination of bold science and a deeply patient-driven mission, what I often describe as science with purpose. I've spent time in the field already, met clinicians and seen firsthand the real impact our science is having on patients' lives. With Vision 2030 as a road map, we have a clear path to meaningfully improve the lives of more than 50,000 patients. Slide 13. Echoing Karen, we entered 2026 from a position of strength following a year of phenomenal execution. We closed 2025 with approximately 19,000 patients on treatment globally, reflecting consistent growth across all regions and all indications. We successfully launched the prefilled syringe, which has proven to be a key driver in increased overall VYVGART demand. At the end of the fourth quarter, we had more than 4,700 prescribers, including dozen new prescribers since the PFS launch. This momentum underscores the execution strength of our field teams, the added convenience the PFS brings to patients and the growing confidence in VYVGART among clinicians. As we highlighted at the start of the year, our next chapter is about applying a proven indication expansion playbook to reach even more patients. MG and CIDP remain the cornerstone of our commercial strength, and we are well positioned to build on that foundation as we scale. Slide 14. We entered the MG market with strong biology and a first-in-class therapy. Since then, we have redefined what patients and clinicians can expect with the highest MSE and a favorable safety and tolerability profile. As a result, VYVGART is the fastest-growing and #1 prescribed biologics in MG with continued momentum driven by earlier line adoption. 6 out of 10 MG patients starting on biologic start with VYVGART. 70% of VYVGART patients are already coming from orals, and we believe the PFS will continue to help drive near-term growth. We are now on track to reach 18,000 additional patients through 2 label expanding opportunities, seronegative and ocular MG. Seronegative MG alone has the potential to move us towards the broadest possible MG label with our May PDUFA just around the corner. And ocular MG gives us a chance to be the first to market in a patient group that has had no precision treatment options. What gives us confidence here is that these expansions build on strong relationships we have already established with neurologists, many of whom are confident in VYVGART through experience treating generalized MG. Slide 15. We are earlier in the CIDP launch trajectory, but are delivering on the same disciplined approach that has led to our successful market expansion in MG. Significant opportunity remains within the 12 dozen patients who are not well managed on current treatment, and our focus today is on continued evidence generation, patient activation and new prescriber adoption. Clinicians continue to respond to the meaningful functional benefit data and well-characterized safety shown in the ADHERE trial. The prefilled syringe is further driving uptake by reducing the administration burden and offering more flexibility to patients. Worth noting, we secured an important access win for PFS in Q4 with UnitedHealthcare, broadening our covered lives to over 90%. CIDP is a highly heterogeneous disease, and we are committed to advancing the science to expand our reach to broader set of patients. Our biomarker program is designed to better define responders and unlock earlier and broader use, and we are advancing empasiprubart in a head-to-head study against IVIg to further explore the bounds of efficacy. Together, these efforts position us to expand the CIDP population we can serve and continue shaping this market over the long term. Slide 16. Our clinical pipeline continues to broaden and deepen, providing a multiyear runway for commercial growth. I'm excited to join the company at this pivotal moment to help scale the organization thoughtfully and translate this pipeline into even greater patient impact. With that, I'll now turn the call over to Tim. Tim Van Hauwermeiren: Thank you, Sandrine. Reflecting on where we stand, argenx has never been better positioned, and our leadership transition comes at the right moment as we enter our next phase of growth. Karen is the right leader to take this forward. She understands our innovation playbook, leads with patients at the center of every decision and brings the operational discipline needed to continue executing against Vision 2030 and beyond. I have complete confidence that she will nurture what has always made argenx special while driving the next chapter of growth for the company. My dedication to argenx and to our mission remains as strong as ever. I look forward to supporting Karen and the entire leadership team as we continue to advance meaningful innovation and deliver for patients and shareholders alike. With that, operator, we will open the call up to questions. Operator: [Operator Instructions] Your first question today comes from the line of Tazeen Ahmad from Bank of America. Tazeen Ahmad: First off, Karen, congratulations on the new role. We're looking forward to continuing to work with you. And Tim, what else can I say, but thank you. You've set the example for everyone to follow, and we wish you the best in your new upcoming role as well. So my first question is going to be on the addition of both seronegative as well as based on today's results, assuming ocular MG to the revenue stream for VYVGART. How should we think about, number one, what the average price would be for each of these subindications? And can you talk to us about what proportion -- you talked to us about how many patients there are. But have you done any market data research to indicate what proportion of those patients are more likely to seek this type of treatment? Karen Massey: Well, thank you, Tazeen, for your comments and also for your question. It's a really exciting day for ocular MG patients and certainly for argenx, as you call out. It's important to think about the fact that we are now the first and only -- or VYVGART is the first and only to have positive data for patients with ocular MG. So a really exciting day for patients. And as you called out, that, combined with the seronegative data that just read out a few months ago, and we have the PDUFA date in May, really positions us well for continued sustained growth in MG and I think an expansion even further of our leadership position in MG. So we're very excited to share that data today. I'll let Karl talk to the price in a moment. But just on the second part of your question around the addressable market, we obviously have done quite a bit of market research, and we'll continue to do so to prepare for how best to go to market. But the best numbers to look at are those that we've provided with the seronegative expanding the addressable market by 11,000 patients and ocular by 7,000 patients that we've provided before. That 7,000 patients in ocular MG, that's not the total ocular MG patient population. That's actually the portion that when we've done the research before, we thought would be eligible for VYVGART. So that's the number that I would stick with. And obviously, as we get closer to -- as we unpack the data more, as we get closer to submission and hopefully approval, we'll be able to provide more color on that. And then maybe, Karl, you could comment on the price. Karl Gubitz: Thank you, Karen and Tazeen, thank you for the question. Yes, we still have to have the discussions with the players, of course. But I do want to mention that we have a strong capability and market access. It is an enabler of our launch, not a hurdle, and the value proposition of VYVGART is well understood and appreciated by all stakeholders. At this stage, I will say that we would expect to have broad access also for seronegative and ocular, and we can assume a similar price as MG, i.e., $225,000 the net benefit or a net price to argenx. Thank you for the question. Operator: Your next question comes from the line of Danielle Brill from Truist Securities. Danielle Brill Bongero: I think I'll ask a question on the CIDP opportunity. Karen, you mentioned in your prepared remarks that you're beginning to see expansion beyond the initial 12,000 patients that you were targeting. Can you elaborate a bit? Are you seeing a step-up in frontline use? And then I think you also mentioned that you secured additional coverage, broadening coverage for PFS to over 90% of covered lives. What impact do you expect this to have on adoption rates in the setting going forward? Karen Massey: Thanks, Danielle, for the question and the interest in CIDP, we're really pleased with the continued growth in CIDP. So, yes, we laid out that the strategy was first to focus on that 12,000 patients that are treated -- that are already treated, but continue to have symptoms. And that is -- continues to be where we see the majority of our patients and the majority of our growth. But you'll recall that our label does allow us to be used in a broader patient population. And there are some payer policies actually that also allow that. So we are starting to see some use of VYVGART beyond just the switch from IVIg. In general, it's still about at 85% of our patients are being switched from IVIg, but there are some that are coming directly. I think as prescribers and neurologists get more experience with VYVGART and see the impact in the real world, then over time, we'll start to see that expansion even more. And as you said, continuing to expand access with the recent UnitedHealthcare decision and having 90% coverage, that also helps to contribute to our growth. So I would say what to expect in CIDP is that continued steady momentum. We're still early in the launch. And so I think we still have some quite a bit of growth ahead of us. Operator: Your next question comes from the line of Derek Archila from Wells Fargo. Derek Archila: Congrats on the progress in the Phase III win today. So I had a question on, do you think approval in ocular MG will drive more utilization in the less advanced MG patients? And I guess, is there anything in the data set that you'll present in the future that could demonstrate prevention of progression to more generalized disease? Karen Massey: Yes. Thanks for the question, Derek. I'll comment on the first and then maybe, Luc, I can hand it to you for the data. So certainly, I think that our hypothesis, I mean, we know that in MG, the majority of patients first do present with ocular symptoms and then the majority of those ocular MG patients do transition into gMG. So a big part of our strategy is expanding the use of biologics to earlier line uses of MG. We are already seeing that. Biologic use is growing in generalized MG. We are driving -- we get 6 out of 10 of those patients that are first use biologics. So we're driving a lot of that earlier use and a lot of that growth. As you say, I think the ocular MG data will help us with that strategy and will provide a halo to that strategy. And then maybe, Luc, you could comment on the data and progression. Luc Truyen: Yes. Thanks, Karen, and thanks, Derek, for the question, which is close to my heart. So with the data in hand, we show that we can meaningfully impact the current symptomatology of ocular MG, which is not MG like. It's a significantly debilitating state to be in. But of course, the excitement of continuing to collect long-term data as we are planning to do and compare that to what is known with the natural progression, which, as Karen said, is a high percentage up to 80% will allow us to make some statements on do we delay progression to generalized MG. So I would say stay tuned. Operator: Your next question comes from the line of Yatin Suneja from Guggenheim. Yatin Suneja: Just with regard to the Q1 dynamics, could you point to us if there are any particular consideration that we should have for Q1 in particular? Karen Massey: Yes. Thanks for the question. And it's important as we're in Q1. So obviously, across the industry, we can see the pattern that there always are Q1 dynamics around reverifications and winter storms, of which we've had quite a few in the last couple of weeks. So argenx and VYVGART are, of course, privy to the same, those same seasonal dynamics. And we saw that last year as well. If you recall, we did have a slowdown in Q1. And then in the end of the year, we delivered 90% full year growth. So I think you can recognize the pattern and expect that. But maybe, Sandrine, you could comment on the underlying dynamics that we're seeing since you've joined. Sandrine Piret-Gerard: Yes. Thank you, Karen. And this is something that I looked at before joining argenx, what is the growth we are seeing. And year-after-year, we have been delivering consistent growth, and this is a pattern you can expect this year, full year because the underlying dynamic are very healthy. I mean when you look at the new patient starts, the provider and the prescriber expansion. When you look at our access, we just mentioned that, but also how strong we are and VYVGART is in leading the growth of the overall biologic market. These are all amazing underlying factors that will help us continue that growth. And then you have the PFS that was launched less than a year ago that drove a lot of momentum last year, plus the expansion of the labels that we are expecting both for seronegative and later for ocular. So all are good underlying factors that will help us continue that growth, as Karen mentioned. Operator: Your next question comes from the line of James Gordon from Barclays. James Gordon: James Gordon from Barclays. The question was on VYVGART for myositis. And my question was, what is the efficacy bar you're looking to exceed in the Phase III in myositis in Q3? What's a good result? Is there hope to be more efficacious than [ brepo ] or JAK/TYK and what they did in the VALOR trial? Or is it more -- a good result would be if you had a similar efficacy and you are better tolerated as well? So what's good and what's really good? And could I also just squeeze in a clarification, not a question, but just normally, there's an OpEx guide, but I didn't see a formal guide this year. Should we assume a similar pace of OpEx growth this year as last year, so '25 similar pace of '26 and maybe more R&D and less SG&A? How do we think about spend this year, please? Karen Massey: Yes. Thanks for the questions there, James. And so I'll open. I'll hand over to Luc to provide some more color on myositis and then Karl on OpEx. But the first thing that I just wanted to frame is when you think about myositis, it's right out of the argenx playbook. I mean there is so little options available to patients here, really limited innovation in the market. And so what we're looking for is a statistical significant benefit coming out of this study. In the DM, in IMNM, there are no approved therapies available. And you heard in the script that there are 20,000 patients with IMNM. So for them, any benefit, I think, is clinically meaningful. But maybe, Luc, you could talk about how we're thinking about the study. Luc Truyen: Yes. Thanks and also for laying it up that this is not a singular indication. So this is a constellation of indications that each have somewhat different pathological drivers. We continued our Phase III program based on the strength of a robust Phase II, which gave us the confidence that we could provide meaningful benefit across the 3 subsets. Ultimately, the data will speak once we complete Phase III. With respect to relative benefit compared to others, of course, studies are hard to compare. And the DM result of brepo certainly is encouraging for the DM patients. But we believe that in DM, multiple modes of actions could play a role. And therefore, we will go on the strength of our own data. In any event, positive data in these diseases is always good for the patient. Karen Massey: Thank you, Luc. And maybe, Karl, a comment on the OpEx. Karl Gubitz: James, thank you for the question. Yes, in 2025, we spent around $2.7 billion on combined R&D and SG&A. That is around 30%, 3-0 percent increase over 2024. Looking ahead, you can expect the combined R&D and SG&A to grow at a similar rate with most of the growth in R&D because that is where we're going to invest to set the company up for the long run, investing in our very exciting pipeline. So thank you for the question, James. Operator: Your next question comes from the line of Alex Thompson from Stifel. Alexander Thompson: Maybe on Graves, I was wondering if you could comment on where you're at from a regulatory discussion perspective on starting the pivotal and whether you think that a single pivotal could be sufficient for an sBLA or whether you might need 2 studies. Karen Massey: Yes. Thanks for the question. We're excited about our Graves program, and it's well underway. Luc, do you want to comment on our strategy around the single study? Luc Truyen: Well, I mean, the ability to run a single study has sufficient evidence of efficacy and be able to define a benefit risk is actually not new. That always existed, but it was at the discretion of the individual divisions as to how much they accepted that or not. This particular division has asked us at this moment for 2 trials, which we are executing on. Karen Massey: Your next question comes from the line of Matt Phipps from William Blair. Matthew Phipps: Congrats on the quarter and progress here. Just wondering if you might be able to give us any more details on the auto-injector, how you can position that versus the PFS and maybe if that can just continue the continued expansion you're seeing from that PFS launch across indications. Karen Massey: Yes. Thanks for the question. We're excited about the auto-injector, and I think it just reinforces our innovation playbook, right, just continually bringing more and more innovation as we drive leadership in the MG market. So auto-injector is on track. We have planned for 2027. And the way we've talked about it is it won't be such a step forward in the way that PFS was because if you recall, the big step forward for prefilled syringe was that we moved from HCP administration to patient administration, and that was a meaningful and important step forward for many patients, giving them the freedom to self-inject. So auto-injector doesn't provide that step change, but it does provide an important step, for patients that provides a better experience for those patients and especially those that are needle phobic. Actually, we mentioned earlier, we're here at the U.S. National Field Meeting. We had a patient just yesterday that was talking to our team, and she was sharing that she wanted to wait for auto-injector because the prefilled syringe needle was something that she was a little nervous about. So it does provide value to patients, but it's not such a step forward that you should think of it as an accelerator in the way that the prefilled syringe was. Operator: Your next question comes from the line of Akash Tewari from Jefferies. Amy Li: This is Amy on for Akash. Maybe just a quick one on your 2 next-gen FcRns 124 and 213. Are you seeing an accelerated path to registrational study? And can you give us a sense of how you're thinking about the indication and then the size of these trials? Karen Massey: Yes. Thanks for the question and the interest in our future portfolio. Maybe I can start. The way that we think about our leadership of FcRn over the coming decades is that we know there is a lot of opportunity for FcRn, in fact, probably more than we can explore with VYVGART alone. And so we see the opportunity of having 2 next-generation molecules as opening up the opportunity to provide a better patient experience in some of the indications we're already in, but also start to push the biology even further and expand the indications that we can -- that an FcRn is making a difference to patients. So I think that's the strategy that we're planning. We think each of the next-generation molecules brings -- will bring that benefit to patients. Thanks for the question. Operator: Your next question comes from the line of Yaron Werber from TD Cowen. Yaron Werber: Congrats on the ocular study. If you don't mind, maybe a couple of questions. For EMPASSION, you switched the primary endpoint to grip strength. In the previous study in ARDA, you gave us sort of the ranges of grip strength. So maybe help us understand how is it powered? Is it superiority sort of head-to-head? What's clinically meaningful? And then secondly, Karen, we have a huge confidence in you, and congrats on the role. Tim, we're just -- we continue to get questions on the timing. I know, obviously, Peter is retiring as Chair. So maybe give us a little bit of a sense what drove your decision to kind of step up the chair. Karen Massey: Thanks for the questions, Yaron. I'll hand it over to Luc first to talk about EMPASSION. And then, Tim, maybe you can take the follow-up question. Luc Truyen: Yes. So in fact, this is a story of growing insights in data as they matured. As we looked at ARDA and ARDA plus, so the Phase IIs, the signal we saw in grip strength gave us increasing confidence that this is really a real and patient-relevant outcome with an increasing separation over time or improvement over time, which in these patients was not seen before. And that's ultimately why in discussion with agency, we started utilizing this endpoint as the primary. You asked about superiority. The study is set up as a non-inferiority study, but with a prespecified option that if noninferiority is met, that we can formally test superiority. The data will ultimately drive that [ tree ]. Karen Massey: Thank you, Luc. And Tim? Tim Van Hauwermeiren: Thank you for the question. I think we're doing this transition out of a position of strength. I think now is the time to do the transition because the business and the organization is in a very healthy and a very strong state. You have seen the pipeline. You know the profitability, which we achieved during the course of last year, very strong foundation of the business. Also from an internal candidate point of view, we are ready. Karen knows the innovation playbook. She's a very strong carrier of the culture of the company, and she's ready to help us scale into our future because she know new therapeutic areas will come on back relatively soon. So consider this as a proactive move based on a position of strength. Thanks for the question. Operator: Your next question comes from the line of Thomas Smith from Leerink Partners. Thomas Smith: I was just wondering if you could provide a bit more color on the Phase IIa results for adimanebart in ALS. Obviously, really difficult indication, very complex biology. But just wondering if there are any learnings from this study that could be applied to the Phase III CMS program or potentially other indications. Karen Massey: Yes, I'll let Luc comment on the data. Luc Truyen: Yes. Thanks for that question. Evidently not an outcome we were hoping for. We felt we had the moral obligation to explore ALS as an indication given our mode of action, trying to -- in this disease where there's very, very limited treatment options to see if we could move the dial. From our POC, the data, unfortunately, don't supports progressing, but we learned a lot, not in the least about how novel endpoints could be used, and we hope to share that knowledge with the field. With respect to impact and learnings on CMS, the context of treatment is fundamentally different. And CMS is directly in the biology of this molecule with the DOK-7 and other mutations affecting the mask receptor. And so that's a much more direct application of this molecule. So we don't think there's a read-through. And on our SMA program, likewise, there is a backdrop of approved treatments. The gene therapies are very well established. And we are going to evaluate whether we can have an add-on efficacy there, which is a different situation than ALS altogether. Operator: Your next question comes from the line of Rajan Sharma from Goldman Sachs. Rajan Sharma: I had just a question on VYVGART growth dynamics through 2026. So just thinking about kind of the underlying growth outside of potential new indications, how should we think about growth across the various formulations of the drug? And if you could maybe just comment on competitive dynamics. I realize there's been a recent new approval in myasthenia gravis. Could you just talk to your confidence in the VYVGART profile and to what extent you think you may be impacted by that emerging competition? Karen Massey: Great. Thanks for the question. What -- I'll provide just one comment, which is one of the things that I think is incredible 5 years out from launch for VYVGART is that what we're seeing is continued growth across all indications, all geographies and all product presentations. And I think that's a sign that there's space for all of the different product presentations, and it's important that we're bringing those innovations. But Sandrine, maybe I can hand over to you to talk about the growth outlook for MG and CIDP. Sandrine Piret-Gerard: Yes. Thank you, Karen. And I can maybe also help answer the question on the competition but that was a second question. So I think for MG, I mean, we have seen an amazing growth year-on-year. And we have, as I mentioned earlier, healthy fundamentals. I mean, our product, VYVGART is being used earlier and earlier. I mean, as I mentioned in the opening, 70% actually are coming from orals. And then on VYVGART, when you have 10 patients coming on biologics, 6 of them are actually starting with VYVGART. So this shows that this is the molecule that patients start on when they are starting on biologics. PFS is the one that has been driving and helping us drive strong growth last year. And as Karen just mentioned, we expect to continue to grow across all mode of administration, including PFS. And then the label expansion, of course, is going to help us this year, starting with seronegative. If you look at CIDP, I mean, we have -- we are still early in launch. So we have launched roughly 1.5 years ago, and we are still have a lot of room within the 12,000 patients that are not fully well managed. And beyond that, we are working very, very hard to lift any challenges either with payers or the inertia of prescribers to start earlier with VYVGART. So overall, very strong dynamics expected for this year like we had in the prior years. So now going to your question on the competition. Actually, we welcome competition. For me, this is -- and for us, this is a sign of progress, and this is a sign of innovation, and that's great for patients to have multiple options. This expands the overall market and VYVGART benefits from a market expansions. I just mentioned that 6 out of 10 patients starting on biologics go on VYVGART. So the more the market expands, the better it is for us. And as we are a data-driven company, all the data we have generated support our confidence that VYVGART profile will help us continue leading that category and remain the #1 prescribed biologics in MG from an efficacy viewpoint, and we are the only one that can really show the strong MSE, the robust safety that fosters earlier use, the ability to meaningfully reduce steroids and then as we mentioned, multiple flexibility on either IV subcutaneous or PFS. So when you take that all together, I mean, we believe that we have a very, very strong profile for continuing our leadership there. Karen Massey: Great. Thanks, Sandrine. Operator: [Operator Instructions] Your next question comes from the line of Sean Laaman from Morgan Stanley. Morgan Gryga: This is Morgan on for Sean. Maybe one on the financials. So with VYVGART delivering $4.2 billion this year in net sales and 90% year-over-year growth resulting in the first year of operating profitability. How should we think about the sustainability of this growth profile as penetration deepens in MG and CIDP throughout this year and next year? Karen Massey: Yes. Thanks for the question. Karl, maybe you want to talk about the growth profile? Karl Gubitz: Yes. I think what we're building here is a long-term sustainable business, as Sandrine already mentioned, we see a lot of growth in MG and CIDP going forward. And the way we look at the financials long term is that revenue growth should exceed OpEx growth, which basically will return operating margins, which will increase over time. That in itself, of course, is not the objective of the company. We have very clear capital allocation priorities, and we're executing on those priorities. But what we should see is that we're going to build on our very strong balance sheet. We currently have $4.4 billion of cash in the bank. And going forward, that number should increase. So I think you can look forward to a long-term sustainable and profitable business. Thank you for your question, Morgan. Operator: Your next question comes from the line of Sophia Graeff Buhl Nielsen from JPMorgan. Sophia Graeff Buhl Nielsen: So just on the Phase III readout for VYVGART in myositis, could you clarify, would you have data to support approval by subgroup? Or will this largely be dependent on the overall data? I think you've been very clear on that the high unmet need within IMNM and the large patient population that could be addressed there and also the heterogeneity within DM. Given these dynamics, would you see these as relatively equally sized commercial opportunities despite the differences in addressable TAMs you've highlighted? Karen Massey: Yes. Thanks for the question. Maybe, Luc, you can talk to the basket trial and our approach, and then I can comment on the commercial opportunity. Luc Truyen: Yes. So the Phase III setup is indeed that we can make statements on all 3 subsets. And of course, the ultimate reflection of that in label will be connecting the data with the regulatory discussion. But in principle, all 3 could be in scope. Karen Massey: Thank you, Luc. And then in terms of the commercial opportunity, the way I think about it, I mean, the total myositis population that we're studying, we think about in terms of it being an MG-like opportunity. But obviously, there are other subtypes. And I like to think about the 2 bookends of the subtypes. So we talked -- you mentioned IMNM. So IMNM, there are no other approved treatment options. There's about 20,000 IMNM patients. So what you can imagine there is that from a commercial perspective, you could imagine that we'll be able to gain a high portion of those patients because there are no other treatment options and the biology is so clear. On the other end of the spectrum, you can think of DM. There are more patients in DM, but it's also more heterogeneous in dermatomyositis. There's also more innovation coming to the dermatomyositis space. So that will grow that patient population. Innovation is good for patients. And I think let's see the data, how it reads out, but I think we should have a good value proposition to be able to compete in that population if the data reads out. So overall, total population MG-like, but the subgroups provide quite different dynamics from a commercial perspective. Thanks for the question. Operator: Your next question comes from the line of Suzanne van Voorthuizen from Kempen. Suzanne van Voorthuizen: It's one on empa and MMN in particular. There was a change in the dosing regimen between the Phase II and III and the Phase III is also head-to-head. Could you elaborate on how you navigate the potential risks that these 2 changes introduce? What gives you comfort that the study can confirm empa's non-inferiority? And I'm also wondering if you can give some color on how you went about setting the non-inferiority margin in this progressive disease? Karen Massey: Thank you. I think that's for you, Luc. Luc Truyen: Yes. Thanks for that question. And I can tell you a lot of thought went into that based on the data again from ARDA, where we tested multiple regimens, and we're able to model and look at an exposure response relationship, which ultimately made us choose the dose regimen we went for. In terms of then choosing or choosing to go head-to-head, here, the thinking was if we were taking placebo-controlled study, we could have a lot of events because people on placebo in this progressive disease, as you say, will need rescue. And therefore, we said, well, why not just do them straight head-to-head? So that was that decision. The second one, how do you determine a non-inferiority margin? And this is actually also where the data on grip strength come in because the only available data on IVIg are on grip strength. So that's why we use that measure to determine the non-inferiority margin. Given the data we see from ARDA, one of the features that is different is that we continuously seem to improve grip strength, something which is not seen in the experience with IVIg. And that gives us confidence that we can at least meet but hopefully beat IVIg. Karen Massey: That's great. Thanks, Luc. And when you zoom out, I think what you can see with your answer is the approach that we take for -- with our programs, strong biology rationale, derisking with a Phase II. And I think we're well positioned for success commercially with this head-to-head data that in the way that you've laid it out. So look forward to that data in Q4. Thanks, Luc. Operator: Your next question comes from the line of Allison Bratzel from Piper Sandler. Allison Bratzel: Just a follow-up on ocular MG and the potential for early treatment with VYVGART to prevent progression to generalized disease. Is that something you're able to capture in Part B of the oculus trial? Or just how long of a follow-up do you need to confidently be able to make that claim? Just any more color there would be appreciated. Luc Truyen: Yes. Thanks for that question to allow me again to go on one of my favorite topics, which is can we slow MG progression. So the open-label extension following Stage B, which we call Stage B, is going to give us over 2 years of data, which if you look at extent epidemiological data, et cetera, should give us enough window to capture these people progressing and whether or not it's to the rate that's there in the outside world. The caveat, of course, is this is noncontrolled data. So any expression of this delaying might have to be in a publication or if the real-world evidence is deemed strong enough in a discussion with the agency. Karen Massey: Yes. I think that's what's exciting about this data, along with some of the other evidence generation that we're doing, a Phase IV study in early disease to be able to see that progression. But I think regardless, one thing that's important is with ocular MG is the symptom burden is significant and the opportunity to transform lives of patients suffering from ocular MG is significant even without the disease progression. So I think we can demonstrate that benefit in the short and the long term. Thanks, Luc. Operator: Your next question comes from the line of Luca Issi from RBC Capital. Luca Issi: Congrats on the progress. Maybe, Luc, if I could circle back on ocular myasthenia gravis here. Again, I appreciate this is a fresh off the press, but how should we think about the kind of clinical significance of the data here, again, in the context of the p-value of 0.012. And then maybe related to it, can you confirm the use of steroids or other therapy was relatively well balanced between the 2 arms, so we can kind of definitively say that the benefit here is coming from VYVGART and is not confounded by any other therapies? Luc Truyen: Yes. Thanks for that question. And of course, we don't share too many detailed data because we want to make sure that the representation in an external conference isn't impacted by doing so. But to come back to the -- yes, we have significant p-value, but that was driven by, in our mind, a very relevant treatment difference between active and placebo. Remember, these endpoints range is between 0 to 18 and to show an active 4-point difference for that individual patient is certainly a relevant outcome. So we feel that in totality, this is a meaningful signal that we have shown. And with respect to balancing on steroids, steroids were allowed but had to be stable. And we are confident that there's no imbalance in the outcome based on anything there. Karen Massey: And maybe just to add to your question on clinical significance. I mean, Luc mentioned in the script, what -- when you think about what the impact that ocular MG has, what patients will tell you is that it strips them of their independence. They lose -- because of the double vision, they lose the ability to drive, they lose the ability to work. And so it has a real impact on their quality of life. So there's no other treatments available other than steroids. So any benefit that we can provide and certainly this a 4-point benefit that we've seen is demonstrable benefit for patients and I think clinically very meaningful. Operator: Your next question comes from the line of Justin Smith from Bernstein. Justin Steven Smith: Just a very quick one, if you could talk about the commentary with regards to switching off subcutaneous Ig on to VYVGART and how that's changed over the last 3 months? Karen Massey: Yes, I'm happy to. Well, I think what you're asking about is there was an -- FDA looking into real-world evidence around switching and CIDP worsening. Actually, we had good news that we have completed that review and the label has been updated with some helpful guidance to HCPs around when switching from IVIg to VYVGART. So I think we're well positioned moving forward. That label update reinforces what we knew from ADHERE and reinforces the risk-benefit profile of VYVGART. Thanks for the question. Operator: Your next question comes from the line of Samantha Semenkow from Citi. Samantha Semenkow: Just one on the ocular MG opportunity. I'm wondering, can you speak to the mix of treating physicians that you're expecting for this patient population? Are they mainly managed by neurologists, ophthalmologists or even neuro-ophthalmologists? And I'm wondering how much education you think you need on the opportunity to drive VYVGART utilization in this segment? Karen Massey: Yes. Thanks for the question. Maybe, Sandrine, you can talk about that and also related to seronegative because we have the PDUFA date coming up in May. And just is there -- are there any changes for our field or the targeting strategy with this label -- with these potential label expansions? Sandrine Piret-Gerard: That's a great question. Actually, we have a big overlap between the current prescribers and the target group we are visiting and the people that will be prescribing for MG in both seronegative and ocular. So it's mostly a neurologist-driven disease. So we don't expect to have to change our footprint. And actually, we increased our footprint early 2024. If you remember, we doubled our footprint to be able to not only target academic medical centers, but then to also be able to visit the community neurologists where we feel the majority of the patients are being taken care of. So you won't see a change of our approach there. And with the big overlap, we're confident we can target the majority of the potential and the prescribers. Operator: Your next question comes from the line of Victor Floch from BNP Paribas. Victor Floch: One question on ARGX-213. So I believe the last time you've updated us on time lines where you were pointing out Phase I results sometimes in H1 this year. So I was just wondering whether we should expect you to discuss those data or to a broader extent, your -- like the development program of that product later this year. Karen Massey: Yes. Thanks for the question. And again, the interest in our next-gen. We are excited. So we're moving forward with 213, and we've shared that update previously, and it is in the clinic. We're working on the indication strategy at the moment and our path forward, and we'll certainly share that when we have an update to share. Thanks for the question. Operator: And our final question today comes from the line of Douglas Tsao from H.C. Wainwright. Douglas Tsao: Just on oMG as a follow-up, we have heard from clinicians who have tried to use it in patients presenting with ocular symptoms, but they've had pushback from payers just given the fact it wasn't sort of on label. I'm just curious if you could provide some perspective on when you think it might start to become a contributor? Will it be sort of getting it added to the label? Or will there be a process where you need to also then talk to payers? Just sort of trying to understand the sequencing when we should think about this because it does seem to be a fairly meaningful commercial opportunity for you. Karen Massey: Yes. Thank you. And I agree it is a meaningful opportunity and a meaningful benefit for patients. So what you can expect, I mean, we'll file as soon as we can based on this data, and I think we have a well-oiled machine. So we'll do that as soon as possible, and then we'll see when the PDUFA date is, assuming the submission is accepted by the FDA. What we normally guide to is because we will need to have conversations with payers, and we will need to change those contracts. What we usually guide to is that it takes about 2 quarters after approval to get those payer policies in place and to really start to see the impact of the opportunity. So we'll take it step by step. And step number one will be preparing the filing as quickly as possible. Thank you. Operator: And this concludes today's conference call. We thank you for your participation. You may now disconnect.
Juan Cases: Good morning, everyone, and thank you for attending the 2025 Results Call of ACS Group. I'm joined by our Corporate General Manager, Angel Garcia Altozano; and our Chief Financial Officer, Emilio Grande. As usual, after the presentation, we'll host a Q&A session to provide you with any clarification that you may need. Those who are connected via our website can ask their questions through the established channel. So let's start with the first slide of our presentation. In 2025, the group delivered very strong operational and financial results with solid growth in sales, backlog and net profit, backed by robust cash flow generation. We're making solid progress in executing our strategy, increasingly leveraging our global footprint and engineering expertise to drive sustainable growth. We continue to actively pursue highly attractive equity investments opportunities across both traditional and next-generation markets, generating long-term value for all our stakeholders. Let me give another view of the key highlights for the period. Ordinary net profit reached EUR 857 million, up 25.3% or 32.4% FX adjusted, exceeding our top end of our revised guidance. On a reported basis, net profit stood at EUR 950 million. Sales and EBITDA were up by 20% and 20%, respectively, driven by the robust momentum across all our segments. Operating margins improved as well across the group. Net operating cash flow reached EUR 2.2 billion in the last 12 months. This is up EUR 320 million adjusted for factoring variations, highlighting the quality of our profit growth. As a result of this strong cash flow generation, the group achieved a net cash position of EUR 17 million at the end of 2025. This is after allocating EUR 2.1 billion to strategic investments and shareholder remuneration. Strategic investments include EUR 564 million in data center projects, EUR 436 million of the Dornan acquisition and EUR 200 million of the capital contribution to Abertis. In addition, EUR 448 million were allocated to shareholder remuneration. New orders during the year of EUR 62.5 billion, showing an accelerating growth trend up approximately 27% FX adjusted, resulting in a higher book-to-bill ratio of 1.3x. Within the outstanding new orders figure, digital infrastructure represented approximately 28% or EUR 17.6 billion with growth of around 130% year-on-year FX adjusted. The order backlog grew by 14.6% FX adjusted, reaching EUR 92.9 billion, supported by sustained demand in biopharma, defense, critical minerals and data centers. Looking ahead, we remain very confident in the group's outlook and set our ordinary net profit growth target of 20% to 25% for 2026 up to EUR 1.070 billion underpinned by strong fundamentals. Let's take a closer look at the group's consolidated performance for the period. Sales rose by 19.7% to EUR 49.8 billion, driven by the exceptional performance of Turner, which achieved approximately 34% organic growth or 40.3% FX adjusted, particularly supported by digital infrastructure, health care and education projects. This momentum was further enhanced by the integration of Dornan and the full consolidation of this since second quarter of 2024. EBITDA increased by 25% to EUR 3.1 billion, with margin expansions across all segments and at overall group level. Profit before tax amounted to EUR 1.7 billion, up 67.3%. On a comparable basis, PBT grew by 24.8%, particularly fueled by Turner's outperformance and the solid evolution of Flatiron Dragados. We delivered a strong ordinary net profit growth of 25.3% year-on-year on a comparable basis, reaching EUR 857 million, above the top end of our full year guidance. Turning now to the ordinary net profit split. I would like to highlight the following: Turner delivered an outstanding performance with its contribution rising 66.6% to EUR 549 million, driven by the strong growth in high-tech markets and improved margins. CIMIC contributed EUR 199 million, supported by the strong growth in data centers, biopharma, health care and education, but also the natural resources. Engineering & Construction recorded a very strong result, growing 35.7% year-on-year, reflecting a higher contribution from Flatiron Dragados and solid results in HOCHTIEF Europe. Abertis delivered a resilient operational performance during that period despite nonoperational impacts. During the year, the group implemented efficiency measures involving EUR 32 million in restructuring costs, aimed at streamlining operations and unlocking synergies that will enhance performance in the coming years. Slide 5 highlights the group's strong and consistent cash flow generation. Net operating cash flow amounted to EUR 2.2 billion, supported by a robust EBITDA, uplift of 25% and outstanding level of cash conversion. Adjusted for factoring variations, the net operating cash flow increased by EUR 320 million. Building on this, the acceleration of cash flow generation in the fourth quarter further improved the previous quarter last 12 months figure of EUR 2 billion. We reached a net cash position as of December 2025 of EUR 17 million, showing an improvement of EUR 719 million since December 2024. This performance is primarily the result of the group's strong net operating cash flow, facilitating significant strategic capital allocation initiatives. In the period, we have executed EUR 1.7 billion in financial investments, including EUR 564 million in data center projects, EUR 436 million for the Dornan acquisition, EUR 316 million of M&A, EUR 207 million in other net infrastructure equity investments and EUR 200 million for the Abertis capital contribution. Financial divestments of EUR 1 billion, including the 50% sales of UGL Transport, the data center platform 50% divestment and the final settlement of ACS Industrial. Additionally, EUR 448 million of cash were allocated to shareholders' remuneration. Our disciplined approach to capital deployment supports our long-term growth strategy while maintaining a solid financial position. Moving on to Slide 7. Our order backlog stands at an all-time high of EUR 92.9 billion as of December 2025. This growth was underpinned by a very strong order intake of EUR 62.5 billion, up 26.6% FX adjusted, resulting in an improved book-to-bill ratio of 1.3x. This very positive performance reflects the group's continued success in securing high-quality projects across strategic growth markets, particularly in data centers, defense, biopharma, critical minerals and nuclear. Notably, digital infrastructure now accounts for approximately 28% of new orders, up circa 130% year-on-year FX adjusted, driven by the strong sustainable demand in data centers. We're also seeing strong traction in Germany, where positioning allow us to benefit from the country's increased focus on infrastructure investment. New awards in Germany grew by approximately 41% year-on-year, reinforcing our ability to capture opportunities in these key markets. In the following slide, we can see a selection of recent awards. It is worth placing these projects in the broader context of the ACS Group strategy, where we have continued advancing to become a leader in rapidly expanding strategic growth verticals, including artificial intelligence, digital and tech sector, energy, including nuclear, critical minerals and defense. This momentum builds on a long established locally embedded presence in core infrastructure markets in North America, Australia and Europe, which remains the foundation of our competitive strength and our ability to scale into these next-generation markets as a life cycle partner. Let's start with the digital infrastructure and advanced tech sector, where we command a leading position. Growth in the global data center market remains extremely strong. Soaring demand for cloud services and AI is expected to quadruple DC and compute CapEx by 2035, boosted by the growth of generative AI and further cloud migration. The group has the resources and capabilities as a firmly established global end-to-end solutions provider to meet this rising demand. During the period, we have been awarded several new large-scale data center projects. Among these new awards we can find. The announcement of the construction of the 902-megawatt data center complex in Wisconsin, which is part of the $500 billion Stargate program. Most recently, Turner was awarded a role in the delivery of the $10 billion 1-gigawatt data center companies for Meta in India. In Europe, Turner was awarded the construction of a 160-megawatt data center in the Netherlands. This is the result of Turner's expansion strategy into Europe with Dornan executing a project for recurring Turner client. We'll also be building a 58-megawatt data center in Malaysia for a long-standing repeat client. Construction has already started for a data center in Alcal , a joint collaboration with Dragados, Iridium, Turner, ensures with participation in the context of the data center platform. Additionally, we have solid medium-term visibility via our order book and our expanding product pipeline in North America, Europe and Asia Pacific. Energy-related infrastructure represents another strategic growth vector for the group, with structurally rising demand driven by the global energy and security of supply. ACS is strategically positioned across the full energy value chain from generation and storage to transmission and advanced technologies, with strong end-to-end capabilities and global engineering expertise. With several decades of experience designing and building nuclear power plants and complex energy facilities worldwide for leading utilities, the group is well placed to support the deployment of the next-generation technologies, including small modular reactors or SMRs as well as new build storage and decommissioning projects. This positions us in a market expected to exceed EUR 500 billion investment in Europe by 2050. At the beginning of 2026, an important spreading milestone was reached when we were selected as part of the Amentum's global project delivery team for the Rolls-Royce SMR nuclear program. And during the final quarter of 2025, we secured a major nuclear and civil works framework contract worth up to EUR 685 million, lasting up to 15 years involving civil infrastructure works at the Sellafield nuclear site in the U.K. Turning to renewables. We continue to strengthen our market presence, particularly in Australia, where our companies have delivered more than 20 major renewable and storage projects. Reflecting this momentum in new awards, CIMIC subsidiary UGL was selected for the Western Downs Stage 3 Battery project in Queensland, Australia to construct a major renewable energy storage facility with energy storage capacity of 1,220 megawatts hour. Let me turn now to Critical Minerals and Natural Resources, another strategic growth market for us. We're capitalizing on accelerating demand for critical minerals, driven by clean energy technologies, digital infrastructure and defense modernization. Leveraging the combined capabilities of Sedgman and Thiess, we have established a global position in minerals, processing and sustainable mining services across key commodities such as lithium, copper, rare earth, nickel, vanadium, uranium and zinc. In December, the group expanded its partnership with Vulcan Energy through a significant cornerstone equity investment, while securing an end-to-end role in the development of its lithium production and processing infrastructure in Germany. Under the agreement, we have also been appointed as EPCM contractor and named preferred supplier for the project's civil works. In addition, we have been awarded contract by Hindustan Zinc to support the delivery of India's first zinc tailing recycling facility. We're recently awarded the Mount Pleasant operation contract extension in New South Wales, Australia to provide full mining services. Moving now to Defense, where infrastructure investment is expected to increase substantially worldwide. In Europe, major multiyear defense investment plans, including in Germany, present substantial opportunities in defense-related capital works and potentially via the public-private partnership model. And in the U.S. and Australia, governments are also planning major increases in defense spending over the next decade. At the end of 2025, the group's defense backlog stood at EUR 3.5 billion, which included a recently secured involvement in a major 10-year collaborative contract for the German armed forces in Hamburg with a total project value of EUR 1 billion. Our North American civil business, Flatiron Dragados being selected as one of the companies for a 10-year construction contract for the U.S. Air Force Civil Engineering Center. And other projects, including the construction of a major dry dock at Pearl Harbor for the U.S. Navy, works for the Royal Australian Air Force base in Queensland and defense infrastructure upgrades in Australia. In biopharma, health and social infrastructure, we continue to hold in positions with several significant new orders such as: First, the New York Public Health Laboratory, consolidating the largest and most advanced state public health laboratory in the U.S. under one roof, the Regional One Health Hospital campus, a once-in-a-generation investment to expand critical services and strengthen community access to care in Memphis. The Philadelphia arena, including the construction management for the new state-of-the-art arena in the South Philadelphia sports complex. Two major building contracts in Germany, a hospital newbuild project in Flensburg, the first one in Germany using integrated project delivery and a PPP project for a research and administration building in Kiel. Finally, the group is also a global leader in transport and sustainable infrastructure with a very positive outlook driven by several infrastructure stimulus packages. In Australia, we were awarded the Perth Airport, new runway construction as well as the Queensland's Gateway to Bruce upgrade. We secured the I-59, I-40 highway upgrade in Duisburg, Germany. Recently, we won the Battery Park Resiliency project, a $1.7 billion construction in New York. And in Sweden, we secured a EUR 1 billion high-speed rail project under collaborative model delivery, part of the East Link program. Let us now move into the performance by segment. On Slide 10, we begin with Turner, which is delivering exceptional results, consolidating its leadership in strategic sectors. Sales grew by 33.9%, reaching EUR 25.8 billion, mainly driven by organic growth across data center projects as well as solid growth in areas such as health care, education, sports and airports. This solid performance was further supported by the contribution from Dornan, whose exceptional performance was up 70% in the year. Profit before tax increased to EUR 921 million, representing an outstanding increase of more than 61%. This was supported by continued margin expansion of approximately 80 basis points to 3.6%, reflecting Turner's successful strategy, focused on advanced technology projects in line with the group's strategic objectives. Net operating cash flow increased by EUR 523 million to an exceptional EUR 1.2 billion. Net cash as of December '25 was EUR 3.3 billion, up EUR 179 million even after the acquisition of Dornan. Turner's commercial strength are demonstrated by its new orders of EUR 33.6 billion in the year, an increase of 44.2% FX-adjusted driving record order backlog to EUR 37.7 billion. Moving on to our operations in the Asia Pacific region, we turn to CIMIC, where sales registered strong growth in the strategic areas such as advanced technology, health care and defense and were 11.2% higher, supported by the full consolidation of this and despite the winding down of large transport infrastructure projects. EBITDA margins grew by approximately 30 basis points underpinned by strong contribution from high-tech jobs across both UGL and Leighton Asia. Ordinary profit before tax increased by 12.3% year-on-year, FX adjusted to EUR 473 million. Attributable net profit grew by 1.4% FX adjusted year-on-year. Net operating cash flow before factoring grew by EUR 43 million, supporting a strong EUR 366 million net cash improvement, which also includes divestment of 50% of UGL Transport and the data center project. Our order backlog was solid, reaching EUR 21.8 billion, up 6% year-on-year adjusted on a comparable basis. New orders were up 5.6% FX adjusted, with particularly strong growth in data center, defense and critical minerals. Turning now to Engineering & Construction segment on Slide 12. We can see solid growth with consolidated sales increasing 15.1% year-on-year FX adjusted to over EUR 10.6 billion, driven by the strong performance in North America and the robust contributions from both Dragados and HOCHTIEF Engineering & Construction. EBITDA margin increased by 53 basis points to 5.9%, supported by significant contribution from Flatiron Dragados. Ordinary profit before tax grew significantly by 45.2% FX adjusted to EUR 275 million. and a strong cash conversion with net cash position up EUR 118 million. Engineering & Construction backlog rose by 10% FX adjusted to EUR 30.1 billion, reflecting a strong order intake of EUR 13.6 billion with notable momentum in sustainable mobility and transportation infrastructure. Looking ahead, the outlook remains very positive. And as I highlighted, we are particularly well positioned to benefit from the infrastructure investment plan in Germany. Continuing now with the Infrastructure segment on Slide 13. Iridium's increased its sales by 45%, driven by the additional contribution of the A13, the financial close of the SR-400 in Georgia and general positive performance across operating entities. Also, as you might know, we have been recently prequalified for the I-77 in North Carolina. This adds to the previous 2 prequalifications of the I-25 in Georgia and I-24 in Tennessee. Abertis' recurring business showed growth above 6%, although financial contribution was impacted by nonoperating results. Abertis distributed a dividend of approximately EUR 600 million in the second quarter of 2025. In the next slide, we provide for your reference, a breakdown of the invested capital and valuation as of December '25 for the portfolio of all assets in our greenfield platforms. Among others, we are now including the valuation of our stake in the data center platform as well as the average value that research analysts are assigning to our SR-400 project. On the next slide, we take a more detailed look at the Abertis numbers. Traffic grew by 2.1%, supported by a strong performance of heavy vehicle traffic. And we saw strong results particularly in Spain, Chile and France. On a like-for-like basis, the company delivered robust revenue and EBITDA growth of 4.5% and 6.2%, respectively, underpinned by the geographical diversification of the portfolio and inflation-linked tariffs. Regarding portfolio development, as you know, Abertis acquired 51.2% stake in the A63 toll road in France. Additionally, Abertis was awarded a 21-year extension and tariff-adjusted of Fluminense and acquired the remaining 49.9% stake in Tunels de Vallvidrera and Cadi. In Chile, the Santiago-Los Vilos concession began operations. Abertis has improved its liquidity and financial strength with net debt set at EUR 22.7 billion. On Slide 16, we show the breakdown of key figures by country for Abertis portfolio. Next, as we do every year, we dedicate a brief section to reviewing some strategic updates. This slide highlights the progress we are making across our strategic growth verticals, both from a developer and a contractor perspective. We have already discussed many of these key milestones in earlier slides. So let me quickly go over the key points. In digital, we continue leading in data centers. The backlog has grown at circa 70% CAGR over the past 3 years. Some important recent awards include the 1 gigawatt project from Meta in India announced only a few weeks ago. As a developer, 100 of our data center platform sites are now grid-connected with around 80% power supply already secured. We are in advanced negotiations for lease agreements covering 150 megawatts IT in the first instance, and we're targeting to sign the first lease in the first half of the year. In Defense, we are on track to deliver the 2030 revenue ambition of EUR 10 billion, driven by major wins like the German Armed Forces campus and the long-term contract for the U.S. Air Force. We're also seeing strong progress in critical metals. We recently acquired an engineering company in the U.S. Additionally, our participation in Vulcan is another crucial strategic step. Lastly, let me stress again the delivery partner role of our consortium with Amentum on Rolls-Royce Nuclear SMR program. Overall, these wins reflect our decisive progress in reinforcing our end-to-end leadership and leveraging our investment opportunities. On Slide 19, we take a deeper look at the outlook for AI-driven data center growth. ACS is strongly positioned to benefit from rising data center infrastructure investment underpinned by sustained structural demand. Market fundamentals continue to accelerate and hyperscaler demand provides multibillion, multiyear visibility. Our global data center intake has more than doubled in '25, up to EUR 17 billion. And finally, AI evolution is not only strengthening our backlog growth prospects, it's also enhancing our core capabilities and opening new growth avenues for ACS. And before we move to the conclusion, this slide delivers a simple yet powerful message. We have already achieved in 2025, our key 2024 CMD goals for '26, 1 year ahead of schedule. Revenue and NPAT have both reached or exceeded the goals we set for 2026, while the net operating cash flow generated between '24 and '25 exceeds the target set for the full 3-year period. To conclude our review of the full year 2025 results, let me highlight the key achievements of the group. First, we delivered a strong operational performance with sales reaching EUR 49.8 billion, up 19.7% year-on-year and ordinary net profit of EUR 857 million, up 25.3% and exceeding the top end of our guidance. The group demonstrated outstanding cash generation with net operating cash flow of EUR 2.2 billion, which in turn supported net financial investments of EUR 1.7 billion. Our order backlog stands at record high of EUR 92.9 million, underpinned by EUR 62.5 billion in new orders, up 26.9% FX adjusted, including EUR 17.6 billion in digital infra order intake. It's also worth highlighting the progress of our data center development platform, our partnership with BlackRock GIP to develop more than 1.7 gigawatt worldwide was a major milestone that reinforced our leadership in one of the fastest-growing global markets. And finally, we remain confident in our ability to continue executing our proven strategy. For '26, we're setting an ordinary net profit growth target of 20%, 25% up to EUR 1.070 billion. Looking ahead to 2026, we remain focused on our strategic growth markets and disciplined capital allocation. As discussed, we see significant infrastructure investment opportunities and continue to pursue bolt-on acquisitions to strengthen our engineering capabilities and long-term growth prospects. We're well positioned to continue delivering sustainable growth and attractive shareholder returns. Thank you again for joining us today. And now we look forward to your questions. Luis Prieto: Luis Prieto from Kepler Chevreux. I had 3 questions, if I could, please. The first one is we've seen the share prices of both stocks do beautifully. And I just wanted to ask you, to what extent it would be tempting for you to maybe reduce the stake in Turner through a listing in order to upstream monies and pay for development and investments at ACS level or, for example, do a reduction in the HOCHTIEF stake and with the same purpose and increase investments. The second question, we're seeing the same assets held for sale on the balance sheet in energy. They've been there for a while now. Any updates of how those disposals are evolving and when we should expect outcomes, news? And then finally, referring to one of the things you were commenting before, you have visibility in your order book until some point in 2028, but you make reference to another -- to a pipeline beyond that, which is obviously essential to sustain the valuations and the expectations that you have for earnings in data centers. Can you give us an order of magnitude of that pipeline beyond the order book that you might have over the today to 2030 period? Juan Cases: Thank you so much, Luis. So let me start. We do not have plans to reduce our shareholding in Turner so far right now or to reduce in HOCHTIEF. And let me take the chance to speak about the way we see the valuation of our share. And I get back to our Investors Day at the end of last year. First of all, we have 2 main businesses, right? The one that is visible through our EBITDA and that's supported by the growth of Turner, our future growth in Germany and HOCHTIEF and the performance of CIMIC. And what we are seeing is 2 main things, without getting into a lot of the details. A Turner that continues growing, a Turner that before 2020 was giving EUR 350 million PBT. And right now this year has delivered EUR 1.45 billion, but with a guidance of up to 30%, which would be around EUR 1.34 million in '26, which we consider very conservative, right? And the reason why we kind of increase is obviously before we are taking into account a lot of the planning, we rely on hyperscalers, we rely on clients, and we are in that planning mode, and we need to land on something before reaching a resolution. And also the U.S. dollars with all our assumptions imply that it will continue to go in the devaluation mode. So that's on the business, right? Now -- so Turner has multiplied by around 3.5x in a few years. But we believe that will continue growing at a very significant path. So not only has grown 70% in U.S. dollars, '25, and we're already giving a guidance of 30%. And we believe that we can double Turner. Now the question is in how many years, but certainly in a reasonable short to medium-term time. Then we do have the multipliers of Turner, right? Turner has a significant portion of its backlog in data centers. We are seeing that our peers in data center space are at more than 30x EBITDA between 20 to more than 30x. Average consensus for Turner is way below that, right? And the rest of the business in Turner goes through semiconductors, batteries, biopharma and other sectors that will continue improving margins. In data centers, we gave a feature for Turner of reaching revenue just in data centers around EUR 25 billion by 2030. So that's a business, right? Then we see Germany growing and defense growing, and we're not including any of these -- the verticals that we're working right now because we do consider that the real value will be seen medium to long term, nuclear, critical metals, et cetera. So we believe on the share and the share valuation. But what the share is not reflecting for obvious reasons is the assets because that's not reflected in the EBITDA. And a lot of what we're doing right now, it's investing in the assets, right? Data center platform, the edge data center platform, additional to the big one with BlackRock, greenfield, Abertis growth and not Abertis growth just inorganic M&A, but the organic M&A and the renegotiation of the contracts that we will provide some visibility this year, right? And then what we're doing in critical metals, industrial energy, et cetera. So we believe that the share will continue to reflect the value of all of this. So right now, we are not taking the view that it's the right time to sell anything basically. Two, asset for sales, I mean, we -- the reality is that there is a combination of facts here, right? One is from an operating net cash flow basis in the Capital Markets Day, we were always talking about approximately EUR 1.5 billion net operating cash flow, post dividend, EUR 600 million in dividends or shareholder remuneration, we had EUR 900 million net for acquisitions, basically or investment. Now that EUR 1.5 billion has ended up being EUR 2.2 billion this year, EUR 2.1 billion last year. So basically, we're talking about EUR 1.4 billion to EUR 1.5 billion firepower per year net of shareholders' remuneration, right? If you multiply that by 5 from now to 2030, there are significant firepower for investments. So there's a strategic piece that we're not so much in a hurry to divest some of the industrial assets. Plus, we want to make sure that they perform in the right way to maximize value, right? So there's a combination of both things. Now your third question was about the pipeline ambition. So you saw on the screen, we are close to EUR 93 billion backlog. Most of our projects, and this has been the real change of strategy in the last 4 years, by moving from being a commodity in construction to being an end-to-end service provider, most of our contracts are not low-price lump sum RFPs. They come at the back of a long negotiating process, design, planning and working with our clients. So there's approximately EUR 25 billion that are not reflected in the backlog, but we are currently working with our clients. Out of the EUR 25 billion, there's EUR 18 billion in Turner, approximately USD 22 billion, at Turner and out of which there's approximately a little bit more than half of it that is data centers. So all of that contribute to our visibility in the medium term and how comfortable we are with our potentially -- I mean our potential guidance that we believe not only at HOCHTIEF, but ACS is conservative, but we need to see how a lot of these projects land and when they do land. Unknown Analyst: This is [ Salvador Lindse ] from Alantra Equities. The first one is on Turner. I see you reported over EUR 3 billion in net cash. I was just wondering whether Turner needs so much cash to operate? And what would your policy on business cross-financing each other or are you moving cash flow to the headquarters in the future could be just to understand how your reported group net cash position is fully available for investments. And the second question would be on the timing and magnitude of the new cycles. Just wondering whether you see something like defense or nuclear reactors or critical minerals potentially becoming as big as the data center investment cycle is likely going to be? Or if it's just long term, but probably more spaced out and not as big as the current investment is? Juan Cases: So starting with Turner. The reason why Turner holds so much cash, and we're not taking it out of Turner is we have 2 reasons. The first one is bonding needs, right, in order to operate. I mean, Turner is reaching the USD 30 billion revenues just in the U.S., and that requires bonding and require security and making sure that you have the right collateral indemnity in the U.S. So that is a big driver of keeping that cash in Turner. But obviously, it's -- I mean, above what they need. The other thing is, for us, it's very important that Turner continues growing. And for Turner to continue growing, there's a few strategies that we're going to put in place. The first one is we need to continue adding engineering capabilities to Turner, number one. The good thing is that right now, with AI, you can escalate that very, very fast, but it will require some investments. The other one is the modularization strategy at Turner because that's the future of construction. So there's additional investments that we're going to be doing in that space. So let's preserve the cash because Turner will need some of that for investments to continue to grow. The good thing about Turner is what they have demonstrated with Dornan is that they can multiply it by 3, the value one company in almost a year, right? So we're quite confident that it's a very good place to allocate capital. Your second question was about the new cycle. So let's go through each one of them. Nuclear. Yes, Nuclear will be like data centers, but more long term, right? We are not expecting to see. But if we want to be in the long term and creating another cycle like data centers, we'll need to wait, right? But it's a long term. It's very high tech oriented. You need a lot of engineering and you need to be from the very beginning, developing that part, right? So it's a long term. We won't see anything in the P&L probably in the short term, but certainly, we are creating a lot of value. And nuclear, it's a very important part of the future not just of AI, but in global of energy. Defense. So defense 2 things can happen. The first one is we keep a Defense 1.0, which is basically infrastructure, and we expect that to continue growing, right? The EUR 800 billion of Germany starts being allocated. Last year, they spent EUR 74 billion. 2026, we're expecting EUR 127 billion, but they start allocating. And you start seeing that. I mean, HOCHTIEF has doubled, now tripling backlog and we will continue growing at the back of that. Same thing in Australia. We need to still see how it's going to develop some of the U.K., U.S., Australia initiatives they have in Australia. They are allocating like around EUR 40 billion in the next 5 years. but hasn't been allocated yet. And then we have North America, where we continue. Now Infrastructure 1.0 will not generate a cycle like data centers, right? It will allow us to grow at a very good pace, but it will not be a data center cycle unless we jump into Defense 2.0. And that's something that without getting into the more radical part of defense, but the dual use technology. That's something we're analyzing, and we haven't made any decision yet. It's easy for us as we do the infrastructure and client request for the full integration, not just the civil building component of it, but we're analyzing what to do with that. Critical metals, I do think that it can be a good cycle. I don't dare to say as good as data centers. It pretty much depends on right now, the rare earth initiatives of the U.S., how serious is it, a very important part. A lot of the copper projects in South America that they are going to initiate. So we are going to track. And then obviously, lithium and batteries evolvement, right? So depending on those 3 variables, it can be a very good cycle as well. And right now, we're not seeing that reflect in our balance sheet because it's pure engineering what we're doing at this stage. Once we have engineering that, we jump into the PCM part of it, which is where the revenues and the EBITDA is, not in engineering. So that's what is now reflected in our P&L. Ãlvaro Navarro: Alvaro Navarro from Bestinver. I have 2 questions. The first one about the dividend policy. After the strong results release and following that HOCHTIEF increase by 26% its dividend. Are you considering to revisit your dividend policy and go up from the around EUR 2 per share right now? And the second one is about this. I think that this year, you have the possibility to execute the put option over the remaining 40%. Is this a possibility? Or are you managing other alternatives? Juan Cases: Thank you, Alvaro. Starting with the dividend policy. I mean, we're always proud of being a yield plus growth company, right? We offer the 2 of those. The yield because traditionally, we have always had a very good dividend policy traditionally. But in growth because right now, we are in other vertical with high growth and high tech, and we want to make sure that we take advantage of being or becoming a leader in those verticals. That's why we are cautious with the dividend policy. Having said that, it's true. We are growing a lot. And yes, there's cash available. So we haven't landed in any conclusion, but most likely we'll increase our dividend policy up above the EUR 2 per share this year. To how much we are analyzing. On the Thiess, we cannot execute the put until the end of this year 2026, with the cash flow being paid in January '27. If there was an opportunity to acquire in advance, we would take it. But that doesn't depend on us. It depends on our partner. Unknown Analyst: It's Victor from Investing. Congrats for the results. I have 3 questions. The first one is on CIMIC. When do you expect a revamp on the cash flows at CIMIC after derisking of the backlog? The second one is going to be if you can confirm at the end of the year, a Capital Market Day in order to provide 3 years guidance for the group? And finally, what is your expectations about the data centers to be commissioned in the half of the year in the initial conversations? How do you feel about that? Juan Cases: Okay. So starting with CIMIC. What's happening in CIMIC, and that's a difference versus North America, Europe and the rest of the geographies is that a lot of the high-tech projects, energy projects, industrial projects are replacing civil and more traditional projects, right? We are building a lot of the additional backlog in Europe on top of the civil that hasn't been reduced -- hasn't been reduced. And in the case of North America, in the case of Turner, residential has disappeared. Commercial office space has gone down significantly in the last 4 years, but the high tech, it's so big and advanced technology, which account right now for 60% of the backlog of Turner, that, I mean, has replaced part of the old market but has exceeded well in advance and above. In the case of CIMIC, New South Wales, Victoria, Queensland has reduced significantly, tremendously the amount of expenditure in transport and civil, right, which were the big jobs. West Gate coming to an end, Cross River Rail coming to an end, all the WestConnex', the North West Rail, the Western Sydney project, all the rail level crossing programs in Victoria and so on and on and on, right? All of them are gone. Each one of these deals were like $5 billion. right? So it's very difficult to replace with transmission line, substations, energy plants, renewables, data centers, all that plant. So the problem is that we are growing and all those areas, CIMIC, UGL, Leighton Asia, they are growing significantly even Thiess, but not to the extent that they can replace those projects. Plus, those projects, they are collaborative. They do not have big advance payments. And right now, we are -- as we finalize those projects, we've been contributing. That 10% advanced payment that we took 5 years ago, we are pretty much spending right now. So you see that winding off cash at CIMIC not being replaced by the new project, right? So that's the issue. Now eventually, those projects will finally be done and which we are not far away. I mean, there's only 2 to go, out of 9, right? So it's a very good position to be. But I mean, so it will happen soon. Will that be in '26 or '27? I mean we'll see. Then on the Capital Markets Day, yes, we're going to have a Capital Markets Day like the one we had in '24, not like the Investor Day we had at the end of last year. We haven't confirmed the date. Don't take me on the month, most likely at the end of October, but not -- but it will be confirmed eventually. And then on Alcal de Henares, I'm going to take the chance to give an update on the data center platform, okay? So Alcal de Henares, which is around 20 megawatts utility like 14, 18 megawatts. That will be commercialized and in operations or at least service to commence operations by -- before the end of the year, Alcal . We will have additional 250 megawatts, before the end of the year, commercialized, probably North America, beginning of construction. And I think that's a reasonable number. And then obviously, that will -- only those once they are commercialized, that will justify in excess of the value of the price paid by our partner for the platform. Unknown Executive: Thank you. That's time for the questions from the other side. Let's start because some of the analysts and investors that have asked about clarification on the guidance. Regarding the guidance, one is, are we using exchange for dollar stable or devaluation of dollar or what it? And regarding also the guidance, what about the free cash flow? The operating free cash flow has been significantly higher. Marcin Wojtal from BofA is asking us if this EUR 1.5 billion free cash flow per annum could be in the lower side, and we could upgrade that. Juan Cases: Okay. So on the U.S. dollar revaluation, one of the reasons why our guidance is conservative. One of the reasons is because we are assuming that the U.S. dollar will continue to go south, and that's reflected in our guidance for the year. That's the most logical and unreasonable assumption in this stage. On the free cash flow, we prefer to be prudent when it comes to free cash flow. It's true that we -- in the Capital Markets Day, we spoke about the EUR 1.5 billion that has ended up being EUR 2.1 billion and EUR 2.2 billion, respectively. And if the market continues to grow, I mean, we certainly, those are the kind of levels that we can expect. But all our plan, all our capital allocation, all our firepower is based on EUR 1.5 billion, right, to make sure because we want to have also -- I mean more conservative approach to factoring, to confirming to that, I mean, we want to make sure that we are cautious in keeping our cash flow as clean as possible. So basically, I don't dare to give a forecast about the net operating cash flow. Obviously, growth typically drives a high net operating cash flows. But again, our firepower is based on a lower amount of the EUR 1.5 billion. Unknown Executive: And regarding that, there are some questions about our capital allocation strategy, especially on the infra assets, particularly Dario Maglione from BNP Paribas is asking us about an update on the status of SR-400, the project the managed lane in Atlanta, but also what is the overview on our capital allocation strategy in this particular assets? Juan Cases: So I get back to the Investor Day at the end of last year, right? Let's assume that we are able to generate the EUR 1.5 billion. Again, we are way above that at this stage, but all our numbers have been run with that scenario. That post shareholders' remuneration, we would have a net of EUR 900 million. From now to 2030, we multiply by 5, so that's EUR 4.5 billion. And we're still, out of the EUR 3 billion, the 1 -- the EUR 2 billion to EUR 3 billion noncore assets that we could divest that we did announce in 2024 in our Capital Markets Day, we have divested EUR 1.5 billion, there's EUR 1.5 billion left. So all of that comes up to EUR 6 billion. What do we want to do with those EUR 6 billion, right? And there's upside because -- I mean, this year, we had EUR 700 million upside to that amount. First, we want to spend in greenfield projects, managed lanes. So EUR 400 million. We got prequalified in the 25 in Georgia, we got prequalified in I-24 Tennessee. We recently got prequalified in the I-77 in North Carolina. There's 2 projects to go, the 285 West in Georgia, and the other one in Virginia. So that's an important part. The other part is data centers. We have the first platform that we signed with BlackRock GIP. We have the edge data center platform, and we are -- and we do have assets, big assets out of the first platform that we are working on them to secure the power and to pursue commercialization. We're looking at opportunities like in critical metals, like we did in Vulcan in Europe, and other potential opportunities in critical metals but also in the energy space. So I mean, a big part of that is going to greenfield. We have another EUR 1.5 billion that probably will go to M&A. And that M&A could bring Abertis, could bring bolt-on acquisitions for some of the things that I said before to enforce Turner engineering and our capabilities. So we are comfortable in general in the capital allocation. Unknown Executive: This question from Marcin as well from BofA regarding Abertis. Do you consider Abertis EUR 600 million annual dividend to be sustainable for the next 5 to 10 years? What is your idea on Abertis strategy? Juan Cases: Abertis is, if everything goes as per the plan, we hope to give a very good picture of the organization. First of all, let's get back to a few numbers of Abertis. Back in 2018, the EBITDA of Abertis was around EUR 3.5 billion, but we lost EUR 1 billion in PPPs that expired, right? So that's basically -- it was EUR 2.5 billion. This year, we have EUR 4.4 billion EBITDA. And our prospects post France, post France are right now between EUR 4.4 billion and EUR 4.9 billion post Sanef? When you look at some of the ratios, and I think we have given some of these ratios in the past, the net debt ratio pretty much versus EBITDA, I think that has gone from 6.6 to 5.2. I think we gave that figure. But our backlog EBITDA versus the net debt has gone up from 3.4 to 5.8, right? So that gives you a view of how we are managing Abertis in the last years. The most important thing in Abertis that there's 3 things going on right now, or 2, the renegotiation of further contracts, and we will give transparency this year, but very important increases of the overall EBITDA of Abertis at the back of these renegotiations and a couple of transactions that we're pursuing with Abertis. We hope that these transactions, the combination of these transactions will give enough visibility not just to the market, but the rating agencies that our FFO versus net debt ratio that has been increasingly from 7 to very high numbers. That is the main restriction to the dividend distribution will be unlocked and we'll get back to normal dividends. And that, yes, will confirm that not only that EUR 600 million is sustainable on time, but we'll have growth to the future and will increase the valuation of Abertis significantly, which right now is like the ugly duck for all the analysts, right? So that will be a nice one eventually. Unknown Executive: I'll change the topic as Graham Hunt from Jefferies is asking about the environment we have in data centers market, the competitive environment you're encountering as you assess additional data center development opportunities. Are you seeing any difference by region, Europe, Australia, of course, U.S. market? What is our position on that front? How we can be as competitive as we are demonstrating? Juan Cases: So different answers to this question, which is a very important topic. In general terms, we continue seeing huge investment. And we do see very important investments in CapEx, but more importantly, the hyperscalers because they need to plan the next 3 to 5 years ahead, they are giving a lot of visibility of what's coming. From the EUR 420 billion that were spent in data centers in '24, they are expecting altogether to reach EUR 1.1 trillion per year '29, right? So that's the kind of amount we're talking about in the market. There's pros and cons in terms of competitiveness, right? The pro is that right now, we believe we're more competitive than before because before, we were -- for every 20-megawatt data center, we were competing with 14 consortiums. For the 2 gigawatts to 4 gigawatts, there's no competition, right? There's little competition. it's more open book. It's more about the hyperscalers know exactly the price of these things and what competitive looks like, right? They don't need to put long-term RFPs. That's a waste of time for them. right? So what we need to make sure is we compete against ourselves and what hyperscalers can do, which is the bar, which is a very high bar, by the way, because they have a tremendous capability. They could do it themselves. If they use us or another contractor company is because they can do it in the same way or better than what they can, right? So that competition is that's one factor. On the other side, what we are seeing is that time is of the essence, but every year is more of the essence. So hyperscalers want to see is a huge reduction in the timing of construction of these data centers. So that's why we are investing in modular construction, and that's why we continue to increase the timing and therefore, making us more competitive. In terms of U.S. versus Europe versus Australia, completely different markets. U.S. is dominated by the fact that they use is a superpower in AI, that they are training the models, that they have all kind of data storage and most of the American companies, they rule the world when it comes to data, right? So that's why you're seeing the 2 gigawatts, the 4 gigawatts. Anything you do in the U.S., you commercialize very quick, right? There's a huge, very liquid market for this from hyperscalers but also medium companies, small companies. There's a lot of AI processing inference. There's a lot of AI training. There's a lot of data storage. And there's a race to become the most powerful data storage hyperscaler. Europe is very slow. And Europe is very slow because right now, there's a debate about what a data center can provide. And there's always a mismatch between direct and indirect value. Direct value. There's always a combination of high energy, high water, low employment. Indirectly, every time you have megawatts of AI process interference, or ecosystem, you build a huge ecosystem of start-ups around data center. And some example, like Virginia, when they got to the 2.7, 2.4 gigawatt capacity, I think that they brought -- they created 10,000 new start-ups as a consequence. Even some of the big operations in the U.S. moved into Virginia, but the same thing in other places. Something similar happened in Ireland, that plus tax incentives a few years ago. And you will be seeing that in Europe. So more and more and more countries, they see data centers as strategic national investments. But that takes time to get to that conclusion, right? Plus once you -- so that delays things a little bit, but it will come. Having said that, Europe is not training AI models yet. Europe doesn't have big hyperscalers yet. They are the American ones, mainly investing in Europe. And the power in Europe is very much intervened and has some restrictions, different country to country, but in the same line, right? So that doesn't help to the development of more data centers in the short term. But it will come, not as big, but it certainly will come and the industry will come to Europe. Asia Pacific, we've seen that booming, but obviously, they are not trained -- except China that -- I exclude China for now. They are not training big AI models, and they do not have that storage, but certainly Leighton Asia has been super active. Out of the backlog we currently have, there's like EUR 2 billion just in Asia Pacific without including Australia. And then Australia, it's going slow moving into data centers, but we're seeing progress in the country towards data centers. Unknown Executive: In that sense, Dario Maglione is asking about the data centers in Spain outlook because he asked that as we plan to have around 800 megawatts of data centers through our JV platform by 2032, how strong is the demand for data centers in Spain? Enough to absorb this amount? Juan Cases: Potentially, yes. potential, yes. That depends. In Spain, what I do think is going to happen is hyperscalers first will fold their demand with their current development. Once they go beyond that, then they will start asking for additional capacity, and that's where a lot of that excess capacity will be used, on a large scale. I'm not talking about ours. I'm talking about Spain, the countries in general, right? But there's demand for a medium companies that right now, they are not doing their own development, but they are looking for, I mean, megawatts of data centers available. I do think that the restriction is not so much on the demand. The restriction is more on the power. When we speak about AI or inference demand, that's different, right? Because that's a very more unique energy demand. It's not like pure data storage. It's more about inference. It's more about AI processing. I think that, that will take more time in Spain versus the rest of Europe or the U.S. Unknown Executive: Final question is coming from Filipe Leite from CaixaBank BPI. Regarding the platform, the data centers platform, he has 2 specific questions. One is regarding the commercialization? Any news about the commercialization on data centers for this year? And the second is much more technical. He's asking about why the cash in from the recent agreement with BlackRock GIP, sorry, is lower than the EUR 500 million we announced, which has been accounted for EUR 428 million? Juan Cases: Okay. I'll start with the first one, and then I will add to this, and I will ask Emilio to add anything he considers. Well, on the first one, I already said before, before 2026, we expect to have in Spain, 14 megawatts IT, which is basically 20 commercialized and built, in the U.S. like 250. And I believe that those could be conservative figures, and then we'll continue adding that every year. When it comes to the platform, I think that is just the inflow versus the outflow net. Emilio, if you want to add? Emilio Grande: Yes, correct. So the net number was estimated to be EUR 500 million is when we announced the transaction last year. It's slightly below that. The net number, EUR 860 million, minus EUR 400 million something. And the only reason is because of the terms of the agreement and the exact amount of investment as of the date of closing. So that's the gap or the difference between the EUR 500 million and the actual cash in net. Unknown Executive: Final question is regarding, as you mentioned, we are pursuing some managed lanes opportunities in U.S. Could you clarify why the consortium structure for the different bids are different from what we have been doing in the past? Or why the first? What is the reason that we have different partners? Juan Cases: No. I mean, we have only 2 consortiums. The main one with Meridiam, Acciona. I mean, we won with them 400 and were prequalified in the 285 and A24 with them in Georgia and Tennessee, respectively. In the case of North Carolina, Kiewit has been a traditional partner of Flatiron in North Carolina. I mean as you know, in terms of macro figures, Kiewit is the largest civil contractor company in the U.S. We are the second largest. But in North Carolina, in particular, we are both very, very strong in the lead positions, and we have been traditional partners. So some of these conversations were back before our consortium with Acciona. So it's just a specific situation in North Carolina. Unknown Executive: There's no more questions from the web. Juan Cases: Any further questions? Okay. Excellent. So thank you very much, everyone, for coming and joining on the phone. Look forward to any questions on an ongoing basis with the next days or weeks. Thanks a lot.
