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Operator: Good day, everyone. My name is Janine, and I will be your lead operator for today's call. At this time, I would like to welcome everyone to the Ashford Hospitality Trust, Inc. conference call this morning. All lines have been placed on mute to prevent any background noise. After today's presentation, there will be an opportunity to ask a question. To ask a question, please press star 1 on your touch-tone phone. To withdraw your question, please press star 1 again. I will now hand the call over to Chief Financial Officer, Deric S. Eubanks. Sir, please go ahead. Deric S. Eubanks: Thank you. Good morning, everyone, and welcome to today's conference call to review results for Ashford Hospitality Trust, Inc. for the fourth quarter and full year 2024 and to update you on recent developments. On the call today will also be Stephen Zsigray, President and Chief Executive Officer, and Christopher Nixon, Executive Vice President and Head of Asset Management. The results, as well as notice of the accessibility of this conference call on a listen-only basis over the Internet, were distributed yesterday afternoon in a press release. Stephen Zsigray: New growth and 6.2% growth in comparable hotel EBITDA. These results underscore the impact of the strategic decisions our team has made over the past several quarters and the strength of our high-quality, geographically diverse portfolio. Total revenue growth meaningfully exceeding RevPAR growth is reflective of the efforts that our asset management team and property managers have taken to grow ancillary revenues, and that discrepancy widened even further in December. Voyager Street has a prime location in proximity to major demand generators in downtown New Orleans. Post-conversion, we expect the new Tribute Portfolio property to realize a 10% to 20% RevPAR premium compared to pre-conversion. With a really improving transaction and financing market, we look forward to updating you on our progress with GrowAHT and the many opportunities that lie ahead for Ashford Hospitality Trust, Inc. I will now turn the call over to Deric to review our fourth quarter and full-year financial performance. Deric S. Eubanks: Thanks, Stephen. For the fourth quarter, we reported a net loss attributable to common stockholders of $131,100,000, or $23.83 per diluted share. For the full year, we reported a net loss attributable to common stockholders of $82,500,000, or $17.54 per diluted share. For the quarter, we reported AFFO per diluted share of negative $2.21, and for the full year, we reported AFFO per diluted share of negative $4.84. Adjusted EBITDAre for the quarter was $45,200,000 and $235,900,000 for the full year. At the end of the fourth quarter, we had $2,600,000,000 of loans with a blended average interest rate of 7.9%, taking into account in-the-money interest rate caps. Considering the current level of SOFR and the corresponding interest rate caps, 77% is effectively floating. One loan has two additional one-year extension options, subject to the satisfaction of certain conditions, with a final maturity date in December 2027. The 703-room Marriott Crystal Gateway Hotel located in Arlington, Virginia had a final maturity date in November 2026 and a floating interest rate. The new nonrecourse loan totals $121,500,000 and has a three-year initial term with two one-year extension options. During the quarter, we also successfully refinanced our mortgage loan secured by hotels that were used to pay down our strategic financing. The refinancing resulted in approximately $31,000,000 of excess proceeds and $37,000,000 of SOFR plus 4.75%. The loan was extended with no paydown and continues to have an outstanding balance, subject to the satisfaction of certain conditions. The loan is interest-only. Subsequent to quarter end, we completed the sale of the 115-room Courtyard Boston Downtown located in Boston, Massachusetts for $123,000,000, or $1,070,000 per key. When adjusted for the anticipated capital expenditures, the sale price represented a 5.9% capitalization rate on net operating income for the trailing twelve months ended 09/30/2024, or 12.3 times hotel EBITDA for that same time period. The previous loans had a combined outstanding loan balance of approximately $438,700,000. Subsequent to quarter end, we closed on a $580,000,000 refinancing, and the BAML Pool 3 loan together with the Westin Princeton for the same time period. Excluding the anticipated capital spend, the sale price represented a 6.9% capitalization rate on net operating income for the trailing twelve months ended 09/30/2024, or 14.3 times hotel EBITDA for that same time period. Keyes Pool D loan, together with hotels previously part of the company's Keyes Pool C loan and Keyes Pool E loan, secured by 16 hotels, has a two-year term with three one-year extension options, subject to the satisfaction of certain conditions, and bears interest at a floating rate of SOFR plus 4.37%. We used approximately $72,000,000 of the excess proceeds to completely pay off the remaining balance on our strategic financing, including the exit fee. The remaining excess proceeds were used to fund transaction costs and reserves for future capital expenditures. We ended the quarter with cash and cash equivalents of $112,900,000 and restricted cash of $107,600,000. The vast majority of that restricted cash is comprised of lender- and manager-held reserve accounts and $2,600,000 related to trapped cash held by lenders. At the end of the quarter, we also had $21,000,000 due from third-party hotel managers. This primarily represents cash held by one of our property managers which is also available to fund hotel operating costs. We ended the quarter with net working capital of approximately $122,000,000. As of 12/31/2024, our consolidated portfolio consisted of 73 hotels with 17,644 rooms. Our share count at the end of the year consisted of approximately 5,800,000 fully diluted shares outstanding after taking into account our recently completed one-for-10 reverse stock split, which is comprised of 5,600,000 shares of common stock and 100,000 OP units. Additionally, as Stephen mentioned, during the quarter, we announced plans to close the offering of the Series J and Series K non-traded preferred stock on 03/31/2025. Since launching the offering in 2022, we have raised approximately $195,000,000 of gross proceeds from the sale of our Series J and Series K non-traded preferred stock. While we are currently paying our preferred dividends quarterly or monthly, we do not anticipate reinstating a common dividend in 2025. This concludes our financial review, and I would now like to turn it over to Chris to discuss our asset management activities for the quarter. Christopher Nixon: Thank you, Deric. In the fourth quarter, we delivered strong performance across our geographically diverse portfolio. Comparable hotel RevPAR increased by 3% over the prior-year period, reflecting solid demand and the impact of our strategic revenue management initiatives. Our Washington, D.C. properties delivered a healthy group performance this period. Group dynamics and corporate transient demand are improving, and we are starting to see accelerating benefits from our GrowAHT initiatives. December was a particularly strong month with a 12% increase in hotel EBITDA over the prior-year period. During the fourth quarter, Embassy Suites Crystal City produced a 22% increase, driven in large part by the successful execution of several GrowAHT initiatives that were in full swing. Booking activity remained strong, with group pace continuing to accelerate across our portfolio. Group room revenue for the fourth quarter increased by 5% over the prior-year period, demonstrating the resilience of our portfolio and the effectiveness of our strategies. I would now like to go into more detail on some of the achievements completed throughout the quarter. With the presidential election cycle presenting both opportunities and challenges, our team implemented an aggressive strategy to drive results. We focused on targeted marketing to political organizations supporting the election, particularly security and campaign teams. Additionally, booking volumes have been robust. 2025 group room revenue pace for the broader portfolio remains strong, currently pacing ahead by 5% over the prior-year period. We added over $13,000,000 in additional group room revenue during the fourth quarter for 2025, representing an increase of approximately 6% compared to the prior-year quarter for 2024. Turning to gross operating performance, I am pleased with our results as fourth quarter gross operating margins expanded by approximately 141 basis points relative to the prior-year quarter. Renaissance Nashville delivered a strong fourth quarter gross operating profit increase of 10% on 3% total hotel revenue growth. Ideally positioned near Downtown Music City Center, this property benefited from recent initiatives aimed at enhancing its operating performance. These initiatives included adding a valuable ancillary revenue stream and cutting other operational expenses. Additionally, our team strategically utilized a supply chain procurement system throughout the year, resulting in over $130,000 in food cost savings for the full year. These efforts underscore our ongoing commitment to operational efficiency and margin expansion, reinforcing our ability to drive sustainable profitability across our portfolio. One hotel that I would like to highlight this quarter is Le Méridien Fort Worth Downtown, which opened during 2024. Thanks to a combination of strategic partnerships, proactive marketing, and early activations, our asset management team has successfully capitalized on the hotel's incredible amenities, achieving