Alberto Valdes: Good morning, everyone. I'm Alberto Valdes, Head of Investor Relations. Welcome to our full year 2025 results presentation. Before we begin, I would like to draw your attention to the disclaimer regarding forward-looking statements on Slide 2. Today's discussion will include certain projections and non-IFRS metrics that provide a clear view of our underlying performance. Today's presentation will be led by Martin Tolcachir, our Group CEO; and Guillaume Gras, our Group CFO. After their remarks, we'll open the floor for a Q&A session. I'll now hand things over to Martin. Martin, the floor is yours. Martin Tolcachir: Thank you, Alberto, and good morning, everyone. I am proud to present what I believe are truly excellent results achieved in the first year of our Growing every day strategic plan. Looking at the outline on Slide 4, our story today rests on 5 key pillars. Dia Spain is not just on track, it is accelerating the delivery of our strategic plan, and we are now significantly outperforming the market. Dia Argentina has stabilized. After a resilient second half, we are now well positioned to capitalize on the recovery in food consumption expect from 2026 onwards. Dia Spain remains the engine of the Group's financial results, driving substantial margin expansion, multiplying net profits and generating robust cash flow. Our exceptional stock performance in 2025 validates our strong operating performance and solid prospect for profitable growth. 2025 marked a pivotal year for Dia. It was the year in which we successfully transitioned from a turnaround phase to one of sustained profitable growth. Now let's talk at this in greater detail. Let's start with Dia Spain and the accelerate delivery of our strategic plan on Slide 6. One year ago, we presented our Growing every day strategic plan, which set out 4 clear targets for leading the market in profitable growth. Our performance in the first year clearly demonstrates that we are not only on track, but exceeding delivery on these targets. We opened 94 new proximity stores, boosting total sales growth to an impressive 8.6%, more than doubling the guidance average rate and increased our adjusted EBITDA margin by 54 basis points to an impressive 6.8%. At the same time, we added to the average capital expended budget, resulting in increased returns on robust deleveraging. As you can see in the next slide, this rigorous delivery is spread across the 4 dimensions of our strategic plan. Our strong like-for-like sales growth, our expanding customer base and improving NPS score is evidence of the positive response by our customers to our improved value proposition. Meanwhile, our franchisee excellent NPS score and our inclusion among Spain's most reputable companies are more than just a source of pride. This enhanced satisfaction and reputation enables us to recruit the best talent to support our operations. Finally, our exceptional share price performance and our surge in liquidity are both powerful market endorsement of our strong results and of our enhanced investor relationship outreach. Let's now move on the main highlights of Dia Spain's operating performance, starting on Slide 8. The rate of sales growth has surged from 5.5% in 2024 to an impressive 8.6% in 2025. Our total sales in Spain reached EUR 5.5 billion. Like-for-like growth reached 7.4%, driven primarily by market-leading volume growth of 5.7%, fueled by an expanding customer base and higher frequency rates. Price inflation was just 1.6%, strategically remaining below general food and beverage inflation and highlighting our commitment to affordability. Finally, despite being in the ramp-up phase, new store contribute an additional 1.2 percentage points to our sales growth. As a result, our total sales growth strongly outperformed the market, enabling us to increase our market share by 12 basis points and consolidate our position as the fourth largest national player and absolute leader in the Proximity segment. Moving to Slide 9. You can see how our customer-centric strategy is promoting loyalty and as a result, sales growth. Our value proposition centers on quality, convenience and affordability, offering a comprehensive and innovative assortment of product and the freedom to choose from leading brands. Thanks to our commitment to quality and local sourcing, sales of fresh product increased by an impressive 15% and now represent 28% of total sales, a significant 160 basis point increase year-on-year. Similarly, our commitment to offering high-quality Dia brand product at affordable price has driven a 10% growth in this category. These products now account for 59% of our fast-moving consumer goods basket, an impressive 170 basis point increase on 2024 and is evidence of a growing base of loyal customers. Continuing on Slide 10. Loyalty sales account for an impressive 56% of gross sales in 2025, marking a 9% increase. This was driven by an increase in the number of loyalty customers and the frequency of their purchases. It is worth noting that the average purchase frequency and basket size of loyal customers is double that of the non-loyalty customers. In this context, the additional of 200,000 loyalty customers in 2025 is of a great value, bringing to -- the total to 5.8 million. The digitalization of our loyalty base continued to progress rapidly, fostered by our gamification initiatives and exclusive promotions. Currently, 58% of our loyal customers who account for 1/3 of our sales interact with us via the application. This channel is growing exceptionally well. It grew by 13% last year. This growth has been driven by double-digit growth on both our own platform and those of third-parties despite the temporary slowdown experienced by delivery platform while they adapt to the recent riders law. Our digital platform complement our proximity network perfectly, reaching 84% of the population and offering the best service level. Over 90% of the orders are delivered on the same day within a 1-hour time slot. Our digital ecosystem combines the unparalleled speed and convenience of our e-commerce platform with the intelligence of our Club Dia loyalty program. This provides customers with a personalized omnichannel experience and us an outstanding Net Promoter Score of 60 points. Turning now to Slide 11, you can see the progress of our store expansion plan. Our goal is to open 300 new proximity stores by 2029. These stores have been selected from a pool of 1,500 high potential locations identified through our proprietary analytic tool. We are giving priority to areas where we already have a strong presence, such as Madrid, Andalusia, and Castilla y Leon, to further increase our store density and improve our logistic efficiency. By focusing not only on large urban hubs, but also on smaller multi-municipalities, we can capitalize on our capital-light format and thrive in areas where large competitors are less efficient. We are now leveraging our scalable franchise model to accelerate the rollout of these select stores, boosting organic growth and share profitability. In 2025, we opened 94 proximity stores, more than offsetting 38 strategic closure and achieving a net expansion of 56 stores. Our aim is to double net openings in 2026. With over 100 net store opening, we will drive organic growth and further consolidate our position as the market leader in Proximity segment. Most of these new stores, 73% are managed by franchisees who currently represent 67% of our network. These hard-working, experienced entrepreneurs help us to bring Dia value proposition to every neighborhood. They manage the store, growing on their local knowledge while we provide infrastructure, product, logistics and service standards. This specialization ensures complete alignment of interest, maximizing productivity and profitability for both parties. The success of this model is reflected in our franchise impressive Net Promoter Score of 75 points. As shown on Slide 12, the expansion of our store is being supported by the modernization of our logistics network. By 2029, we aim to resize and renovate 6 of our 12 logistics platform, improving their service level and capturing significant operational savings. This follows the successful model of our first renovate platform in Illescas, Toledo. In 2025, we opened a second logistics center in Dos Hermanas, Sevilla and start construction of a third Leon scheduled to open in the coming months. A further 3 logistics platforms are planned for Malaga, Levante and Catalunya in 2027, '28 and 2029, respectively. These new platforms are built to the highest standard of efficiency, productivity and sustainability and enable us to optimize our operating margins. Renovating refrigeration equipment is also helping us to improve our energy efficiency and reduce our carbon footprint. To date, 68% of the logistics network and 24% of our store have been decarbonized. The next slide #13, shows our continued progress on ESG. Here, I am pleased to announce our new sustainability plan to 2029, named The Value in Every Day, which will positively impact all our stakeholders. Having successfully complete all the initiatives proposed under our previous sustainability plan by 2025, we have defined 84 new actions for the next 4 years grouped into 5 categories. Firstly, actions to improve our customer awareness of quality nutrition through strategic alliances with suppliers and nutritional experts. Secondly, action to extend our ESG training programs to all employees and strengthen our inclusive hiring and diversity targets within our meritocratic culture. Thirdly, action we will contribute to the development of urban and rural communities by sourcing locally, creating new jobs, improving accessibility and taking social actions. Fourthly, action to accelerate our decarbonization plan, lift our 0 waste and food waste prevention targets, consolidate our responsible sourcing standards and implement the DRS scheme for packaging recycling. Finally, we will further improve our reporting and disclose enhancing our ESG rating visibility and fostering customer perception and trust. Now let's turn to Argentina's operating performance on Slide 15. Dia has demonstrated resilient management by successfully navigating a challenging macroeconomic environment. The strategic measures implemented in 2025 were instrumental in stabilizing sales volume, delivering positive adjusted EBITDA and free cash flow and maintaining a robust net cash position. Firstly, we refine our product assortment to increase shelf productivity, and we implement a high-return promotion strategy supported by enhanced communication to stabilize sales volumes. Secondly, we optimize our network by closing underperforming stores, streamline in-store operation and reducing our logistic footprint to cut secondary distribution costs and restore profitability. Finally, in terms of finance, we optimize our inventory levels to free up cash and only invest in maintenance to preserve the business self-financing capacity. The success of these measures is clearly evident in our second half performance metric. Firstly, we achieved 2% like-for-like sales volume growth in the second half of the year, gaining 31 basis points in market share. Secondly, we successfully turned the margin around, moving from minus 0.5% in the first half to plus 1.3% in the second. And most importantly, we moved from a negative cash position to generating EUR 12 million in free cash flow in the second half of the year, ending with robust liquidity. As you can see on Slide 16, we believe the worst is already behind us. While the year-on-year comparison still shows a decline in like-for-like sales volumes, the sequential quarterly trend indicates clear stabilization in the second half of the year. 2026 is set to be a pivotal year for the Argentina, as you can see on the next Slide 17. The Argentinian economy is already showing positive signs with more moderate inflation, a stabilized exchange rate and a solid growth prospect for the coming years. The consolidation of Argentina macroeconomic framework and relative price stability with the bulk of fiscal adjustment now complete, should allow for a gradual but sustained recovery in the household disposable income. This will enable consumers to return to more normal food consumption patterns. In this scenario, our leading position, operational efficiency and financial discipline provide a solid foundation on which to capitalize on the expected recovery in food consumption from 2026 onwards. As you can see in the next Slide 18, our leading market position in Buenos Aires gives us a solid base from which to rebuild growth and profitability. We are the leading proximity food retailer and top-of-mind brand in the Buenos Aires region, thanks to our competitive prices, high-quality products and successful loyalty program. Our balanced assortment includes a high-quality private label, generating close to 30% of gross sales, well ahead of the market average. We offer a high-quality fresh product assortment, combined with guaranteed product availability to meet essential customer needs. Our strong value proposition results in best-in-class consumer satisfaction, as reflected by an impressive Net Promoter Score of 78 points. I will now hand you over to Guillaume, who will briefly explain our financial results. Guillaume Gras: Thank you, Martin. Let's start with Spain's strong financial results on Slide 20, which demonstrate the effectiveness of our strategy. As mentioned earlier, gross sales increased by 8.6% to reach EUR 5.5 billion, while net sales, excluding the franchise margin and value-added tax, grew by 8.2% to reach EUR 4.6 billion. The slight difference in terms of gross and net sales growth reflects a stronger growth rate from franchise-operated stores. Our adjusted EBITDA margin increased by an impressive 54 basis points to reach 6.8%, one of the highest in our sector. This was driven by operational leverage and rigorous cost management, resulting in an 18% increase in adjusted EBITDA to reach EUR 313 million. Finally, I would like to highlight the threefold increase in our net income to EUR 166 million, including EUR 52 million from the recognition of deferred tax assets in the second half of the year. Given the positive net income achieved in the last 2 years and our robust profit forecast, we are well positioned to activate tax assets. Dia Spain still has over EUR 660 million in tax loss carryforwards pending activation. This equates to over EUR 165 million in potential future tax savings, meaning that Dia Spain's effective tax rate will remain below 20% in the medium to long-term. Excluding this tax effect, our net income would have reached EUR 114 million in 2025, doubling that to previous year. Our high profitability also led to strong free cash flow generation, totaling EUR 140 million. This resulted in a significant reduction in net debt, as you can see on Slide 21. Cash flow from operations reached EUR 301 million. This figure includes the recovery of EUR 33 million in tax refunds during the first half of the year, following the official removal of the regulatory cap on certain tax deductions. Net CapEx totaled EUR 161 million during the period, representing a 60% year-on-year increase linked to the execution of our store expansion plan. Following the refinancing of our debt in December '24, which provided the stable framework needed to execute our 5-year strategic plan, net financial payments totaled EUR 61 million. As a result, we achieved a net debt reduction of EUR 79 million. This represents a 24% decrease compared to the end of 2024, bringing the total down to EUR 251 million. You can see this on the next Slide #22. The company boasts a set of solid credit metrics. Firstly, it has a low financial leverage with an adjusted net debt-to-EBITDA ratio of just 0.8. Secondly, it has a long-term financing structure with no significant debt repayments until 2029. And thirdly, it has a solid net cash position of EUR 295 million at the end of 2025. These robust credit metrics offer ample flexibility to support accelerated growth while maintaining a low leverage profile. Now let's turn to the financial results of Dia Argentina on Slide 23. As previously mentioned, gross sales in Argentina decreased by 15% to EUR 1.5 billion, affected by a 10% decline in like-for-like sales volume and above all, by the translation effects of the 40% depreciation of the Argentine peso in 2025. Net sales mirrored the performance of gross sales, declining by 15% to EUR 1.2 billion before the application of IAS 29 accounting rules for hyperinflationary economies. These rules had negative noncash impact of EUR 104 million. It is important to reiterate that our decisive cost control and financial discipline enabled our adjusted EBITDA margin to recover by 180 basis points to reach 1.3% in the second half of the year. This resulted in a positive adjusted EBITDA and free cash flow of EUR 4 million and EUR 3 million, respectively. As you can see on Slide 24, rigorous working capital management and targeted maintenance CapEx protected our cash position throughout a challenging year. The EUR 27 million working capital inflow was driven by optimizing stock levels, unlocking trapped cash and covering targeting maintenance CapEx, which preserved Dia Argentina's net cash position, almost intact before the foreign exchange took effect. The depreciation of the Argentine peso by 40% in 2025 had a translation effect of EUR 25 million on its net cash position, which closed the year at EUR 61 million. This solid net cash position, together with our rigorous financial discipline, ensures that the business remains self-funded and ready to capitalize on Argentina's expected macroeconomic recovery. Finally, let's conclude the review of the financial results with a brief summary of the Dia Group's consolidated results from continuing operations, on Slide 25. Dia Spain continued to be the driving force behind the Group's growth and profitability. It achieved a 3% increase in consolidated gross sales, reaching EUR 7.1 billion as well as an 8% increase in adjusted EBITDA, reaching EUR 316 million. This resulted in a 30 basis point improvement in the consolidated adjusted EBITDA margin, reaching 5.4%. Notably, our consolidated net income for continued operations more than doubled to a robust EUR 115 million, excluding a EUR 14 million profit contribution from discontinued operations. This relates to the reversal of unapplied contingencies regarding the sale of the Portuguese business in 2024. Conversely, in 2024, discontinued operations contributed a loss of EUR 107 million linked to our exit from Brazil. The company is thus returning to profitability following a successful transformation process that has established its position as Spain's leading supermarket chain in the Proximity segment. It now boasts a robust and profitable business with promising prospects for growth. Finally, the Group's free cash flow reached a robust EUR 143 million. This resulted in a net debt reduction of EUR 51 million, bringing it down to EUR 190 million at the end of the year. Now I would like to draw your attention to our exceptional stock performance in 2025, as shown on Slide 27. This powerful market endorsement is a testament to our strong achievements and solid prospects for profitable growth. Dia's share price has made an extraordinary recovery, rising by 140%, while our average daily liquidity has surged fivefold and is now consistently above EUR 2 million. Our market cap grew from EUR 0.9 billion at the end of 2024 to over EUR 2.1 billion at the end of 2025, releasing EUR 1.2 billion of shareholder value. Despite this impressive performance, Dia is still trading at a discount compared to our peers. Closing this gap should increase our market cap to over EUR 2.7 billion, in line with the current analyst consensus valuation. Our share price recovery and surging liquidity reflects renewed and growing confidence from institutional investors, underpinned by our proactive investor relations outreach. Last year, we executed 14 targeted roadshows in major financial hubs and participated in 10 investor conferences, effectively presenting our new equity story to over 190 high-quality investors. We have added 2 new brokers to our sell-side coverage, and we are actively encouraging new coverage from pan-European brokers to further increase our visibility among institutional investors. We are committed to broadening our investor base and building deeper, long-standing relationships with investors, ensuring that we fulfill our value creation commitments. Now I hand you back to Martin, who will deliver his closing remarks and outlook for 2026. Martin Tolcachir: Thank you, Guillaume. I will now conclude this presentation with some closing remarks on Slide 30 before moving on the Q&A session. The excellent results achieved in the first year of our Growing every day strategic plan validate the success of our proximity model and the strength of our customer-centric strategy. We are delivering robust volume-led like-for-like growth, significantly outperforming the market, while accelerating the rollout of our expansion plan ahead of the schedule. This operational excellence is driving a substantial expansion of margins, a twofold increase in the net income and strong cash flow generation. Looking ahead to 2026, our goals are threefold. Firstly, to maintain our position as the market leader in like-for-like growth. Secondly, to accelerate the rollout of our expansion plan with over 100 net store openings this year. And thirdly, to continue to increase our adjusted EBITDA margin. We will also continue to monitor strategic opportunities in Spain's fragmented market that could generate additional shareholder value. In any case, please note that we only view these opportunities as strictly supplementary to our core organic growth road map, and we won't allow any distraction from it. Meanwhile, Dia Argentina has demonstrated resilient management by successfully navigating a challenging macroeconomic environment. The strategic measures implemented in 2025 were instrumental in stabilizing sales volume and delivering positive adjusted EBITDA and improving free cash flow in 2025, while maintaining a robust net cash position. Our leading position, operational efficiency and financial discipline give us a solid foundation on which to capitalize on the recovery in consumption expected from this year as the macroeconomic environment normalizes. 2025 marked a pivotal year for Dia. It was the year in which we successfully transitioned from a turnaround phase to one of sustained profitable growth. With a significantly strengthened balance sheet and proven proximity strategy, we are now well placed to deliver long-term value. This transition is being increasingly validated by the financial market, as reflected in our exceptional share price performance and enhanced stock liquidity. Thank you for your attention. We are now open to your questions. Alberto Valdes: Thank you for your attention. The Q&A session is now about to begin. To ask a question over the phone, please press the asterisk, then the number 5 on your telephone keypad. As a shareholder, you may also submit questions through the red button on your webcast screen. Once we have verified your ownership, we will answer your question. If we are unable to do so during the session, we will respond directly to your e-mail address. Questions received from analyst covering our stock will be addressed first. Thank you. All right. Here comes our first question from Alvaro Bernal at Alantra. Alvaro Bernal: I have 3 questions, if I may, all related to the 2026 guidance. The first one is regarding sales growth. You have grown at 9% in Spain in 2025, ahead of the 4% to 6% guidance. What do you expect for 2026? If you can provide a mix on volume, price, store opening, it would be very helpful. Second one is regarding margins. You delivered a solid 6.8% margin in Spain. What do you expect for 2026? And what are the drivers of this improvement? And the last one is regarding CapEx in Spain, having in mind that you're accelerating your store opening plan to a targeted 100 net openings in 2026, what can we expect in terms of spend? That's all. Congratulations on the results. Alberto Valdes: Thank you. Very clear questions, Alvaro. I think the first 2 are for Martin. The last one on CapEx, maybe is more suitable for Guillaume. Martin, if you're ready. Martin Tolcachir: Sure. Thank you, Alvaro, for your question. Clearly, 2025, our sales delivered an impressive 8.6% increase, as you mentioned. This performance was built on a robust 7.4% like-for-like, basically supported by volume growth and also an initial contribution of our expansion plan that added 1.2% to the top line. So going to your question on '26, what we can share is that, what we expect is to maintain our market leadership in like-for-like growth. We really think that the value proposition that we are proposing is clearly the one is choose by customers, and we are going to keep our rhythm of like-for-like ahead of the market. On the expansion, what we expect is also overperform the growth of square meters of the Spanish market. We are targeting 100 net openings for the year, and that will also allow us to accelerate the growth again in 2026. This acceleration means that in total growth, 2026 is projected to again outperform our guidance range of 4% to 6%. On the margins, what I can share with you is that clearly, Spain again reached 6.8% in 2025, that this is 54 basis point expansion. That was driven basically by this strong operational leverage and rigorous cost discipline, as was already presented by Guillaume. Outlook for '26, our focus is clearly on accelerating our organic growth. We expect, based on that, a fixed cost dilution and rigorous cost management to offset wage and transport inflation, again, enabling us a further improvement in margins this year. However, this -- there will be a more, let's say, normalized pace compared to the extraordinary jump seen in 2025. Perhaps for the CapEx, I can give to Guillaume. Guillaume Gras: Thank you, Martin. First, to remind, in 2025, Dia Spain net CapEx totaled EUR 161 million, in line with the guidance provided and 60% above the EUR 99 million invested last year in 2024. So the year-on-year increase is mainly related to our store expansion plan. Looking ahead to 2026, we expect to double our rollout speed with more than 100 net store openings. Consequently, we should expect around EUR 50 million higher CapEx than in 2025, pointing to over EUR 210 million. Remember that this CapEx is fully financed by our operating cash flow. This enables us to maintain low financial leverage throughout our strategic plan. Alberto Valdes: Thank you very much, Martin and Guillaume. The next question comes from Luis Colaco at JB Capital. Luis Colaco: I have 4 questions on my side. The first one would be regarding the breakdown in terms of sales growth for 2026. We saw an exit rate of like-for-like of circa 7.7%. You guided before -- last year for 2% to 3% like-for-like. And we are seeing the inflation in Spain still in the food sector already at 3%. Do you think that this guidance that you provided last year between 2% and 3% isn't conservative at this stage? Second question would be on the expansion of stores that you project. You said that you expect 100 net new stores for 2026. You opened 54 already in 2025. So I wanted to understand if the 300 net new stores that you projected from 2025 to 2029, also, does it look conservative at this stage? And I assume that the 300 is net new stores. That wasn't clear for me, in the past. And the third question would be on the debt. You've been deleveraging in a very fast way. We know that you refinanced your debt in 2024 at a very high rate. Bearing in mind your current net debt-to-EBITDA, do you think that you will be able to refinance your debt at the end of this year? And what type -- if this is -- if you agree with me, do you think that -- can you provide us some color on what type of spread should we be assuming for debt refinancing? And the fourth question would be also on the market in general in Spain. We've been seeing the nominal food retail sales growing -- accelerating the growth. What do you attribute this to, immigration, higher purchasing power from consumers? If you could give us some color would be great. Alberto Valdes: All right. Very clear questions. Thank you very much, Luis. I think the first pool of questions regarding the sales growth in Spain, also our store expansion and the macroenvironment, could be very good questions for Martin and the one regarding our financials is more suitable for Guillaume. Martin, are you ready? Martin Tolcachir: Thank you, Luis, for your questions. What we are seeing in -- for Spain in terms of growth -- the drivers of growth, we expect now inflation position between, say, 1% to 2% this year. We still have some pressure, especially in fresh product. But then we have also a mix effect that will offset partially this pressure, so again, between 1% to 2%. In volume like-for-like, what we expect, or what we are expecting is a consistent growth between 3% and 4%, which is a robust growth in this market. And in terms of expansion, what we are assuming now is a contribution of around 3% coming from this plan. In terms of our acceleration in expansion, but more broadly, the acceleration that we are seeing in the execution of our plan in 2025 and our solid prospect for 2026, we really think that while we are delivering ahead of the schedule and accelerating in general, it may be premature to review our strategic targets only 1 year after its launch. However, given, again, this positive trends, I wouldn't rule out revising our targets plan next year, let's say, in 2027. Concretely, concerning the opening stores, you can assume that, yes, the 300 additional stores openings are net -- in the framework of our plan. Then some comments on the macroenvironment, as you pointed. We expect in Spain a solid growth in terms of GDP. 2025 was at 2.8%, which is a real strong performance, especially when we compare with the rest of biggest economy in Europe, Germany, France. So really, really strong support of this growth. We consider as we see in the -- all the available information that 2026 will remain a strong year for Spain. We project this growth around 2.4%, again, driven by a strong domestic demand and all the external sector. In terms of inflation, 2025 was already a year of the moderation, and we expect 2026 with a number of around 2% in terms of inflation. We really are -- appreciate seeing a clear improvement of the disposable income from household, which is really important for our business. Last year was already a positive year and all the information we are gathering confirm that 2026, again will be a positive year in terms of recovery of this real disposable income, which, again, it's key for our business. So last element that we can share is that in terms of population and tourists, we are still seeing solid numbers that will sustain this trend looking forward. Guillaume Gras: And regarding the refinancing, today -- the lockup period of the current financing expires at year-end, paving the way for a potential refinancing from 2027 onwards. As this time approaches, we intend to leverage our strengthened credit profile, reduced leverage and proven operating track record to optimize our cost of debt. And this should reduce financing costs and unlock our current capital allocation constraint, providing us with greater flexibility to remunerate our shareholders. How much do we expect? It's too early to say, but we expect a relevant reduction cost of debt. Luis Colaco: Just a follow-up question on what you said. You mentioned before the like-for-like between 1% and 2% in terms of prices, if I'm not wrong, 3% to 4% in terms of volumes. But that already surpasses the 4% to 6% total sales growth that you guided for. Is that correct? Martin Tolcachir: With the prospect we are having today for 2026, clearly, we expect to outperform our range, the range of growth that we give as guidance in 2026, clearly. Alberto Valdes: Yes, that is very clear. Thank you, Martin. The next question comes from Jose from CaixaBank. José Rito: So I have 3 questions. The first one is on net debt evolution at the consolidated level in 2026. If -- based on the fact that you should expect to accelerate store openings and also CapEx, if you expect to reduce net debt by 2026 versus 2025? That will be the first question. The second question related with the tax credit. So the activation of the tax losses were carried forward, I think that you had around EUR 1 billion in the balance sheet at least last year. There was some activation this year. Can we assume that the company will activate a similar amount in 2026? And how should we assume the phasing of this? If you can provide a little bit more details on this, I think it will be helpful. And finally, the third question on the working capital evolution in Spain. There were slight cash outflows in 2025, reason for this? And also how do you expect this to evolve in 2026? Alberto Valdes: All right. Thank you, Jose. If I understood you well, you're asking about our net debt prospects for the coming years and if we are going to be reducing our net debt position again in 2026. That is a good question for Guillaume. You also ask about our income tax in 2025 in the second half, which was significant. If you can give Guillaume a little bit more color on that and also on our prospects? And finally, I think you ask about the working capital change in Spain in 2025 and also your views, Guillaume, regarding next year, 2026. So when you're ready. Guillaume Gras: Thank you, Alberto. Regarding net debt projection for this year, as we increase our CapEx, we expect to maintain our current net debt. So that's the first point. Second, regarding income tax, in light of our positive performance and strong future profit expectations, we had EUR 52 million out of a total deferred tax asset balance of EUR 217 million, that was activated in the second half of the year. This, together with the one-off reversal of a fiscal provision totaling EUR 9 million registered in the first half, this more than offset the corresponding annual corporate tax resulting in positive tax income of EUR 47 million in 2025. So regarding 2026, Dia Spain still has deferred tax assets totaling EUR 165 million pending activation, which will not expire. We plan to activate these assets progressively over the coming years, which will result in an effective tax rate below 20% in the medium to long-term. Regarding the working capital change in Spain, the outflow you mentioned of EUR 10 million, if I'm not mistaken, is linked to a calendar effect here in our supplier payments. So it's just something punctual. Looking ahead to 2026, we expect a positive working capital inflow driven by our projected sales growth and expansion plan. Alberto Valdes: Thank you, Jose, for your questions. We've got another one coming from Pablo Fernandez from Renta 4. Pablo Fernandez: Congrats on these solid numbers. Just 3 on my side. The first one is just a follow-up on growth and margins, in this case about Argentina. Could you provide some color about the [indiscernible] picture and maybe offer some guidance on your expectations about sales and margin expansion in '26? And the second one, do you keep considering the business in this contract as a strategic or maybe this first green shot could be a good opportunity to divest in the country? And the final one is regarding the EUR 10 million of assets held for sale in your balance sheet. Maybe you could provide some color about it? Alberto Valdes: Thank you, Pablo, who is now shifting to Argentina. He's asking about how we see the macroenvironment and our prospects for 2026? Also, if we consider this as a strategic business or we could consider its divestment? And finally, a question regarding assets held for sale, that is more suitable for Guillaume. So Martin, the floor is yours when you're ready. Martin Tolcachir: Thank you, Pablo, for your question. On Argentina, in terms of GDP, following the sharp contraction in 2024, GDP is estimated to have a recovery of, let's say, 4% in 2025, driven mainly by a rebound in the agriculture sector and the gradual recovery of the energy and the mining sector. The economic forecast suggests this recovery will continue in '26 with the GDP growth expected to remain between 3% to 5%, but with an increased contribution from private investment and consumption in addition to the primary sector. In terms of inflation, as you know, inflation has significantly decelerated from the inflationary peak of '23 and '24 to a single-digit monthly rates at the end of last year. In this context, the real disposable income began to recover in '25 amid rising wages and more moderate inflation. Still, it remains at a very low level and following 20% cut in 2024 due to measure implemented to eliminate the fiscal deficit. So looking ahead, what we expect -- the consolidation of Argentina's macroeconomic framework and relative price stability are expected to enable the sustained normalization of household disposable income and the gradual recovery of food consumption from this year onward. As you know, we have a strong position in Argentina. We have a leading position in Buenos Aires. We have a strong brand, a loved brand in the country and a brand that is perceived as the -- more competitive in terms of prices and the leader also in terms of own brand quality and loyalty program. We have an operational and supply chain solution that is really competitive in that market, and that means a real value for us. We have a value proposition that also combines this own brand, fresh products and national brands that differentiate our value proposition from the other players. In this context, the -- we consider that the consumption is now bottoming, and we expect a gradual recovery from this year onward. So in this context, again, we are not considering the sale of the Argentina at the moment. Selling the business now will fail to capture the value we really think this operation have and this strong position that we have in the country and more particularly in our leadership in Buenos Aires. And again, all the potential recovery that we are foreseeing based on the healthy and the strengthening of our value proposition. What we expect in terms of sales growth is, again, this gradual recovery during 2026, although the sequential quarterly trend should continue to improve. The positive year-on-year comparison will be more evident, especially as the year progress. Last question on also margins for Argentina. As you know, we have put in place decisive cost control and financial discipline that allows us to get to a positive adjusted EBITDA in the year. The second half of the year we have been already capturing the benefits of all that strategic decisions. And again, the full year, we finally closed a positive 0.3% of adjusted EBITDA margin. This year will be a year where we are capturing -- we are going to capture fully all this -- the benefits of all that decision, and we expect to improve our adjusted EBITDA margins in Argentina. Guillaume Gras: And regarding the question about assets held for sale, the EUR 10 million you are seeing, corresponds to real estate assets belonging to Dia Argentina. We talk about one warehouse and 14 stores. These assets are up for sale in 2026 with the aim of reinforcing the company's net cash position. As you know, and just to remind, Dia Argentina had a net cash position of EUR 61 million at the end of the year. This, together with our rigorous financial discipline and the monetization of real estate, will ensure that the business remains self-funded and ready to capitalize on Argentina's expected economic recovery. Alberto Valdes: Very clear, Guillaume. Thank you, and Martin. We have a final question from Marisa Mazo from GVC Gaesco. Marisa Luisa Mazo Fajardo: Alberto, congratulations for the results. I have 3 questions. The first one is in logistics. Can you remind us how may be impacting costs when you continue opening your new warehouses? And how much is the annual investment? The second issue is on the financial debt and the repayment. If I'm not wrong, you have to pay penalty on the -- if you repay the debt from year 2027 onwards. And also, you're still accounting for the opening fee. How we -- may we think about which will be the trade-off between renegotiating the debt and all the other impacts it has? Alberto Valdes: All right. Marisa, thank you for your questions. If I understood you well, you're asking about your logistic optimization plan, specifically how much we think it could contribute to improve our adjusted EBITDA margin by 2029 and how much we are -- we expect to invest in each of these platforms and throughout the plan. That is a good question from -- for Guillaume. And you also asked about our -- if I understand you well, the potential refinancing of our debt as from 2027 and how much it could contribute to reduce our financial costs, both questions for Guillaume. The floor is yours when you're ready. Guillaume Gras: Yes, Alberto. Regarding logistics, the gain we expect from this optimization plan by the end of 2029 is 30 bps and requires yearly investment by 20 -- sorry, EUR 10 million to EUR 15 million per year. Regarding debt, as I said, we have a strong penalty until the end of 2026 if we repay now the -- our current debt. So that's the reason why we are waiting for 2027. And today, it's too early to know how much we can save, but we believe that it will be a relevant saving. Alberto Valdes: All right. There are no more questions from our analysts over the phone. Let's now review the written questions received from our shareholders who are following us through the webcast. Some of them have already been answered. Fernando was asking about our plans regarding the business in Argentina and a potential divestment. I think that has already been addressed very clearly by Martin. Then Luis and Jose are asking about the share price potential and also about potential M&A in Spain. I think the first one could be a good question for Guillaume and the one regarding M&A, maybe for Martin. So if you're ready, we can answer these ones. Guillaume Gras: So regarding the share price potential, it's -- of course, we cannot provide any guidance regarding our share price. We know that our stock price has made an extraordinary recovery last year, validating our successful business transformation. However, we see that we are still trading at a significant discount to our European peers on 2026 consensus numbers. According to the latest analyst consensus average, target price is EUR 46 per share. So there is still a significant upside potential. This fundamental upside is based on, let's say, 5 points: one, our unique business model which gives us strong competitive advantages. Our strong -- two, our strong organic growth that significantly outperformed the market; three, the profitability that is above the average of the sector; and also our strong cash flow generation and low leverage profile. That's the main element for the share price potential. Martin Tolcachir: Thank you for this question on M&A. And I would like to start by first saying that our focus and our full priority is to deliver on our strategic plan, the plan that we have shared with you last year and that we are executing rigorously, and any other consideration has to be considered, again, with no possibility to distract us from the execution and delivery of this plan. And this plan is based on customer experience improvement, like-for-like growth and our organic expansion. However, our robust financial position enable us to evaluate potential M&A opportunities within Spain. Spain is still a fragmented market. And we consider that they can be with opportunities that could create additional value for our shareholders and our responsibility is to analyze and consider these options. In any case, not that we -- again, we only consider these opportunities as supplementary to our core organic growth road map, and we will not allow anything to distract us from it. Also important to share with you that we already defined clear criteria for evaluating any M&A opportunity in Spain to ensure that any potential transaction will really create long-term value for our shareholders. In that regard, we only consider assets that are profitable and generate cash flow that are complement to our business model and national footprint, that create clear opportunities of quantifiable synergies, have limited integration cost and offer a real attractive returns. In any case, any event of this nature materialize -- if in any case an event of this nature materialize, we will disclose it to the market swiftly in accordance with the applicable regulations. Alberto Valdes: That is super clear, Martin. Thank you very much. We have another question from [ Alvira ] and Jose. They are both asking for potential dividends or shareholder remuneration in the context, again, of a potential refinancing as from 2027? That maybe is a good question for you, Guillaume. Guillaume Gras: Yes, Alberto. So as you know, dividend payments are not permitted under the current refinancing agreement, but this is not definitive. Delivering -- we think delivering our strategic plan and fulfilling our financial commitments will give us the flexibility to reconsider our capital allocation priorities in due course. And of course, an early refinancing of our current debt facilities from 2027 onwards could remove our current capital allocation constraints. Alberto Valdes: Thank you, Guillaume. The last question comes from Mohanty. He is asking about our store closures in Spain and our prospects? Maybe Martin, if you can answer this last one? Martin Tolcachir: Sure. No problem. You have seen that in 2025, Dia Spain closed 38 stores. This is twice the natural rhythm of annual turnover, as we didn't close any store in 2024 that will be incompatible with the redundancy program that was in place. Looking ahead to the coming years, what you should expect is a natural turnover of around 15 to 20 stores per year. And these closures are mainly based on the change to the rental conditions, store relocations or the closure of underperforming stores. But we will come back to this historical average rhythm -- natural rhythm, I would say, of around 20 stores per year. Alberto Valdes: Super clear. And there are no more questions from the webcast. Thank you very much, Martin and Guillaume. If you require further clarifications, please contact us, the Investor Relations department. And you will find the contact details on this presentation or on our web page. Thank you very much, again, for your attention and look forward to connecting with you at our first half results presentation. Have a nice day.
Operator: Hello, and thank you for standing by for Baidu's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Baidu's earnings release was distributed earlier today, and you can find a copy on our website as well as on newswire services. On the call today, we have Robin Li, our Co-Founder and CEO; Julius Rong Luo, our EVP in charge of Baidu Mobile Ecosystem Group, MEG; Dou Shen, our EVP in charge of Baidu AI Cloud Group, ACG; and Henry Haijian Hu, our CFO. After our prepared remarks, we will hold a Q&A session. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other filings with the SEC and Hong Kong Stock Exchange. Baidu does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Our earnings press release and this call includes discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Yanhong Li: Hello, everyone. In Q4, Baidu General Business total revenue was RMB 26.1 billion. Revenue from our core AI-powered business exceeded RMB 11 billion, accounting for 43% of Baidu General Business revenue. In AI Cloud Infra, subscription-based revenue from AI accelerator infrastructure grew 143% year-over-year, accelerating further from 128% in Q3. Meanwhile, Apollo Go maintained its robust momentum, delivering 3.4 million fully driverless operational rides in the quarter. Total rides increased by over 200% year-over-year. 2025 marked the third year of our journey in Gen AI and a pivotal year where AI became the new core of our portfolio. In 2025, we made substantial progress in scaling AI across our businesses, accelerating AI cloud growth, expanding robotaxi operations with improved unit economics and deepening AI integration into our mobile ecosystem. Looking at our portfolio through an AI native lens, momentum across our core AI-powered businesses continue to build in 2025. AI Cloud Infra gained strong traction through its highly efficient and cost-effective training and inference capabilities. Revenue from AI Cloud Infra reached approximately RMB 20 billion in 2025, up 34% year-over-year, outpacing industry growth. Our AI application portfolio is among the most comprehensive in the industry, combining AI-empowered flagship products with AI native offerings that unlock entirely new use cases. For the full year 2025, revenue from AI applications exceeded RMB 10 billion. Apollo Go achieved a significant landmark. We delivered over 10 million fully driverless operational rides in 2025 alone. To date, we have provided a total of over 20 million rides to the public cumulatively. With our accelerated global expansion, Apollo Go's footprint has now reached 26 cities worldwide, reinforcing our leadership in autonomous ride-hailing services. Lastly, our AI native marketing services, including digital humans and agents, sustained strong growth with revenue up 110% year-over-year. Collectively, these results demonstrate AI's growing contribution to Baidu's value creation and our ability to translate AI capabilities into scalable commercial impact. Now let me share the key highlights of the quarter, starting with our proprietary AI chips. This quarter, we announced the proposed spin-off and separate listing of Kunlunxin. After more than a decade of steadfast investment in self-developed AI chips, we are proud to see the market increasingly recognize their value and proven performance. This milestone validates our long-term strategic vision and unlocks new opportunities for value creation. Our AI chips are built on a proprietary architecture developed in-house from day 1. They deliver stable, high-performance AI computing at scale with broad compatibility across different models and frameworks. This enables customers to deploy faster with lower integration costs. What distinguishes our AI chips is a proven track record of large-scale, real-world deployments with leading enterprises across diverse industries, spanning financial services, telecommunications, energy and Internet sectors. Customers choose our chips for reliable performance, stable supply at scale, exceptional software compatibility and strong efficiency, especially in inference workloads. Looking ahead, we see significant opportunities for both Baidu and Kunlunxin as AI infrastructure demand continues to accelerate. Next, I will turn to our AI cloud infrastructure. Our infrastructure is among the most advanced in China, powered by a diverse mix of domestic and international high-performance computing resources. In Q4, subscription-based revenue from AI accelerator infrastructure grew 143% year-over-year, achieving triple-digit growth for the full year 2025. Importantly, we saw a continued shift toward a more recurring, structurally healthier revenue model. The robust growth was fueled by rapidly expanding enterprise AI adoption. As customers integrate AI into core operations, the unique value of our full stack end-to-end AI architecture becomes increasingly evident. By owning and optimizing across all 4 layers, we achieved sustained advantages in stability and cost effectiveness, better addressing enterprises' needs for AI deployment. These advantages are translating into tangible market momentum, fueling accelerated adoption of our AI Cloud Infra. In Q4, we further broadened our client reach. Leading enterprise clients deepen their partnerships with us, driving increases in both usage and spending. We also saw healthy growth contribution from our mid-tier clients. We continue to strengthen our presence in diverse industries, like Internet services, gaming, autonomous driving and embedded AI, underscoring the versatility of our infrastructure. Embodied AI, in particular, showed notable momentum. Revenue from this vertical doubled quarter-over-quarter in Q4. We onboarded a new wave of leading humanoid robotics companies, cementing our position as the go-to cloud service provider for China's fast-growing embodied AI industry. Next, I'll cover our foundation model progress, which is a critical part of our AI capabilities. We remain fully committed to advancing our proprietary foundation model, ERNIE. Following the unveil of ERNIE 5.0 last quarter, we launched an updated version in January. As we advance ERNIE, we remain guided by a clear application-driven approach, making ERNIE strongest where it matters most for our portfolio. To execute this approach more effectively, we recently restructured our model development organization into 2 dedicated teams. One team advances ERNIE state-of-the-art foundation model capabilities, maintaining our technological edge in this fast-evolving space. The other team tailors models for specific business needs, reducing costs, improving response latency and optimizing model size and efficiency to ensure our technologies are not just cutting edge, but readily scalable across our businesses. Close collaboration between both teams ensures our technologies stay grounded in real-world needs while our applications benefit from continuous technological advancement. Now turning to AI applications. This is where we believe AI's greatest value will ultimately reside. We are pioneering AI applications to solve complex real-world problems for both individuals and enterprises. Let me share our progress across multiple key areas, starting with AI-powered search. In Q4, we continued our AI search transformation, pursuing one of the most comprehensive and ambitious transformations globally. Our focus remains on continuously improving the quality of AI search results while expanding what users can accomplish directly within search. This quarter, for example, we introduced AI-generated infographics into our search results, utilizing text-based information where appropriate to make key insights immediately clear and digestible. We've also integrated more MCP capabilities across key scenarios, including e-commerce, health care and local services. This enables actions such as shopping, booking and health care consultation to be completed seamlessly within the search experience. During the Chinese New Year, we moved quickly to embrace the latest AI agent innovation by integrating OpenClaw, a recently popular open source agent framework directly into Baidu app with one-click access, enabling our users to immediately benefit from cutting-edge agentic AI capabilities with an MAU of around 700 million. We provide easy access to OpenClaw for almost half of the Chinese population. For ERNIE Assistant, which is the AI chatbot integrated across our platform, we enhanced the user experience by introducing broader multimodal capabilities. This improvement have been well received by users, driving ERNIE Assistant's MAU to exceed 200 million in December. We are also scaling our AI search API. Adoption has accelerated in Q4 with call volume up over 110% quarter-over-quarter. With industry-leading authority, comprehensiveness and newly added multilingual capabilities, our AI search API is now opening up broader possibilities for the international market. Next is digital humans, which represent a compelling form of AI application. They combine visual presence, voice and real-time interaction to create more engaging and effective experiences. In December 2025, the number of digital humans live streaming on our platform increased nearly 200% year-over-year. Beyond Baidu's own platforms, our digital human technology is expanding to empower the broader industry. Leading companies have partnered with us, including Jingdong, Zuoyebang and TikTok, validating the performance and efficiency of our digital humans. On the technology front, we believe our hyperrealistic digital human represents the next generation of capabilities. This quarter, production costs declined to roughly 1/3 of previous quarter levels, bring industry-leading cost performance and positioning this technology for broader adoption. Another area of progress is Miaoda, our vibe coding platform, which enables users without coding experience to build applications through natural language, including WeChat Mini Programs, websites, mini games and more. Following the Q4 launch of Miaoda's international version, MeDo, users globally have created over 1 million AI applications as of early February, all without writing a single line of code. Looking ahead, we see meaningful opportunities to unlock even greater possibilities in AI application development. Lastly, we are using AI to solve operational problems and drive efficiency gains across industries. One example is Yijian, our advanced visual intelligence platform. Yijian enables enterprises to automate operational compliance and safety checks through intelligent visual analysis. While known brands across coffee chains, quick service restaurants and fine dining are now using Yijian to ensure high standard operations across their thousands of locations. Another example is FM Agent, our self-evolving agent, designed to solve complex operational challenges. By autonomously reasoning across data, rules and real-world constraints, it simulates countless scenarios to identify best solutions. We've seen strong validation both internally through our own cloud resource optimization and externally across industries like manufacturing, energy, finance and logistics, where efficiency improvement is a universal priority. On the organizational front, we recently established the Personal Super Intelligence Business Group, or PSIG. PSIG unifies Baidu Wenku and Baidu Drive, our 2 flagship consumer-facing AI applications. Even before this organizational integration, the 2 teams have already collaborated at the product level to deliver innovations like Free Canvas and GenFlow. This new group enables even deeper collaboration going forward as we accelerate the rollout of new applications to foster a robust growth curve driven by application layer innovation. Shifting to physical AI. Apollo Go represents our largest AI application in the physical world. 2025 was a year of accelerated scaling for Apollo Go, where we reinforced our leadership in operational scale and achieved significant progress in global expansion. We continue to expand fully driverless operations at pace, delivering 3.4 million fully driverless operational rides in Q4 with weekly rides peaking at over 300,000. Total rides grew by over 200% year-over-year. Cumulative rides provided to the public have surpassed 20 million as of February 2026, firmly cementing our position as the world's leading autonomous ride-hailing service provider. We entered 2026 with momentum across key international markets. In the U.K., we advanced our partnerships with Uber and Lyft moving forward with plans to pilot autonomous vehicles in London with testing expected to begin in the first half of 2026. This represents an important step in Apollo Go's international expansion, extending our right-hand drive robotaxi capabilities from Hong Kong to another strategically important market. In Switzerland, we initiated testing in St. Gallen following our market entry last quarter. In the Middle East, we achieved progress in both Abu Dhabi and Dubai. In Abu Dhabi, we launched a fully autonomous ride-hailing services on Yas Island in January with AutoGo. In Dubai, we secured the city's first fully driverless testing permit from the Roads and Transport Authority. We also announced the next phase of our global partnership with Uber to bring our fully autonomous ride-hailing services to Dubai via the Uber platform. These are critical milestones that accelerate our progress across the Emirates. In Asia, we entered a new market, South Korea, starting with the Seoul metropolitan area, further expanding our presence across the Asian region. Meanwhile, in Hong Kong, we expanded our open road testing into Tsuen Wan and initiated cross-district testing between Airport Island and Tung Chung, bringing us closer to commercial readiness there. As of February 2026, Apollo Go's global footprint reached 26 cities, demonstrating the scalability of our autonomous driving technology across diverse regulatory and operational environments. Looking ahead, we are focused on accelerating expansion to more cities globally while continuously improving operational excellence and unit economics. Our growing experience across diverse markets gives us confidence in our ability to scale further, and we expect more cities to achieve positive unit economics over time. Underpinning this expansion, safety remains our top priority and the foundation of everything we do. Our autonomous ride-hailing service is the safest globally with our fully driverless vehicles experience an airbag deployment accident only once every over 12 million kilometers. As we scale, we will continue strengthening safety standards and ensure sustained reliability. Ultimately, our mission is to harness AI to transform mobility, making it fundamentally safer, more affordable and more comfortable and improving how millions of people move, work and live. In summary, with AI now firmly integrated across our portfolio, we believe we are well positioned to deliver sustainable value and shape the next phase of the AI era. With that, let me turn the call over to Henry to go through the financial results. Haijian He: Thank you, Robin, and hello, everyone. We are making progress on our key focus areas. Over the recent quarters, we've enhanced disclosure for greater transparency and driven operational efficiency improvements. This quarter, we took a significant step to unlock value from our strategic AI chip investments through the proposed Kunlunxin spin-off and a separate listing, a milestone we are particularly pleased with. We've also announced a new USD 5 billion share repurchase program and adopted a dividend policy for the first time. Additionally, we've sharpened our strategic focus on high-potential AI applications by forming a PSIG business group, integrating Baidu Wenku and Baidu Drive. These actions reflect our consistent execution and ongoing focus on creating shareholder value. Looking at Q4 results, we saw positive momentum. Baidu General Business total revenue increased 6% quarter-over-quarter with non-GAAP operating profit, expanding 28% sequentially to RMB 2.8 billion. Operating cash flow for Baidu turned positive in Q3 and remained positive in Q4, generating a combined RMB 3.9 billion across both quarters. In terms of our core AI-powered business, in Q4, revenue exceeded RMB 11 billion, accounting for 43% of Baidu General Business revenue. We are seeing strong momentum across several areas. AI Cloud Infra continues to gain market traction and outpace industry average. Our AI application portfolio is expanding rapidly with strong enterprise adoption. Combining AI Cloud Infra and AI applications, our cloud revenue reached RMB 30 billion for the full year 2025. Meanwhile, Apollo Go reinforces its position as a global leader in autonomous ride-hailing with one of the industry's largest footprints and the strongest growth momentum. And AI native marketing services is growing fast. These results demonstrate our progress, and we believe this is just the beginning. We have a robust pipeline of initiatives ahead, and we are confident in our ability to create lasting shareholder value. Now let me walk through the details of our fourth quarter and full year 2025 financial results. Total revenues in Q4 were RMB 32.7 billion, increasing 5% quarter-over-quarter, primarily due to an increase in Baidu core AI-powered business. Total revenues for the full year 2025 were RMB 129.1 billion, decreasing 3% year-over-year, primarily due to a decrease in legacy business, partially offset by an increase in Baidu core AI-powered business. Cost of revenues was RMB 18.3 billion in Q4, which remained flat quarter-over-quarter. Cost of revenues was RMB 72.4 billion in 2025, increasing 10% year-over-year, primarily due to an increase in costs related to Baidu core AI-powered business. Operating expenses were RMB 13.0 billion in Q4, increasing 10% quarter-over-quarter, primarily due to an increase in expected credit losses and a onetime employee severance costs to improve efficiency. Operating expenses were RMB 46.3 billion in 2025, increasing 1% year-over-year. Impairment of long-lived assets was RMB 16.2 billion in 2025, attributable to an impairment loss of core asset group. Operating income was RMB 1.5 billion in Q4, and operating margin was 5%. Operating loss was RMB 5.8 billion in 2025 and operating loss margin was 5%. Excluding impairment of long-lived assets, operating income was RMB 10.4 billion in 2025. Non-GAAP operating income was RMB 3.0 billion in Q4, and non-GAAP operating margin was 9%. Non-GAAP operating income was RMB 15.0 billion in 2025, and non-GAAP operating margin was 12%. In Q4, total other income net was RMB 1.2 billion compared to RMB 1.9 billion last quarter. Income tax expense was RMB 1.0 billion compared to income tax benefit of RMB 1.8 billion of the quarter. In 2025, total other income net was RMB 12.5 billion compared to RMB 7.4 billion in the same period last year. Income tax expense was RMB 1.3 billion compared to RMB 4.4 billion in the same period last year. In Q4, net income attributable to Baidu was RMB 1.8 billion, net margin for Baidu was 5% and diluted earnings per ADS was RMB 3.71. Non-GAAP net income attributable to Baidu was RMB 3.9 billion, non-GAAP net margin for Baidu was 12%, and non-GAAP diluted earnings per ADS was RMB 10.62. In 2025, net income attributable to Baidu was RMB 5.6 billion, net margin for Baidu was 4% and diluted earnings per ADS was RMB 11.78. Excluding the impact of impairment of long-lived assets, net income attributable to Baidu was RMB 19.4 billion. Non-GAAP net income attributable to Baidu was RMB 18.9 billion, non-GAAP net margin for Baidu was 15% and non-GAAP diluted earnings per ADS was RMB 53.41. We define total cash and investments as cash, cash equivalents, restricted cash short-term investments, net, long-term time deposits and held-to-maturity investments and adjusted long-term investments. As of December 31, 2025, total cash and investments were RMB 294.1 billion. In Q4, operating cash flow was RMB 2.6 billion. In 2025, operating cash flow was negative RMB 3.0 billion, which remained positive for the past 2 consecutive quarters. Baidu General business had approximately 29,000 employees as of December 31, 2025. With that, operator, let's now open the call for questions. Operator: [Operator Instructions] Your first question comes from Alicia Yap with Citigroup. Alicis a Yap: I have questions related to the model. So we have noticed very active model iteration recently. How does management view the current competitive landscape? And then Baidu recently also released updated ERNIE 5.0 and also make some organizational adjustments. So could management discuss the strategic rationale behind these moves and also how the company thinks about the relationship between the model evolution and also the application in your overall AI strategy? Yanhong Li: Alicia, this is Robin. We did see very active model releases recently. The market is highly competitive and moving fast. But amid all the competition, we've always believed that applications matter more than models because models ultimately create value through applications. That is why we always take an application-driven approach with ERNIE. Model improvements are guided by the most valuable and promising use cases. And this has been consistent across every iteration of ERNIE. As I just mentioned, recently, we released the updated version of ERNIE 5.0. At the same time, we've been proactively making organizational changes to stay agile in the fast-moving market. We restructured our model team into different focus areas. One team continues pushing frontier capabilities at the foundation model level to maintain technical leadership. ERNIE has clear strength in several key areas, such as creative writing, omnimodel understanding and instruction following. We are confident we will keep improving ERNIE's performance across key application scenarios. Meanwhile, this high-value application scenarios continuously provide ERNIE with real data and feedback, driving model iteration and making ERNIE better and better. The other team works much closer to specific business needs and application scenarios focused on reducing costs, improving speed and increasing efficiency or leveraging the best available models for specific use cases, all aimed at helping businesses better leverage AI based on their actual needs. We recognize that model capabilities are broad and application scenarios can be highly diverse. And no single model can lead everywhere. So we fully leverage ERNIE where it has clear strengths, and we are open to using other models where they are better suited. The goal is always to achieve the best application outcomes. So to sum up, we will continue with our application-driven approach using real application needs to continuously iterate and optimize our models while also keep refining applications themselves to deliver better and better results, ultimately, creating tangible value for users and businesses. Operator: Your next question comes from Alex Yao with JPMorgan. Alex Yao: I have one question about the Baidu AI Cloud. We noticed that Baidu AI Cloud revenue delivered strong growth for the full year 2025. Can you elaborate and help us understand the key growth driver behind the robust revenue growth number? And how should we think about the AI cloud revenue growth outlook in 2026? Dou Shen: Thank you, Alex. This is Dou. For 2025, our AI cloud revenue, which includes revenue from AI Cloud Infra and AI applications, reached RMB 30 billion. Revenue from AI Cloud Infra grew 34% year-over-year, outpacing the broader market. Within AI Cloud Infra, subscription-based revenue from AI accelerator infrastructure grew 143% year-over-year in Q4 and has become the primary growth driver, demonstrating strong momentum. We remain highly confident in sustaining strong growth momentum in 2026. Underpinning our growth is the accelerating enterprise AI adoption. We are seeing a demand growth in both training and inference workloads, and we expect the demand for AI computing to keep expanding, creating significant opportunities ahead. Baidu's full stack end-to-end AI architecture is a key differentiator in capturing such opportunity. Under the foundation of this architecture is our industry-leading AI infrastructure, which achieves an excellent balance across performance, efficiency and cost. Our AI infra is powered by a diverse mix of chips. We have built deep expertise in heterogeneous computing and unified scheduling, which enables us to efficiently manage computing resources from different chip vendors and achieve industry-leading performance and efficiency. In the meanwhile, our proprietary chip capabilities provide a significant competitive advantage. As Robin just mentioned, our self-developed Kunlunxin AI chips deliver strong performance, compatibility and cost efficiency. They have been deployed at scale with leading enterprise customers across financial services, telecom, energy and Internet sectors and the market feedback has been very positive. Kunlunxin serves as a key component of our own cloud platforms computing power, playing an important role in our overall AI infra. As AI demand grows, the advantages of our AI infra will become increasingly evident. Beyond AI infra we just discussed, we are continuously evolving our best-in-class agent infra to help enterprises rapidly build and deploy AI agents at scale. We keep bringing in the latest, most cutting-edge capabilities. For example, we recently launched simplified open cloud deployment on Baidu AI Cloud, which streamlines the process so that even users with no coding experience can quickly deploy their own open cloud agents. Then looking into 2026, as enterprise AI deployments deepen further, we are confident that our cloud business will continue to grow faster than the industry. We expect AI Cloud Infra to maintain strong momentum with AI accelerator infrastructure continuing to serve as a core driver, propelling our overall cloud business toward a more sustainable and high-quality growth mode. Operator: Your next question comes from Lincoln Kong with GS. Lincoln Kong: So actually, this quarter, we see this AI-powered business continue to deliver a pretty solid growth. So how does management view the current stage development for those AI-powered business? So when should we expect this share to exceed, say, 50% of the Baidu General Business? And what will be the key driver going forward for the AI-powered business? Yanhong Li: Okay. Let me start by sharing how we think about our core AI-powered business. This includes AI cloud infrastructure, AI applications like Baidu Wenku and Baidu Drive and our robotaxi business, Apollo Go, and our AI-native marketing services, including agents and digital humans. AI-powered business organizes our business according to the nature of our products and services, where AI is empowering each to create meaningful customer value and business impact. In Q4, AI-powered business revenue exceeded RMB 11 billion. That's like 43% of Baidu General Business revenue. This percentage has been rapidly increasing over the recent quarters, and AI-powered business is becoming the core driver of our overall revenue growth. Each of our AI-powered businesses has clear strategic positioning and competitive advantage. First, AI Cloud Infra. We see enterprises scale AI from pilots to production and our full stack end-to-end AI capabilities enable strong performance at competitive cost. AI Cloud Infra revenue grew faster than the industry average in 2025 with subscription-based AI accelerator infrastructure revenue accelerating sharply in Q4. And second, it's AI applications. We've always believed AI's ultimate value will settle at the application layer, and we built one of China's most comprehensive AI application portfolios. As AI capabilities continue to evolve and new use cases emerge, we see significant expansion potential in this business. And then third is the robotaxi business, Apollo Go. Apollo Go is scaling rapidly while expanding internationally. We lead globally in operating scale, safety record, efficiency and cost structure. And the fourth is AI native marketing services like agents and digital humans. They improved engagement and conversion, and we're seeing strong market adoption with great potential ahead. So looking to the mid- to long term, as enterprise AI deployment deepens, monetization capabilities of AI applications improve and physical AI applications such as autonomous driving continue to expand, and we're confident in the growth trajectory of our AI-powered business. This AI-powered business aren't isolated. They continuously reinforce each other through our full stack capabilities. And based on current visibility, we believe our core AI-powered business will become the majority of Baidu General Business in the foreseeable future. Operator: Your next question comes from Wei Xiong. Wei Xiong: Could management elaborate on the framework that you use to allocate capital, including shareholder returns, organic investment and potential strategic opportunities? And also, could management comment on the long-term strategic positioning of Kunlunxin within the Baidu Group? Haijian He: This is Henry. I believe many of you may have noticed our recent series of initiatives. These include enhancing our disclosures, improving operational efficiency, optimizing our organizational structure, advancing the proposed Kunlunxin spin-off and separate listing and also announcing our new share repurchase program and the first dividend policy. And recently, we're also reforming the PSIG, the Personal Super Intelligent Group business group, integrating Baidu Wenku and Baidu Drive. Altogether, these moves reflect a coherent execution framework, demonstrating our improved management execution and ongoing commitment to creating shareholder value. I think take our new share repurchase program as one example. We are very focused on providing clear and sustainable returns to shareholders. So in the recent, in February, the Board has approved a new USD 5 billion share repurchase program, which we plan to execute on a regular basis in a very disciplined and transparent manner. We are also introducing Baidu first dividend policy. We believe the introduction of the policy alongside with a sizable buyback program will further strengthen our shareholder return profile and attract a broader range of investors, thereby further diversifying our investor base. As we mentioned, the proposed spin-off and a separate listing of Kunlunxin is another good example. We are making very good progress of the listing process. Kunlunxin is a result of over a decade of investment and represents a critical infrastructure component of our full-stack AI capabilities. We believe this spin-off and a separate listing will receive strong market recognition and unlock significant value for Baidu as a group. So looking ahead, we firmly believe the company has tremendous value, and we will continue unlocking it through various initiatives. We remain committed to deliver sustainable and consistent returns to our shareholders. So more initiatives will follow in due course. So stay tuned with us. Thank you. Operator: Your next question comes from Gary Yu with Morgan Stanley. Gary Yu: My question is on robotaxi. First of all, congratulations on the robotaxi expansion into more countries, especially to my hometown Hong Kong. Can you share your overseas strategy in 2026? And what are your key competitive advantages there? And also with Waymo recently valued at $126 billion, how is management thinking about unlocking Apollo Go's value? Would you consider a spin-off? Yanhong Li: Gary, as I mentioned last quarter, I believe robotaxi has reached a tipping point globally. Through continuous delivery of safe autonomous drives and positive word of mouth, we're seeing more countries and regions creating supportive environment for robotaxi operations. We believe the industry will accelerate in 2026. Apollo Go is a clear global leader in this space. We've completed over 20 million cumulative rides. At peak period, our weekly fully driverless rides exceeded 300,000. To date, Apollo Go fleets have accumulated more than 300 million autonomous kilometers, including over 190 million fully driverless autonomous kilometers with an outstanding safety record. And we continue advancing our industry-leading technology to make rides safer and more comfortable. We're also accelerating international expansion to capture global opportunities. Today, our global footprint spans 26 cities across different continents, covering both left-hand and right-hand drive robotaxi market. Our autonomous driving system works reliably anywhere across different traffic patterns and different urban environments. Notably, very few players have entered right-hand drive robotaxi market, while we've already established a presence and are making rapid progress. Moreover, we have a fundamental cost advantage. RT6 is the world's first purpose-built production vehicle designed from the ground up for Level 4 autonomous driving. At under USD 30,000 per vehicle, RT6 offers the industry's best cost structure and combined with our leading operational efficiency, this enables us to achieve the lowest cost per mile globally while maintaining superior safety. We were the first to achieve UE breakeven in Wuhan in late 2024. And as you know, most major cities have higher ride-hailing prices than Wuhan. To accelerate global expansion, we are leveraging diverse strategic partnerships. For example, we are collaborating with Uber and Lyft in London to launch this year and in Dubai with Uber also. These partnerships drive faster, more efficient market expansion. We see Apollo Go as a strategic growth engine with significant long-term potential. Many major cities are short of human drivers. More supply via robotaxi service not only offer safer rides, but also stimulate ride-hailing demand, therefore, add tax revenue to the government. It also releases precious land from parking spaces and provide additional monetization opportunities for these real estate assets. Our focus is on 3 areas: first, aggressively scale up safe and comfortable operations by deploying more vehicles. Second, continuously improving unit economics with the goal of achieving UE breakeven in more cities this year. Third, expanding with flexible business models, both domestically and internationally. As for strategic options, we will remain flexible and evaluate the best path that maximizes long-term shareholder returns. And of course, our focus is always on execution and sustainable growth. We believe the autonomous ride-hailing sector as a whole remains undervalued. Over time, we expect valuations across the sector to better reflect the transformative potential of this technology, which creates meaningful upside opportunity for Apollo Go. Operator: Next question comes from Miranda Lang with Bank of America Securities. Xiaomeng Zhuang: Wish you a happy year of hope. So my question is about competition. We have seen that the consumer-facing AI competition is intensifying recently, especially during the Chinese New Year. How do you assess the current competitive dynamics? Where do you see Baidu's AI2C products such as the early assistance, differentiation and also positioning in this market? And lastly, how to think about the path to monetization? Rong Luo: This is Julius. The AI2C product market is highly competitive. We have seen some competitors about very aggressive market strategies to rapidly scale their user base in the past Chinese New Year. However, as technology and products evolve rapidly, we still believe our core strategy should remain grounded in actual user needs. We are highly committed to continuously enhancing our existing products and services capabilities through AI innovations to better serve our users. In our flagship consumer-facing products, like Baidu app today, we have built a ERNIE Assistant to strengthen our service capabilities across the entire user journey, from information thinking to providing solutions and completing tasks. On information thinking, we have significantly enhanced our users assess information through ERNIE Assistant. For example, we have improved the answer accuracy and relevance through RAG, and ERNIE Assistant maintains low error rates with minimal hallucinations, delivering the highly trustworthy content to users. We have also integrated the multilingual AI such as API capabilities that can enable the users to assess the broad information sources during conversations, improving the information richness and usability. And especially for scenarios like travel planning, which is quite helpful. And in December, ERNIE Assistant's MAU surpassed 200 million and with conversation rounds and engagements growing quite fast. For past complexion, we are integrating MCP agents to connect users with tools and real-word services. This quarter alone, we're adding nearly 100 service capabilities, especially in health care, travel, education and e-commerce. For example, through the Baidu Health MCP integrated into ERNIE Assistant, users can assess a range of health care capabilities, spending online to offline services. In e-commerce, our MCP module saw a very strong GMV growth quarter-over-quarter. Meanwhile, we are taking a different approach with the stand-alone ERNIE app, our positioning as a platform for innovation and experimentation. Our earlier multi-model AI features have gained good traction with the young audiences. And more recently, we have added AI capabilities focused on the workplace productivity, tapping into ERNIE's ability to handle the complex tasks in professional settings. We are seeing the promising early signals in these productivity scenarios. We take a measured approach to monetize the AI tools and products, prioritizing the product excellence and the user experiences. Monetization will follow naturally as the products mature. Thank you for your question. Operator: Your next question comes from Ellie Jiang with Macquarie. Ellie Jiang: My question is mostly focusing on the AI investment. How do you think about the AI-related CapEx over the next 12 to 24 months? How should we think about the return profile of these AI investments and the expected impact on the ROIC over time? Broadly speaking, where do you see further efficiency opportunities to support margin and cash flow improvements in the future? Haijian He: This is Henry. First of all, on CapEx and AI investment, since we have launched early in March of 2023, we have invested over RMB 100 billion in AI. Going forward, we will continue to maintain this level of investment density. Second, we are very conscious about returns and understand investors' focus on the return on capital invested. That's why we have work to improve our financial performance, and we have delivered good results on key metrics over the past few quarters. For example, in Q4, gross profit for Baidu grew double digits sequentially and non-GAAP operating income for Baidu increase about 35% quarter-over-quarter. We also performed better on the margin profile, both on gross margin and operating margin increasing sequentially. Importantly, operating cash flow for Baidu turned positive in Q3 and remained positive in Q4. With the second half, operating cash flow reached nearly RMB 4 billion. Free cash flow for Baidu also turned positive in Q4. Thirdly, we have also found and explored alternate ways of supporting our financial needs including, for example, operational and financing leasing as well as we have access to the low-cost interest banking borrowing. For example, some of these bank borrowings and the leasing facilities carry the interest rates as low as below 2%. Though these approaches help us maintain a healthy long-term financing structure while sustaining our AI investments and support our business growth. So in summary, we will continue to maintain our AI investment density, while balancing investor focus on profitability and return time lines. We believe that even with significant AI investment, our operating cash flow remain positive going forward as well. Thank you. Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.