total revenue growth ahead of our initial budget by 21%. A key driver of this early success was our focus on strong community engagement, even before the hotel's grand opening and ribbon-cutting events. We partnered with Fort Worth Sister Cities International, the Fort Worth Chamber, and Downtown Fort Worth, Inc. to improve awareness prior to the opening. Additionally, the hotel conducted exclusive hard-hat tours for prospective customers and community partners, generating early excitement and demand. To attract business travelers, we introduced Bonvoy room packages and brought on a dedicated business travel sales manager to engage with companies in the downtown area and establish corporate accounts. Simultaneously, to position the hotel as a vibrant social and dining destination, our team launched dynamic food and beverage activations, including live music and happy hours at the upscale lobby restaurant and a stunning rooftop lounge. Further, an aggressive early rate strategy for group bookings, secured through strategic collaborations with our other properties in the area, helped establish a competitive market presence with additional overflow blocks. By positioning itself as a premier venue for group events and conferences, this upscale boutique property has delivered an exceptionally strong performance right out of the gate, and I am excited about its long-term potential. As Stephen mentioned, this quarter marked the successful completion of our strategic repositioning of Crowne Plaza La Concha Hotel in Key West, Florida, into Autograph La Concha, now part of Marriott's Autograph Collection. Ideally located on Duval Street in Old Town Key West, this transformation followed a $35,000,000 investment, including upgrades to the lobby, bar, restaurant, exterior, guest rooms, bathrooms, corridors, pool, and meeting space. A key enhancement was the conversion of a previously underutilized spa into premium rooftop suites, offering some of the best views in Key West. I am equally excited about the conversion of our La Pavion Hotel in downtown New Orleans to a Tribute Portfolio property following a $19,000,000 investment. This renovation included extensive exterior work, upgraded guest rooms and bathrooms, a refreshed restaurant, and a reimagined hotel lobby bar. The new Bar Eighteen O Three pays homage to the rich history of both the hotel and the city, named after the year Emperor Napoleon signed the Louisiana Purchase. These conversions exemplify our ability to unlock embedded value in our portfolio, and looking ahead, we expect La Concha and La Pavion to benefit significantly from Marriott sales distribution and loyalty platforms, enhancing long-term performance and value. As part of our GrowAHT initiatives, we implemented strategic measures during the fourth quarter to drive hotel EBITDA, focusing on food and beverage, parking, and labor expenses to enhance profitability while maintaining service standards. We conducted audits of revenues of all outlets and gift shops to optimize offerings and improve margins. Parking fee and a store preservation fee adjustments will provide additional revenue streams. We also partnered with Remington to reduce allocated expenses. We launched a day-use hospitality program, monetizing hotel amenities. On the labor front, we refined staffing models, optimized schedules, and leveraged technology to improve efficiency while preserving guest service. As we move into 2025, we will continue identifying opportunities to further drive hotel EBITDA and maximize value. Turning to capital expenditures, in 2024, we completed the extensive guest room and public space renovation at Embassy Suites Dallas and began the guest room renovation at Embassy Suites West Palm, which is on track for completion during 2025. Additionally, renovations at Residence Inn Evansville and Courtyard Bloomington are progressing well. At Hilton Garden Inn Austin, a restaurant and meeting space renovation will modernize the property and capitalize on its prime downtown location. In 2025, we will execute several PIPs to support brand franchise agreement renewals while enhancing guest experience. Later in the year, we plan to embark on public space renovations at Hampton Evansville and Westin Princeton. These initiatives underscore our commitment to asset excellence and delivering superior guest experience. In total, we expect to spend between $95,000,000 and $115,000,000 in 2025 as we continue to enhance and elevate our portfolio. In summary, group business continues to show solid growth. Demand remains strong across key markets, and our ancillary revenue initiatives are performing well. Looking ahead, we are actively rolling out additional GrowAHT initiatives aimed at enhancing operational performance, all designed to drive efficiency, lower cost, and improve profitability. We remain optimistic about our portfolio's outlook for 2025 and confident in our ability to unlock additional value. That concludes our prepared remarks, and we will now open up the call for Q&A. Thank you. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press 1 on your touch-tone phone, and you will hear a prompt that your hand has been raised. If you are using a speakerphone, please lift the handset before pressing any keys. Should you wish to withdraw, please press 1 again. Our first question comes from the line of Jonathan Jenkins from Oppenheimer. Sir, please go ahead. Jonathan Jenkins: Good morning. Thanks for taking my questions. First one for me on the Grow initiative. Chris, I think you noted some changes in benefits that you are already seeing here in 4Q. But can you maybe quantify the benefits that you have seen and provide some color on the ramp period and cadence throughout the year and maybe some additional color on potential opportunities that get you to that $50,000,000 target? Christopher Nixon: Yes. Great question, Jonathan. Thanks for the question. So we have begun rolling out all initiatives. I would say more than half of the initiatives are fully rolled out and underway. Obviously, we have seen the impact of performance that a number of these initiatives started having immediately with the December numbers we have cited. We look ahead to Q1 and January; that outperformance is pulling through, so we are very optimistic. Many of the initiatives will continue to roll out through the course of the year. We are very happy, but we are not satisfied. As we are going through 2025, we are still identifying new initiatives and potential new partnerships and things we can do to build on. I would say roughly half of the initiatives have been fully rolled out, and then the remainder will be rolled out throughout the remainder of the year. Jonathan Jenkins: I believe you talked about 20% to 30% RevPAR premiums in or above that, which is impressive. And then switching gears to the conversions, Stephen. Think those assets have largely stabilized, or is there additional ramp period from here? And then more broadly, any additional thoughts regarding conversions in the portfolio and how much of an opportunity that could be? Christopher Nixon: Yeah. Hey, Jonathan. This is Chris. I will take that. We are very encouraged by the performance of the conversions. As Stephen indicated, we underwrote pretty aggressive returns, and both hotels are outperforming that. In La Pavion, the outperformance is north of 40% in January. That continued through February, and that is accounting for normalizing for Super Bowl impact. So when you remove Super Bowl, the hotel is still performing at that level, outperforming underwriting. When you throw an event like Super Bowl in there, it is through the roof. La Pavion was sold out for four straight nights over Super Bowl with a RevPAR which exceeded $900. So extremely strong performance. The hotel continues to ramp. Down in Key West, we are starting to see the broader market soften a little bit in occupancy, so it is great that we are up, which is obviously great news for us. Occupancy has outperformed the market, but where we have really seen the benefit is on the ADR side, with ADR gains that are significantly outperforming underwriting. We are seeing strong distribution performance, as we expected, from Marriott. But performance at both hotels is kind of blowing our underwriting out of the water. I think there is still some additional runway before that stabilizes. Jonathan Jenkins: Okay. That is excellent. And then switching gears to the transaction environment, can you provide some additional color there? And has there been any noticeable difference in portfolio deals versus one-offs that are worth calling out? Any changes in bid-ask spreads or pickup or changes in conversations you have been having as of late? Any additional color there would be helpful. Christopher Nixon: Yeah. We have definitely seen improvement in the financing market, and that has driven improvement in transaction markets, certainly driven optimism that 2025 is going to be a much better year for transactions. From our perspective, I expect that we will continue to sell a handful of additional assets, but I would caveat that and say that we are going to continue to be very disciplined. We want to ensure that we are getting optimal value on our sales. There does remain a bid-ask spread in a handful of markets, and so we need to explore several different opportunities. We are not going to transact on all of them similar to what we have done in prior quarters. But we also expect to continue to deleverage and improve our balance sheet overall. Jonathan Jenkins: Okay. That is good. And then lastly for me, if I could, just a clarification question on your floating rate exposure. I assume that increased sequentially, just the expiration swaps. Is that the case? And more broadly, is there any additional color you can provide to us on how you are thinking about your fixed versus floating rate exposure? Do you expect to get into swaps to lower that floating exposure? Deric S. Eubanks: Yeah, Jonathan. This is Deric. I will take that. It is a combination of interest rate caps burning off as well as SOFR dropping back below strike prices on those caps. That is why we are more floating now. Historically, we have always preferred floating-rate financing just because it has more flexibility. We think it is more of a natural hedge to our business, and we believe over time that you will typically pay less floating. Obviously, that has been a challenge for us over the last year or two. But I think you will continue to see us have a mix of fixed and floating, sort of a bent to more floating. Jonathan Jenkins: Okay. Very helpful. I appreciate all the color, everyone. Thank you for your time. Operator: That concludes our question-and-answer session. Thank you for joining today’s call, and we look forward to speaking with you all again next quarter. That concludes our conference call for today. Thank you for joining, and you may now disconnect.