Operator: Greetings and welcome to the PENN Entertainment Fourth Quarter 2025 Earnings Call. I would now like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead. Joseph Jaffoni: Thank you, Nicky. Good morning, everyone, and thank you for joining PENN Entertainment's 2025 Fourth Quarter Conference Call. We'll get to management's comments and presentation momentarily as well as your Q&A. During the Q&A session, we ask that everyone please limit themselves to 1 question and 1 follow-up. Now I'll review the safe harbor disclosure. Please note that today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. . It's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead. Jay Snowden: Thanks, Joe. Good morning, everyone. I'm joined here in Wyomissing by Felicia Hendrix and Aaron Laberge as well as other members of our senior executive team. I'm pleased to report PENN's diversified retail portfolio delivered another solid quarter during which retail adjusted EBITDA grew year-over-year after adjusting for poor weather in December. In our Interactive segment, we successfully rebranded our U.S. online sportsbook to the Score Bet on December 1 and achieved positive adjusted EBITDA in December, driven by continued momentum from our iCasino products disciplined cost management and strong online sports betting hold rates. 2026 is an exciting year for us in which we expect to generate year-over-year segment adjusted EBITDAR growth of 20%. And we are well positioned to benefit from the strategic investments we have made over the last several years and are laser-focused on improving free cash flow generation, deleveraging and opportunistically returning capital to shareholders. I want to highlight the foundation that set us up nicely to deliver on our goals for this year and beyond, which are summarized on Slide 6 of our investor presentation. First, our diverse retail business is healthy and growing, generating sustainable free cash flow. In addition to anniversarying much of the new supply in several of our key markets, we will have 2 more retail growth projects opening by the end of the second quarter this year. and we're seeing continued momentum at 2 that we opened last year. Second, we expect our Interactive segment to inflect to breakeven adjusted EBITDA for the full year, which would represent a $268 million year-over-year improvement. Third, we have rightsized our maintenance capital spend on a go-forward basis, which we'll touch upon more later. And fourth, we will begin to realize synergies from our corporate restructuring and cost optimization initiatives. The new organizational structure we announced in early January will allow us to become a leaner and flatter organization, enabling business leaders to be more empowered and drive greater productivity. All in all, we expect to save over $10 million in annualized run rate expenses for the company as we streamline the organization, which will mostly phase in over the first half of the year. The operational benefits are already in flight. In terms of rightsizing our property maintenance CapEx, we have done an excellent job over the last 6 years of upgrading our casinos, refreshing our slot floors and investing in non-gaming amenities like updated hotel rooms, new tel sports books, new restaurants and entertainment venues. In addition, our dockside to land-based growth projects are expected to meaningfully reduce our maintenance CapEx cost going forward. With the improvements we have made to our properties, we feel comfortable with bringing our recurring maintenance CapEx levels down by $20 million and returning to near pre-COVID level spending. Slide 7 really drives some of the significant free cash flow we expect to generate in 2026 and beyond. Importantly, this growth in free cash flow will enable us to delever meaningfully in 2026 and opportunistically return capital to shareholders. In fact, we expect to generate more than $3 per share of free cash flow in 2026 and reduce our lease-adjusted net leverage by more than 1 turn. Returning now to our results for the quarter. On the retail side, we experienced another quarter of year-over-year growth in theoretical revenue across all rated worth and age segments with our older demographics and VIP play contributing meaningfully to these results. The bad weather in December negatively impacted segment adjusted EBITDA by approximately $7 million. In addition, our segment was negatively impacted by new supply, Bossier City and New Orleans, in those markets in Louisiana and our Midwest segment was impacted by new supply in Council Bluffs, Iowa. Core business trends were otherwise stable across the portfolio with regional strength in Ohio and St. Louis as well as our LaBerge, Lake Charles property. We're seeing continued momentum at our new hotel tower at M Resort in Las Vegas, which is capturing previously unmet demand including booking 2 of the largest groups in the property's history recently. In December, the property achieved record gaming volumes. And in January, we generated record net revenue at M. Meanwhile, the new Hollywood Casino Joliet is delivering strong results both from new and reactivated customers with a nearly 13% year-over-year increase in the number of active players helping to drive meaningful increases in both gaming and nongaming revenues. The early performance of these projects provides us continued confidence in the anticipated success from the upcoming ownings of the Hollywood Columbus Hotel Tower and the new Hollywood Casino Aurora, in addition to our new council properties scheduled to open in late 2027 or early 2028. As we said previously, we anticipate all of these development projects to generate approximately 15% plus cash-on-cash returns. On the interactive side, we experienced rec gaming revenue in the fourth quarter driven by the continued growth of our stand-alone Hollywood Eye Casino products and increased cross-sell as well as improvements in our online sportsbook product offering and operations. Revenue growth, excluding tax gross-up of 52% year-over-year was primarily attributable to iCasino growth of 40% plus and online sports book growth of 73%. including strong revenue and positive adjusted EBITDA in December, our first month operating as theScore bet in the U.S. Additionally, adjusted EBITDA improved $70 million year-over-year in the fourth quarter, driven by strong adjusted flow-through of 95%. We are encouraged by the upward trajectory of the interactive business. Our sports book is maturing through a more disciplined regionally focused marketing strategy that prioritizes iCasino jurisdictions. Our reduced fixed media spend provides us much more marketing flexibility to strategically invest more in Canada as well as the U.S. hybrid states with both iCasino and online sports betting and in customer cohorts with more compelling returns, particularly as we look ahead to new market openings like Alberta, which is anticipated later this year in 2026. Importantly, we've retained users through the Score Bet rebrand and continue to engage them across our ecosystem. Retention and new user growth will remain our top interactive priorities and the foundation for our long-term growth in that segment. The positive trends in our Interactive segment give us confidence to recommit to achieving breakeven adjusted EBITDA in 2026. And with that, I'll turn it over to Felicia. Felicia Kantor Hendrix: Thanks, Jay. Our Retail segment generated revenues of $1.4 billion adjusted EBITDAR of $456.4 million and segment adjusted EBITDA margins of 32.3%. Inclement weather in December negatively affected retail adjusted EBITDAR in the quarter by $7 million, with the largest impact in the Northeast segment. We expect the combination of our high-quality portfolio plus our new growth projects to generate year-over-year retail net revenue and adjusted EBITDA growth in 2026, For retail net revenues, we forecast a range of $5.7 billion to $5.85 billion and retail adjusted EBITDA will range from $1.86 billion to $1.98 billion. . As you think about your quarterly modeling, the severe weather in the first quarter thus far has negatively impacted retail adjusted EBITDA by approximately $5 million to $10 million. For the second quarter of 2026, at our new property in Aurora, we expect to have approximately 2 weeks of downtime as we look to open the new land-based facility. And as you know, our second half results will benefit from the opening of all 4 of our retail growth projects. All of these items are reflected in our guidance. Our Interactive segment in the fourth quarter generated revenues of $398.7 million, including a tax gross-up of $182.7 million and adjusted EBITDA loss of $39.9 million. For 2026, we expect Interactive revenues of approximately $1.6 billion inclusive of an estimated tax gross-up of about $760 million or a revenue improvement of roughly 20% year-over-year, excluding the tax gross-up. This growth will be a function of the playbook we initiated in December as we transition to the Score Bet sports book in the U.S. and shifted our focus and resources to our U.S. iCasino states in Canada with a focus on iCasino and cross-sell. Complementing our revenue growth is a more rationalized cost structure. Our marketing expenses will decline significantly year-over-year as we made our last payment to ESPN in December 2025. We anticipate our marketing spend to come in approximately $150 million lower than in 2025 as we align spending with our revised regional strategy focused on iCasino and Canada. With performance and brand spend fully in our control, we will adjust allocations based on results. Further, we have rightsized our interactive operations to fit our new structure with payroll and G&A declining proportionately. As a result of our revenue growth expectations and more rationalized cost structure, we continue to expect our Interactive segment to generate breakeven adjusted EBITDA in 2026 and note that we will expect all components, U.S. OSB, iCasino and our Canadian operations to generate positive contribution margin in 2026. This forecast does not contemplate any new jurisdictions launching in 2026, including Alberta. As we look to full year 2026, we expect U.S. OSB MAUs to decline year-over-year given the transition from ESPN BET to the Score Bet while U.S. eye Casino as well as Canadian OSB and iCasino MAUs should increase year-over-year, reflecting our strategy to realign our digital focus. We expect the OSB and iCasino hole rates to remain around 9% and 3.7%, respectively. As for quarterly EBITDA cadence, the first 3 quarters of 2026 should generate small adjusted EBITDA losses, and we expect the fourth quarter to be profitable. We expect the other category adjusted EBITDA to be a loss of $119 million for 2026. The table on Page 9 of our earnings release summarizes our cash expenditures in the quarter, including cash payments to our REIT landlords, cash taxes, cash interest on traditional debt and total CapEx. Of our total $190 million of CapEx in the quarter, $85 million was project CapEx, primarily related to our 4 development projects. We ended the fourth quarter with total liquidity of $1.1 billion, inclusive of $687 million in cash and cash equivalents. On November 3, 2025, PENN received $115 million in funding from GLPI at a 7.79% cap rate in connection with the second hotel tower construction at the M Resort Las Vegas. In conjunction with the opening of the $360 million Hollywood Aurora in late 2Q we expect to receive $225 million in funding from GLPI near project opening and the remaining $21 million from the City of Aurora by the end of the year. We have elected not to take GLPI capital in connection with the construction of our Columbus hotel tower. The combination of this funding with a strong free cash flow and more optimized CapEx spend Jay discussed earlier, will enable us to delever nicely throughout the year. Total 2026 CapEx will be $445 million, which includes $225 million of project CapEx, down from $408 million in 2025 and $220 million of maintenance CapEx compared to $239 million in 2025. We expect total cash payments under our triple net leases to be $1 billion in 2026. For 2026 cash interest expense, we project $145 million. For cash taxes, we do not expect to be a cash taxpayer in 2026 given the favorable tax deductions enabled by the One Big Beautiful Bill in addition to our acquired NOLs and various tax credits. Our basic share count at the end of the fourth quarter was 133.2 million shares. After the June 20 repurchases of the convertible notes, we now have 4.5 million potential dilutive shares from the remaining convertible notes stub and about 1 million dilutive shares from RSUs and stock options. I will now turn it back to Jay. Jay Snowden: All right. Thanks, Felicia. In closing, I want to say that I'm proud of what our property interactive and corporate teams were able to accomplish in 2025, including the resilience shown on the retail side and the successful rebranding of our OSB product to the Score Bet. I couldn't be more excited about the many catalysts we have ahead of us in 2026, including the opening of our new Aurora property and the Columbia Hotel. The continued ramp of Joliet and the M Resort Hotel tower and achieving breakeven in Interactive. I'm also excited to welcome our 3 new board members, Heather, Jeff and Fabio, who bring a lot of relevant experience and fresh perspectives to our board. We look forward to this being a year of strong execution at PENN with an emphasis above all on free cash flow generation and deleveraging and transforming our strategic investments into consistent long-term returns and value creation for our shareholders. . And with that, can we please open the line for the first question. Operator: [Operator Instructions] We'll take our first question from Brandt Montour with Barclays. Brandt Montour: Thanks for all the details this morning. Maybe starting off on digital and drilling into that top line '26 target of 20% revenue growth ex gross up. Jay, maybe you could put a finer point on that or just flesh it out a little bit. We know that you're growing iGaming in excess of that. there's more moving pieces on the OSB side with handle down because of, obviously, the exit of and then, of course, hold was probably a benefit or was a benefit here in the recent months. And so we kind of really don't know what the run rate top line OSB is at right now. So just what's growing faster within that 20% iGaming. But if you could just flesh out what's going to get you to that 20% and how conservative it is? Jay Snowden: Yes. Happy to, Aaron, feel free to jump in as well. certainly being driven primarily by growth in iGaming. We've seen really strong growth rates throughout 2025, and I'm happy with what we're seeing so far at the start of 2026, our products continues to get better on the stand-alone Hollywood app. We're seeing really, really strong retention. We were before the rebrands and obviously, we weren't affected as much on the iGaming side from the sports betting rebrand of ESPN BET to the Score Bet, so primarily driven by iGaming growth. We also expect to see NGR growth on the sports betting side despite lower handle. As you can imagine, we've taken a really, I would say, refreshed look at our entire database on the interactive side. If you look at from a retention perspective across the worst cohorts and the interactive database the top -- we sort of break it down into 8 different categories and the top 4 are virtually unchanged from a retention perspective. both before the rebrand and after the rebrand on a month-over-month basis. So feeling really good about retention at the mid-worth and high-worth segments. And where you're seeing falloff on the retention side is where we're doing that by design is at the lowest worth segments. Most of those are unprofitable customers. And so pulling back on reinvestment at the low worth is going to help on flow through overall. It's going to lower our promotional reinvestment overall and focusing on our higher worth VIP and mid-worth customers just generates much more efficient business. So you'll see NGR growth despite some handle declines in 2026. Aaron LaBerge: Yes, not much to add. I mean eye Casino is currently growing faster than 20% right now, which we're happy about. Obviously, OSB is going to continue to go down. But as Jay mentioned, we're going to moderate that with lower promotional expenses to improve flow through. So we feel pretty good right now with what we're looking at for the year. Brandt Montour: Okay. That's super helpful, guys. And then over in the retail, the promotional environment was a headwind in '25. To some extent, there was obviously supply pressure. Can you just talk about those 2 items? Obviously, they're related into '26 and what you're expecting for the year? Jay Snowden: Yes. We're happy to share that we're seeing less impact. I think there was some sort of initial shock to some changes in reinvestment and some customer shifts and movements in a couple of markets. It's really primarily where we felt it the most is in a couple of markets in Louisiana, really 3 markets, Baton Rouge, New Orleans and, of course, Bossier City, which we talked about. And then in Council Bluffs, Iowa, the combination of new competition, new supply in Omaha, Nebraska and then another competitor in Council Bluffs, where we saw some higher reinvestment levels. We're seeing that all starts to sort of fade and we do lap finally. We lapped the opening of the new supply in Bossier City here this month in February. We're feeling good about trends at our properties in Bossier City now that we've lapped that opening. . There'll probably be some residual impact maybe the next month or 2. But we should be in the clear, I would say, in mid Q2 in terms of Bossier City. And I would say Councils Bluffs, there was a pretty major expansion of a new competitor in Omaha, I believe it was April of last year. So by the time you get to mid to late Q2, you've anniversaried the new supply shocks and competitive reactions. So I think the second half of the year should be feeling pretty good in terms of that acting then as a tailwind when you look at it on a year-over-year basis. Operator: We will move next to Barry Jonas with Truist Securities. Barry Jonas: Yes, Jay, why don't I take that second question you gave there maybe expanded as we think about the guidance range. Maybe what are you assuming between the range for new supply impact, something like more first half versus second, but also any assumptions embedded there for new project growth, anything for One Big Beautiful Bill. Just want to get a sense like what the -- what the difference is between the high and the low end of the guidance range. Jay Snowden: Yes. We anticipated and contemplated all of the factors that you just highlighted, Barry. I do think that as I look at what consensus looks like by quarter, we probably feel stronger about the second half of the year than the first half. There's some weather impacts here in the first quarter that Felicia highlighted between $5 million and $10 million impact. We built that into our full year guide. So that's no change to the full year guide. But in terms of the cadence from Q1 to Q2, Q3 and Q4, there's a little bit of noise in Q2, and that we'll be opening our Aurora property. And you'll recall that when we opened Joliet, we had to shut the property down for 2 weeks. And so there's obviously a cost headwind to not generating revenue, but still having the costs flow through the P&L as we get ready to open Aurora. . The second half of the year, we really feel like we're in the clear. We're going to have all 4 of our growth projects that we've been talking about for the last couple of years. We'll be open, 2 of them fully ramping, the ones that we opened in 2025. And feeling pretty good about launching the other 2. They're likely to open at the very end of Q2. The current construction schedule has us opening the Columbus hotel as well as the Aurora property, really at the tail end of Q2, call it, end of June. We'll firm that up in the next probably 1 month or 1.5 months publicly, but that's the way I would model it. And as you think about same-store versus new when you look at the EBITDA projection or guide for 2026, we look at our same store, including the markets with new supply as being basically flat year-over-year from an EBITDA perspective. And then the upside you see on a year-over-year basis, the 3% growth overall is being driven by the 4 growth projects. Barry Jonas: Got it. And then I wanted to follow up on interactive, really nice to see the breakeven guidance this year. But at least conceptually, how should we be thinking about the maybe profitability scenarios for the segment in the years ahead. Clearly, new iGaming legalization will be a major factor, but it does seem like the royalties are a major positive today that could tail off at some point. Jay Snowden: Yes. We are the only market we're aware of that is going to launch new this year is Alberta. That will happen. We leave some time around midyear that hasn't been firmed up yet, but that's what we're anticipating. That should be a good market for us. Obviously, our strongest market, I've highlighted before, has been Ontario from a market share and a contribution margin perspective. So we expect Alberta to be a good market, reasonable tax rate similar to Ontario, both online sports betting and online casino. There will be some investment that goes into that mark similar to when we launched Ontario, but we would expect to have similar market share results in that market as well. The Score brand really does carry across the country. It's not just specific to the province of Ontario. So feeling pretty good about that. And I think to answer your question of how does breakeven in '26, what does it look like? How does that bridge to '27, '28. We just need, I think, another couple of quarters to see what is the revenue trajectory, both on the iGaming side as well as in OSB? How does the launch go in Alberta? So look, we're in control of all of the levers. That's a great feeling as we here head into 2026 here. And we feel really comfortable with being able to achieve breakeven. There's different paths to getting there, which would impact what your '27 and '28 outlook is. So we just need a little bit more time under our belt. We're feeling good about the first couple of months post rebrand. We provided you some KPIs in the slide presentation for what December and January look like on a combined basis. And feeling pretty good about that. It's actually quite rare that when you go through a rebrand and you're making assumptions, obviously, you're building out what your assumptions are and then make adjustments on the fly. We've been really close to what we assumed we would be from a retention as well as a new user perspective. There's been little tweaks here and there that we've made. But overall, feeling pretty good about what we anticipated and what we're seeing in the business. Operator: We will move next to Jordan Bender with Citizens. Jordan Bender: I want to start on the casino side. So the bulk of the project CapEx is coming to an end in the coming months outside of Council Bluff. Jay, you might not be able to say anything on it today, but how do you view the development pipeline in the casino business over the next coming years? Jay Snowden: Yes. I'll answer it, I guess, sort of internally looking if that's where you're headed directionally, I'm happy to answer thoughts on externally. But within PENN, we do have a few more projects that we're analyzing right now. I've mentioned before on our other calls that we've got some other aging river boats in markets like Louisiana, Mississippi and 1 more actually in Illinois, that actually -- as we do the analysis, the return profile looks quite similar to what we're seeing in Joliet real time and in M-Resort. Now that 1 is hotel expansion, but we'll we anticipate with Aurora, the water to land conversion. So I would say stay tuned on that. We've been analyzing these for some time, and I think you should expect to hear more about that here in 2026. But you're right in terms of project CapEx, it's was really at its peak in 2025 at over $400 million, and Felicia highlighted the first half of this year as we sort of finished up at Columbus and Aurora, another $225-ish million. So that there'll be some Council Bluff spend as we get to the end of 2026 and head into '27. We anticipate that property opening up sometime towards the end of '27, it might leak into early '28. Anything else that we have planned as long as it pencils and we've got the support locally, which are all the things that we're working on right now and you should anticipate hearing more about that in the coming quarters. Jordan Bender: Great. And then on the follow-up for the interactive guide, a lot of positive comments around kind of what's going on following the rebranding but the guidance I believe you guys did go from breakeven to positive to just breakeven. Can you kind of just flesh out what you're seeing in real time that's caused that shift? Jay Snowden: Yes. Look, you have to take a midpoint when you're putting out a guide. And so I think that just feels comfortable right now. Again, we were positive EBITDA in December. I feel good about the business result in January. We're still in the middle of February. Super Bowl overall actually worked out in our favor. We did well, not so much on the Moneyline wagers, but player props definitely worked in our favor and same game parlay most of the star players did not score touchdowns in that game. So overall, Super Bowl was good. The other sports in February have been okay. So hold has been, I would say, pretty close to where we anticipated through the first 2 months of the year on a combined basis. So just -- we've built our budget from the bottom up, and it told us that we felt comfortable putting breakeven out there, and we're delivering against that now. obviously continue to update all of you on our quarterly calls as to how the year is progressing. But in terms of being 2.5 months, close to 3 months post rebrand we're right where we wanted to be. Operator: We will move next to Dan Politzer with JPMorgan. Daniel Politzer: I wanted to follow up just on regionals. I know you called out the first quarter, you've seen a little bit of weather impact, but perhaps the other side of that, have you started to see any of the stimulus benefits, the tax refunds start to flow through. And historically, what is the relationship between those tax refunds and maybe the uplift that you would see in your properties? Jay Snowden: Yes, it's a good question, Dan. It's really hard for us to know when we see really good volumes on a weekend, how much of that is -- there's been a break in the weather. How much of that is that there's tax refunds are starting to flow, and they're higher than people anticipated. So I think the answer is that we're seeing some of all of that. I would tell you that as bad as the weather was in January, and that really hit us across every 1 of our segments, regional segments other than West but even hit us in the south, You'll recall the storm was really across the country. And then in February, Midwest weather has actually been fine. It's the Northeast where we've gotten beat up. We had to shut down a couple of our properties early this week. So there's definitely noise there, but I would tell you that when the weather breaks, whether it's a weekday or certainly on the weekends, we're seeing really strong volumes. We're seeing really strong spend per customer when they visit. And I think that's probably going to continue now that the tax dollars are starting to flow through into people's accounts. we would anticipate finishing up February strong. The weather looks good in the 10-day forecast really across the country. And March is set up to be a good month. The calendar doesn't work in our favor as well in Q1. Something else to keep in mind, we had an extra weekend day this year in January, which is the weakest month of the 3. Last year, you had an extra weekend day in March, which is the strongest month of the 3. So something to keep in mind, again, just in terms of your quarterly modeling, Q1, maybe not as strong as maybe you would anticipate relatively speaking, but it's going to get stronger throughout the year, especially for PENN as we have the second half of the year, the 4 growth objects all open and starting to hit a run rate that we're comfortable with. Daniel Politzer: Got it. That makes sense. And then just pivoting to capital allocation. I think in your slide, you refer to those capital return optionality. One, it is a 2-part. Is there a number for the full year for the repurchases that you ended up doing? I'm not sure if there was any incremental versus when we got the update on the last call? And then how are you thinking about that capital return as you referenced the optionality with returning to shareholders versus reducing debt versus some of those growth investments that might be on the horizon? Felicia Kantor Hendrix: Yes. Thanks, Dan. Yes. So in 2025, as you know, we set out to purchase 350 million shares. And as we discussed in our last quarter, we ended up buying back [ 354 million ] for 2025. And just putting that into context, that's about 14% of our shares outstanding in '25. And then since 2022, we repurchased $1.1 billion of stock or 25% of our shares outstanding. So we've demonstrated repurchases are an important part of our capital allocation strategy and continue to be so, but also delevering and investing in our development pipeline, where we expect to generate 15% cash-on-cash returns are also important parts of our capital allocation strategy. So we talked about earlier that we expect to generate $3 per share of free cash flow this year. . And then you couple that with the $225 million in funding we should receive from GLPI for Aurora before the end of the second quarter. And then the remaining $21 million that we'll receive from the city of Aurora before the end of the year, all that's going to enhance our liquidity and reduce our leverage. So really then, at the end of the day, it's about our balance, right? And we'll remain focused on all 3 of those components, buyback delevering and investing in our growth throughout the year. Operator: We will move next with Joe Stauff with Susquehanna. Joseph Stauff: I wanted to ask maybe a couple of questions to dig in a little further on the early returns, obviously, Julia and M Resort. And just kind of lessons and how we think about the ramp from here, we can all see the Joliet kind of win per unit per day somewhat flattening out. I don't know if that's the weather or maybe there are some marketing campaigns that you are thinking about. But -- and also in M Resort, obviously, you have a lot more capacity. You talked about record gaming volumes in December in January. So I was wondering, is that a function of higher capacity, higher visitation. What are you seeing there in terms of maybe derisking, say, the 15% cash on cash return going forward? Jay Snowden: Yes. No, good questions, Joe. Let me take a step back for a second, just in terms of the hotel expansion projects versus the water to land conversions. The hotel project expansions, you see really a more immediate pack positively to incremental revenues and incremental EBITDA. And the reason for that, I think, is relatively intuitive, which is that you're adding a hotel. There's not a whole lot of labor add. You've obviously got housekeeping front desk, valet. But the Columbus property and the M Resort property were built for more hotel rooms, right? In the case of Columbus built for a hotel in terms of restaurant capacity, entertainment venue capacity, gaming floor. We don't have to we didn't have to invest in expanding any of those areas as part of those projects. So we knew that we had a lot of demand -- unmet demand that we couldn't handle at the M Resort and we were sort of cultivating these relationships with many of these groups and conventions that would come through. And then they would just outgrow us because we only had 390 rooms. We've essentially almost doubled the capacity pretty close to 750 total rooms at M now. And so we've got groups both coming back and new large groups coming in for the first time. we can deliver a level of service and personalization that they just won't find on the strip because those hotels are so large and those groups sort of can get lost. So feeling really good. I mean if you look at the resort results, which we do every day and you look at occupancy and you look at ADR, you almost don't even realize we added -- we doubled the number of rooms because the occupancy has been almost as strong as it was prior year with half the room, the same thing on an ADR basis. So we're feeling really good about M Resort, the return profile gets us even more excited about Columbus. Columbus, believe it or not, this is kind of an odd step, but it's our #1 property in the portfolio from a cross-property visitation standpoint, and that's with no hotel today. So we obviously are feeling really good about being able to generate much stronger VIP cross-sale from other markets, both in Ohio and outside of Ohio that it is a destination for us. especially during the Ohio State football season. So that's kind of the hotel expansion wrap up. I would say. As it relates to Joliet, we're feeling really good because remember, and you've been there, Joe, you were there for the grand opening. That property was really the first location or amenity or offering to open up in what is a very large mixed-use development called Rock run. There's actually a 250-plus residential development that's opening up right next to our later this year. There's a 285-room flagged hotel that's opening up within walking distance of our property sometime in 2027. There's a number of restaurants and entertainment venues. I mean this is -- it's a real mixed-use development. For those of you that have been St. Charles, Missouri close to the Ameristar property there. It's the same developer. And we expect to have a similar critical mass when all is said and done over the next couple of years. So Joliet as good as the start has been. And the way I sort of summarize the demand figures that Joliet, we've seen our active database, which we covered on the call earlier, 130% growth from pre to post. We see daily visitation has doubled. Our table volumes have doubled. Our nongaming revenue doubled and our slot revenue is between 40% and 50% growth. And so I think there's an opportunity to still grow that slot business higher than that base of 40% to 50%. And anything above that just makes the return profile that much stronger. And the difference, again, between the hotel expansions versus these water to land casino conversions is that when we first opened, like we did at Joliet, the first few months, you've got a lot of slot leased product on your floor figuring out what your customers are gravitating toward from a slot content perspective. You have all of your restaurants open every day, all of your bars and a lot of entertainment programming, you're figuring out what works. And so your margins are going to be lower those first call it, a couple of quarters post opening. And then you start to fine tune. And I think we're the best of business at doing that. And so you should expect the margins for Joliet over the next couple of quarters continue to improve. And by the time you hit the 1-year anniversary, you're really cranking from a top line and a bottom line perspective. I would expect the same sort of cadence from quarter 1 to quarter 4 post opening for Aurora as well, whereas Columbus, you're going to see a more immediate impact both on the top line and bottom line as well as in your margins. Joseph Stauff: And just a follow up. Is the Aurora property, the newer property, obviously, is that also opening up? I hadn't been there. in a mixed-use development as well similar to Joliet? Jay Snowden: It is not, but we stand to benefit that we literally sit next to immediately adjacent to the Chicago premium outlets. And when you're entering and exiting that mall, which is -- I don't have the stats in front of me, it's millions and millions of vehicles and people per month. And when you're exiting the Chicago Outlet Mall, you're at a stoplight, you turn left to go on the interstate or you go straight and you roll right into our parking drug. So I would say it's actually a little bit better in the sense that just from a timing perspective, it's already developed and already has critical mass on a daily basis. And so we stand to benefit the Chicago Premium outlets really don't have any sort of mid-tier or higher end restaurant offerings, and that's something that we will have. Remember though we don't have a hotel at our Aurora property today on the water, we will have a hotel, we'll have a spa, outdoor entertainment, lots of restaurants. It's a sort of a bigger more higher-end amenity mix version of what you saw at Joliet. So we're feeling really good about being able to feed off of the Chicago Premium Outlet Mall there as well. Operator: We will move next to Shaun Kelley with Bank of America. Shaun Kelley: Jay or Felicia, if you could just remind us on the kind of size or scope around the Alberta launch costs. Ontario was quite a while ago, and I can't actually remember if it was done under the sort of more of the Score model before your acquisition. But just kind of if you could help us put some parameters around if that market goes, I know the timing is a little uncertain. But if that market does open this year, what's the kind of range of J-curve investment you guys might expect to make there? That would be helpful. Jay Snowden: Yes. We're still sort of finalizing our marketing launch plans there and taking the best of in terms of what works with our Ontario launch and eliminating the things that didn't work. So I would say it's going to be probably somewhere in that $15 million to $20 million range, but give us another quarter to fine-tune our marketing plans and get back to you. on that. Obviously, it's a really important market. And we've all learned through the years that those initial sign-ups, you get those are the most valuable customer cohorts that you end up with. And so we got to make sure that we launched successfully in Alberta like we did in Ontario and when you do, you tend to hold on to your market share much more effectively. So I would say stay tuned. But generally speaking, that's probably the range. Shaun Kelley: Perfect. And then sort of a strategic follow-up, Jay, last quarter, you had, I think, some really defined views the broader prediction market landscape, we continue to see a lot of sequential growth in that business. I'm kind of curious on twofold. One, any identification you guys have on just your kind of core business on handle metrics as to any impact you might be seeing. But I think much more importantly, just your kind of -- as this continues to evolve, we continue to see spin-offs of more and more gaming like mechanics. Where do we sit today from where we were 3 months ago on your view? And how do you think the industry is kind of coming together here as it relates to this because we have seen, obviously, the CFTC come in with some pretty public remarks blessing these markets and continue to see a lot of people moving forward? Jay Snowden: Yes. It's a fully loaded question on a really controversial topic. I laid out a lot of my thoughts on the last call. I would say those thoughts really haven't changed. What has continued to evolve is that it's really clear as mud today in terms of where this is going from a legal perspective. You've got regulators and attorneys general that are suing prediction markets and then you have the prediction markets that are suing regulators and trying to beat them to the punch, It's obvious to anybody who's ever been in the gambling business. And even those who aren't that sports betting is gambling. I don't know how you defend that, that it is not. And I know regulators have taken that view. It really puts the PENNs and the MGMs and the Caesars of the world in a very awkward position. We have our land-based businesses that generate tremendous cash flow. We employ thousands and thousands -- tens of thousands of team members across the country. We are big contributors to our communities. And those gaming licenses are the most valuable assets we have. We're not going to put those at risk. So when regulators say this is illegal gambling don't do it, we don't do it. But there are those that are able to do it and are doing it in other states. And so it's just -- it's very -- it's confusing. I would say, the impact overall in terms of what we're seeing today on our sports betting business we can't really tell what the impact is. We all see the handle trends. I think there's lots of variables that impact handle, prediction markets certainly are 1 of those, how much we don't know today. This really can't get in front of the U.S. Supreme Court fast enough. I mean, that would be my ultimate perspective and answer because we're just going to keep seeing this get delayed and delayed and delayed and the businesses get bigger and broader and what are they doing? We don't know the answers to some of those questions. But we're obviously not going to put our licenses at risk. We're going to stay very close to our regulators. I do think, as I said on the last call, that we as an industry of land-based casinos that aren't able, aren't allowed participate in prediction markets, we've got -- I think the best defense is offense, and we've got to figure out how to play more offense here. And I've got ideas. I've shared that with some of my counterparts. And we continue to discuss those ideas with our regulators as well as lawmakers on how we can play more offense as an industry and turn this into a win for them, meaning the states and also for the operators like us. Unknown Executive: And I would say on the sports betting side, you're seeing a lot more competition on the marketing side going after sports betters directly. So we are seeing that versus going after investors, they're going after sports betters. So that's become pretty evident over the short term here. Operator: We will move next to Chad Beynon with Macquarie. Chad Beynon: I wanted to ask about the main iGaming bill that was passed, obviously, unique in terms of the partners that are there. You guys have a good database and could potentially partner with somebody. Can you talk about if this bill goes into existence in terms of operations, maybe your opportunity to benefit economically in that market? Jay Snowden: Sure, Chad. I mean that's -- I can't answer that 1 today because we're still in discussions. I would just take a step back. What happened in Maine is mind blowing. We've been operating as a casino entity there for 2 decades. We've invested hundreds of millions of dollars. We've employed hundreds of Mainers. We're great -- we're -- as involved in the community as you're going to find any business leader. And the governor in Maine decides to hand a monopoly to a third party that's never invested dollar in the industry. I don't understand that. It doesn't make sense to me. It shouldn't happen. That said, it's being challenged legally as it should be and we'll see where it goes. If it ends up standing, then we're going to do our best to figure out a way to compete in that market. But the way that this was done was not popular publicly, and that's very evident. And I'm not sure how the governor concluded that was the best course. But it is what it is. We'll figure out a way to compete if it doesn't upstand legally. Chad Beynon: Okay. And then separately, on the retail guide, it looks like margins are going up by a few basis points, 45% flow-through at the midpoint. You guys are going to benefit from the new properties. You talked about the returns there. But just as we think about the same-store expenses, maybe labor, utilities, et cetera, the nontax items. Do you have high confidence that there's not going to be much inflation in '26? And if you hit those revenue targets, at least at the midpoint that you can hit on that flow through? Jay Snowden: Yes. From what we can see today, Chad, I would say, yes. We have a couple of labor negotiations in 2026 that we thought we've got a pretty good handle in terms of what the outcomes -- the range outcomes will be. Got a good handle on utility and insurance expenses, things of that nature. So it really is more of a -- think about it as a first half of the year, you're still going to feel some impact from those new supply markets that we haven't anniversaried yet or in the process of anniversarying. You've got the Aurora opening, which again, will be -- will hurt margins at least for the first quarter, maybe 2 quarters. The other 3 growth projects that we've -- we'll be ramping at Joliet and margins will be in a really good place. certainly the second half of the year, M Resorts margins are in a great place right now. Columbus will be out of the gate in a great place. So that's sort of the impact. Just think about it maybe as a first half of the year, maybe not as much upside same-store [indiscernible] at the second half of the year, you'll probably start to see more upside in terms of margin growth the same-store level. Operator: We will move next to Jeff Stantial with Stifel. Jeffrey Stantial: Jay, Felicia, Aaron. Maybe starting off on the Interactive business. We haven't seen a bit of an uptick in the promotional environment this quarter on the sports side of things. The private operators continue to spend quite aggressively and then some of the larger operators have come out with parley insurance and other initiatives like that. Jay or Aaron, whoever wants to take this. Is this something you're noticing an impact on retention in sports that you could actually pinpoint in the quarter? Are you fast following any of the parlay focused generosity initiatives? And if you could just help us think about, I guess, overall sensitivity and the projections to the promotional environment, specifically in sports, just given the shift in strategy, that would be helpful. . Aaron LaBerge: Yes. This is Aaron. We are seeing that in sports, although as you know, our strategy has really shifted to focusing on iCasino in hybrid states. and in Canada. So when we're looking at OSB only states, we're taking a much more methodical look at our promo dollars and users that we're trying to retain and attract. So we have great retention at the high end of value, kind of the promo chasers and the people that are looking for gimmicks and promos in the low end tend to be churning out, which is what we expected. And then we use that money to reinvest in hybrid states where there's iCasino and sportsbook. So it is happening, but we are not necessarily competing in that market anymore as vis-a-vis Fandora Draftkings, we don't see ourselves in that realm, although we do try to find opportunities to provide value where they don't. But your observation is true. It is getting competitive, but we're kind of staying out of that right now. Jeffrey Stantial: That's great. And then maybe staying on the Interactive business. Felicia, in the past, you've given us some frameworks for just thinking about market share across the 2 verticals, maybe without having to get into specific numbers this time, can you just talk directionally on how you think about overall market growth relative to market share expansion on the casino side that's sort of embedded in the '26 guide. Jay Snowden: Yes. I'll grab that one. This is Jay. I would say that we expect -- we've essentially said it already. We would expect to continue to grow our market share on the iCasino side and see that our handle share will shrink on the OSB side. That's the best way to think about it. We're really focused on retention and driving profitable new users as first-time betters into the ecosystem. So [indiscernible] we're hyper focused on the states that offer both online casino and OSB. OSB only states we're likely to have a different new sign-up offer. We actually already deployed that, that differentiation between OSB only versus hybrid. And so that's where it's going to be in 2026. We feel we also have a great opportunity on reactivation, people that over the last several quarters and years have registered and signed up and made deposits, maybe taking advantage of a promotion and they're either inactive, dormant or they're not as frequent players with us or gambles with us as we would anticipate. So we're really focused on reactivation as well. And that's really, all of that just feeds into the P&L story for this year. It's going to be a much more efficient approach to the business and 1 that we think will generate a much higher return long term. Operator: We'll take our next question from David Katz with Jefferies. David Katz: I wanted to just talk about the land base or retail portfolio. You've made some obviously very effective investments in upgrading that. And do you have a pipeline of more of those? Should we expect to see more of those kind of upgrade projects? Clearly, the retail landscape has gotten much more competitive post-COVID. Jay Snowden: Yes. I had mentioned earlier, David, we do have some more opportunities in states like Louisiana, Mississippi and actually 1 more of our water-based facilities in Illinois. So we're analyzing the return profiles on those projects, working with local leaders, lawmakers, community leaders and figuring out which of those may make sense for us as long as they hit our return profile that we're comfortable with, which would be that 15-plus percent cash on cash. We've got others that we believe will fit that return profile. We just have to make sure that everything else lines up and I would say stay tuned for more on that here in 2026. David Katz: I appreciate it. If I could just follow up to that end. I don't expect you to give us a number today and in this forum, right? But is it a majority of the portfolio, right? Is it 2 to 3 properties, 3 to 5 properties? Any order of magnitude, I think, would be helpful here. Jay Snowden: It would be certainly low single digit, less than a handful, but yes, there's -- across those 3 states I mentioned, call it, 3 or 4 projects that we're looking at right now. . Thanks, David. And Nicky, we'll take 1 more question, please. Operator: We do have a question, comes from the line of Stephen Grambling with Morgan Stanley. Stephen Grambling: Thank you for sneaking me in here. This should be maybe a quick one. Just -- I know that you gave a guide that implies kind of an OpEx growth rate on the property side. Just curious if you could provide any more details on some of the puts and takes that maybe underpin that. Jay Snowden: Yes. I would say a pretty typical year of OpEx growth we're comfortable with the flow-through on the incremental revenues that we're showing there at around 45% could end up being a little bit better than that, but you're going to have typical growth in your labor number primarily annual merit increases. Like I said, we have a couple of labor negotiations that we're working through. So primarily there, we don't anticipate strategically any changes in our marketing reinvestment overall. You're going to have some natural growth in areas like insurance, sometimes utilities, but that would be driving the lion's share of it, Stephen. All right. Thanks, everyone, for joining. We look forward to catching up with you again next quarter. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Greetings, and welcome to the TG Therapeutics Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Jenna Bosco, Chief Communications Officer. Please proceed. Jenna Bosco: Thank you. Welcome, everyone, and thank you for joining us this morning. I'm Jenna Bosco, and with me to discuss TG Therapeutics' Fourth Quarter and Year-end 2025 financial results are Michael Weiss, our Chairman and Chief Executive Officer; Adam Waldman, our Chief Commercial Officer; and Sean Power, our Chief Financial Officer. Following our safe harbor statement, Mike will begin with an overview of our recent corporate developments. Adam will provide an update on our commercial efforts, and Sean will review our financial results before we open the call for Q&A. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include expectations regarding our future operating and financial performance, including sales trends, revenue guidance, projected milestones, development plans and outlook for our marketed products. Please note that these statements are subject to risks and uncertainties that could cause our actual results to differ materially from those indicated. These risks are detailed in our SEC filings. Additionally, any forward-looking statements made today reflect our views only as of this date, and we disclaim any obligation to update or revise them. As a reminder, this conference call is being recorded and will be available for replay for the next 30 days on our corporate website at www.tgtherapeutics.com. With that, I'll turn the call over to Mike Weiss, our CEO. Michael Weiss: Thank you, Jenna, and good morning, everyone, and thank you for joining us today. 2025 was a defining year for TG Therapeutics. We didn't just grow, we scaled, we strengthened and we demonstrated that BRIUMVI is becoming a foundational therapy in relapsing multiple sclerosis. Let's start with what matters most, performance. We delivered approximately $616 million in total global revenue, the vast majority of which came from $594 million of BRIUMVI U.S. net sales, and we capped the year with a strong fourth quarter of $183 million. That represents approximately 92% year-over-year growth and 20% sequential growth from Q4 over Q3. Those numbers reflect something simple. Physicians are choosing BRIUMVI, patients are staying on BRIUMVI and confidence in the product continues to build. That confidence is reinforced by our 6-year open-label extension data from ULTIMATE I and II presented at ECTRIMS this past September. Nearly 90% of the patients were free from 24-week confirmed disability progression after 6 years of continuous treatment, 6 years and the relapse rate seen in the 6-year BRIUMVI treatment translates into 1 relapse occurring in every 83 years of treatment. And importantly, no new safety signals emerged. On the R&D front, we advanced our Phase III ENHANCE study, evaluating consolidation of the day 1 and day 15 BRIUMVI infusions into a single 600-milligram dose. Enrollment is complete. We expect top line data midyear with the potential 2027 launch of this consolidated treatment schedule. If successful, this could meaningfully simplify the treatment experience. We believe effective therapies should not only work well, but be as convenient as possible for patients, which brings me to our subcutaneous program. We are developing a self-administered at-home subcu BRIUMVI to be delivered via an auto-injector. Our Phase III study is evaluating 2 dosing schedules, every 2 months and quarterly administration. The trial is now approximately 75% enrolled, and we're targeting pivotal top-line data later this year or early next year with a potential 2028 launch. We see this program as having significant commercial potential. The subcu portion of the anti-CD20 market is substantial and being able to compete in this space, we believe, could nearly double our total addressable market opportunity. Beyond MS, we are actively advancing plans to explore BRIUMVI in additional autoimmune indications, including having treated a series of Myasthenia Gravis patients in a Phase I study. And finally, Azer-cel, our allogeneic anti-CD19 CAR-T is being studied in patients with progressive MS. It's still early, but momentum is building. Our clinical trial sites are identifying patients quickly. In fact, demand is exceeding available trial slots. That tells us something important. There is a real unmet medical need. We look forward to sharing updates from this program later this year. Turning to some financials. I'll leave the details to Adam and Sean, but suffice to say, we expect to continue generating positive cash flow in 2026 and beyond, which gives us a rare financial flexibility within the biotech universe. We've been clear about our capital priorities, invest to maximize the multibillion-dollar BRIUMVI opportunity, expand the pipeline judiciously for sustained future growth, repurchase shares when we believe TG is materially undervalued and otherwise allocate capital in ways that generate long-term returns. With respect to share buybacks, we completed our first $100 million share repurchase program, and the Board authorized an additional $100 million last year. At current levels, we view our shares as significantly undervalued relative to the cash flow profile we expect over the coming years, and we will not hesitate to act accordingly, including adding leverage to reduce our share count. And to be clear, we purchased shares to create long-term value, not for the optics. Before closing, I want to touch on something I'm personally very proud of. Many of you saw Christina Applegate launched Next In MS during Super Bowl 60. We are honored to partner with her on this platform. Next In MS is about honest, unfiltered conversations about life with MS, about difficult realities about resilience beyond treatment decisions. We're not just commercializing BRIUMVI. We're building the MS company that shows up for patients beyond the prescription. To close, at TG, our mission remains simple: deliver meaningful therapies, simplify treatment, create lasting value for patients and shareholders. I'll now turn the call over to Adam Waldman, our Chief Commercial Officer, for a detailed commercial update. Adam, go ahead. Adam Waldman: Thanks, Mike, and good morning, everyone. 2025 was a year of continued acceleration for BRIUMVI, and we closed the year with another strong quarter of execution and growth, further expanding our position in the RMS market. For the fourth quarter of 2025, we delivered U.S. net sales of $183 million and continued sequential expansion versus Q3. For the full year, BRIUMVI U.S. net revenue reached $594 million, reflecting sustained momentum built on the strong commercial foundation established in the first 3 years of launch. Growth throughout the year was driven by consistent and increasing year-over-year new patient starts, continued expansion of our prescriber base, better-than-expected persistence, greater depth within high-volume infusion accounts. Importantly, growth was broad-based across both academic and community settings, reflecting rising physician confidence and expanding utilization. BRIUMVI continues to strengthen its competitive position within a large and growing anti-CD20 market. Within the IV anti-CD20 segment, we continue to gain dynamic share. Physicians remain focused on proven efficacy, long-term safety experience and operational efficiency and BRIUMVI's 1-hour twice yearly maintenance infusion profile supported by multiyear data continues to resonate in a competitive environment. We are seeing a balanced mix of treatment-naive and switch patients, reinforcing both the breadth of the opportunity and the continued expansion of our footprint within the class. Our execution remains strong across all commercial functions, and TG is emerging as a leader in the therapeutic category. As the franchise continues to scale, we have continued to invest behind the business. During 2025, we expanded our field organization to deepen coverage in high-opportunity geographies and broaden our reach among community neurologists and independent infusion centers. That expanded footprint is driving increased prescriber engagement and positions us to accelerate further penetration in 2026. We also expanded our direct-to-patient engagement efforts during the year. In addition to our national BRIUMVI campaign, as Mike mentioned, we recently announced our partnership with Christina Applegate to launch NextInMS.com, a new educational platform designed to provide resources and information to individuals living with RMS and their caregivers. Christina's long-standing advocacy within the MS community brings credibility and visibility to broader conversations around navigating life with MS. Through Next In MS, our focus is on education, empowerment and encouraging informed dialogue between patients and their health care providers. As BRIUMVI continues to scale, we believe it's important to engage thoughtfully and meaningfully within the MS community, and this partnership reflects our growing leadership position in the space and our long-term commitment to supporting the MS community. As we look to 2026, we are reaffirming our previously issued full year U.S. BRIUMVI net revenue guidance of $825 million to $850 million, with total global revenue at $875 million to $900 million. Our outlook reflects continued growth driven by expanding prescriber adoption, increasing depth within existing accounts and ongoing share gains and a growing installed base of patients with strong persistence on therapy. We've entered 2026 with real momentum. New patient starts are tracking to our strongest level since launch. Physician confidence continues to build and our share trajectory within the IV anti-CD20 segment remains favorable. Importantly, after operating alongside competitive entrants for several quarters, BRIUMVI has demonstrated that it can compete effectively and continue to expand its position within the class. Turning to the first quarter and based on the strong demand trends we are seeing earlier in the year, we expect U.S. revenue to grow sequentially over Q4 levels to approximately $185 million to $190 million, even after accounting for typical seasonal headwinds. As we have mentioned previously, the first quarter generally reflects routine factors such as benefit reverifications and gross to net variability driven by deductible resets, which can influence the timing of net revenue early in the year. These dynamics are consistent with what we have seen historically in the category and are fully incorporated into our full year guidance. We also expect ex-U.S. revenue to be in the range of $5 million to $10 million for the first quarter. Taken together, the strength of demand and continued share expansion gives us confidence in our reaffirmed guidance and our ability to drive meaningful growth in 2026. To summarize, we have delivered another year of strong growth in 2025. We continue to gain share in a competitive IV anti-CD20 market. We have invested meaningfully in field expansion and direct-to-consumer initiatives to support the next phase of growth. We are off to a very strong start in 2026, tracking to record new patient enrollments entering the year. BRIUMVI is now a scaled and expanding franchise, and we believe the commercial platform we've built positions us well to continue driving meaningful growth in the year ahead. With that, I'll turn it over to Sean to walk through the financials. Sean Power: Thank you, Adam, and thanks, everyone, for joining us. Earlier this morning, we released our fourth quarter and full year 2025 financial results, which are available in the Investors and Media section of our website. I'll begin with a discussion of our revenue for the fourth quarter and full year, which Adam briefly touched on. We are pleased to report U.S. BRIUMVI net product revenue of $182.7 million during the fourth quarter. Total net product revenue for the quarter was $189.1 million, which includes $6.4 million of product revenue related to sales to our partner, Neuraxpharm in support of ex-U.S. commercialization. For the full year 2025, global revenue was approximately $616 million, predominantly comprised of $594 million in U.S. BRIUMVI net product revenue, $12.8 million in revenue from products supplied to Neuraxpharm and $9.4 million in royalty and other revenue. Our gross margin for the quarter was slightly below typical as a result of timing of sales to our ex-U.S. partner and a onetime inventory reserve. Shifting to operating expenses, which we define as R&D and SG&A, excluding noncash comp. Full year 2025 expenses totaled approximately $328 million, in line with our prior guidance of $300 million to $320 million. The modest variance was driven primarily by incremental manufacturing and development costs related to subcutaneous BRIUMVI and continued commercial investment. Revenue growth significantly exceeded the increase in operating expenses, resulting in operating income of $123 million for the year. For the fourth quarter, net income was $23 million or $0.14 per diluted share. For the full year 2025, net income totaled $447.2 million or $2.77 per diluted share compared to $23.4 million or $0.15 per diluted share in 2024. As a reminder, 2025 results including nonrecurring income tax benefit of approximately $340 million, which relates primarily to the release of our deferred tax asset valuation allowance in the third quarter. Turning to our balance sheet and capital position. We ended the year with more than $600 million in current assets, approximately $200 million in cash, cash equivalents and investment securities, $300 million in accounts receivable and $140 million in inventory. During the year, we completed our previously authorized $100 million share repurchase program, purchasing approximately 3.5 million shares at an average price of $28.55 per share. The Board has since authorized an additional $100 million share repurchase program, reflecting continued confidence in our long-term outlook. Looking ahead to 2026, we expect full year operating expenses of approximately $350 million, excluding noncash comp, plus approximately $100 million in expenses associated with subcutaneous BRIUMVI manufacturing and secondary manufacturer start-up activities. These costs run through R&D today, but if the programs are successful, the related inventory would be sold in future periods with little to no associated cost of goods as the manufacturing expense has already been recognized, positively impacting gross margin in future periods. In summary, 2025 represented a year of strong execution for TG. We delivered substantial revenue growth, generated meaningful operating income and positioned the company for continued expansion in 2026. With that, I will now turn the call back over to the conference operator to begin the Q&A. Operator: [Operator Instructions] The first question comes from Michael DiFiore with Evercore ISI. Michael DiFiore: 2 for me. Roche has recently highlighted accelerating subcu uptake in community practices and Novartis continues to emphasize strong growth in the -- in self-administered first-line use. You've described broad momentum across academic and community settings in the HCP administered segment. So my question is, can you help us think about how those dynamics fit together and where you're currently seeing the strongest incremental momentum by site of care? And I have a follow-up. Michael Weiss: Sure. Thanks for the question. Adam, do you want to go ahead? Adam Waldman: Yes, sure. Thanks for the question, Mike. So listen, we've now operated alongside the new entry from Roche for several quarters now. We continue to seek share gains in the IV segment. Physicians seem to be -- continue to be driven by clinical data, long-term data, operational considerations. It seems like the majority of the de novo business seems to be coming from Ocrevus IV. But importantly, we're also -- we're not seeing any decreases in the switches from Ocrevus to BRIUMVI. So that's an important factor, too. And in terms of what's driving our share, we're seeing growth across both private practice and academic centers. We think it's the durability of the clinical profile, as Mike mentioned, the 6-year data, especially the safety data within there and the efficacy data. We continue to believe the operational advantages of BRIUMVI, the 1-hour infusion, the twice a year are relevant for patients and infusion centers. We continue to expand prescriber breadth and depth with our expansion of our field force. And I think we're seeing great momentum. And as I mentioned, the underlying demand is very strong. Enrollments are tracking to the highest since launch. And we continue to see share gains across the board, across patient types, across sites of care. And importantly, also, we see very strong persistence. So overall, really strong and the fundamentals are great. Michael DiFiore: Very helpful. And my follow-up question is on gross to net. You previously noted that gross to net can fluctuate with site of care mix, particularly in hospital exposure. So as these -- as growth evolves across channels, are you seeing any meaningful change in gross to net assumptions? Or does your prior framework still hold? Adam Waldman: Yes. As I mentioned in the prepared remarks, gross to net can vary quarter-to-quarter. In Q1, gross to net is influenced by deductible resets and high utilization of co-pay programs. Consistent with what we've seen historically, does not represent a structural change in how we think about gross to net. It's a Q1 dynamic. Our full year guide reflects the net revenue profile for this year. It is a Q1 dynamic that seems to be consistent with what we see across the CD20 space, also other specialty products, and it's fully baked into our full year guidance. So I hope that answers the question. Operator: The next question comes from Tara Bancroft with TD Cowen. Tara Bancroft: So I'm curious to hear your thoughts around positioning now that you're several years into this launch, but guidance for Q1 and the year are pretty conservative. So I was hoping you could give us some more detail on the proportion of new versus switch patients and how much revenue now is from patients that are remaining on treatment for these extended periods of time and whether new patient starts are still growing or leveling off and why? Sean Power: Thanks. Adam, it's all you still. Adam Waldman: Go ahead. Yes. Thanks for the question, Tara. Listen, I think I'll just reiterate what we're seeing. The majority -- we're seeing record new patient enrollments here. We're still seeing growth. We're seeing great share gains in the IV segment. And I think that's being driven by the things that I mentioned, durability of the clinical profile, the 6-year data, the operational advantages, our investment in both the expansion of our field force. It could very well be our DTC efforts, although hard to single out a single factor here. But all these things, I think, are leading to continued confidence in the product across the board, and that's why we're seeing such a great demand that we're seeing right now. As far as new versus switch, I mentioned a couple of quarters ago, the business becomes more predictable as we've now walked into more switch. Sorry, not switch, repeat patients. So we are seeing more and more repeat patients as a bigger part of our business as that patients continue to pancake from quarter-to-quarter and stay on therapy for long periods of time. As I mentioned before, also, our persistence is quite strong. And so we're seeing patients staying on therapy for -- it looks like out to week 48, week 72, week 96 seems very good. So all those things are leading to growth. We do expect -- we do expect growth in 2026 and meaningful growth in our guidance. Operator: The next question comes from Prakhar Agrawal with Cantor Fitzgerald. Prakhar Agrawal: Congrats on the quarter. Maybe just a follow-up on the new patient start. Adam, you said you're seeing good growth in new patient starts, but I'm trying to connect the dots between your commentary as well as what's implied in the guidance because based on our math, the guidance would imply a more modest year-on-year growth on new patient starts. So how much conservatism is baked into the guidance? Or should we expect a lot higher gross to net for full year 2026? And secondly, how much incremental investments would you need for the subcu launch? And what would be the plans to commercialize subcu BRIUMVI ex-U.S. given that it seems to be a large market for drugs like Kesimpta, so there could be a lot of value there. Adam Waldman: Yes. Mike, do you want me to continue to go here? Michael Weiss: Yes. Why don't you and just start off. Go ahead. Adam Waldman: Yes. I mean, look, we're early in the year here. Like I said, we're seeing a strong start to the year. We're early here. We'll continue to update the guidance as we see fit, as we continue to get more time with -- we'll see how we do throughout the year. It's, of course, possible that we could see outperformance that could come from continued new patient starts. We could see incremental share gains. We could see better-than-expected persistence. That's -- we're being somewhat conservative here. But so far, the year is starting are strong, but we're -- again, we're only in February. So we'll see how that goes. And then in Q1, we're seeing just a disconnect in Q1 prior to your question, strong new patient growth. However, you do face the Q1 issues and headwinds as I described on gross to net and benefit reverification. And then Mike, I don't know if you want to take the subcu question. Michael Weiss: Sure. Yes. I mean in terms of incremental investment, Prakhar, I mean, Adam can answer this as well as me, but overlap between our current field force for IV to subcu is, I think, about 80%. So I don't -- there's not a huge incremental cost. There will obviously be some incremental marketing costs associated with it. But overall, it's not a huge incremental investment to launch subcu in the U.S. As for ex-U.S., we expect our partners at Neurax will opt into that program when offered it. And so we'll work with them on the ex-U.S. strategy at that point. Operator: The next question comes from Corinne Johnson, Goldman Sachs. Corinne Jenkins: Maybe continuing on the conversation on subcu. Some of the competitors started providing color on the role I think a subcu offering could play over time with respect to IV versus subcu share. I guess what is your perspective there, particularly given the variety of dosing options within subcu that could be coming over the next couple of years, including obviously, BRIUMVI? Sean Power: Sure. I'll give it a start, Adam, you can supplement if you like. Look, the subcu portion of the market has been relatively stable for a while, I think 35% to maybe 40% it fluctuates up and down quarter-to-quarter. Long term, the more options that are available creates more energy in that space and more people marketing in that space. So I do believe that over time, with new options available, that space can expand and probably will expand. To what extent is hard to predict at this moment, but I do think there's probably some forces that will push people towards subcu at home over time. And yes, so I do think that market will continue to -- Adam, any additional thoughts? Adam Waldman: No, that's perfect. Sean. Operator: The next question comes from Brian Cheng with JPMorgan. Lut Ming Cheng: Just looking at the existing sales force, is there any potential need for a refocus of their goal this year? And are there pockets of opportunities that you think might be more important this year just given more adoption on the subcu side? And then on a related note, how should we think about the expenses projection related to the DTC campaign that you have set up for this year? What magnitude of a step-up can we expect? Sean Power: Thanks, Brian. Adam, do you want to lead us off here? Adam Waldman: Sure. Yes. Thanks for the question, Brian. We -- as I've mentioned before, we continue to take a strategic expansion approach to our field force. We have continued to add people as we've seen opportunities to do so. We're looking at it strategically. We add people where we see opportunity and continue to hire the best people that we can find in the area. As far as a new goal, I don't know that it needs a new goal. I think we have a pay-for-performance culture and an accountable culture. We've hired the best people in the industry. This team is fantastic, and they continue to deliver on what we've asked them to do. So I don't think we need a new goal. I think we have a great team. I'm very confident in the commercial functions, as I mentioned, I think they're doing an excellent job. Operator: The next question comes from William Wood with B. Riley. William Wood: So thinking about some of your -- the subcu Phase III that's going on currently. I'm just curious when we might actually see or if there's a chance that we might see any subcu bioequivalence data generated. So how we can sort of think about that, the Phase III readout later this year? And then also in terms of some of the earlier-stage programs, I know you've got Phase I ongoing in Myasthenia Gravis. But just curious if and when we might expect to see some of these earlier stage data from the earlier-stage programs, any of that reading out later this year at conference? Michael Weiss: Sure. Thanks for the question, William. In terms of subcu, yes, as we discussed, Phase III is approximately 75% enrolled. We continue to be excited about that program and it's -- the opportunity for us there. Phase III data is expected later this year or early next year. In terms of the Phase I bioequivalence data, it's been coming in. The study is actually, I think, just about to close formally. So there's overlap between the Phase III and the Phase I just for follow-up and all those kinds of things. So the Phase I is, I think, just about closing up or maybe it's not there yet, but getting close. We'll take a look at the timing of conferences and the timing of the Phase III data and see if it makes sense to actually put the Phase I data out or not based on timing of where we are at the Phase III and the conference schedule that's available once that data is fully evaluated and presentable format. So the answer is, I don't know as of yet. But like I said, based on the preliminary data, we're feeling very good about the program and very excited about the Phase III outcome that will be later this year. In terms of Phase I MG, I have not talked to the team yet about what their plans are for presenting that information. Anecdotally, I know the study -- the patients who have been treated with MG look quite good in terms of their response to the drug, which I don't think is much of a surprise to anybody. But I'll check back with the team and I'll be able to give some more guidance later on that once I find out what their plans are. Operator: The next question comes from Emily Bodnar with H.C. Wainwright. Emily Bodnar: In terms of the ENHANCE trial and launching that next year, can you just talk about how you think about that from a market perspective and if you see any potential for kind of incremental revenue growth with implementing that launch? And then maybe if you could just talk a bit about some early metrics that you're tracking with the DTC launch and the Next In MS program? Michael Weiss: Sure. Thanks for the question, Emily. So in terms of the ENHANCE trial launch and incremental potential from that, I'll take a crack, Adam, and then please jump in. We've done some market research. Generally speaking, it's extremely positive feedback on eliminating the second dose, the convenience factor for both patient and for centers is viewed very high in the research we're doing. Anecdotally, I've personally been in advisory boards recently where people are even more enthusiastic than they've previously been about reducing that first dose. In terms of incremental market share gains, I think from our research and from the anecdotal experience that we have, we do believe that it will help us continue to gain market share gains in this area. Again, it's just -- every time we make it easier, it's just -- it's better. In terms of -- the other side of it is in terms of switches, people are excited about it to use this on label for switches, which we think will be helpful there. And generally speaking, if you're looking at going on IV OCREVUS or IV BRIUMVI, you now have another reason or another convenience reason to go on to BRIUMVI, eliminating that first dose, which they still have -- we'll still have 2 doses upfront for their IV plus the much longer infusion. So yes, we do think that will have a positive impact, and we're looking forward to that launch. Adam, anything more on that topic? Adam Waldman: No, I think you covered it. That was great. Michael Weiss: Okay. And then the second part of the question was early metrics on DTC. I know that's one of Adam's favorite topics, so I'll hand it off to him. Adam Waldman: Yes. No, thanks for the question, Emily, and asking about our partnership with Christina and Next In MS. As I mentioned, we view these efforts as building long-term category leadership. The feedback from customers and patients and advocacy groups has been incredibly positive. so far. Obviously, we're looking at in terms of metrics that you asked about, the engagement with the content has been -- has exceeded our expectations. We're looking at the number of people who sign up on our website, the number of website visits, number of sessions, and we'll continue to track it. But so far, everything has exceeded our expectations and the engagement with the materials has been fantastic. Operator: Thank you. At this time, I would like to turn the call back to Mike Weiss for closing comments. Michael Weiss: Great. Thank you, operator. And thanks again, everyone, for joining us. '25 was a very strong year for us. '26, we expect to be even stronger, including a number of very exciting catalysts, including the top line data from our ENHANCE trial, some preliminary data from Azer-cel and then perhaps the biggest one of all at the end of the year or early next year, pivotal data from the subcutaneous BRIUMVI program. To our TG employees, thank you always for your dedication to those living with MS. To the health care providers, individuals with MS and their families. Thank you for your trust. And to our long-term shareholders, thank you for recognizing the potential of what we are building here at TG. We're just getting started. Have a great day. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
David Baquero: Hello. Welcome to this presentation of Atresmedia. This year, we were going to give the presentation in Spanish, but you can also receive the translation in English. We have a simultaneous translation service. And Silvio Gonzalez, who is the VP, will give the presentation presenting the results for 2025 and a quick overview of the strategic plan update. and also the Financial Director and myself, helping with the question of the issue of the questions. Without further ado, I'd like to hand the floor to Silvio to present the results for the year. Silvio Moreno: Good afternoon. We're going to have a quick overview of 2025. And as always, 2025 was a complicated year for the sector for macro reasons and certain sections such as automation and also because there are different competitors in streaming platforms. And this has also meant that it's been a rather complicated and challenging year. And we try to be rigorous in terms of the application of our strategy in terms of audience and the market and our products. It's been once again a very successful year. We have been leaders in audience far ahead of our competitors in the field of audiovisuals, TV and digital audiovisuals. I apologize, but we are receiving continual interruptions in the audio. We can give you the following data. In TV, we had a market share of 26.1%. And as we will see, not just in terms of global -- in overall global market share of 28.15% with the premium markets, 22.6 million monthly, which is the leading platform in this country. And in radio, it's been an excellent year with more than 3 million listeners per day, which is the best figure since 2015. And we can -- this confirms the strength of our brands. In terms of markets, -- in terms of the advertising market, it's grown at approximately 1%. And in the 2 sectors where there's been -- for example, in terms of revenue, there's been a downturn in TV of 4.4%. And in radio, it's increased by 2.6%. This has resulted in total revenues of over EUR 1 billithey're, which is slightly lower than last year. And there's been -- well, audiovisual has also fallen by 2% in total revenues and radios by plus 4%. This has given us a pro forma EBITDA. Well, as you know, we carried out an incentive redundancy plan, early redundancy plan. The EBITDA is EUR 133 million. In terms of dividends paid in 2025, EUR 146 million. And we also have to take into account the impact year-on-year. The pro forma EBITDA is EUR 146 million and a net EUR 133 million and net profit, EUR 96 million. The financial position at the end of the year gives us a good net cash position, a very high cash conversion rate of 0.9. And it's been an exceptional year in terms of dividends. We've paid EUR 146 million in dividends at a ratio of EUR 0.64 per share, which is the highest since 2017. I think that the year 2025 has been an excellent year for our shareholders. And if we take into account share revaluation, and also high profitability, the total shareholder return for 2025 was plus 26%. But now I'd like to analyze the different pillars of Spanish advertising market of Atresmedia. The total market has fallen by 4.4% in TV, and radio plus 12.6%. Outdoor has increased by 6.7%, which is above the average for the sector. And you have to remember that this is a sector which is going to complement our results. And that shows you the performance of the advertising market in the outdoor segment in the last year. And you can see that the growth is not that high, but it's been constant since 2020. As always, we try to ensure that this drop in the market doesn't have an impact on our prices. We'll look at this later on, and we compare this with digital products in our offer to our 360 offer to our clients over the year. And the figures remain fairly solid in this respect. As regards audience share by groups, we have to see that it's been an excellent year. For 5 years, we are leading audience share, increasing the gap between ourselves and our next competitor. And that's important. In reality, we compete with Mediaset because it's the only commercial competitor that's access to the publicity market, the advertising market. There you can see also the curve for TV, which is the Spanish national broadcasting company, TVE, and that continues to be an important player within the advertising market. So it's been an excellent year in terms of audience share in terms of total audience share and also the total day and also in prime time. And this all gives us an advantage with respect to our main competitor, which is Mediaset Spain. As regards to audiovisual main milestones, we can highlight the following. Again, 2025, we've been the absolute Spanish leader. Atresmedia is the first, let's say, you can see we have 4 consecutive leading in total individual and prime time audiences and contents are of significant quality. And the audience appreciates that quality. Furthermore, we've consolidated our position as a stable channel with stable channels. We're stable in the mornings with our newest channels and both during -- at bid day and also in prime time. We are practically leaders in the majority of these slots during the day, and that's allowed us to achieve stable results. And the forecast is that we will continue to achieve good results in the coming years in audience figures and also in terms of the revenues we obtained from our business. As regards Atresmedia Digital, again, it's another year in which we're leaders in these different platforms among users in AVOD and SVOD. In AVOD, we have 2.5 million users, monthly video users and 18 million registered users and more than 750,000 subscribers as of December '25 and 20 million hours of video consumed with a local platform that's able to offer quality content and achieve a large number of subscribers. As regards Atresmedia Webs, of all of the products that we develop, which is not within AtresPlayer, we have the audiovisual group with the #1 audiovisual group and the seventh overall in terms of most visited sites with 22.6 million average for -- and then also in others in the digital sphere under influence marketing H2H, which is above -- growing at above market average and Smartclip, which has had a complicated time. It's suffered a lot, but it's maintaining its position as a company, maintaining its profitability, but it's been a complicated time in digital advertising. So I think that they've achieved excellent results and good penetration in that particular segment. And we'd like to focus a little bit more on Atresmedia audiovisual content. We increased by 10% year-on-year with 750,000 subscribers. And again, we've tried to adapt the prices for all of our subscribers, which has offered a good return. That hasn't affected our audience figures too much, and the results have been pretty good. Apart from that, the platform has been very successful, thanks to strategic mix of content. Disney+, for example, it's important to value quality and Disney+ values the quality and also the market position of our platform. Another important point as part of our 360 platform, -- and something which we'd also like to focus on at the end is the agreements that we've reached, the agreements with the main streaming platforms in the country such as Prime, Movistar, et cetera. And that's another important part of our business because this also allows us, thanks to the flow of content sales to develop products of quality, more expensive products and with a very loyal audience. And also in terms of international TV, we're also the leader in -- we've got 32% of the Spanish film box office in Atres Cine or Atres Films with 14 films in distribution. And in international, well, we have 58 million households, which is plus 7.3% year-on-year. It's part of our strategic plan. Well, we continue to maintain 58 million households, and that is also a way of generating additional revenues apart from those that we achieve in other segments. And in the middle of the year, we acquired the company, Last Lap. Last Lap is an events company, which focuses fundamentally on sports and also experiential marketing. And I have to be honest that the incorporation has gone very, very well. The second half of the year was much better than the year -- previous year in the same period. And additionally, we are going to merge this with the events part of Atresmedia. So this will give rise to a company with a turnover of approximately EUR 50 million. We're talking about an average of 3 events per day, and that will make us one of the leading events companies in the Spanish market. So this market is fairly fragmented, I have to say. And I'd like to talk a little bit about Atresmedia Radio. As I said before, our radio is working very well. the audience figures, approximately 3 million listeners and that is the best data since 2021 and the best data since 2015. So that's the figure for Onda Cero is the best figure since 2015, and Access Radio has achieved the best figure since 2021. Our prime time radio programs with Carlos Alsina has achieved historic audience figures achieving more than 1.7 million listeners per day. But apart from that, I think it's also the program with most credibility and the most rigor in terms of its journalism, let's say, in the field of radio in Spain. So we're extremely happy with the results that have been achieved with that program in 2025. And as regards the revenues for the entire year, well, there you have the figures slightly lower than the figures that we achieved in 2024, EUR 1,002.3 million compared with EUR 1,017.9 million. And there you can see the breakdown. OpEx pro forma that's ex post the incentive redundancy plan is EUR 86.9 million -- EUR 868.9 million, which is plus 3.4% compared with last year. To a like-for-like comparison, then the OpEx is -- would probably have declined if it wasn't for that. And in cost terms, we are very, very committed. The pro forma EBITDA, EUR 133.3 million, which gives us a net profit on a pro forma basis of EUR 96.3 million compared with EUR 120.3 million in the previous year. The entire pro forma results, well, EUR 45 million, which corresponded to the redundancy plan, which have been provisioned accordingly, but the impact on cash flow is something that is felt during the entire period. So it doesn't reduce in any way the cash flow structure of the group and the financial structure that we have. We analyze now revenues by segment. And we can see how this EUR 1 billion has been distributed. There you can see the figures for compared with financial year 2024. And fundamentally, well, the main decrease has this been downturn of EUR 49 million in audiovisual. We are going to -- we've managed to offset this with improvements in content production and distribution of EUR 1 million and others in perimeter, EUR 29 million. That's a total of EUR 30 million. In contrast, radio has performed much better with an increase of plus EUR 3 million, increasing from EUR 83 million to EUR 86 million. Therefore, we're trying to ensure that the weakness displayed by the audiovisual sector this year is bolstered and led by the incorporation of companies that are leaders in other sectors, which will allow us to achieve greater stability. In terms of OpEx by sentence, by segment, there you can see EUR 869 million in the total group compared with EUR 840 million last year. If we consider the contributions of new perimeter companies, then OpEx by segment would be more or less flat line or possibly negative in some instances. So we continue with the idea of adjusting in cost terms with a view to maintaining our quality and our competitive quality because that is something that will allow us to generate income, revenues and based on a pricing policy that ensures that we are clearly the group that offers better prices compared with the competitors in the rest of the sector. As regards to EBITDA, well, -- the EBITDA in 2024 was EUR 178 million, which has dropped to EUR 133 million. Most of that decrease corresponds to the group's audiovisual segment for the reasons I explained before. The performance has been much worse than we expected compared in the publicity market. Some sectors have virtually disappeared such as the mobile banking sector, publicity. And that is largely due -- and also there's also not mobile phone, it's the automobile sector. And there's also a lot of uncertainty regarding the impact of electric vehicles. And we're also observing that the automobile market -- publicity market is actually increasing this year. As regards Atresmedia cash flow, well, there you have the figures there. In 2024, plus EUR 140 million, operating cash flow, EUR 126 million. And again, we've had EUR 146 million for the payment of dividends, M&A, EUR 22 million. Therefore, we end with a net financial position of plus EUR 58 million, high -- a strong financial stability. Okay. Let's move on to our strategic overview. Well, we've tried to -- you have to highlight the cost discipline that we managed to maintain and also maintaining a leading position. We've also tried to incorporate in our perimeter companies that are in sectors that have great growth capacity in the future, such as Last Lap and [ Cera ] and the companies I mentioned earlier. In terms of Atresmedia strategic overview, -- we would like to highlight 7 pillars or levers on which we have based our strategic plan. Although the strategic plan has to change and adapt to the changing environment, we believe that these are the different areas that we really have to focus on. First of all, consolidating leadership in audiovisual radio. We must be leaders in audiovisuals and radio. That's fundamental. It's essential that we continue to produce good content. Digital is core. It continues to be in the new segment because that's the only way that we can really offer a product to the market, which is of interest to our listeners and to our viewers. So that is a challenge that we consider to be essential. And we will fight to maintain our leading position. We've been leaders now for 5 years. It may seem easy. But whenever the actual -- the market changes, we have to adapt as well. And it's essential that we -- our contents and products are accepted by our users, and these are things that are often outside our control. We continue with the idea of maximizing content exploitation cycle and becoming increasingly efficient in these areas. Our aim is to ensure that leadership in audiovisual production is something that we have to extend very, very clearly throughout the whole of our perimeter. Apart from being leaders, it's essential that we have new products. And these new products will allow us to ask higher prices from our users in the market. We ended the year with a gap with respect to Mediaset of approximately 27%. So clearly, we are perhaps in the high pricing slot the gap compared with 2008. And in the case of radio, well, you have to consider the different revenues that are generated per listener in the industry. We have the highest revenues per listener in the industry. We want to continue being leaders in audience share in commercial products, and we want to maintain our premium pricing because we want to try to ensure that we can offer content that offer greater quality for -- and also are much more profitable for our advertisers. Some time again -- well, some time ago, we developed our audiovisual platform, AtresPlayer. And this is an essential element in our roster of services. We've not just incorporated traditional audiovisuals, but also our AtresPlayer platform with the AVOD and SVOD options. The idea here is to ensure that we're able to optimize our inventories and to try to get the most out of the product. We want to continue with our pricing policy review and also explore new distribution agreements and also empower our international SVOD platform or payment platform. So the idea is to explore digital as an essential element as part of the pack, which also is accompanied by special prices because, as you know, some of the low prices are not that interesting for us. We want to occupy the premium audiovisual market with prices of approximately EUR 13 or EUR 14 per, which is almost 7x more than the EUR 2.5 of traditional television. That's just for comparison purposes. We've also demonstrated that our commitment to content and the ability to actually develop all of the spheres in which we operate is a strategy that clearly yields successful results and generating revenues from every single element, no matter how small it is within that package is essential. And I think that the operation has been exceptional in the last year. In the case of Netflix, well, there was a good operation there. And we've also achieved the leading Spanish-speaking series on Netflix last year. Another example, we can also see how in each of the different segments in which we operate, this is something that we're really exploiting. So I think that we're really exploiting all of our products and trying to get the most value-added and revenues from those products. That is a strategy that we've seen has worked very well, and we have to continue developing this. We have to continue to support and reinforce that because through that strategy, we've been able to maintain stable and significant revenue. In the area of content production, we have decided that if we want to become leaders, we need to be leaders in quality and also leaders in content production. Approximately EUR 400 million each year in content production. This means that we are leaders by a long shot. And we've increased our production in Spanish producers because apart from giving good financial results, it also allows us to establish a very close relationship with the content producers. And that is something that we want to maintain as part of our strategy. We continue to be leaders in fiction and cinema. And the aim is to continue the trend that we maintained in previous years. We would like to improve production processes by incorporating AI. Many production processes are done now almost exclusively with AI. So we're incorporating AI in our, let's say, way of working. And we've always said that we believe that AI-based processes can control quality. And this is fundamental, particularly in the case of news programs and current affairs programs. We want to be responsible producers. We want to ensure that everything is controlled. We don't want to have problems for young viewers caused to -- due to errors committed on the part of our teams. We don't want to just base our production process on AI. We need the human element as well. But we always have to incorporate this vision into our production processes. What else have we done? Well, I have to mention Last Lap, as I highlighted earlier. It's been one of the most active years in the history of Atresmedia in terms of corporate operations with EUR 17 million in Last Lap, and they achieved better results than last year. In terms of the synergies with Atresmedia events, this will give us a combined revenue potential of EUR 50 million. And we believe that since they have a presence in Portugal, this has enormous opportunities for organic and inorganic growth because it's a very dispersed sector. And we believe that we can consolidate our position there. As regards to Clear Channel, the price of the agreement is EUR 115 million to acquire 100% of Clear Channel Spain. It's a strategic operation in the outdoor advertising segment. We are in the process of achieve -- we're awaiting approval by the CNMC. It's expected in the first quarter of 2026, but this is something that we don't control. So we expect that by the end of the first semester of this year or if not the first quarter of this year, then we should receive approval from the CNMC. We have high hopes with this acquisition. We believe it's a digital component that will give us a greater variety and possibility to digitalize other areas, and this will generate more value. And apart from offering a higher quality offer, it's something that we have great hopes for. And as always, we are really focused on improving our efficiency. We've developed this voluntary redundancy plan. And also, we've also tried to work on a restructuring process and action plan for rapid implementation. And the aim of this plan, it's 136 people that will be affected by this voluntary redundancy plan. And it's part of this objective of becoming more efficient. And I think that the corporate climate in Atresmedia is enviable for many of our competitors. And we aim to improve all of our internal and commercial processes to become more efficient and more cost efficient as well. So in the area -- again, we want to incorporate AI in our commercial processes, but it's also important to highlight that year after year, our commercial area is one of the most innovative commercial areas and which is capable of offering more innovative products. This year has been key. And it's one of the reasons why we are key players in our premium segment. And we hope to generate better returns, and that will continue to be the case. And every year, well, that area has done their job very, very well, and it will continue to do so. So we expect that we will see in 2026 continuing in this process of corporate efficiency as a priority. Yes. And to summarize the year, I think it's important to highlight our efforts to maximize shareholder returns with a total shareholder return of 26% dividends paid of EUR 146 million with a dividend yield of 13%. It's an estimated operating cash flow ratio with respect to EBITDA of 0.9. And in M&A, we would like to explore markets which we believe can actually add something of value to our group. And these are part of the targets that we have set. and which will fundamentally support the audiovisual area. So it's been a complicated year from the market perspective, but we performed relatively well. And for shareholders, it's probably been the best year in the history of Atresmedia. What do we expect for 2026? Well, we expect a difficult year, a difficult year. It's clear that the geopolitical and economic uncertainty and shocks don't cease, they continue. So it seems as if we're always living on knife's edge. Because of what's happening in the States, the markets are going up and down. Nobody ever knows what's going to happen with Iran, for example. So the macroeconomic situation is rather complex, rather complicated. As regards Atresmedia, we expect following the poor performance of the audiovisual advertising market last year and largely due to the uncertainty. Part of this may have been resolved, but we're not sure if any other additional uncertainties will occur. We expect the audiovisual market to more or less be flat. The radio segment will increase slightly at approximately 2%, 3% growth is what we estimate. But in outdoor, we really believe that we will achieve midrange growth, much in line with this year, like 5% or 6%. Therefore, total revenue for Atresmedia will be more or less stable at constant perimeter. And we would have to add the revenues generated by -- Last Lap in the first half of the year because we integrated Last Lap last year and also Clear Channel. We expect an EBITDA margin of somewhere in the region of 15%. And we also expect to end the year provided we -- these forecasts are fulfilled with a net financial position of minus EUR 25 million because you have to take into account that we've included the payment of dividends, the payment for the acquisition of Clear Channel and also we're pending a cash-in in the region of EUR 45 million from the tax authorities following the decision of the Supreme Court, which certain rulings that were issued before against us. So we hope that, that is something that will be concluded in the first semester of the year. The Board at its meeting yesterday, and this was supported by the general shareholder meeting, a complementary dividend of EUR 47 million, EUR 0.21 per share, which is the same amount that was -- or the same ratio as in the interim dividend. And so -- we have the feeling that there's a great deal of uncertainty in the market. We have to maintain our clear strategy, a strategy that is reasonable, but is also yielding results. We consider that it's important to maintain market prices. And to do so, we have to be creative and innovative, offering new products in the audiovisual digital sector. And we are optimistic because we believe that the contribution of the companies that we've onboarded in our perimeter will be very significant for our group. So that is how we see the year 2026. Thank you. David Baquero: Thank you. We now have a Q&A session, and we would like -- we would be delighted to answer any questions that you may have. Operator: [Operator Instructions] And the first question is from [indiscernible] from Bestinver Securities. Unknown Analyst: I have 3 questions regarding audiovisuals and one about Clear Channel. As regards audiovisual, the first question is last year, we saw a significant deterioration in the relative performance of TV compared with other platforms or media. I would like to know beyond the trends that you've highlighted in the sector, I would like to know what you consider the reason for this deceleration in the relative performance of TV is. Do you believe it's due to, on the one hand, the increase in audience of TVE, which has been promoted by strong public spending. And I know that you don't compete there in publicity, but you do an audience share? Or do you believe it's due to the eruption or the sudden appearance of many of these strong streaming platforms? What are the reasons do you consider for this different performance compared with other media? And secondly, a clarification because it's possible that I didn't read the slides properly. But in the presentation, you referred to publicity performance that's flatlined in audiovisuals, but the results that you presented indicate that you expect that audiovisual investment will improve with respect to last year. So I just would like to understand if you're referring exclusively to television or if it includes TV and digital. It's just to obtain a better clarification about what that concept includes and a better explanation about that flatline growth and the type of performance that you're beginning to see this year in the different segments. And the final question regarding Clear Channel. The question is if the delays in the decision of the CNMC is causing any impediments in this process. And with the integration of this company, what would be your management priorities in the short term? Pricing? Or what do you consider to be the main objectives there? And I apologize for the long questions as a gentleman. Unknown Executive: Thank you. I'll begin with the final question, Clear Channel. Well, Clear Channel surprised us a lot because we thought that it was going to be an operation that wouldn't have arouse too much doubt in the minds of the CNMC. In fact, it's also a interest in the market. We didn't expect this lead to such an in-depth analysis and these delays as is occurring. We haven't received any latest information from the CNMC regarding the process. So we've got no idea what the result will be. And whether it's an operation that they will approve without any further queries or whether we'll have to do anything more. And why is it good for the company? Well, the company has got a problem. I'm not sure if you know. All Clear Channel operations in Europe, I think it's only Spain remains. And there's also been a purchase by the parent company in the United States. We apologize, but the quality of the audio is extremely poor from the main room. And I think that they're also considering the impact this will have on their shareholders. So the situation is not good for Clear Channel either. I believe that Clear Channel as well as the majority of outdoor platforms or media have a certain process of digitalization to undergo. We have to consider the role of digital media, and we consider the contribution will be significant because at the end of the day, that's also a way of generating audiovisual products that many people can see on digital platforms. So we believe that the future is very positive. And what do we consider to be the reasons for the decrease or the decline in the audiovisual market? Well, in part, it's due to the situation of uncertainty in many sectors. So they are holding back on their investments. And for example, one example is the automobile sector. And this is important in terms of volume and price. Our revenues comprise 2 main pillars, the subscribers who acquire premium products at premium prices. And at the end of the day, we've observed that -- there's been little change in some segments, but there's been an overweighting of household spending compared with added value. And this has led to a decrease in the value of the market. Again, we apologize, but the audio from the main room is extremely poor, and it's very difficult to translate. As I said, such as the automobile sector, this year, we hope that there will be a significant improvement. But that's one of the reasons why the market fell last year. Competition has hurt us because it was the first full year of streaming platforms. And and also the cultural sponsorship -- the sponsorship of cultural programs by TVE, which is the Spanish national broadcasting company has also hurt us. It's important to maintain strict cost control. We're able to produce quality products being efficient and highly dynamic and efficient in costs. As regards to the other question that you had regarding whether the market had flatlined, we were performing more or less the same as we did before. We expect our performance to be very similar to last year, as I explained in the strategic overview. So when we talk about an improvement of the market, we expect it to improve with respect to last year. In the first 2 months of the year, in January and February this year, the performance has been negative, but better than we expected because as I said, we've managed to recover in certain areas. And we'll have to see exactly how the year evolves. But at the moment, we are actually better than we initially expected. And we'll have to see how the year evolves. And I think that I've answered all the questions there. Operator: The next question comes from Fernando Cordero, Banco Santander. Fernando Cordero: The first question concerns the comment that you made. about the importance of audience share leadership and also with respect to your main competitor in 2025, that audience leadership, when we also look at the evolution of the public television channel, it's the question about the difference in market share. I would like to know what the difference is due to and whether you believe that it's something that the market will end up reflecting. Do you believe that that's a relative performance on your part? And secondly, as regards your diversification policy, with Last Lap and Clear Channels in corporations, where do you think that you would have to grow in the medium and long term? Unknown Executive: As regards to audience share leadership, it's important to remember that our main focus is on leading audience with respect to Mediaset, which is our commercial competitor, although we would like to be the global leaders, which we are, but we would always like to try to be the audience share leaders with respect to our main competitor, not the public channel. If you were to -- although there's been a decrease in market share, if you look at the evolution of market share or audience share, there's been a certain degree of flexibility evident. -- the market share that we obtained between both of us is very high. In the first 2 months of this year, based on the data we have, we are actually improving our share. We have seen that there is a certain degree of structural stability in audience shares in the market between Mediaset and ourselves. In terms of diversification, well, everything related to publicity, the advertising market and all of the variables you have to consider, whether it's marketing, new media or platforms or highly digitalized platforms or media. You have to remember that we are actually working very strongly on the digital segment of the market, which is one of our main lines of action. And in the area of content, we believe that it makes sense to commit to that area significantly. But these will continue to be minority participations in, let's say, a producers. Perhaps economically speaking, they may not be performing as well compared with the in-house production, let's say. So we're analyzing different opportunities. executive opportunities, and we're also looking at opportunities for new markets where the prices are attractive. and where the markets are mature. And we're focusing on that at the moment. But at present, we don't have any operations in the pipeline, any other operations in the pipeline. We will have to see how Last Lap evolves and also Clear Channel once that agreement has been confirmed because these have been the 2 most important acquisitions that we have made since the creation of the company. And then we have to consider the net financial position of EUR 25 million -- minus EUR 25 million. We have to consider our participation in cyber and what could happen with cyber between now and the future because the value there is important. Fernando Cordero: Just one follow-up question regarding the first reflection regarding audience leadership. And I'm very grateful for your comments that you've seen that the market is -- has a structural distribution. Given that scenario, how would you reflect on reflecting that market situation where cost evolution is less flexible and extrapolate that to your investment in content for Open TV? Unknown Executive: I would say that the audiovisual market which is related to more traditional TV is where things are more stable, where there's an important difference in share is in digital with respect to our main competitor. I have to say that the digital market is still developing, still evolving. So we've got still quite a lot to discover. In terms of our aim to maintain leadership at other times in the life of the company, we've always focused on trying to maintain that leadership. And this also allows us to maintain a premium pricing, which is very important for the company. It's true that there's not much flexibility in the audience share, but there has been some variation. And we've noticed that we have increased our market share, our audience share with respect to our nearest competitor. But given the wide range of products and offer, it's not easy to achieve changes in audience share. We don't expect major improvements in revenues. I'm referring to old style TV. But in terms of our capacity, let's say, our vision for the universe by that, I refer to all of the different segments, whether it's AVOD, SVOD, content production, et cetera, that is where we can achieve better revenues. In short, it's true that traditional audiovisuals is in the period of maturity. And we believe that content production in the digital universes where we can achieve better results and better revenues. The work we've done there has been very good, but we still think there's still a lot to be done. And Fernando, let me just add one more thing. It's true that the audience shares or the audience share figures have been very similar with respect to last year. And -- but I think that a difference of 2% in audience share compared to the nearest competitor is quite a lot. It's approximately EUR 30 million or EUR 15 million, the gentleman corrects himself. So that has a big impact on results. that percentage difference in audience share is not so important, but rather the value of the content that allow us to be leaders in all of our different windows or slots. I don't think we could separate from our traditional TV lines. We couldn't separate that differential product compared with television, which may be 10x better if we didn't have those types of contents with those -- with the audience. Operator: [Operator Instructions] And the next question comes from Inigo Egusquiza from Kepler. Íñigo Egusquiza: I have 3 questions, very quick questions. Firstly, Silvio, a follow-up on something that you mentioned regarding publicity in January and February on television this year. If you could quantify a little more from things that I've discussed with other people in the sector. I understand that January and February, there hadn't been as significant decreases in October and November, but there had been increases in publicity indeed. I'd like to have -- ask if you could give me a little bit more detail about those figures. And secondly, the OpEx figure for 2025, you mentioned various times that if we were to exclude the new companies that have been integrated in the perimeter, it would have [ outlined ]. Could you explain that OpEx figure a little more? Because from the figures that I have in mind, -- Last Lap had a higher OpEx, but I think that you've only consolidated H2H. So I'm a little surprised that, that increase in OpEx in 2025. Could you clarify those figures a little more? And the third question is more about the guidance that you've given for 2026. You referred to the EBITDA margin and returning to 15%. In 2025, I think it was in the region of 13%. Could you explain a little given your revenue plan, I understand that this has been due to improvements in your OpEx figures. Could you explain the impacts and also explain the savings in the voluntary redundancy plan, which I understand is going to be rolled out gradually, but perhaps you could specify and give us more details about those figures. Unknown Executive: As regards to your comments about flatline OpEx, it's important to remember that Last Lap -- the acquisition of Last Lap took place at the end of last year. And that means that if you were to exclude the OpEx of Last Lap and a company that we incorporated called the equality or something, this would mean that the OpEx growth like-to-like would be approximately 7%. That's the explanation regarding OpEx. Secondly, as regards to the period of January to February, the publicity or the advertising market is seeing a decrease of approximately 5%. In our annual plan, we expected that to be greater. So we're more or less in line with what was actually forecast. But that was the performance in January and February. And the final question, the third question was, well, our challenge there is to be more efficient. We would like to reduce costs in relation to each of our products. That's a challenge. And obviously, when you start to embark on new areas of business, it's difficult to obtain higher margins. In the case of Clear Channel, the margin was 18%, and it could probably increase. So we're now thinking about the effect that this could have for Atresmedia. That's the idea there. Operator: There are no more questions at this moment in time. So I would like to hand the floor to the speakers. David Baquero: I would like to thank everyone for your questions. If you have any doubts or questions following this presentation, we will be delighted to answer. Thank you very much for your attention, for your participation, and we wish you all a very good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to Donaldson Company's Second Quarter Fiscal Year 2026 Earnings Webcast and Conference Call. [Operator Instructions] I would now like to turn the conference over to Sarika Dhadwal, Head of Investor Relations. Please go ahead. Sarika Dhadwal: Good morning. Thank you for joining Donaldson's Second Quarter Fiscal 2026 Earnings Conference Call. With me today are Tod Carpenter, Chairman, President and CEO; Rich Lewis, Incoming President and CEO; and Brad Pogalz, Chief Financial Officer. This morning, we will provide a summary of our second quarter performance and our outlook for fiscal 2026. During today's call, we will discuss non-GAAP or adjusted results. For second quarter 2026, non-GAAP results exclude pretax charges of $6.7 million, including $2.9 million of restructuring and other, and $3.8 million of business development charges. This compares to prior year pretax charges of $6.6 million, including $2.2 million of restructuring and other, and $4.4 million of business development charges. A reconciliation of GAAP to non-GAAP metrics is provided within the schedules attached to this morning's press release. Additionally, please keep in mind that any forward-looking statements made during this call are subject to risks and uncertainties, which are described in our press release and SEC filings. With that, I will now turn the call over to Tod. Tod Carpenter: Thanks, Sarika. Good morning, everyone. Donaldson Company achieved record sales in the second quarter as we worked hard to meet strong customer demand across all 3 of our segments. Our underlying business is robust as evidenced by our high backlogs and continued strong order intake. While we faced short-term execution challenges in our Industrial segment, we saw strength in areas such as independent aftermarket within Mobile Solutions and Food and Beverage and Disk Drive within Life Sciences. We also announced the acquisition of Facet, the largest acquisition in company history, which I will discuss in a few minutes. Entering the second half of the year, I have confidence in the strength of our organization and our commitment to deliver on our updated fiscal 2026 outlook, which represents record sales of approximately $3.8 billion with operating margin and adjusted earnings per share at all-time highs. Throughout our history, our talented global teams have demonstrated a commitment to deliver for all of our stakeholders, including our customers, shareholders and employees. We continually do this through our leadership position in filtration, which was built on decades of solving our customers' most difficult filtration problems; our best-in-class technology, uniquely powerful because we focus on filtration capabilities and then leverage these technologies across markets; our ability to help customers meet evolving environmental and operational goals by helping to protect equipment, processes and people; and our clear strategic and balanced growth strategy. This is how we have and will continue to win. In late January, we announced our next President and CEO, Rich Lewis, effective next week on March 2. This transition reflects a long-term succession planning process that comes at a time when we are well positioned for the future, thanks to the talent, dedication and discipline of our global team. Rich has been with Donaldson since 2002 and has been our Chief Operating Officer since August. On behalf of the entire organization, I want to congratulate him, and I look forward to his future success. Before I turn it over to Rich to discuss our second quarter results in more detail, I want to touch on our recent acquisition of Facet, which we are very excited about. This acquisition complements and expands Donaldson's product portfolio, bringing high-performance fuel and fluid filtration capabilities for mission-critical applications and broadening our exposure to durable end markets such as Aerospace and Defense and Power Generation. Importantly, approximately 70% of Facet's revenue are driven by recurring regulated replacement part sales, a nice fit with our already large composition of replacement parts. Facet makes us stronger, adding nearly $110 million in sales with gross margins and EBITDA margins significantly above our current company average. The company has low capital intensity and strong cash flows. We look forward to welcoming the Facet team to Donaldson and reporting on our combined performance. Now I will turn it over to Rich, who will talk more about the second quarter highlights, and then Brad will take us through the financials in more detail. Rich? Richard Lewis: Thanks, Tod. Good morning, everyone. First, I'd like to thank Tod for his leadership and congratulate him on his successful Donaldson career, including his impact as CEO over the past 11 years. I am honored to step into the CEO role and look forward to working alongside our broader leadership team to build on our momentum and deliver for our stakeholders. I also look forward to my continued partnership with Tod as he transitions to the Executive Chairman position. Now I'll cover our second quarter results. At a high level, sales were a record $896 million, 3% above prior year with growth across all 3 segments. Currency translation and pricing benefits were partially offset by volume declines in both Mobile and Industrial Solutions. Operating