Operator: Good morning, everyone, and welcome to the MYR Group Fourth Quarter 2025 Earnings Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now turn -- like to turn the call over to Jennifer Harper, Vice President of Investor Relations and Treasurer, for introductory remarks. Jennifer Harper: Thank you, and good morning, everyone. I would like to welcome you to the MYR Group conference call to discuss the company's fourth quarter and full year results for 2025, which were reported yesterday. Joining us on today's call are Rick Swartz, President and Chief Executive Officer; Kelly Huntington, Senior Vice President and Chief Financial Officer; Brian Stern, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment; and Don Egan, Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment. A copy of yesterday's press release announcing our fourth quarter and full year 2025 results, can be found on the MYR Group website at myrgroup.com under the Investors tab. A webcast replay of today's call will be available on the website for 7 days following the call. Please note today's discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group's management as of this date, and MYR Group assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. For more information, please refer to the risk factors discussed in the company's most recently filed annual report on Form 10-K. Certain non-GAAP financial measures will also be presented. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release. With that, let me turn the call over to Rick Swartz. Richard Swartz: Thanks, Jennifer. Good morning, everyone. Welcome to our fourth quarter 2025 conference call to discuss financial and operational results. I will begin by providing a summary of the fourth quarter and full year results, and then we'll turn the call over to Kelly Huntington, our Chief Financial Officer, for a more detailed financial review. Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions. We closed 2025 with strong financial performance in the fourth quarter and full year revenues of $3.7 billion. A steady backlog of $2.8 billion at the end of 2025 reflects a healthy bidding environment and the continued investment in infrastructure to meet the growing electrification needs across the U.S. and Canada. Our work this year underscores the stability and expansion of our clients' relationships as well as our measured pursuit of new opportunities. We continue to see strong bidding activity across our business segments, and are closely monitoring these opportunities and positioning ourselves to strategically pursue and execute projects with operational excellence. As always, our success is grounded in an unwavering commitment to our customers through safe and reliable project execution. Our teams are dedicated to helping our customers advance their business objectives, and I'm grateful for their continued hard work. Now Kelly will provide details on our fourth quarter and full year 2025 financial results. Kelly Huntington: Thank you, Rick, and good morning, everyone. For the year ended December 31, 2025, we reached record annual revenues of $3.7 billion. Full year net income of $118 million and EBITDA of $233 million. Our fourth quarter 2025 revenues were $974 million, which represents an increase of $144 million or 17% compared to the same period last year. Our fourth quarter T&D revenues were $531 million, an increase of 18% compared to the same period last year. The breakdown of T&D revenues was $330 million for transmission and $201 million for distribution with increases of $64 million in revenue on transmission projects, and $17 million in revenue on distribution projects from the prior year. Work performed under master service agreements continue to represent approximately 60% of our T&D revenues. C&I revenues were $443 million, a record high for our C&I segment and an increase of 17% compared to the same period last year. C&I segment revenues increased primarily due to an increase in revenue on fixed price contracts. Our gross margin was 11.4% for the fourth quarter of 2025 compared to 10.4% for the same period last year. The increase in gross margin was primarily due to the fourth quarter of 2024 being negatively impacted by certain T&D clean energy projects and a C&I project. In the fourth quarter of 2025, gross margin was also positively impacted by better-than-anticipated productivity, favorable change orders and a favorable job close out. These margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects. T&D operating income margin was 7.4% for the fourth quarter of 2025 compared to 6.7% for the same period last year. The increase was primarily related to the fourth quarter of 2024 being negatively impacted by certain clean energy projects. In the fourth quarter of 2025, T&D operating income margin was also positively impacted by a favorable change order and better-than-anticipated productivity. These operating income margin increases were partially offset by an increase in costs associated with project inefficiencies on certain projects. C&I operating income margin was 6.6% for the fourth quarter of 2025 compared to 3.9% for the same period last year. The increase was primarily related to a larger portion of our C&I projects progressing at higher contractual margins, some of which are nearing completion. In the fourth quarter of 2025, C&I operating income margin was also positively impacted by better-than-anticipated productivity, a favorable change order and a favorable job close out. These operating income margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects. Fourth quarter 2025 SG&A expenses were $65 million, an increase of $8 million compared to the same period last year, primarily due to increases in employee incentive compensation costs and employee-related expenses to support future growth. Fourth quarter 2025 interest expense was $1 million, a decrease of $1 million compared to the same period last year. The decrease was attributable to lower interest rates and lower average outstanding debt balances during the fourth quarter of 2025 as compared to the same period last year. Our fourth quarter effective tax rate was 21.2% compared to 40.9% for the same period last year. The decrease was primarily due to changes in state tax rates used to measure our state deferred income taxes and lower permanent difference items. Fourth quarter 2025 net income was a record $37 million compared to $16 million for the same period last year. Net income per diluted share of $2.33 compared to $0.99 for the same period last year. Fourth quarter 2025 EBITDA was a record $64 million compared to $45 million for the same period last year. Total backlog as of December 31, 2025, was $2.8 billion, a 9.6% increase from the prior year. Total backlog as of December 31, 2025, consisted of $1.0 billion for our T&D segment and $1.8 billion for our C&I segment. As a reminder, our backlog includes projected revenue for only a 3-month period for many of our unit price, time and equipment, time and materials and cost plus contracts, which are generally awarded as part of a master service agreement. However, our master service agreements typically have a much longer duration. Fourth quarter 2025 operating cash flow was $115 million compared to operating cash flow of $21 million for the same period last year. The increase in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions, higher net income and lower contingent compensation payments associated with a prior acquisition. Fourth quarter 2025 free cash flow was $85 million compared to free cash flow of $9 million for the same period last year, reflecting the increase in operating cash flow, partially offset by higher capital expenditures to support future growth. Moving to liquidity. We had approximately $265 million of working capital, $59 million of funded debt, $408 million in borrowing availability under our credit facility and $150 million in cash and cash equivalents as of December 31, 2025. We have continued to maintain a strong funded debt-to-EBITDA leverage ratio of 0.25x leverage as of December 31, 2025. We believe that our credit facility, strong balance sheet and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions and opportunistically repurchase shares. I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment. Brian Stern: Thanks, Kelly, and good morning, everyone. The T&D segment delivered steady fourth quarter and full year results, supported by a healthy mix of smaller to midsized jobs and ongoing master service agreements. Our performance reflects the continued application of our core business principles around safety, quality and reliable execution. Bidding activity remains healthy as backlog, revenue, margins, and income increased from 2024 to 2025. We continue to expand relationships with long-term clients and pursue opportunities with new and existing clients, building on the positive industry outlook. This quarter, Great Southwestern Construction executed a new 7-year master service agreement in Kentucky for transmission line construction and maintenance projects. L.E. Myers was awarded a transmission project in Virginia as well as transmission work in Iowa. In addition, Sturgeon Electric won two transmission projects in Oregon and transmission work in Arizona. Both Sturgeon Electric and High Country Line Construction were awarded station and line work in Washington, California and Arizona. Harlan Electric was selected to perform multiple jobs throughout New Jersey and Pennsylvania. According to electric -- Edison Electric Institute industry data, investor-owned electric companies are projected to invest approximately $178 billion in transmission construction between 2025 and 2028. This level of planned investment reflects an ongoing need for grid modernization and the increased capacity to accommodate load growth. As utilities invest in these upgrades, we believe we are well positioned to benefit from expanding backlogs and long-duration project pipelines. With our experience, we continue to position ourselves to capture future 765 kV projects along with 500 kV and 345 kV transmission and substation projects over the next 10 years. MYR Group subsidiaries are prepared to pursue and perform these opportunities across the U.S. and Canada. In summary, we are proud of our accomplishments in the fourth quarter and all of 2025. We will continue to actively bid and execute projects of varied capacity, size and complexity across the U.S. and Canada, while maintaining our consistent focus on safety and the development of our dedicated workforce, who ultimately enable us to take on the important work ahead. I will now turn the call over to Don Egan, who will provide an overview of our Commercial and Industrial segment. Don Egan: Thanks, Brian, and good morning, everyone. Our C&I segment achieved solid results in the fourth quarter, thanks to the health of our core markets. We continue to see steady bidding activity and increases in backlog as we strategically monitor and pursue new opportunities in collaboration with our valued customers. We believe our ability to safely and skillfully execute projects of various sizes continues to create many long-term opportunities in our core markets. Data centers continue to be one of the most active areas of investment nationwide, fueled by the accelerating need for cloud, AI and digital infrastructure. Industry researchers expect this demand to remain robust through 2026, with utilities and developers working to expand power capacity to support this surge. Infrastructure-related construction is also benefiting from ongoing commitments in transportation, clean energy, wastewater and fresh water treatment facilities. Our ever-expanding network of clients continues to engage us early on upcoming opportunities in these segments. Our teams across all subsidiaries continue to execute and pursue an array of work. During this period, we were awarded multiple data center projects in Colorado, Arizona, California and New Jersey. In addition to data centers, our subsidiaries were awarded projects in clean energy, manufacturing and industrial projects in California and Arizona. These accomplishments highlight our ongoing momentum and solid market presence throughout the U.S. and Canada. In conclusion, we believe our core markets remain healthy and the depth of our customer relationships continues to create new opportunities. This success is driven by our dedicated employees whose commitment to quality and safety is at the heart of everything we do. Thank you, everyone, for your time today. I will now hand the call back to Rick for his closing remarks. Richard Swartz: Thank you for those updates, Kelly, Brian and Don. We are proud of our fourth quarter and full year 2025 performance, which demonstrated the strength of our sound business strategies and our ability to maintain and expand long-term customer relationships across both segments. We believe our core markets are well positioned for continued growth as investment in electrical infrastructure accelerates. We remain committed to safely executing projects, strategically bidding opportunities and supporting our customers in an ever-changing energy environment. We believe our proven track record of collaboration, integrity and dependable project delivery puts us in a strong position for opportunities ahead. We are excited to play a meaningful role in strengthening the electrical infrastructure that keeps our communities running. I would like to thank our employees for their invaluable contributions and our shareholders for your continued support of MYR Group. I look forward to the year ahead. Operator, we are now ready to open the call up for your comments and questions. Operator: [Operator Instructions] Our first question comes from Sangita Jain of KeyBanc. Sangita Jain: First, Rick, can I ask you for your thoughts on the large transmission market out there? I know you were optimistic on late 2026 potential bookings for 2027 revenue. Just wondering if you're seeing the same type of trend right now. Richard Swartz: We are. Nothing's changed on that side. I mean it takes a while to bring these projects to market, and we've known that. So we're in good conversations with our clients, and we believe we'll capture some of that work that will start to burn in '27. Sangita Jain: Got it. And then, Kelly, maybe for you, cash flow has been really, really strong this year. So I'm trying to figure out if some of that was catch-up from the pending payments from last year's solar projects or if there's any meaningful advances in new projects that we should be aware of? Kelly Huntington: Yes. Thanks, Sangita, for that question. Yes, a very strong year for cash flow and particularly in the fourth quarter. A lot of that is driven by our lower DSOs. We're now -- we've been in the mid-50s versus the historical average of around 70. And that's driven by a combination of things. We saw a 16-day improvement if you look year-over-year with 11 days of that in the third quarter. Part of it is getting beyond those -- the problem projects that we had in 2024. But I'd say a larger factor is just that we have a very strong net overbuild position, really driven by some of the large fixed price work that we have on the C&I side, in particular. So I think that does represent potentially a little bit of a headwind as we look forward. And part of that will depend on the mix of work that we have as far as awards this year and how much of it is some of that mid- to large-sized fixed price work that can have a more favorable billing profile versus more MSA weighted, which is great work to have, but doesn't have quite as positive of the cash flow profile. Operator: Our next question comes from Julien Dumoulin-Smith of Jefferies. Brian Russo: It's Brian Russo on for Julien. Could you just comment more on the strength in the T&D backlog at $1 billion, looks like it was up about 20% year-over-year, quite a bit of improvement from the year-over-year progression that we've been seeing in the last few quarters. Just curious, are any of the new projects, in particular that Kentucky MSA agreement included in the December backlog? And then also, is there any Xcel $500 million 5-year MSA in that December backlog as well? Richard Swartz: As far as the backlog goes, I'd say on the Xcel stuff, very little of that is in that backlog as of now. I mean we said it would be a slow start to the year and then kind of progressing throughout the year and increase. So again, not too much of that in our backlog right now because we only count 90 days of that MSA work, as Kelly highlighted in her script within our backlog. When we look at the Kentucky side, that work really will start later this year. So not much of that in there. So again, we've seen great activity in the markets out there, and we're being selective on what we take on and really focused on long-term relationships with clients. 