margin was 14%, down from 15.2% a year ago as a result of gross margin pressure. Volume deleveraging, concentrated operational inefficiencies related to our production shifts to support higher demand in Power Generation and footprint optimization costs negatively impacted gross margin in the quarter. Adjusted earnings per share were $0.83, flat versus the record achieved in 2025. Now looking at our segments. Mobile Solutions sales were $557 million, up 2% driven by currency benefits. Aftermarket sales were $447 million, up 1% with high single-digit growth in our independent channel, offset by OE channel declines. Overall, we are benefiting from share gains and increases in global vehicle utilization. On the first-fit side, off-road sales of $86 million increased 8% as we cycle against weak market conditions from prior year, particularly in agriculture. On-Road sales of $23 million decreased 9% as a result of continued declines in global truck production. Touching on our Mobile business in China. Sales were up 18% due to strength in off-road and aftermarket. This marks our sixth consecutive quarter of growth in China, and we are optimistic about the future opportunities in this important market. In Industrial Solutions, sales were $260 million, a 2% increase compared with 2025, driven by currency benefits. IFS sales of $223 million grew 7% from continued strength in Power Generation, particularly in North America and Europe, and demand for new equipment remains significant. Rounding out our Industrial Solutions performance, Aerospace and Defense sales were $37 million, down 19% versus prior year due to project timing, primarily in defense. In Life Sciences, sales of $80 million increased 16% year-over-year, largely as a result of robust growth in Food and Beverage and Disk Drive. In Food and Beverage, our largest business within Life Sciences, new equipment sales grew substantially in all regions, laying the foundation for future replacement parts sales growth. We continue to win, including in areas such as liquid cooling for data centers, and we are winning with key OEMs and channel partners through our strong sales processes and technology-led products. Given our second quarter results and our expectations for the second half of the year, we are updating our margin and earnings outlook for fiscal 2026. At the midpoint of our revised guidance ranges, we continue to expect a record year for Donaldson, now inclusive of record sales of $3.8 billion and sales growth in each of our segments, consistent with our previous expectations. Operating margin expansion of 50 basis points to an all-time high of 16.2%, including second half operating margin consistent with our prior guidance. Earnings per share of $3.97, roughly 8% above prior year, and free cash flow conversion of approximately 90%, which provides us capital allocation optionality to return value to our shareholders. In summary, I am proud of the agility and resilience displayed by the Donaldson team as we navigate some short-term operational headwinds to set ourselves up for stronger performance over the long term. With that, I will now turn it over to Brad, who will provide more details on the financials and our outlook for fiscal 2026. Brad? Brad Pogalz: Thanks, Rich. Good morning, everyone. I want to start by thanking the Donaldson team. They demonstrated tremendous agility as we work to deliver for our customers while making progress on several big projects, including the work done on the Facet acquisition. Facet will be an important addition to our company. We expect to close in the next couple of quarters. And as Tod mentioned, Facet will make us stronger, strategically and financially. Beyond Facet, we're focused on delivering the strong second half performance reflected in our guidance. But first, a summary of our results. Note that my profit comments exclude the impact from the nonrecurring charges Sarika referenced earlier. Total sales increased 3% and adjusted EPS of $0.83 was flat year-over-year. Operating margin declined 120 basis points to 14% due primarily to the impact from discrete operational issues on gross margin. Second quarter gross margin was 33.7%, down 150 basis points from the prior year and below our expectations. About 60 basis points of the total gross margin decline was due to deleveraging from lower volume in the Mobile and Industrial segments. We anticipated some year-over-year gross margin pressure in the quarter as there were certain businesses, particularly OE aftermarket and defense with difficult comparisons from last year. But the timing of orders and delivery had a greater impact than planned. For the second half of fiscal '26, we expect the volume pressures abate based on our strong backlogs and the leverage that comes with our typical second half sales step-up. Second quarter gross margin was also impacted by inefficiencies driven by changes we are making to our manufacturing footprint. One item that spiked this quarter relates to Power Generation and specifically, the production of our large turbine systems. To meet the super cycle demand and deliver on customer-specific requirements of producing in North America, last year, we began producing these large systems for the first time at one of our facilities in Mexico. The combination of a protracted startup process in Mexico and surging demand resulted in a gross margin headwind of about 40 basis points in the quarter. We have plans in place to accelerate our improvement and expect to make progress in the second half of this fiscal year. Another area where we expect improvement in the second half relates to our ongoing footprint optimization initiatives. This fiscal year is an important milestone for this work with the most significant projects expected to be completed by fiscal year-end. In the quarter, we had about 30 basis points of gross margin pressure as we go through the final stages of a plant closure in the U.S. and associated transfer of production. Once through this heavy lift period, we will begin to realize cost benefits later in this fiscal year and into the future. While gross margin in the second quarter was not to our expectation, the drivers of the performance reflects short-term headwinds from the work we are doing to establish long-term efficiencies in several of our most important businesses. Our forecast contemplates sequential improvement in gross margin and full year expansion. I'm confident we will deliver on that target. At the same time, our team continues to do an excellent job managing our operating expenses. As a rate of sales, operating expenses improved to 19.7% from 20% a year ago, reflecting benefits from the structural cost optimization initiatives launched during the prior fiscal year as well as continued expense discipline. We are prioritizing opportunities while conserving where we can, providing necessary offsets to the footprint work we are doing. In terms of segment profitability, Mobile Solutions pretax profit margin was 16.8%, down 60 basis points from prior year, primarily due to volume deleveraging in the aftermarket OE channel and footprint optimization efforts. Industrial Solutions pretax margin was 11.9%, down from 16.1% in 2025, stemming from the previously mentioned operational inefficiencies and footprint optimization costs. With improving plant efficiency and benefits from leverage on higher sales, we expect Industrial pretax operating margin to step up notably in the second half. Life Sciences pretax margin improved to 9.3% from a loss of about 1% a year ago. Strong sales in our higher-margin Food and Beverage and Disk Drive businesses and benefits from a more focused expense structure following optimization programs a year ago drove the improvement. Turning to our fiscal '26 outlook. First on sales, we are reaffirming our consolidated sales guidance of 1% to 5% growth, with stronger-than-expected sales in Mobile Solutions and Life Sciences being offset by lower Industrial Solutions sales. Our forecast assumes pricing and currency translation will each contribute about 1% to growth. Within Mobile Solutions, we're increasing our growth forecast to a range between 2% and 6% compared with flat to up 4% previously, primarily due to favorable currency. We are raising our guidance for aftermarket and now expect sales up mid-single digits versus our previous low single-digit forecast, primarily due to strength in our independent channel from currency, pricing and volume. Consistent with our prior guidance, off-road sales remain on track to grow mid-single digits, mainly due to a modest rebound following significant declines in agriculture a year ago. On-road sales are expected to be flat for the year, also in line with our prior guidance due to muted global truck production. In Industrial Solutions, sales are forecast between a decline of 1% and an increase of 3% versus the previous expectation for growth between 2% and 6%. Sales of IFS are now expected to grow in the low single digits, down from mid-single digits previously, due largely to declines in sales of dust collection and industrial hydraulics systems. Aerospace and Defense sales are projected to decline mid-single digits versus flat previously due to the timing of certain programs. In Life Sciences, we are increasing our sales forecast as benefits from favorable currency translation are expected to complement already strong Food and Beverage and Disk Drive momentum. To that end, we project sales to increase between 5% and 9% versus a 1% to 5% increase previously. We expect benefits from sales leverage and continued cost discipline to generate full year pretax margin in the mid- to high single digits, up from mid-single digits previously. Given our second quarter performance and our outlook for the balance of the year, we revised our operating margin guidance to a range between 16% and 16.4%, a decline of 30 basis points at the midpoint from our prior forecast. Despite the temporary gross margin headwinds in second quarter, the full year operating margin forecast still reflects a record level and at the midpoint, an incremental margin approaching 35%. With that change, we now expect fiscal 2026 EPS between $3.93 and $4.01 per share. At the midpoint of $3.97, we are projecting EPS growth of 8% on 3% sales growth. Our earnings guidance contemplates a second half step-up in sales, supported by our strong backlogs as well as gross margin expansion resulting from the operating improvements I discussed earlier. Now on to our balance sheet and cash flow outlook. Our capital expenditures are expected to be between $60 million and $75 million with focused investments, including new products and technologies across all verticals. We continue to project cash conversion in the range of 85% to 95%, an improvement versus 2025 and consistent with historical averages. The balance sheet remains a strength of Donaldson's with our net leverage ratio currently at 0.7x. Adjusting for the Facet acquisition, Donaldson would have a net leverage ratio of approximately 1.7x, still leaving us ample financial flexibility to thoughtfully invest for our future growth. As we think about shareholder value creation for the long term, our capital allocation priorities are unchanged. First, reinvest back into the company. We are the leader in technology-led filtration and intend on maintaining our position. R&D investments in strategically important high-growth, high-margin areas where we have a clear path to win will drive our success. Our longer-term efforts are also supported by ongoing working capital investments and capital expenditures. Our second capital deployment priority is disciplined M&A. We actively work through a pipeline of opportunities. Discipline is key to our approach. We are excited about our Facet acquisition and look forward to pursuing additional opportunities that meet our strategic and financial criteria. We are creating long-term value through our growth investments, but also through the return of cash to our shareholders. Our third capital allocation priority is dividends. Calendar year 2025 was our 70th year in a row of paying dividends and the 30th in a row of increasing our dividend. We have every intention of maintaining our status as a proud member of the S&P High-Yield Dividend Aristocrat Index. Share repurchase is our fourth capital deployment priority and it has always been the variable component. Given the pending close on our acquisition of Facet, we do not expect to repurchase additional shares in the balance of this fiscal year. Year-to-date, we have repurchased 1.2%, which offsets dilution. And our focus now is using the strength of our business to rapidly pay down debt. Looking beyond the quarter, the underlying fundamentals of our business are strong, and we have the right priorities to deliver another year of profitable growth and value creation. Now I'll turn the call back to Tod. Tod Carpenter: Thanks, Brad. As I sit and reflect today, I am particularly pleased with Donaldson Company's continued evolution as a premier global provider of technology-led filtration solutions, and I'm excited for the opportunities that lie ahead. It has been a privilege to be part of this organization for the last 30 years and an honor to have led the company for the last 11. I'll not be far away as I take on the role of Executive Chairman. I am highly confident in our teams around the globe who make Donaldson what it is and who I know will reach new heights under Rich's leadership. With that, I'll now turn the call back to the operator to open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Angel Castillo with Morgan Stanley. Oliver Z Jiang: This is Oliver on for Angel today. Can I just double click on A&D. I know you guys guided down here for '26. Is that because of projects shifting into 2027 or something to do with underlying demand? And then how should we think about your guide versus what you're seeing for Facet? Is that just a product of different portfolios and aftermarket? Richard Lewis: Oliver, this is Rich. Yes, let's -- I'll take your first question. So when you think about A&D, we're coming off record sales levels the last couple of years. And clearly, we've had suppressed revenue in the first half of the year. It's really a combination of two things. So we've got some timing issues on some of our military projects. These can be lumpy. We also have supply chain challenges as well that are ongoing. I would say this, overall, we're very comfortable with the order intake. If you think about the backlog of this business sort of post October, it's up over 20%. So orders are coming in nicely. We feel really good that the second half run rate is going to be significantly improved. The name of the game is really going to be working with our suppliers and making sure we can ship all the orders. Some of these suppliers are single-sourced directed buys. We are trying to qualify new suppliers. These projects can take quite some time. But overall, it's really about muscling through this order book. So we'll see a significant step-up in the second half. And then as far as Facet goes, we do play in different parts of the market. And they're exposed to different types of -- they're more military fixed wing. They're are also a lot of marine. We tend to be more ground vehicle. And so we play in different parts of the market, but we'll start to see improved performance in the second half on the revenue. Oliver Z Jiang: Great. That's really helpful. And then just maybe one follow-up on Industrial. I know some footprint changes this quarter. Do you kind of expect that to continue or abate somewhat into fiscal 3Q and 4Q? And then can you talk just a little bit about what that buys you in terms of Power Gen? Does that potentially expand throughput or potentially even a bigger portfolio there? So any color there would be helpful. Richard Lewis: Sure. Yes, let's take the footprint optimization work. I know we've been talking about this for a while. These projects are pretty complex. They typically last 12 to 24 months. We have had an accelerated amount of activity in this space over the last couple of years. Just to put it into perspective, we have 4 plant closures that we've been working on, none of which touch Power Gen. It's other parts of the industrial business. Two of these are in their final phase, which basically means the plants are closed. The assets have been transferred to the new location, and they're working through the learning curve and the productivity increase. We would expect that work to come to a conclusion through the balance of the fiscal year. We also have two other ones. We will close those plants in quarter 3. And they'll be working through the learning curve and the productivity increase in Q4. Maybe a way to think about it is you'll start to see the benefit, the margin improvement benefit in our guide in F'27. We also do these projects for a couple of reasons. We're trying to reduce our asset base, and we're also trying to reduce or improve our risk profile. So we believe these projects ultimately will be very successful, but we do have a few more months here of work ahead of us. Operator: Your next question comes from the line of Bryan Blair with Oppenheimer. Bryan Blair: Tod, congratulations on a very successful career, including over a decade as CEO. And Rich, congrats on the [indiscernible]. Tod Carpenter: Thanks, Bryan. Richard Lewis: Thanks, Bryan. Bryan Blair: Of course. I was hoping that you guys could offer a little more color on how IFS orders trended through fiscal Q2 and what your team is seeing thus far in Q3. Year-on-year growth was stronger sequentially, aligning with the prior guidance framework of mid-single-digit growth. Power Gen, some inefficiencies in the second quarter, but certainly a good guy in terms of growth path. Brad, I know you called out dust collection and hydraulic systems as the areas of relative weakness. I guess, if you can offer some finer points on whether there is accelerated weakness through fiscal Q2 into Q3 in those areas or you're simply taking a more cautious or conservative stance on continued macro uncertainty. Richard Lewis: Yes. So maybe I'll take the business side, the macro and then if Brad wants to add anything on the numbers, he can weight in as well. So if we sort of disaggregate IFS, you mentioned it, Power Gen is clearly very, very strong right now. Just at a big picture, we're booked through the end of the fiscal and we've loaded fairly solid bookings already into the next 2 fiscal years. So we're feeling really good about the demand on Power Gen. And it's pretty broad-based. We're seeing it across sort of the compressed gas side on the oil and gas piece and on peak and base load energy generation. A lot of that's tied to the data center push that's going on. On the IFS side, yes, we're seeing -- it's a bit mixed. Globally, we see relatively decent order patterns outside of the Americas. The Americas have been pretty soft. And we're still seeing a fair bit of quoting activity in the Americas. I think the uncertainty in the economy is driving people to be cautious on pulling the trigger on POs. On the -- I would say, across the board, if you look at replacement parts, those continue to perform very well. We see good utilization rates and good order intake on the replacement side. Brad Pogalz: Bryan, this is Brad then. I'll just add. I think as you look at the first couple of quarters, dust collection is about where it was in the second quarter in terms of the overall year-over-year conditions. So not much to comment there, but I do want to underscore a point Rich made. This is really about our new systems and the first-fit side of the business. The machines are still running. Aftermarket is still doing well in IFS, and we've got good opportunities there with our placement. It's just about getting these capital expenditure decisions of our customers to break free a little bit. Bryan Blair: Understood. That's helpful color. Facet is an intriguing deal for your team, certainly mix enhancing. Can you speak to the historical growth rates of the asset, whether we should expect accelerated growth under Donaldson ownership? If so, what the drivers are there? And then how we should think about P&L impact looking to fiscal '27? I know you had said close within the next couple of quarters, so sometime in the fiscal back half. But if we look to next year, how should we think about impact? Richard Lewis: Yes. Maybe just -- I'll just take a step back if it's okay and just talk a little bit about Facet from a broader perspective. I mean we're really excited about Facet potentially join the Donaldson family. Obviously, we'll continue to work through the regulatory process to close this deal in the next couple of quarters. But this is a business that we've been following and frankly, admiring for a long time. It's a perfect fit for what we're trying to do on an M&A side. So it's high-level recurring filtration revenue. They've got a durable competitive advantage given the sort of the regulatory nature of their end market, and it sits in a high-margin, high-growth business. We'll talk about the growth rates here in a second. And as we've gotten to know the team there, we think it's also a very good fit culturally, really good folks, very committed to their customers a deep, deep knowledge. Now the growth rates, so as we put in the deck that we posted out on our website, yes, they're high single digits, and it's a mix of volume and pricing. And we would expect that to continue. They have a lot of potential growth opportunities outside of their core military and commercial markets on the aerospace side. And those are a lot of markets that we play well in on our industrial. So we hope over time that we'll find significant growth synergies. We have not baked that into our expectations. That's all upside. But yes, it's going to be a good fit for us, and we're really excited about it. Brad Pogalz: Bryan, on the P&L side then, Obviously, we expect to close in a couple of quarters. So nothing factored into the fiscal '26 guidance, but you mentioned fiscal '27. As we think ahead, I think the important point that we said in the prepared remarks is that it's mix positive on our most important operating metrics, gross margin and EBITDA. Obviously, this is a business then that we will work to integrate properly. We don't expect much in the way of cost synergies, a few million dollars, but more from procurement because it sits in a unique spot relative to where we sit in these markets. So I think, overall, we'll give more detail with fiscal '27 guidance, but we're excited about this from the strategic side that Rich mentioned and the financial implications to Donaldson. Operator: Your next question comes from the line of Tim Thein with Raymond James. Timothy Thein: Congrats again to both Rich and Tod. And Tod, I'm hopeful that you're able to observe its turnaround and go for basketball and retirement. Tod Carpenter: Thanks, Tim. Timothy Thein: Yes, only one way to go. The question is on the mobile business. And just in terms of the -- based on the full year guide, it implies that the growth in that line picks up a little bit in the second half. Maybe you can just talk about -- you mentioned the strength -- continued strength in the independent channel. Just maybe what your you're seeing and hearing from the OEM dealers. And then looking out a bit, how do you expect that eventually as the first-fit business hopefully rebounds? How would you expect kind of the interplay between those 2? Maybe just what you've observed historically when you start to see the first-fit side begin to pick up? That's the first question. Richard Lewis: Thanks, Tim. Maybe let me break this down. Let's talk about the replacement parts side for a second. So as you pointed out, the releasement part orders through our independent channel have been very strong. We still continue to see that performance continuing. No slowdown there at all. When we think about the OE side, this year, we returned to, what I would call, a sort of typical normal year-end, their fiscal year-end inventory management practices. So we did see a pretty good pull back relative to the prior year where we actually saw people stocking up, which was pretty atypical. So year-over-year, it was a pretty drastic change. What we always look for is when you come out of those holidays, what happens with your backlogs? And we saw a sharp increase. Unlike our independent aftermarket, which is really you get orders, you ship them within 24 hours, our OE partners do give us really good visibility on lead times. And we've seen a sharp increase in our hard backlogs on the OE. So we're really confident the second half will be a significant improvement there. Maybe touching on the first-fit markets. If you think about ag and truck, they still continue to be performing near, what we would call, bottom of the cycle. We're monitoring this closely because when these markets come back, and hopefully, this answer your question, they come back aggressively. I think 20% to 30%. And we want to be really ready to make sure we address our customers' needs. So we're staying very tight with our customers on that. I will say we're seeing signs of pockets or optimism and ag with some increased order intake on the first-fit side with select OEs, but it's not broad-based at this point. Also, in the truck market, we're having signals from some of our truck manufacturers that in the second half of calendar year '26, so which will be our fiscal year '27, they're planning for increased truck builds. I would say we remain cautious on this and being ready for the upturn because when it does happen, it happens aggressively. But that's how we characterize the markets as we sit here today. Timothy Thein: Yes. That's great. That's super helpful. And then maybe, I don't know, Brad, just how to think about the -- it's kind of a multipronged answer. But just as that growth, again, if you kind of outlined, if and when that begins to come in, how to think about just the mix impact on margins in that segment? Again, I'm sure there's multiple variables that go into that. But any help you can give on that in terms of how we should be thinking about the incrementals as that mix eventually kind of normalizes? Brad Pogalz: Sure. Well, you hit the main point. It is multivariable, but there's a mix impact as we sell more to the OEs and especially on the new equipment as that comes back. But honestly, that's something to Rich's point, that we're getting ready for. And while we may have a little bit of a rate mix impact that we talk about in future quarters, the earnings will flow to the bottom line from that. And I think we'll get very nice leverage on it as it moves through the P&L. And then the other side, and I just want to -- it's a modest tangent to your question, but to the point Rich made and about these markets, I think we will also see some bounce back in the Mobile Solutions segment in the quarter. There was a part of my script where I talked about the volume deleveraging. This will bounce back. So when we think specifically about the second half of the year, we would expect Mobile Solutions profit acceleration from here as the volume starts to come in as well. Operator: Your next question comes from the line of Adam Farley with Stifel. Adam Farley: Can we go back to the operating efficiencies and power generation? I just wanted to put a finer point on what exactly happened there? What was the underlying cause? And then just expectations on how that kind of ramps going forward? Brad Pogalz: Yes. So I gave you the macro perspective on Power Gen. So clearly, the demand is very strong. We're in the middle of sort of rebalancing our product portfolio across both sites so we can maximize output. So we've moved production into our facility in Monterrey, Mexico. We've ramped that facility's capacity up significantly through a combination of process improvements to increase flow and a dramatic increase in staffing. And so we're working through the learning curve and onboarding these employees. A lot of the hiring is behind us, and now it's really about training and onboarding these employees in the third quarter here. We do expect output from this site to continue to improve with this increased capacity and their productivity will continue to get better throughout the fiscal year. Adam Farley: Okay. And then maybe one more on the pending acquisition of Facet. Could you maybe talk about the total addressable market for Facet, Facet's market position and maybe primary competitors in the space? Richard Lewis: Yes. So from a competitor standpoint, they're one of the leaders. There's a couple historic players that lead in this space, and then it fragments from there. They play in a lot of different markets. And so they're in the commercial, the marine and military space. We believe there's a lot of headroom for continued growth. And some of the interesting opportunities are actually in what I would consider maybe our core industrial markets, which would be relatively new to them. And so yes, there's a lot of space for us to grow this business over the coming years. Operator: Your next question comes from the line of Brian Drab with William Blair. Brian Drab: Congratulations, Tod and Rich. I'll follow up more with both of you later and save the sentimental stuff for the nonpublic call. Some of the strongest growth lately has been coming from the Life Sciences segment, of course. And I was wondering if you could just talk a little bit about that Disk Drive business. I know you've talked about the HAMR technology in the past that's driving incremental demand for your products. What is the -- even though the growth is so strong lately, I'm wondering, could that accelerate. Could that business be much bigger? And how tied are you to the data center build-out? And can you just talk a little bit about that business, who your customers are and what the TAM is for you in that space? Richard Lewis: Yes. Brian, as you point out, the Life Science business has been doing very well. We restructured that business last year to bring more focus. And the 2 largest businesses, Food and Bev and Disk Drive have been really excelling. On the Disk Drive side, if you think about what's driving a lot of that demand, it is AI and cloud storage. There's a strong demand for drives and more and more dense storage. HAMR clearly addresses that. I would say our growth is a combination of market comeback and share gains. And we do believe that the market has runway to grow. A lot of our customers are building at very high utilization rates right now. And so as they bring on more capacity, the demand feels like it's there for the foreseeable future. So HAMR has been a big success so far. We've ramped that business up with one of our OE customers this year, and we look forward to that continuing to gain market penetration. Brian Drab: And your technology or products that you're -- that's used in that application is what exactly? Can you just remind me? Richard Lewis: Yes. So it's a filter. In the early days, it was a filter to remove particles,, much like some of the air filters. But as these drives have become way more sophisticated, now we're doing absorption technologies that really take out harmful gases and fumes. These drives are very, very, very sensitive. And that's part of our share gain in this space. As the technology continue to increase, we were able to continue to differentiate our capabilities and take additional market share there. Brian Drab: And then is there any detail that you can give on your liquid cooling exposure? I know you mentioned it today on the call again, but what products, technologies are you supplying there? And what's the potential addressable market for Donaldson there? Richard Lewis: Yes. So on the liquid cooling, it's really an extension of the products that we sell in the Food and Bev. Their products have applicability in several other process filtration applications. And this is one. We've seen a sharp uptick in interest. A lot of these data centers are converting from air cooling to liquid cooling and our products fit very nicely with that. It's a pretty fragmented market right now because there's really no clear standards on the systems. And so I'd say it's a bit early to judge how big it's going to be. But certainly, we're seeing a lot of activity and a lot of interest in that space. Operator: Your next question comes from the line of Laurence Alexander with Jefferies. Laurence Alexander: Just two quick ones. First, on the Power Gen side, can you give some perspective on how you think the competitive market has changed, the competitive landscape has changed since the last cycle? And do you -- how much more capacity expansion do you think you would need to do to keep up with the order books that have been announced by the equipment makers? And secondly, on the acquisition, what's your time frame for the acquisition to get to an acceptable return on capital? Richard Lewis: So I'll take the Power Gen, and then I'll let Brad address the second question. So from a Power Gen perspective, yes, I mean, the demand is very, very high. I would say the dynamic that's different now is because, as you're aware, we sort of narrowed our focus after the last cycle. We're seeing, I would say, more interest in being fair and balanced with the commercial deals. And so we'll continue to take orders that make sense for us commercially. We're increasing our capacity in our Mexico facility fairly significantly. And so we believe we're in a good position from addressing our customers' needs. They have many other constraints besides our product. And so it feels like we're well aligned with what their build capability is right now. Brad Pogalz: Laurence, this is Brad. In terms of the returns, this is much more of a strategic acquisition than a synergy play. And with that, thinking about it on a cash basis, probably more at our cost of capital in the 5-year time horizon. But I think the really positive side of this business is it's throwing off cash immediately. We get to earnings accretion pretty rapidly. We said year 2. And of course, our goal is to make that even faster. Operator: Your next question comes from the line of Rob Mason with Baird. Robert Mason: And Tod, Rich, I'll offer my congrats on passing the baton there as well. Rich, I think in your comments earlier, you talked about the second half margin outlook had not really changed in the updated guidance. But it does sound like there's more work to do on the footprint optimization effort to -- it just kind of give us a feel for the confidence level around the ability to ramp margins whether that means the third quarter margin step up more meaningfully or if that happens more in the fourth and just -- yes, again, just kind of the confidence level to keep that margin -- second half margin outlook intact, just given the second quarter challenges. Richard Lewis: Yes, I think -- I mean you hit on it, Rob. Clearly, we need to see the volume come back in our OE and Aerospace and Defense businesses. We have those backlogs. So we feel really confident on that part. We'll have to continue to fight through the supply chain issues on the A&D, but the team is really focused on that, and they're working hand in hand with our suppliers. So that part of it, we feel pretty strongly that we're in a good position. The restructuring work, as I mentioned, a couple of these are done. And so we should start to see the costs go down and some of the benefits start to feather in. The other 2 are still ongoing in Q3. Probably the risk there is if there is a delay or there's any unexpected problems. But right now, we're on track. And certainly, we would expect to have those finished up here by the end of the fiscal for sure. And then Power Gen, as we mentioned, we've doubled the workforce down there just in our first quarter. And so we feel good. The turnover is low. The staffing is starting to become productive. So we need to see continued progress on that in the second half. But based on all the observations with the team, we're well on track for them to continue to accelerate improvement through the second half of the year. Brad Pogalz: Rob, I'm going to add one point, too. And I think an important note here is as we look at the second half step up, some of that comes with expense leverage as well. We've got really good controls over what's going on with expenses in the company. When you think about the improvement in the second half, a big portion of that also comes from the natural leverage. So as Rich said, we've got the backlogs to deliver the sales. We'll keep expenses at a rate that's, give or take, are at a dollar level. That's give or take where we were in the first half. So there's the leverage that comes with that, too. Robert Mason: Okay. Very good. That was actually my next question. Just the jumping off point there, given second quarter OpEx anyway was step down sequentially. Maybe just last question. Just thought process. Again, it's smaller business, I understand on the first-fit side. We're certainly aware of the on-road, the truck challenges. But this -- it does -- to reach flat for the year does kind of infer that you see some recovery in that business. I mean should we just be putting all that recovery in the fourth quarter? When I say recovery, sequentially in the fourth quarter. Brad Pogalz: Yes. I think the move towards the second half and late in the second half is it. I will -- I mean, of course, Rich said this earlier about the trough. We're seeing some green shoots out there. I think the public data sources that many of us follow suggest even an increase in truck production in Class 8 heavy-duty in North America this year. So there are some things that give us encouragement. On top of it, we talked last quarter about some of the moves of programs within this business that we've won. I think that's an important part of our first-fit business is we're still gaining share with the OEs. So to the extent that production comes back, that's just incremental growth for us. Operator: And that concludes our question-and-answer session. And I will now turn the conference back over to Rich Lewis for closing comments. Richard Lewis: That concludes our call today. Thanks to everyone who participated. We look forward to reporting our third quarter fiscal 2026 results in June. Goodbye. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Greetings, welcome to the Wolverine World Wide, Inc. Fourth Quarter Fiscal 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star and the number 1 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jared Filippone, Head of Investor Relations. You may begin. Jared Filippone: Good morning, welcome to our fourth quarter fiscal 2025 conference call. On the call today are Christopher E. Hufnagel, President and Chief Executive Officer, and Taryn L. Miller, Chief Financial Officer. Earlier this morning, we issued a press release announcing our financial results for the fourth quarter and full year 2025, and guidance for fiscal year 2026. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business and constant currency revenue growth rates, were reconciled to the most comparable GAAP financial measures in attached tables within the body of the release or on our investor relations page on our website, wolverineworldwide.com. I'd also like to remind you that statements describing the company's expectations, plans, predictions, and projections, such as those regarding the company's outlook for fiscal year 2026, growth opportunities, and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. All revenue growth rates will be cited on a constant currency basis, unless otherwise stated. With that, I will now turn the call over to Christopher E. Hufnagel. Christopher E. Hufnagel: Thanks, Jared. Good morning, everyone, and thank you for joining us on today's call. The fourth quarter marked the conclusion of a good year for Wolverine World Wide, Inc. We made substantial progress in advancing our strategy and further transforming the company while delivering solid financial results in the process. We delivered high-quality revenue growth in line with our value creation model, led by Merrell and Saucony, our two biggest brands. Merrell drove high single-digit growth for the year, while Saucony posted a record year with a 30% increase compared to 2024. I am pleased with how our global teams navigated a turbulent year, executed our strategy with pace and distinction, and delivered top and bottom-line results that exceeded our expectations, highlighted by annual adjusted earnings per share up over 50% compared to the prior year, and further progress in strengthening our balance sheet. As we turn the page to the new year, I believe our brands, company, and team are better and stronger. Brand awareness and affinity are turning positively for Merrell, Saucony, Sweaty Betty, and Wolverine. We have taken market share in important categories. We have made encouraging progress in our DTC business, and we have well-defined plans in motion to again deliver mid-single-digit top-line growth, supported by our current order book, while continuing to expand profitability in the year ahead. Even with tariffs, and as we continue to responsibly invest in product innovation, demand creation, and modern tools and capabilities to drive the business this year and into the future. I want to start this call with an update on our biggest brands, their recent progress, and their plans for this year. Beginning with Merrell. Merrell remains focused on modernizing the outside, developing more athletic, style-led, versatile performance and lifestyle footwear while elevating the brand around the world. In the fourth quarter, Merrell grew revenue 5% with balanced growth across regions and channels. Notably, DTC inflected the growth with revenue up mid-single digits, even as we were less promotional in stores and online. The brand once again took market share in the U.S. hike category. Underpinning these results, we saw increases across key brand health metrics to finish the year, a positive indicator for the work we are doing to build better brands. Merrell's key performance franchise, the Moab Speed 2, nearly doubled sell-through year-over-year at U.S. Retail in the quarter, while the Moab 3 also continued to deliver solid growth. The Agility Peak 5 contributed good growth in trail running as well. Similar to key performance franchises, the brand's latest expression of versatile lifestyle footwear, the Wrapt collection, continued to grow rapidly, with the iconic Jungle Moc also delivering solid growth. In 2026, Merrell plans to deliver newness across its key performance and lifestyle franchises, including fresh colors and materials, seasonal energy drops, and new styles to bolster the collections. Just a few weeks ago, the brand launched the new Agility Peak 6, delivering better fit, stability, and traction within the trail run category. Early sales are tracking very well relative to our expectations. Merrell also expects to introduce the new SpeedARC Peak later this summer, leveraging the brand's highly innovative and visually disruptive SpeedARC technology to further strengthen its trail run offerings. With positive momentum and a strong product pipeline, Merrell's entering the new year with an enhanced marketing strategy and demand creation plan for record investment to further elevate the brand. Next week, the team anticipates launching a new global platform, unifying its storytelling under one umbrella and advancing the brand's powerful purpose: to share the simple power of the outside with everyone. To entrench the brand's role in outdoor performance footwear, Merrell has secured title sponsorships of the Skyrunner World Series and Skyrunner National Series in the U.S., encompassing more than 20 of the most elite trail running races globally. In addition, the brand plans to build on its key city strategy in Tokyo and Paris, adding London and New York, with a focused blend of integrated events, activations, and retail presentations. Merrell celebrates its 45th anniversary in 2026, and we expect this to be a milestone year for the brand. Shifting to Saucony. Saucony is uniquely positioned as a disruptive challenger brand at the intersection of the two of the fastest-growing categories in the market: performance and lifestyle running. To conclude the brand's record year in 2025, Saucony drove broad-based revenue growth across categories, regions, and channels, a total increase of 24% in the fourth quarter. Performance, the majority of the brand's business, was up over 20%, with lifestyle growing even faster. In the biggest quarter for DTC, the channel grew mid-teens. Importantly, Saucony saw further increases across brand health metrics, especially with runners. The brand continues to lead with pinnacle innovation with an Endorphin collection for elite runners, which again drove strong growth year-over-year at U.S. Retail in the quarter. The brand's core four franchises, the Ride, Guide, Hurricane, and Triumph, aimed squarely at the broader casual running opportunity, continue to contribute good growth as well. On the lifestyle side, Saucony continues to inject energy into the brand around the world. This past fall, the brand launched collaborations with Jae Tips and Engineered Garments, among others. In December, Saucony partnered with culture-shaping powerhouse, Westside Gunn, and influential retailer, Kith, to release a very special collaboration at Art Basel. The drop, featuring the Pro Grid Triumph 4, garnered global attention and drove record traffic to saucony.com and sold out in minutes. The brand continues to have a voice in the cultural discourse, in addition to innovating in performance running, and has strong plans in place once again for 2026. This year, Saucony expects to deliver new iterations for each of its core four franchises, starting with the Ride 19 launch last month, which has immediately become a top seller on saucony.com. With this year's updates, the Triumph 24 and Hurricane 26 are both slated to get new proprietary Incredilux foam, a high-end compound that delivers a luxurious ride with enhanced energy return, cushioning, and durability. Just 25 days ago, Saucony brought to market what we expect to be its biggest debut launch of all time to date, the all-new Endorphin Azura, fueled by a fully integrated global activation plan. The Azura is a lightweight super trainer with innovative geometry and advanced energy return foam to help the runner go fast every day, and delivers all this innovation for $150. The shoe represents a meaningful incremental opportunity for the brand and has been highly anticipated and well received by the market and consumers. At this early stage, demand at saucony.com is already far ahead of forecast, and sell-through at retail, both here and abroad, has been exceptionally strong. On the lifestyle front, the Pro Grid Omni 9, Ride Millennium, and other key silhouettes are planned to see fresh colorways and materializations this year. The brand once again anticipates an impactful lineup of collaborations, including additional drops with Westside Gunn, Misses New York, Engineered Garments, and others. In addition, Saucony anticipates reintroducing archive styles like the Grid Paramount, Kinvara 1, and Gripper at Tier Zero retail to continue to drive newness and influence at the very top of the distribution pyramid. To capitalize on the momentum we have built, we plan to step up Saucony's brand-building efforts in 2026, making our largest annual marketing investment ever in the brand. Saucony plans to continue to sponsor key events like the London 10K, the Shoreditch Half Marathon, the Eiffel Tower 10K, and new this year, the Berlin 10K. Coming stateside with the Love Run Philadelphia Half Marathon in March, as well as organize its own events like The Maze, a series of exclusive run club races with recent installments in Seoul, New York City, and London. In addition, the brand anticipates expanding its key city strategy from Tokyo and London into Paris, with continued events and activations and the planned opening of a new pioneer store in Paris later this year. While we are investing in growing awareness and fueling brand heat, we continue to strengthen the brand's ground game as well, driving sell-through with point-of-sale and co-op activations and enhanced field support. Saucony possesses a significant global opportunity and continues to see momentum around the world. The brand has been able to marry performance and culture in a unique and compelling way, and we expect another year of double-digit growth in 2026. I now like to spend a few minutes on Sweaty Betty and Wolverine, two brands that gained traction as we closed the year. Starting with Sweaty Betty. The brand is focused on solidifying its positioning as one of the original activewear brands centered around empowering women through fitness and beyond. The brand drove mid-single-digit revenue growth in the fourth quarter, completing a full year of quarterly sequential improvement in year-over-year revenue performance. 2025 was a pivotal year for Sweaty Betty as we reset the brand strategy. Encouragingly, the brand has built momentum in the U.K., enhancing our product offering with more newness and driving the acceleration of DTC growth in the critical fourth quarter. We also made progress on expanding the brand's distribution outside of the U.K. with priority retailers and partners across Europe and into Asia Pacific. Importantly, we successfully strengthened the brand in its positioning, seeing meaningful gains in the fourth quarter across key brand health metrics, especially with younger consumers, the fifth consecutive quarter of improvement. Looking ahead to 2026, Sweaty Betty's product line continues to get stronger, powered by increased newness, better category diversification in outerwear and new bottom silhouettes, and a more focused strategy to go to market with greater impact. The brand storytelling continues to become bolder and more distinctly Sweaty Betty as well, in part with the launch of its new Born Sweaty campaign just last week. Finally, the brand is making good progress in evolving its global distribution footprint to scale more effectively and more efficiently over time. As a result, Sweaty Betty is well positioned to build on momentum in its home market, and it is seeing early benefits of expanding its international partnerships. While the U.S. reset that we initiated in the third quarter of last year remains a near-term headwind as the brand establishes a healthier foundation for future growth. Finally, closing with our namesake brand, Wolverine. The Wolverine brand finished the year a little better than we anticipated entering the fourth quarter, down approximately 11%. As we shared in November, the brand's performance has taken longer than anticipated to turn around. However, I believe we diagnosed the challenges and appointed the right leadership to effectively run a better brand and business moving forward. I am encouraged by both the progress we have made recently and the early results we are beginning to see in the marketplace. The product pipeline, which candidly had become tired, has improved. The team focused on developing more trend-right silhouettes to resonate with evolving consumer preferences, boosting innovation to strengthen more premium product offerings, and architecting better segmentation in the marketplace. The Rancher collection, with the Rancher Pro at a premium price point, has enabled the brand to capture opportunity in the important Western work category and drove significant growth at U.S. Retail in Q4. The Infinity System, the brand's pinnacle expression of its performance comfort technology, launched mid-year and performed well in the back half of the year. As a result of both new innovation and newfound strength in core offerings, the brand began to take back market share and work boots in the fourth quarter, our strongest quarter of share gains in nearly five years. In 2026, the team plans to build on this momentum, bolstering the brand's premium assortment further with the Loader franchise, extend its Western work offering into lifestyle with the new Wheatland collection, and expand its Infinity System technology with new iterations of the Alpha Infinity. Wolverine is stepping up its demand creation as well, investing up and down the marketing funnel. To expand reach, the brand partnered with country music star Jordan Davis throughout 2025 and was an exclusive presenting partner for Season 2 of Paramount+'s hit series, Landman. Partnership helped deliver tens of millions of impressions for the brand and drove new consumers to wolverine.com. The brand also enhanced its presence in social media. We are actively collaborating with influencers to support programs like the launch of the Infinity System and Landman, and have initiated a host of additional in-store Landman activations with key retailers. Encouragingly, the brand saw increases across key brand health metrics to close the year. With the product beginning to check and marketing efforts amplified, Wolverine's focus is now on recalibrating the marketplace, balancing inventories at retail and better aligning distribution to the brand's more premium leadership positioning. We expect this recalibration will take a couple of quarters, but we are seeing good progress as we enter the new year and anticipate Wolverine will deliver flat revenue in 2026 compared to 2025. I'd like to hand the call over to Taryn L. Miller to take you through our results for the fourth quarter and full year, along with our outlook for 2026 in more detail before I provide some key takeaways to close our prepared remarks. Taryn? Taryn L. Miller: Thank you, Chris, and welcome everyone. In 2025, we executed our strategy by advancing our product pipeline, accelerating marketing activation, and strengthening operations to support profitable growth. We delivered revenue growth, expanded margins, and further strengthened the balance sheet while navigating a dynamic trade policy environment. This performance reflects disciplined execution and positions us for sustained growth in 2026. I will start today with our full year 2025 results, then cover fourth quarter performance, and conclude with our outlook for 2026. Fiscal 2025 revenue was $1.874 billion, an increase of 7% compared to 2024 on a reported basis. Revenue increased 6% on a constant currency basis as foreign currency provided a $14 million benefit. Additionally, the 53rd week contributed approximately 70 basis points to revenue growth, with the benefit largely concentrated in the DTC channel. Gross margin was 47.3%, an increase of 300 basis points compared to the prior year, with the improvement largely driven by lower supply chain costs and a favorable mix shift towards more full price sales. The timing benefit from tariff mitigation efforts, net of higher tariff costs, provided a 50 basis point positive impact. Adjusted operating margin was 9%, an increase of 170 basis points compared to the prior year. Adjusted diluted earnings per share increased 53% to $1.35, compared to $0.88 in 2024. I will now take you through the highlights from our fourth quarter. Revenue was $517 million, above the $506 million midpoint of our guidance. The over delivery was driven primarily by the Active Group, with the Work Group also performing slightly better than expectations. Reported revenue growth was 5% compared to the prior year, or 3% on a constant currency basis, with foreign currency providing an $8 million benefit. The following channel, segment, and brand performance is provided on a constant currency basis. Wholesale revenue increased 3% compared to the prior year, driven by international growth. While the U.S. was approximately flat, as Wolverine and the broader Work Group continued their marketplace reset. DTC revenue increased 4% compared to the prior year, including the benefit of the 53rd week driven by the strength in EMEA and solid performance in the U.S. at Merrell and Saucony. Active Group revenue increased 10% in the fourth quarter, ahead of our guidance of high single-digit growth, while Work Group revenue declined 12% and was slightly better than expected. Merrell revenue increased 5% in the quarter, driven by strong wholesale performance in EMEA and in the U.S., supported by continued market share gains and its key city strategy. DTC returned to growth both in the U.S. and internationally, following a successful holiday season. Saucony revenue increased 24% in the quarter, driven by strong growth in both the U.S. and internationally. Double-digit wholesale growth was supported by continued positive sell-through at retail. DTC grew in mid-teens, and both performance and lifestyle categories delivered meaningful gains. Sweaty Betty revenue increased 5% in the quarter, driven by growth in EMEA, DTC, and wholesale. Results were supported by product newness, strength in outerwear, expanded international wholesale distribution, and the benefit of a 53rd week, partially offset by the brand's ongoing reset of the U.S. market to a more premium DTC business. Wolverine revenue declined 11% in the quarter, reflecting the ongoing U.S. marketplace recalibration. Retail sell-through trends were encouraging and supported market share gains, underscoring the brand's building strength in its core boot category. Consolidated gross margin for the fourth quarter was 47%, an increase of 340 basis points compared to the prior year and 70 basis points above our expectations. The year-over-year improvement reflects continued product cost savings, a favorable mix shift toward more full price sales, and an 80 basis point timing benefit from our tariff mitigation efforts net of higher tariff costs. Adjusted operating margin was 11%, an increase of 110 basis points compared to the prior year and 50 basis points above our expectations. The improvement was driven by a continued gross margin expansion, which more than offset strategic investments and higher incentive compensation. As a result, adjusted diluted earnings per share increased 13% to $0.45, compared to $0.40 in the prior year and exceeded our outlook of $0.39–$0.44. Turning to the balance sheet. In 2025, we built on the progress made over the past two years, delivering solid cash flow, further strengthening the balance sheet, and improving financial flexibility. Operating free cash flow in 2025 was $126 million, above the $90 million midpoint of our guidance, largely due to working capital timing. Improved profitability and better-than-expected operating free cash flow enabled us to reduce net debt by $81 million in 2025, ending the year at $415 million. As a result, we exited the year with bank-defined leverage of 2 times. Approximately 90% of our gross debt is now comprised of senior notes maturing in 2029, providing us with a well-positioned and flexible maturity profile. During the fourth quarter, we opportunistically repurchased approximately $15 million of our common stock at an average price of $16.13. The repurchase was intended to offset dilution from stock-based compensation and had no impact on 2025 earnings per share. We ended the year with approximately $135 million remaining under our current share repurchase authorization. Turning to our outlook for 2026, which is anchored in a focused strategy to sustain momentum in our largest brands, while continuing to drive more consistent performance across the rest of the portfolio. For full year 2026, revenue is expected to be in the range of $1.96 billion–$1.985 billion, representing reported growth of approximately 5.2% at the midpoint. This includes an estimated $14 million foreign currency benefit compared to the prior year. The absence of the 53rd week is expected to be an approximately 70 basis point headwind to revenue growth, with the impact largely concentrated in our DTC business. On a constant currency basis and excluding the 53rd week in 2025, we expect revenue to grow approximately 5.2% at the midpoint. In terms of phasing for 2026, we expect revenue growth to be slightly more first half weighted, with the majority of the foreign currency benefit expected in the first quarter, while the fourth quarter comparison reflects the absence of the 53rd week that benefited 2025. The following segment and brand outlook is provided on a constant currency basis. Active Group revenue is expected to increase mid-single digits, and Work Group revenue is expected to be approximately flat. Merrell revenue is expected to increase mid-single digits, supported by new product launches, including the Agility Peak 6, refreshes across core franchises in modern colorways and materials, and disciplined marketing investments. We also expect improved DTC performance, with the momentum generated in the fourth quarter carrying into the new year on a healthier foundation. Saucony is expected to drive outsized and broad-based growth in the low to mid-teens, with gains across both performance, which makes up the majority of the brand's revenue, and lifestyle. In performance, the recent Endorphin Azura launch and the planned refresh of all the four franchises in 2026, supported by continued marketing investment and ground game activations, are expected to drive global growth. Lifestyle growth is expected to be led by international markets, particularly in EMEA, where we are seeing healthy demand supported by key city activations. In the U.S., following expanded distribution, 2026 is focused on optimizing the footprint through sharper assortments and marketing to support full price sell-through and sustainable long-term growth. Sweaty Betty revenue is expected to decline low single digits, with growth in its EMEA DTC business and expanding distribution in select international markets, more than offset by the absence of the 53rd week and the ongoing transition of its U.S. business toward a more premium DTC model. Within the Work Group, Wolverine revenue is expected to be approximately flat, with performance anticipated to improve in the second half of the year as the brand continues to recalibrate the U.S. marketplace and the benefits of improved product and marketing builds throughout the year. Before turning to gross margin, I will walk through the tariff assumptions underlying our outlook. Our 2026 guidance reflects the continuation of the tariff rates that went into effect in August 2025. Based on that assumption, we now estimate the full year unmitigated impact from higher tariffs to be approximately $60 million, or an incremental $50 million versus 2025. Any tariff rate reduction would impact the second half of the year. If the recently announced 15% tariff rate were to be implemented and remain in place through the end of 2026, we estimate it would reduce the 2026 tariff impact by approximately $5 million–$7 million relative to our current guidance. We are closely monitoring recent trade policy developments. We will evaluate potential changes as clarity improves. Gross margin is expected to be approximately 46%, down 130 basis points compared to 2025. The decline is being driven by higher tariff costs, an estimated 300 basis point unmitigated impact, partially offset by pricing and other mitigation actions, a favorable mix shift towards more full price sales and product cost savings. Adjusted operating margin is expected to be approximately 9.1%, up 10 basis points compared to last year, reflecting the impact of higher tariffs on gross margin that is anticipated to be more than offset by operating leverage from revenue growth, cost discipline across the organization, and continued efficiency improvements. We continue to make disciplined investments in our brands, primarily in marketing and key capabilities. Interest and other expenses are projected to be approximately $23 million, down from $28 million last year due to the reduction in net debt. The effective tax rate is projected to be approximately 18%. As a result, adjusted diluted earnings per share is expected to be in the range of $1.35–$1.50, compared to $1.35 in 2025. We have not assumed any future share repurchases in our 2026 outlook. Operating free cash flow is expected to be in the range of $105 million–$120 million, with approximately $20 million of capital expenditures. Moving to our first quarter outlook. Revenue is expected to be in the range of $445 million–$450 million, representing reported growth of approximately 8.5% at the midpoint compared to the prior year. On a constant currency basis, revenue is expected to increase 5.1% at the midpoint, with most of the full-year foreign currency impact anticipated to occur in the first quarter. Active Group revenue is expected to be up high single digits, and the Work Group is expected to be down mid-single digits compared to the prior year. Gross margin in the first quarter is expected to be approximately 47.5%, down 10 basis points compared to last year. This includes an approximate 260 basis point unmitigated tariff impact. First quarter gross margin is expected to be higher than the full year average, as Q1 typically benefits from favorable channel mix. As the year progresses, tariff impacts are expected to become more pronounced, while the year-over-year benefit from mitigation actions implemented in the second half of last year is anticipated to moderate. Adjusted operating margin is expected to be approximately 6.6%, an increase of 30 basis points compared to last year, as pricing, product cost savings, and SG&A leverage are anticipated to more than offset tariff headwinds. Adjusted diluted earnings per share is expected to be in the range of $0.20–$0.22, compared to $0.19 last year. In summary, 2025 was a year of meaningful progress. We delivered revenue growth, expanded margins, generated strong cash flow, and strengthened the balance sheet, while continuing to invest in our brand-building model and the capabilities that support consistent execution across the portfolio. We look ahead to 2026, we recognize the operating environment remains dynamic. While there is more work to do, our strategy is sound, our investment priorities are clear, and we enter the year from a stronger financial and operational foundation. With that, let me turn the call back to Chris before we open it up for questions. Christopher E. Hufnagel: Thanks, Taryn. In the year ahead, we anticipate building upon the good work we have done to date and continue to transform the company to become great builders of global brands. We are focused squarely on building awesome products, obsessing over design to deliver innovative, trend-right performance and lifestyle products that help make our consumers' lives better. Telling amazing stories, amplifying marketing activations to raise our brand's awareness and deepen our emotional connections to consumers, and importantly, driving the business each and every day. I am pleased the heavy lift of the turnaround is behind us with our transformation now well underway. Our balance sheet is stronger and our business is much healthier. Our streamlined portfolio, enabled by our platform of lean centers of excellence, is focused on brands rooted in authenticity, product innovation, and category leadership. We believe our brands are well aligned with long-term macro consumer trends at their core and uniquely positioned to extend into broader adjacent lifestyle opportunities. Our biggest brands are growing around the world, and Sweaty Betty and Wolverine are getting better each day. Finally, our teams are motivated, aligned, and squarely focused on our consumers in executing our brand-building model with pace and distinction, working together as One Wolverine to make every day better. I would like to close by expressing my sincere thanks to our teams around the world for their work last year, not only delivering solid financial results, but also building better brands and a better Wolverine World Wide, Inc. in the process. You have been great, and I am excited to see what we can do together in the year ahead as we write the next chapter in our company's history. With that, thank you to all for taking the time to be with us this morning, and we will now open for questions. Operator? Operator: At this time, if you would like to ask a question, press star, then the 1 on your telephone keypad. To withdraw your question, simply press star 1 again. We kindly ask that you limit yourself to 1 question and return to the queue for any follow-ups. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jonathan Robert Komp with Baird. Please go ahead. Jonathan Robert Komp: Hi, good morning. Thank you. I want to ask about the outlook for Saucony for the year. A very healthy growth projected again. Could you give a little more context specifically on the domestic business, the drivers that you see across performance and lifestyle? If you could, any color on how distribution might play out year-over-year for the year, any color there? Just separately, unrelated question on tariffs. Are you changing any of your practices given the ruling with IEEPA tariffs? Are there scenarios that you accelerate any purchases or try to take advantage of lower rates here temporarily? Thank you. Christopher E. Hufnagel: Sure. Thanks, John. I will tackle the Saucony question first, and then we can talk about tariffs at the end. Saucony remains, I think, a very compelling growth story in total. Following a record year in 2025, we are looking at low to mid-teen growth in 2026, and that growth is really broad-based, performance and lifestyle, domestic and international. Performance piece is a very encouraging part of that business, the biggest piece of the business. We just launched the Endorphin Azura, which we think is going to be the biggest debut launch in the history of the brand at this time, and we are refreshing the brand's core four franchises, the Ride, Guide, Triumph, and Hurricane. The Ride just launched, and it is well ahead of our expectations out of the gate. We are coupling a very strong product pipeline with a record year of investments, going after our key city strategy and doubling down, because that has proved very beneficial around the world. Sponsoring events, the London 10K, the Shoreditch Half Marathon, the Eiffel Tower 10K, adding the Berlin 10K, and then bringing it stateside with the Philadelphia Love Half Marathon, and then our own events, like The Maze. Going further with the Run as One campaign, and then importantly, investing in the ground game, in POS and activation at retail, so we can do better on the sales floor where consumers are engaging in the business. On the lifestyle side, it is a strategically important piece of the business, but smaller than the performance piece in total, and going to grow this year. After a very good year last year, domestically, we gained 130, 140 basis points of market share in lifestyle in the U.S. respectively. We remain encouraged by that. Key styles are the ProGrid Omni 9, the Ride Millennium, and then importantly, a really strong cadence of collaborations again this year. Westside Gunn, Minted New York, Engineered Garments, and they are really targeting that Tier Zero account base, which we have had success with. Regional strength, I think it is important to note, it is not just a U.S. story. Very strong growth in EMEA. Pleased with how we are doing in China, and Asia Pacific as well. Encouraging trends relative to our DTC business. I think in total, if you are looking to evaluate the Saucony story, you have to look beyond a category or a channel and look at the global growth we are trying to drive at a sustainable level, and I think we are pleased with the progress. As it relates to your question about the domestic business, the lifestyle piece, like I noted, is a smaller piece of the business, albeit important. We expect lifestyle to drive growth internationally this year, and it is expected to grow faster than the performance piece of the business. There has been a lot of attention paid to that U.S. athletic specialty channel, which we talked about on the last call. We anticipate doors this year, while it will be down to second half of 25, will be flat from the first half of this year to the second half of this year, as we have taken the learnings from that rollout and applied them going forward. I think in total, we remain bullish on the Saucony prospects. Obviously, very pleased with an all-time record year last year, and then to be able to guide to low- to mid-teens growth this year and to see that growth really broad-based. There is not one category, one channel driving the growth. It really is across the board. Very optimistic about the Saucony brand, what we can go do. I still maintain, I think there is a great global potential for that business to be a very big, powerful player in the category and certainly very meaningful to Wolverine World Wide, Inc. in total. As it relates to tariffs, I will let Taryn talk a little bit about that, but obviously, it remains a very fluid situation. Obviously, with the Supreme Court decision late last week, and then the news out of the administration at the end of last week and then this week, we continue to monitor it. I am very pleased with how we reacted to tariffs coming out of Liberation Day last year. I think the muscle we built in the turnaround, how we worked to be nimble and agile and work collectively together as One Wolverine helped us navigate a very turbulent year last year. I am really pleased with the work that we did across the organization, the brands, the corporate centers, our global supply chain, and how we navigated that. I think we will continue that forward into this year as well. We are staying very close to it. We are trying to glean as many insights as we can on a daily basis and then work to move the organization appropriately to make sure we can both protect and deliver consistent results for the shareholders. Taryn L. Miller: John, as Chris noted, the tariff environment does remain dynamic, but our mitigation strategy, which you asked about, is unchanged, and it builds on the actions that we began in 2025 and that we are advancing further in 2026 as it relates to the pricing actions, the product cost savings, the focus on that full price discipline and discretionary savings. Our mitigation strategy is unchanged. Specifically, to your question about any planned acceleration of inventory, I would say, given the recent change to the 15%, the incremental tariff that was communicated, not implemented yet, and the continued policy uncertainty, we are not planning any material changes to our normal inventory receipts at this time. Christopher E. Hufnagel: That is all very helpful. Thank you. Thank you, John. Operator: Your next question comes from the line of Mitchel John Kummetz with Seaport Research. Please go ahead. Mitchel John Kummetz: Yes, thanks for taking my questions. Chris, on Saucony, the plan for 2026 U.S. lifestyle, it was not clear to me in your response to Jonathan's question if you expect U.S. lifestyle to be up for the year. I know you talked about the door count, which is helpful. I am curious what you are seeing in those go-forward doors that you added last year that you are continuing to sell into. Are you seeing growth there? How are you seeing that? Are they taking more product? Are they taking a broader assortment? I do have a follow-up. Christopher E. Hufnagel: Thanks, Mitch. I think we continue to see strength in U.S. lifestyle around the lifestyle assortment that we have. Again, the majority of doors that we opened over the past couple of years, those doors have checked and met expectations. A subset did not, and we are working quickly to rationalize those doors to make sure that the learnings that we have taken, we can apply to go-forward doors, and build a base from which to grow again. U.S. lifestyle globally will be up for the brand this year, and we anticipate it being up for this year. U.S. lifestyle will contract this year, just based on lapping that door count. We view that as a one-year lapping that door expansion, and then moving forward and building a healthier base going forward. Mitchel John Kummetz: You mentioned some things happening at sort of Tier Zero accounts. I am curious, you mentioned some franchises, so I was not clear to me what those were. Look, when you think about your lifestyle business, sort of Retro Tech versus classics, are you seeing, like, at the Tier Zero level, are you seeing more momentum in one or the other? If there is potentially, like, an uptick in classics, does that mean much in terms of eventually that translating to more mainstream lifestyle accounts? Christopher E. Hufnagel: That is a great question. I appreciate you asking about fashion and trend because that is really what we are competing in this piece of the Saucony business. Retro Tech remains healthy. I think three of the top five styles in the fourth quarter were Retro Tech styles, and I think four of the top five growth styles in the fourth quarter were Retro Tech styles. It remains a healthy piece of the business. At the same time, we are gaining share in that category, up over 100 basis points in both. I think we are thinking about where the world moves next and then the diversification of the product line. I will be very honest, I am really lucky that Saucony is a 100-plus-year-old brand that has an amazing archive from which to pull from to react to trends. Not all brands have that privilege, we do. We are trying to bring newness and diversification to the line. I think Tier Zero, those great retailers, those trendsetters that edit and curate where the world moves, they are thinking about what is next and what can be next, and we are showing them other products from the archive that are certainly resonating with them. It does not mean that the big commercial opportunity in Retro Tech is over because we are still capitalizing on that. At the same time, we have to make sure that we stay in tune to where trend and fashion is going and out in front of those retailers, and importantly, the very influential customers they serve. Mitchel John Kummetz: That is helpful. Thanks. Christopher E. Hufnagel: I am getting choked up, I am. Operator: Your next question comes from the line of Peter Clement McGoldrick with Stifel. Please go ahead. Peter Clement McGoldrick: Hi, good morning. Thanks for taking my question. I was curious if you can help us think about the makeup of revenue growth in 2026. It is really encouraging to see the improvement in DTC. Can you quantify what is embedded in your DTC outlook and the pace of direct consumer engagement across your brand portfolio? Taryn L. Miller: As regards to DTC, we talked about the improvements that we saw in the fourth quarter, as that has been a focus in terms of improving the performance in the holiday season, and encouraged by the improvement we saw in that fourth quarter. Looking into 2026, we did not give specifics in terms of DTC versus wholesale, but I would say that we would expect growth in both DTC and wholesale contributing to the business. Peter Clement McGoldrick: Could you give any color across the brands, is it Merrell or Saucony leading that, any outsized performance relative to the brand guidance that you represented for 2026? Taryn L. Miller: I would not call any specific brand out. The approach that our team is taking, Chris talked about how we are looking across the portfolio when we are building out capabilities, and the team came together and demonstrated that in the fourth quarter, looking into the holiday, in terms of what were the learnings that we are applying, whether it is Saucony, whether it is Merrell, whether it is Sweaty Betty, or the Work Group. We have a healthier foundation in total across the business. As I look at DTC, the only thing I would call out is DTC in the fourth quarter of 2026 will have an absence of a 53rd week. As I said in my prepared remarks, the 53rd week does have a bigger impact on DTC, given just the nature of that business model of always on when you think of e-commerce and in the stores. Peter Clement McGoldrick: Okay, very helpful. Thank you. Christopher E. Hufnagel: Thanks, Peter. Operator: Your next question comes from the line of Anna A. Andreeva with Piper Sandler. Please go ahead. Anna A. Andreeva: Great. Thank you so much for taking our question. Nice results. To Taryn, on the guide for 2026. You guys have been in investment mode for, I guess a good portion of two years now. Can you break down the sources of leverage implied in the 2026 guide? How should we think about marketing within that? I think you mentioned a marketing campaign at Saucony coming up. Can you just talk about the durability of SG&A leverage in the context of your longer term margins? Chris, sorry if we missed this, on Sweaty Betty growing mid-single digits in 4Q, how did the business perform in the core markets in the U.S. and U.K.? I think you said still in the reset mode in the U.S. Maybe talk about specific initiatives to return the brand to stabilization and then growth. Thank you so much. Christopher E. Hufnagel: Sure. I will go first, and answer the Sweaty Betty question, and then have Taryn talk to you about investment and leverage. I think we are pleased with Sweaty Betty's performance in the fourth quarter. We the business. Again, I think the important thing is how we have redefined and reset that strategy, really focusing on the home market. I think that the business checked in the fourth quarter, we are pleased, less promotional. I think the messaging is resonating. We are seeing increases in brand health metrics, and then importantly, we are seeing new category diversification working well for that brand. Outerwear, new bottom silhouettes are certainly encouraging. In the U.K., which is a fairly tough trading environment right now, and certainly a fiercely competitive category in which that team operates. Pleased with the product pipeline, pleased with the DTC performance, pleased that the heavy lift of the integration is now behind us, and that team is really laser-focused. I think this year, moving forward, I spent time with the team just a couple of weeks ago reviewing product and marketing, and I think that they are very well lined up and situated really well for this year, both on the product piece, but it is really getting back to their distinctive voice, this distinctly Sweaty Betty, this rebellious roots. I think that Born Sweaty campaign is a perfect amplification and manifestation of that approach. In the U.S., frankly, after the acquisition, we became very promotional, and it was really damaging to the brand in total, and we did not have the financial wherewithal to make all of the needed investments around the world that were planned. We have worked to reset and retrench that U.S. business, becoming less promotional, becoming more full price, becoming more premium, and thinking about that in the longer term. We are coupling that reset in the U.S. with doubling down on the U.K. business and then plugging Sweaty Betty into our international business and really beginning to grow across EMEA and in Asia Pacific. I am really pleased with the progress that team has made. I am very happy with the strategy and certainly the results in the fourth quarter and how we are thinking about 2026, give me increased confidence about that brand and what it can mean to the portfolio. Taryn L. Miller: Anna, for SG&A, the leverage that we are guiding to in 2026 really reflects the work we have been doing as part of our broader strategy, which is making those targeted investments that we have talked about the last two years in our brands and in our key capabilities to support growth. While we have been making those investments, we have also been continuing to drive efficiencies across the rest of the organization. More specifically, a meaningful portion of the leverage comes from scale efficiencies on that higher revenue base. As we have made those investments in the brand and in those capabilities of growing the revenue, we are getting scale efficiencies there. The leverage from that, from the majority, where we are seeing the leverage is across the majority of our cost structure outside of those four brand-building investments. It is not just one area, it has been broad-based as we have been looking for those efficiencies in the business. We are also benefiting from the targeted cost actions that we took in 2025, that we brought and carried into 2026 on a structural basis. I think how I would summarize it is that SG&A leverage in 2026 is driven by a combination of the scale efficiencies and the targeted cost actions that we have been taking over the last two years, that we had called out that it would be key to our value creation model. The final point regarding your specific question on marketing, we have made over the last couple of years, needed investments into marketing and building that brand awareness, building out the brand building model. I would expect in 2026 that it would remain fairly consistent, as a % of revenue, as where it was in 2025. Anna A. Andreeva: Appreciate it. Very helpful, and best of luck, guys. Christopher E. Hufnagel: Thanks, Anna. Operator: Your next question comes from the line of Mauricio Serna Vega with UBS. Please go ahead. Mauricio Serna Vega: Great. Thank you. Thanks for taking my questions, and congratulations on the results. First question on the Endorphin Azura. Maybe could you elaborate a little bit more on what gives you confidence about this franchise long-term opportunities? Do you think it could drive more distribution over time? The second point more to Taryn, maybe could you talk a little bit more about the cadence of the tariff impact on gross margin? I think you alluded to more meaningful impact or bigger impact as the year progressed. I just want to understand, like, in terms of cadence, like, which quarter should be the most impacted and so forth. Thank you so much. Christopher E. Hufnagel: Sure. Thanks, Mauricio. We are bullish on the Azura. I think the team did a very nice job identifying an opportunity in the marketplace, and then importantly, building a beautiful product that performs. It was really well anticipated by the marketplace, given everything that we had built into it, and all of the initial reaction to it. I think we are even more encouraged by the initial response to it. It is important, it is not just a domestic response, but we are hearing feedback both domestically and globally. Ahead of expectations, a good launch at saucony.com, beginning to feed into retail here in the U.S., and we are encouraged by that. I love the fact that we have, as Saucony, a leader in innovation and bringing elite products to elite runners, our ability to take innovation and democratize that, and identify white space in the marketplace, and then build a beautiful shoe at a $150 price point, is a testament to that product team, and certainly the opportunity we think that it possesses in the marketplace. I do think it opens up additional distribution for us, places that we may not have great exposure to today. Pleased with the Azura. Again, we anticipate it to be the single biggest debut launch in the history of the brand, to date, because we are going to try to do it again. Certainly pleased initially out of the gate, with Azura and what it can mean to the Endorphin franchise and the broader Saucony brand. Taryn L. Miller: To the tariff question and the phasing of that, based on our guidance of approximately $60 million of full-year unmitigated impact, we would expect more of that already coming through in the first quarter, reflected in the guide, that in the first quarter, we said it would be unmitigated around 260 basis point impact to gross margins, and on the full year, around 300. That indicates that the unmitigated impact will start to come through more in the second quarter and into the back half of the year. The reason Q1 is a little lower than the average is primarily related to the composition of the inventory that is flowing through the P&L in the quarter, and that includes some differences in brand mix and sourcing mix as well. Somewhat, to somewhat degree, as you will recall, there were different tariff rates last year, too. Why Q1 is lower is more, somewhat lower, is a combination of that brand mix and sourcing mix. Mauricio Serna Vega: Got it. Is it fair to assume that it goes all the way to Q4 of this year, the tariff impact? Taryn L. Miller: Yes. Mauricio Serna Vega: Thank you. Taryn L. Miller: The $60 million. Mauricio Serna Vega: Yes. Taryn L. Miller: ... like I said, being that 300 basis point impact, we have assumed it through the end of the year. Mauricio Serna Vega: Great. Thank you so much. Christopher E. Hufnagel: Thanks, Mauricio. Operator: Your next question comes from the line of Laurent Andre Vasilescu with BNP. Please go ahead. Laurent Andre Vasilescu: Good morning. Thank you very much for taking my question. I wanted to follow up on Saucony. On the last call, it was mentioned that new doors was a third of Saucony's third quarter growth. Curious to know how much it was for 4Q. Then slide 9, it details your global distribution network, but this quarter, it removed a list of key accounts like DTLR, Foot Locker, JD, which was detailed in the three key slides. Curious to know why was that the case? Are there any accounts, Chris, that you are actually exiting for FY 2026? Then I have got a question following up, Taryn, on the FIFO accounting treatment. Christopher E. Hufnagel: Can you repeat the second half of—I got a little lost on the first part of your, the door count question? Laurent Andre Vasilescu: Sure, Chris. For sure, 4Q, what, like, what was the like for like? The second question really was around the fact that your slide nine, in your presentation this morning, it used to give you the list of a key account, and it does not show it. I am curious to know, of that 1,300 doors, are you exiting out any of those accounts? Just if you can, for the audience, can quantify, is it, like, 300 doors, is it 400 doors you are exiting out? That would be very helpful. Thank you, Chris. Christopher E. Hufnagel: We anticipate for U.S. Saucony Lifestyle to be in about 1,000 doors in the first half of 2026 and the second half of 2026. The retailers that make up those door counts include the likes of JD, DTLR, Foot Locker, Champs, Journeys, Nice. That is that expansion, and how we are thinking about those door counts, specifically. Laurent Andre Vasilescu: Wonderful. Thank you, Chris, for answering the question. Appreciate it. Then, Taryn, your 3Q 10-Q shows that 3Q EPS was boosted by $0.02 or about 7%, with the FIFO accounting change, which helped your gross margin, I think about almost 50 bps. Curious to know how much the FIFO change helps your 4Q gross margin and EPS, and how do we think about that change in accounting, as we think about 1Q, 2Q? Because I would think, when you change to FIFO, it is helpful in an inflationary environment with tariffs. Thank you very much. Christopher E. Hufnagel: Thanks, Laurent. Taryn L. Miller: Yeah, Laurent. You will recall that we made the change in the third quarter. Laurent Andre Vasilescu: Yep. Taryn L. Miller: The majority of our inventory was already on FIFO accounting. Actually, earlier in the year, we had had part of when we were looking at how do we simplify, how do we more standardize when we look for efficiencies, part of it was related to the inventory accounting in terms of why did we have it two ways. There was an effort to put the minority of the business in line with the majority of it to move to FIFO, which we did in the third quarter. What is displayed in the tables, and Jared can expand, is just an explanation of if we had not done it. I think what is important to call out is that in the guidance that we gave in November, we had already made that accounting change and contemplated the impact. Laurent Andre Vasilescu: How much— Christopher E. Hufnagel: Yeah, Laurent. Laurent Andre Vasilescu: Yeah. Christopher E. Hufnagel: Yeah. Laurent Andre Vasilescu: Yes. Christopher E. Hufnagel: There will be— Laurent Andre Vasilescu: How much was the benefit? Christopher E. Hufnagel: On four Q? Is that the question? Laurent Andre Vasilescu: Yeah, how much was it for Q4? It will be in the 10-K, obviously, that is, I think it is filed a little later. For the audience, how much was it in terms of EPS benefit for Q4? Christopher E. Hufnagel: Yeah, I would say, obviously, based on our guidance in November, this was already implied, so no impact on results versus guidance. In the quarter, just so you know, we will have a full year table. We provided the tables in 3Q call. Doing the math, it is on the COGS line, it is about $1.4 million or so. Laurent Andre Vasilescu: Okay. Thank you very much. Best of luck. Christopher E. Hufnagel: Yep. Thanks, Laurent. Operator: Your next question comes from the line of Samuel Marc Poser with Williams Trading. Please go ahead. Samuel Marc Poser: Thank you for taking my question. I wanted to follow up on. You say that, well, I am just trying to decipher how much bigger, what percent is the lifestyle business versus the performance business within Saucony? Can you give us some idea of the differential? Christopher E. Hufnagel: We, yeah, we talked about that last call. Performance is the majority of the business or a lion's share of the Saucony business. Lifestyle is a smaller segment. Samuel Marc Poser: At any degree? I mean, is it 60, 40, or, I mean... Christopher E. Hufnagel: We have been consistent. The performance is the lion share of the business in Saucony, Sam. Samuel Marc Poser: Secondly, in the U.S., maybe I am not sure if it is overseas, you have a third party, managing or a third-party sales team selling your lifestyle product. I am wondering why that is and why you have not brought that in-house. Because I think if you had brought that in-house, you might not have had the 1,300 stores, and you might have avoided some issues. Christopher E. Hufnagel: I think that the model which we use, a combination of in-house sales teams, along with agents and agencies, is not unique to us, especially in growing businesses. The partners that we do have, we retained for, they bring a certain expertise to the business. I think we are obviously continuing to evaluate those relationships going forward and get to a normal course of business. I think so far, the relationships have served us well. Samuel Marc Poser: All right. Thank you very much. Christopher E. Hufnagel: Thanks, Sam. Operator: Your final question comes from the line of Ashley Anne Owens with KeyBanc Capital Markets. Please go ahead. Ashley Anne Owens: Hi. Great. Thanks for taking our question. Maybe just to start, given Saucony's low double-digit plan for the first quarter, anything you can say on the guardrails you have set with accounts on initial buys versus chase to ensure that pull, not push model holds through the first half? Secondly, talked a lot about improving that full price mix within the portfolio. As you look at the early 2026 reads, how is the consumer absorbing those higher AURs? Any categories within active that you are seeing greater elasticity? What are the areas you believe you can still lean into some more premiumization? Thank you. Christopher E. Hufnagel: Sure. Thanks for the question, Ashley. I think, as we think about growing the success that we have had in Saucony, where it was two years ago, to posting an all-time record year last year, again, with low to mid-teens growth anticipated for this year, I do think we think really closely about distribution decisions, both domestically and internationally. I think that is a big part of the Saucony story that hopefully is coming through, that it is not just a U.S. story or a single category or a single couple of shoe story. It really is broad-based growth. We do think about that. Accounts that we open up, what we offer them. I think in the past, historically, we probably have not done as good a job as a company as thinking about segmentation, distribution, and who gets what. I think that is part of our new global brand building model and the discipline we have tried to enact over the past couple of years, and that is certainly a piece of that. At the same time, with a global business, we learn a lot. We are always trying to learn both what is happening within brands in different parts of the world, at the same time, sharing learnings from brands across the other brands in the portfolio. I think our EMEA business, I think that team has done a really great job, specifically in Merrell, Saucony, growing those brands, and then certainly think about how they think about the marketplace and distribution and segmentation. Those are all things that we are paying close attention to. We do think we are at a special moment in Saucony's history. Certainly pleased with the progress we have made. At the same time, I think there is a much bigger opportunity that we need to go chase. Taryn L. Miller: Regarding your question on what we are seeing in terms of the market and the pricing action. While our price increases, they have only been in market for a little over two quarters, generally, the market response has been in line with our expectations, and I think that is reflected in we were looking at fourth quarter in the busy holiday season, and that came in line with our expectations in terms of the performance. Across the business, we have taken deliberate actions, and that includes the pricing that you are referring to that offset the tariffs and improve our cost structure. We have also been innovating our products and investing in the marketing so that we can achieve more of that full price selling. I think that that healthier source from product mix, improved full price realization, and the disciplined channel execution that Chris spoke to, all of those, we are looking at contributions in terms of the growth. I would say so far, what we have seen is in line with our expectations. Ashley Anne Owens: Super helpful color. Thank you, and best of luck for the year. Christopher E. Hufnagel: Thanks, Ashley. Operator: That concludes our question and answer session. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, everyone, and welcome to the Bristow Group's Fourth Quarter 2025 Earnings Call. Today's call is being recorded. [Operator Instructions] At this time, I'd like to turn the call over to Red Tilahun, Senior Manager of Investor Relations and Financial Reporting. Redeate Tilahun: Thank you, Luke. Good morning, everyone, and welcome to Bristow Group's Fourth Quarter and Full Year 2025 Earnings Call. I'm joined on the call today with our President and Chief Executive Officer, Chris Bradshaw; and Senior Vice President and Chief Financial Officer, Jennifer Whalen. Before we begin, I'd like to take this opportunity to remind everyone that during the course of this call, management may make forward-looking statements that are subject to risks and uncertainties that are described in more detail on Slide 3 of the investor presentation. You may access the investor presentation on our website. We will also reference certain non-GAAP financial measures such as EBITDA and free cash flow. A reconciliation of such measures to GAAP is included in the earnings release and the investor presentation. I'll now turn the call over to our President and CEO. Chris? Christopher Bradshaw: Thank you, Red. I will begin with a note on safety, which is Bristow's #1 core value and our highest operational priority. We experienced fewer lost workdays in 2025, the second consecutive year of improvement in this metric. The Bristow team remains committed to our Target Zero Safety culture and the belief that we each own safety every day. By maintaining situational awareness and always looking out for one another, we can deliver on Bristow's commitment, zero accidents and zero harm. We are also pleased to report strong financial performance in 2025. Full year adjusted EBITDA of $246 million was in line with guidance for 2025, and we are affirming our financial guidance range of $295 million to $325 million for 2026, which reflects adjusted EBITDA growth of approximately 25% year-over-year. We expect strong cash flow conversion, which Jennifer will further detail in her commentary. For now, I will refer you to Slide #15 in our earnings presentation, which summarizes the transformative growth in Bristow's business over the last few years. Since the pandemic era trough in 2022, we have experienced significant year-over-year growth in revenues, adjusted operating income, adjusted EBITDA and margins. With the continued growth and diversification of our Government Services business, Bristow has evolved into a scaled, multi-mission aviation services provider with leading market positions in our core markets. As reflected in our affirmed financial outlook, we expect adjusted operating income in our Government Services business to double in 2026. And the high-quality infrastructure-like cash flows from these contracts provide a durable cash flow foundation for the company. In addition, we expect adjusted operating income in our offshore energy services business to increase by approximately 15% in 2026, primarily due to improved terms on contract renewals. In January, Bristow completed a successful refinancing of our senior notes, with an upsized $500 million transaction at a lower coupon rate of 6.75% and an extended maturity into 2033. Bristow's positive financial outlook, robust balance sheet and strong liquidity position, support the initiation of the company's cash dividend program, confirmed by yesterday's announcement of a $0.125 per share dividend payable on March 26, 2026. I will now hand it over to our CFO for a more detailed discussion of 2025 results and our financial outlook. Jennifer? Jennifer Whalen: Thank you, Chris, and good morning, everyone. Today, I will begin with a review of Bristow's sequential quarter and full year financial results on a consolidated basis before covering the financial results and 2026 guidance ranges for each of our segments. Total revenues and adjusted EBITDA were $9 million and $7 million lower in Q4 compared to Q3, respectively. Primarily due to lower seasonal activity in our other services and Offshore Energy Services segment. As Chris noted, we are pleased to report another year of strong financial results with total revenues in 2025, up $75 million compared to 2024 and adjusted EBITDA of $246 million, which is approximately 4% higher than last year and in line with our previously published outlook. At this time, we are affirming our 2026 guidance ranges of $1.6 billion to $1.7 billion for total revenues and $295 million to $325 million for adjusted EBITDA. Turning now to our segment financial results. Revenues in our Offshore Energy Services, or OES segment, were $3 million lower in Q4, primarily due to the end of fixed wing services in Africa and lower utilization in the U.S. Adjusted operating income was consistent with the preceding quarter as the lower revenues were partially offset by higher earnings from unconsolidated affiliates coupled with lower net operating expenses, largely due to lower subcontractor and repair maintenance costs. Year-over-year, OES revenues were $24.4 million higher, primarily due to increased utilization and additional aircraft capacity in Africa of $21.7 million and higher utilization in the Americas of $19.2 million, primarily driven by the U.S. and Brazil. Revenues in Europe were $16.5 million lower due to lower utilization. Adjusted operating income was $30 million higher in the current year primarily due to the higher revenues, coupled with lower general and administrative expenses of $5.9 million and lower operating expenses of $3.6 million. The decrease in G&A costs was attributable to lower professional service fees, insurance and lease costs, while operating expenses benefited from lower R&M costs, lower fuel prices and lower insurance premiums, which were partially offset by higher personnel and other operating costs related to increased activity. Our 2026 OES revenues guidance range is between $1 billion and $1.1 billion compared to $990 million reported for 2025. And our 2026 adjusted operating income guidance range is $225 million to $235 million compared to $203 million in 2025. Moving on to Government Services. Revenues were $0.8 million lower primarily due to lower seasonal activity in the U.K. but were partially offset by the commencement of operations at an additional base in Ireland. Adjusted operating income was $3.2 million lower in Q4, impacted by higher repairs and maintenance of $2.9 million, resulting from lower vendor credit and the timing of repairs, coupled with higher personnel costs of $1.6 million related to contract transitions, which were partially offset by lower other operating expenses. Full year revenues from Government Services were $49.8 million higher in the current year with the commencement of the Irish Coast Guard contract and higher U.K. SAR revenues, largely resulting from favorable FX impact and the commencement of fixed-wing services. Adjusted operating income was $12.6 million lower in the current year primarily due to higher expenses attributable to the commencement of new contracts in Ireland and the U.K., partially offset by the higher revenue. The outlook for our government services business is positive. As illustrated by the 2026 revenues guidance range of $440 million to $460 million and adjusted operating income guidance range of $70 million to $80 million, which is roughly double that of 2025, as shown on Slides 14 and 15. With strong margins and earnings potential of this business will continue to improve as the operations and revenues for these contracts continue to ramp and certain cost of side as transitions to the new contracts conclude in 2026. And finally, revenues from our other services were $5.2 million lower in Q4, primarily due to lower seasonal activity in Australia and adjusted operating income was $4.1 million lower due to the lower revenue partially offset by lower operating expenses of $1.2 million related to lower seasonal activity. On a full year basis, revenues from other services were $0.8 million higher in the current year as a result of higher activity, partially offset by lower revenues due to the conclusion of certain dry lease contracts. Adjusted operating income was $5.4 million lower in the current year, primarily due to higher operating expenses of $5.9 million, offsetting the higher revenues of $0.8 million. The increase in operating expenses was due to higher activity in Australia. We expect the improved economics in our regional airline in Australia to continue for this segment to remain consistent and cash flow accretive. In our 2026 revenues and adjusted operating income guidance for this segment is between $130 million and $150 million and $225 million, respectively. Moving on to cash flows and liquidity. As of December 2025, our unrestricted cash balance was approximately $286 million with total available liquidity of approximately $347 million. In recent years, working capital has been impacted by increases in our various other assets, primarily related to start-up costs for new government services contracts and inventory to support new contracts and mitigate risks related to supply chain constraints. Despite these impacts, the business has continued to generate strong operating cash flows. In 2025, Cash flow from our operations generated $198 million compared to $177 million in the prior year, and adjusted free cash flow was approximately $26 million higher in the current year. We expect the business to continue generating strong free cash flows into 2026 and working capital to improve over time as supply chain constraints subside and our new contracts include their transition period, reaching their full operational run rate. Lastly, as Chris noted, in January, Bristow closed a private offering of $500 million senior secured notes due in 2033, with a coupon of 6.75%. The company used a portion of the net proceeds redeemed the 6, 7, 8 senior notes, with the remaining net proceeds to be used for general corporate purposes. This refinancing has increased the pro forma cash balance and liquidity of the company. Today, Bristow has no near-term debt maturities, attractive financing with lower coupon rate and improved terms, amortizing equipment financing that include flexible prepayment terms and growth and net leverage ratios that have continued to reduce each year. In summary, we are pleased with Bristow's financial performance this year and with the outcome of this transaction and remain committed to protecting and maintaining a strong balance sheet and liquidity position, while furthering shareholder return initiatives with the commencement of our new cash dividend program. At this time, I'll turn the call back to Chris for further remarks. Chris? Christopher Bradshaw: Thank you. I will now refer you to Slide #21 in our earnings presentation, which summarizes Bristow's annual net asset value or NAV disclosure. As a reminder, we provide this NAV presentation annually in compliance with certain covenants and other disclosure obligations. The helicopter fair market values are based on a desktop appraisal performed by a third-party expert as of December 31, 2025. The NAV calculation takes this estimated fair market value of Bristow's owned aircraft, plus the book value of other tangible assets, less total debt and deferred taxes, to arrive at an aggregate NAV of approximately $1.8 billion or $60 per share. Thus far in the call, we have discussed Bristow's financial outlook for 2026 and outlook supported by the growth and stability of our government services business, the heavy weighting of our offshore energy services business, the more stable production support activities and the breadth and diversity of the geographic markets we serve. Looking forward, we would now like to share some perspectives beyond the confines of calendar year 2026. Bristow continues to have a positive long-term outlook for offshore energy services activity. Deepwater projects are favorably positioned, offering attractive relative returns within the asset portfolios of oil and gas companies. And we believe offshore projects will receive an increasing share of future upstream capital investment. This positive demand outlook is paired with a tight supply dynamic. The fleet status for offshore configured heavy and super medium helicopters remains tight, and the ability to bring in new capacity remains constrained with long manufacturing lead times on production line that must be shared with military aircraft orders. We believe this constructive supply/demand balance supports a positive outlook for the offshore helicopter sector. As noted earlier, with the continued growth and diversification of our government services business, Bristow has evolved into a scale, multi-mission aviation services provider. We see additional growth opportunities in our core government search and rescue business as well as a broader spectrum of aviation services to government and military customers. In the context of a complicated geopolitical landscape, and expectations for significant increases in defense spending. We believe there will be compelling organic and inorganic growth opportunities for a specialized aviation services provider with Bristow's track record, operational expertise, and financial flexibility. Finally, as summarized on Slide #5 of the earnings presentation. We have continued to advance Bristow's position as an early leader in advanced air mobility. We recently completed Bristow's first electric aviation project conducted as an international test arena in Norway in partnership with the local regulator and our partners at Beta technologies, where we flew over 100 missions and 6 months of operational testing. In addition, we recently secured some of the first delivery slots, including slot number one, for the hybrid electric, highly versatile Electra EL9 Ulta short take-off and landing aircraft. Bristow also recently announced an expanded role and advancing the U.K.'s first electric air travel network through a new collaboration with vertical Aerospace and Skyport infrastructure with initial service targeted for early 2029. We believe that Bristow has created significant option value with minimal capital commitment to date and what is expected to be a large and rapidly growing addressable market for these new generation aircraft. With that, let's open the line for questions. Luke? Operator: [Operator Instructions] The first question will come from Jason Bandel with Evercore ISI. Jason Bandel: So you affirmed your '26 OES guidance and noted improved terms on contract renewals. Can you talk about how far into the renewal cycle you currently are? Has there been any kind of changes to rates as these contracts renew and how much of this is reflected in your guidance? Christopher Bradshaw: Yes. As of our last disclosure, we were about 50% through rolling over our Offshore Energy Services customer contract portfolio, and we expect to be substantially complete with that conversion by the end of this calendar year. So by December of this year, effectively all of the OES customer contract portfolio, we'll have reset. The impact is reflected in our guidance for 2026 and most of the 15% uplift in the adjusted operating income for that segment is due to those improved contract terms. On average, globally, the rate uplift for leading-edge contracts compared to the legacy contract rates they're replacing is about 25%. There are some regional differences, some higher and some lower, but on average, it's been about 25%, and that's holding pretty consistent. Jason Bandel: Got it. And then next, can you highlight, I guess, the regions here that are going to be driving your growth in '26 and where you are most likely to mobilize additional capacity, whether it's taken from other markets or just from a new aircraft deliveries? Christopher Bradshaw: Yes, happy to do that. The regions where we're seeing more demand and growth and where we're mobilizing additional aircraft capacity include Africa, which has been a strong region for us for the last couple of years, and we expect it to remain that way in 2026 as well as Brazil, which has been one of the fastest-growing deepwater basins. And again, we expect that to continue. Those are probably two of the faster-growing ones that I would highlight in terms of where additional capacity is moving into. Jason Bandel: Got it. And last one for me, just on a popular topic this quarter in terms of the discussion around Venezuela. We generally think about the entree opportunities there, but there has been some offshore gas development in the past. How do you view potential opportunities for Bristow in Venezuela? And just given your presence in the Caribbean, would you have any kind of advantages if you decide to enter that market? Christopher Bradshaw: Yes, there could be. We're not expecting near-term opportunities to materialize for offshore helicopters. Though we will be supporting some work out of Trinidad into joint basins that overlap with Venezuela, which are more likely to go forward now. But as you noted, we do have a large presence in the Americas. That includes a long time presence in Trinidad, where we do both crew change and search and rescue work as well as the Suriname and including [ Curacao ]. So given our presence in the region, I think if and when opportunities do materialize, we're as well positioned as anyone to take advantage of them. Operator: The next question comes from Josh Sullivan with Jones Trading. Josh Sullivan: Just wanted to ask on UKSAR2G, just on the transition, how is that coming along? Supply chain issues or otherwise state of the world? Any delays or risks to aircraft delivery time lines we should be thinking about? Christopher Bradshaw: Thank you for the question, Josh. I'd say, overall, the transition from the current UKSARH contract to the new UKSAR2G contract is going well. And I want to extend my gratitude to the whole team, everyone on the Bristow team as well as Matachy's Coast Guard team that are working on that. There have been some aircraft delays, consistent with the supply chain issues that have plagued the aviation industry and certainly the civilian helicopter industry over the last few years. I think Leonardo is having some of those with their suppliers and vendors as well. So we have had some aircraft delivery delays, which is complicated the time line, but we're working closely in collaboration with our customer at the Marine and Coast Guard Agency to manage through those issues. And the communication is going well. And again, overall, the contract transitions UKSAR2G is progressing along. Josh Sullivan: Got it. And then I guess on the Irish side, now you have the full suit of bases online and the costs you mentioned in the prepared comments there, Jennifer, can you just talk about what costs are going to be subsiding through '26 and how that ramps down? Jennifer Whalen: Sure. So there are still transition costs for the Irish contract into 2026 as we took the new over the last phase in February. There's still training that needs to occur. These pilots are moving from one aircraft type to a new aircraft type. So it's primarily that training and getting everyone up to speed and ready to go on the new contract. Josh Sullivan: Then maybe just switching over to advance air mobility. Congrats on Norway Sandbox and getting that done. But curious if you could give us any insights into findings or how significant that initiative was towards your future plans, but you guys are on the tip of the spear there. So it's always interesting to hear your perspective. Christopher Bradshaw: I would say very significant. This was really a first-of-its-kind project globally, and we were able to operate the aircraft really on a daily basis in partnership with the local regulator and beta technologies and get some valuable real-world insights. There will be a formal report published in a couple of months. I don't want to preempt that. But I would say at a high level, there are some learnings related to the battery storage, battery charging as well as radar position and communication of the aircraft. There'll be more to say on that when the full report comes out. But again, we were really excited to complete that project, which is one of the first of its kind globally. Josh Sullivan: And then just one last one. Chris, your comments on just the defense market, given geopolitically what's going on and your interest there. But then combining it with the reality that you guys are at the tip of the spear and the advanced mobility market and the interest the defense market has in those applications. Are you looking at your combined capabilities here? Is that going to be an advantage? Or are you thinking more traditional kind of defense sort of orientation? Christopher Bradshaw: We're thinking both. We're thinking traditional defense orientation, and we're already doing work today with the U.K. MOD, and we've done some work historically with the U.S. military, but we think that opportunity set will be a big one for us going forward. But also, I think you're spot on, Josh, in mentioning that our early leader position and advance air mobility should be a strong interplay with government and militaries, which are expected to be some of the biggest customers globally for those new generation aircraft. Operator: The next question comes from Savi Syth with Raymond James. Savanthi Syth: I wonder if you could talk a little bit about the thinking and the shift in your debt strategy here and how you're thinking about kind of balance sheet targets going forward? Jennifer Whalen: Sure. We were happy to execute the transaction that we did in January and we were able to upsize that with an attractive coupon in terms and really dramatically better credit spreads than the last issuance that we had. We did state that we plan to pay down debt by the end of 2026, and that would likely be our UKSAR2G equipment financing and all things being equal, that will still be the case. In the meantime, we will plan to evaluate other opportunities so we still feel comfortable where we're at on that and we're happy to get that refi done. Savanthi Syth: Got it. And then just on the aircraft deliveries that are expected here in '26. Could you remind me kind of the plan on the financing front on that, Jennifer? Jennifer Whalen: So we do have orders for 7 AW189 this year. We do plan to either pay for those with cash on hand or lease them or do something else around that, but no significant financing needed based on what we did in the bond deal. We did pledge a couple of those in that bond deal. Savanthi Syth: Got it. And then just finally, if I might ask one last question just on the Electra announcement that came. It sounded like this included some agreements on PDPs. Just could you talk about or provide a little bit more detail on kind of the timing and level of investment in that area? Christopher Bradshaw: Yes. Thank you for the question, and happy to address that. To date, we only have a few million dollars of capital commitments that have been made. The agreements that we have in place are subject to certain milestones around certification and aircraft performance. If those are met. And if we see the compelling market opportunities we have the option to bring those aircraft in. And specifically to the Electra that would be up to $30 million for the ones that have been ordered thus far and the financing for anything that we would do around advanced air mobility. We think we have the ability to execute given the financial flexibility that Bristow has built today with our balance sheet and liquidity position. Operator: [Operator Instructions] Our next question will come from [indiscernible] with Texas Capital. Unknown Analyst: As it relates to your guidance, can you talk to some of the variables that could either surprise you on the upside or the downside? Jennifer Whalen: Sure. Happy to answer that. So there are a few items that would bias either to the high side or the low side of the range, really the macro environment price of oil, stability of prices could -- about 15% of our revenues do come from exploration, which would be the most affected by those. Foreign exchange rates, particularly the British pound and the euro in our search and rescue contracts in Ireland and the U.K. We do get paid in those currencies and so they could bias us one way or the other depending on what happens with the dollar to those currencies. And then further, either supply chain constraints or improvements could also affect that bias one way or the other. Unknown Analyst: That's very helpful. And then can you also help us to sort of understand where the next kind of notable government contracts might develop? And what that timeline might look like? Christopher Bradshaw: Yes. There's not a published tangible timeline for a lot of the search and rescue projects to date. But I would note that there are a lot of conversations that are going on now, particularly with European governments A lot of them have made commitments to spend more on defense over the next several years. And one of the ways, from a budgetary standpoint, they may look to balance that is potentially outsourcing some of the non combatant services like a civilian Coast Guard. So we are having encouraging conversations with a few different countries in Europe today about outsourced coast guard opportunity similar to what we're already doing for countries like the U.K., Netherlands, Ireland, et cetera. So we remain optimistic about the pipeline for additional government search and rescue work. And then beyond that, we do see a broader set of opportunities for an aviation service partner to work in public-private type partnerships with militaries and governments in both Europe and the Americas to meet some of the defense -- increased defense spending objectives that they have. Operator: Our final question will come from Steve Silver with Argus Research. Steven Silver: First, referencing the NAV slide, does the cited $1.6 billion in fair market value of the owned aircraft reflect any of the new aircraft that have been committed for purchased but not yet delivered or does that just apply to the current fleet? Jennifer Whalen: Steve, thanks for the question. No, the fair market value of the aircraft on the NAV side reflects the third-party appraisal of the aircraft that Bristow has in the fleet today and does not include the anticipated new delivery. However, there are deposits in the -- towards the new aircraft and the other PPE line on that NAV slide. Steven Silver: Great. And so even though commercialization is still a few years out now, but as AAM gets closer to the market and Bristow now secured initial delivery slots, is there any early view that you guys have on the supply dynamics that you envision for that market that could help define the pace of an eventual commercial rollout? Christopher Bradshaw: It will start small as those companies mature their manufacturing capabilities. So it could be single digits to low double digits in the first year ramping up pretty quickly after that. But I think it will be a measured pace within this decade. But likely scaling to a much larger hundreds of units across the different manufacturers as we roll the calendar into the next decade. Steven Silver: Great. And one last one, if I may. Earlier, you discussed the improved terms on the 2026 contract renewals for OES supporting adjusted operating income growth. Can you provide any details on the percentage of the total contract book that was up for renewal this year? And any parameters around contracts coming up for renewal over the next couple of years that you're envisioning? Christopher Bradshaw: So about 50% of the OES customer contracts had renewed prior to the end of 2025 and most of the rest of potentially all will have renewed by the end of this calendar year. The benefits of that within calendar 2026 are reflected in the guidance range that you provided and future years will include the full year benefit of those. It's been a healthy rate uplift, again, about 25% on average globally for leading-edge rates compared to the legacy contract rates that they're replacing. And most of the 15% increase in our adjusted operating income from our OES segment in 2026 is due to those improved contract terms. Operator: This concludes our question-and-answer session. I will now turn the call over to Chris Bradshaw for closing remarks. Christopher Bradshaw: Yes. Thank you, Luke, and thanks, everyone, for joining the call. We look forward to updating you again next quarter. In the meantime, stay safe and well. Operator: This concludes today's call. You may now disconnect at any time.