90% of our business is return clientele. We're always looking for those one-off projects as additive. But again, how do we grow with our existing clients, and that's where our focus is at. Brian Russo: Okay. Great. And just a follow-on there in T&D. We saw a very large Texas-based wires company announce a rather robust 5-year capital plan update. And can you just remind us what your positioning is currently in Texas? And then maybe what your level of activity has been kind of in the past up-cycles in capital spend that we've seen? Richard Swartz: Yes. Texas has been a good market for us. for the last decade. I mean it's been a good market. We continue to see that grow. We're excited about some of the opportunities that are out there with some of the 765 work, but even some of the 500 and 345 work we're -- we do that every day. So I think the 765 is upcoming. We're excited about our positioning on that. But again, we're seeing good activity, not just in Texas, but across the nation. Lots of good opportunities out there. Brian Russo: Okay. And the strong C&I margins in the fourth quarter, plus 6%, how does that fit into the 5% to 7.5% operating margin target step-up you're guiding towards this year? And then just kind of tie that into the backlog. Are there still projects still to be completed that would be in that old kind of 4% to 6% target? Or are those really nearly all burned? So everything from here on out is really in the new 5% to 7.5% range? Richard Swartz: Well, I would say our forecast when we look at it for the year is operating within the midpart of both our T&D and C&I margin profile. So in that midpoint of that, we see good opportunities out there. We continue to see good activity in the market. So with that being said, we haven't changed from what we said last quarter on both from a revenue standpoint, we look at that 10-ish percent growth in both segments and as a company overall. And then we look at operating in those -- that mid part of that range. So good opportunities there, and I think we'll continue to do everything we can to increase our margins from our standpoint as far as what we do from a prefab standpoint, from an efficiency standpoint, from utilizing our equipment better, and we'll continue to try to maximize on that side. Operator: Our next question comes from Justin Hauke of Baird. Justin Hauke: Great. So I had two quick ones here. The first one, I was just going to ask about -- in your backlog, you break out what you expect to book over 12 months and what you expect to book beyond 12 months. And it looks like almost all the backlog increase this quarter was kind of the longer duration backlog. And so I guess I just wanted to understand the components of that. Is that some of the data center work from C&I that you're talking about? And so like your -- the duration of your projects is just extending because the size is getting bigger? Or maybe just kind of how to think about that. Richard Swartz: Sure. On our larger project side, I would say those go out a little way. So they go out -- some of those data centers take 18 months to construct or so, 18 to 24 months when you look at the larger projects, and that goes for transportation work. Some of that goes beyond that. They're 4- or 5-year projects. But again, good activity on the small and midsize that's burning quickly. But on the larger projects, it does take a little longer to construct those projects. Justin Hauke: Okay. And then I guess my second question, not to be myopic, I guess, but obviously, there's been a lot of winter weather all over. 1Q is not typically your productive quarter versus the summer. But just curious if there's anything you would be thinking about or you want to communicate in terms of potential weather impacts in the first quarter that would be unusual that have occurred thus far? Or maybe it's not, maybe it's just in line with kind of normal seasonality? Richard Swartz: I think for us, we always did our work on normal seasonality. I think there's always going to be some storms that take place if it's -- I don't think [indiscernible] always affects us in the way that maybe really wet weather where we can't traverse the right-of-way. That seems to affect us a little bit more. But again, we're always monitoring the weather, and it really has to do where those -- what projects are affected. You can see in any given area, I mean, you can be 50 miles away and it really affects one area and it may not affect the other. So again, the weather hasn't affected our business across, I guess, the country everywhere equally. So I would say we'll -- we continue to look at that. Weather is the biggest impact we can have. But again, it hasn't affected us across the country as a whole, just in some select areas. And with that, sometimes we have some offset of some storm and other type works that we're doing for repair. But again, our base business is that day-to-day MSA and just construction projects. We like storm work. But again, we're not dependent on it. Kelly Huntington: Yes. And I would just add a little bit broader context, Justin, and looking at first quarter revenues, we are expecting that we will trend in the first quarter a little bit above that full year rate of about 10% growth, and that's really driven by first quarter last year, we had a little bit slower start. So it is a bit of an easier comp compared to the rest of the year. So just as you're thinking about modeling that, we would expect a little stronger revenue growth in the first quarter. Operator: Our next question comes from Caitlin Donohue of Goldman Sachs. Caitlin Donohue: Just focusing on the data centers, you outlined a few awards this past quarter. How are you seeing that project pipeline shape up for 2026, 2027 as you're speaking with your customers? Richard Swartz: The conversations are strong on that side. It's not just '27 and '28. I mean we're having conversations with customers that go well beyond that time frame. So again, I think our awards are always lumpy just on how long it takes the projects to get finalized. But again, great conversations going forward. So good activity in that market. But again, not completely dependent on that market by itself. We like the diversification we have with transportation, health care, some of that other work we do. So good opportunities on that side also. Caitlin Donohue: That's helpful. And then just on capital allocation strategy for 2026. We've seen CapEx step up a little bit. You've done buybacks in the past. How are you thinking through MYR Group's strategy for the year? Kelly Huntington: Yes. We are seeing great opportunities to continue to grow our business organically and through acquisitions. And so I think as we've talked about before, we'll continue to prioritize our capital allocation to growth. We do use share repurchases opportunistically. And I think the last 2 years are a great example of that with deploying over $150 million at an average price of $117. So -- but I think at this point, really focused on the growth opportunities that we see both organically and from acquisitions. Operator: Our next question comes from Manish Somaiya from Cantor Fitzgerald. Our next question comes from Brian Brophy of Stifel. Brian Brophy: Just want to kind of continue the conversation on the large transmission opportunity and some potential awards you may see there. Would those -- assuming you see something in the back half of '26, as you kind of alluded to, would those projects be additive to growth in 2027? Or would you have to pull resources from somewhere else to meet some of that demand? Richard Swartz: I don't see us having to pull any resources. I mean we've done a good job of retaining our employees, recruiting and developing people. So to us, that's additive. And it goes into '27 and beyond. So it's not just the work that's going to start in '27. We see the cycle being much longer than that. So I think it's a decade worth of growth out there, and we're going to capitalize on it where we can, and there's some great opportunities we feel coming our way. Brian Brophy: Great. Yes, that's good to hear. And then just as a follow-up to that, how do you think about some of the large transmission wins potentially impacting the profile of the business -- margin profile of the business at all, maybe not from an individual project standpoint, but capacity utilization overall. Should we think about that being a margin driver? Richard Swartz: Yes. I think it can show, I guess, marginal -- margin increases on that side. Again, it's how can we better utilize our equipment, how can we take labor out of the field and do more things on the prefab or the kitting side. So we're always looking at that side and being a solution provider for our customers. So I think along with that, we're always looking to enhance our margins. But again, our relationships with our clients are long term. So it's not always -- on this side, it's -- they're a regulated business. We'll continue to, I guess, push margins where we can, but more from an efficiency standpoint than what I'd call ever reaching out and trying to gouge our customers or anything like that. We really build on long term. Again, over 90% of our business is return clientele, and we always want to make sure we maintain those relationships. Operator: Our next question comes from Manish Somaiya from Cantor Fitzgerald. Manish Somaiya: Can you hear me? Richard Swartz: Yes. Manish Somaiya: Okay. Wonderful. Rick, I have the first question for you. In the press release, we talked about the bid environment being steady. Maybe if you can just give us a sense as to what you're seeing in terms of pricing by geography, by end market? And what are you walking away from business that may not be attractively priced? So maybe if you can just give us a sense of what's going on in the marketplace. Richard Swartz: I think for us, our -- I would say we've got a select client list. We're not trying to be everything to everyone, if that makes sense. So if on the -- let's take C&I as an example, if it's a customer we've done work for a long time with or somebody that's a continued relationship or we can build a continued relationship, we're really focused on that side, not the one-off ones. We're not focused on bidding a project that has 20 bidders on it. We like the customers that have select bid lists or we have teaming arrangements with. So with that side, good activity, good opportunities there. I would say, market by market when you're talking geographies across the U.S., some are a little tighter than others still, but we see those areas that are maybe not as busy as others getting busy in the future. So we're always monitoring that. We've got 65-plus offices across the U.S. and some in Canada. And with that, we're always using that local expertise to help us pick what work we want to go after, which ones really fit us and which ones don't. So along the way, we always evaluate those opportunities. And again, we're seeing good activity in all our marketplaces. Manish Somaiya: And I know we talked a bit about the data centers. Maybe Don can shed some more light. Are the customers on the data center side, hyperscalers, GCs, developers? Maybe