Alberto Valdes: Good morning, everyone. I'm Alberto Valdes, Head of Investor Relations. Welcome to our full year 2025 results presentation. Before we begin, I would like to draw your attention to the disclaimer regarding forward-looking statements on Slide 2. Today's discussion will include certain projections and non-IFRS metrics that provide a clear view of our underlying performance. Today's presentation will be led by Martin Tolcachir, our Group CEO; and Guillaume Gras, our Group CFO. After their remarks, we'll open the floor for a Q&A session. I'll now hand things over to Martin. Martin, the floor is yours. Martin Tolcachir: Thank you, Alberto, and good morning, everyone. I am proud to present what I believe are truly excellent results achieved in the first year of our Growing every day strategic plan. Looking at the outline on Slide 4, our story today rests on 5 key pillars. Dia Spain is not just on track, it is accelerating the delivery of our strategic plan, and we are now significantly outperforming the market. Dia Argentina has stabilized. After a resilient second half, we are now well positioned to capitalize on the recovery in food consumption expect from 2026 onwards. Dia Spain remains the engine of the Group's financial results, driving substantial margin expansion, multiplying net profits and generating robust cash flow. Our exceptional stock performance in 2025 validates our strong operating performance and solid prospect for profitable growth. 2025 marked a pivotal year for Dia. It was the year in which we successfully transitioned from a turnaround phase to one of sustained profitable growth. Now let's talk at this in greater detail. Let's start with Dia Spain and the accelerate delivery of our strategic plan on Slide 6. One year ago, we presented our Growing every day strategic plan, which set out 4 clear targets for leading the market in profitable growth. Our performance in the first year clearly demonstrates that we are not only on track, but exceeding delivery on these targets. We opened 94 new proximity stores, boosting total sales growth to an impressive 8.6%, more than doubling the guidance average rate and increased our adjusted EBITDA margin by 54 basis points to an impressive 6.8%. At the same time, we added to the average capital expended budget, resulting in increased returns on robust deleveraging. As you can see in the next slide, this rigorous delivery is spread across the 4 dimensions of our strategic plan. Our strong like-for-like sales growth, our expanding customer base and improving NPS score is evidence of the positive response by our customers to our improved value proposition. Meanwhile, our franchisee excellent NPS score and our inclusion among Spain's most reputable companies are more than just a source of pride. This enhanced satisfaction and reputation enables us to recruit the best talent to support our operations. Finally, our exceptional share price performance and our surge in liquidity are both powerful market endorsement of our strong results and of our enhanced investor relationship outreach. Let's now move on the main highlights of Dia Spain's operating performance, starting on Slide 8. The rate of sales growth has surged from 5.5% in 2024 to an impressive 8.6% in 2025. Our total sales in Spain reached EUR 5.5 billion. Like-for-like growth reached 7.4%, driven primarily by market-leading volume growth of 5.7%, fueled by an expanding customer base and higher frequency rates. Price inflation was just 1.6%, strategically remaining below general food and beverage inflation and highlighting our commitment to affordability. Finally, despite being in the ramp-up phase, new store contribute an additional 1.2 percentage points to our sales growth. As a result, our total sales growth strongly outperformed the market, enabling us to increase our market share by 12 basis points and consolidate our position as the fourth largest national player and absolute leader in the Proximity segment. Moving to Slide 9. You can see how our customer-centric strategy is promoting loyalty and as a result, sales growth. Our value proposition centers on quality, convenience and affordability, offering a comprehensive and innovative assortment of product and the freedom to choose from leading brands. Thanks to our commitment to quality and local sourcing, sales of fresh product increased by an impressive 15% and now represent 28% of total sales, a significant 160 basis point increase year-on-year. Similarly, our commitment to offering high-quality Dia brand product at affordable price has driven a 10% growth in this category. These products now account for 59% of our fast-moving consumer goods basket, an impressive 170 basis point increase on 2024 and is evidence of a growing base of loyal customers. Continuing on Slide 10. Loyalty sales account for an impressive 56% of gross sales in 2025, marking a 9% increase. This was driven by an increase in the number of loyalty customers and the frequency of their purchases. It is worth noting that the average purchase frequency and basket size of loyal customers is double that of the non-loyalty customers. In this context, the additional of 200,000 loyalty customers in 2025 is of a great value, bringing to -- the total to 5.8 million. The digitalization of our loyalty base continued to progress rapidly, fostered by our gamification initiatives and exclusive promotions. Currently, 58% of our loyal customers who account for 1/3 of our sales interact with us via the application. This channel is growing exceptionally well. It grew by 13% last year. This growth has been driven by double-digit growth on both our own platform and those of third-parties despite the temporary slowdown experienced by delivery platform while they adapt to the recent riders law. Our digital platform complement our proximity network perfectly, reaching 84% of the population and offering the best service level. Over 90% of the orders are delivered on the same day within a 1-hour time slot. Our digital ecosystem combines the unparalleled speed and convenience of our e-commerce platform with the intelligence of our Club Dia loyalty program. This provides customers with a personalized omnichannel experience and us an outstanding Net Promoter Score of 60 points. Turning now to Slide 11, you can see the progress of our store expansion plan. Our goal is to open 300 new proximity stores by 2029. These stores have been selected from a pool of 1,500 high potential locations identified through our proprietary analytic tool. We are giving priority to areas where we already have a strong presence, such as Madrid, Andalusia, and Castilla y Leon, to further increase our store density and improve our logistic efficiency. By focusing not only on large urban hubs, but also on smaller multi-municipalities, we can capitalize on our capital-light format and thrive in areas where large competitors are less efficient. We are now leveraging our scalable franchise model to accelerate the rollout of these select stores, boosting organic growth and share profitability. In 2025, we opened 94 proximity stores, more than offsetting 38 strategic closure and achieving a net expansion of 56 stores. Our aim is to double net openings in 2026. With over 100 net store opening, we will drive organic growth and further consolidate our position as the market leader in Proximity segment. Most of these new stores, 73% are managed by franchisees who currently represent 67% of our network. These hard-working, experienced entrepreneurs help us to bring Dia value proposition to every neighborhood. They manage the store, growing on their local knowledge while we provide infrastructure, product, logistics and service standards. This specialization ensures complete alignment of interest, maximizing productivity and profitability for both parties. The success of this model is reflected in our franchise impressive Net Promoter Score of 75 points. As shown on Slide 12, the expansion of our store is being supported by the modernization of our logistics network. By 2029, we aim to resize and renovate 6 of our 12 logistics platform, improving their service level and capturing significant operational savings. This follows the successful model of our first renovate platform in Illescas, Toledo. In 2025, we opened a second logistics center in Dos Hermanas, Sevilla and start construction of a third Leon scheduled to open in the coming months. A further 3 logistics platforms are planned for Malaga, Levante and Catalunya in 2027, '28 and 2029, respectively. These new platforms are built to the highest standard of efficiency, productivity and sustainability and enable us to optimize our operating margins. Renovating refrigeration equipment is also helping us to improve our energy efficiency and reduce our carbon footprint. To date, 68% of the logistics network and 24% of our store have been decarbonized. The next slide #13, shows our continued progress on ESG. Here, I am pleased to announce our new sustainability plan to 2029, named The Value in Every Day, which will positively impact all our stakeholders. Having successfully complete all the initiatives proposed under our previous sustainability plan by 2025, we have defined 84 new actions for the next 4 years grouped into 5 categories. Firstly, actions to improve our customer awareness of quality nutrition through strategic alliances with suppliers and nutritional experts. Secondly, action to extend our ESG training programs to all employees and strengthen our inclusive hiring and diversity targets within our meritocratic culture. Thirdly, action we will contribute to the development of urban and rural communities by sourcing locally, creating new jobs, improving accessibility and taking social actions. Fourthly, action to accelerate our decarbonization plan, lift our 0 waste and food waste prevention targets, consolidate our responsible sourcing standards and implement the DRS scheme for packaging recycling. Finally, we will further improve our reporting and disclose enhancing our ESG rating visibility and fostering customer perception and trust. Now let's turn to Argentina's operating performance on Slide 15. Dia has demonstrated resilient management by successfully navigating a challenging macroeconomic environment. The strategic measures implemented in 2025 were instrumental in stabilizing sales volume, delivering positive adjusted EBITDA and free cash flow and maintaining a robust net cash position. Firstly, we refine our product assortment to increase shelf productivity, and we implement a high-return promotion strategy supported by enhanced communication to stabilize sales volumes. Secondly, we optimize our network by closing underperforming stores, streamline in-store operation and reducing our logistic footprint to cut secondary distribution costs and restore profitability. Finally, in terms of finance, we optimize our inventory levels to free up cash and only invest in maintenance to preserve the business self-financing capacity. The success of these measures is clearly evident in our second half performance metric. Firstly, we achieved 2% like-for-like sales volume growth in the second half of the year, gaining 31 basis points in market share. Secondly, we successfully turned the margin around, moving from minus 0.5% in the first half to plus 1.3% in the second. And most importantly, we moved from a negative cash position to generating EUR 12 million in free cash flow in the second half of the year, ending with robust liquidity. As you can see on Slide 16, we believe the worst is already behind us. While the year-on-year comparison still shows a decline in like-for-like sales volumes, the sequential quarterly trend indicates clear stabilization in the second half of the year. 2026 is set to be a pivotal year for the Argentina, as you can see on the next Slide 17. The Argentinian economy is already showing positive signs with more moderate inflation, a stabilized exchange rate and a solid growth prospect for the coming years. The consolidation of Argentina macroeconomic framework and relative price stability with the bulk of fiscal adjustment now complete, should allow for a gradual but sustained recovery in the household disposable income. This will enable consumers to return to more normal food consumption patterns. In this scenario, our leading position, operational efficiency and financial discipline provide a solid foundation on which to capitalize on the expected recovery in food consumption from 2026 onwards. As you can see in the next Slide 18, our leading market position in Buenos Aires gives us a solid base from which to rebuild growth and profitability. We are the leading proximity food retailer and top-of-mind brand in the Buenos Aires region, thanks to our competitive prices, high-quality products and successful loyalty program. Our balanced assortment includes a high-quality private label, generating close to 30% of gross sales, well ahead of the market average. We offer a high-quality fresh product assortment, combined with guaranteed product availability to meet essential customer needs. Our strong value proposition results in best-in-class consumer satisfaction, as reflected by an impressive Net Promoter Score of 78 points. I will now hand you over to Guillaume, who will briefly explain our financial results. Guillaume Gras: Thank you, Martin. Let's start with Spain's strong financial results on Slide 20, which demonstrate the effectiveness of our strategy. As mentioned earlier, gross sales increased by 8.6% to reach EUR 5.5 billion, while net sales, excluding the franchise margin and value-added tax, grew by 8.2% to reach EUR 4.6 billion. The slight difference in terms of gross and net sales growth reflects a stronger growth rate from franchise-operated stores. Our adjusted EBITDA margin increased by an impressive 54 basis points to reach 6.8%, one of the highest in our sector. This was driven by operational leverage and rigorous cost management, resulting in an 18% increase in adjusted EBITDA to reach EUR 313 million. Finally, I would like to highlight the threefold increase in our net income to EUR 166 million, including EUR 52 million from the recognition of deferred tax assets in the second half of the year. Given the positive net income achieved in the last 2 years and our robust profit forecast, we are well positioned to activate tax assets. Dia Spain still has over EUR 660 million in tax loss carryforwards pending activation. This equates to over EUR 165 million in potential future tax savings, meaning that Dia Spain's effective tax rate will remain below 20% in the medium to long-term. Excluding this tax effect, our net income would have reached EUR 114 million in 2025, doubling that to previous year. Our high profitability also led to strong free cash flow generation, totaling EUR 140 million. This resulted in a significant reduction in net debt, as you can see on Slide 21. Cash flow from operations reached EUR 301 million. This figure includes the recovery of EUR 33 million in tax refunds during the first half of the year, following the official removal of the regulatory cap on certain tax deductions. Net CapEx totaled EUR 161 million during the period, representing a 60% year-on-year increase linked to the execution of our store expansion plan. Following the refinancing of our debt in December '24, which provided the stable framework needed to execute our 5-year strategic plan, net financial payments totaled EUR 61 million. As a result, we achieved a net debt reduction of EUR 79 million. This represents a 24% decrease compared to the end of 2024, bringing the total down to EUR 251 million. You can see this on the next Slide #22. The company boasts a set of solid credit metrics. Firstly, it has a low financial leverage with an adjusted net debt-to-EBITDA ratio of just 0.8. Secondly, it has a long-term financing structure with no significant debt repayments until 2029. And thirdly, it has a solid net cash position of EUR 295 million at the end of 2025. These robust credit metrics offer ample flexibility to support accelerated growth while maintaining a low leverage profile. Now let's turn to the financial results of Dia Argentina on Slide 23. As previously mentioned, gross sales in Argentina decreased by 15% to EUR 1.5 billion, affected by a 10% decline in like-for-like sales volume and above all, by the translation effects of the 40% depreciation of the Argentine peso in 2025. Net sales mirrored the performance of gross sales, declining by 15% to EUR 1.2 billion before the application of IAS 29 accounting rules for hyperinflationary economies. These rules had negative noncash impact of EUR 104 million. It is important to reiterate that our decisive cost control and financial discipline enabled our adjusted EBITDA margin to recover by 180 basis points to reach 1.3% in the second half of the year. This resulted in a positive adjusted EBITDA and free cash flow of EUR 4 million and EUR 3 million, respectively. As you can see on Slide 24, rigorous working capital management and targeted maintenance CapEx protected our cash position throughout a challenging year. The EUR 27 million working capital inflow was driven by optimizing stock levels, unlocking trapped cash and covering targeting maintenance CapEx, which preserved Dia Argentina's net cash position, almost intact before the foreign exchange took effect. The depreciation of the Argentine peso by 40% in 2025 had a translation effect of EUR 25 million on its net cash position, which closed the year at EUR 61 million. This solid net cash position, together with our rigorous financial discipline, ensures that the business remains self-funded and ready to capitalize on Argentina's expected macroeconomic recovery. Finally, let's conclude the review of the financial results with a brief summary of the Dia Group's consolidated results from continuing operations, on Slide 25. Dia Spain continued to be the driving force behind the Group's growth and profitability. It achieved a 3% increase in consolidated gross sales, reaching EUR 7.1 billion as well as an 8% increase in adjusted EBITDA, reaching EUR 316 million. This resulted in a 30 basis point improvement in the consolidated adjusted EBITDA margin, reaching 5.4%. Notably, our consolidated net income for continued operations more than doubled to a robust EUR 115 million, excluding a EUR 14 million profit contribution from discontinued operations. This relates to the reversal of unapplied contingencies regarding the sale of the Portuguese business in 2024. Conversely, in 2024, discontinued operations contributed a loss of EUR 107 million linked to our exit from Brazil. The company is thus returning to profitability following a successful transformation process that has established its position as Spain's leading supermarket chain in the Proximity segment. It now boasts a robust and profitable business with promising prospects for growth. Finally, the Group's free cash flow reached a robust EUR 143 million. This resulted in a net debt reduction of EUR 51 million, bringing it down to EUR 190 million at the end of the year. Now I would like to draw your attention to our exceptional stock performance in 2025, as shown on Slide 27. This powerful market endorsement is a testament to our strong achievements and solid prospects for profitable growth. Dia's share price has made an extraordinary recovery, rising by 140%, while our average daily liquidity has surged fivefold and is now consistently above EUR 2 million. Our market cap grew from EUR 0.9 billion at the end of 2024 to over EUR 2.1 billion at the end of 2025, releasing EUR 1.2 billion of shareholder value. Despite this impressive performance, Dia is still trading at a discount compared to our peers. Closing this gap should increase our market cap to over EUR 2.7 billion, in line with the current analyst consensus valuation. Our share price recovery and surging liquidity reflects renewed and growing confidence from institutional investors, underpinned by our proactive investor relations outreach. Last year, we executed 14 targeted roadshows in major financial hubs and participated in 10 investor conferences, effectively presenting our new equity story to over 190 high-quality investors. We have added 2 new brokers to our sell-side coverage, and we are actively encouraging new coverage from pan-European brokers to further increase our visibility among institutional investors. We are committed to broadening our investor base and building deeper, long-standing relationships with investors, ensuring that we fulfill our value creation commitments. Now I hand you back to Martin, who will deliver his closing remarks and outlook for 2026. Martin Tolcachir: Thank you, Guillaume. I will now conclude this presentation with some closing remarks on Slide 30 before moving on the Q&A session. The excellent results achieved in the first year of our Growing every day strategic plan validate the success of our proximity model and the strength of our customer-centric strategy. We are delivering robust volume-led like-for-like growth, significantly outperforming the market, while accelerating the rollout of our expansion plan ahead of the schedule. This operational excellence is driving a substantial expansion of margins, a twofold increase in the net income and strong cash flow generation. Looking ahead to 2026, our goals are threefold. Firstly, to maintain our position as the market leader in like-for-like growth. Secondly, to accelerate the rollout of our expansion plan with over 100 net store openings this year. And thirdly, to continue to increase our adjusted EBITDA margin. We will also continue to monitor strategic opportunities in Spain's fragmented market that could generate additional shareholder value. In any case, please note that we only view these opportunities as strictly supplementary to our core organic growth road map, and we won't allow any distraction from it. Meanwhile, Dia Argentina has demonstrated resilient management by successfully navigating a challenging macroeconomic environment. The strategic measures implemented in 2025 were instrumental in stabilizing sales volume and delivering positive adjusted EBITDA and improving free cash flow in 2025, while maintaining a robust net cash position. Our leading position, operational efficiency and financial discipline give us a solid foundation on which to capitalize on the recovery in consumption expected from this year as the macroeconomic environment normalizes. 2025 marked a pivotal year for Dia. It was the year in which we successfully transitioned from a turnaround phase to one of sustained profitable growth. With a significantly strengthened balance sheet and proven proximity strategy, we are now well placed to deliver long-term value. This transition is being increasingly validated by the financial market, as reflected in our exceptional share price performance and enhanced stock liquidity. Thank you for your attention. We are now open to your questions. Alberto Valdes: Thank you for your attention. The Q&A session is now about to begin. To ask a question over the phone, please press the asterisk, then the number 5 on your telephone keypad. As a shareholder, you may also submit questions through the red button on your webcast screen. Once we have verified your ownership, we will answer your question. If we are unable to do so during the session, we will respond directly to your e-mail address. Questions received from analyst covering our stock will be addressed first. Thank you. All right. Here comes our first question from Alvaro Bernal at Alantra. Alvaro Bernal: I have 3 questions, if I may, all related to the 2026 guidance. The first one is regarding sales growth. You have grown at 9% in Spain in 2025, ahead of the 4% to 6% guidance. What do you expect for 2026? If you can provide a mix on volume, price, store opening, it would be very helpful. Second one is regarding margins. You delivered a solid 6.8% margin in Spain. What do you expect for 2026? And what are the drivers of this improvement? And the last one is regarding CapEx in Spain, having in mind that you're accelerating your store opening plan to a targeted 100 net openings in 2026, what can we expect in terms of spend? That's all. Congratulations on the results. Alberto Valdes: Thank you. Very clear questions, Alvaro. I think the first 2 are for Martin. The last one on CapEx, maybe is more suitable for Guillaume. Martin, if you're ready. Martin Tolcachir: Sure. Thank you, Alvaro, for your question. Clearly, 2025, our sales delivered an impressive 8.6% increase, as you mentioned. This performance was built on a robust 7.4% like-for-like, basically supported by volume growth and also an initial contribution of our expansion plan that added 1.2% to the top line. So going to your question on '26, what we can share is that, what we expect is to maintain our market leadership in like-for-like growth. We really think that the value proposition that we are proposing is clearly the one is choose by customers, and we are going to keep our rhythm of like-for-like ahead of the market. On the expansion, what we expect is also overperform the growth of square meters of the Spanish market. We are targeting 100 net openings for the year, and that will also allow us to accelerate the growth again in 2026. This acceleration means that in total growth, 2026 is projected to again outperform our guidance range of 4% to 6%. On the margins, what I can share with you is that clearly, Spain again reached 6.8% in 2025, that this is 54 basis point expansion. That was driven basically by this strong operational leverage and rigorous cost discipline, as was already presented by Guillaume. Outlook for '26, our focus is clearly on accelerating our organic growth. We expect, based on that, a fixed cost dilution and rigorous cost management to offset wage and transport inflation, again, enabling us a further improvement in margins this year. However, this -- there will be a more, let's say, normalized pace compared to the extraordinary jump seen in 2025. Perhaps for the CapEx, I can give to Guillaume. Guillaume Gras: Thank you, Martin. First, to remind, in 2025, Dia Spain net CapEx totaled EUR 161 million, in line with the guidance provided and 60% above the EUR 99 million invested last year in 2024. So the year-on-year increase is mainly related to our store expansion plan. Looking ahead to 2026, we expect to double our rollout speed with more than 100 net store openings. Consequently, we should expect around EUR 50 million higher CapEx than in 2025, pointing to over EUR 210 million. Remember that this CapEx is fully financed by our operating cash flow. This enables us to maintain low financial leverage throughout our strategic plan. Alberto Valdes: Thank you very much, Martin and Guillaume. The next question comes from Luis Colaco at JB Capital. Luis Colaco: I have 4 questions on my side. The first one would be regarding the breakdown in terms of sales growth for 2026. We saw an exit rate of like-for-like of circa 7.7%. You guided before -- last year for 2% to 3% like-for-like. And we are seeing the inflation in Spain still in the food sector already at 3%. Do you think that this guidance that you provided last year between 2% and 3% isn't conservative at this stage? Second question would be on the expansion of stores that you project. You said that you expect 100 net new stores for 2026. You opened 54 already in 2025. So I wanted to understand if the 300 net new stores that you projected from 2025 to 2029, also, does it look conservative at this stage? And I assume that the 300 is net new stores. That wasn't clear for me, in the past. And the third question would be on the debt. You've been deleveraging in a very fast way. We know that you refinanced your debt in 2024 at a very high rate. Bearing in mind your current net debt-to-EBITDA, do you think that you will be able to refinance your debt at the end of this year? And what type -- if this is -- if you agree with me, do you think that -- can you provide us some color on what type of spread should we be assuming for debt refinancing? And the fourth question would be also on the market in general in Spain. We've been seeing the nominal food retail sales growing -- accelerating the growth. What do you attribute this to, immigration, higher purchasing power from consumers? If you could give us some color would be great. Alberto Valdes: All right. Very clear questions. Thank you very much, Luis. I think the first pool of questions regarding the sales growth in Spain, also our store expansion and the macroenvironment, could be very good questions for Martin and the one regarding our financials is more suitable for Guillaume. Martin, are you ready? Martin Tolcachir: Thank you, Luis, for your questions. What we are seeing in -- for Spain in terms of growth -- the drivers of growth, we expect now inflation position between, say, 1% to 2% this year. We still have some pressure, especially in fresh product. But then we have also a mix effect that will offset partially this pressure, so again, between 1% to 2%. In volume like-for-like, what we expect, or what we are expecting is a consistent growth between 3% and 4%, which is a robust growth in this market. And in terms of expansion, what we are assuming now is a contribution of around 3% coming from this plan. In terms of our acceleration in expansion, but more broadly, the acceleration that we are seeing in the execution of our plan in 2025 and our solid prospect for 2026, we really think that while we are delivering ahead of the schedule and accelerating in general, it may be premature to review our strategic targets only 1 year after its launch. However, given, again, this positive trends, I wouldn't rule out revising our targets plan next year, let's say, in 2027. Concretely, concerning the opening stores, you can assume that, yes, the 300 additional stores openings are net -- in the framework of our plan. Then some comments on the macroenvironment, as you pointed. We expect in Spain a solid growth in terms of GDP. 2025 was at 2.8%, which is a real strong performance, especially when we compare with the rest of biggest economy in Europe, Germany, France. So really, really strong support of this growth. We consider as we see in the -- all the available information that 2026 will remain a strong year for Spain. We project this growth around 2.4%, again, driven by a strong domestic demand and all the external sector. In terms of inflation, 2025 was already a year of the moderation, and we expect 2026 with a number of around 2% in terms of inflation. We really are -- appreciate seeing a clear improvement of the disposable income from household, which is really important for our business. Last year was already a positive year and all the information we are gathering confirm that 2026, again will be a positive year in terms of recovery of this real disposable income, which, again, it's key for our business. So last element that we can share is that in terms of population and tourists, we are still seeing solid numbers that will sustain this trend looking forward. Guillaume Gras: And regarding the refinancing, today -- the lockup period of the current financing expires at year-end, paving the way for a potential refinancing from 2027 onwards. As this time approaches, we intend to leverage our strengthened credit profile, reduced leverage and proven operating track record to optimize our cost of debt. And this should reduce financing costs and unlock our current capital allocation constraint, providing us with greater flexibility to remunerate our shareholders. How much do we expect? It's too early to say, but we expect a relevant reduction cost of debt. Luis Colaco: Just a follow-up question on what you said. You mentioned before the like-for-like between 1% and 2% in terms of prices, if I'm not wrong, 3% to 4% in terms of volumes. But that already surpasses the 4% to 6% total sales growth that you guided for. Is that correct? Martin Tolcachir: With the prospect we are having today for 2026, clearly, we expect to outperform our range, the range of growth that we give as guidance in 2026, clearly. Alberto Valdes: Yes, that is very clear. Thank you, Martin. The next question comes from Jose from CaixaBank. José Rito: So I have 3 questions. The first one is on net debt evolution at the consolidated level in 2026. If -- based on the fact that you should expect to accelerate store openings and also CapEx, if you expect to reduce net debt by 2026 versus 2025? That will be the first question. The second question related with the tax credit. So the activation of the tax losses were carried forward, I think that you had around EUR 1 billion in the balance sheet at least last year. There was some activation this year. Can we assume that the company will activate a similar amount in 2026? And how should we assume the phasing of this? If you can provide a little bit more details on this, I think it will be helpful. And finally, the third question on the working capital evolution in Spain. There were slight cash outflows in 2025, reason for this? And also how do you expect this to evolve in 2026? Alberto Valdes: All right. Thank you, Jose. If I understood you well, you're asking about our net debt prospects for the coming years and if we are going to be reducing our net debt position again in 2026. That is a good question for Guillaume. You also ask about our income tax in 2025 in the second half, which was significant. If you can give Guillaume a little bit more color on that and also on our prospects? And finally, I think you ask about the working capital change in Spain in 2025 and also your views, Guillaume, regarding next year, 2026. So when you're ready. Guillaume Gras: Thank you, Alberto. Regarding net debt projection for this year, as we increase our CapEx, we expect to maintain our current net debt. So that's the first point. Second, regarding income tax, in light of our positive performance and strong future profit expectations, we had EUR 52 million out of a total deferred tax asset balance of EUR 217 million, that was activated in the second half of the year. This, together with the one-off reversal of a fiscal provision totaling EUR 9 million registered in the first half, this more than offset the corresponding annual corporate tax resulting in positive tax income of EUR 47 million in 2025. So regarding 2026, Dia Spain still has deferred tax assets totaling EUR 165 million pending activation, which will not expire. We plan to activate these assets progressively over the coming years, which will result in an effective tax rate below 20% in the medium to long-term. Regarding the working capital change in Spain, the outflow you mentioned of EUR 10 million, if I'm not mistaken, is linked to a calendar effect here in our supplier payments. So it's just something punctual. Looking ahead to 2026, we expect a positive working capital inflow driven by our projected sales growth and expansion plan. Alberto Valdes: Thank you, Jose, for your questions. We've got another one coming from Pablo Fernandez from Renta 4. Pablo Fernandez: Congrats on these solid numbers. Just 3 on my side. The first one is just a follow-up on growth and margins, in this case about Argentina. Could you provide some color about the [indiscernible] picture and maybe offer some guidance on your expectations about sales and margin expansion in '26? And the second one, do you keep considering the business in this contract as a strategic or maybe this first green shot could be a good opportunity to divest in the country? And the final one is regarding the EUR 10 million of assets held for sale in your balance sheet. Maybe you could provide some color about it? Alberto Valdes: Thank you, Pablo, who is now shifting to Argentina. He's asking about how we see the macroenvironment and our prospects for 2026? Also, if we consider this as a strategic business or we could consider its divestment? And finally, a question regarding assets held for sale, that is more suitable for Guillaume. So Martin, the floor is yours when you're ready. Martin Tolcachir: Thank you, Pablo, for your question. On Argentina, in terms of GDP, following the sharp contraction in 2024, GDP is estimated to have a recovery of, let's say, 4% in 2025, driven mainly by a rebound in the agriculture sector and the gradual recovery of the energy and the mining sector. The economic forecast suggests this recovery will continue in '26 with the GDP growth expected to remain between 3% to 5%, but with an increased contribution from private investment and consumption in addition to the primary sector. In terms of inflation, as you know, inflation has significantly decelerated from the inflationary peak of '23 and '24 to a single-digit monthly rates at the end of last year. In this context, the real disposable income began to recover in '25 amid rising wages and more moderate inflation. Still, it remains at a very low level and following 20% cut in 2024 due to measure implemented to eliminate the fiscal deficit. So looking ahead, what we expect -- the consolidation of Argentina's macroeconomic framework and relative price stability are expected to enable the sustained normalization of household disposable income and the gradual recovery of food consumption from this year onward. As you know, we have a strong position in Argentina. We have a leading position in Buenos Aires. We have a strong brand, a loved brand in the country and a brand that is perceived as the -- more competitive in terms of prices and the leader also in terms of own brand quality and loyalty program. We have an operational and supply chain solution that is really competitive in that market, and that means a real value for us. We have a value proposition that also combines this own brand, fresh products and national brands that differentiate our value proposition from the other players. In this context, the -- we consider that the consumption is now bottoming, and we expect a gradual recovery from this year onward. So in this context, again, we are not considering the sale of the Argentina at the moment. Selling the business now will fail to capture the value we really think this operation have and this strong position that we have in the country and more particularly in our leadership in Buenos Aires. And again, all the potential recovery that we are foreseeing based on the healthy and the strengthening of our value proposition. What we expect in terms of sales growth is, again, this gradual recovery during 2026, although the sequential quarterly trend should continue to improve. The positive year-on-year comparison will be more evident, especially as the year progress. Last question on also margins for Argentina. As you know, we have put in place decisive cost control and financial discipline that allows us to get to a positive adjusted EBITDA in the year. The second half of the year we have been already capturing the benefits of all that strategic decisions. And again, the full year, we finally closed a positive 0.3% of adjusted EBITDA margin. This year will be a year where we are capturing -- we are going to capture fully all this -- the benefits of all that decision, and we expect to improve our adjusted EBITDA margins in Argentina. Guillaume Gras: And regarding the question about assets held for sale, the EUR 10 million you are seeing, corresponds to real estate assets belonging to Dia Argentina. We talk about one warehouse and 14 stores. These assets are up for sale in 2026 with the aim of reinforcing the company's net cash position. As you know, and just to remind, Dia Argentina had a net cash position of EUR 61 million at the end of the year. This, together with our rigorous financial discipline and the monetization of real estate, will ensure that the business remains self-funded and ready to capitalize on Argentina's expected economic recovery. Alberto Valdes: Very clear, Guillaume. Thank you, and Martin. We have a final question from Marisa Mazo from GVC Gaesco. Marisa Luisa Mazo Fajardo: Alberto, congratulations for the results. I have 3 questions. The first one is in logistics. Can you remind us how may be impacting costs when you continue opening your new warehouses? And how much is the annual investment? The second issue is on the financial debt and the repayment. If I'm not wrong, you have to pay penalty on the -- if you repay the debt from year 2027 onwards. And also, you're still accounting for the opening fee. How we -- may we think about which will be the trade-off between renegotiating the debt and all the other impacts it has? Alberto Valdes: All right. Marisa, thank you for your questions. If I understood you well, you're asking about your logistic optimization plan, specifically how much we think it could contribute to improve our adjusted EBITDA margin by 2029 and how much we are -- we expect to invest in each of these platforms and throughout the plan. That is a good question from -- for Guillaume. And you also asked about our -- if I understand you well, the potential refinancing of our debt as from 2027 and how much it could contribute to reduce our financial costs, both questions for Guillaume. The floor is yours when you're ready. Guillaume Gras: Yes, Alberto. Regarding logistics, the gain we expect from this optimization plan by the end of 2029 is 30 bps and requires yearly investment by 20 -- sorry, EUR 10 million to EUR 15 million per year. Regarding debt, as I said, we have a strong penalty until the end of 2026 if we repay now the -- our current debt. So that's the reason why we are waiting for 2027. And today, it's too early to know how much we can save, but we believe that it will be a relevant saving. Alberto Valdes: All right. There are no more questions from our analysts over the phone. Let's now review the written questions received from our shareholders who are following us through the webcast. Some of them have already been answered. Fernando was asking about our plans regarding the business in Argentina and a potential divestment. I think that has already been addressed very clearly by Martin. Then Luis and Jose are asking about the share price potential and also about potential M&A in Spain. I think the first one could be a good question for Guillaume and the one regarding M&A, maybe for Martin. So if you're ready, we can answer these ones. Guillaume Gras: So regarding the share price potential, it's -- of course, we cannot provide any guidance regarding our share price. We know that our stock price has made an extraordinary recovery last year, validating our successful business transformation. However, we see that we are still trading at a significant discount to our European peers on 2026 consensus numbers. According to the latest analyst consensus average, target price is EUR 46 per share. So there is still a significant upside potential. This fundamental upside is based on, let's say, 5 points: one, our unique business model which gives us strong competitive advantages. Our strong -- two, our strong organic growth that significantly outperformed the market; three, the profitability that is above the average of the sector; and also our strong cash flow generation and low leverage profile. That's the main element for the share price potential. Martin Tolcachir: Thank you for this question on M&A. And I would like to start by first saying that our focus and our full priority is to deliver on our strategic plan, the plan that we have shared with you last year and that we are executing rigorously, and any other consideration has to be considered, again, with no possibility to distract us from the execution and delivery of this plan. And this plan is based on customer experience improvement, like-for-like growth and our organic expansion. However, our robust financial position enable us to evaluate potential M&A opportunities within Spain. Spain is still a fragmented market. And we consider that they can be with opportunities that could create additional value for our shareholders and our responsibility is to analyze and consider these options. In any case, not that we -- again, we only consider these opportunities as supplementary to our core organic growth road map, and we will not allow anything to distract us from it. Also important to share with you that we already defined clear criteria for evaluating any M&A opportunity in Spain to ensure that any potential transaction will really create long-term value for our shareholders. In that regard, we only consider assets that are profitable and generate cash flow that are complement to our business model and national footprint, that create clear opportunities of quantifiable synergies, have limited integration cost and offer a real attractive returns. In any case, any event of this nature materialize -- if in any case an event of this nature materialize, we will disclose it to the market swiftly in accordance with the applicable regulations. Alberto Valdes: That is super clear, Martin. Thank you very much. We have another question from [ Alvira ] and Jose. They are both asking for potential dividends or shareholder remuneration in the context, again, of a potential refinancing as from 2027? That maybe is a good question for you, Guillaume. Guillaume Gras: Yes, Alberto. So as you know, dividend payments are not permitted under the current refinancing agreement, but this is not definitive. Delivering -- we think delivering our strategic plan and fulfilling our financial commitments will give us the flexibility to reconsider our capital allocation priorities in due course. And of course, an early refinancing of our current debt facilities from 2027 onwards could remove our current capital allocation constraints. Alberto Valdes: Thank you, Guillaume. The last question comes from Mohanty. He is asking about our store closures in Spain and our prospects? Maybe Martin, if you can answer this last one? Martin Tolcachir: Sure. No problem. You have seen that in 2025, Dia Spain closed 38 stores. This is twice the natural rhythm of annual turnover, as we didn't close any store in 2024 that will be incompatible with the redundancy program that was in place. Looking ahead to the coming years, what you should expect is a natural turnover of around 15 to 20 stores per year. And these closures are mainly based on the change to the rental conditions, store relocations or the closure of underperforming stores. But we will come back to this historical average rhythm -- natural rhythm, I would say, of around 20 stores per year. Alberto Valdes: Super clear. And there are no more questions from the webcast. Thank you very much, Martin and Guillaume. If you require further clarifications, please contact us, the Investor Relations department. And you will find the contact details on this presentation or on our web page. Thank you very much, again, for your attention and look forward to connecting with you at our first half results presentation. Have a nice day.
Operator: Welcome to the FTI Consulting Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mollie Hawkes, Head of Investor Relations. Please go ahead. Mollie Hawkes: Good morning. Welcome to the FTI Consulting conference call to discuss the company's fourth quarter and full year 2025 earnings results as reported this morning. Management will begin with formal remarks, after which, we will take your questions. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including the company's outlook and expectations for full year 2026 based on management's current beliefs and expectations. These forward-looking statements involve many risks and uncertainties, assumptions and estimates and other factors that could cause actual results to differ materially from such statements. For a discussion of risk factors and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the safe harbor statement in the earnings press release issued this morning. A copy of which is available on our Investor Relations website at www.fticonsulting.com as well as other disclosures under the heading of Risk Factors and forward-looking Information in our annual report on Form 10-K for the year ended December 31, 2025, our quarterly reports on Form 10-Q and in our other filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call and will not be updated. FCI assumes no obligation to update these forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. During the call, we will discuss certain non-GAAP financial measures. A discussion of any non-GAAP financial measures discussed on this call and reconciliations to the most directly comparable GAAP measures are issued in the press release and the accompanying financial tables that we issued this morning. Lastly, there are 2 items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical, financial and operating data, which have been updated to include our fourth quarter and full year 2025 results. With these formalities out of the way, I'm joined today by Steve Gunby, our CEO and Chairman; and Paul Linton, our Interim Chief Financial Officer and Chief Strategy and Transformation Officer. At this time, I would like to turn the call over to our CEO and Chairman, Steve. Steve Gunby: Thank you, Molly. Welcome, everyone. Thank you all for joining us today. As I guess some of you have seen already this morning, we reported once again record fourth quarter revenues and record results for this year. I'm hoping that many people on this call know by now that those sorts of record results are not unusual for us. But in this case, given the challenges we faced when we started the year, I'd like to pause on those results a bit more than I typically do and reflect a bit on just how we got here. If you remember, at the beginning of 2025, we talked about the fact that in 2025, we were probably facing more headwinds than I think perhaps we've ever faced during my time here. We talked about the fact in the second half of the year, most of our businesses were slow. In fact, we thought some of the markets we were in were slow, and we are bringing that slowness into 2025. We talked about the fact that though we have a terrifically competitive Tech business. It was facing dramatic declines in second request activity. We talked about the fact that FLC, which was showing the strength we always thought that business could command, was now facing uncertainty regarding demand due to the potential regulatory enforcement changes in the United States. And perhaps most important, on top of all that, we talked about the major challenges we were facing within our Compass Lexecon business, E con. It's a great business, with the world's leading professionals but a business that was facing truly substantial disruption heading into 2025. If you remember that discussion, those discussions of the headwinds from the beginning of the year -- the fact that in the face of all those challenges, our teams delivered the 11th year in a row of adjusted EPS growth and another record year of revenue to me, at least, and I hope some of you, is incredibly powerful, may be more powerful and more noteworthy than just simply another record year and maybe more -- even more powerful than our results in the years where everything seemed to go right. The ability to deliver those sorts of results in the face of those challenges. To me, it's about as convincing an argument for the resilience of this company as I could imagine. And to me, it underscores something that I will come back to, which is not just the powerful trajectory of this company over the last while because powerful trajectories [indiscernible] looking backwards with the incredibly bright future that, that sort of performance portends for this company. So let me take a moment to go back through that year in a little bit more detail. In terms of the negative headwinds we talked about at the beginning of the year, unfortunately most to them turned out to be real. The impact of the slowdown in second activity request, the second activity levels actually did happen and in fact, it worsened in the first half of the year. And CorpFin had an even slower first quarter than we expected. And Compass Lexecon, though we were able during the course of the year to attract some terrific talent, the adjusted EBITDA impact we faced in 2025 was actually substantially worse than we anticipated at the beginning of the year. So how in the face of all that, did we end up with this record year? As Paul will talk about, we did have some onetime things that helped us this year, but those are not the primary story. The primary reason we delivered those sorts of powerful results is because we have such a set of multifaceted powerful businesses, not one great business, but multiple great businesses. with people in those businesses who take responsibility, who take responsibility for making the core investments that drive the business. Who take responsibility for standing by those investors, working them so they can come to fruition. The sorts of actions that we have driven in those businesses in a lot of places around the world, in prior years and in '25 were the actions that allowed us to overcome the headwinds we faced. Let me give a little bit more detail. And let me start with a difficult story, the Tech story this year, at least for parts of the year. Tech business did have a slow year overall. Important, what we always do when we face a business that's slow is evaluate, is it because of the competitive position? Or is it because of transient market factor. If it's -- our position is strong, we continue to support that business, continue to invest in that business. And if you remember, we have, over the last few years, talked about just how powerful our Tech business is, how it strengthened itself competitively and how much share it has gained as a result. When we looked at Tech performance this year, we did not find that those truths have changed. We found the market was slow. Second requests were slow. So we supported that business, the great teams we have in that business, we invested, we attracted talent. And so when the market started to turn later in the year, we were the beneficiaries. So even though Tech business did have a down year overall. You can see in that down here, you can see the resilience that competitiveness and that strength and it began to show up once again in tech's fourth quarter results. In ECon, the situation is a bit different. There, the economics did not improve as the year went on. If you remember, the Compass Lexecon disruption really only started to hit us somewhere in the middle of the second quarter and intensified as the legacy revenue from the professionals who departed slowed down as the year went on. And though we were able to add some terrific talent, talent that we believe over the long term will be terrific assets for this business, those investments in 2025 as usual at the outset hurt the P&L. So unlike Tech, Compass Lexecon did not do a u-turn in terms of quarterly results in 2025. Actually, the year got worse as it went on. And overall, the impact was worse than we anticipated at the beginning of the year. As I alluded to above, what happened is that those results in Compass Lexecon and Tech were overcome by truly terrific performances in the rest of our businesses, businesses in CorpFin and FLC and in Stratcom. I can't do possibly do justice to all the efforts by all the people to make that come to fruition. In CorpFin, for example, there are so many things that made a difference. The results there are attributable to both things we did within the year with really terrific nimble management but also the result of powerful multiyear investments that teams have made in different practices and different geographies. Investments that, for example, have allowed us to transform over the last few years, our restructuring business from what at one point was primarily a U.S. credit or right restructuring business to be a global leader in restructuring, playing and leading in many places on both creditor and company side, which in turn, I believe, makes us right now the #1 or #2 position in restructuring in more markets around the world than any other player. Those sorts of moves individually look small, but collectively, they have allowed us to move from a position 15 years ago when we were not the prime player to win, say, the bulk of the global Lehman Brothers bankruptcy to today where we are top of mind team, the top of my team, I believe, to help with the massive global engagement, whether it's Hertz or Steinhoff a couple of years ago or this year with Sunnova Energy, Spirit Airlines, Wolfspeed or others. And that is just talking to the transformation of our restructuring position equally or perhaps even more powerfully are the result of our investments our teams have made in building multiple businesses beyond restructuring. Our set of transaction businesses, which delivered record results this year even in slow markets and our transformation set of services, which despite having some extraordinary slow market, delivered a terrific second half of the year. And our teams did all that while continuing to recruit record levels of senior talent and promoting our next generation of experts, which, of course, bodes extremely well for our future. In FLC, the progress we have seen reflects the great positions we have built now over multiple years, combined with enhanced leadership and enhanced communication, of those capabilities to the market. Entering the year, however, even with that strength, we had concerns about headwinds from policy shifts like the slowdown in FCPA and other changes in regulations. In the face of those headwinds, our performance in FLC this year, have to be honest, actually astoundedly. I think there were a couple of different factors that particularly drove it. First of all, in slow markets, it is often the case that the strongest players tend to take share, and I believe the actions and investments that leadership have taken, particularly in the U.S. but not limited to the U.S. over the last few years has positioned us to win some of the biggest jobs in the market. If you win the biggest jobs in the market, even if there aren't that many big jobs, you can be up when the market is down. And I think that was part of the reason we were successful this year. The other reason, I think, was the nimbleness of this team in multiple places around the world. Our leaders believe in the proposition that we have built, but they also understand there are multiple potential markets for those propositions. And so understand that the federal government is enforcing certain regulations, but the state governments are, we need to go talk to the people who are working with the state AGs. Our folks did that sort of pivoting activity this year. And that nimbleness allowed us to grow and extend our relevance with clients even though certain places, which have been a big source of revenue in prior years were slow in the face of the regulatory changes. Let me turn to Stratcom. Stratcom, as you know, after close to 10 years of growth, had a bit of slowness over the past couple of years. And so early in 2025, the leadership team did reevaluate some of the bets and they took some corrective action. But at least as important, that team also had the confidence to continue to make investments in many parts of the world and in many parts of the business where we've been succeeding and have conviction. Those sorts of investments in areas like corporate reputation, public affairs, M&A, activism, crisis, together with some terrific promotions and hires in prior years, drove a powerful return to growth for Stratcom this year. If you add this all up, the headwinds certainly were there in 2025. The combination of Tech and ECon added up to almost $100 million of adjusted EBITDA headwind last year. Those headwinds were partially overcome by some onetime benefits like positive litigation settlement. But the primary factor driving this outperformance was $135 million of adjusted EBITDA growth in the other 3 segments. Let me leave 2025 behind. And if I may share a few thoughts about where I believe that leaves us going into 2026 and beyond. Entering '26, we still have some substantial headwinds, particularly early in the year. The most substantial one involves Compass Lexecon, which Paul will talk about, where we have the full cost impact in our P&L, but still haven't yet started to see anywhere near the full benefit of the people we've added. And critically, in the first couple of quarters, we are cycling the part of the year last year before the disruption really started to impact us. So for the first half of '26, the year-on-year comparisons will be quite difficult for Econ Consulting. The second headwind relates to onetime benefit even though they weren't the primary reason we outperformed in 2025, there were some significant benefits in last year's first quarter, mainly again the positive legal settlement I mentioned. So again, early in the year, we have the issue of cycling those. The third headwind is different, more fundamental and more related to the business and something we've seen from time to time in the past. As you've seen, we continue to add senior head count last year. And given our low leverage expert model, we will continue to add senior head count when the right people become available. And as you know, that investment is a negative hit to P&L initially. Although we are a senior-led model and even with AI-created efficiencies, we do need also superb junior people to support those senior people. And because of caution coming into last year, we didn't do quite as good a job as we could have been adding the terrific junior people to support the senior people. And so we are looking to add junior talent, particularly in the second half of the year. So because of those near-term headwinds, though we are targeting are clearly targeting stronger revenue growth and targeting solid growth in adjusted EPS again next year. We are not yet back to forecasting the sort of double-digit growth in EPS that we have averaged since 2017, not yet back to that. Let me try to put '24, '25 and our outlook for '26 into a broader perspective. If you look over the last 24 or 30 months, many competitors have faced some of the slowest markets they've seen in many years. And some like us have had their own idiosyncratic disruptions of significance, ours obviously being the disruption in Compass Lexecon business. And we've been affected by those. Of course, we have, all companies are, and all companies face those sorts of things over time. If in the face of that, we achieved the midpoint of our guidance in 2026. Notwithstanding all that, we will deliver adjusted EPS growth for the 12th year in a row. And we will do that while continuing to invest in great senior talent and junior talent. We will have the largest, most powerful group of senior and junior professionals that we've ever had, we will be working on the most powerful set of assignments, brand building assignments, supporting our clients on their most critical issues and opportunities, which in turn will further enhance our brand. To me, that shows once again, yes, there are lots of idiosyncratic effects that can affect you and they can affect you substantially for a bit. They are a short-term transient market forces that can be a headwind. But my 40 years of professional services say that if we focus on the things you can control, the things you believe in, making sure you have great value propositions in areas of real importance for clients and you focus relentlessly on being the best in those over any intermediate period. The factors you control, trump the idiosyncratic factors and you persevere, you succeed no matter what the markets are. I think the last 2 years as well as the last 5 and 10 have shown that. They show the immense power of having great teams of committed leading experts, particularly in today's increasingly disrupted world. All of that leaves me notwithstanding any headwinds we faced in '25 or facing '26 or beyond enormously confident about the power and future trajectory of this company. With that, let me turn this over to you, Paul. Paul Linton: Thank you, Steve, and good morning, everybody. But as Steve said, we delivered another record year. So I'm pleased to take you through our full year and quarterly performance and provide our guidance for 2026. Beginning with our full year 2025 results. Record revenues of $3.79 billion increased 2.4% compared to 2024, which reflects record performance in our CorpFin, FLC and Stratcom segments as each of those businesses delivered double-digit organic growth in 2025. This robust growth more than offset declines in our Economic Consulting and Tech segment, which, as Steve discussed, faced headwinds this year. Important, even with those headwinds, which were worse than we anticipated at the beginning of 2025, the breadth and depth of our offerings allowed us once again to deliver record revenues as well as record adjusted EBITDA of $463.6 million and record GAAP and adjusted EPS of $8.24 and $8.83, respectively. Now turning to the details of the fourth quarter. Revenues of $990.7 million increased 10.7% compared to the prior year quarter. As discussed in our Q3 earnings call, we expected the fourth quarter seasonal slowdown across the business. Instead, revenues increased 3.6% sequentially with every business, except FLC delivering sequential growth. Fourth quarter net income of $54.5 million increased 9.7% compared to the prior year quarter. The increase in net income was partially offset by an $11.8 million valuation allowance expense again certain prior year foreign deferred tax assets. GAAP EPS of $1.78 increased 29% compared to the prior year quarter. Adjusted EPS of $1.78 increased 14.1% compared to the prior year quarter. As a reminder, Q4 '24 adjusted EPS excluded an $0.18 special charge related to severance. Both GAAP and adjusted EPS included the valuation allowance expense which reduced EPS by $0.38. SG&A of $213.6 million compared to $208.1 million in Q4 of 2024. The increase was primarily due to higher variable compensation, legal and business development expenses, which were partially offset by lower bad debt and travel and entertainment expenses. Adjusted EBITDA of $106.2 million or 10.7% of revenues compared to $73.7 million or 8.2% of revenues in the prior year quarter. Our fourth quarter effective tax rate of 37.1% compared to 16.9% in Q4 of 2024. Absent the valuation expense, our effective tax rate would have been 23.6%. Billable head count decreased 3.2% and non-billable head count decreased 2.5% compared to the prior year quarter. Now turning to our performance at the segment level for the fourth quarter. Corp Fin record revenues of $423.2 million increased 26.1% compared to the prior year quarter. The increase was primarily due to higher demand and realized bill rates in turnaround and restructuring, which grew 25%, transactions, which grew 46% and transformation, which grew 13% as well as higher success fees. Notably, in transactions, our strength is more than just market driven. For example, our top 20 engagements in Q4 2025 more than doubled in size compared to Q4 2024. Our engagements have expanded in size and scope as we bring more of our services to our clients across the deal life cycle. In turnaround restructuring, our record quarterly revenues were driven by rules in some of the largest bankruptcies around the world from Spirit Airlines in the U.S. to Prax Oil Refinery in the U.K. and Azul Airlines in Brazil. In the fourth quarter, turnaround and restructuring represented 47%, transformation represented 28%, and transactions represented 25% of segment revenues. Adjusted segment EBITDA of $80.1 million or 18.9% of segment revenues compared to $44.7 million or 13.3% of segment revenues in the prior year quarter. The increase was primarily due to higher revenues, which was partially offset by an increase in compensation particularly variable compensation and higher SG&A and pass-through expenses. Sequentially, CorpFin revenues increased 4.5%, primarily due to a 10% increase in transformation a 6% increase in turnaround and restructuring services -- or revenues, which was partially offset by a 4% decrease in transactions. Turning to FLC. In FLC, revenues of $192.9 million increased 9.7% compared to Q4 2024. The increase was primarily due to higher realized bill rates for risk and investigation services. Notably, financial services has been a key driver of growth throughout 2025, as this industry is facing a convergence of regulatory and technological fits. For example, we have been hired by many leading financial services companies to evaluate whether the use of AI models by our clients and their partners are in compliance with regulatory standards. The assessment requires expertise in data analysis and understanding of applicable laws and regulations as well as experience and credibility with the regulatory agencies. Adjusted segment EBITDA of $23.8 million or 12.3% of segment revenues compared to $18 million or 10.2% of segment revenues in the prior year quarter. The increase was primarily due to higher revenues which was partially offset by an increase in variable compensation. As I mentioned earlier, FLC was the only business that saw a sequential revenue decline. However, the decline was only 1% compared to an extraordinary Q3, which had record quarterly revenues. FLC's fantastic performance this year showcases how much deep expertise matters. When the clients are facing their most high stakes challenges. And important, our ability to shift our focus as clients' needs change. This is reflected not only in the headline cases or expert supported but also in our revenue per billable professional, which has increased 22% over the last 3 years. Economic Consulting revenues of $176.2 million decreased 14.5% compared to Q4 of 2024. The decrease was primarily due to lower demand for non-M&A and M&A-related antitrust services which was partially offset by higher demand for financial economic services and higher realized bill rates for international arbitration services. Adjusted segment EBITDA of $1 million or 0.6% of segment revenues compared to $15.8 million or 7.7% of segment revenues in the prior year quarter. The decrease was primarily due to lower revenues and an increase in forgivable loan amortization, which was partially offset by lower compensation and bad debt. As you may recall, in Q4 of 2024, Economic Consulting had higher than usual bad debt related to one completed matter. Sequentially, ECon revenues increased 1.8% primarily due to higher national arbitration service revenue. In Technology, revenues of $99 million increased 9.3% compared to Q4 of 2024. This increase was primarily due to higher demand for litigation and M&A-related second request services. Adjusted segment EBITDA of $14.8 million or 14.9% of segment revenues compared to $6.6 million or 7.2% of segment revenues in the prior year quarter. This increase was primarily due to higher revenues. Sequentially, technology revenues increased 5.3% primarily due to higher information governance and litigation services. Important, our technology revenues increased 7% and adjusted segment EBITDA increased 69% in the second half of 2025 compared to the first half of 2025 due to higher second request and litigation revenues. Stratcom's revenue of $99.4 million increased 14.8% compared to Q4 of 2024. That increase was primarily due to higher demand for corporate reputation services and an increase in pass-through revenues. Adjusted segment EBITDA of $19 million or 19.2% of segment revenues compared to $13.8 million or 15.9% of segment revenues in the prior year quarter. This increase was primarily due to higher revenues, which was partially offset by higher pass-through expenses and variable compensation. Sequentially, Stratcom's revenues increased 11.2% and primarily due to a $3.4 million increase in pass-through revenues and higher-than-expected demand for corporate reputation and financial communications services. Stratcom's fantastic Q4 and record 2025 performance underscore the relevance of our expert-driven model when clients are facing [ bet ] the company issues and the value of that expertise is reflected in our higher revenue per billable professional. Let me now discuss key cash flow and balance sheet items. Net cash provided by operating activities of $152.1 million for the year ended December 31, 2025, compared to $395.1 million for the year ended December 31, 2024. The largest driver of the year-over-year decline was higher forgivable loan issuances. In Q4, we issued $3 million in forgivable loans net of repayment following $18 million, $72 million and $162 million of forgivable loans to existing and new employees and affiliates net of repayments in Q3, Q2 and Q1, respectively for total issuances of $255 million in 2025. During the quarter, we repurchased 519,944 shares at an average per share price of $160.58 for a total cost of $83.5 million. During full year 2025, we repurchased 5.3 million shares or 15% of our shares outstanding at an average price of $163.07 for a total cost of $858.6 million. As of December 31, 2025, approximately $491.8 million remained available under our stock repurchase authorization. Base sales outstanding of 88 days at December 31, 2025, compared to 97 days at December 31, 2024. Now turning to our 2026 guidance. We are, as usual, providing guidance for revenues and EPS. We estimate that revenue will range between $3.94 billion and $4.1 billion. We estimate GAAP EPS will range between $8.90 and $9.50. We do not expect there to be a variance between GAAP and adjusted EPS. Our 2026 guidance reflects several key factors that shape our outlook. First, I want to address an issue that is a major focus in the marketplace, AI. Embedded in our guidance is our experience that the proliferation and broad adoption of AI will continue to be a significant positive for FTI. Important that we are not a software developer or reliant on commodity services. FTI is a low leverage, expertise-driven firm. We leverage technology in many places, which is in support of highly expert-driven work and crisis situations and in times of transformation. Our competitive advantage is we have senior people, we're able to operate in high-stakes matters where clients need accountability and judgment and people who can quickly help them navigate those situations for the right results. Our history has shown that FTI has benefited in periods of disruption. When risk is elevated and when markets are facing discontinuous change, regulatory shifts or heightened litigation or businesses need to be rebuilt or restructured. We are already finding that AI is generating entirely new categories of work. For example, we are supporting clients in a new set of high-profile disputes which involve AI companies and how users are interacting with AI, from ownership of AI generated content, the harm caused by AI misinformation and bias, the unauthorized use of data and privacy concerns. We believe the rapid pace of AI innovation, experimentation and adoption will be one of the most disruptive events in our lifetime. And that disruption is and will drive demand for our experts. Second, the midpoint of our revenue guidance reflects a 6.1% year-over-year growth. To achieve the midpoint of our range, we expect aggregate revenue growth across CorpFin, FLC, Tech and Stratcoms to exceed that midpoint. CorpFin, FLC and Stratcoms are coming off record performances in 2025 and enter 2026 with solid momentum. This is particularly true in transactions and restructuring, risk and investigations, construction solutions and data and analytics and corporate reputation. And as is typical for our business, this momentum is supported by several large engagements. As those matters conclude, they may not be immediately replaced, which we have reflected in our guidance. Tech rebounded in the second half of 2025 and enter 2026 on a much strengthened trajectory. Third, our guidance assumes a multiyear rebuild in our Compass Lexecon business. We are excited about the talent we have retained and attracted and we believe this business has one of the strongest benches of academic economists globally. While we have stabilized our cost base, we continue to face headwinds as we cycle a first half 2025 that was not fully impacted by the revenue -- by revenue disruption or increased cost of retaining and attracting talent. As a result of these tough comparisons on certain compensation costs in Q1 we expect Economic Consulting adjusted segment EBITDA to reach its lowest point in Q1 2026. We expect the business to no longer be a drag on year-over-year EBITDA growth in the second half of 2026. Fourth, we continue to invest in talent. In 2025, we announced 85 senior hires. And in 2026, we plan to build teams around these leaders while selectively adding junior, senior -- sorry, adding senior professionals, where we see the right opportunities. We also expect more junior hiring in parts of the business were hiring lagged in 2025. Fifth, while we remain committed to disciplined cost control, we expect SG&A expenses for the full year to be approximately $45 million higher than in 2025. In particular, Q1 2026 SG&A is expected to be approximately $30 million higher than Q1 2025, primarily due to legal settlement gains in Q1 2025 that will not recur. We will also hold our all Senior Manager -- Senior Managing Directors meeting in April of 2026, resulting in higher event-related expenses primarily in Q2. And lastly, we expect an effective tax rate of 22% to 24%, which compares with 27% in 2025. Overall, our guidance reflects our best judgment at the midpoint and recognizes that our largely fixed cost structure can lead to outsized earnings impact from modest changes in revenue. Before I close, I want to emphasize a few key themes that I believe underscore the attractiveness of our company. First, our diverse portfolio of services allows us to support our clients regardless of economic cycles. From turnaround restructuring to M&A to cybersecurity investigations to crisis communications. Second, as discussed, we are a top destination for great talent. Third, our management team is focused on both growth and utilization. Fourth, our business generates excellent free cash flow, and we have a strong balance sheet that provides us the flexibility to boost shareholder value through organic growth, share buybacks and acquisitions when we see the right ones. These factors combined are powerful and they have been consistent across quarters and years. That consistency has allowed us to deliver 8 years in a row of record revenues and in 11 years in a row of adjusted EPS growth. Importantly, we delivered this performance not only in the areas where market factors were on our side, but also in areas where we faced headwinds, such as 2025. We are tremendously confident in the power of this company and its potential. With that, let's open up the call for your questions. Operator: [Operator Instructions] Our first question today comes from Andrew Nicholas with William Blair. Andrew Nicholas: I wanted to start with one that's pretty similar to the one I started with last quarter, which is just on Economic Consulting. Specifically, how would you -- how much of the kind of stabilization quarter-over-quarter or even the improvement in terms of year-over-year declines would you attribute to the market environment versus improved productivity from some of your recent hires? And on the latter point, just a broader update on how you're feeling about the ramp in productivity of the academic focused hires in particular as you look ahead to '26? Steve Gunby: Thank you, Andrew. Look, I think, as Paul indicated, I think we are not yet at the bottom of the economics of our ECon practice, primarily driven by the Compass Lexecon situation. And of course, the year-on-year in the first half of this year will continue to be a drag given the fact that the impacts really didn't hit us until somewhere in the middle of the second quarter. And I think that's because we've added costs, both to retain people and we've added these great people. And as of yet, we have not yet seen material revenue gains. We've seen some individuals who brought revenue. Some of the people who came, who can bring revenue are still required by their contracts to be doing revenue with the prior employers. And then some of the people we hire are more early-stage academics who have longer-term futures. So it is a slow ramp on the revenue side, particularly in the U.S., is really what I'm talking about. I think -- and particularly in the U.S. antitrust business, there's really 3 different businesses here. The U.S. finance business was hit on the comp line to help retain people, well, we didn't really lose anybody, and the revenue was actually up in '25, and we feel like that's in pretty good shape. The European business was down even though we didn't lose much talent. And that might have been market conditions. It might have been us being a little distracted by the fight to keep our people. But we are expecting that to get back to solidity by the second half of the year. And we have early signs that it is -- the revenues are coming back there. The real issue is the U.S. antitrust business, where we invested a lot to add that talent and it's slow progress. I think it's an amazingly good group of economists. It is not an aggressive group of business developers. And so you got to get out there and let the lawyers know that you have these great talent. And I think it's taken a while for us to do that. I think we're now finally doing it in a bigger way, and we're getting receptivity as you might imagine. And I think if you look recently for example, the [ Med case, ] which was a major, major case a few weeks ago, the judge cited our testifiers, Dennis Carlton, John List, these are the leading academics that we're talking about. But I don't think most lawyers knew that John List was with us until then, and we're changing that. But I think it's a work in progress, but it's a worthwhile endeavor, but I can't tell you it's a median rebound there. Does that help? Andrew Nicholas: Yes, absolutely. No, that's super helpful. And then I guess my follow-up question. Paul, you talked about AI and the defensibility of the model. in this kind of new AI paradigm. But I'm curious maybe addressing or talking about it from a different perspective, which is on the restructuring front. To the extent that AI is a disruptor as we expect it to be. Do you expect that to positively impact demand for restructuring or business transformation? And if that's the case, how do you feel you're kind of situated from a staffing or capacity perspective to capture that upside and drive growth in that business in that type of scenario? Paul Linton: Maybe I'll start and then see if Steve wants to weigh in. We -- I think we believe we've built the #1 or #2 global restructuring practice. So from that standpoint, we benefit from disruption in markets as businesses have to go through financial difficulties, whether we're helping on the creditor side or on the company side. So from that standpoint, I think we feel well positioned to benefit. Now the timing of disruption from AI or from other factors, I think that's anyone's guess how quickly that will unfold. Surely, there will be winners and losers as AI disrupts business, various businesses in various industries, whether that hits in '26 or '27 or '28 I think that's less certain. Regardless, I think we're well positioned once it starts to happen and once it starts to unfold. Steve Gunby: Maybe I could just broaden that point here. I think that the key thing is our company exists because there is disruption in the world. If the world were calm, no bankruptcies, no crisis, no litigation, no difficulties, no M&A, no stress I don't think my company would exist. We exist because the world is complicated, changes fast. It has disruptive elements. It has -- there's litigation, somebody does you wrong, you sue somebody. And it takes real expertise to navigate those and to win the litigation and to dive in to figure out what happened on the cyber account and so forth. So our company exists because in times of crisis and disruption, you need the leading experts. You don't need technology. You need leading experts who know how to use the latest technology, and that's what we are, which is why we are finding that AI so far -- and we believe going forward will be a positive for our company. So I hope that's helpful, Andrew. Operator: [Operator Instructions] The next question comes from James Yaro with Goldman Sachs. Unknown Analyst: [ Divyam ] here on behalf of James. I know you touched upon this aspect in the prepared remarks, but could you update us on the impact of AI on the business? What are the impacts you are seeing thus far. You've talked about this being a positive for the business in 2026. Could you elaborate around -- more around that aspect where you will see any benefits? And whether there are any more negative impacts, which you can foresee? Steve Gunby: Yes. Look, I think risk a little redundancy. I think the main places where we're seeing the benefit is more on the revenue side. Do we have some efficiency gains? Of course. Will we need as many people summarizing EU regulations in Brussels at the lowest level, the summarization function? You don't need as many. But do you still need people who understand what EU regulations are going to do. The impact on the company? Or are they going to actually enforce it the advice, the value-added, you need that. You need that. And by the way, as the world gets more disruptive and there's EU regulations on AI, you need people who could do that and understand AI and so forth. And so -- we think our Brussels business is a growth business. Do you tweak the leverage a little bit? Yes, you tweak the leverage. But mostly, so far, we're not finding it on efficiency. And we haven't yet torn apart all our cost structures and then are claiming big dollar gains on that. Where it is, is, this disrupted world is triggering demand. And the last question said, will it trigger more bankruptcies and so forth? We suspect it will at some point. I don't think that's where it is. But I think as Paul referred to, in our FLC practice, where the regulatory changes, you have AI companies that are, what do you call, fintech companies that are using AI models that somebody has to go into that fintech company and figure out, is it violating regulatory standards. And that requires somebody who understands regulation, who understands the regulators and is credible with the regulators who could testify in court if they needed to and understands how to tear apart in AI algorithm. How many people do you know that can do that. And so we get work from this. And we think that the more disruption happens from AI, the more of those sorts of things are going to happen, whether it's crisis, communications around those sorts of things or it's bankruptcies around those sorts of things or it's investigations around those sorts of things. So that's why we're feeling like over the next years, this is a positive force for a firm that is like ours, a low leverage, expert-driven firm positioned against disruption. Does that help? Unknown Analyst: Yes, that is super helpful. As a follow-up, there appears to be some market disruptions that are impacting the capital market, which could impact a few of your businesses. Could you speak to whether you're seeing any impact thus far? And could there be some if this AI disruption continues? Steve Gunby: Yes. No, of course, I don't know which ones, there seems to be less disruption in the market. But for example, I think we were involved in one way or another in a couple of the private credit perturbations that happened a while ago. And obviously, we have capability to help in any sort of credit thing there, whether it's investigations, fraud investigations or its bankruptcy or it's advising creditors on those sorts of things. To the extent that I think Jamie Dimon said when you see a cockroach, you rarely see just 1 to the extent he's right. We're positioned on that market to be of help to people. But I think in general, when there's economic dislocation something pops out, whether it's bankruptcy or it turns out that somebody who's committing fraud or somebody just needs to advice or there's M&A opportunities, and we are positioned against all of those. Does that help? Unknown Analyst: Yes. Again, that's helpful. One last question from our end. You reduced debt by $145 million Q-o-Q and repurchased less debt and at least what we thought. Could you help us think through the capital deployment priorities from here and view on the ability to add leverage from here? Steve Gunby: I didn't understand the point about us reducing debt less than you expected. Is that the question? Or you're saying going forward? What's your question? Unknown Analyst: No. So debt reduced by $145 million Q-o-Q in 4Q '25 and the repurchases were less than what we had at least thought about heading into the earnings. So just wanted to get some clarity around the capital deployment priorities heading from here. Steve Gunby: Yes. Look, I think our capital strategy has been the same for -- since I've gotten here, which is part of the thing that makes our company -- the 2 things that create value for our shareholders are organic growth and the ability to sustain organic growth. And then given that it's organic growth primarily, and it's not acquisitions, we can grow organically and have very positive cash flow. And so therefore, the other issue is for us to use our cash wisely. And our definition of why, is, use of cash is dependent on circumstances. A-plus acquisitions that come along, they don't come along that often, and they don't come along with the right culture of people that often and they don't come along with the right culture and cheap and reasonable price. But when they do, when we have them, we do them. Historically, that's not been the primary use of cash. When we had high expense debt, we got rid of some of the high expense debt. And then on share buybacks, we have been very opportunistic. Our experience is that our company is a sustained growth engine and sometimes the market believes and then at least 3 times in my 10 years here, the market has fallen out of belief. One in 2017 when -- even though we were forecasting reaffirmed guidance, the stock dropped back into the 30s, one at the end of 2020 when we said the restructuring boom from COVID was over and yet, it didn't mean demise for our company because our testifiers were now able to go back in court and the stock dropped from 154 to I think, 96. And then the third, candidly, this year, where we clearly expressed the view of headwinds. But we also expressed the view that those were temporary headwinds that we thought we could overcome. And we don't believe the market fully understood. And so we don't buy shares back every quarter, but when we believe the market has fundamentally overgeneralized a short-term hit, and we think we can create value for our shareholders by going in. And so I think all 3 of those times, we bought well north of 5% of our company back. And so that's what we monitor. And if we find the right opportunities, we're not afraid to jump on it. And as you've mentioned, whatever you say about our debt situation, is tiny, right? I mean I think our net debt in the fourth quarter might have been $100 million, which puts us like 1/4 of EBITDA. So I think we have plenty of opportunity to do whatever seems to make sense going forward. Does that help? Operator: As there are no analysts left in our queue, this concludes our question-and-answer session. Steve Gunby: Let me just say thank you all for your attention and your support. It was an interesting year with a fair amount of challenges. I have to say I'm so excited about our team's ability to weather those challenges and important different than when I got here 10 years ago, how many people in our company have now the confidence to if they have a slow quarter to continue to invest behind great businesses and great people. We have now proved time and time again that, that works for the multiyear trajectory. And it builds a firm that people want to join and be part of. It's a fun journey, we look forward to continuing it with you. Thanks for your time. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and welcome to FEMSA Fourth Quarter 2025 Conference Call. My name is Augier, and I'll be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions] I would now like to hand the call over to Mr. Juan Fonseca, Investor Relations Director at FEMSA. Please go ahead, Juan. Juan Fonseca: Good morning, everyone, and welcome to FEMSA's Fourth Quarter and Full Year 2025 Results Conference Call. Today, we are joined by Jose Antonio Fernandez Garza, FEMSA's CEO; Martin Arias, our CFO; and Jorge Collazo, who heads Coca-Cola FEMSA's Investor Relations team. The plan is for Jose Antonio to open the conversation with some high-level comments on performance, followed by a strategic overview and an update on our priorities. Next, Martin will provide more details on the results. And finally, we will open the call for your questions. Jose Antonio, please go ahead. Jose Antonio Garza-Laguera: Thank you, Juan. Good morning, everyone. Today, I would like to split my remarks in two. First, we will focus on operational results and trends, highlighting some important points and takeaways. Then we will address more strategic topics, including an update on our priorities as well as some relevant structural changes we are putting in place as we prepare for the next stage of growth. Let me begin with the performance of our business during the fourth quarter, particularly at OXXO Mexico. Back in October, during our previous quarterly call, we mentioned we had observed what seemed to be an inflection point in the same-store sales and traffic trends that made us optimistic about the fourth quarter and beyond. As you saw in the numbers, this improved trend indeed continued through the end of the year and allowed us to close 2025 on a positive note with same-store sales for Proximity Americas approaching the mid-single-digit growth range at 4.4% and traffic that while still negative, 0.6% was markedly better than what we saw earlier in the year. While we are not satisfied with the year's performance, as we look back at 2025, we have gained many lessons, and we can also take some encouragement from the fact that initiatives put in place in the second half of 2025 have begun to show results. We began 2025 with a challenge. Traffic at OXXO Mexico was falling by mid-single digits, and it was not following the cyclical recovery we had expected. Initially, we attribute it to the economy and the typical post-election hangover. Accordingly, it took us a little while to diagnose the causes. But once it became clear to us that we had a competitiveness issue versus the traditional trade around some of our core categories, the team designed and put in place a broad set of tactical affordability-focused initiatives. This including growing our mix of returnable beverage packages, increasing multi-serve presentations, seeking from suppliers more competitive promotions and packaging architectures as well as agreeing with suppliers on adding low price point SKUs in core categories like snacks and tobacco. The strategy worked as designed. We quickly began to recover market share. And as we saw in today's results, our numbers are now trending closer to our long-term expectations. Obviously, we do not operate in a vacuum. Earlier in the year, we mentioned abnormally poor and wet weather in most of the country as a relevant factor in our traffic underperformance and weather was more normal during the fourth quarter. That helped. We also talked about a soft consumer environment and generally lackluster macro sentiment around investment and economic activity in Mexico. Those have not really improved in recent months, but they seem to have stabilized. However, by focusing on the variables and drivers that we could control, our efforts delivered the desired results. That is an encouraging reminder of the strength and resilience of the OXXO platform. Having said all that, 2025 also highlighted the fact that the core consumer occasions that we serve best, trust, impulse and gathering still have significant opportunities to expand the number of consumer occasions where OXXO can be more relevant and create value. 2025 also highlighted the need to prioritize and focus on a few bold initiatives that will create significant new waves of value. Furthermore, as we already mentioned in our last call, in 2025, we began to address the need for a leaner fit-for-purpose organizational structure, which has now been fully implemented at OXXO Mexico and is currently being implemented at Proximity Americas as well as FEMSA Corporate. More details on that later. As we look at 2026, we aim to regain OXXO Mexico's growth and relevance with a clear focus on recovering traffic and same-store sales through a sharper value proposition and improved customer experience and strong operational execution. In the short to medium term, the team is working hard to take our core categories to their full potential, which means enhancing our already strong competitive position on impulse while also prioritizing and focusing on improving our position in food premiums with a focus on our coffee and breakfast offerings. On this front, we have a number of tests in place and are already seeing some compelling results from initiatives such as increasing the affordability of our regular coffee offering, while we learn from our successful food propositions in Colombia and Brazil and adjust them for the Mexican consumer, aspiring to be a go-to solution for a convenient and value compelling breakfast alternative. Further down the road, we believe we can also pursue and capture new missions like the daily replenishment occasion by improving our offering of pantry essentials at great value while continuing to strengthen our beyond trade opportunity with incremental payments and financial solutions. In the future and in various forums, I will begin to share more details and updates on some of these long-term initiatives. Considering that we currently only represent around 10% of all the categories in which we participate, we continue to see an enormous opportunity to keep growing our business in Mexico by capturing a broader share of consumer spending, increasing our store base by more than 1/3 over the next decade and leveraging that incremental scale to deliver growth while sustaining high returns. In fact, if we look at the whole of FEMSA during 2025, we deployed over $1 billion of CapEx in organic growth in Mexico across our business units for the third year in a row, despite the fact that at the consolidated level, you see a reduction versus 2024, reflecting our ability and willingness to adjust the pace of investment in challenging environments. I want to briefly highlight some of the operations delivering standout performances during the quarter, beginning with OXXO Colombia, where our value proposition has finally come of age, and we generated positive EBITDA for the first time for the full year and nearly breakeven EBIT in the fourth quarter. For its part, Bara showed strong momentum in the discount space, also growing its same-store sales by double digits, while we continue to fine-tune its value proposition and increase the mix of private label offerings now approaching 30% of the mix for all of BADA. And in Europe, Valora generated record operating income in 2025 on the back of strong retail results in Switzerland and solid expense containment. For Coca-Cola FEMSA, as Juan mentioned in more detail during their call, we remain focused on three clear priorities: first, driving volume by growing the core, strengthening execution and reinforcing our portfolio; second, take Juntos+ to the next level, leveraging AI and advanced analytics to create more value for our customers and improve decision-making; and third, continue fostering a customer-centric culture of empowerment. However, just like we point your attention to the successes, we must acknowledge when things do not go as intended. In particular, during the fourth quarter, our Health division again registered a provision for uncollectible accounts for MXN 487 million from the institutional side of the Colombian business, in line with similar provisions registered in 2023 as that segment of the market continues to struggle. This comes as the business in Mexico only begins to stabilize after significant downsizing, combining for an underwhelming result for the quarter. Our new management team at the Health division has completed its initial assessment and has launched a series of initiatives focused on more disciplined use of capital and commercial practices with a focus on cash flow generation and returns. This will be a tough year in terms of results for this division, particularly as it relates to our institutional business in Colombia and the need to stabilize the Mexico operations. Martin will get more into the details in a minute. Now let me get to the second part of my remarks. Beyond the quarterly results and operating trends, I want to provide you with a broad update on our strategic priorities as well as some of the changes we are making to our organizational structure to better align with those strategic priorities and with a focus on increasing efficiency and effectiveness. As we have said in the past, we strive to create value by generating returns in excess of our cost of capital. This means focusing our investment capacity with precision and purpose on those initiatives that can create the most value as well as putting the strongest possible team together and deploying our best people to where they are most needed. At the same time, together with Martin and the finance team across our business units, we are putting in place a renewed focus on cash flow rigor, pushing the teams to think about cash with an owner's mentality and exerting full control over the levers that drive cash, including an obsessive focus on managing working capital and highly disciplined investment in CapEx. Let me briefly touch on expansion, which remains a key pillar of our long-term growth strategy. During 2025, we instilled a more rigorous approach to store base growth across the portfolio, particularly in Colombia and Brazil. We have closed early cohort and underperforming stores as we keep refining our value proposition, resulting in a more measured number of net additions. This was a deliberate adjustment, not a structural shift in our ambition, and we are well positioned to accelerate growth going forward. Our top priorities remain consistent with what we have discussed in the past. As I just mentioned, the Mexican market will continue to be at the top of our list. OXXO Mexico remains our first priority as we continue to capitalize on the white space opportunity while we strengthen and expand our value proposition by consistently adding incremental layers of value to ensure we increase our relevance for an evolving Mexican consumer. Mexico is also Coca-Cola FEMSA's largest market, and we continue to develop and deploy the right market and portfolio strategies to grow our core and successfully navigate a challenging regulatory environment. At Bara, we now have two growth engines, having just opened our second distribution center in Monterrey. Together with our Bajio and Jalisco growth sale, we will continue to fine-tune our value proposition and raise our mix of private label beyond the current levels. 2026 should also be the year that we increase our pace of store expansion with plans to grow our store base by approximately 1/3 during this year. Moving to Brazil, our second largest market, we now have full strategic control of OXXO, and we will continue to fine-tune our value proposition while we also accelerate growth within the State of Sao Paulo. In particular, we will continue to develop our successful prepared food offerings, while we also increase our operational focus and execution. For 2026, our target for store expansion is approximately 100 net new stores, representing slightly more than 15% growth as we continue to build scale in this high potential market. Brazil is also a very high priority for KOF, where they see a compelling opportunity to keep growing the business, enhanced by cutting-edge digital capabilities with Juntos+. In Colombia, we have achieved strong unit economics at the OXXO store level anchored in a successful value proposition for prepared food. As a result, we are ready to further scale the operation in a disciplined manner with plans to increase our store base by 20% in 2026. Beyond Latin America, we are excited about our operations in the U.S. and Europe. In the U.S., we remain focused on fine-tuning our value proposition with a focus on prepared food, testing different alternatives and continuing with the conversion of the store base to the OXXO banner with positive results. For its part, Valora has exceeded expectations, particularly through the strength of our Swiss retail platform and the management team's proven ability to operate with increasing levels of efficiency. To better support these priorities and to prepare us for sustained long-term profitable growth, we have redesigned our organizational structure, integrating the leadership teams that existed at FEMSA corporate and at the Proximity and Health division, consolidating them at the FEMSA corporate level. As a result, in addition to Coca-Cola FEMSA, we will have the four large retail divisions reporting to me: OXXO Mexico through Carlos Arroyo, Proximity Americas and Mobility through Constantino Spas, Health and Multi-Formats through [indiscernible] and Europe through Michael Mueller. All corporate functions such as finance, strategic planning, human resources, corporate affairs and sustainability will also be consolidated at the FEMSA level. This consolidation will allow us to run a leaner, more streamlined organization while realizing meaningful synergies and efficiencies. Another critical component of this restructure effort involves Spin and OXXO Mexico. As we have continued to develop the value proposition of Spin during the past 5 years, we have come to understand that the physical growth path of OXXO and the digital growth path of Spin not only are not divergent, but they actually converge and intersect. Digital does not replace the store. It amplifies it. And the store is not a constraint on digital. It is its greatest competitive advantage. As a result, we have redefined our ecosystem 2.0 as a model focused on OXXO Mexico, creating greater alignment between Spin and OXXO. The principle is straightforward, one client, one strategy and one aligned P&L. This implies narrowing our focus and emphasizing the role of Spin within the OXXO store network, for example, by postponing the application for a full banking license and instead giving us the time to clarify the lending opportunity through the right partnership. This increased alignment of the Spin and OXXO platforms will allow us to merge digital and physical talent, capabilities and ways of working to reinforce our omnichannel value proposition where payments, services, loyalty and data are embedded into the store experience while creating important savings and efficiencies. Spin already reduced its negative EBIT for the full year 2025 by almost 30%, and we are estimating a further improvement of close to 20% in 2026. In the context of this important strategic adjustment, today, we want to recognize Juan Carlos Guillermety's leadership in building digital capabilities that are critical for FEMSA. Under his guidance, our ecosystem strengthened its value proposition, consolidated strategic partnerships and defined our financial ambition, setting the foundation for this new stage of integration. Juan Carlos will transition into an advisory role and Rodrigo Garcia Jacques will assume the leadership of Spin with a clear mandate, consolidate execution, ensure a permanent alignment with OXXO Mexico and maintain operating discipline. We expect the combined effect of all these restructuring efforts and the sustained improvement in performance from Spin to result in a positive impact on our bottom line of approximately MXN 1 billion on an annualized basis, which will show up in our results mainly at the corporate level. The efficiencies will ramp up during 2026 and reach their full impact in 2027 and beyond. Martin will also elaborate on some of the ground level implication of these changes. And with that, let me turn it over to Martin to go over the numbers in more detail. Martin Arias Yaniz: Thank you, Jose Antonio. Good morning, everyone. Let me begin by walking you through FEMSA's consolidated financial results for the fourth quarter of 2025. During the fourth quarter, total revenues increased by 5.7% year-over-year, reflecting a combination of improved trends in Proximity Americas and continued growth outside of Mexico, particularly in Coca-Cola FEMSA and Valora. Operating income increased by 8.5% as cost containment initiatives offset gross margin pressure. These results reflect, for the most part, a recovery in the fourth quarter relative to the first 3 quarters. Net consolidated income for the quarter amounted to MXN 12.7 billion, representing a 33.6% increase compared to the fourth quarter of last year, driven mainly by an increase in income from operations of 8.5%, nonoperating expenses that fell by 62.7% and a decline of 26.6% in income taxes due to nonrecurring items, which were partially offset by MXN 830 million of foreign exchange loss from our U.S. dollar-denominated cash position compared to a gain of MXN 2.7 billion in the comparable period and lower interest income as a result of a reduced cash position during the period. Turning to our operating results. Starting with Proximity Americas. During the fourth quarter, total revenues increased by 5.3% or 6.3% on a comparable basis, mostly driven by same-store sales growth in Mexico as well as top line growth in OXXO Colombia and Peru. Gross margin stood at 48.1%, reflecting a 40 basis point expansion as a result of an improvement in OXXO LatAm, driven by increased scale and more disciplined commercial negotiations with suppliers. Operating income increased by 7.7%, while operating margin was 12%, reflecting the initial benefits of our overhead reduction and productivity initiatives, along with disciplined expense management, which allowed us to translate most of the gross margin expansion all the way to the operating level. During the quarter, Proximity Americas added 209 net new stores, closing the year with a total of 1,125 stores. At the same time, we have been prioritizing a rigorous evaluation of our entire store base. And as part of this process, we closed the number of underperforming stores in LatAm, particularly in Colombia. These actions allow us to enter 2026 refocusing growth on profitability and strong unit economics at the store level. Moving on to OXXO USA. We ended the year with 50 converted stores under the OXXO banner. We continue to make progress in our foodservice strategy, expanding our hot food and coffee offerings as well as assortment expansion. All these initiatives are part of a learning process as we continue to refine the value proposition in the region. Finally, at Bara, we added 63 net new stores during the quarter and 157 during the full year, remaining on track with our long-term growth ambitions while continuing to optimize the discount offering. In Europe, Valora delivered revenue growth of 2.5% in pesos in the fourth quarter. Gross margin was 37.9% and operating income increased by 10.8%, reflecting continued cost discipline and a favorable mix in Swiss retail while navigating a challenging macro environment in Germany and a softer performance in foodservice B2B. The decline in gross margin of 550 basis points is a result of the reclassification of full year 2025 distribution expenses from SG&A to cost of sales, all in the fourth quarter. On a comparable year-over-year quarterly basis, the fourth quarter 2025 gross margin would have expanded by 70 basis points. There is no impact on operating income as a result of this reclassification. Moving to the Health division. Fourth quarter revenues increased by 4.6% or 6.7% on a comparable basis, driven by strong growth in Colombia and Ecuador, complemented by flat performance in Chile, while Mexico remained under pressure, primarily due to lower store base compared to last year, following the closure of underperforming locations as part of our restructuring efforts. Additionally, during the quarter, we reclassified the full year 2025 distribution expenses from SG&A to cost of sales, all in the fourth quarter. This change was made purely for accounting presentation purposes to better align the classification of distribution costs with the nature of the expense. There is no impact on operating income because of this reclassification. However, as a mechanical effect of this change, gross margin was impacted by approximately MXN 1.8 billion, reflecting the proportional shift of those expenses into cost of sales. This is the full amount for the year 2025, which we are recording in the fourth quarter. If we only recorded the amount corresponding to the fourth quarter, the impact to gross margin would have been a reduction of 110 basis points relative to the comparable period. Additionally, during the fourth quarter, we reclassified certain administrative expenses into selling expenses for the full year. For comparability purposes, we suggest focusing on the sum of selling and administrative expenses. Operating income from the quarter was MXN 573 million with an operating margin of 2.5%, largely reflecting a deteriorating environment in the Colombian institutional business, where we took a charge of MXN 487 million for uncollectible accounts. Excluding this effect, operating income would have been MXN 1 billion with an operating margin of 4.6%. At OXXO GAS, same-station sales increased by 8.7% during the quarter, supported by higher wholesale volumes, which is allowing us to leverage our scale and optimize logistics. Operating margin stood at 4.8%, maintaining profitability levels compared to last year, reflecting disciplined cost management and operational efficiency. Turning briefly to Coca-Cola FEMSA. During the fourth quarter, the company delivered revenue growth of 2.9%, supported by growth across geographies, particularly outside Mexico. Operating income increased by 13.3%, reflecting continued focus on efficiency and disciplined execution. As always, we encourage you to refer to Coca-Cola FEMSA's earnings call for a more detailed discussion of the results. As Jose Antonio mentioned in his remarks, we continued advancing our restructuring process. The initial phase began late last year with the fit-for-purpose initiative, which was focused on OXXO Mexico and Health, and we expect to generate more than MXN 800 million on an annualized basis and has recently been put into place. We are now extending that discipline across Proximity and Health, FEMSA Corporate and Spin, including the consolidation of overlapping structures between the Proximity and Health division and FEMSA Corporate and between OXO Mexico and Spin to generate additional savings. These initiatives will generate approximately an additional MXN 1 billion on an annual run rate basis beginning in 2027, most of which will be reflected at the FEMSA corporate level. Due to the timing of the transition and the implementation of the new structure, we will not begin to see the full run rate benefit until the end of 2026. These efficiencies are primarily driven by headcount optimization, the simplification of the organizational structure as well as improving results at spin, supported by underlying business momentum and an organizational restructure in that business. Importantly, in the fourth quarter of 2025, we recorded provisions related to this restructuring process, which will temporarily offset a portion of the savings before the full benefits are reflected in our results. Before closing, let me briefly address capital allocation. During the fourth quarter, we deployed MXN 14.2 billion in CapEx, bringing full year CapEx to MXN 45.3 billion, focused primarily on store expansion, manufacturing, supply chain infrastructure and strategic capabilities across the company. That said, full year CapEx came in below 2024 levels, mainly driven by three factors. First, in Mexico, a softer macro environment allowed us to prudently postpone certain capacity and infrastructure investments without compromising service levels or long-term growth plans. Second, as we just mentioned, we implemented a measured slowdown in expansion in selected markets, particularly in OXXO LatAm, where we prioritize profitability and unit economics or pace of growth. Third, this outcome also reflects a renewed discipline in capital allocation, ensuring that every peso deployed meets our return thresholds and strategic priorities. On this point, we are increasingly linking expansion decisions to clear visibility on traffic recovery, margin sustainability and cash generation. Importantly, none of these adjustments alter our long-term growth runway. Instead, they demonstrate our ability to be flexible on investment timing in response to market conditions while preserving financial strength and return discipline. In terms of shareholder remuneration, for the full year from March 2025 to March 2026, total capital returned to shareholders through ordinary and extraordinary dividends and share buybacks amounted to $3.1 billion at the exchange rates at the time of payment. Importantly, this past January, we completed the deployment of our extraordinary dividend for 2025, totaling $1.7 billion at the exchange rates at the time of payment. Regarding our previously announced $900 million share repurchase objective, we executed approximately $600 million with the remaining $300 million pending execution. This delay was primarily driven by blackout periods during most of the second half of last year, which limited our ability to execute buybacks. Consistent with the road map we presented a year ago, our plans from March 2026 to March 2027 include extraordinary returns of approximately $1.3 billion. Tomorrow, we will present our recommendation to the Board of Directors regarding both ordinary and extraordinary returns of capital, and we will communicate the Board's resolutions accordingly. We expect that by the end of this year, we will be slightly below our target of 2x net debt to EBITDA, excluding Coca-Cola FEMSA, which will require us to consider additional returns. However, given how close we will be to the target and the potential inorganic projects that we are currently evaluating, we want to retain the flexibility to execute on such projects or to announce extraordinary capital returns, including buybacks later this year. It goes without saying that the performance of our business this year will also inform any additional extraordinary decisions. As we look at the year that begins, we are confident in the resilience of our portfolio, the actions we have taken to unlock further value across each of our divisions and our ability to continue executing with discipline. Our focus is clear: improving returns on capital, strengthening the fundamentals of our core businesses and allocating capital thoughtfully to continue to create value for our shareholders. And with that, we can open the call for your questions. Operator: [Operator Instructions] Our first question comes from Thiago Bortoluci from Goldman Sachs. Thiago Bortoluci: Antonio, congrats for the results. Martin, thank you very much for your time. I have two questions here, right? The first one is on the balance between growth and profitability, particularly in OXXO Mexico, right? I remember last earnings call, Jose Antonio, you mentioned a number of initiatives to improve traffic and protect demand. Obviously, a lot of this has been already playing out. But still in this quarter, you had better gross margins and lower traffic at OXXO Mexico, right? So my question is, going forward, how ready do you think the assortment and the value proposition in Mexico is already set? And if there is any low-hanging fruit or any clear initiatives yet to be done, if you could help us just understanding particularly in which category that might come from? And then my second question, maybe for you both on the initiatives and restructurings, right? Obviously, we understand directionally what you're trying to do here. But just on the magnitude, right, this is relevant. Martin mentioned like MXN 800 million plus another MXN 1 billion from the fit for purpose and Spin. This is like almost 3% of your net income, right? So I think the question here is, what are those low-hanging fruits and how possible this kind of efficiencies can exist in a company so efficiencies can exist in a company so efficient as FEMSA. Why hasn't this been done before? And what makes you confident that going forward, this could be fully executed on track? Those are the questions. Jose Antonio Garza-Laguera: Thiago, thank you. Very complete and full questions. I'm happy to address them. Both, I will address the first one, and then I will let -- I will address a brief thing on the second one, but I will let Martin complement me. On growth and profitability, if you look at the full year of 2025, to me, it was a year that left me disappointed. It was much better the second half of the year. So I am very happy with the turnaround that we were able to implement, but I am much more obsessed with bringing profitable traffic and growing market share in our core consumer occasions than on short-term profitability. And obviously, I am much happy of how the year ended on the fourth quarter because it looks like we're turning -- taking a turn. And I am very happy with how the year started. I don't want to give any spoilers, but we see the trend continues upwards in terms of traffic, and that keeps me optimistic. But our obsession is not profitability -- just for profitability per se. Our obsession is we are about 10% of the consumer occasions we address. The total addressable market is huge and OXXO -- should remain the favorite part of the Mexican consumer for not only our core categories like impulse, like tobacco, like beer, like soft drinks, but more and more other consumer occasions like breakfast and coffee, like daily replenishment, which we are already playing there, but we are not playing to win as much as we want. And that's what's going to be our obsession. To be able to give you a number, it's tough. What I do see is that there's still a lot of margin expansion to be gained from our core supplier partners. A lot of -- some of that has to be given back to the consumer to bring them on a profitable way more and more into the store. And so for us, a year with same-store sales traffic decline is a year that we -- that's a miss. We need to gain traffic on a same-store sales basis, and we're going to be obsessed with that. However, obviously, it has to be profitable growth. I hope that answers you the first question. For the second question, we began even my tenure in proximity with an obsession of trying to get leaner and meaner, and we were able to do that in Health and in OXXO Mexico. We've now instituted some efficiency opportunities in Spain, and we have just finished the same thing with FEMSA. On an FTE basis, I think we are done. We are not seeing a need for more restructuring. We have the team that we need in place to accomplish our goals. But there are still opportunities to do non-FTE restructuring. There's -- we are looking at every little expense that we make and everything that we think is redundant, not necessary or not bringing those traffic to the store should go. And so we're reviewing every consultant, every law firm, everything, every expense that we think may not be necessary going forward. And there should be even more opportunities that Martin mentioned, but it's too early for me to promise you a number. And with that, I'll open it to Martin. Martin Arias Yaniz: Yes. I mean, as to your broader question of this, why now? And look, I've been around the block a long time with different types of companies. This tends to happen like this in terms of waves. You go through phases where you're making best and you're expanding and you're building capabilities. And as you begin to see the results of that, you naturally prune. And with Jose arriving to the seat of the CEO, he wanted to give us a renewed focus on this issue that he had already started at Proximity. Also with his arrival and given that the structure we ultimately decided to implement, which was to collapse the P&H division with FEMSA Servicios, that also created a new opportunity that didn't exist before when we had decided to maintain that division. As to the figures and the numbers, it's just very important to note, there's two numbers. There's one that will tend to be reflected more in Proximity Americas, which has to do with the fit for purpose, which was announced and we discussed for the first time last year. And then that should be impacting in Proximity Americas generally throughout this year as it gets implemented and rolled out. And some of that also gets reflected in Salud because I also mentioned it was in Salud, so some of that will be seen in the overhead expenses of Salud. The part that is at FEMSA Corporate is a combination of two things. It's a combination of reduction in costs. Definitely, there has been a net reduction in FTEs throughout the organization, particularly relating to the merger of P&H and FEMSA Corporate. Some of this has to do with Spin. So it will be reflected also at FEMSA Corporate because FEMSA Corporate is the one that consolidates the results of Spin. And in the case of Spin, it's not only a significant tightening of costs, which is directly related to the narrowing and focusing of the strategy and the ambition of Spin. As we mentioned on the call and in the press release, we're postponing the license. Premia will no longer be offered to third parties outside of the OXXO ecosystem and... Jose Antonio Garza-Laguera: For the FEMSA ecosystem. Martin Arias Yaniz: The FEMSA ecosystem. And we've also narrowed some of our efforts on payment platforms in small mom-and-pop stores. Some of these things have been delayed or postponed for the foreseeable future until we have greater visibility about the payment platform in the store, the credit initiatives. So also part of what's included in that figure is our expectation that the losses at Spin should be coming down. because of all these cost reductions, but also because we expect the momentum of the business with this renewed focus and alignment to improve. Obviously, that is a sort of a view about what will be the improvement in the top line performance of Spin. So it's a little bit harder to rely on because it depends on a lot of external things going right as well. Operator: Our next question comes from Ricardo Alves from Morgan Stanley. Ricardo Alves: My first question on OXXO. I think that another impressive performance on the gross margin. It's great to see that. In our conversations, we've seen some people more concerned about financial services in the long term. So I wanted to think about your gross margin performance and financial services in taking advantage of all these long-term strategic initiatives. I wanted to think about that in the long term. Are there main initiatives that you're already working for 2026 as we speak to kind of defend your position and to remain relevant. The two main components of the gross margin that we always discuss, commercial income and financial services, I think that commercial income is easier for us to understand given your physical presence, given the World Cup this year and et cetera. But -- so perhaps my question is more directed to your strategy around cash in and cash out. We've been talking about remittances for the past couple of quarters. So an update here would be great. And then I'll ask my second question later. Jose Antonio Garza-Laguera: So as you say, commercial income is still early and growing, and it's a huge source of growth. And I think we're just scratching the surface in terms of what we can do with retail media and other commercial income projects. In terms of financial services, look, it's still -- it's growing on traffic or if you blend that all together and if you put even top-ups for cell phone, this thing is driving growth. It's growing traffic at same-store sales level. It's accelerating. We just put Banorte as part of the [indiscernible] network, and it's driving tremendous growth. We see the need and the consumer demand needs for payments, being able to use the OXXO network as an ATM is still -- and I think it's going to be for the foreseeable future. If you ask me long, long term, that's in a way, and I would say we haven't even scratched the surface on what we can do with remittances. But we've been -- we keep installing the cash machines in more and more stores. And I think there's still a huge opportunity for us to capture market share in remittances. Long, long term, it is obvious that as people go more and more into digital, some of these services will fade or will reduce as we are seeing with cell phone top-ups reducing and going more into digital payments. And I think that's where Spin plays a huge, a critical central role within OXXO, and that's why the decision to turn it back into the OXXO ecosystem. If you look at Spin, Spin is a phenomenal fintech, but we've underdelivered in [indiscernible] making it a useful tool to bring people into the store. And I think Spin's value really does not come from choosing between OXXO or being a fintech. It comes from really bringing both together. Spin -- OXXO is really the best competitive advantage that Spin has, and you can use. There's a lot of things that we have not been promoting well that you can do with a Spin QR. You can take a picture of a Spin QR and you can tip your waiter, your gardener, your whatever or you can send/give money to a colleague and you can make it go to the OXXO store and with a QR scan really very quickly deliver it or pick the cash up. So I think we're just scratching the surface of what you can do when you combine a digital application and a physical network of over 25,000 stores. We have a lot of things on the pipeline, things in like PUDO, working with some of the e-commerce players. But I think we are just scratching the surface of the services that will come and replace the wave of services that will go entirely digital. So I'm optimistic that the pace of change will allow us to adapt, and we will come up on top on the long term. But obviously, there will be pluses and minuses throughout the coming years. Does that answer you, Ricardo? Ricardo Alves: It does, [indiscernible]. Should I ask my follow-up now or go back to the question queue? Jose Antonio Garza-Laguera: Yes. Please go ahead. Ricardo Alves: Yes. Yes. The other one is probably for Martin. I think that a helpful summary, Martin, that you gave on shareholder distribution, strong year in 2025. Congrats on the execution there. As we're thinking about 2026, however, we've ran a couple of sensitivities and we get easily to a potential excess cash beyond $3 billion. I'm not saying that this is the number that FEMSA is going to be distributing to shareholders, but it seems to us that the excess cash balance by the end of this year could be significantly higher unless some of the basic assumptions that we saw in 2024 and 2025 could have changed. For instance, I don't know if maybe the potential ticket for M&A is higher than before or maybe if the 2x target of leverage, maybe if we stay below 1.5, 1.7, that would be okay in the longer term. So I just wanted to provoke you a little bit more here. We seem -- it seems to us that the excess cash position could be significantly higher. So I just wanted to hear your thoughts on that. Martin Arias Yaniz: Sure. I mean without trying to understand your number on this call in real time, which would probably not be prudent or helpful, I would remind you that given the extraordinary $1.3 billion that we've already committed to distribute, the $300 million in buybacks -- and let's just assume the Board approves, which I don't think is a difficult assumption to make, that the dividend -- ordinary dividend will be consistent with what we paid last year. We're talking about easily $2.4 billion, $2.5 billion being paid out this year, March to March. That's nothing else happening. So if for some reason, we do spectacularly -- so my estimate of excess cash is less than yours. And number two, if for any reason, it is what I expect and/or even better than I expect, and we will reserve the right during the year to do more buybacks, announce another extraordinary dividend. So we're not foreclosing the possibility. It just seemed given how close I expect to get to the 2x net debt to EBITDA that now we're just really, to be honest, playing with some decimal book points as opposed to -- and I don't need to be that precise because I have the flexibility and the company has the flexibility during the year to buy back more shares or call a special meeting -- shareholders' meeting and declare another extraordinary dividend. But I'd be happy offline to talk through numbers and try to understand where your $3 billion comes from. Operator: Our next question comes from Rodrigo Alcantara from UBS. Rodrigo Alcantara: Congratulations on the results. So two questions. The first one on the fit for purpose, amazing what you are doing there. Just for the sake of the conversation, I know that you of course have been in the road talking to investors. And as a frequent answer that you have -- a frequent question that you have received is in relation on how KOF fits into this new structure that you are envisaging. So my question is precisely to hear from you now in the call like what you are answering when you received this question about KOF within this fit for purpose. And my other question would be, very quickly, do you have any early comments on the unfortunate events that we have seen in terms of security arising to from what happened 2 days ago in Jalisco, right? We have seen some news flow there about x number of stores being affected. So any commentary on that would be helpful. Jose Antonio Garza-Laguera: Thank you, Rodrigo. These are, as you say, very relevant question. The first one being very frequent one. The second one, I hope it's not -- it's never asked again. But on the Coca-Cola FEMSA side, as you know, we are always evaluating possibilities for all of our businesses. And we do not see ourselves as a conglomerate. We are very focused on what we bring value. We love these two -- our businesses, our main businesses where we are, and we see huge future ahead of them. And we've proven to you guys that we are pragmatic. We are a 135-year-old company, or that we started with beer. And we don't -- other than the huge amounts of beer we sell from many brewers in OXXO, we are not into beer anymore, and we will remain ourselves very pragmatic going forward. If these 2 companies, Coca-Cola FEMSA and Proximity or retail were 2 separate companies, would you consider merging them? The answer is absolutely no. Now the possibilities of separating has a lot of implications, a lot of things that we're going through, a lot of analysis that has gone through our minds. So I would let the comments there. For now, the structure that we have works great for us. And if something changes, we would address it at the appropriate level. On the second thing, Rodrigo, obviously, it was a very sudden and unfortunate event in the last couple of days. I do want to take a minute first to recognize the heroic and incredible work done by many of our employees and frankly, customers. We've received dozens of videos, comments, memories of people filming, protecting our stores, protecting our collaborators. We have a heroic employee that basically tried to put her life at risk to save one of the stores. I just want to say, first, no customer at all was even injured during these disruptions by organized crime. Our employees suffered minor injuries. All of them are out of danger. And I was incredibly moved and touched by the amount of customers and employees that through themselves to save some of the stores that we were in danger. On the great scheme of things, we were not as harmed as much. We had to close for 1 day up to 6,000 of our stores. Yes, precautionary -- precautionary, but a day after we had opened over 90% of them. And today, only about 300 stores remain closed. If you look at the amount of damage that the country received, it's -- I mean, we had about 200 stores with some level of affection. It could be a loading or all the way to a store burn. But I would say most of those stores in a week or so will be up and running. But the fact is that we are everywhere. We are in every town in Mexico. We are -- and so it's not -- that we haven't seen anything that's against us. It's just that given that we are all over the place, we tend to be the first ones targeted, but there were other supermarkets, other convenience stores, other pharmacy chains affected. It's just that we tend to get the most coverage. I also do want to recognize the incredible closeness and collaboration with the security personnel, Army officers, Guardia Nacional, the authorities have been incredibly close to us and helpful in monitoring the situation and giving us feedback, and we've been able to give feedback. So I am very impressed by the security authorities, both Army, Marines and Guardia Nacional and the response has been tremendous. So I was also very thankful for that incredible back to normal that came quickly. So I really hope these things don't happen again. And we have protocols in place that have made my team very proud of how we were able to respond and have no incident on customers and some minor injuries on employees that are out of danger. Thankfully for addressing that question and thankfully, thanks for letting me give these comments. Operator: Our next question comes from Alvaro Garcia from BTG Pactual. Alvaro Garcia: I have two questions. The first one on the restructuring. Martin, I know you've run through it. I just kind of wanted to walk through the numbers. In the past, you've mentioned a cash burn at the corporate level of almost $200 million, a cash burn at the Spin level of around $150 million. So -- and then today, you mentioned the MXN 1 billion and the MXN 800 million. So I was wondering if you could just clarify if it's MXN 1 billion -- if it's MXN 1 billion plus MXN 800 million. I know some of that might be at Proximity Americas. But I guess at the corporate level specifically, how should we think of what used to be that cash burn? What might that look like on a pro forma basis into 2027? That would be very helpful. And then will Spin formally be merged into OXXO? I know that has relevant sort of fiscal implications. So that's my first question. And then I have a very, very quick follow-up, which I can ask after very quickly. Martin Arias Yaniz: Sure. Let me -- Spin will not be merged into OXXO. There will be activities that were undertaken at OXXO and Spin that will be centralized in one of the 2 businesses. But Spin will remain as a separate distinct operating unit with its own budget, its own routines for management and its own support functions in order to ideally protect the unique capabilities that have been built around that business. Number two, as to the cash burn of Spin, in effect, there are -- the way we account for the cash burn of Spin is in a very conservative fashion. So that $200 million figure coming down to $150 million is a figure, which is Spin stand-alone. And what does that mean? Given our -- the transfer pricing rules and allocation of revenues and so on, there is a formula pursuant to which Spin has to share the revenues that are generated from certain service offerings that Spin provides that use the store. And it has to pay for certain services that are executed in the store by the store employee. So that number, just to put it in its context, is a very conservative way of measuring the cash burn of Spin on a stand-alone basis. On an ecosystem basis, it's significantly lower than that. And I'll give you a prime example. Spin by OXXO is -- generates a cash burn at Spin. But when you look at the ecosystem of all the payments that are executed in the store through Spin by OXXO, which arguably might never be executed had not Spin by OXXO existed. When you look at it, that business, for example, is breakeven, is easily breakeven. We do expect that cash burn to decline. So from the $200 million to $250 million, you should continue to see it come down. Some of this will be difficult to account because when you see it in others, there will be eliminations, accounting eliminations, which will counteract some of the effects. And we will do everything we can to give visibility and transparency on this as we progress throughout the year, and you ask us the follow-up question, how we're undergoing on this. And yes, the 2 figures are complementary of each other. In other words, there are some. There's MXN 800 million at P&H -- I'm sorry, Proximity Americas, which relates primarily to OXXO Mexico, but also includes -- and I should have been maybe a little bit clear, it does include an amount for Salud, which is basically cost reductions across the businesses, but very focused on overhead, but it also included savings within the operations. And the MXN 1 billion refers primarily to savings at FEMSA Servicios, FEMSA Corporate from the collapse of the 2 structures, P&H division and FEMSA Servicios. It also includes the momentum we expect from Spin at its top line. It includes also significant savings at Spin from the narrowing and focusing of our ambition. Alvaro Garcia: And it includes -- I'd imagine it also includes additional head count from -- that you're moving towards the corporate level. That's also included in that MXN 1 billion figure. Martin Arias Yaniz: Yes. Yes. Well, again, it's the net savings from moving some of those people over here plus the people here and then the net savings book we will execute. Alvaro Garcia: Awesome. And then just one very quick one on OXXO. Now it's super helpful. Really appreciate the color, and I will be asking that going forward. On revenue growth at Proximity Americas, it grew 5.3%. Same-store sales was 4.4%, sort of the lowest gap we've seen between same-store sales growth and total revenue growth in quite some time, that productivity factor. If you could comment on that, that would be very helpful. Juan Fonseca: Alvaro, this is Juan. Yes, I think there's a number of things at play there, but a couple of them are some of the growth is actually also happening now outside of Mexico. So we saw a really good quarter from LatAm, and we had some currency headwinds there. So if you look at the comparable number, as you can see in the table, it's a little bit higher. But there's another factor, which has to do with the openings and closings. And we mentioned we are closing a fair number of stores in different markets because they are, for lack of a better word, mediocre. But they're selling, and we're replacing them with hopefully better stores, but that are brand new, right, or much newer. And so I think in some ways, we're exchanging potentially better stores, replacing stores that clearly kind of exhausted their potential and never really reached what we expected. And so I think that's also playing into that number. I think we're going to do a deeper dive. I'm happy to take this offline because you're right. Normally, you would have expected something perhaps in the order of 8 as opposed to the 6 that we're showing. Operator: Our next question comes from Bob Ford from Bank of America. Robert Ford: Jose, how should we think about the strategy in Brazil? And how does it change following the separation from Raizen? And did your current same-store trajectory in Brazil, how long will it take you to cover all the central administrative and overhead expenses? And where do you see the most promising category SKU and service opportunities in Brazil for OXXO? Jose Antonio Garza-Laguera: Great question, Bob. Thank you. To be honest, we're very excited for what we have been able to achieve in Brazil. We -- it was great to have a partner for the first few years. It gave us confidence, security. It gave us some training into how to build and gain permits and stuff. But now we're very excited that we're ready to go on it alone. And the potential we see is still enormous. We keep -- I think it's the third year in a row that we grow same-store sales on double digits. I'm pretty sure that number is right. And this -- and 2026 also began very, very strong. I mean we've had good weather. We've had carnival, but we see huge potential. To give you a precise number of how many stores do we need to get to pay for its overhead, I don't have the number, but it's still maybe -- it's going to be probably around 1,000 stores, which I have full confidence that we will be over 1,000 stores in Brazil. I think our huge challenges in Brazil are twofold. One, we need to continue growing the same-store sales business to a level that allows us to really absorb all the costs within the store. The cost structure in Brazil still has opportunities vis-a-vis Colombia, turnover-wise, cost to hire, cost to fire, et cetera, all these operational things, but they've been improving dramatically month-over-month. So at the moment -- and this number will -- as soon as we are able to stabilize and if we are able to have 7 net employees per store, gross margin of around 38% and around MXN 1 million per month, which all of them are 5% to 10% off. That's when we will know this will be a 10,000 store business or a 5,000 store business. It's that dramatic that turnaround. In terms of categories that we are excited, we are impressed by the food offerings. We have very strong margins on food and coffee, and we play a strong game there. We sell phenomenal Pao de Queijo, coxinhas, empanadas. All these things are -- our customers love them and are eating them frequently. Our coffee offerings is amazing. It's obviously pure Brazilian premium coffee, and we sell at a good price. And the other great thing is the consumer occasion, the impulse occasion of beer gathering plays a humongous role in Brazil. Obviously, you don't have the service component that we have in Mexico, but there are other services that we're beginning to try in terms of gaming, and other gift cards and other things that are part of the landscape in Mexico and could play a significant role in Brazil that we are trying to implement. So overall, it's too early, but I am very passionate about our Brazilian business, and I will not rest until we have 10,000 stores in Brazil, hopefully not far into the future. Does that answer you, Bob or... Robert Ford: No, it does. Very helpful, Jose. And just with respect to the Mexican drugstore business, what are the next moves? Jose Antonio Garza-Laguera: That's a tough one. Thank you, Bob. Martin Arias Yaniz: Bob, you're going from the best to... Jose Antonio Garza-Laguera: From a darling to a tough one. We haven't nailed pharmacy in Mexico. It's been a tough business. We are not experts at it. We are -- we have a phenomenal business in Chile. Our pharmacy business in Colombia getting -- discarding the institutional side is great. In Ecuador, we're growing. We're growing share. We're growing profits. So our South American business is great. Mexico, I think we don't play with the league against the real good players. There is a future for pharmacy in Mexico, maybe more closely related to OXXO in over-the-counters. And on digital -- so if I see a future for us in pharmacy has more to do with helping doing an omnichannel type of pharmacy. And I think there are certain corners of Mexico where we can be profitable in the Pacifico region and in the Southeast. But overall, it's -- we're not winning in that. And unless we do something different or we exit that business, I don't see a foreseeable change in our Health Mexico business, being very honest. Juan Fonseca: And I think just -- I think this is somewhat obvious, but if you look at the competitive position that we have in all the -- in the other 3 countries were either the main player or the #2 player moving towards #1. And in Mexico, we never really were able to get to that critical mass and really take away from the couple of large incumbents. So that -- this being a scale business, that was a tough one to break. And so that's, I guess, where OXXO comes in, in terms of can we do something disruptive than use OXXO, but that's still very much in the drawing board. Jose Antonio Garza-Laguera: I would just add, I mean, we have now a great CEO of our pharmacy in Mexico. He's doing wonderful things with the tools he has. I think the business is stabilizing, and it will not burn cash this year, hopefully, but it's not winning. That's for sure. Operator: Our next question comes from Antonio Hernandez from Actinver. Antonio Hernandez: Congrats on your results, and thanks for that asked that difficult question before me. But another question that I have is regarding Bara and OXXO. What about maybe cross-selling across the different private labels, different SKUs? I know it's a different value proposition. But still, I mean, you're growing Bara, you're facing competition at OXXO. So any findings that you have there or anything that you could provide would be helpful. Jose Antonio Garza-Laguera: Can you clarify, you're saying we are facing competition between Bara and OXXO... Antonio Hernandez: No, no, no. OXXO in terms of affordability, what was mentioned earlier in the call. So maybe some findings or any learnings that you found in Bara and that you can apply to OXXO as well cross-selling... Martin Arias Yaniz: Okay. And that's like a bunch of reflection... Jose Antonio Garza-Laguera: Very, very interesting question. Thank you, Antonio. So I think the worst thing you can do is try to change your positioning just based on your competitor. We have a phenomenal competitors in the discount space. That's obvious. They're growing, they're doing well, and they play a good game in their current discount space. And I think Bara has, in my opinion, a stronger value proposition for the long term against other discounters. It needs to grow its private label offering. But I like our odds in competing against the discount space. The discount space is going to grow dramatically in Mexico over the next couple of decades. And Bara has a real chance of becoming one of the leading players there. And I like what we have, and we are very -- our value proposition for Bara is very much adapted for the Bajio and Jalisco region and our stores we're opening in Monterrey are to me the perfect mix of what the Norteno needs. You see beer, you see assortment of beer, you see -- but you also see private label of food and daily replenishment and snacks and supermarket or grocery. So I love our concept, and that's where we're going to compete against those players. OXXO has a great role to play in getting into affordability in beer, in soft drinks, in tobacco, in snacks. And then for the daily replenishment, where we have a role to play that's different from the discounters is that daily replenishment. I need something urgently. I don't need a pack size. I don't need -- I need the brand I know, the brand I love, the brand I recognize in a smaller format for my daily things because I forgot shampoo and I need something for the gym or whatever. That consumer occasion OXXO will be where it competes more similar assortment to what you see on the traditional trade, where it's still 50% of the consumer basket, by the way. So I think OXXO has a lot of room to grow on the daily replenishment more similar to the traditional trade and Bara and whoever wants a very private label, very low pricing, they could go to a Bara or one of our competitors for that. Having said that, we do see private label becoming more relevant in OXXO and complementing the offering that we have. We already have a lot of private label in OXXO in our cooking oil, in our coffee, in some snacks. And we see that even in diapers and some housing products. And so I think OXXO can also develop some powerful brands around private label, especially where in some categories where commercial income is not as significant, and we can play a bigger role. But I think each one will have its place. And I see a lot of growth for OXXO, and I see a lot of growth for discount, hopefully more Baras than other ones. Juan Fonseca: And I suppose some suppliers from Bara could be... Jose Antonio Garza-Laguera: Definitely, some of the suppliers in Bara. And even some of the private label suppliers of our pharmacy business in South America are interested in coming over and doing some things that we can sell in OXXO and in Bara. Does that answer you? Antonio Hernandez: Okay. Okay. That's very clear. And just a quick follow-up. Do you have any white space potential number for Baras in Mexico? Jose Antonio Garza-Laguera: Tens of thousands. They're slapping me here for saying that, but I think there's a room for many thousands. Antonio Hernandez: Many thousands... Jose Antonio Garza-Laguera: Yes, that business is here to stay. It will be huge. I don't want to sound Donald Trump huge, but it's going to be big. Operator: Our next question comes from Hector Maya from Scotiabank. Héctor Maya López: Congrats on the results. Jose Antonio, Martin, I just wanted to understand from the excess cash right now and the planned deployments, the cash deployments, about $1.5 billion might be set aside still for M&A, correct? And on this, how has the appetite for M&A changed in the U.S.? I mean, has it changed a bit due to political uncertainty or the current immigration policies may be affecting traffic in states close to the Mexican border? And on the ongoing work to adapt the value proposition in the U.S., how long do you think you would still need to reach a point in which you feel comfortable enough to now go on a more aggressive growth path by organic expansion or more M&A in the U.S.? Jose Antonio Garza-Laguera: I will address it briefly and I'll let Martin and Juan complement. Thank you, Hector. So we are not saving that money exclusively for inorganic M&A. I think Martin expressed it very well. We want to be -- we are evaluating a lot of opportunities throughout FEMSA. Not all of them are inorganic M&A. There are other things. And all those things are put into the equation, and we want to be cautious before we pronounce whether we give this cash in either buybacks or other opportunities to even considering another extraordinary dividend. So it's not exclusively that we are hunting for inorganic M&A. Having said that, we have a lot of things coming our way, some of them in the U.S. for convenience stores. But to be honest, none, we have been surprised by the expectations of the sellers, and we want to be very cautious. We are not concerned about traffic in the Texas region for immigration or stuff. We have a very long-term view for the U.S. The U.S. still has a long way to go to consolidate. And we are learning a lot from our little operation in Texas. We're getting more and more relevant in the El Paso region. We want to be the winners and win share and gain the confidence of the El Paso one, the Midland citizen, the Odessa. So that's where we're concentrated. When we see we can gain share against the QuickTrips and the other local players, we will become more aggressive in growing our footprint. We are already -- we bought a couple of stores here and there in El Paso, and we're very happy with that. So we're looking more at tuck-ins, small chains, the bigger chains. I'm very surprised about their expectations for multiples that are outrageous. Some of it has to do that everyone wants to think that they're the next Casey's. And to be honest, not all of them deserve those valuations. But credit to Casey's that they've done a tremendous job. But no, we have a long-term view, and we're still looking at opportunities in U.S., but we're being very cautious with our returns. Martin Arias Yaniz: Yes. I mean very little to add. We have -- our interest has not diminished. It's been -- we have been unable to find an entry point with the right risk reward in a reasonable period of time that made us willing to pull the trigger. So as we have said, the entry into the United States is a function of finding the right opportunity. It's not an unconditional need that we have. It has to be based on being able to find value-creating opportunities. Operator: Our next question comes from Renata Cabral from Citi. Renata Fonseca Cabral Sturani: I have two follow-ups here, one on Brazil and Bara. My question is, are Brazil and Bara already seen as scalable platforms. I know it was already discussed here as a great opportunities. But just to understand from your view today that's durable -- there's durable economics or they are seeing a proof of concept in terms of proposition that they can offer to the clients compared to OXXO, obviously, already consolidated and very clear for everyone. And in terms of capital allocation, timing allocation, especially, we are seeing the company much focused on the strategy. Now you have just discussed about the Health business that the company are working towards that. So we see the company much more focused, and we discussed it here 3 and more really important opportunities such as opportunities to grow in the U.S., Brazil, Bara. We have a top 2 that maybe in the next 5 years, you see more opportunity than the others. If you can shed some light qualitatively, I would really appreciate. Jose Antonio Garza-Laguera: I got your question on Bara and OXXO Brazil very clearly, and I'm happy to add some comments, but I didn't understand very well the second question. Can you repeat it? Renata? Renata Fonseca Cabral Sturani: Sure. Yes. In terms of the big opportunities that we already discussed it here in the call, for instance, Bara, OXXO, expansion in the U.S. Can we have one of them should be bigger in the next 5 years? Or the company today is allocating more time in which of those initiatives? Jose Antonio Garza-Laguera: Okay. Okay. I think I get it. Okay. obviously, Bara and Brazil are -- our obsession is OXXO Mexico and Coca-Cola FEMSA Mexico. Those are the motors and have huge growth opportunities that are our priorities. Then what keeps me very excited and frankly, come with a smile to work every day is OXXO Brazil and Bara. OXXO -- Bara is much more advanced in readiness to hyperscale. We've been tailoring the value proposition for the last probably 5 years. And today, we have a value proposition that we love, we are happy. We opened a distribution center in Monterrey, and we are ready for hyperscaling. And in Mexico is where it's easier to transfer capabilities of hyper growth. So you should expect a faster growth in unit numbers in Bara than in OXXO Brazil. OXXO Brazil first is a Sao Paulo bet. It's still very much Sao Paulo bet. It still has a lot of room to cover in Sao Paulo. And we've focused much more in quality versus quantity. So we are ready to open about 100 stores in 2026. That is a low number to what we would love to, but we much rather mature the right processes in place, the category management in place, the commercial income capabilities in place, the categories that really are going to move the needle and the process control that would allow us for OXXO Brazil to become a very valuable bet. If you do the DCF type of OXXO Brazil growing around 100 stores a year versus growing 1,000 stores a year moves exponentially the value of OXXO Brazil going forward. So 100 stores a year is not enough for us to call OXXO Brazil the second wave of FEMSA. But we're working hard on solving the operational things that we need to solve so that OXXO Brazil can grow at, I don't know if 1,000, but a store a day. That's still a few years down the line. So I think it's behind us. In terms of other bets, I think we have our plate full with OXXO Mexico, OXXO Brazil. But I would say we are incredibly surprised, and I don't want to scare you guys, but we're incredibly surprised about what we are beginning to see as opportunities for growth in Europe, mostly organic. But it's Europe -- the management team in Europe has done a tremendous job in getting more value. And we are still in very early stages of OXXO USA. And we think -- I think we shouldn't call it OXXO USA. We should call it OXXO Texas, New Mexico and that region, and we see huge opportunities for growth there as soon as we are able to refine our value proposition. That's where we are right now. I think those things are further down the road and not in the near future. Juan Fonseca: Yes, I would add to what Jose just said. I mean if you just look at the numbers that we provided you in this call about how many stores we're going to be opening this year. Obviously, this is just 1 year, and it doesn't speak too much about the future. But we said for Bara, we are aspiring to grow it by 1/3 in 2026. For OXXO Brazil, we spoke about 15%. OXXO Mexico is less than 5%, right? Obviously, this is -- it has to do with how big the base already is, but it also has to do with how -- what is our conviction about the value proposition and how many incremental tweaks we need to make. I do think that in Brazil, it feels like we've been in Brazil for just a little bit of time compared to how long we've been working on Bara. Never mind how long we've been working on OXXO, right? So there's nothing magical about this. It's -- you just get to the point where you step on the gas at different points in time. But also to Jose's earlier comments where you begin to think about eventually thousands of stores in a way that is actually somewhat literal as opposed to just hypotheticals. Operator: Our next question comes from Ulises Argote from Santander. Ulises Argote Bolio: And all the details that you have shared this has been extremely helpful. So Jose, I actually had one for you and kind of taking advantage there as you kind of ramp up into the CEO chair. But on your opening remarks, you said you were not satisfied with the results that we saw in the year, right? I know there's always room to grow and always room to improve. But if we are here 1 year from now and specifically maybe 2 or 3 key things, but what has to change from where the company is today for you to start next year's remarks saying you see a successful 2026 in the books? Jose Antonio Garza-Laguera: Great question, Ulises. I would love to see hitting our top line growth of mid-single digits in OXXO with profitable traffic growth in same-store sales, at least -- I mean, for me, at least same-store sales growth of traffic, which is a tough, tough challenge because we have IEPS in soft drinks or taxes in soft drinks, added taxes in tobacco, the beer category with some struggles. But with the World Cup, with all of that we are doing with food, with all that we're doing in affordability and coffee, I should -- for me, success should mean same-store sales growth in the OXXO Mexico level. That should be added with market share growth. And then obviously, I would love to see Colombia in an -- at least EBIT breakeven and then Brazil hitting its targets of getting closer to a nice gross margin, opening 100 net new stores successfully. To me, that's what I would qualify as success. Europe should give us another strong year more because of efficiencies that they're still pulling out of the business, hopefully, with a couple of interesting deals that we're looking with partnering with some service stations. And then Coca-Cola FEMSA taking advantage of the World Cup and being able to transfer most of the price of the IEPS without any share loss gains, even with some gains in share and then gaining ROIC. All of them should be able to be gaining return on invested capital. Finally, if we are able to open a store a day in Bara, 1 store a day in Bara profitably, I will celebrate with champagne. That's success for me next year -- I mean, this year, sorry. Ulises Argote Bolio: Amazing. That's great to hear and super clear. And if you reach that Bara per day target, I'll send you the champagne myself, Jose. Jose Antonio Garza-Laguera: Thank you. I will send you a selfie or invite you for a toast. Operator: Our next question comes from Henrique Brustolin from Bradesco BBI. Henrique Brustolin: Jose Antonio, I wanted to circle back to your comments on OXXO Mexico about the opportunities you have for the new consumption occasions, right, or the large opportunity you see in breakfast, coffee, daily replenishment, which you're already present. But as you mentioned, you can effectively start to play to win on them. I just wanted to hear a little more what needs to change operationally in terms of assortment, pricing or even store execution for this to start to gain more traction? And how do you see the transition in terms of timing and implementing all these initiatives taking place to reflect in the performance of OXXO stores in Mexico? That would be my question. Jose Antonio Garza-Laguera: Great. Just to be clear -- thank you, Henrique. But just to be clear, on regards to food or in general? Henrique Brustolin: The question was in general, if there is anything specific that you can move the needle more or you are more focused at, it would be great to hear as well. But it was a category on food and the daily replenishment that you mentioned you can play to win. Jose Antonio Garza-Laguera: Yes. So we've tried everything -- I mean, we've really tried a lot of things on food over our history. And it always has been a struggle because of the huge level of complexity that it brought into the OXXO store. And we were able to simplify complexity first when we did this partnership with Caffenio and we brought the coffee, these Japanese thermos that were a huge advantage and simplify the store operations many years. Now we're moving beyond that towards automated coffee machines. I just -- we all just came from a trip to Japan and now our coffee machines look like 10-year-old coffee machines. So it's impressive how the coffee store infrastructure has evolved in developed markets. There's huge potential for us to bring coffee into our stores. Just to give you an example or just to give you some thoughts -- some guidance on coffee. We sell about 28 cups per store per day in Mexico. Japan's convenience stores sell over 100. Colombia or Colombian stores, which, by the way, Colombia, Mexico has similar per capita on coffee are about 90 coffee per day per store. So we have a long way to go in becoming and we have very good coffee. It's 100% Mexican coffee from Hidalgo, Oaxaca, and from Veracruz. And I think we need to really win the narrative on why the best coffee to start your morning is the coffee at OXXO. It's high quality. It's really affordable at a very convenient price, and we're considering even lowering the price. Now people do not go to OXXO just for the coffee. They want a good feeling, hot breakfast option, and we are trying many different things, but we haven't delivered something that we can turn it national. We are looking at this hero product and we're trying a few things. But I think that also brings a lot of complexity to the store. How do you bring freshly baked product with some protein on it to start your morning in a fulfilling way. We are doing it incredibly well in Colombia, where over 25% of our revenue is full. In Brazil, it's almost 20%. In Mexico, we have a long way to go to get to those numbers. But I am continuously impressed by what the OXXO team is bringing to the table in terms of evolution. And then we're also trying a lot of little things like that pizza program in Monterrey, which has been a huge success. I don't know if it's going to scale so much, but it's incredibly successful. The batch things we're trying. So I think there's a lot of things to develop on that. That will be just part of the story. The other one is we need to be more competitive on daily and replenishment. And we need to continue to gain share in our impulse categories. So a lot of things moving on, but I think if we are able to win on the breakfast occasion and start moving the needle on daily replenishment, we should have a strong 2026. Operator: This does conclude the Q&A section. At this time, I would like to turn the floor back to Mr. Juan Fonseca for any closing remarks. Juan Fonseca: Thanks, everyone, for attending today. Obviously, you know what to find us. The IR team is always around to double-click on questions that maybe were not raised during the call. Thanks, and have a great rest of the week. Jose Antonio Garza-Laguera: Thank you, everyone. Operator: Thank you. This does conclude today's presentation. You may disconnect now, and have a nice day.