if you can just give us a sense. And then as it pertains to backlog, is -- it seems, obviously, everybody is doing more data center work. But would you say that the backlog on the C&I side is diversified? Or is it kind of more concentrated? Don Egan: Well, I'll answer that question first. It is -- our backlog is very diversified. Yes, you're absolutely correct. There is a lot of activity in the market, and we're having conversations with end users, the hyperscalers, general contractors, developers. It's ongoing conversations on a very regular basis, if that answers your question. Manish Somaiya: And in terms of the customers on the data center side, would it be hyperscalers or general contractors, developers? Don Egan: Again, as I stated, it's all the above. We are having conversations with hyperscalers on a daily, weekly basis, same with general contractors and end users, owners. Manish Somaiya: Okay. And then just lastly, Rick, from a high level, obviously, you guys don't give guidance, but what would be the puts and takes for '26 as you kind of look at your internal benchmarks and targets? How should we think about the risks and opportunities? Richard Swartz: Let me go back to Don's question real quick, the one you asked for him. I would say the other side on data centers is it's not just the new construction. I think that's really what has the headline, but a lot of it is the retrofits in existing buildings, too. Existing data centers that have been there, I mean, they're living buildings. They're always changing the technology. So as that happens, that repeat work for us is very important. And once we're in a data center, we tend to stay there for a long time. So it's not just the new builds. It's also that retrofit work. That's the only thing I would add to that. When we look at kind of the puts and takes going forward, I would say the biggest impact we can always have on the T&D side is weather. Other than that, the activity in the market other than something that would -- we don't see right now from any of our conversations with our client would be any kind of slowing in the market. But we don't see that nor do we anticipate it. So it's really the weather on our T&D is the biggest impact. And then the timing of these projects, how quick they roll out would be the other kind of risk out there because it's not if these projects are going to be built, it's when. So sometimes you can see a 2- to 4-month push on projects, but it's not like they're going to be pushed out years. And that's kind of how we see it now. And then the other side on the T&D side that I'd probably highlight is permitting. Sometimes that can push a project out a little bit. But again, it's not if the projects are going to be built, it's when. So again, good activity on both sides, both T&D and C&I. Operator: Our next question comes from Tim Moore of Clear Street. Timothy Michael Moore: Great job with your backlog growth and book-to-bill. My equipment utilization tailwind for the T&D side was already asked. So I just have two questions remaining. Maybe, Rick, you can maybe walk us through or even Kelly elaborate on kind of the trade-off in your selectivity for staffing for maybe like an 18-month data center versus cross-selling a more medium-sized utility project. I know they're are separate segments, but I'm just kind of wondering if you could talk a bit more to like the regional staffing playing in, cross-selling opportunity. And if it is a new customer, not more than 90% incumbents. Richard Swartz: Yes, I'll start there. Like what you just said, I mean, 90% of our business is return clientele. We're always focused on that. We're always trying to cross-sell. There's lots of opportunities on that side, especially on data centers where the substation in that side might be on -- within the owner side of it rather than the utility side. So either way, we're able to construct that portion of the project. I would say we're always looking at those opportunities. We're always going to focus on our long-term clients first. And then we'll take the one-off ones later. If they're just going to build one project and out, that's probably not our focus. But if they're going to build multiple projects, that's where we're focusing. And I think we've done a very good job on, as an example, some of our data centers where there are facilities that are -- they build one building, then they move into the next. And as they build out their campus, it's a great place for us. There are some of them where we might be on -- as an example, we're on building 3 of maybe a planned 12 buildings. So again, this goes out for many years forward, and that's really where our focus is. Kelly, do you want to add? Kelly Huntington: I think you covered that well, Rick. Thanks. Richard Swartz: Okay. Timothy Michael Moore: Great. That was really helpful. The only other question I had, given your liquidity and the cash and the bolt-on acquisition opportunity, can you maybe just talk high level about the philosophy? Is your priority within T&D more of the electrical contractors? And then on the C&I side, is it to build geographic scale like in the Southeast? Just kind of curious if you can add any color. Kelly Huntington: Sure. I can start on that one... Richard Swartz: Go ahead, Kelly. Kelly Huntington: I was just going to say on the T&D side, we definitely focus on electrical contractors. We do have really good geographic presence across the U.S. and up into Canada and Ontario on the T&D side. So we also look at opportunities that would be ancillary services like right-of-way or foundation or environmental work. Those can be of interest to us as well. On the C&I side, I would say really two primary screens from a strategic perspective. First would be the geographic fit because we don't have quite as consistent of coverage as we do on the T&D side and then really taking a close look at the end markets they serve. So does that acquisition opportunity have a similar profile as far as exposed to those higher growth tend to be less cyclical, more complex core markets like we are. So those would be the main things we're looking at, really still focused on tuck-in acquisitions in the places we know and the risk profiles that we understand as well. Operator: Our next question comes from Jon Braatz of KCCA. Jon Braatz: Rick, your markets are very strong, and I think you -- and you've indicated that the top line, you could see 7% to 10% type of revenue growth. But should the opportunities present themselves as they might, do you have the ability, the capacity, the labor force and infrastructure in place to maybe accelerate that growth as we go forward? Richard Swartz: Yes. I mean we've got that opportunity. I think if you look back in our history, we've grown more than that in certain years, and we -- other years, we've tamed that back a little bit. Again, it's timing of the awards, how they happen. I see good opportunities out there, but where we're really focused is controlled growth also. I think anybody could really add revenue at this point, but could they do it profitably. And for us, it's maintaining that right amount of growth, so we can be profitable. We're definitely capable of doing more than that. But we have said for this year, we anticipate growing in that 10%-ish range. So a little more than the 7%. But again, making sure we have controlled risk and then we take on the right opportunities. Jon Braatz: Sure. Given the strength of the market and the number of projects out there and so on, I sense that you could be more selective and maybe the risk profile of the work that you're doing has improved. Would that be a fair statement? Richard Swartz: Sure. We're always focused on that as we select our projects is how do we limit our risk, how do we partner with our customers? How do we make sure that we have those kind of conversations. But again, derisking our projects is definitely important to us, and that's one of the evaluations we go through as we look at projects is I would say we have less risk in our backlog today than we had in our backlog a year ago or 5 years ago. Operator: I'm showing no further questions in the queue. I would now like to turn the call back over to Rick Swartz for additional closing remarks. Richard Swartz: To conclude, on behalf of Kelly, Brian, Don and myself, I sincerely thank you for joining us on the call today. I don't have anything further, and we look forward to working with you in the future and speaking with you again on our next conference call. Until then, stay safe. Operator: Thank you. This concludes today's conference call. We thank you for your participation, and you may now disconnect.
Rutger Relker: Good morning, everybody. Welcome at our full year 2025 results presentation. It's good to see so many of you joining today's webcast. I'm happy to introduce to you our CEO, Stephane Simonetta; and our CFO, Frans den Houter. Stephane will kick off the presentation with some business highlights, followed by Frans, who will give an update on our financial developments. Stephane will then share some insights on strategy in action and provide an outlook for the year 2026. After the presentation, we will give you the opportunity to engage directly with us via the Q&A session. Later today, we will make both the presentation and the recording of today's webcast available via our website. Please welcome Stephane to start the presentation. Stephane Simonetta: Thank you, Rutger, and good morning, everyone. Let's start this presentation with a few key messages about our 2025 results. First of all, it is no secret that our performance has been impacted by the continuous short-term end market softness. And during the year, we have been focusing at Aalberts in what is within our control where we could still take action, and we did some good progress in our operational excellence initiative in order to protect our margin. Very good progress in free cash flow improvement with lower inventory, lower CapEx. Very good progress. This is for me one of the key highlights in '25 with our portfolio optimization with great acquisitions and also progress in our divestment. But '25 was also the first year of the deployment of our Thrive 2030 strategy, a foundation for future growth. So in a year when on one hand, we celebrated our 50th anniversary at Aalberts, we took a lot of action to strengthen our portfolio, improve our position and navigate through the end market challenges. The results going into the numbers, and Frans will give you a more details in the financial development. So EUR 3.1 billion revenue with a negative organic growth of 2.5%, EUR 410 million EBITDA equivalent to 13.2% of revenue and sustaining good added value margin of 63%, more than EUR 360 million free cash flow, CapEx at EUR 189 million and as a consequence, an earnings per share at EUR 2.61. In terms of shareholder returns, we are proposing a stable return with a stable dividend at EUR 1.15 and starting a new share buyback program of EUR 75 million. Many of you know us. Let me just remind you the value proposition in our 3 segment. In our building, we are engineering solutions in heating, in cooling, in sanitary system, mostly in residential and commercial building. In industry, we are providing services to all the global industrial OEM in Europe, in U.S.A. with heat treatment, with surface treatment, and we are helping our customers to improve their energy consumption. And on semicon, offering system solution to all the global OEM, not only in the front-end, but now also on the backend side of the value chain. So definitely, we want to continue to engineer mission-critical technologies, enabling a clean, smart and responsible future. And when we look at the long term, why Aalberts is still very well positioned for the long-term growth driver because we are very well exposed to 4 global trends. These 4 global tailwinds, which are urbanization, technology acceleration, reshoring and decarbonization. Long-term value creation is still very well promising. Now let's go to our operational development in 2025. How did we do in building? How did we do in industry? How did we do in segment? Starting with the global revenue. The breakdown of our revenue by segment, by end market, by geography and by SDG goal. So on the geographical side, no major change compared to last year, same on the SDG exposure. And you can see that building is still 50% of our revenue, industry 35% and semicon 15%. I'll come back to the exposure by end market during the next slide. Our strategy is the same. We want to have leadership position, and we want to be aligned with attractive end market. And so where we are investing is definitely aligned with some of these megatrends. Our performance by segment, a mixed picture. We will not repeat again what I said earlier, but we are back to growth on building with 1.3%, still a moderate organic growth. But of course, the margin has been challenging with 11.7%. Industry, better organic growth than last year, but still minus 2.8%. And this is where also we sustain very solid margin at 17.2%. And in semicon, as you remember, it started in the last quarter of 2024, and we have seen quarter after quarter still the destocking ongoing from our customers. Now it is coming to an end, but '24 was still -- '25 was still minus 13.8%. And our margin as a consequence, down to 11.9%, but also with a conscious decision for us to sustain our capability for the long term and not go too low in our cost optimization. Now let me go through each segment and tell you some of the highlights and some of the low light. So in building, on the good side, on the market, continued growth in commercial building in our key prioritized verticals like data center, like hospitalization, like district energies, and this is where we continue to optimize. Very good solid growth also in the U.S.A., in our overall segment and more challenge in France and Germany, more challenge in our connection system, some of the highlight on the market side. And on the performance side, we continue to optimize our footprint, continue to drive operational efficiency and are now also accelerating purchasing initiative to get back to a more robust margin in the coming years. Looking at the market trend, you see what we face in '25 and what is our view about 2026. So more stable trend on 2026 in residential building more positive on commercial building and also on infrastructure industry and utility building. So we continue to have very good position in residential building, but we don't expect major growth on the market side, and we actually see many growth opportunity where we are also pushing organic growth initiative in commercial building and in infrastructure. That's our view about the 2026 market. Now if I go to the other segment with industry. So -- where did we do well in '25 with a good growth with good organic growth in aerospace, in defense, in power generation and where we face the most challenge has been definitely in automotive, in the machine build and that's also what we continue to see in '26. Solid margin, we continue to drive operational efficiency, further footprint optimization and have the success to continue to deliver such a good performance. And the market trend, a bit similar to 2025. Actually, we see automotive now coming to a plateau with a flattish organic growth. Same for machine being and other industrials, but more positive, and we continue to see more order, more positive growth on aerospace, power gen and defense, where our order book in some part of the business is really increasing. So positive momentum, some more stable. And semicon, I mentioned it already, challenging on the front-end with the destocking from our customers, but we start to enjoy the growth of backend only two months since the acquisition of GVT. Very good also progress in defense in this segment where we have some of our technologies, some of our factories also supplying a major OEM in the defense area. And as you can see now in our breakdown by technologies, you have a new segment called system build and qualification, which is actually what we do in GVT. I'll come back later about our backend exposure and why we are so excited about the future growth opportunity. And here for '26, it's actually more positive, right? We see growth in the front-end, even higher growth, growth in the backend and growth in other industries. So more positive based on what we see on the market trend, based on what we see on our customer order book and all the requests we are getting. So a positive momentum going forward. And to conclude the 2025 operational performance, very pleased, very happy to report that we are still on track with our sustainable commitments, still with more than 70% of our revenue linked to sustainable development goal. We are reporting 71%. And year after year, continuing to reduce our CO2 emission in Scope 1 and Scope 2 absolute emission also based on the portfolio, acquiring company, divesting companies. So good progress, aligned with our targets. So pleased with the performance on the environmental side. And that's what I wanted to share for our 2025 operational performance. Let me now hand it over to Frans that will give you an update about the financial development of the year. Frans den Houter: Thank you, Stephane, and good morning, everybody. And indeed, let me talk you through the financial developments of 2025. First of all, on the revenue, you see on the left here, the challenging market circumstances resulted in a negative organic growth of minus 2.5% and the year ended with a total of EUR 3.09 billion. On that revenue, we delivered 13.2% EBITA margin, which is 1.8% lower than 2024 and translates into EUR 410 million of EBITDA. The net profit landed at EUR 284 million. We have been focusing on finding the right CapEx balance, and we aim to be below EUR 200 million by year-end, and we landed the number for CapEx on EUR 189 million, still investing in the future of the company in organic expansions, in innovation, but also being mindful of the cash impact. As such, free cash flow number is really strong, EUR 361 million, 64% conversion, really a good number, of course, reflecting the CapEx that I just discussed, but also inventory, net working capital, and I will come back on that in a bit more detail in a slide to come. So 30.2% margin as a conclusion in a challenging market for the year 2025. Let me give you a breakdown of our revenue impact. And first of all, corrections for the M&A. In the acquisitions, you see EUR 105 million plus, basically driven by the acquisition of SGP in 2024, and we did 3 acquisitions that we completed in 2025. Geo-Flo, Paulo and GVT were added to the portfolio and delivered, as I said, EUR 105 million. On the divestment side, in 2024, we divested EPC and December '25, we announced divestment of Metalis and also confirmed that we have reduced our shareholding in KAN to 45%. With that, that company is now accounted for as an associate and no longer fully consolidated in our books. EUR 59.6 million minus on the divestment in terms of revenue. ForEx did not work in our favor in the revenue side, specifically the U.S. dollar, minus EUR 26 million. And the organic decline translation of the minus 2.5% total EUR 77 million, bringing it to EUR 3.09 billion on the revenue. If we then go to the EBITDA breakdown, again, of course, the M&A impact, and you see for the acquisitions that we've done, really a good contribution to the EBITA margin, EUR 18.7 million in the first