Robyn Grew: Good morning, everyone, and thank you for joining us today. I'm Robyn Grew, the CEO of Man Group, and I'm joined by our CFO, Antoine Forterre. I'll begin with a high-level overview of our investment performance and client engagement in 2025. Antoine will then walk you through the financial results, after which I'll update you on our multiyear priorities now 2 years on from when we first announced our strategy before providing longer-term context on the evolution and positioning of our business. 2025 was a year of pronounced peaks and troughs for markets where periods of volatility tested investor resolve before conditions eventually stabilized. We navigated shifting sentiment, and at times, unprecedented reversals, absorbing shocks from DeepSeek in January, tariff announcements in April, ongoing geopolitical tensions and debate over the sustainability of fiscal spending and AI infrastructure investment. Markets demonstrated a remarkable capacity to withstand stress, though the path was far from smooth. Given this environment, I'm pleased to report a set of results that shows just how resilient Man Group is. Antoine will go into more detail later, but I'll start with some headlines. Firstly, I'm delighted that we ended the year with AUM of $228 billion, driven by $21.4 billion of positive investment performance and $28.7 billion of net inflows. Through continued cost and capital discipline, we generated core earnings per share of $0.276. Along with this, we also executed against our strategic priorities, completing the Bardin Hill acquisition, simplifying our operating model and positioning the firm for long-term growth. These results underscore the continued demand for our differentiated offering, the depth of our client relationships, and crucially, the value of the diversified business we have built. On the topic of diversification, the benefits of having a diversified range of investment content were highlighted clearly in 2025. The first half of the year was undoubtedly testing for trend following strategies, continuing the run of underwhelming performance that began in Q2 of 2024. The reversal of the Trump trade in Q1, combined with the administration stop-start approach to tariffs, created whipsawing market conditions where sustained trends were incredibly hard to find. However, investor sentiment moved on from the lows of early April, and August proved to be the inflection point. As risk on sentiment took hold, several trends finally began to emerge and persist. Our strategy has adjusted positioning to capture these moves, delivering strong gains into year-end. In that context, it was great to see AHL Alpha and AHL Evolution finish the year up around 5%. The strength we saw across our strategic priorities enabled the firm as a whole to successfully navigate the significant period of stress for trend following. The results from a numeric range were particularly impressive. Over the past 3 years, these strategies have delivered returns averaging 4% over their respective benchmarks. Our liquid credit strategies also continued their strong run of outperformance, while our multistrat Man 1783 once again delivered outstanding returns. By dynamically allocating across our full range of uncorrelated strategies, it has delivered consistent, high-quality performance since launch in 2020. On an asset-weighted basis, relative investment performance was positive overall in 2025, driven primarily by our long-only strategies. Within alternatives, the overall relative underperformance was largely attributable to AHL Evolution's performance earlier in the year, which trades harder to access markets and differs significantly from the traditional trend followers in the index. Turning to clients. We prioritized being present with our clients in 2025, holding over 16,000 meetings to understand their evolving needs and help them navigate a complex environment. That focus drove exceptional client-led growth during the year. We delivered record gross and net inflows, nearly 20% ahead of the industry. We've taken market share for the sixth consecutive year, a very strong outcome in the context of a challenging fundraising environment. As you can see from the chart on the left, the strength was broad-based. It is well known that large allocators are seeking to do more with fewer managers, consolidating relationships around true strategic partnerships. That trend plays to our strengths, and the numbers reflect that. It was also a record year for new client additions with 36% of gross sales coming from relationships entirely new to the firm, while our top 50 clients remain invested in more than 4 strategies on average. Whether I'm speaking with a pension fund in North America or a sovereign wealth fund in the Middle East, the feedback I receive is clear. Our clients face increasingly complex challenges that require tailored solutions. With a broad range of uncorrelated strategies delivered through a technology-powered platform, we have the capability and the scale to meet that demand. From customized risk levels and access to new asset classes to the launch of new product structures, we are adapting to how our clients want to work with us. That agility is a competitive advantage. And now I'll hand over to Antoine, who will take you through the numbers. Antoine Hubert Joseph Forterre: Thank you, Robyn, and good morning, everyone. I'll begin with last year's financial highlights before providing further details on our AUM, P&L and balance sheet. As Robyn mentioned, we ended the year with AUM of $227.6 billion, up nearly $60 billion since the end of 2024. The increase was driven by positive investment performance of $21.4 billion and record net flows of $28.7 billion. On a relative basis, our net flows remained ahead of the industry for the sixth consecutive year with our sustained growth in market share further validating the relevance of our offering to clients. In 2025, we recorded net revenue of almost $1.4 billion, including performance fees of $281 million, mostly from non-AHL strategies. This demonstrates the progress we have made in diversifying our mix of revenue and performance fee generation in particular. We also recorded $38 million in investment gains. Fixed cash costs of $430 million reflect the actions we took earlier in the year to maintain cost discipline and to better align resources towards our strategic priorities. At 48%, the compensation ratio was within our guided range, reflecting lower net revenues in the year. As a result, core profit before tax was $407 million with $294 million of core management fee profit before tax, which equates to $0.196 of core management fee EPS. Lastly, we are proposing a final dividend of $0.115 per share, taking the total dividend for the year to $0.172 in line with 2024. We continue to maintain a strong and liquid balance sheet with net tangible assets of $723 million as at the end of December, supporting our disciplined capital allocation policy. Our overall asset-weighted relative investment outperformance was 1.3% compared to 1% in 2024. Investment performance was positive across all product categories with long-only strategies delivering particularly strong results. Our long-only offering contributed $34.5 billion in net flows, serving as a powerful endorsement of our differentiated proposition in this space. While alternative strategies faced some headwinds due to the poor performance from trend following strategies in the first half, engagement on liquid alternative, and crisis Sapphire remains robust as we head into 2026, reinforcing the continued relevance of our uncorrelated content. Other movements were $8.9 billion. This includes $6.7 billion of FX tailwinds owing to a weaker U.S. dollar as a significant proportion of our AUM is denominated in other currencies and $2.7 billion from the acquisition of Bardin Hill. Finally, in addition to fee-paying AUM, we also ended the year with $4.9 billion of uncalled committed capital, which provides a strong foundation for future AUM growth across our private markets business. Before moving on from AUM, I wanted to spend a moment on the new reporting categories we're introducing this year. This updated categorization, which you can see on the slide, reflects the growth and evolution of our business, provides greater transparency on our strategic priorities, such as credit, and aligns more closely with market practice to improve comparability with peers. As you'd expect, there is no material change at the long-only and alternative category level. We have simply reclassified the subcategories to make them easier to understand. More details, including information on fee margins, can be found in the investor data pack on our website. We will continue to provide the previous categorization in our materials up to Q3 of this year to ensure a smooth transition. And of course, we are available to answer any questions you might have. Our run-rate net management fees, which represent a point-in-time snapshot of the firm's management fee earning potential increased to $1.182 billion at end of December 2025 from $1.058 billion at the end of 2024. This was driven by the significantly higher AUM at the end of the year and the strong recovery in trend-following performance in the second half. This is the highest level in more than 10 years. The run-rate net management fee margin decreased from 63 basis points at the end of 2024 to 52 basis points at the end of '25, reflecting the shift in underlying AUM towards long-only strategies during the year. As I have emphasized many times before, we did not target a particular net management fee margin, but instead prioritized driving profitable growth across all our product categories. Moving on to performance fees. In a year where trend-following strategies struggled before recovering in the second half, core performance fees were $281 million compared with $310 million in 2024. This is a strong reflection of the progress we have made in diversifying our business and its performance fee earnings potential. It underscores our ability to deliver strong outcomes for our shareholders even in years of below average contribution from trend following. At the end of December 2025, we had $59.6 billion of performance fee eligible AUM, of which $36.6 billion was at high watermark compared to $21.1 billion at the beginning of the year. A further $17.4 billion was within 5%. An often overlooked feature of our business is a $13 billion of AUM from the long-only category is performance fee eligible, increasing our performance fee earning potential while providing valuable diversification. This slide provides further insight into how performance fee earnings potential has changed over time. If you have followed us for a while, you might recall a similar slide at our Investor Day in 2022. The dark blue line plots the distribution of a Monte Carlo simulation of the next 12 months' performance fee outcomes based on distances from our watermark, expected returns and volatility assumptions for our key performance fee-paying funds as at December 2025. The median simulated performance fee outcome for 2026 is $471 million. This is a 35% increase from $349 million at the end of December '21 and nearly 3x what we expected in December 2016. This improvement predominantly reflects the growth in performance fee eligible AUM and the progress we have made diversifying the underlying range of strategies that contribute to our performance fee earnings. As of the 20th of this month, we had accrued approximately $350 million of performance fees due to crystallize in 2026. As always, this figure is not a forecast or guidance, but rather the position at a specific point in time. The amounts that crystallize will fluctuate increasing or decreasing based on investment performance up to crystallization dates. Moving on to costs. Fixed cash costs of $430 million were 5% higher compared with 2024. This includes a $16 million impact due to the strengthening of sterling against the U.S. dollar and another $4 million from the Bardin Hill acquisition. These increases were partially offset by the cost control actions we took earlier in the year, as reflected in the decrease in headcount. The overall compensation ratio increased marginally to 48%, reflecting the decrease in management and performance fee revenue during the year. However, the recovery in trend-following performance in the second half meant that we were able to remain below the upper end of our guided range. From 2026, we will be changing the modeling framework, moving away from the fixed cash costs and comp ratio guidance to a core PBT margin range. Our previous guidance was established in 2013 during a period of significant restructuring when the business looked materially different. This approach, which focuses on a few specific line items within our P&L without allowing for fungibility of spend, is no longer fit for purpose. Our operating model has evolved and technology is ever more central to our business. Going forward, we will manage the business to a core PBT margin, typically between 30% and 40%, varying based on the quantum and mix of revenue. It may be outside this range in years with particularly high or low core performance fees as it has been in recent past in both directions. This range is calibrated around the average realized core PBT margin of 35% between 2020 and 2025. This change provides greater operational flexibility, which is critical to remaining agile given the pace of change. It should not change the way you think about and model the overall profitability of the business. Importantly, it also does not alter our commitment to cost and capital discipline or remove the ability to benefit from significant operating leverage in exceptional performance fee years. Core net management fee earnings per share were $0.196, 9% lower than 2024, while performance fee earnings per share decreased to $0.08, down from $0.106 in 2024. Total core earnings per share were $0.276. In summary, despite the challenging market conditions for trend following in the first half, 2025 was another year of resilient earnings for the firm. We continue to maintain a strong and liquid balance sheet, which gives us optionality and flexibility to pursue our long-term growth ambitions and return capital to shareholders. At the end of December, we had $723 million of net tangible assets, including $173 million in cash and cash equivalents. Our seed capital program continues to play an integral role in supporting the growth of our business. In 2025, we seeded 12 new strategies, including new private credit strategies and active ETFs in line with our strategic priorities. Gross seed investments at the end of December were $603 million. The portfolio remains well diversified across strategies and markets. This brings me to capital allocation. Our policy remains disciplined and intends to support the future growth of the business while delivering attractive returns to shareholders. It follows a clear waterfall with 4 categories. First, we aim to increase the annual dividend per share progressively over time, reflecting the firm's underlying earnings growth and free cash flow generation. In 2025, dividends to shareholders totaled approximately $200 million. Second, we deploy capital to support product development and technological innovation. We continue to actively manage our seed book considering the opportunities available. And in 2025, we redeployed $400 million of seed capital. We also continue to invest heavily in technology to ensure we remain at the forefront. Third, we evaluate M&A opportunities that align with our strategic priorities. In 2025, we completed the acquisition of Bardin Hill, bolting on opportunistic credit and performing loans capabilities to our credit business. Finally, any remaining available capital is returned over time through share buybacks. Last year, we repurchased $100 million of our share capital at an average price of 182p. Including the proposed final dividend and the $100 million share buyback I just mentioned, we returned approximately $300 million to shareholders in the year. Over the past 5 years, the total capital returned to shareholders via dividends and buybacks is $1.8 billion, over 50% of our market cap as of the end of December. Shareholders now receive an additional 23% of every dollar of earnings when compared with 2021. On that note, I'll hand over to Robyn to take you through the next section of the presentation. Robyn Grew: Thanks, Antoine. 2025 tested us at times, but we navigated the challenges to emerge stronger and finished the year with real momentum. That is a powerful validation of our strategy. We were able to deliver a resilient set of results because the diversification we have built over recent years is delivering. In a year where trend-following faced significant headwinds, it was the strength in quant equity, liquid credit and solutions on the investment side, combined with strong growth across client channels and geographies that delivered for us. That is our strategy working as intended. The benefits of diversification are clear, and this slide illustrates why. The capabilities we have scaled have near 0 or even negative correlation with trend following. The more high-quality uncorrelated content we offer, the more relevant and valuable we are as a strategic partner to clients. That relevance drives growth. And as you can see on the chart in the middle of the slide, the business today looks very different from just 4 years ago, both in terms of scale and business mix. That shift also matters for earnings. Not only does it grow and strengthen our management fee stream, but as Antoine mentioned earlier, it also improves our performance fee earnings potential. Non-AHL performance fees have grown significantly from $116 million in 2021 to $225 million in 2025. Diversification has reduced our reliance on any single investment strategy and has increased the stability of our overall earnings, providing new options for growth that ultimately drive value creation for shareholders. The strategy we outlined 2 years ago will enable us to continue to deliver this diversification. As many of you will recall, we outlined 3 priorities at our full-year results 2 years ago. They were to diversify our investment capabilities, to extend our reach with clients around the globe and to leverage our strength in talent and technology, all while continuing to invest in the core of our business. We set ambitious goals to drive the next chapter of growth for Man Group. Now, more than ever, we have conviction that we are targeting the right areas. Although not every initiative moves at the same pace, the prevailing trends in our industry remain largely unchanged. Client engagement is the strongest it's ever been, and we have good momentum across several pillars of our strategy. Let me take you through the progress we've made in more detail. Starting with our investment capabilities. Our credit platform continues to go from strength to strength. We now manage $53.1 billion across the liquid and private credit spectrum, up from $28.3 billion just 2 years ago. Organic growth in liquid credit has been exceptional with strong client demand for our high-yield and investment-grade strategies in particular. We also completed the acquisition of Bardin Hill in October, which adds opportunistic credit to our existing private credit offering and strengthens our CLO capabilities. I'm very pleased with where we stand. We are now a broad-based partner across the credit space. On quant equity, it was pleasing to see our long-only strategies had an exceptional year, growing AUM by 97% and continuing our track record of alpha generation. Alongside strong performance, it is the ability to offer a high degree of customization at scale that is also proving hugely valuable to clients. Mid-frequency is a complex space that requires significant investment in research and infrastructure, and there's a lot of work going on behind the scenes. We've developed 2 distinct strategies that take different approaches to idiosyncratic alpha generation, factor exposure, geographical focus and holding periods. Notably, our quant alpha capability delivered 21.3% net performance in 2025, which offers clear evidence of our progress in this high potential space. We continue to deliver complex solutions to help our clients solve their most significant challenges. That remains a real differentiator for us. More recently, our advisory offering in partnership with the Oxford-Man Institute has been in strong demand as we partner with clients to deliver thought leadership that helps them to navigate issues they face across their portfolios. A great example of this is the work we've done on timing the market in collaboration with one of our Nordic clients. The agility we have shown in adapting to client needs has served us well, and that will not change. Finally, I spoke about Man 1783 earlier today. After another strong year in 2025, we've delivered 10.5% net annualized performance over the last 3 years for our clients. That is a track record that puts us up there with the best in this space. We are continuously improving our investment processes, knowing that innovation is not just about launching the next flagship product, it's about making everything we do better every single day. We've also made strong progress extending our client reach, targeting the regions and channels where we are underweight relative to the size of the opportunity. North America is a great example of that. I'm delighted that we have nearly doubled annual gross flows from North America in 2 years, from $10 billion to nearly $20 billion. Growing our presence in the institutional channel has been a particular highlight with a 24% increase in North American pension plan clients. Given the sheer scale of that market, we see a significant runway for growth. In Wealth, we've seen a similar trajectory. We are bringing institutional quality liquid products to one of the fastest-growing segments in asset management, and the opportunity here is large. To strengthen our offering, we launched 4 active ETFs across discretionary and systematic styles in equity and public credit last year. Our strategic partnerships continue to deliver strong growth. The Asteria joint venture is a great example of that, where appetite for our credit products has been particularly strong. Finally, on insurance, I'm sure many of you are aware that this is a complex area that requires careful groundwork. We have laid those foundations globally, and our strategic partnership with Meiji Yasuda is an encouraging early step. Discussions with prospects continue, though it remains contingent on the ongoing build-out of our overall credit capabilities. Our third priority is to continue leveraging our strengths in talent and technology, both of which are underpinned by the culture of constant improvement that runs through our DNA. We're always looking ahead, positioning the business for future growth. A good example of this is the change we made last year in Systematic, bringing AHL and Numeric together under one division to drive innovation, product co-development and research collaboration. We approach technology with the same mindset. And as a result, we're not just keeping pace with change, we're leading it. We made significant advances in AI during the year, developing over 100 plug-ins across the firm using a range of AI platforms. For us, this isn't a peripheral initiative. It is truly embedded across our entire organization. And it's one of the reasons Anthropic has chosen to partner with us on the design and application of AI in investment management. I think that tells you something about where we stand. Our ambition is clear to become an AI-powered asset manager. We have the heritage, the expertise and the data to make that a reality. So across all 3 pillars, investment capabilities, client reach and talent and technology, we have made meaningful progress. The strategy is delivering, and the results speak for themselves. We entered this year in great shape and with good momentum. Our $87 billion liquid alternative business gives us a platform with an exceptional long-term track record of delivering for clients and shareholders. In an environment where clients are increasingly focused on uncorrelated returns, liquidity and crisis alpha, the relevance of that platform has never been greater. Alongside that, we now manage $17 billion in private credit with teams focused on underwriting discipline and the ability to capture dislocation when it arises. Our long-only business has scale, a clearly differentiated proposition and a proven ability to generate alpha. And finally, we've aligned resources with our strategic priorities, ensured cost and capital discipline and position the business for long-term success. The result is a firm with its highest run rate net management fees in over a decade and near record performance fee optionality. I feel very good about how we have started the year and our ability to capture the opportunities that lie ahead. It is not just our business that is well positioned, the market environment is supportive, too. After a decade defined by U.S. exceptionalism, we are seeing a more complex, dispersed landscape emerge. That is exactly the environment in which active management thrives and allocators are responding. The chart in the middle shows their plans for 2026, which favor many of the strategies where we have strength, hedge funds, portable alpha, active extension. Our ability to help clients navigate this environment with a broad range of alpha-focused strategies has never been more relevant. At the same time, demand for customization continues to grow. Capital allocated via customized structures has increased 61% since 2023, reflecting a clear shift towards strategic partnerships and tailored solutions. You've heard me talking about our strengths in that space time and time again. It is where we have a clear competitive advantage. So to close, 2025 tested us and our strategy delivered. Record inflows, AUM at all-time highs and a resilient set of earnings in a year that was far from straightforward. The diversification we have built proved its worth. I'm incredibly proud of what this team has achieved. None of this is possible without the exceptional talent across our firm. Their energy and commitment are what set us apart. We enter 2026 as a more diversified, structurally stronger business that is well positioned for growth. The landscape is shifting in our favor. Markets are more dispersed, allocators are demanding more from fewer partners and the value of our offering has rarely been clearer. We have the investment content, we have the client relationships and the technology platform to capture that opportunity. And I have absolute conviction that our strategy will deliver long-term value for our clients and our shareholders. With that, we'll open up for analyst Q&A. Robyn Grew: As a reminder, to ask a question, you need to have joined the presentation via the Webex link. Press the Raise Hand button and please unmute yourself when we can call your name. Thank you. Antoine Hubert Joseph Forterre: Thank you, Robyn. And we'll start with Nicholas. I'm going to send a request, and you should be able to unmute. Unknown Analyst: Can you hear me? Antoine Hubert Joseph Forterre: Yes, Nicholas. Unknown Analyst: Three questions from my side, if I may, please. One on AI one on absolute return and one on capital return. So on AI, I think the Anthropic partnership is super interesting. I appreciate it's early days, but do you have any ambitions or key milestones you can share with us from that partnership? And I guess just more broadly, if we think beyond yourselves, how do you expect AI to impact competition and alpha generation in the markets in which you operate? And which markets do you think could see the most significant impact, please? So that's the first one. On absolute returns, I appreciate the strong delivery in diversifying the business for sure. But if I focus on absolute return, could you just give us a sense of investor sentiment and engagement there given the shift from underperformance to recovery, but there's still a negative relative performance? And are there any further redemptions in the pipeline we should be aware of? And then finally, on capital return, I guess, following the repayment of the RCF, you have significant available net cash and equivalents. What was the rationale to keep the dividend stable and not declare any additional capital return? And should we see this as an indication of your M&A pipeline? Robyn Grew: Right. Do you want to... Antoine Hubert Joseph Forterre: I will go ahead and start with the last one. Robyn Grew: Yes. Antoine Hubert Joseph Forterre: Which is -- I'll start with the last one. So we have a clear, unchanged capital allocation policy, dividend first, which we aim to grow in line with earnings over the cycle. And if you look at earnings year-on-year, they were down, hence, keeping the dividend flat. Now, if you look over the last 5 years, we've increased the dividend, I think, to the tune of 10% per annum over that period. So we've delivered the growth over the cycle as intended with our policy. And then, we aim to invest in the business, both organically and inorganically. If you look at last year, we deployed investments in technology, but also did an acquisition. And then after that, we look at returning capital by way of buyback, which we executed last year to the tune of $100 million, so we returned $300 million to shareholders last year in addition to doing an acquisition, a bolt-on acquisition in a year that didn't see us generate huge amount of capital given the slightly softer performance fees. So very much in line with our policy, we're keeping dividend flat. Do not read anything into future M&A. The Board in due course will consider options and might return capital to shareholders as and when it sees fit. I can take the absolute return one going reverse order if you want and you can do AI. Robyn Grew: Yes, for sure. Yes. Antoine Hubert Joseph Forterre: So I would differentiate between trending following and the rest of offering. Trend following has indeed a soft -- let's be clear, a poor first half and then a tremendous recovery that extends into 2026. The rest of absolute return category, which I think is best represented by our Fund 73 performed well throughout. 73 was up in the first half and up in the second half to finish the year last year at 14%. In terms of investor sentiment, the outflows we saw last year were prominently driven by the trend following category as well as some of the risk parity category. Both have had a strong second half and start of the year. And eventually, performance is what leads to flow. We don't comment on future flow, as you know. So I'm not going to give you specific comments, but I think you can read in the confidence that we have, the way that we think of ourselves starting '26 in a strong position and the belief that we have in our client relationship. AI? Robyn Grew: AI. Fair to say we're excited about the opportunity set. No specific milestones that we've set with Anthropic, but this is a partnership where we believe we can add to their understanding of what the needs are, but also drive the solutions that we can put in play across the organization, be they at the front end and the research capability that we can look at and develop more or indeed through the entirety of the AI capabilities you see for efficiencies and effectiveness through the rest of the organization. For us, we've spent 35, 40 years being at the cutting edge of technology. This is no different. We believe we are in a terrific place to benefit from use, utilize and lead with some of the strongest players on the street, this extraordinary technology capability. So tremendously excited, no real milestones, but we think this partnership will help us, along with everything else we do, take full advantage of the full suite of technology. Antoine Hubert Joseph Forterre: With that, I'm going to go to Arnaud. Arnaud, you should get a request to unmute. Arnaud Giblat: I've got 3 quick questions, please. Firstly, going back to the buyback. So historically, when you tend to come back into performance fee territory and in a good position, usually, that does correlate with buybacks. I'm just wondering, why there hasn't been -- and particularly, if I'm looking at the cash flow statement, I noticed a big outflow in terms of working capital. So maybe if you could give us a bit more color there and what your thinking is in terms of the buyback. I mean, the net financial assets did improve. So I would have expected some nonetheless. Second question is on St. James's Place. There was some news flow around St. James reallocating mandate. I'm just wondering what was the quantum that might impact our flows and when that comes through? And my third question is on management fee margins. The run rate management fee margin looking forward has reduced. Clearly, there's a bit of a mix shift between categories, and I understand that. I understand that you don't manage the business given management fee margin and all business is good. But I'm just wondering, if I isolate each category, are we seeing -- at constant mix, are we seeing dilution margins, is my question? Robyn Grew: Yours, I think. Antoine Hubert Joseph Forterre: Yes, I'll take them in order, and thank you for the questions. Expand a bit on the buyback, performance fees is, obviously, one source of capital generation, and therefore, a correlation between performance fees and capital returns because it sort of follows a waterfall we outlined. I go back to what I mentioned earlier. Last year, we deployed $300 million of capital returning to shareholders plus an acquisition in a year where cash flow generation was still more subdued. There's a timing of cash flow point as well, and we start the year in a strong position. Do not read anything in that signal. We have not changed our capital policy. But at this point, the Board has not decided to announce a buyback. St. James's Place, we don't comment on future flows. We have had in the past commented on very large flows in and out when we felt it was relevant, but we're not commenting on future flows. The outlook remains the one that you can read, and we've outlined. And then, on management fee margin, we are seeing a mix shift both between categories and within categories. Between categories, we -- if you look at the year, we finished the year with a majority of our AUM on the long-only side, which is traditionally lower margin. I think 60% of our AUM is long-only. And that explains the overall the shift. Within categories, you're also seeing the same thing. If I pause on the absolute return category, what we saw last year was a slight relative underperformance evolution, and then, worse flows in the evolution because of higher-margin product than the other content within that category. And that explains why within that category, you also saw margin erosion. We are not seeing any kind of fee pressure that we call out here. So it is really a mix effect at the category level and within the category level. I'll go to David McCann. David McCann: Hope you can hear me. Antoine Hubert Joseph Forterre: Yes. David McCann: A couple of my questions have already been answered. So I've got just 2 left. The first one, on the new 30% to 40% PBT margin guidance, I mean, I guess reading into your comments, it sounds like there's some fresh investment that's going to go into things, including AI. But presumably, the reason you can keep the margin roughly where it has been is because you're intending to get some kind of efficiency and/or productivity savings from that. But maybe you could sort of give some color on that sort of those 2 forces, and how you're thinking about them in that mix? And then, I guess, delving a little bit deeper into sort of one of the previous questions, yes, clearly, you've had some strong recovery, as you've touched on as well in a number of your funds in the second half of last year and continuing into this year, which is good. I appreciate you're not giving color on flows as such. But, yes, historically, when you have seen sort of some recovery following a period of weakness, you have sometimes seen investors, I guess, take money out at that point. They kept during the period of underperformance, but then came out when it did recover. So are you seeing any signs of that happening? That would be the second question. Antoine Hubert Joseph Forterre: I will start with this one. No, I mean, nothing again that we call out that's already in the numbers. And you're right, performance and flows do correlate, although it's not like it's a sort of immediately identifiable correlation. It usually comes first on the wealth channels and then institute tend to have a kind of a longer horizon, and hence, the sort of lumpiness in flows that we often refer to. The PBT margin is really about, as I said, giving us more flexibility across the various lines compared to what we have. It is not intended to kind of change the profitability for shareholders. That's an important point I want to repeat. When it comes to AI and technology, we're not doing this because of specific efficiency that we've identified. This is not a way to kind of capture the efficiencies. This is about us being able to continue to invest in the business, benefit from those kind of very significant advances in technology and the strength that we have. So we continue to deliver growth. Key point, as I said, is this does not change anything to the ongoing profitability of the business. David McCann: Okay. It's more about the alpha that -- potential alpha that the strategy can develop rather than anything... Robyn Grew: Correct. Antoine Hubert Joseph Forterre: I will then go to Hubert. Hubert, you should be able to unmute. He says, hopefully. Hubert Lam: Yes. Hubert Lam from Bank of America. I've got 3 questions. Firstly, obviously, there's been a lot of focus recently on private credit. Can you talk about your software exposure within your U.S. private credit business, and any commentary about credit quality within that line? Second question is also on credit. Can you just also talk about the deployment within Varagon? How that's coming along? How much dry powder you have there currently? And last question is on 1783, another strong year of performance. Can you just talk about what you can do to scale up that product given that, that seems like a pretty big opportunity that you can exploit there just given the strong performance? Antoine Hubert Joseph Forterre: Thank you, Hubert. Which one you want to take? Robyn Grew: Well, why don't I start with 1783? Let's start there, and we'll split it up between us. Really pleased with the performance. You're right. Thank you for calling that out. I'm glad you're enjoying the performance as much as we are in that space. It's -- we continue to see and have really excellent conversations with clients. We have a strong belief in this product and its track record. And so this is about making sure that we can convert some of those conversations into investment. But we feel very good about it. The performance is robust. We continue to see strong engagement on it. And so that's -- the scale is there. We have the capability, and it has the capacity to operate. I'll take the, I am sure it is, private credit piece, just on our exposure. Let me do it slightly differently. We have very limited -- let me say it at the start, we have very limited exposure to software and technology across both of our direct lending and opportunistic credit books. For background, direct lending, software and tech exposure is sort of somewhere sub-6%. Think about it like that. But also think about it in a slightly different way. This is a middle market business where also it's been run with high discipline in underwriting and risk management. So this piece that we talked about through last year about being slower in deployment, because we valued the risk management approach and proper underwriting quality, was what we continue to believe is the right thing to do. Our exposure is far less than any of our peers, but also we're not facing retail markets. This is an institutional-facing business. So we also don't suffer or have to worry about liquidity mismatch, for example. So we believe this is a good strategy. Middle market provides good opportunity. We run our business with high discipline and high-risk focus. We're not exposed to the sector in the way that you might have been seeing others have been. We don't have liquidity mismatch issues, and we continue to have strong belief that this is an area for development. In terms of dry powder? Antoine Hubert Joseph Forterre: Still $4.9 billion is a number we mentioned. And underlying in the AUM categorization, and the direct lending category has deployed a bit more capital, so you don't see it, but it's the underlying AUM has actually increased. It's obviously increased more because of the acquisition of Bardin Hil we have made in the year. Before I go back to the screen, we still have a couple of questions, I'm going to read a question from Mike Werner, who seems to have issues probably dialing in Webex. We saw a significant increase in long-only performance fee-eligible AUM in 2025. Was this due to a large mandate? Or is this a trend we should expect to continue going forward? If you go to Slide 10 of our presentation, you see that at the end of '25, we have $13 billion of long-only AUM that was performance fee eligible. That's increased from $5.8 billion as of the end of 2024. That is a series of mandate. It is not a single mandate. Obviously, there are entity mandates, so they tend to be sizable by construction, but it's not just one, it's a series of mandates. And that in part explains why we generated $100 million of performance fees in long-only in 2025. Second question from Mike, is it possible to get a breakdown of seed capital between public and private markets given the delta in equity in those strategies? The answer is yes, you have it in Slide 14 at the bottom, liquid markets account for 79% of our seed investments and private markets 21% of our seed investments on a gross basis. I will then go to Isobel. Isobel, you should get the request to unmute. Isobel Hettrick: Can you hear me okay? Robyn Grew: Yes. We can. Antoine Hubert Joseph Forterre: Go ahead, Isobel. Isobel Hettrick: I just have one, please. So if you take a step back and look at the Man platform, holistically, where do you think there are potential capabilities you're missing or need to enhance inorganically going forward? Robyn Grew: Thanks, Isobel. I'll take that question. We have always been very clear we will always look for capabilities that are uncorrelated to that, that we have today, but still rhyme with the verbs announced that we understand. But let's be clear, that doesn't -- that comes from organic growth. We can demonstrate that as you think about, for example, the high-yield and investment-grade credit business we've built here organically. That is -- that speaks to the capability we have already to grow that capability. It's not just about M&A. We added 5 new teams into the discretionary space. So we're interested in capability that comes, again, in an uncorrelated content from that space. So we're not focused on a specific area. You know the strategy that we're trying to follow. We feel like we're making great strides in that space. But right now, we are very, very focused on the book of business we have in front of us, and we'll continue to look for capabilities that we don't currently have. But right now, we're feeling quite good. Antoine Hubert Joseph Forterre: And then we have 1 last question from -- or questions from Jacques-Henri. Jacques-Henri, I'm going to request you to unmute. We haven't had the chance to get acquainted. So if you could tell us which firm you're from as well. That would be great. Thank you. Jacques-Henri Gaulard: Can you hear me? Robyn Grew: Yes. Antoine Hubert Joseph Forterre: Yes. Jacques-Henri Gaulard: I'm Jacques-Henri Gaulard, Kepler Cheuvreux. I had 2 related to the updating model framework on the PBT. Getting the 30% to 40% now, is it a bit a reflection of the fact that 2025 was really, really tough, despite that, you more or less made it? And it's like if we can make it in that type of condition, then we'll definitely make it whatever happens almost, sorry about that. And the second question would be your non-core costs is actually a little bit lumpy, and the definition is effectively quite range. Would you consider probably reducing the range of those core costs to actually include some of them into the pretax margin definition? Some of your peers, for example, include the restructuring costs in there. That's it for me. Congrats for this morning. Antoine Hubert Joseph Forterre: Thank you, Jacques-Henri, for the questions. So the range is really a reflection of the evolution of the business over the last now 13 years. When the previous framework was put in place, the business was going through heavier restructuring with a very focused approach on costs, fixed costs in particular. And that's why previous management focused on kind of single-line item targets across the P&L. As we evolve the business, as we invest for growth, as we invest in technology, but also grow our teams, we feel that having the ability to use the cost P&L line more fungibly makes more sense with that importantly taking away from shareholders. So do not read anything into it. The second question is on non-core costs. You're right that last year, we had an increase in the non-core costs for really 3 specific reasons. Most of them really related to 2025. The first one is the court case, which is ongoing. That went to trial in March of last year. The trial will conclude in March of this year. So we incurred some legal costs. This relates to allegations made from the 1990s. So firmly not sort of related to the current core business, which is why they sit in non-core. The second was the kind of restructuring charge we took around the middle of last year, as we addressed difficult first half and realigned resources across the business. That's another around $30 million, of which $10 million is noncash, $20 million is cash. And then the third element in the non-core line, which is more in keeping with what you usually see is the noncash impact of reevaluation of liability in relation to Asteria partnership. Asteria, you might recall, is a joint venture that we have focusing on wealth in Italy in particular and continent in general. It's going very well. As a result, the implied valuation of the liability that we have remaining on our balance sheet has increased and also flows through the non-core. We're not proposing any change to our definition. Importantly, what you saw last year is not on the basis of a change either. It's just the same definition, in a year that's a bit exceptional. With that, I don't believe we have any more questions. So we'll finish here. Thank you all very much for your time. Robyn Grew: Thank you very much.
Philip White: Good morning, everyone. Welcome to our 12 months unaudited results presentation. As you know, I'm Phil White. I'm Executive Chair of Mobico. Introducing to my colleagues. We've got Brian Egan, who is our CFO; and Paco, who is our COO. You met all 3 of us before at our half year results. And you can remember at that time, we weren't really in the best of places. And at that time, you will recall that only 1 of our 5 divisions, as said, was really making any real money. Today, we are here to talk to you about the stability we brought to the business as well as the momentum being gradually built up as we implement our Simplify for Success program. And apology first. I'm sorry that the results we are presenting today are unaudited. But as you know, we were left without an auditor late in the day last year, but I'm really pleased to say that we now have KPMG on board. That's a big win, believe it or not getting an auditor. I know I'll probably be counseled by our advisers for saying this, but please forgive me, I will only use the word unaudited once because I could use it in every sentence as we go along. So -- and I think the same applies to the word adjusted. So forgive me on that, because I don't want to be here all day, and I'm sure you don't want to be here whole day, too. The reporting schedule again for this year is quite complex, and we'll spend most of 2026, would you believe, in close periods. But Brian will explain the schedule in more detail. As is usual, I'll start with the highlights. Brian will follow on the financial review, and then Paco will do all the operational stuff. But let's start with the highlights first, guys. As you can see, we've delivered significant progress in 2025. Revenue increased by 6% to GBP 2.8 billion, while adjusted operating profit increased by 9% to nearly GBP 200 million. Operationally, we achieved nearly 25 (sic) [ 24 ] billion passenger [ kms ] secured new contracts worth over GBP 1 billion. Our German rail business provided a full service in December, would you believe for the first time in 2 years. And importantly, as you've seen, we've reached an agreement with the 5 German PTAs in North Rhine-Westphalia on the restructuring of all our rail contracts. This derisks the business and ensures that our rail operations are sustainable in the long term. All of this has been achieved while making solid progress on safety across the whole business, something, as you know, is absolutely integral to the way we operate. In business, we all know that not all contracts are perfect, and we've inherited a few difficult ones. But in business, you also have to deal with the unexpected. When this happens, I always believe it's better to be totally transparent and to be very open. Too open, some people will say, but that's my style. In 2025, as you know, we experienced some issues with certain contracts, and we fully recognized this in the year, whilst at the same time, demonstrating the strength of our underlying business. Honestly, we would prefer the scale of the adjusted items to be much smaller, and that certainly is our ambition going forward. Before we dive into the numbers, I just want to remind you of our strategy that we announced at our H1 results for '25. Our road map is unchanged, and we remain focused on stripping away complexity to reveal the high-performing businesses that we know are there. While continuing to cut through the noise, it means really streamlining our management structure and aggressively attacking overheads. We are removing as what I call the corporate glue, the surge of large and listed companies, the duplication of functions and processes going through procedures, waiting for yes and nos. It takes a hell of amount of time to do this and slows us down in the past. By being smarter and integrating our operations where it makes sense, we are becoming a leaner, faster and more effective organization. Our financial health is absolutely paramount. We are very focused on generating cash, improving liquidity and reducing debt. Every pound of CapEx is now being scrutinized to ensure maximum value, and we are leveraging Alsa's operational excellence to unlock synergies group-wide. Through simplifying and strengthening, we are putting the business back on the path to success, just like where we used to be. The financial impact of actions across the group are already visible with operating profit H2 performance of GBP 138 million. And I'm pleased to say that in H2, all our divisions were profitable. In Germany, we've taken the necessary steps to make our rail business sustainable for the long term by eliminating the significant cash flows over the remaining life of the contracts. Once the agreement is formally signed, we'll be able to provide you guys with a more detailed breakdown of the figures. Until then, I would ask you to please bear with us in respect to the amount of detail we can give you today. We're aggressively reducing costs with some savings delivered in '25, and we're announcing today that we will deliver GBP 75 million of cost savings in '26 with an annual run rate of GBP 100 million by the end of the year. We have largely integrated UK Coach into Alsa to create a more robust business, one that will meet the challenges of increased competition. We have also completed our exit of loss-making businesses in NXTS in our Coach division and the loss-making CARTA contract in WeDriveU. Despite the progress to date, we do recognize the challenges ahead. Our priorities for '26 are very clear. As I said, our strategy is indeed simple: simplify, strengthen and succeed. Whilst our operational story today is one of transition, this should not take away the fact that Alsa has delivered another record year. This was driven by growth in Spain and further revenue diversification. In Morocco, we have faced and resolved several challenges, and this has led us to a reduced operating footprint in the country. WeDriveU completed its first year as a stand-alone entity, and we are applying lessons learned there to improve operational and financial performance. We exited early the loss-making CARTA contract at the start of this year, '26. This contract had lost over [ $303 million ] in 2025. You'll see from our RNS that we've provisioned GBP 52 million for WMATA. We aren't waiting for a miracle there. As I said, we want to be open and transparent. We are pursuing legal redress with our client, but we are ensuring this no longer distracts from our profitable core business. In the U.K., the integration of UK Coach into Alsa is now largely complete with operational and functional benefits starting to be seen from the start of this year. And in Bus, preparations continue for franchising. In Germany, as mentioned previously, we are now operating a full service. This result was achieved through our investment in driver training and increased recruitment. It sounds pretty easy, really. It's pretty obvious anyway. Across the group, we have maintained strong momentum, securing 25 new contracts with a total value of GBP 450 million, whilst maintaining a disciplined conversion rate of 28% on new deals. This compared to 23% last year. It's really worth noting that these contracts exclude nonconsolidated stuff like joint ventures and joint operations. Most notably, the project of Qiddiya in Saudi Arabia and the Guadalajara Health bid will bring the total value of new contracts secured in '25 in excess of GBP 1 billion. We also expect to be awarded 2 key contracts in Spain shortly. These include a retention of one of Alsa's largest regional contracts and the expansion of our business in Ibiza, where we'll become the largest operator in the island. A key highlight is the ongoing growth in Alsa passenger volumes, which reached a new milestone of 640 million passengers. This was largely driven by a growth of 10% in Spanish domestic demand, mainly regional and urban resorts. As you can see from the charts, we're witnessing consistent upward growth in passenger numbers across Spain. This isn't merely a seasonal trend. It's a fundamental shift towards public transport and one that is being supported and driven by the Spanish government across the whole country. We do expect this momentum to continue in 2026 as a Spanish single ticket, which offers unlimited travel for a flat monthly rate becomes embedded in consumer behavior. I will now hand over to Brian, who will take you through the numbers in more detail. Brian Egan: Okay. Thank you very much, Phil, for that, and good morning, everyone. Before going into the 2025 figures, I want to mention the 2024 numbers have been restated for a GBP 0.8 of a million EBIT impact in Germany. They also reflect the discontinued operations of NASB and NXTS. This ensures a clean and like-for-like comparison for the performance we are discussing today. Revenue of GBP 2.8 billion represents a 6.2% increase from 2024, driven primarily by Alsa's strong growth at 12.8% and Alsa has now reached GBP 1.5 billion in revenue, reflecting the continued diversification in addition to a great performance in both regional and urban. We've also enjoyed good revenue growth in WeDriveU of 4.7% from new contracts wins both in shuttle and in transit business. Revenue growth helped deliver a 9.3% increase in operating profit, noting second half performance was significantly better at GBP 138 million versus GBP 60 million in the first half. It also, if you look on the very right-hand side, shows the improvement in performance this year versus the same period for last year. This reflects the improved underlying operational performance and the benefit of cost savings arising from the restructuring and efficiency improvements that we've been making. Free cash flow was GBP 77.3 million. This was lower than last year, but that was mainly caused by cash outflows related to the school bus business, which were made prior to its sale in July, so in the first half of the year. Covenant gearing improved by 0.1x from the end of 2024. And again, this has been helped by the proceeds from the school bus sale. In terms of statutory results, operating profit from continuing operations decreased from GBP 12 million to GBP 21.9 million. To understand the bridge between our adjusted statutory operating profit, there are several nonoperating charges that I'll walk you through. There were no charges to the German rail onerous contract provisions in the period. However, we did utilize GBP 56 million in the provision during the year, leaving the remaining provision at GBP 133 million. This provision will be reviewed in detail for the 15-month audited results. So it's reviewed in detail once a year. Moving to WeDriveU. We have made a GBP 52 million onerous contract provision in respect of the WMATA contract. And we are seeking legal address, which Phil as mentioned, for -- in order to recover ongoing losses. We expect the outcome of these legal proceedings to be successful and the contract losses significantly reduced. However, the benefit of this legal settlement is not included in the provision calculation. We are confident of a favorable outcome. However, the process is expected to take 18 to 24 months. It's a long process. In the year, the utilization of the provision was just over GBP 4 million. It's worth also taking a moment to say that we have learned from the WMATA contract. We have overhauled our North American bidding process to include vigorous review procedures. A GBP 38.5 million charge has been recognized in the income statement for retained legal liabilities tied to the open insurance claims from the NASB sale, the school bus sale. The charge stems largely from material adverse developments in more significant individual cases. The year-end cash impact from settled claims was just under GBP 19 million. In Morocco, following a rapid change in local operating environment, we have taken a GBP 27 million charge. This reflects a combination of price concessions we made in Casablanca, which enabled outstanding debts to be settled and also a noncash impairment charge following the abrupt transfer of Marrakech and Tangier contracts in December. To put this adjustment in perspective, on an adjusted basis, Morocco contributed an operating profit of EUR 8 million compared to just under EUR 13 million in 2024. Amortization of intangibles with acquired businesses from continuing operations increased by GBP 2.8 million during the period. This represents the annual charge for intangibles such as acquired brands and customer contracts. This happens every year. Finally, as part of our strategic initiatives to stabilize and improve the group's performance, we invested GBP 35 million on restructuring and streamlining costs and also some transaction fees related to the school bus disposal. The year-end cash impact for restructuring was GBP 29.8 million. Overall, there was a cash outflow due to adjusting items in the period. This figure includes adjusting items for discontinued operations. So now turning to our balance sheet provisions at the bottom of the slide. We currently have GBP 133 million remaining on the German OCP. We will reevaluate the provision for our 15-month audited results as it will be dependent upon the finalization of the legally binding agreements with the PTAs, which are due to be signed before the 30th of June. Of the GBP 47 million remaining provision for WeDriveU, we expect to utilize GBP 8 million in 2026. And again, as I mentioned, this is still subject to the legal process. Moving to our divisional breakdown. Alsa was our most significant growth driver with revenue increasing by just under 13% to reach the GBP 1.5 billion mark. And operating profit increased by 14% to GBP 212 million. As I've already mentioned, underpinning these numbers is strong underlying demand in Spain. Both regional and long-distance sectors are performing well, supported by a better expected trading environment, particularly towards the end of the year. In WeDriveU, revenue increased by just under 5% to GBP 432 million, driven by new contract wins. And as again, as I mentioned, both in shuttle and in transit businesses. However, the full year profit remained below 2024 levels due to challenges with WMATA contract and the CARTA contract, which has now been exited, which Phil mentioned in his presentation. We saw a meaningful change in the second half of the WMATA performance with WeDriveU improving to a GBP 17.6 million profit in H2. This recovery is expected to continue in 2026. On the other hand, the U.K. business continues to face a very challenging environment, but has shown great resilience with revenue decreasing only 4.6% to GBP 587 million despite intense competition in the Coach business. Breaking this down, UK Coach contributed GBP 315 million revenue, while U.K. Bus delivered GBP 272 million. Given the separation of the U.K. Coach as it has moved under Alsa, a profit split isn't available in these financial results. However, a breakdown will be provided in the full 15-month results ending 31st of March. With ongoing competition in key routes, it has been a very difficult year for UK Coach with revenues declining by 6.2%. However, passenger numbers only fell by 3.8%. And on a positive note, the market appears to be growing and growing quite strongly. Within U.K. Bus, revenues rose by 2.4%, and this is largely due to the fare increases that we implemented towards the end of June. The decline in passenger numbers reflects the wider problem right across the industry in the U.K. During the period, we also sold Acocks Green depot and Oak Road. This resulted in a GBP 4.3 million increase in the adjusted operating profit for the 12 months. Overall, the U.K. reported a GBP 4.6 million operating loss, as I said, largely due to the competitive pressures in U.K. Coach, also combined with rise in employer national insurance costs. We expect to see this performance improve as we move into 2026, along with the benefits of integration into Alsa. In Germany, revenue decreased by 1.6% (sic) [ 1.4% ] to GBP 253 million. And whilst the -- the adjusted operating profit increased to GBP 15.6 million due to improved operational performance, and this actually was very significant. We recovered from the loss to a profit-making position. The in-year losses on the RRX contract were GBP 56 million, and this is a cash outflow, which -- this is the significance of the German contracts that we're in the process of finalizing. Central Function costs increased by GBP 2.3 million, principally due to higher costs in relation to professional services and include a higher audit fee. However, this sort of hides the underlying cost savings that have been made during the year. Looking forward to 2026, we expect Alsa to maintain current levels of performance. For WeDriveU, we expect continued underlying recovery, whilst we continue to redress WMATA through the legal process. By integrating UK Coach into Alsa, the business is becoming more competitive. Nevertheless, we expect 2026 to be a challenging year. U.K. Bus is expected to be at breakeven, subject to finalization of funding discussions with Transport for the West Midlands. And in Germany, our rail business is benefiting from operational improvements and will be derisked once we have the PTA agreement signed by the 30th of June. By the way, that's important to mention that the revised contracts will be backdated and effective from the 1st of January 2026. In respect of Central Functions, we expect further cost reductions. Moving to our cash flow performance for the period. The most important point to highlight is the impact of school bus, which is shown in the middle column. In 2025, school bus was a significant drag on group liquidity prior to its disposal. The school bus cash outflow was driven by substantial investment in CapEx and working capital requirements that were committed in 2024. Excluding school bus, the group free cash flow was GBP 76 million. Key year-on-year movements include a working capital net inflow due to the timing of cash collections in Alsa. The increase in tax is due to a one-off refund because of the change in tax law, which significantly reduced our cash tax payments in 2024. And we are looking -- we have an ongoing project to look at managing our tax burden. As one of the problems we have is that our debt is sitting in the U.K., most of our profits are in Spain, and therefore, we don't have an offset for interest. We are targeting a total CapEx of GBP 120 million for 2026. This reflects our commitment to disciplined spending, maximizing cash conversion as we move forward. And Phil has mentioned this in his presentation and Phil has -- or Paco is also going to mention there is very, very strict CapEx control now in the organization. However, despite the strong CapEx control, we are able to pursue new growth opportunities, focusing on CapEx-light contracts. In terms of net debt, we saw a GBP 286 million inflow, reflecting the cash proceeds from the school bus disposal. We recorded a cash outflow of GBP 118 million related to items excluded from our adjusted results, and I talked through these earlier in the presentation. It should be noted that we have paid the hybrid on coupon for 2025, which is the last payment at GBP 21 million. The next payment due is GBP 40 million, which is in February 2027. There was a GBP 9.6 million outflow from other items, primarily driven by exchange movements and derivative settlements. This is partly offset by the sale of an investment. When we pull all of this together, the group achieved net -- total net funds inflow of GBP 127 million for the period. The funds inflow was offset -- has offset the loss of school bus EBITDA, resulting in a covenant gearing improving to 2.7x. I should mention that the covenant gearing for the 15 months would be dependent on a number of factors, including the German rail agreement, which has quite complicated accounting implications. However, we can confirm that we will be within the covenant requirement. In terms of debt maturity, at the 31st of December 2025, the RCFs were all undrawn, and we had nearly EUR 900 million in total between cash and undrawn committed facilities available to us. The majority of our RCF will only expire in 2029. Notably, the interest rates on our instruments are relatively attractive, and we have significantly reduced our exposure to interest rate volatility with over 90% of our debt now at fixed rates, in fact, 94%. We have sufficient liquidity to meet our debt maturities arising in 2027. And then finally, just to talk through -- sorry, almost finally, I want to briefly walk through our financial calendar for 2026. As you may have noted, we have adjusted our 2025 and '26 accounting periods following the appointment of KPMG as our new auditor, which took place in November. These changes are designed to provide KPMG with sufficient time to complete their audit work. However, we do plan to return to a December 31 year-end in 2026. Our current financial year will be for a period of 15 months to the 31st of March 2026, and we expect to release our audited results in late June, early July. Looking into the second half, we will report 6-month interim results for the period ending September 30 and expect to release those in late November. And finally, to bring us back into alignment with the standard calendar year, the final accounting period for 2026 will be a shortened 9-month period ending the 31st of December '26. Results for the period are expected to be released in March of 2027, making a return to a normal 12-month December year-end. In terms of financial imperatives, the focus remains on ensuring our strong top line growth translates to sustainable value creation. As such, we've implemented a disciplined approach to cost control. Specifically, we are implementing controls over capital expenditure and working capital to maximize cash generation and reduce debt. As Phil mentioned, the mission is simply to succeed -- to simplify to succeed. Behind this, we have our Simplify for Success cost program, which is currently targeting GBP 75 million of cost savings in 2026 with a run rate of GBP 100 million from the end of 2026. We are targeting an adjusted operating profit of GBP 195 million to GBP 210 million in 2026. I note, and this is quite important that this does not include the positive impact of the revised contract changes from the German rail businesses. Once these agreements become legally binding, which we expect will happen by 30th of June of this year, we will update our guidance. In summary, Alsa remains an engine of growth. WeDriveU is on a recovery path, and our U.K. and German businesses are leaner and more resilient with GBP 75 million in targeted savings and an operating profit guidance of GBP 195 million to GBP 210 million and positive net cash in 2026. I will now hand over to Paco, who will go through the operational review. Francisco Iglesias: Hello. Good morning. Thank you, Brian. Thank you, Phil. Thank you all of you for being here. For me, it's the first time I'm in the floor, and it's an honor to share some words with you. Just to -- as you have noticed, I'm Spanish, but you probably don't know is I'm from the South of Spain, that means that my accent is a little bit poor. So apologies for that, but I hope you can understand me better. I'll try to give you a more view on the operational side after all the numbers that Brian and the strategy from Phil, I would like to say something a little bit different on that well, this is Alsa, you know that I know Alsa a little bit. I've been working for Alsa for 34 years, and I'm very proud in the last 10 years as CEO. But I would like to explain what is behind the figures of Alsa. And I think it's important to know what's the portfolio of the business that Alsa maintains at the moment that you probably know that Long Haul is like a jewel of the crowd, long haul is 17% of the company. It's just 17%. Where we are growing more at the moment, what we are growing a lot in international that was almost 0, 5 years ago. because Morocco is there. And also in the diversification area that we are also improving. And the largest part of the company right now is the regional one that is also under a concession under franchisees process. But if you see the figures, we have managed to keep growing in 2 digits in terms of revenue and also in terms of profit. And the margin, to be honest, is unbelievable. I think it's to achieve 14% margin is challenging for the future. But I would like to convey that it's been a record year for Alsa, but not only in terms of revenue or profit or margin, but also number of passengers, customer satisfaction index, safety target, digital sales. So it's a mix, a combination of all the factors that we are working in to get the strategy and the numbers done. And a couple of points regarding the environment that Alsa, especially in Spain are now involved. One is very important is there is no direct impact in the figures, that is the approval of the mobility law in Spain. Just for you to know that the former mobility law took place in, if I'm not wrong, '87. So that means that it is a new law after 40 years. And why it's important that this mobility is now a right for the citizens in Spain. It's not only a word. It's something that is like a new pillar of the well-being of the society in Spain as the healthy or the pensions, we have also now mobility on the top of the priorities of the government, and this is very important. And also this new law secure the system of franchising and concession for long haul in Spain. So I think it's very important. It's something that has been very controversial in the past regarding if it's going to be regulated or liberalized now with the new law is secure. And the other point is the strong support from the government, from this government to the public transport, not only by the law, but also for the -- it's not subsidy. It's like because it's not subsidies to the companies is to reduce price for the passengers to use more public transport. And I think it's -- the current government has put on the table million of euros to support all kind of transport, rail, coach, buses and the rest. So I think it's important you to know. And my view on '26 is very positive. And the first 2 months, I cannot show you the figures, but the starting of the year '26 is going -- is performing very well. Let me give you an example of growth. This is Qiddiya, the Saudi city on that. How can we -- growth in that contract is EUR 500 million contract in 8-year plus a potential extension of 2 more. And it fits exactly with the strategy of Alsa. It's asset-light, is low risk and it's a project that is absolutely scalable because this is one of the -- it's the first mega project that the Saudi government is building in the country, but the plan is to have 10 projects like Qiddiya, in the next year. So we have been awarded in the first one. So we are well positioned for the rest of the tendering process that will take place. And it's also remarkable that we have won this contract competing in the, what I call the Champion League because we were competing there with the state owned -- French state-owned company, the Italian one, the Singaporean one. Well, the top of the, company and Alsa that is -- the size of Alsa is not that high as you can imagine as some of our competitors, and we won the contract through technology and through innovation. For example, you cannot see very well, but this is one of the main -- of the strong points in our offer is to build what we call the station for the future. That is a new concept of how people are going to move in the country. And I think it's key that it's not a question of price, not only price, it's a question of technology where we are the technical support for the government as well. If we move to WeDriveU, as Brian mentioned, I think despite the total figures, the figure from H2 has been very, very positive. We have managed to change the trend that we had in the past. You know that from the H1, we have the separation process with the school bus that has some cost. And now we are focused on -- once the separation has been made, we are focused on the strategy of cost and also to improve operation and to have better margins on that. So -- and also, as Brian and Phil mentioned, one of the main points is to get rid of the loss-making contract. We don't have much. We're managing in the States almost 100 contracts, but there are 3, 4 of them that are negative. And we are in the process of avoiding all this risk for the future because that will make directly an improvement in the final figures. Also to say that the states I passed a lot of times in the last year, there is a lot of room for improvement. Our market share in the state is very, very little. For example, one of our competitors have 10x the size of WeDriveU. That means we have a lot of place. And we are now entering some new areas of the industry like universities where I see very interesting through technology and through good performance. And I'm quite happy about the future as well in 2026. If we go to U.K., I think it's -- we cannot share the figures from bus and coach, but I can give you some light on that. On the bus, we are -- a slight increase on revenue, but it's true that the passengers are going down, not that much, but I think it is in the same trend that all the urban industry in U.K. are doing and are suffering right now. But I think positive news is we have managed with the authority to secure the fundings in order to have at least, I would say, breakeven in '25 and of course, in '26. Also very important in the coach that I would define that the integration of U.K. Coach and Alsa is completely success. Now here, I can see Javier, who is in charge of U.K. Coach in Birmingham. And we are in just less than 6 months, we have changed a lot of things. And again, if we go to the numbers, the decline on passengers in long haul has been less than 4%. But if you consider that our competitor, our main competitor in long haul has doubled the size of the flights and the routes that they are operating, our less in passenger is very, very little. And we still have the majority market share in long haul by far to our competitor. And we have also a very clear strategy on focusing on specific routes with the new pricing tool on technology that we have completely changed a new structure that we have put in place leaner, more close to the ground to have -- to know the problems and to have several areas depending on the different products that Javier is running there. For example, we have a clear vision that we need to grow in airports that we are -- in the overall figures, we are growing a lot. And of course, we are tackling with massive savings with no impact on safety, not impact at all in the operational excellence. So I'm also very optimistic regarding '26 that we can manage to reverse the situation that we have. Finally, Germany, I think as Phil mentioned, I think it's several milestones. For the first time, we have -- we are running 100% of the services after years. And what is even more important, we have achieved the number of drivers that we need that you know that we have a shortfall in drivers in the last year that made us some penalties with the PTA. Now we have all the drivers. And what is more important, we have all the drivers with a lower cost because you know that part of the driver that we were using in the past came from third parties for agencies now and with a higher cost. Now we are running all the operation with our own drivers. And for '26, I think it's very important because it's the year not only because of the agreement with the PTA that they are doing extremely well, but also because they are going to start the new process of bidding there. So -- and I think we are now in a very good position after the agreement with the drivers with good KPIs in operation to try to keep growing in that market that I see also very interesting for the future. And this is my final slide. I would like to say that this is after 1 year working on the -- throughout the group, 5 things that I have identified that we are working in the same page. This is -- these are facts. This is not only narrative. This is -- there is fact behind all this statement. First, all the divisions are performing better than last year, these numbers. Second is we have huge opportunities of all around the world. I mentioned Saudi. I mentioned states, but we have also some other opportunities in some other places. The massive cost reduction that we are implementing all around the divisions, including Alsa, but also the rest of the divisions. So we are going to work in the future. In the present -- we are right now working in the present with a leaner and more efficiency base of cost. So that gives us the opportunity to be more profitable that is linked with the next point that we are improving the margin on every single contract. We are avoiding totally loss-making contracts. This is a process that we're going to finish in the next months, and we are trying to get a little bit more of every single contract to gain 1% in every single contract, you can imagine that it has a huge impact on profit. And finally, probably this is not a real -- it's a fact, but it's not a number behind that I've been working, as I said, with National Express in the past for the last 20 years. And for the first time, and thanks to these guys, we are working as a group. Now it's not -- there are 4 CEOs or Vice President or whatever. We have the same protocols. We have the same CapEx view. We have the same procedure for safety. We have everything. So I think it's very important in order to get synergies from one part of the world to the other. For example, U.K. Coach, we are using the pricing technology of Alsa or -- but we have also exported some from the states in terms of Chatel to the business -- or France in the business that we have started in Spain, for example. So -- that's all. I would like to end thanking all of you. Any question after Phil's conclusion, but I want to convey that we as a team are strong. We are excited with the present and the future and myself are very, very optimistic with '26. We will see you in the next month again for your presentation. So you can check if I was right or wrong. I hope I was right. Thank you. Philip White: Just to conclude, special thanks to my buddies over here, Paco and Brian. Let me say, Paco. You have no need at all to apologize for your English. People can probably understand. I'm not mentioning you. But Paco, your accent from the south of Spain, it's much easier for people to understand than my accent from the north of England, but well done. That was a great presentation. Let's conclude. We're not going to keep you much longer over the presentations. But I suppose to conclude the first half of the year, compared to that, we're in a much better position in the H2, and there's been a significant turnaround throughout the business, especially coming up in 2026. We've streamlined our business by getting rid of the corporate glue, as I say, and exited loss-making operations. No point in running them if you're not making money. We are streamlining and simplifying, removing unnecessary layers and complexity. We're working smarter, becoming leaner, more agile and better able to respond positively to market trends and opportunities. And there's still lots and lots of opportunities out there for us. As Brian mentioned, cost and cash flow are now the key priorities for strengthening the business. And of course, we continue to seek every opportunity to deleverage. Everything we've discussed today is about creating a sustainable business. I spent the first 6 months of my tenure looking backwards, trying to fix things that had happened probably years ago. We're now no longer just looking backwards to manage challenges, we are rewiring and rebuilding our business to deliver long-term profitable growth for our shareholders. And for our millions of customers, we are committed to delivering what they deserve, and that's the best possible service we can provide. We are here for them. They are not here for us, and that's important. So in summary, we're fixing the businesses that need our focus. We are simplifying and integrating where it counts. Importantly, we are taking our people with us on this journey, returning the brilliant talent that we have in our business, and I can tell you, we have some brilliant talent. I'm not just saying, that's easy to say. But working with these guys since I've joined, very young, and they make me feel young, too, and I love that. But from the Board up to the guys who turn out every day to run our buses to run our coaches and run our trains, whose jobs can be both very difficult and dangerous, we owe a hell of a lot to these guys. Thousands of them who do this on a regular basis. A couple of thank yous. Thank you for coming along today, and thanks for the patience you've given us over the last 12 months-or-so. A very special thanks to our advisors over there who support us all the time. Yes, give us a nudge when we need it, pull us back when we need it and stop us for saying silly things, which is mainly me when I'm feeling a bit crazy. Now we couldn't do it without you guys really, really appreciate it. But thanks for turning up today. I can tell you, I'm very looking forward to a number of site visits in Ibiza, right? Where I can show you our late night and early morning service, and I'm sure you'll enjoy it. So thanks very much for everything. Thank you. Philip White: And over to Q&A. Are you going to manage this? Gerald, do you want to kick off? Gerald, be nice. Gerald Khoo: Gerald Khoo from Panmure Liberum. I'll start with 3, if I can. Morocco, can you talk us through what's gone wrong? When did it go wrong? And why has it led to such a large exceptional charge? And on the topic of exceptionals, can you talk through how much of those turn into cash? And let's assume WMATA does, I know you're all confident that it won't. And then, again, on the exceptionals, you talked about sort of more cost reductions, what exceptional should we expect associated with that? And finally, on U.K. Bus asset monetization, I think you sold 2 depots. You gave us the game. Are you able to give us the proceeds from those 2 sales and how many depots have you got left? Philip White: Can you do the operational stuff in Morocco first explaining what happened there? And Brian, can you deal with exceptional stuff? Francisco Iglesias: Okay. Morocco, we started just to put you in context, we started Morocco in 1999. So it's 27 years ago. And we reached 6 operations in Morocco in 5 years ago. So until more than 20 years, we didn't reach the size of the business that we have. Now we are running 4 cities, and we are running the first and the second cities in Morocco, that is Casablanca and Rabat, as you know. So I think it's part of our bidding process. Sometimes you win, sometimes you lose. This is nothing to be at fault. And we are still the largest urban operator in Morocco. And what we have done with the exception is just to all the assets we have and the staff that we need to be out of the company because of the process of losing Tangier and Marrakech. This is the cost. But if you ask me, are you optimistic in Morocco? We are making money in Morocco. We will make money in Morocco '26. We have some opportunities in the future to keep growing. But as the largest operator there, it will be more difficult because now there are more big companies competing with us that we don't have in the past. But we have also some areas that I cannot say, but some areas of diversification that we can enter in the Morocco market. So my view is it's been -- of course, I prefer to win rather than to lose, but I think it's part of the normal business, and I'm not especially worried and I'm optimistic for the future in Morocco. Philip White: I think when you're operating a successful business, you grow it to the extent that we did. There's always a lot of people, a lot of competitors who want a share of it. They'll come in and take it, whatever business you're in, whatever profits you're making. And I think that's what's happened to us in Morocco. But on the numbers, Brian? Brian Egan: Yes. Morocco, we had a provision of just roughly GBP 20 million at the half year. So this -- then in the second half of the year, we had this issue where the authorities ended a contract and we had to impair some of the assets. In terms of the other questions, the sales of the depots, we sold 2 depots, just over GBP 4 million, the proceeds from those. And then we look to monetize the rest of the U.K. Bus business. That was all that we had at the end of the year. On the exceptionals for the cost restructuring, we don't have a number for this year at the moment. We're working through more cost takeout. We'll give more guidance on that for the -- at the 15-month stage. We have a better handle on that. And then the final one was the adjustments. So I can very quickly go through them. I mean, obviously, the -- we drive new contract provision, which you mentioned, I mean, we do absolutely expect to be successful in litigation. But -- that is -- that won't be a cash cost if we were unsuccessful, but that certainly is not what we expect. And the legal advice is very solid. On the legal claims, that will end up being cash because it's a provision for settlements. On the intangibles, that's noncash write-down and the restructuring cost is mainly -- that is mainly cash. That is mainly cash. And Morocco going forward, that is really -- in terms of a go forward, that isn't an impact because that's a provision against -- in other words, we're not going to recover that debt. That debt has now gone. It's not a cash -- it's not -- the debt has disappeared effectively. Philip White: And Gerald, on the West Midlands depots. One is a depot Acocks Green, it's very old, in need of a lot of maintenance and the other property was a bit of car parking land. So it's one garage and a bit of land. Gerald Khoo: It sounds like it was in the books [indiscernible]. Philip White: Yes. Francisco Iglesias: Yes. A little bit more than that. But... Philip White: There was no write-down was there? Brian Egan: No, no. We made a profit of [ GBP 4 million ]. I think it was in the books, it was about [ GBP 7 million ] was in the books. Muneeba Kayani: Muneeba Kayani, Bank of America. So firstly, just on your guidance, the low end implies a decline in profits and EBIT. So can you explain how you've thought about that in the range like the bottom and top end scenarios? Secondly, on Alsa. So if I understand your outlook, you are saying kind of maintain profitability. Is that a comment on the margin, given the strong margin that you saw last year. So you still expect top line growth? If you could just clarify kind of the moving parts between the top line and the margin outlook on Alsa for '26 as you've thought about it? Brian Egan: Yes. I'll give -- I might ask Paco for some help on the second one. But for the first question, we've taken a view on the guidance for next year. We felt it was right to start at the more or less where we entered this year, I guess, very slightly below. I mean we certainly hope to do better than the minimum, but that is where we felt being sensible about guidance was the right place to be. What we don't want to do, which has been a constant theme in the past is where we give guidance and then miss it. So we want to give content that we're very firmly believe that we can achieve. And then on the margins. On the margins, Alsa had an extraordinarily strong performance this year. And again, maintaining that performance, and there are some challenges, for example, in Morocco, we've just discussed. So making sure that we can maintain that level of profitability going forward, I think, is what we believe is achievable. I mean there are quite a lot of challenges within the mix of Alsa. I don't know whether you have anything to add? Francisco Iglesias: Yes. Yes. Okay. Of course, I said in the presentation that 14% is unbelievable. It's something that even if you have asked me 1 year ago, I would say that's very, very difficult to achieve 14%. What I can say is the trend in Alsa that we are growing in terms of revenue through business as usual, passengers that are growing even 2 digits, thanks to a lot of things. But also because we are winning new contracts, for example, that figure is not included the contract or it's not included in the new contract that we are going to start in Ibiza or some other places or Guadalajara. So I don't -- to be honest, I don't know if we can reach 14% of margin. But I can say is that we are still growing. There is room for improvement in terms of revenue, in terms of passengers, even in terms of profit if you are not obsessed that I need to reach 14% of margin, I'm obsessed that we need to keep growing in all the opportunities we have. If the margin is 12%, it's fine for me. If the margin is 20% much with it. Philip White: I think you might think we're a bit cautious. I think -- we think by being open and realistic we've got to rebuild a lot of trust with you guys and with our shareholders. And I think by being open and realistic, then putting figures out that end up to be meaningless is the best way to go rather than totally failing and failing to hit guidance year-on-year. I don't think that's the best way to go. Muneeba Kayani: And if I may ask a third question on the Qiddiya project in Saudi Arabia. We've heard in other projects there, there have been many delays. So kind of as you think about this project and other projects in Saudi, how do you factor in kind of timing of these projects and impacts from your perspective? Francisco Iglesias: Well, my experience you know that we run the 3 contracts in Middle East, 2 in Saudi and 1 in Bahrain. This Qiddiya project, this is a fact we were awarded, and we need to start in 45 days after the sign of the contract. So my experience is they are doing very quickly because they know they need to have these cities running. And for example, they are now launching a project with rail that we are not in. But -- and we have been asked the time line day to ask that we can manage a second project there. So I'm not worried about that. And also to say that in the first month of operation, it was like a wide operation. We made profits from the day #1 because it's not a risk contract. It's a gross cost. So it's -- so if I have to bet, I would say that it's something that is going to happen quite quickly. Jack Cummings: Jack Cummings at Berenberg. Three questions, please. The first one is just on cost savings program. I was wondering if you could just flesh out a little bit more. I know you mentioned kind of corporate glue, but what specifically you are taking out the business in what divisions? And the second is on the pipeline. Obviously, you won a decent amount of revenue and contracts both outside of the joint venture and including it. What's the pipeline looking like for full year '26? And then just finally on covenant leverage, I think 2.7x at year-end. How should we think about how that's going to trend over the next 12 months? Will it tick up a little bit in the next 3 to 6 when North America School Bus comes out and then full? Just any more color there would be great. Philip White: I'll do the corporate glue one because it's my theme this one. It's quite easy really. And it's what Paco said, it's the first time we've been really operating as a team probably since I left a long time ago. We work together. We've got a strong GEC, our group executives. But importantly, it's how you deal with requests either for approvals or for help. We deal with them quickly. If it's a no, we tell them no straight away. We don't just ask them, can you give me more information? Can you give me more information and then tell them no. And if it's a yes, we're pretty positive about that. It's all about the speed of things. Attending these big corporates where we've all worked before, they lose -- their nimbleness goes. And the slower they are on making decisions and getting bogged down, more chance that opportunities disappear. And we've had one already. I mean, an acquisition in another country in Europe. We've delayed it and deferred it and messed about with it in the past, and it's gone away. And this is danger, by being so pretty slow, you can miss such a lot by being too careful. We've got this governance. I know you guys think governance is important, and I appreciate that. But governance doesn't make you any money. It makes you do things right, and you know the difference between right and wrong. But there's a balance between good governance and good and quick decision-making, and that's getting rid of that glue that's sticking us everywhere. Francisco Iglesias: Let me add something that we are now, as Mobico running 12 countries. If you compare 12 countries with our main competitors in the Champion League, they are running in 40, 50 countries. So that means that there is a lot of room for places to go. Let me not releasing the exact pipeline. But it also is a fact that we submit roughly 30, 3-0, bidding process in a year. I would say less than half in Spain. This is the line of their share, but more than 50% out of Spain in the other 11 countries that we run, we are preparing something too. But not only that, we are also having a look or -- not footprint, but some researches and some ongoing negotiations with at least 5 more countries where we are not in at the moment. So let me say that I'm not going to say you the opportunity because they are competitors. But I can assure you that we have a lot of opportunity. I'm not sharing -- I'm not sure that we're going to win all of them. You know that the ratio of winning contract is about 30%, but you can imagine that if we have this size of opportunities, I don't know, 1, 2, 3, we will win, I hope. If not, it has to fire me. Philip White: Brian, can you do the cost stuff? Brian Egan: Just in terms of cost savings, so GBP 75 million, that is spread right across the group. Head office is -- I mean, just in very rough terms, there's around GBP 15 million at head office. The big focus, as we've mentioned in really all the presentations has been on U.K. Coach, which is about [ GBP 25 million ] and then it's [ GBP 10 million ] out of the other divisions. So Germany, Alsa and WeDriveU. So -- but it really is right across the business. On the covenant, it's a little bit complicated because of the German settlement because that's going to influence the ratios very significantly. And in fact, the accounting is quite complicated. In fact, even KPMG are getting technical advice as to how it's treated. But it will be -- without Germany, it will be in -- it will obviously, the covenant ratio, but probably in the 3s. But I'm probably getting stared now, I'm not supposed to say. So it will be in 3 excluding Germany, with Germany, and that again, depends on accounting, it would be lower. And by the year-end, it will be below 3. Philip White: Questions, guys? Ruairi Cullinane: Ruairi Cullinane, RBC. The first question on Alsa concession renewal. So what percentage of Alsa's revenues are up for renewal in full year '27? Is there anything else coming in the years after that? If you could even give us an indicator of what percentage of earnings that would be even better. Then secondly, on provisions on the balance sheet, you've hopefully quantified that there will be GBP 8 million of utilization from the WeDriveU onerous contract provision. You may not be able to comment on German rail, but if you can, that would be appreciated. And then is there anything else we should be thinking about? Yes, I'll leave it at that. Philip White: Okay. Thanks, Ruairi. Can you talk a bit about concessions coming up, Paco, well, this year and next year? Francisco Iglesias: Yes. Well, the franchise process is ongoing. This -- it's true that it has been a general delay but it's something, for example, right now, there is 1 or 2 contracts on the table. We are not incumbent, but in Spain, we have -- in March, it's -- we need to submit at least 2 offers in the process. So we will have the process. I don't expect that we will have in all -- of course, not all of them because if I'm not wrong, we manage 21 contracts in long haul in Spain. So probably it's a process that will take at least a couple of years to finish. And after that, you know that there is a process of mobilization, claims and so on. So I don't have the crystal ball, but I think it's something that for sure is not going to impact '26. It's strange that could impact in '27 or at least in the first half of '27, but it's something that is happening. And of course, we haven't lost a single contract in long haul in the history in Spain. And as I show the revenue of long haul is 17% of the company is a good margin. And of course, after a bidding process you usually lose a bit of margins, but because you have to reduce price. But after that, there is a recovery coming from the increase on passengers. So it's a process like a peak on that. So I don't know if that answers your question or not, but this is my expectation. Philip White: On German rail, I'm sorry, I can't give you any more because that's a commitment we've made to the local authorities there until we get the contract signed. They're a different organization to us, political organization and they have got a lot of people who they report to, including their elected members and offices and also central government. But we did say in the announcement that we're reducing the length of our loss-making contract. We're increasing the length of our profit profit-making contract. And we're also changing the basis of our profit-making contract to gross costs rather than net cost, and that takes away a lot of revenue risk. All, I can say there have been long negotiations, and we're very happy with the outcome. There's a lot of tricky accounting, I can't understand, but as Brian says, we're seeking help there, but we are very satisfied with the outcome. Brian Egan: I think the important one is when you put the 3 contracts together, the cash leakage is going to stop. That's the intention. Philip White: And Brian, on provisions and stuff? Brian Egan: Well, I think only the 2 provisions. So on WMATA, it can be GBP 8 million be released next year. And then on the German one, we just have to finalize the contracts and we disclose that. So hopefully, again, with the full year results. We just have to finalize the contracts and we disclose that. So hopefully, again, with the full year results. Philip White: Okay. Any more questions, guys? Are we done? I think we are. Thank you very much for coming along. Really enjoyed meeting as usual. We'll be seeing a lot of you in the future, particularly in this year. Please don't get too bored with us. I know we're not the most exciting people, but we do our best. Thank you very much. Brian Egan: Thank you.
Operator: Ladies and gentlemen, good day, everyone, and welcome to Vipshop Holdings Limited Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, I would like to turn the call to, Ms. Jessie Zheng, Vipshop's Head of Investor Relations. Please proceed. Jessie Fan: Thank you, operator. Hello, everyone, and thank you for joining Vipshop's Fourth Quarter and Full Year 2025 Earnings Conference Call. With us today are Eric Shen, our Co-Founder, Chairman, and CEO, and Mark Wang, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our safe harbor statement in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made. Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income attributable to Vipshop's shareholders, and non-GAAP net income per ADS, are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the reconciliations of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen. Eric Shen: Good morning, and good evening, everyone. Welcome, and thank you for joining our fourth quarter and full year 2025 earnings conference call. This year has been defined by strategic realignment, operating resilience, and a firm commitment to high-quality growth in a dynamic market. While we entered 2025 facing a multi-consumer environment, I'm pleased to report that the agility of our off-price retail model has allowed us to stabilize our top-line performance and continue to deliver robust profitability for the full year. Our fourth quarter results came in slightly below our expectations. This was primarily due to a deceleration in December sales as customer activity slowed. We attributed it to the weak winter apparel demand alongside delayed holiday shopping due to a later spring festival. While we saw short-term pressure this quarter, our long-term road map remains unchanged. We continue to make solid progress that reinforces our flywheels from merchandising, customer engagement, to operations. In 2025, we implemented a strategic reorganization of our merchandising and customer engagement team to enhance agility and long-term competitiveness by enabling faster decision-making and breaking down internal silo. We have unlocked a strong foundation for long-term growth. Throughout the year, our merchandising strategy centered on 3 pillars: enhancing customer relevance, building differentiation, and deepening category expertise. Advancing these capabilities has been fundamentally allowed us to consistently and effectively align high-value brand supply with evolving customer demand. We are building a stronger, more connected portfolio of branded products. Last year, our merchandising team further deepened our supply network. This enabled us to acquire more quality deep discount inventory, driving sales growth steadily across our most valuable brands. Leveraging data-driven insights, we are proactively shaping a resilient assortment that wins in growth categories while keeping our supply chains responsive to shifts in customer needs. We are seeing an encouraging early signal of cross-sell from apparel into related categories like mother and baby, childcare, and lifestyle. We will remain focused on refining these synergies to better serve our customers' diverse needs. Our Made for VIP line has become a key driver of our differentiation, with sales in these exclusive categories growing by over 40% to account for 5% of online apparel sales in 2025. Having successfully built these foundations of scale, we are now in the position to evolve our approach for the next stage of growth. We are streamlining our exclusive products to build a clear identity and drive mind share when customers see an exclusive tech, which should instantly recognize a promise of high value and reliability. This is how we transfer the line into competitive differentiations, reliable courage, on-trend selection, and exceptional value. Our optimistic buying proactive is another key differentiator, allowing us to select a portfolio of high-demand items from top global and domestic partners. This delivers a compelling value proposition based on quality, price, and style. Combined with dynamic fresh sales and treasure hunt experience, it drives wild customer apparel, full excitement, and encourages repeat visits. We are moving faster to lock in more exclusive low-priced inventory to attract high-value shoppers and deepen the discovery drive of our platform. To enhance customer experience, one team now manages the entire journey from initial brand and acquisitions to value-driven growth and lifelong engagement. We have enhanced our capabilities to target and engage user efficiency, which serves as the core foundation of our full life cycle customer strategy. Early progress is promising, and we are focused on the sustainable runway ahead to build a more seamless cross-category experience that maximizes lifetime value. The Super VIP program remains the cornerstone of our growth. Active SVIP members sustained double-digit growth for the fourth quarter. For the full year 2025, active SVIPs grew by 11% to 9.8 million, contributing 52% of our online spending. Through exclusive upgrades such as providing sales and family benefits, SVIPs consistently demonstrate significantly higher retention and repeat purchase than those of regular customers. Their sustained loyalty and spending power provide a reliable revenue stream and increase our apparel to brand partners, seeking high-quality customer access. Turning to the operations. We have enhanced our capabilities to better think merchandise with customer intent, delivering measurable results. We implemented multi-objective optimization in our searching engine, directly improving conversion rate. We also prioritize diversity and freshness in our recommendation engine, which has enriched discovery and drive high browsing frequency and return visits. Look ahead, we are exploring generative search and recommendations to enable more dynamic, interactive, and integrate discovery experience. Lastly, we have made great strides in deploying AI across our business to drive tangible value with advanced AI applications in searching and recommendations, customer service, and marketing. We have enhanced the customer experience and empowering our brand partners, laying a strong foundation for deeper company-wide integration. Notably, our AI-powered customer service effectively automates routine interactions, improving the overall speed and relevance of customer support. The system now manages the majority of product inquiries and generate personalized recommendations with automated resolutions reach approaching 90%. AI-generated content is now widely used in marketing, driving efficiency and effectiveness, taking our own campaign, for example, by leveraging AIGC to automate creatives and placements. We have reduced production costs while optimize customer acquisition efficiency. Furthermore, we have used AIGC to generally summarize our customer reviews and product portfolio, helping brand partners boost their sales effectiveness. With its full-scale launch, our AI virtual try-on feature has proven to be an effective driven customer engagement. Initial data confirm its impact on loyalty, showing that engaged customer has a high rate of repeat visits. Our next phase is fundamentally integration of AI, moving beyond stand-alone workflows to embed it within our core operations, making it primary driver of growth and business-wide efficiency. As we're looking back on 2025, we have become a more agile, customer-central and technology-driven organizations. We have enhanced our leadership in the off-price sector as an indispensable gateway for brand navigation, China shifting consumption landscape, as value shopping become a structural trend. We are uniquely positioned to capture high-value customers and expand our share of wallet through merchandising and supply chain reliability. While the macro environment remains dynamic, our focused strategy and strength execution giving us great confidence in delivering sustainable profitability growth in 2026 and beyond. At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results. Mark Wang: Thanks, Eric, and hello, everyone. We concluded 2025 with resilient performance underpinned by solid profitability in a dynamic market. This financial strength stems from our disciplined approach to investing, ensuring the every dollar we deploy advance our core business and builds lasting momentum. Over the past year, we focused on enabling the business with agility, ensuring our investments in merchandising, consumer engagement, and operational upgrades, as well as AI enhancements, directly strengthen our business core. This discipline has translated into quality earnings and is building the foundation for durable competitive advantage. As Eric emphasized, we have seen tangible progress which has repositioned us for sustained momentum. Our focus remains on stewarding our capital to support its business priorities, ensuring we have both the flexibility and the financial foundation to execute our long-term growth strategy. Turning to capital returns. I'm pleased to confirm that we delivered on our 2025 commitment, returning a total of USD 944 million to shareholders through dividends and share repurchase. For 2026, we are maintaining this momentum. Consistent with our prior year's policy, we intend to distribute no less than 75% of our full year 2025 non-GAAP net income attributable to Vipshop's shareholders. This will be executed through an increased annual dividend of approximately USD 300 million as well as the continuation of our share repurchase program. These actions reflect our confidence in the company's cash-generating capability and our steadfast commitment to shareholder value creation. Now moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers presented below in renminbi and all the percentage change are year-over-year change, unless otherwise noted. Total net revenues for the fourth quarter of 2025 were RMB 32.5 billion compared with RMB 33.2 billion in the prior year period. Gross profit was RMB 7.4 billion compared with RMB 7.6 billion in the prior year period. Gross margin was 22.9% compared with 23.0% in the prior year period. Total operating expenses decreased by 3.7% year-over-year to RMB 4.9 billion from RMB 5.1 billion in the prior year period. As a percentage of total net revenues, total operating expenses decreased to 15.0% from 15.2% in the prior year period. Fulfillment expenses decreased by 1.0% year-over-year to RMB 2.4 billion from RMB 2.5 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses were 7.5% compared with 7.4% in the prior year period. Marketing expenses decreased by 6.1% year-over-year to RMB 873.7 million from RMB 903.3 million in the prior year period. As a percentage of total net revenues, Marketing expenses decreased to 2.7% from 2.8% in the prior year period. Technology and content expenses decreased by 9.3% year-over-year to RMB 425.5 million from RMB 469.2 million in the prior year period. As a percentage of total net revenues, technology and content expenses decreased to 1.3% from 1.4% in the prior year period. General and administrative expenses decreased by 5.2% year-over-year to RMB 1.1 billion from RMB 1.2 billion in the prior year period. As a percentage of total net revenues, general and administrative expenses decreased to 3.5% from 3.6% in the prior year period. Income from operations increased by 1.7% year-over-year to RMB 2.90 billion from RMB 2.85 billion in the prior year period. Operating margin increased to 8.9% from 8.6% in the prior year period. Non-GAAP income from operations was RMB 3.2 billion compared with RMB 3.4 billion in the prior year period. Non-GAAP operating margin was 10.0% compared with 10.2% in the prior year period. Net income attributable to Vipshop's shareholders increased by 5.8% year-over-year to RMB 2.6 billion from RMB 2.4 billion in the prior year period. Net margin attributable to Vipshop shareholders increased to 8.0% from 7.4% in the prior year period. Net income attributable to Vipshop's shareholders per diluted ADS increased to RMB 5.12 from RMB 4.69 in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders was RMB 2.9 billion compared with RMB 3.0 billion in the prior year period. Non-GAAP net margin attributable to Vipshop's shareholders was 8.8% compared with 9.0% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS was RMB 5.66 compared with RMB 5.70 in the prior year period. As of December 31, 2025, we had cash and cash equivalents and restricted cash of RMB 24.1 billion and short-term investments of RMB 5.8 billion. Now I will briefly walk through the highlights of our full year results. Total net revenues were RMB 105.9 billion compared with RMB 108.4 billion in the prior year. Gross profit was RMB 24.5 billion compared with RMB 25.5 billion in the prior year. Gross margin was 23.1% compared with 23.5% in the prior year. Income from operations was RMB 8.1 billion compared with RMB 9.2 billion in the prior year. Operating margin was 7.7% compared with 8.5% in the prior year. Non-GAAP income from operations was RMB 9.9 billion compared with RMB 10.7 billion in the prior year. Non-GAAP operating margin was 9.3% compared with 9.9% in the prior year. Net income attributable to Vipshop shareholders was RMB 7.2 billion compared with RMB 7.7 billion in the prior year. Net margin attributable to Vipshop's shareholders was 6.8% compared with 7.1% in the prior year. Net income attributable to Vipshop shareholders per diluted ADS was RMB 14.15 compared with RMB 14.35 in the prior year. Non-GAAP net income attributable to Vipshop's shareholders was RMB 8.7 billion compared with RMB 9.0 billion in the prior year. Non-GAAP net margin attributable to Vipshop's shareholders was 8.3%, which remained stable as compared with that in the prior year period. Non-GAAP net income attributable to Vipshop shareholders per diluted ADS increased to RMB 17.08 compared with RMB 16.75 in the prior year. Looking forward to the first quarter of 2026, we expect our total net revenues to be between RMB 26.3 billion and RMB 27.6 billion, representing a year-over-year increase of approximately 0% to 5%. Please note that this forecast reflects our current and preliminary view of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A. Operator: [Operator Instructions] We will now take the first question coming from the line of Ronald Keung from Goldman Sachs. Ronald Keung: [Foreign Language] Jessie Fan: Ronald, would you please translate your question into English please? So maybe I'll just translate the question first and then let Eric respond to the question. [Interpreted] So, the first question is about the quarter-to-date business performance, whether the seasonality, especially late spring festival has impacted the business performance and have -- have we seen any recovery in the business? Based on the guidance, it seems like we are accelerating revenue growth a little bit. The second question is about the margin outlook for 2026 because we have seen that margins for 2025 seems to be under a little bit pressure in terms of GP margin and NP margin, whether we have new investments for 2026? And how do we think about gross margin cost and expenses and NP margin, whether we can stabilize our margin profile. Eric Shen: [Foreign Language] Jessie Fan: [Interpreted] So, on the first question regarding the Q1 guidance, let's take a look at the Q4 first. I think our online sales actually took a hit in Q4, especially in December. It was way too warm in China in most regions for people to buy winter clothes. And since Chinese New Year is late this year, nobody was actually in a rush to shop for the holiday. Because of that, apparel didn't nearly as well as our other categories. But as we head into the first quarter, Q1, actually, we have seen consumer activity has clearly picked up, largely driven by New Year shopping. And if we look at January and February combined, actually, we do see a nice recovery in our core business. So, this has kept us firm on track with our guidance of 0% to 5% top line growth, and we are confident that we can deliver that growth and for Q1 and for the rest of the year. Second on margins, I think our business philosophy has been very consistent. We remain focused on high-quality growth at sustainable profitable growth for the business, especially in a dynamic macro environment today. So, we expect margins will be stable, and we will make every effort to outperform in terms of margins for 2026 and beyond. Operator: [Operator Instructions] Our next question comes from the line of Alicia Yap from Citigroup. Alicis a Yap: [Foreign Language] I have 2 questions. First is that related to the user growth. I think management previously commented that we are hopeful to see the user growth momentum to sustain. So just wondering if management could share with us what is your expectation for the user growth for 2026? And then regarding the demand, how are you seeing the demand for the apparel versus the non-apparel growth? And second question is related to AI. Just wondering, does management believe the overstocked business model that we have for Vipshop, would that be actually more resilient against this Agentic commerce? And with that, will VIP actually invest more resources into growing the offline business such as the Shan Shan Outlet? Eric Shen: [Foreign Language] Jessie Fan: [Interpreted] So on the first question about customer growth. Customer growth is definitely our top priority. That's actually the foundation for sales growth and ultimately profitability. In Q4, we had thought we should have maintained the customer growth momentum. But due to expected slowdown in consumer activity, actually, customer growth is a little bit under pressure. We expect customer to regrow for 2026. And we ideally, we should see customer growth is actually faster than sales growth to offset the impact of a slightly rising return rate. So we are definitely going to make every effort to bring customer back to growth track in 2026. On the second question regarding category preferences, consumers are still, generally speaking, still cautious and selective and value conscious, but they continue to shop across different categories, including discretionary categories. They just need strong reasons to do so. So that's why we focus so much on providing the best value across the shopping carts, including apparel and non-apparel categories. And we are making changes in both categories, especially in standard categories to drive repeat business for our most valuable customers, including SVIP and high-value customers to increase their cross-category purchases for family shopping. Lastly, on AI. definitely, AI is fundamentally transforming many industries, including the e-commerce industry. And for an off-price retailer like Vipshop, we are definitely adapting to this trend to remain competitive. We believe fundamentally, our business model relies on merchandising on how well we can secure quality deep discount inventory, how well we can provide a best value for customers. We think as long as we make a difference in merchandising and supply chain reliability, we will not be left behind. Of course, the online business is a hypercompetitive business. That's why we look for -- we are constantly looking for opportunities offline, especially with the outlet business, which proves to be a very good business model in terms of stable revenue streams and profitability. So we are actually expanding our presence for Shan Shan outlets which are doing great in terms of sales and profit contribution. And we expect a mirrored pace of expansion into more cities and regions and geographies. We expect to see continued strong growth in terms of sales, revenue and profit from Shan Shan business. And we expect with a strong offline presence, we will be we will be able to offset any potential challenges from AI. Operator: There are no further questions at this time. At this time, I would like to turn the conference back to Jessie for any closing remarks. Jessie Fan: Thank you for taking time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Adam Warby: Good morning, everyone. Very good to be with you here today to talk about FY '25. And FY '25 was a year of real tangible growth for Ocado, but one that also saw the business mature in a number of important ways. And while we've seen robust growth in the business and good progress across most of our global operations, we also worked to help some partners address a number of key challenges in their early network decisions. This included constructive engagement with our partners in North America, as they made decisions to close sites in areas where demand has not evolved as initially expected. And in fact, last year, we reflected that a number of our partners were looking at a small number of sites, which required a different strategic approach. And while the decisions made in North America to close were difficult, it does reflect a mature approach with those partnerships and putting them on a stronger foundation for long-term and sustainable growth. With exclusivity now having ended in North America, we've begun the journey to reengage in many of the commercial opportunities available in that very large -- world's largest grocery market. And Tim will reflect on this and Ocado's approach to reentering the wider global opportunity as Ocado moves into this next phase of commercial growth. So I look forward to hearing more about that soon. I've now been Chair for just over a year. And during that period, I've spent a lot of time engaging closely with a range of stakeholders. And reflecting on what I've learned, I remain still very excited about the significant opportunity that remains in -- to solve a range of business issues across the omnichannel journeys of our retailers. And Ocado itself is still a business that has a huge breadth of talent, a unique and world-leading technology platform, a visionary leadership team and a scaled commercial relationship with many of the leading retail brands around the world. I've enjoyed getting under the skin of these issues over the past year. And while recognizing that executing in a competitive and ever-changing world is challenging, I do believe Ocado is well positioned to take advantage of the significant global opportunity, both with current and future partners. I particularly value the time spent with many of our Ocado partners, including counterparts at Coles, Ocado Retail, of course, Kroger and of course, our JV partner, M&S. This engagement gives a tremendous window into the strategic thinking of our partners and in particular, a depth of understanding on how some of the world's most successful retailers think about their own long-term success and growth. Today, you'll hear from Stephen and Tim about progress we're making towards the key priorities that we laid out at the half year. First of all, our core priority to turn cash flow positive later this year with full year cash generation in FY '27, the measures that we're taking to drive continued growth and greater efficiency with our partners, and lastly, how we're reconfiguring key parts of the business to make sure we're well set to take advantage of the renewed and significant global opportunity. So over to you, Stephen. Stephen Daintith: Thank you, Adam, and good morning, everybody. I hope you're all well. Thank you for joining us at today's full year '25 results. I'm going to take you through the financials. Next slide, please. Okay. Here are the headlines. So good financial progress across the board really. Revenue grew, group revenue by 12%. I'm going to take you through the logistics and the tech solutions growth shortly. We had strong adjusted EBITDA growth of GBP 66 million to GBP 178 million. The underlying cash flow, if you exclude the letter of credit, was a GBP 230 million outflow. But if you were to take that into account, underlying cash flow would be GBP 140 million -- GBP 130 million better, driven by that receipt from the letter of credit. I should say upfront, by the way, on the closure fees from the 4 site closures and on the letter of credit, the accounting is not straightforward. It mostly impacts fiscal '26 and future years, but we've included in the appendix a couple of charts that show you how it all works when it comes to do your modeling. So I just wanted to make that open upfront. The retail -- sorry, the underlying cash flow in terms of credit, I talked about that. Liquidity finished the year yet again with healthier liquidity of GBP 700 million or so of cash and the access to the revolving credit facility. This has been bolstered further by the GBP 279 million inflow that came in post the year-end. So we're sitting on very good cash balances today. It does mean, and I'll get into it when we look at our debt chart shortly, as we approach our debt maturities with the optionality there. Certainly, in the first instance, the GBP 350 million convertible bond that's due in January '27, we can pay out of cash, which you will see our gross debt numbers starting to come down, important factor for us, particularly when you see the trend in interest costs. Yet again, we achieved our guidance for revenue, margin and cash flow targets and hit all of those. There's probably nothing more I'll say here. I'll take you through the detail now of each business. Here's the statutory chart, getting you to your earnings before tax of GBP 403 million, a positive number, but benefiting, of course, from the big adjusting item of the valuation of Ocado Retail of the stake of our 50% in Ocado Retail when we deconsolidated the asset and M&S took over consolidation. As a consequence of that, we took our value that we put in at GBP 1.5 billion or so, half of that and then you adjust for the assets that are on our balance sheet to get to that adjusting items income. A couple of other callouts. Tech solutions revenue growth, I'll go through that. Logistics, 11%. I think it's probably worthwhile calling out the finance cost line, a GBP 48 million increase in our interest costs. As I've mentioned earlier, there are plans to address that debt and gradually reduce that gross debt level. I'll get to that shortly. So Ocado Group adjusting items. Here is the key item there at the top that I talked about, Jones Food, if you recall, went into administration last year. We wrote off those assets that were consolidated on our balance sheet. We were a consolidating company. The Kroger of lessor credit pre fiscal '25. So whilst the cash was received in early this year -- sorry, last year, in fact, there is an accounting recognition of the revenue related to prior periods, which is an adjusting item in the prior period. You'll see at the chart at the back how it works. It's not straightforward. The organizational restructure, that is not the cost of the restructuring that we're about to do. We did a small amount -- a relatively small amount of restructuring principally in G&A and in technology in the first half of this year. So there's a small amount in there. The rest is pretty straightforward. So tech solutions. Well, you know the business model, grow the average number of live modules on that point, and we'll come to it shortly. That's probably the key number in respect of becoming a cash flow positive business full year fiscal '27, turning cash flow positive in the second half of '26. 121 modules today, driven by -- the growth there is driven by new sites going live. We've got around 6 sites going live over the next couple of years, but also drawdowns in existing sites. Those are the 2 drivers of that growth in modules. The quicker we grow our utilization of those sites, fill their capacity, the more modules and CFCs that are ordered going forward. That's a key metric for us. Recurring revenues make up the bulk of that revenue, that GBP 444 million, growing by 7%. And as you'd expect, that's in line with the growth in average number of live modules, but also the fees that we get, as you'll see shortly, per module that are indexed every year to local inflation. The nonrecurring revenue, a material increase in nonmaterial revenue by GBP 41 million, but there's a lot of noise within that number. A lot of it that's in there is around the Morrisons fee that we got when we exited their 5 modules out of Erith. It's about -- I think about GBP 17 million or so there. And then there's about a GBP 15 million number in respect to the closure fees as well. So you'll see that detail later on in the pack in the appendix. Other than that, contribution margin for tech solutions, an improving contribution margin of 72%. Of course, the revenue does benefit from those items that I mentioned, but we've also included a potential decommissioning provision in there in respect of those site closures. So just to make sure that we balance it out that we haven't taken all of that benefit directly to contribution. There is some provision in there as well. These are the expense items of the technology spend and then support costs. That's the G&A costs that exist, but it's also the partner-facing teams as well. As you'll see shortly in the slide, it's sales team, but it's also G&A, corporate overhead type teams. Okay. left-hand chart showing the progression of average live modules. Now clearly, as we approach '26 and '27, we are going to be hindered in '26 by, of course, the sites that have closed in -- recently that were part of that 121 number. We make that up by the sites that go live. We also make it up by Ocado Retail drawing down on further modules as well, which they will do, self-evident given we're going to show you shortly where they are on their capacity, but as they're growing as strongly as they are another year of growth, 15% revenue growth. And that's driven by volume as well. That's a volume-driven growth. Better revenue per module, I talked about that, that progression, indexation playing a part there drives our recurring revenues. That's the math. So here you go, go live of CFCs and drawdowns to drive the growth following the resets. Here on the right-hand side, we call out the CFCs we expect to go live over the next couple of years. And again, there's some bullet points there that just reinforce my earlier comments around module drawdowns and the importance of those. We expect by fiscal '27 to be at at least 125, and we're targeting over 130. But for the purposes of the modeling of cash flow positive, this range does the job. We expect we can go further than that, but let's get there when we do. That's our ambition. Okay. Direct operating costs, we expect those to benefit further going forward, but you can see the progression here, continued efficiency in the operations. We do think we can get to these being below 25% and therefore, an over 75% contribution margin. Technology spend, you can see how it's declined in fiscal '25 to a total across CapEx and P&L costs of GBP 248 million. We will be seeing shortly in the guidance that we give for fiscal '27, again the cash flow positive. We are looking at around GBP 100 million or so reduction in that spend over the next 2 years. We have made it very clear for quite a while that the last 5 or 6 years has been a peak investment period for us. If you recall, we launched those reimagined innovations in January 2022, and now they're going into the market with our partners taking those, Ocado Retail in the U.K., Kroger in the U.S. and so on, ordering them and seeing the productivity gains that Ocado Retail is already benefiting from. So it's a natural part of our evolution as we expected for this technology spend to start to wind down. SG&A costs will reduce further as we focus on a leaner operating model. You'll see that in the mix there of SG&A costs that we've actually -- I know it's split in the first half, second half split, we'll show it a little later. We've actually put an extra GBP 6 million into partner-facing sales teams and G&A costs have come down by the same GBP 6 million. So whilst it's flat year-on-year, the mix has changed quite significantly, and we'll continue in that direction. Again, that number, we're expecting there to be about GBP 50 million lighter in '27 versus where it is currently today in fiscal '25. That gets you to your GBP 150 million of cost savings. Ocado Logistics, okay, 11% growth in revenue, orders, again, it's volume-driven growth, as you might expect. So what would I call out on this slide, pretty reliable EBITDA number that we're generating. EBITDA has grown a little year-over-year. A lot -- some of that, I should say, is down to TSAs that have rolled off that we provided to Ocado Retail that we're now charging for as those transition services agreements have concluded. So we're getting more profitability out of the business. Eaches is growth of 8%, orders per week up 10% in line with revenue growth. UPH, again, we're going to show -- we're going to see a chart in a while that shows that UPH progression, really important part of the business model and the investment case for Ocado, which is the productivity our technology can bring to warehouses, drive down labor count and drive down labor costs where labor is becoming more expensive and more scarce, a really important part of our investment case. And going through those metrics, there you go. You can see the progression in UPH. Luton has at a peak of 318 UPH recently, and we averaged 289 in fiscal '29 -- fiscal '25, sorry. And then DP8, pretty steady at around the 21 number, 21.5 this year. So just close to 22 drops per van per 8-hour shift. Ocado Retail. Another really strong year for Ocado Retail, revenue growth at 15%, strong growth in our customers and growing our market share in the online grocery market, 15% revenue growth, gross profit up by 14%. Across these cost lines, you can see the operational leverage coming through as well, with the revenue growth of 15%, CFC costs up just 7%. Service delivery, that's hit hard by U.K. labor inflation, but also by the national insurance changes that kicked in over the last year or so. Utility costs flat year-on-year. Support costs, you can see growing by just 8% and marketing costs growing by just 3%. So good operational leverage in the business model. What else? I think I've pretty much highlighted the key things there. The underlying EBITDA margin, if you were to add back the GBP 33 million of Hatfield fees is now a 3.8% number. We expect those Hatfield fees to reduce as Ocado Retail orders more modules. There is a credit system in place that as they place more -- order more modules, for every 3 ordered, roughly there's around a 2% reduction in the Hatfield fees number, which is a 13 module count for that business -- for that -- sorry, that warehouse. Ocado Retail, structural and volume-led sales growth, orders per week, so it's a volume-driven growth, not a price-driven growth, 13% growth in orders, average basket value up slightly at 1.3%, and I think you'll be familiar with these trends. Okay. Again, customer growth now comfortably over GBP 1.2 billion -- GBP 1.2 million, sorry, basket items stable and utilization. There's the chart, the important one for us. We like that chart because it means they're going to be ordering more modules and CFC shortly. Watch this space on that one. So our cash flow, when you put this all together, this is from an EBITDA basis down to a cash flow basis in fiscal '25, there's our EBITDA. The cash received into contract liabilities, we get -- that's the cash that actually came in. We deduct then, of course, the amount that was recognized through the P&L account, which is part of the EBITDA number and because that's the noncash item that we take that out. The working capital movements we benefit from. There's the interest payment line that I highlighted earlier, GBP 46 million increase in that cash outflow year-over-year. CapEx pretty much in line with last year. CapEx is principally the CFCs, of course, the MHE, but also our technology spend. OAI CapEx, that's related to McKesson. Lease liabilities, no movements there and nothing to write home about in the other line. And then finally, the proceeds from the letter of credit of GBP 113 million, getting you to that underlying cash flow of GBP 100 million. Net cash inflows. When we take into account the final receipt from AutoStore, from that settlement that we concluded, agreed with them around 3 or 4 years -- 3 years ago now. That's the final payment that's now come through. On our financing, we actually paid -- whilst we paid down less debt than the amount of debt that we've raised and benefiting with GBP 58 million on the balance sheet, which you see today. Other items, you may have read that we've sold our stake in Paneltex, which was a very small GBP 400,000 investment, and we've got back comfortably our money back from the valuation of that sale, which is around GBP 20 million sale or so. And we own 25% of the business. Okay. The outlook for the year ahead, for the next couple of years. This goes back to my earlier comments. We have guided for quite a while that we'd be heading towards 20% of recurring revenues. When you do the math, this is the GBP 250 million or so that we spent across CapEx and P&L spend in fiscal '25, declining by about GBP 100 million to GBP 150 million in fiscal '27. Tim will be talking more about that during his pack. Other than that, I will then move on. CapEx has been weighted to the Re:Imagined fees, as you can imagine. You can see the composition of the capital items in fiscal '25 in the pie chart at the top there. And then there's more commentary around the '26 and the '27 targets outlook. The cost that we are taking out of the business of GBP 150 million in aggregate, that will be an exercise that is commencing now. The key events will be in March and then later in the year as well, there'll be another event. We'll just have to see how that progresses over the course of the year. It will take place -- I should have said, it will conclude by the end of November. There'll be progressive reductions over the course of the next 6 months because a better way of framing it. Lowering and leveraging our SG&A cost remains a key focus for us. This GBP 50 million of costs come out of this area. You can see the trend has been a downwards trend. You can see the shift there between the blue and the green bars around partner-facing teams and corporate functions. I think I've pretty much commented on this dynamic already. There's the GBP 150 million, putting it all together, and just reinforcing that point. And summarizing the key building blocks to be cash flow positive for full year '27. Live modules of GBP 125 million to GBP 130 million plus, I'll explain the drivers of those. That will generate a contribution of around GBP 400 million with a cash contribution of circa GBP 3 million per module. Total tech spend and SG&A spend will be around GBP 250 million from around, you can see, the GBP 400 million in fiscal '25. That's the GBP 150 million saving. And then we get a variety of other net inflows, including upfront receipts from partners. We typically get about GBP 34 million a year from -- GBP 30 million to GBP 40 million a year from those. Logistics cash inflows, the business that generates cash for us, take off our lease costs and then whatever the movement is on working capital from year-to-year. Net interest costs are we've modeled GBP 80 million to GBP 100 million, but hopefully, there'll be opportunity there to reduce that given our strong liquidity. And as I said, when we look at our debt stack and options to address some of those maturities, some of those -- some of that debt. We've concluded here in the final bullet, there will be sufficient cash flow to be cash flow positive and to fund circa 10% module growth. So one could argue that if we did a 15% module growth in fiscal '28 versus '27, we wouldn't have the cash flow. We might not be cash flow positive because we're putting the CapEx in. That's a high-quality problem, I think. We'll cross that bridge when we get there. That would be the only reason why we wouldn't hit our target if we had some big orders for delivery in '28 and '29. But I think both Tim and I would actually welcome that. Okay. Managing our debt maturities, and I've talked about this. You can see here, by the way, the GBP 56 million convertible bond due December '25, we paid that off, if you recall, just after the year-end. The GBP 500 million has gone away. This is the one we'll be targeting out of cash, the GBP 350 million. And there may be opportunities as we look through with our cash balances to look at those other 3 debt gross items that we've got as well. So I think you can pretty comfortably expect our gross borrowings number to start to come down quite significantly, which will be good news. So summary guidance, tech solutions revenue of around GBP 500 million, and adjusted EBITDA margin of around 30%. Logistics, more of the same, no great surprises in there. We're going to be having somewhat perversely a GBP 200 million outflow in the year that we turn cash flow positive. A lot of that is driven around the timing of our cost reduction activities that I talked about, the sequencing over the year. You get the full year benefit in '27, but you then see a partial year benefit in fiscal '26, which explains a lot of this dynamic. CapEx will be around GBP 250 million, and those are all the key numbers of our guidance. And that concludes it, there you go. I'll just repeat those messages. Good management of our balance sheet. I think we've been pretty good and proactive there on debt management, strong financial performance in '25, cost and capital discipline becoming a key theme for the organization. And again, the core priority is to turn positive during the second half, but it's backed up by a very robust plan as well. Thank you very much. Tim, over to you. Tim Steiner: Thank you, Stephen. Thanks, everyone, for joining us today. All right. Let's move on. Right. So we've had a good year in a number of ways. So I think one of the key metrics is that first one is that's the international CFC volume growth of the 26%. So we just want to keep helping our clients to grow. We're helping them to grow more and more, and we want to see that number continue to grow, and the compounding effect of that will lead to more and more drawdowns of modules that are available in existing CFCs as well as demand for future CFCs. Just again, to give you some idea of scale, we shipped 72 million orders across the whole of the OSP platform last year with a 98 -- more than a 98% fulfillment rate, 0.7% of average OSP waste. And then we saw quite a lot of efficiency coming into the platform last year. We got across the platform to a 21 DP8 on a weighted average basis across all of our clients. We saw an average of a 10% improvement in CFC productivity across our clients. And as Stephen mentioned before, in the financial year, we achieved 318 UPH in Luton and since the end of the financial year have got into the 320s. The metrics keep getting better. And to put it into context that 318 UPH, that means that a 40-item order is fulfilled in less -- using less than 8 minutes of human endeavor compared to about 75 minutes to do the same thing in a manual operation picked in store. So as you know, we've been busy working with our partners on partner success. That's the one area that Stephen outlined where we've been spending more money, improving our partners. We thought we'd pick a couple of examples just to show you not just what the equipment is capable of doing, but how we help our partners and what kind of results we achieve. So this is one warehouse where we've been working closely with one of our partners. Again, because of partner confidentiality, I won't get into exactly who they are, please don't ask me. But this is an international warehouse. This is a combination of 2 things. This is a combination of new software and operational advice. In this particular first example, this is DP8, so this is deliveries coming out of that warehouse. And we helped over an 8-month period to get a 34% improvement in the number of drops per shift. To put it into context, actually, the top of that graph is 25 DP8. So actually, it's higher than the U.K. The U.K. is not a standout performer on DP8. We have achieved greater results in some of our international warehouses. And so this is not a question of somebody who is extremely poor becoming less extremely poor. These are actually quite impressive numbers and are significantly ahead of our partners' expectations. If we choose a UPH example, here is a UPH example, it's a 5-month period that we went in and helped a partner inside their warehouse. We improved their labor productivity by 1/3 in just 5 months. That is a combination of better operational processes. So we're helping partners in their planning and in their operations as well as a rollout of some of an early rollout of some of the reimagined kit into that building. But -- so quite meaningful results in short periods of time. We brought back in Lawrence Hene, who used to run a significant part of Ocado Retail for many years, and he's leading our partner success efforts, working alongside Nick de la Vega, who's come in to run our revenue sales and partner relationships. So significant progress in those areas. In terms of CFCs driving growth, here are some comments, which I won't read them out. I'll let you read them yourselves from some of our newer partners, Alcampo, Auchan Polska and Coles, who all have opened warehouses recently, who are all seeing strong growth in their sites ahead of the wider online markets that they operate in, are achieving incredible NPS scores from their customers. What we're seeing is if you take an existing geography where you have existing store-based operations and move them into a warehouse, you can see not only enormous pickups in NPS, customer satisfaction generally, but you can also see 30% to 50% growth beyond the market and beyond your baseline in a very short period of time from the better performance, better availability, better fulfillment, fresher goods that arrive from putting those volumes into the warehouses. I think, obviously, we've spoken a bit about the warehouses that have closed. You need to put volume through warehouses. These are examples of retailers that have got some volume from store-based operations and putting that volume into warehouses makes enormous sense. So historically, we built warehouses that were designed to largely do fulfillment from order today, deliver tomorrow. We've talked before, we talked at Re:Imagined about inventing new software that would enable these warehouses to be used for order today and deliver today. We have been rolling out that software during the course of the year. We are still in the early stages of rolling out that software. It is currently available for rollout with all of our partners, and we expect it to be in the vast majority of warehouses before the end of the year. It's currently deployed in 9 CFCs. We've seen the earliest deliveries from order to delivery of 73 minutes. Now 73 minutes is not an impressive number for speed of delivery of an online grocery order. You can do that in 10, 15, 20 minutes, but from micro sites with 1,000, 2,000, 3,000 SKUs in them, with efficiency levels that are really, really poor. This is an order processed in a large-scale Ocado CFC with extremely high productivity, as we spoke about before, with range of 200, 30,000, 40,000, 50,000 SKUs available to those customers. And it is not costing anything in productivity to achieve that. And that order is being delivered in a scheduled 8-hour route, but we are able to get the last from the customer ordering it to delivering it to as little as 73 minutes for a full basket order. We have seen in the first warehouse we rolled this out in days where we're achieving 40% same-day deliveries in an international CFC. We think this is a game changer, and we look forward to the rollout of this across the rest of the network and our partners continuing to work with it and increasing the amount of capacity that they have for same-day ordering, which largely addresses that large shopper universe of people who find -- want to shop online, but find it hard to plan where they'll be able to take advantage of the big ranges, the hypermarket prices and same-day delivery. We also spoke at the half year about aggregators. So we have now integrated aggregators into our platform for the first time in the past year, enabling customers who order groceries with our partners, but from wider platforms. So from aggregator platforms, those orders are going through and then those orders are processed either in Ocado CFCs or using Ocado in-store picking software in the client stores, making significant efficiency compared to having multiple apps and multiple pickers in those stores. And these changes really reflect the evolution of the online grocery market where in some markets, significant amounts of volume are going to aggregators who don't process orders themselves or don't have stores or warehouses themselves. But now our platform is flexible and those orders can get pushed through it. It has enabled Morrisons to increase their aggregator coverage in the U.K. to a further 100 geographies. It's enabled Monoprix to roll out to 22 further cities in France with one of the global aggregators that they work with. So let's just talk a little bit more about the evolution of the platform. If we went back to 2018, there's a little graphic here that described largely the platform that we sold to our early partners. We had a largely next-day service. Partners are expected to operate OSP web shops and take 100% of the orders across OSP, web and mobile. And they were processing those largely in warehouses at an average of a 6-module size for home delivery in vans, either directly or via spoke sites. It was a narrow but successful approach to the market that has served us extremely well here in the U.K. for a number of years. But the market has changed and the market continues to evolve. And today, shoppers expect to shop online with total flexibility across different platforms, lead times and shopping missions. And retailers need and want to meet those expectations without incurring the high costs associated with the traditional fulfillment. So where are we today? Today, our platform supports all different shopper lead times from sub 1 hour, 1 to 6 hours, remaining same-day and next-day deliveries. We support bringing orders into our platform through managed fulfillment where the clients run their own front ends through the OSP web shop that continues to evolve and deliver a market-leading experience as well as mentioned before, through aggregator sites as well. We can process those in in-store fulfillment over 1,000 stores live through our new store-based automation that can range from 4,000 to 5,000 square feet attached to a store up to about 17,000 square foot potentially unattached to a store. In 2 to 10 module sites, for large scheduled delivery businesses in micro fulfillment centers, as I said before, from about 4,000 to 17,000 square foot that do not need to be attached to a store if they don't want to, as well as in manual warehouses or third-party DCs, serving all the different customer missions and all of them with the best economics. And then in the last mile space, we're working today delivering customers to order -- delivering orders to customers using couriers, lockers, customers collecting it, home delivery and home delivery via spoke. It's an incredible amount of total and evolution of the platform to total flexibility for our existing global partners and future global partners. It is the product of a very large and busy R&D period for us as a business. But we've now deployed most of this evolved platform for our partners worldwide with strong results. And with our exclusivity rolling off in multiple markets, we're focused on bringing these benefits back to some of the world's most mature grocery markets for the first time in years. As we move into this new commercial phase, we're also taking steps to realign our business to better serve our global customer base and focus on new prospects opportunities with the biggest value. But I wanted to start by reflecting on the scale of some of our commercial footprint today as I think it's sometimes underestimated. Most of you are aware of our global grocery partnerships worldwide. They remain the core revenue driver for our technology solutions business and the partnerships where our technology is most fully deployed. However, our commercial footprint does extend more broadly into the wider logistics, CPG and retail sectors, primarily driven by our growing AMR business. Today, our technology is live in 127 warehouses and more than 1,000 stores worldwide with 70 commercial clients and partners. We've got more than 17,000 bots live on grids around the world as well as 431 on-grid picking arms, that number growing probably daily, more than 2,500 truck AMRs, and we're seeing keen interest in initial orders for our new case handling product, Porter case handling AMR. So as we move into a new commercial phase at Ocado, we're building on strong widespread relationships with many recognized and leading worldwide brands. We're also making changes to the structure of our technology solutions segment. Stephen has already talked through our progress towards reaching our steady-state cost base that we flagged over the last few years. We've made significant strides towards our full year '27 targets over the course of the last year, and we continue to track towards those targets as we move out of this peak development cycle and into a steady-state R&D phase. The structural changes that we're making support these goals and make sure our business is properly geared towards our priorities, namely a renewed and focused go-to-market strategy, a simpler operating model, investment concentrated where we see the clearest path to value creation. One of the first key steps is the consolidation of our commercial divisions, meaning Ocado Solutions and Ocado Intelligent Automation are now operating as a single point of sales and account management under the new leadership of Nick de la Vega, who joined us as Chief Revenue Officer at the end of last year. This change also reflects an overall shift in our approach to new commercial opportunities with a more targeted approach to the most valuable opportunities and primarily within sectors where our expertise is most needed. Taking the example here, which shows in the blue areas of the grocery supply chain where our technology has been traditionally deployed in the CFCs and delivery to homes. One of the key lessons we've learned from the market engagement of OIA has been that there's significant opportunity to go further up the grocery supply chain and the CPG supply chain. We see significant opportunities to expand into those areas, both case replenishment for stores and wider distribution networks, both where AMR products like Chuck and the new Porter solution can bring significant capital-light productivity improvements. Our AMR products are already deployed in upstream CPG supply chain environments, and we see a positive opportunity to build on this business supported by a single, more simple commercial structure. We believe that opportunities like this will bring significant added value and optionality to our core OSP business, enabling us to grow an attractive new revenue stream in our tech solutions business alongside our core automation and fulfillment assets. Our solutions are very deployable in the case pick market for store replenishment. We highlighted this next piece in the half year, but I think it's really important that we continue to focus on it, which is about bringing the right fulfillment for the right market. To be successful today, retailers need to do careful network planning to make sure they deploy the right solutions in the right places at the right time in their development of their e-commerce journey. But we have a full toolkit to address those different opportunities. It's a framework for future growth, and it underlines some of the decisions taken in recent months. We can do everything from low-density solutions where you use manual pick in store with world-leading efficiency using our software. We can do manual pick in dark stores. As we mentioned, store-based automation before, we're going to focus on that in a moment, micro fulfillment centers as well as the large automated CFCs. The critical lesson that we've learned is that you do not buy a large-scale CFC unless you have a business to put through it. They are not a profitable asset if you don't use them. But if you do use them, they're great. So moving on with a little bit of focus on a CFC to start with. So a CFC can range from about GBP 150 million of annualized sales to over GBP 500 million in capacity. GBP 500 million is approximately what we refer to as a 6-module CFC. So if we take a 6-module CFC as an online case study, it can do about GBP 480 million of annualized sales in a standard sales pattern with kind of similar metrics to an Ocado Retail business. Today, to build a 6 module CFC requires both upfront fees and retailer CapEx to put in things like fridges beyond a standard developer spec shed of about GBP 50 million of investment. The benefit of running that at GBP 480 million of sales compared to doing this in store is somewhere in the region of GBP 30 million to GBP 40 million a year, meaning it is a 1- to 2-year payoff asset. These buildings are amazing if you can use them. And that really is the key lesson. Some of the buildings in North America were not being used and those retailers working with us have made the decision to close them, where these buildings can be used when you have an existing business or you can rapidly grow into these buildings, they are significant improvements for the same volume going through them. As I mentioned before, they deliver a far superior customer service, driving up significant NPS, resulting in significant uplifts as well in sales. So if you go into a building where you've got, say, recent examples, we built some 3 module sites. We've launched a 3 module site recently. We've got another one in build at the moment. If you've got 1 or 1.5 modules of business from your store pick to go into that facility, by the time you go into it and see the uplift and you've got strong growth, you're in a very good position to drive to full capacity and see significantly quick retailer cash payback. These have been -- these principles have been a key in the engagement with all partners at the moment and are reflected in those new CFCs that we're building. And this kind of thing is reflected as well in some of the CFCs that have opened with Coles, for example, putting significant volume into their new CFCs in Melbourne and Sydney in the year that they've opened. And you saw the positive comments from Leah just before. If we move on now to the other end of the spectrum, which is store-based automation. Here's a nice little visual of our store-based automation sites with the external pickup ports, the same on grid -- the same robots operating on grid, the same on-grid robotic picking. The one new piece being the external ports, a small development that we are engaged in at the moment. Store-based automation is a phenomenal product if you have a lot of customer pickup direct from store because you can process these orders really quickly and really efficiently compared to in-store. It's a phenomenal product if you have a lot of gig-based direct-to-customer deliveries from drivers picking up 1, 2 or 3 orders. They can also interact from those ports and those products can also be picked incredibly quickly from order to delivery. It is even more important if you're doing ultra short lead time delivery because when you pick ultra short lead time orders in a grocery store, the effective pick rate drops by about 70% because you're no longer able to batch and pick in the zones. You have to run around and pick a smaller order across the whole geography of a store for a single customer. And the pickup to doing it in our machine will be comfortably into the double -- a number above double-digit percentages in terms of efficiency improvement. Now if you take some markets, if we take a market like the U.S., for example, 8 years ago, the average store was doing $1 million to $2 million of sales. These machines wouldn't work sensibly to do $1 million to $2 million of sales, but markets have grown dramatically. And so here's an example of the sites that we've been talking to retailers about in the last few weeks that we've been able to speak to retailers in the North American market. And we're seeing significant enthusiasm for this product across every conversation that we've had with retailers in that market. Typically, sales in store could be anywhere from $5 million to $40 million online. I know the $40 million sounds like a large number. There are people who are interested in sites of those size. That's also a particularly relevant size for the French market, which is a 90-plus percent pickup market. But if we take a case study of a store with $12 million of sales, that's a fairly common size. That's 10% to 15% of a store that does $80 million to $120 million of store-based sales, now doing 10% to 15% online. The full retailer upfront fees to us and CapEx would amount to about $2 million upfront, we estimate, with a greater than $1 million a year operational improvement. This ignores the improvements in NPS. This ignores the benefits of increased capacity, which is suffering in a number of the larger stores and busier stores in these retailer networks. This is just pure labor savings, predominantly labor savings in these facilities, meaning that retailer cash paybacks of 2 years are quite possible in this space across all of the stores, across markets that are doing $8 million, $10 million, $12 million, $15 million, $20 million, $25 million, which in many markets now is the kind of average. If we look at the U.S., for example, when we entered into our exclusivity arrangements with Kroger 8 years ago, the U.S. grocery market was $30 billion in size. Next year, we're not ready to roll out store-based automation in mass scale at the moment. We're looking to do a couple -- a few handfuls of sites at the moment to prove all the different points around the costs and the execution. But by 2027, when we would look to roll out in scale, the U.S. grocery market is estimated to be 8x the size it was in 2018. This is why when people rolled out what they believed were micro sites 8 years ago, they tried to roll out one site to cover 5 to 10 supermarkets worth of volume. It created incredible complexity that doesn't exist today because today, each of those sites now needs $8 million, $10 million, $12 million e-com sales from the singular site. But also the difference today is that we can build these things in a fraction of the space that was being used with a fraction of the labor that was being used because of advances like our incredible AI-powered pixels to action on-grid robotic pick, which today is doing more than 50% of the picks in Luton across a 45,000 SKU range. Globally, since we entered into a number of exclusivity arrangements, the global market has more than doubled. And so we are super excited about reentering a number of markets where we're having some very interesting conversations with a large number of grocers and keeping Nick in his new role very busy. So in summary, we're reentering markets, with a tech solutions business with a simpler operating model, with a focused commercial operations and a strong R&D base. We're seeing strong interest in a massively evolved solution set with massively more flexibility, a wider fulfillment tool set and world-leading shopper outcomes. Our partners are seeing robust underlying growth, strong year-on-year improvements in operational performance, and we have learned important lessons. We now have stronger foundations of our key partnerships and clear pathways to deliver disciplined, sustainable growth worldwide. And on that, we'll start taking questions. Tim Steiner: Tintin knows I can't handle as many as 2 at once because I forget what they were. Tintin Stormont: Absolutely. Tintin Stormont from Deutsche Numis. Two questions. If we look at that graphic that you showed, the manual pick in store, manual pick in dark stores, and you look at the level of activity in terms of pipeline and trying to speak to customers, where is it sort of kind of busiest? Where is all the activity happening? And Stephen, for you, for those types of potentially new sales, how should we think about the revenue models? Is it more upfront fees? Or are we still thinking about the recurring fee as a percent of the capacity? That was actually one question. The second question was just a modeling one on Hatfield fees just in terms of how do we anticipate that GBP 33 million to come down over the next couple of years to 2027. Tim Steiner: Let me just try, and I might answer yours as well. Stephen Daintith: Go ahead I thought you might. Tim Steiner: The first initial interest from retailers in SBA is actually around their biggest sites, their busiest sites, where a number of retailers have maxed out capacity. So the kind of first focus is, oh, wow, can you do something that gives me more capacity in those locations? The brilliant thing about that is if you do that, it's going to simultaneously show them how much economically better they are and what better experience they deliver to shoppers. So when you look at the estate, there's an amount of the estate that is just something needed because they're maxing out capacity. And then there's the vast majority of the estate where once you realize what these things are capable of doing, you'll realize you've got a 2-year payoff. But most retailers won't turn down a product with a 2-year payoff that also gives them increased customer shopper outcomes and increased capacity. So there's a lot of interest. Markets are evolving and growing fast. And the more it moves to the shorter lead times, the more attractive the product is versus the manual alternative. I've tried to explain that before with the pick speeds. Globally, 180, 200 type pick speeds, if you're aggregating orders and segmenting pick walks and stuff like that, those drop to like 60 if you're running around frantically trying to get something ready for a courier in 5 minutes. In our store-based automation products, those will be picked over 1,000 -- a human pick endeavor will be over 1,000 UPH because the humans will be doing half over 500, okay? So just massive increases in efficiency. In terms of the fees on those sites, largely, we don't expect to have any significant outlay if we roll out that product. So the upfront fees should cover the majority of our investment into those sites, meaning that for a retailer, they're likely to have as a percentage of sales, a higher upfront outlay. But as it's a much more phased because you roll out store by store where you need it. So as a function where you need it, as we showed before, it's got a 2-year payback. So attractive on both sides. Our ongoing fees are likely to be slightly lower than our ongoing fees on the OSP product because we're not amortizing and financing as much equipment. And we'd aim to make a similar percentage of sales contribution to our R&D, SG&A profitability. The Hatfield fees have got a split that's about -- that's just about 60-40. So 60% of those fees will amortize over time as the equivalent amount of volume is taken down in new sites and 40% of those fees will remain until the end of the Hatfield lease. Marcus Diebel: Marcus Diebel from JPMorgan. Maybe just on the rollouts and ramps for your partners. We've seen some delays in Korea and Japan. Can you just talk a little bit more sort of like what's going on? Obviously, you don't want to like split hairs, but obviously, we had delays with Kroger and then a different outcome than we maybe thought. So if you just can tell us a bit more what actually happens there. Yes, that's the first question. Tim Steiner: So look, they're slightly different scenarios. One is Japan. Japan, we're opening 3 warehouses in a contiguous geography. So in fact, so long as there are a sufficient number of live modules, the exact timing of when the third site goes live is not hugely important because the volume is being done in site 1 and site 2. The site 3 isn't needed from a volume basis on that date, but it's about our clients building programs and about the time lines that they give us. We can get in and build very quickly. I think we speak about the fact that we built a warehouse from scratch and went live in 12 months this year from a greenfield site. So it's really just about when those handovers to us come. Sometimes those programs are set up and for whatever reason it is, it can be an internal reason that our client or it can be an external reason to do with zoning or commissioning or something like that. Those projects sometimes, we can't be sure at this point exactly when they're going to go live. In Korea, it's actually the first site is in Busan. The second site is in Seoul. Seoul is a bigger, more developed market. So we'd like to see that site live as early as possible, but we think it's a chance it's going to roll into next year. So we'd rather be transparent about that. We are with the client in store pick, and we are now seeing good growth on that platform and excited about the first launch later this year in Busan. Marcus Diebel: Yes. And the second question is just on sort of like we talked about it before. And what is your sense in regards to the sort of like urgency at your client base because we live in times of the technology evolves quickly, both software and hardware. So why is it now really the time to go the next step or to wait? I think previously, you commented on the analogy of an iPhone, at some point, you just have to buy it. But I obviously hear this a lot more at stage. So what is sort of like the kind of like situation where clients are in? Tim Steiner: Look, I think with most of our clients, they say they're seeing significant online growth. We saw 26% through the sites. And capacity is an issue at places outperforming their competitors in terms of shopper experience and efficiency and cost structures. And we keep coming back to the same kind of point. If you've got GBP 50 million of business and it's scheduled delivery and it's spread across a 3-hour catchment area, the best way to do that is in-store, right? There isn't an automated product that will help you to do that well. If you've got GBP 150 million of business or GBP 500 million of business in a 3-hour catchment, then the rightsized warehouse is the best way to do that. And the warehouses we would build today are half the size and 75% more productive than one we would have built 3 years ago, right? And so they're an ever-increasing attractive option. If you're doing -- if you've got a wide geography with not enough density to do that or you've got more immediacy business and pickup business, if you've got $2 million, $3 million at a single site, don't build store-based automation. It's not going to have a return yet. If you've got $5 million to $8 million annual growing, it's time to start considering building it. If it works as well as we expect it to work and can be built in the size and at the price we expect it to, that mean the economics work well for us and work well for -- even better for our partners. That's what we have to show in the next 12 to 18 months. But it is a question of people aren't wanting to invest in big J curves at this point. People aren't wanting to speculatively say, I think there's going to be a giant market in this place. I have nothing. I'm going to go and build a $0.5 billion capacity facility in this small city. When we're talking about something like, as you mentioned before, in Japan, this is not a small city. We're building facilities in Tokyo, okay, which is something like 40 million people living in the geography of those cities. So that's just an enormous market. But the likes of Calgary, people aren't going to speculatively build a 6-module site in the Calgary going forward unless they're already doing 3 or 4 modules worth of business in their store pick operations. Sarah Roberts: Sarah Roberts from Barclays. So just my first question, the Kroger and Sobeys sites that were closed seem to be in the underperforming category of CFCs that I think you've spoken about before. Just wanted to understand across the wider network, not having to give any details on specific partners, but how many CFCs are still in that kind of underperforming bucket? Or have those now moved to a level where you're both happy with the utilization. Just wanted to get a sense of any potential further downside across the existing network. Tim Steiner: I would say it's very limited downside at this point. I don't want to say there's 0, but there's very limited downside at this point. Sarah Roberts: Okay. Helpful. And then on the side of store and automation side, obviously, it's a little bit more of a competitive market versus potentially the full CFC model where you are the only player that can do that level of automation. So I just wanted to understand how you're seeing yourself positioned in the kind of micro fulfillment area, a bit of the warehouse automation market, why you deserve to win and how you're thinking of playing there, that would be really helpful. Tim Steiner: Absolutely. Look, I think the key things to make these work and what hasn't been understood before and where people have failed when they've rolled some out and not had the success they wanted for clients is based on a few things. One is just actually their understanding of handling grocery and the variation in grocery, the interaction with stores. And there, we obviously are in 1,000 stores today as well as delivering whatever, we think, we said 72 million orders last year across our platform. So we've got enormous knowledge that a number of these players just have got next to none. When we see people bragging that in the last 8 years, they've had this much volume go through a platform. And when we look at it, we've done that volume in the last 1.5 weeks, right? So we've got a depth of knowledge, number one. Number two is retailers want to do this in the smallest possible sites. And cubic storage is the densest storage for the products that you need to store, number one. And we have the solution, and we've spoken about this before, that can get the highest throughput from a square meter of grid, a square meter of processing because our bots are faster, accelerate faster, deaccelerate faster and our control algorithms allow them to work in greater density, and our single space bot patent means that nobody else can achieve the density that we can achieve. So in terms of using the least amount of space to generate the highest potential throughput, we are in the best place. That is significantly more relevant when you're trying to carve out a corner of a busy store in a city than that is when you're trying to put something in a massive warehouse outside of city. Our on-grid robotic pick is completely unique and one of the most advanced cases of AI being used in the physical world today. And by having at least 50%, we're at 50% already in sites in Luton, for example, by having more than 50% picked on the grid at the top of the grid, which is sharing the same air space as our moving robots, it's an immensely complex technical challenge. It removes the need to put human pick stations downstairs or to put robotic pick stations downstairs, which then take up twice as much space as the human ones did. But by removing that space, we're able to build these incredibly dense sites. So where we have spoken to retailers who have recently built or have been exploring building alternative sites to address the challenge of capacity, we are capable of building similar capacities that they've been talking to in less than half the space and with significantly higher range capabilities. And so we cannot see anything that has the capabilities that we have in this space. James Lockyer: It's James Lockyer from Peel Hunt. Two questions as well. First one, last time you spoke about how you managed to get Detroit up capacity by 50% because of some upgrades you've been doing. I think at the time, you said you think the entire estate could benefit from 30% over time. It would be good to understand how that's been going during the period and how you're seeing that benefit your own CapEx and OpEx efficiencies. Tim Steiner: So James, yes, look, we are over the design capacity in Detroit. We are over the design capacity in all of the -- everywhere other than Erith, in Dordon, the 2 oldest CFCs in the U.K., all the other ones are operating above design capacity. Continue to believe that we'll see at least the numbers that we outlined to you before. We are starting to achieve those. They are baked in as part of the plan for U.K. expansion over the next couple of years. And it's kind of what does it mean to a new warehouse? It's part of why a new warehouse can be only 50% of the size of what we built when we built those warehouses. So we're not able to get the full 100% uplift that you theoretically could today if you took the building again and built into it, but we are looking close to 50% in most of those sites in terms of their incremental capacity that they're going to be able to achieve. And the enhanced productivity, which is separately beneficial in terms of reduced labor also then means that if you can pick half of it with robots and you are picking 50% more, you are actually using less pickers than your original design, which means the outside of the building in the car park still works for you. You need to save some of those spaces for the extra drivers that you're going to have and now driving that increased volume. So there's a lot of considerations in making those changes. The one site that's most complicated in for us in the U.K. is Luton because we've got a third-party automated freezer in it. And that's the expensive part of building. Otherwise, it's very capital efficient for us and for Ocado Retail to achieve its next step of growth. And going forward for clients, their CapEx in a building that's half the size is materially lower, their ongoing rent rates and services are materially lower. The availability of sites is materially easier closer to customers when you start to be able to build these things in smaller buildings. Our space efficiency versus some others is just extraordinary. So we were talking to a retailer recently, and they said they weren't interested in big warehouses, and we said, no, of course, in their market, it wasn't relevant, store-based automation. I said, yes, that is what we're interested in, and we're looking at some sites already. And then they gave us the size that they were looking at. That to us was a warehouse. To them, it was store-based automation, but it was between 50,000 and 100,000 square foot. And for the volumes that they wanted, we'd have been looking at 10,000 to 15,000 square foot. So we're space efficient. James Lockyer: And then the second question was on the case study you gave around, I think it was the 25 DP8 on there, which is significantly better than the U.K. you mentioned at the time. Why do you think the reasons are specifically that, that was better? Was it density? Was it urgency from the clients? Was it just more savvy users? Why do you think it was better than the U.K.? Tim Steiner: We have some U.K. sites that we operate out of that are between 25 and 30 today. So it's like if you carve out -- that particular site has a geography that more reflects some of the sites that we've got in the U.K. as it's got a small radius around a warehouse doing a lot of volume, doing the full volume of the warehouse, you can do turnaround routes. So one of the challenges is you fill the van up, let's say, in the U.K., you can fill a van with 22, 23, 24 orders, there's -- it's then hard to go above that. So where we do 28 or so, it's because we have vans that are not working a single 8-hour shift on one route. So you have to do things like having 6 -- so in the U.K. in one of our sites, we do a lot of 6-hour and 10-hour routes. So we do -- the drivers alternate 3 of 1 and 2 of the other each other week. They do 38 hours, 42 hours, 38 hours rather than 40, 40, 40, and then we can offload a whole van in 6 hours or almost 2 vans in 10 hours. In some geographies, that's hard because the stem times are not there. And we are working on some longer-term quite complex and clever solutions to that to enable us to break through those numbers. But basket size and proximity and density and things like that come into it. Giles Thorne: Yes. Giles Thorne from Jefferies. Tim, there's been a lot of public discussion about Ocado and Kroger and Sobeys. And to my reading, a lot of it has ultimately been quite gentle on Ocado and most of the blame that people are looking to apportion blame has been put at the feet of Sobeys and Kroger. But nonetheless, it would be useful to hear your reflections with hindsight on things that you could have done differently that would have led to a more orderly outcome or a different outcome. And then the second question -- go ahead, Tim. Tim Steiner: No, no, go ahead. Giles Thorne: Second question is on -- I'd like to hear you talk about some of the compromises you've had to make on your innovation pipeline as a result of the cost efficiency program. Are there any bells and whistles that you wanted to build that have been put back up on the shelf and we'll have to wait for another time? Tim Steiner: Sure. Look, on the Kroger and Sobeys one, would I like to have built the warehouses that Sobeys wants to build in a different sequence so that instead of the third warehouse being in Calgary, would -- should I try to influence management to build it somewhere with a bigger population opportunity with more density that they already had in their network or something? Did we just accept the orders? Yes. Is that in hindsight, a bit naive? Yes. Could we have -- we know this because we've been working on it for the last 8 years, but could we build warehouses where a client could build a 3-module warehouse where a client could turn it on with 1 module and where we're -- economically that is a good warehouse for us even if that client never grows beyond 1 module? We're there today. We weren't there 8 years ago. So 8 years ago, we built 4s and 6s and 8s and 10s or 7s and 10s. And we insisted on clients opening them with 3 modules or 4 modules, which economically, we needed them to do because of the CapEx that we have put into those sites, and we even needed them to grow. But it was a big outlay. It was a big ongoing cost for the clients if they didn't fill them. We didn't have a strong enough sense they weren't going to fill them, and they haven't filled them. And so hence, they're a drag and a burden. Today, we've got 3 module sites going live, as I say, with 1 module down where the client is already doing 1 module before we put the spade in the ground in their store pick operations, expect to be at, let's say, 1.5 modules the day the site goes live, and we're allowing them to grow them in quarter module increments as opposed to having to grow them in 1 module increments. So we've been aware of the challenges of our early business model, and we've been working on that for the last 8 years. We obviously still have to live with the consequences of those early sites and those early decisions. So we need something that is economic for us and our partners at smaller size. We have it today. We need something that our partners can start with the smallest volume and the lowest kind of fixed outlays, and then can they grow it? And we're talking to clients about doing this in a more flexible way in terms of their charging and how that works with their growth that are massively useful for them and still work for us. So we're learning these lessons. Ideally, we might have built 2 warehouses -- might have signed 2 warehouses in 2018 and 3 warehouses in 2019. If we could have built the warehouses that we've got in a slightly more linear way rather than kind of pushed upfront, then maybe we could have learned some of these lessons earlier and helped our clients. And maybe if some of those 7 module warehouses where they were paying us for 3 modules had only been a 3-module warehouse and they've been paying us for 1, maybe there would have been a growth path to see that filling up and those would still be open. We're not blameless as such. But again, it's not our -- there are -- our partners are the ones that need to drive the acquisition of -- we can help them, and we are helping a number of our partners to understand how to best do online marketing, how to best trade an online business, but we need our partners having made a commitment to a site to try and work very hard to put volume into that site. Giles Thorne: And what does Nick bring that you didn't have before? Tim Steiner: Nick's got a huge depth of experience working with technology partners, accounts, clients, just kind of a much greater focus than we've ever had in terms of experience of doing large complex technology implementations where how to work with those clients to influence them to create the behavior that means we're both successful. I think one of the kind of combined naiveites between ourselves and our partners would have been kind of their view of we bought this amazing stuff, and if we just turn it on, we'll have a successful business. And obviously, we've been saying for a while, that's not the case, but we still don't have that element of control where even where we realize it, some of our partners have still behaved a bit like that. And we're kind of like, he's very good at getting in there and talking through that challenge and trying to get those retailers to realize what they need to do to contribute towards making their business successful and not just a view that because we've written some clever code and we've got some [ dwizzy ] robots, that means they've got a business. Giles Thorne: And so then on the innovation puts and takes. Tim Steiner: Look, we have that combo at the moment of some of the biggest projects that we did rolling off, reimagined and the re-platforming, which you will have noticed as -- well, I don't know you personally, but a number of you will have noticed as U.K. customers, the kind of the move -- the migration to OSP. That e-com migration and mobile app migration that happened in the summer at Ocado Retail was Ocado Retail moving the last part of its business on to OSP. They were the last of the 13 partners, Morrisons in the U.K. had migrated before. So that kind of catch-up of all the tiny bits of things that drive acquisition, retention, frequency, margin, basket, et cetera, are all in OSP, and it's an onward journey from here, as well as having got live in 11 markets with payments and currencies and regulations and laws and all that kind of stuff. Together with the rollout of Re:Imagined and efficiencies that are coming through in -- with AI in terms of not just coding, but testing and various things that mean that our overall productivity per person is significantly improving. What's not on the list is hard to say, but it's the more speculative stuff is not on the list. The core things that we want to do to deliver store-based automation, to deliver the growth in existing facilities in the U.K., in particular, to do with supply chain, and we talked about this at Re:Imagined called Orbit, continued work on helping our clients attract and retain and make it easier for shoppers to shop, continued attention on making it easier to run the platform for our partners and the rollout of short lead time orders. All these things are still in there, right? Everything that we really, really need is in there. We are going a little bit slower on some of the other opportunities to deploy our kit in other logistics supply chain scenarios. We have got continued spend to enable it to move up the grocery supply chain, but we could go faster on some of those points. And we may choose to, in the future, if we start to do some significant contract wins in those areas. So there are some things that are like show and tell, like we're doing those a little bit slower, where we -- maybe if we did them a little bit faster, we could then show something and maybe win some business. But it's a very tough process. We're being very rigorous on it. But we expect to get a significant amount of innovation in terms of features and functionality coming, and probably '27 will be a record year for us in terms of innovation. '26, we've got some -- I wouldn't -- I think it would be naive to say we're going to have a record year in '26 because of the disruption of actually going through the reduction in size, but I expect by '27, we'll be back at a record level of innovation. And the amount of change in the platform that we have achieved with this -- with all these amazing people in the last few years is incredible. And I tried to outline that in that slide before, the flexibility of the platform. It's not just the flexibility, it's the intelligence of the platform and so many different things it can do today. We have done so much innovation in that time period. It's amazing. William Woods: William Woods from Bernstein. I suppose the first question, historically, you've been quite cautious on the ROI and the ROC from smaller sites. And I don't think that was just capacity. I think that was operational complexities around the ability to store certain levels of SKU breadth and depth, duplicative picking, decamp complexities, all that kind of stuff. Have you worked out those operational issues? And if it does work, why haven't you built a 1 module site, for example? And I'll come to my second question in a second. Tim Steiner: The first one is what we can build today compared to what anybody could build 5 years ago is dramatically different, okay? The lighter weight bots, the third-generation lightweight bot can be deployed in a different way to the older heavier bots in terms of safety and crash barriers and stuff. And then the space savings that might be 1 or 2 grid spaces in a huge site is not massively relevant when you make it a tiny site is massively relevant. The weight going through the grids as a result of the bots and that weight accelerating at the same speed and therefore, the forces that need to be offset and what you need to do in the floor space is relevant. So if we built these 3 or 4 years ago, we need to start piling underneath supermarket floors and stuff. So there's just differences like that. The on-grid robotic pick taking up at least 50% today and moving towards 70% or 80% of the picking, again, simplifies the whole process. The remote monitoring and operations of our grids and our on-grid robotic pick, which we centralized into facilities in Bulgaria, in Mexico and in Manila, mean that we can run multiple sites, the reliability of the robots and therefore, not needing to have like live on-site engineers at every site permanently. Just there's a whole host of these reasons why this is viable now and we couldn't have built with our infrastructure 5 years ago. Now the people that did try and build things with different infrastructure 5 years ago just didn't have the process knowledge, didn't have the automation with the right throughputs, too much capital, too much labor, too much space. And they didn't succeed at what people wanted. But I think it's important to understand 2 things have changed. That's the supply side has changed, what we're able to do. But if you think back because at one point, we were going to get killed by a company -- because there's been loads of companies over the years, everybody said we're going to get killed by. And one of them at one point was a company called TakeOff, and TakeOff was the micro sites company, and they went around to the person that we didn't sell our OSP to and sold every one of their competitors, 1, 2 or 3 of those sites and said they were going to sell them each 1,000. They did sell them 1, 2 or 3. They never sold them the 1,000 and they eventually went bankrupt. The sites were, as I say, from a supply side, they were too big, they weren't efficient enough and the process flows just weren't good enough. The output wasn't strong enough, et cetera. But the demand side was different, too, because the demand side at the time was to make this site viable, you need a $10 million site or $20 million site and you're doing $1 million or $2 million a store. So they were like a mini where -- they were trying to do a mini version of our centralization where you've got -- so they kind of didn't have the benefits of our centralization, and they didn't have the benefits of being where they needed to be because they were only actually where one store was, whereas because the U.S. as a market has grown -- will have grown by the next year ninefold in that time, those $1 million to $2 million sites are now $9 million to $18 million. And so now you can have one of these things at each location. So the offsetting disadvantage of taking a $600 million site and splitting it into 60 can be offset by the advantages of being in that local geography, leveraging existing assets of that retailer and being able to do pickup in 30 minutes or in 5 minutes in store and being able to do ultra short lead time deliveries and working with the gig economy drivers that for a whole variety of reasons are significantly cheaper in the U.S. than a unionized labor force driving your own vehicles. Does that -- William Woods: Do you not think there's an issue with kind of holding a certain number of SKUs? Could you hold the whole SKU range of a store and... Tim Steiner: Yes. So this is your second part of question. We probably ought to take this offline if you want to. But we have a lot of experience of moving product and understanding how this can work. We've come up with some very good ways of doing this where the majority of the -- significant majority of the velocity will be in the automation. There will be some stuff that is not in the automation, but we will not be -- but our automation allows you to do a robotic merge. So you're not doing one of these things where you've got some pick from here, some pick from there, some pick from there and then humans need to try and marry that up and then deliver it somehow to a customer because the whole thing will be merged by robotics in our machine. But also we do carry already multi-SKU totes in our machine, so we can carry extensive ranges. We can replenish those ranges alongside the store replenishment for things of volume. We can replenish those ranges through batch picking in the store, but not for the specific customer, like keeping a SKU of -- a single item of each SKU in the automation, but not through an optimized pick walk on a batch basis, and we can merge in the rotisserie chicken and the sushi at the point of handing it over to the customer. So we are working through all of the challenges that we are well aware that have been encountered in this space. Today, people want to look at merging prescriptions from other sources, merging general merchandise. Our grid and some of our patents around our grid process, ones that we didn't license to our competitors in the cross-licensing are very important here and enable us to do things that drive, we think, unparalleled efficiency. We need to deliver it all. There's nothing that we're trying to deliver that we see as rocket science, as in on-grid robotic pick is rocket science. Obviously, it's not Starlink or SpaceX or whatever, but it's very, very, very complex. We've done the heavy lifting because we have that technology. There's just stuff we need to do around building up those processes, leveraging other things that we do. Like we already do store pick, so we know about optimized store pick. We just need to bring some of those bits together in the next year, build the first few prototypes for our clients, hope and believe that they'll be successful as we want them to do and then believe that there's an opportunity for thousands and thousands of them. William Woods: Great. And then just the second one was just on that prototype. Have you got a prototype that's working today that's delivering the economics that you put on the slide? Or is this still a little bit theoretical? And when should we get to a point where we can see one? Tim Steiner: It's probably -- it's on a spectrum. So you're kind of outlining 2 things, something nobody has ever built and something that's live and working in the exact size and format with all the pieces of equipment. I don't have that, but I'm also not here. I'm here, okay? I've got grids and bins and robots. I've got on-grid roboting pick. I've got early prototypes working of dispatch ports. I've got the software that runs the robots around. I've got the software that does the store pick. I've got software that does consolidation. So we've got and can illustrate most of the components. We can show small sites that we built small sites, but they were 10,000 square foot. They weren't 4,000 square foot. We've got and built -- we've got robots now running around in freezers, right? So we've got robots in chill, robots in -- ambient robots in freezers. We've got and tested robots moving between temperature zones, which is an important part of this. And to come back to your other question, so we're kind of -- we're here. We want to be here before we -- I don't want to sell thousands of them into [indiscernible], right? Because I don't want to take the responsibility of delivering thousands of them that we might not be able to hit the price targets and therefore, we'll need more capital or we might have the returns or whatever it might be. And we want to clear up those process flows when we're dealing with a couple of dozen sites, not when we're dealing with 1,000 live sites, right? We don't want to be deploying 3 sites a day at the same time as trying to make the first one work, right? Your first question is why not a 1 module site? And there are people who are looking at sites that are not probably 2/3 of a module. There's a point where there's some things that you can do when you miniaturize that will only expand to a certain size. And then when they expand to a certain size, some of the costs double. So for example, if you can run a single grid with a single maintenance area and you can have a part of those robots running into a chilled area, you can eliminate a whole maintenance area. That works to a certain size and a certain size, it just isn't feasible anymore, and I need to have 2 grids. At that exact moment, I need 2 maintenance areas. I need 2 wireless controllers controlling my bot fleets. I need more grid barriers and stuff like that, right? There's a cost uplift. And so there is this kind of area between the biggest of the micro store-based automations and the other sites where you kind of get into an area where you can see an increase in cost, but it's not really worth it for the increase in volume. You'd rather have 2 of these than 1 there. And then you get to a point where, no, I'm going to take that. Does that make sense? It's kind of -- so we model an enormous amount of data around what is physically feasible to be built. And we are talking to retailers for stand-alone sites, attached sites, ranges from 10,000 to 50,000 in the grids, throughputs from $8 million to $50 million, sizes from 4,500 square feet to 17,000 square feet, different use cases, right, different peak hours, different amounts of customer interaction, courier interaction. We've designed lots of different examples, and we're very good at simulating them and understanding what throughput should be available out of them. We just hope to build a few that are good examples. One of the challenges at the moment is actually saying no to a few people who want something that we could build, but we don't think that's the thing that we need to have thousands of, and we'd like to build a few of the ones that ultimately we believe there will be thousands of to show that concept to the world in a real-live 100% operating environment. [indiscernible] Thanks very much.
Operator: Good morning, and welcome to the SM Energy's Fourth Quarter and Full Year 2025 Financial and Operating Results and 2026 Outlook Live session. [Operator Instructions]. Please note today's event is being recorded. I would now like to turn the call over to Pat Lytle, SM Energy's Senior Vice President, Finance. Please go ahead. Patrick Lytle: Good morning, and welcome to today's call. I'm joined today by our President and CEO, Beth McDonald; and Executive Vice President and CFO, Wade Pursell. We're looking forward to sharing our latest results and our 2026 plan with you and answering your questions. Our discussion today includes forward-looking statements. Please see Slide 2 of our earnings presentation, Page 2 of the earnings release, Page 3 of our 2026 outlook release and the Risk Factors section of our most recent 10-K, which was filed earlier this morning for risks associated with these statements that could cause actual results to differ. We will also discuss non-GAAP measures and metrics. Definitions and reconciliations to the most directly comparable GAAP measures can be found in both the earnings release, outlook release and slide deck. Now I'll turn the call over to Beth. Beth? Elizabeth McDonald: Thanks, Pat, and good morning, everyone. It's an exciting day as we provide our first release of the new SM Energy. 2025 was a pivotal year for our company, and it set the stage for 2026 in this transformational moment. We improved on every part of our investment thesis, including returns to stockholders, operational execution, financial strength and increasing the scale and quality of our portfolio. With the full details in our posted materials, I will quickly hit some highlights from 2025. We delivered record operating cash flow, adjusted EBITDAX, production and oil volumes. Importantly, oil was 53% of the total. Our teams found new ways to rapidly apply best practices and increase operational efficiencies through longer laterals and development of deeper zones. We integrated our oil-weighted Uinta assets. Since late 2024, we have applied our proven technical capabilities to unlock greater value from this high-quality oil basin and its multiple stack pays. We strengthened our financial position by reducing net debt by $437 million, ending the year at roughly 1x leverage. As a result, we returned capital to stockholders distributing $104 million through dividends and share repurchases. Lastly, we expanded our scale and inventory across the top U.S. basins through organic reserve growth and our announced merger with Civitas. Now let's turn to 2026. We have 3 strategic objectives that you will continue to hear throughout the year: integrate, execute, bolster. First, Integrate. We are focused on integrating Civitas and capturing $200 million to $300 million in synergies. To date, we have already actioned $185 million of our target, which is close to $1 billion in present value and just under 20% of our market cap. Total synergies could unlock up to $1.5 billion in present value or nearly 30% of our market cap. Next, Execute. Our plan maximize sustainable free cash flow. By investing in our high-return opportunities, we can continue to strengthen the balance sheet while accelerating the return of capital to stockholders. We will execute with a safety-first mindset and seek new ways to efficiently develop our assets to maximize free cash flow through disciplined capital allocation. We have reset and optimized our activity levels to accomplish this. Here are the key takeaways from the 2026 outlook. Our plan was developed to maximize free cash flow in a $60 oil and $3.50 gas environment. Capital investments will total $2.65 billion to $2.85 billion with our high-margin Permian activities receiving about 45% of the total. Total expected CapEx is about 14% lower than pro forma 2025. With lower capital, we reset activity levels to 11 rigs, down 3 rigs from a pro forma average of 14. We have prioritized value over volume. First quarter estimates reflect only 2 months of Civitas. Looking forward, volumes in the second half of the year are expected to range between 420,000 and 430,000 BOE per day at 55% oil, more indicative of our go-forward run rate. There are a few slides in the presentation that provide more detail and a reconciliation of production for your reference. Ultimately, our plan reflects greater capital efficiency to maximize free cash flow, strengthen the balance sheet and accelerate return to capital. Lastly, our final objective is to Bolster. This relates to our balance sheet and our return of capital framework. I'll now turn the call over to Wade to cover this important catalyst for us. Wade? A. Pursell: Thanks, Beth. Good morning, everyone. So let's talk about Bolster now and how we'll strengthen an already strong capital structure. Starting with the balance sheet on Slide 15. This reflects the impact of the Civitas merger. I believe the 3 categories for measuring balance sheet strength are #1, liquidity; #2, maturities profile; and #3, total leverage multiple of annual EBITDAX. So first, liquidity. As we announced in late January, and our secured bank facility, the borrowing base was increased to $5 billion, with lender commitments increased to $2.5 billion. The maturity date was extended to January 30, 2031. Therefore, we currently have nearly $3 billion of liquidity. In addition, last week, we announced the sale of a select natural gas weighted South Texas assets totaling $950 million, which we expect to close in the second quarter. The metrics behind this deal are very favorable to where SM stock trades today. This will further strengthen our significant liquidity position, which leads me to #2, maturities. We anticipate using some of this liquidity to take out all of the 2026 bond maturities this year and the $417 million bond due in 2027 at some point as well. The remaining maturities are staggered nicely. We'll continue to delever with our free cash flow. We may also look to term out some of the earlier maturities should the bond market terms look compelling. I should also mention that we recently received credit upgrades by S&P and Fitch. Now number three, total leverage multiple. Our total pro forma leverage is in the mid-1s area. We are comfortable with this area given the liquidity and maturities profile just discussed. However, our goal is to drive it down into the low 1s area, further strengthening our position, which is a perfect segue to return of capital on Slide 16. The increased scale and quality of our assets, combined with our strong balance sheet, give us confidence to increase the fixed dividend by 10% to $0.88 per share annually. Our base fixed dividend remains a core component and with this increase provides a current yield of just under 4%. Remaining free cash flow will be allocated between debt reduction and stock buybacks, enabling us to delever from increased post-merger debt levels while continuing to take advantage of the compelling value we see in our equity. Today, our plan is to allocate 80% of our quarterly free cash flow after dividends to debt reduction and 20% to stock repurchases. Looking forward, as we reduce debt, we would expect to increase our allocation to share buybacks. And on that note, I'll turn the call back to Beth for closing remarks. Beth? Elizabeth McDonald: Thanks, Wade. As our results and plan demonstrate, we are relentlessly focused on maximizing free cash flow, reducing debt and accelerating returns to stockholders. We have new flexibility in how we allocate capital across our expanded portfolio, where our inventory now spans more than 8 years. As such, we are able to prioritize value over volume. We look forward to reporting on our progress throughout the year. Joe, this concludes our prepared remarks, and now we're ready to take questions. Operator: [Operator Instructions] And our first question comes from the line of Brian Velie with Capital One Securities. Brian Velie: I thought I could maybe dive in here real quick. In terms of total production guidance for this year that you put out your initial numbers last night there, you pointed out in the release that a portion of the decline year-over-year is the result of the 3-stream conversion to 2-stream conversions. I wondered if you could talk through where those conversions are happening to help give us an idea of the magnitude of that piece of the impact. And then maybe after that, how we can think about modeling or anticipating price realizations that go with those NGL and gas streams on those assets? Elizabeth McDonald: Yes. Thanks, Brian, for that question. The plan is really focused on prioritizing value over volumes. We're maximizing free cash flow to bolster the balance sheet and enhance our return on capital framework. We have a lot of confidence in this plan, and we understand there's a lot of movement going on within the production itself. If you turn to Slide 9, you can see a reconciliation for your reference. And when you normalize for all those moving items, the production change is not that different. Let's speak specifically to the question that you had on the 3-stream to 2-stream conversion. If you look at it by basin, there's really no change for SM South Texas or Uinta Basin clearly. For the DJ, we would exit about 20% of DJ BOEs to be allocated to NGLs. So when you're modeling that, you can continue to use Civi historical gas and NGL realizations as estimates. When you turn to the Permian, the value is really small. We really only expect about 5% of the BOE to be reported as NGLs going forward there. And you can use Civi's historical NGL realizations. And for Permian gas, you could use SM's realizations. So within that reconciliation, I think it's important that most of you guys kind of focus on the right-hand side of that slide, the second half '26 volumes, which are expected to be the 420 to 430 MBOE per day at 55% oil and that's really where we start to see our capital efficiency increase as we have our go-forward run rate. A. Pursell: Yes, if you look at total capital, Brian, about 45% will be in the second half. So if you think about what that run rate looks like, I think it's going to look pretty capital efficient. Brian Velie: Okay. That's great. That's a good segue maybe to my follow-up, if I can. I did notice your 1Q CapEx, it's a little bit of a heavier spend versus a straight ratable through the year. I guess would it be fair to assume that a piece of that is just the pro forma 14-rig total that Beth mentioned in the prepared remarks there, that that's kind of your starting point and you -- in that presentation, you're shedding down to about 11 rigs by year-end. So is that kind of what's driving that front half spending? Or is there anything else at play that I should maybe be thinking about? Elizabeth McDonald: Yes, I'll start and then let Wade finish on that. First of all, we just love the strength of our combined portfolio. And this transaction really provides us some optionality and really, frankly, optimization beyond what either company could do individually. With that, we come into the year with 15 rigs. So we started with a high CapEx spend and then it will lower throughout the year to average out around 11%. And so yes, there is that optimization of the program on the back half of the year. And we really look forward to our technical team, seeing them in action on this new portfolio and seeing that continued optimization on the back half of the year. Wade, do you want to add anything? A. Pursell: No, that covered it well. Operator: Next question comes from the line of Tim Rezvan with KeyBanc Capital Markets. Timothy Rezvan: I want to follow up. Wade, we had we had a quick chat last night. You mentioned you're not going to have a formal debt or leverage target in place going forward. Our modeling, which is a work in process, shows a path to sub-$5 billion in 2027. And I know you highlighted the liquidity. But we're also looking at the other side of things where we see -- we appreciate your honesty on that 8-year inventory life. So given that's maybe shorter than some peers or maybe where you want to be, how do you think about the appropriate leverage profile given you're not really where you want to be with inventory life? I'm just trying to kind of weigh those 2 topics? A. Pursell: Yes. That's a great question, Tim. By the way, we love our inventory. But on the leverage side, I mentioned we're in the mid-1s area, which is not -- we're very comfortable in that area. I said that in my remarks, and I'll say it again, especially given all of our liquidity and the maturities profile and the fact that that's being calculated at an oil price that we believe is mid-cycle or below. I think that's really important. Our desire is to get leverage into that low 1s area. I'll just call it that without getting too precise. And as we move down into that low 1s area, when I say that, 1.2, 1.3, then assuming the liquidity position is similar to what it is, assuming the maturity profile is manageable, assuming that's at a reasonable commodity price assumptions, then you'll see us increase that stock buyback percentage. Elizabeth McDonald: Yes. And then I'll just -- Tim, I'll just hit on the inventory real quick since you brought it up. The inventory was run at $60 and $3. So that's quite different than last year where we had it at $70 and $3.25. And our inventory really is 3P high-confidence locations rather than sticks on a map or acreage math. And so we're very confident in these high-quality, low breakeven inventory that we have on here. It's resulting in longer laterals and greater capital efficiency. Timothy Rezvan: Okay. I appreciate the context. And then as a follow-up, this is sort of a related theme, Beth. That the Permian assets you're acquiring from Civitas, on the Midland, you've operated there obviously many years. Civitas had commented in the past, about really focusing on the Wolfcamp A and B for their inventory. They didn't talk about the Jo Mill, the CRD or even the deeper intervals. So I know it's early days, but that's probably the easiest asset to sort of integrate given your skill level there. Can you talk about what's sort of baked into that 8-year number? Are you using those same assumptions that Civitas had? Or maybe broadly speaking, do you anticipate organic additions as you do more work on the Civitas Midland assets? Elizabeth McDonald: Yes, good question, Tim. The first thing I would say is that we love the strength and position of our portfolio, especially as it relates to the Midland Basin and our technical team is jumping right in and combining with the prior team from Civitas which we now just call those people our teammates at SM Energy. But we're very happy with what we've done so far. We're 4 weeks in, but we'll continue to use are high-quality, multivariate analysis, our geomechanical modeling that we have going on in the Southern Midland Basin as we optimize that stacked pay development. And we'll continue to see those optimizations in the back half of this year and into '27. So is the work done? No. We have a lot of work to do, but we have the best people and the best processes, along with the best technical data to get us there. Operator: The next question comes from the line of [indiscernible] with ROTH Capital Partners. Unknown Analyst: So my first question is going to be like can you please walk us through the capital cadence of the 2026 and also the production cadence. I knew that you said it's going to be front half weighted and also the production is going to be around 420,000 to 430,000 BOE per day in the second half of the year. But I just -- what I'm thinking right now is like is the first quarter's capital is going to be the highest of the year and also the production will be peaked in second quarter of '26? Elizabeth McDonald: Yes. So I'll start on that. And again, we're prioritizing value over volume in our plan to maximize free cash flow. And we understand that the first quarter and even into the second quarter, have some variables and things changing in there, which we've highlighted on Slide 9. One of the things that's really important to take into account is the legacy Civitas assets. Those were front loaded on their CapEx side, and we -- from September into kind of January of this year, there was a significant decline on those assets, about 14%. And so we have inherited that and pulled it into our program. And so that's a result also of the underlying decline that you're not seeing in this reconciliation. So that's one piece that's not shown on the slide here. But I think the important piece is as you move past this and you look at the second half of the year, that second half '26 run rate is clean. We have 45% of our capital in the second half of the year, and it's a 55% oil mix. And so that's really where you should focus where there's less changes going on in the front 2 quarters. A. Pursell: And it's built to where it rolls right into 2027 at that level. Unknown Analyst: That's very helpful. So maybe my second question would just about the cash tax. Do you -- I don't expect to pay any cash tax for 2026? A. Pursell: Yes, pretty minimal this year. I'm pleased to report, and that's just due to the benefit of IDCs, some of the benefits from the Big Beautiful Bill. Even with the divestiture and the gain on that, we're not -- we're projecting minimal cash taxes this year. Operator: The next question comes from the line of Oliver Huang with Tudor Pickering & Holt. Hsu-Lei Huang: For my first question, just when you're thinking about the Permian program that you all have laid out for this year, any sort of color you can provide around the composition of the program, just how much of that activity is expected to come out of the Delaware? And then when we're looking at the Midland, any sort of split on your traditional oilier RockStar area versus the southern part of the basin where assets carry a higher GOR mix? Elizabeth McDonald: Yes. So let me just dive in. We -- just like I just told Tim, we really love our strength in inventory position, especially as it relates to the Permian Basin. We think this is a cornerstone asset for us, and we'll continue to optimize it over time. When you look at the program having most allocation going to the Permian because it has great returns and great margins. The composition of that program is about 1/3 Delaware, 2/3 Midland Basin. And then within the Midland Basin, we're still optimizing on kind of the allocation between the overall program. And we'll continue to do that and increase our returns and capital efficiency late through this year and into '27. Hsu-Lei Huang: Okay. That's helpful color. And maybe just for a follow-up question. I know you all mentioned earlier that back half of the year run rate seems like a good starting point to carry forward. Just given all the moving pieces for A&D, the conversion to 2 stream on certain volumes, any sort of color on where maintenance CapEx for you all sits on a pro forma basis at that run rate? A. Pursell: Well, I think looking into 2027, and we -- look, we haven't gone to the detailed level that we will do eventually. But if you're assuming a CapEx in the area of this year's CapEx or slightly less, you're going to be -- you're definitely going to be in the ballpark. Hsu-Lei Huang: Okay. Perfect. And just to clarify, when you say this year's CapEx, is that assuming 12 months for both Civi and SM or what you all have kind of rolled out for the 11 months of Civi and 12 months of SM? A. Pursell: I'm assuming the guided number there when I say that. Elizabeth McDonald: That's one time cost. Operator: [Operator Instructions] Next question comes from Michael Scialla with Stephens. Michael Scialla: I wanted to ask -- when I look at Slide 4 and compare the percent production from each of your 4 core areas with the CapEx going into each on Slide 8. They look I guess, somewhat similar? I know production is an output, not really something you're targeting. But I guess, as you look at those, do you anticipate production growing in any area? Is it may be growing in the Uinta and declining in the DJ and Permian a bit? Or anything we can deduce from how much you're spending versus what you anticipate the production profile to be for each of those areas? Elizabeth McDonald: Yes. Thanks, Mike. I'll just start and then I'll let Wade add any color to what I'm saying. If you look on Slide 4, those are really the 2025 production volumes, and where that stands kind of on a pro forma basis? And then as we roll into 2026, just like you said, we're prioritizing value over volume specifically. When we looked at the capital allocation across all of the basins, we're really focused on maximizing free cash flow. That's why on Slide 8 in the bottom right, you see the capital allocation by basin. And I think that really addresses most of where the production is as well as kind of the split there in the Permian of 1/3 to Delaware and 2/3 to the Midland Basin. Do you want to add anything? A. Pursell: No, that's good. I mean it's -- as you know, Mike, it's that we built the plan with a desire for sustaining free cash flow through the years here with efficient operations in the areas. So that's all I would add. Michael Scialla: Okay. I guess I was just trying to think of, is one area of sort of looked at as more of a free cash flow generator or cash cow, while you're trying to grow any of the areas. It looks like Uinta maybe has some ability to grow? Is that a fair assumption? Elizabeth McDonald: I'd say, when you look at the combined portfolio, we've known that Uinta and South Texas, both are growth areas for us. We have multi-stack pay there with great returns. And I think as we look at the combined portfolio and the strengthened position that we have in the Permian Basin, we'll continue to evaluate that with our technical teams to see how we can continue to grow that area because it has such great returns and great margins as well. Michael Scialla: Appreciate that. I wanted to ask about the decision to increase the dividend. Your stocks lagged over the past year, and it's one of the cheapest in the sector on the EBITDA multiple. Just your thoughts around that decision? Was there pressure from investors, you feel like you need to increase the dividend to be competitive with the rest of the group. I just wanted to get some more color on that? A. Pursell: Yes, I would say it was not due to pressure from investors. I would say it was more due to our confidence in the combined company going forward, strengthen the balance sheet, quality of the assets, visibility. We set that fixed dividend back in late 2022 at a level that we feel comfortable with, but we expressed the desire as things develop and the company grows to increase it over time modestly. And I think this is the third time we've done that now. So it was really nothing more than that. It was just to express our confidence in the company going forward. Operator: The next question comes from the line of Kevin MacCurdy with Pickering Energy Partners. Kevin MacCurdy: It looks like the biggest difference between maybe the combined companies last year and your pro forma plan is in the DJ. And so maybe you can talk about what you saw in the DJ and what Civitas was doing and how you wanted to approach that plan differently this year in 2026? Elizabeth McDonald: We really like the DJ program that we have. Let's start there that it's great returns, and it's very capitally efficient when you're looking at new wells going forward. One of the things that's slowing down enables us to do is strengthen our position as far as optionality and flexibility to where we go within the basin in order to maximize free cash flow and optimize really the plan and what the returns are coming out of there. And so slowing down a little bit gives us the ability to take time since our technical teams haven't worked that. And so we're basically integrating with the broader Civitas technical team. Looking at the broader portfolio, slowing down a little bit, allows us to optimize and strengthen our position there. Kevin MacCurdy: Great. And as a follow-up, and I apologize if this is already addressed on the call, but the -- if I look at Slide 19, it appears that you're turning in line more wells than you're drilling in 2026. And I just want to kind of confirm that this is like -- are you drawing down DUCs in 2026? And if so, is that happening in the first part of the year versus the second part of the year? And is that kind of -- I assume that's not sustainable in 2027. But maybe if you can just kind of address that and unpack that a little bit? Elizabeth McDonald: Yes, I'll just start that. Again, our capital allocation and our plan was really built on maximizing free cash flow. And as a result, we have the options to basically slow down and do that. Our DUC count really is related to the timing of our active development. We don't manage to that. We have a level and a balance that just really depends on the pad size, how many rigs we're running and the activity levels that we're carrying. So the DUC count is really just an artifact or an output of that planned activity slowdown, right? So we remain focused on capital efficiency. And basically, going in there with the fleet right after the rigs are finished in order to build a plan and deliver results that are maximizing free cash flow. Operator: There are no further questions at this time. I'd like to hand the call back to Beth McDonald for closing remarks. Elizabeth McDonald: Thanks, Joe. Thank you all for your time today and your questions. As we close, I want to reiterate our 3 strategic priorities of integrate, execute and bolster. First, integrate. The Civitas integration is progressing well, and we are really pleased and proud with the strong performance of our team. We've already actioned $185 million of our $200 million to $300 million target which represents under $1 billion of present value or nearly 20% of our market cap. For execute, we're focused on execution across our scaled strengthened portfolio to maximize free cash flow and deliver differential stockholder value. And bolster, we recently announced our $950 million divestiture that will strengthen our balance sheet and accelerate return of capital to stockholders under our new return of capital program. We look forward to seeing many of you guys in the coming weeks. Have a great day. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time, and enjoy the rest of your day.