year of integration. And on the divestment side, as we have progressed our portfolio also there, the minus EUR 4 million is the impact on the EBITDA. Of course, also a small currency effect, minus EUR 3 million, basically also predominantly the U.S. dollar. And then the organic decline on EBITDA is EUR 73 million. And that requires a bit of context because there are a few elements in there, I would like to highlight. First of all, minus EUR 20 million on inventory, a noncash one-off correction as we have revised the group accounting policy for inventories to make it more robust and aligned throughout the company. That again, resulted in a minus EUR 20 million noncash correction. On holding elimination, we see a year-on-year deterioration of EUR 10 million. I will come back on that in the next slide. And then the remainder is really the drop-through of the lower revenue that we saw in the previous slide. Also, please bear in mind that on semicon, we have been careful in flexing our costs as we see and want to be prepared for the growth in this segment in the short future. Totaling EUR 409 million, 30.2%, basically most important driver, the lower organic decline. Coming to free cash flow. I already mentioned we're very happy with this number, EUR 361 million. That's a healthy free cash flow. We have a 64% conversion, which is 10% higher than the previous year. And we -- in the waterfall, you see, first of all, of course, the negative impact of the lower performance, almost EUR 60 million of EBITDA impact on the cash flow in a negative way and that we knew to compensate with CapEx and net working capital. In the line item other, there's a cash out on the provisions that explains this item. On a earnings per share bridge, yes, you, of course, see here the translation of the lower organic performance also in the EPS impact, EUR 0.3 the biggest one in this list, but also be very mindful of the financing costs that have gone up with EUR 0.13 as we have increased our debt level in the company with EUR 300 million to support the acquisitions that we have done. Yes, acquisitions and nice to see also that the acquisitions contributed positively and were value accretive from an earnings per share point of view. Small impact positive from the share buyback and then totaling the earnings per share on EUR 2.61 for 2025. On the segment reporting, yes, Stephane already showed the revenue and the profitability, but here, you see also the CapEx that we added. If you look in the building segment, be very mindful in the 11.7% EBITDA margin, there's also the impact of the one-off noncash inventory correction of EUR 20 million that I just explained. But also please be mindful of the CapEx, where you see really almost 50% reduction. As we have been investing also in '24, in preparing for growth, you see this year that is more a modest number. In industry and in semicon, CapEx numbers are in both segments comparable with the previous year. Well, in industry, we keep investing, of course, in our footprint and in expansion and also good to see 17.2% EBITDA margin in a challenging market. I think still earmarks a resilient performance in that segment. In semicon, markets have been tough, but still, we are fully confident in the long term. We have invested in an acquisition in a nice company called GVT, but also you see here that the CapEx is still of a high level, EUR 53 million. As we also invest in our new factory in Dronten, which will come into operation early 2027. So you see still there a lot of assets that we are having under construction in this segment. As I said, holding elimination in the last column requires a bit of context. We see a minus EUR 4 million in 2024 as a comparable number. Please be mindful that there was an insurance claim proceed in that number. So that number was really lower than it normally is. For this year, 2025, minus EUR 14.8 million, which basically translates the normal run rate of holding cost. We earmarked that between EUR 10 million and EUR 50 million, and that number is in this range and comparable with last year. On top, the movements in '25, there were significant additional M&A costs. You already saw some of that in the first half, but we have been able to compensate that with the book profits on the divestments that we have done. So that netted out. That was circa EUR 30 million of book result compensating the additional M&A costs and bringing this to basically reflecting the normal run rate on holding cost. In the tech line, you see at the bottom here, low profitability due to challenging end markets. I think that summarizes from a P&L point of view. If we go to the balance sheet, on the left top, net debt increased with EUR 300 million, I already mentioned, which translates into a leverage ratio of 1.8. Yes, we target always to be below 2.5, and we're comfortably below that number. We already deleveraged a little bit, of course, additional year-end because of the proceeds from the divestments that we have done. And then with that, a leverage of 1.8x. On the equity side, we see, of course, the impact of the lower result, but also, again, the dividend that has been paid and the share buyback had impact and yes, a small step down in solvency, but still 56.1% earmarks a resilient company and also has the balance sheet to support the Thrive 2030 agenda in the coming years. The capital employed and the ROCE at the left bottom, yes, ROCE has come down with 2% to 12.7%, partly because of the majority is explained by the lower profit from the P&L. And the other part is because of the increased capital employed, which is driven by the higher debt that we also just touched on. A bit more context on net working capital because there, yes, we see really an important step from 80 to 71 days, EUR 563 million net working capital, reflecting lower inventories. We improved our inventory position with 12 days to 82 days DIO which is a good number. We had a three day improvement on accounts receivable and a six day lower accounts payable, which then compensates the other two parts because the lower payable position is a cash out, of course. And with that, on balance, a nine day improvement. If we go into a deep dive a little bit on the 12 improvement days on the inventories, there are a few elements to mention. Roughly half of it is really hard work by many people in the organization, managing our stocks, managing our supply chain and really understanding well what the forecast requires from our inventories. That is half of the progress. The other part, we were also supported with some tailwinds. Two days of ForEx, for example, in our favor. The whole M&A mix and the impact on inventory was also another two days, and the inventory item, the noncash EUR 20 million correction that I've discussed earlier translated in a two working day improvement. So six days of one-offs and the rest is really because of progress on inventory management, which was absolutely in a good step in 2025. Then let's go to the exceptional costs. Three items in there totaling EUR 84 million. First of all, operational excellence, EUR 40.8 million. Yes, we keep making our -- progressing on our efficiency programs and drive operational excellence into the organization. And with this EUR 40.8 million, we target a yearly reduction of EUR 50 million as a benefit. Then EUR 28.9 million as an impact from the write-off on investments. The majority of this is explained by semicon innovation where we have been investing money. But yes, we do not see the perspective on how to commercialize this. So it's a nice technology, but we have no -- not sufficient confidence and perspective on commercialization, resulting in a write-off of EUR 28.9 million. In 2024, the company has already decided to exit Russia, which is a lengthy and complex process. Again, in 2025, we made progress on this and EUR 14.5 million as a result in the exceptional cost for, yes, the Russian exit that we are working on. And with that, let's also take a little bit of a wider perspective into capital allocation. And you can see in this slide, we keep, of course, investing in our company. In CapEx we just discussed how it was for 2025. In M&A, we also touched on this and here you see over the past five years, how we have been investing in the profitable growth agenda. Next to that, we value shareholder returns, and we think it's important. And you see here a perspective on the past five years, where we allocated almost EUR 700 million to the shareholders, normally in dividends, but in 2025, also complemented by a share buyback program. And that is a nice bridge to the proposed shareholder return for this year. As my last slide, and as Stephane already mentioned, we proposed a dividend of EUR 1.15 over the year, and we announced a share buyback program that will start tomorrow of again, EUR 75 million. And with that, 2025, we deliver a stable return to our shareholders. And with that, I would like to hand over back to Stephane to update you on our strategy. Stephane Simonetta: So let's talk now how did we do progress in our Thrive 2030 strategy. First of all, let me say that while I'm not satisfied with the performance and the lack of organic growth in '25, I'm actually quite pleased with the progress we did deploying our four strategic action. And you know our Thrive 2030 strategy. I mentioned already, we still see positive long-term trend with the four global tailwind, and we still have the same four priorities. So let me now just give you an update for these four strategic actions on profitable growth, on leadership position, the Aalberts way and sustainable commitment. And let's start with growth. And you see that we are not pleased with the progress. On one hand, we continue to see good traction on many end market, on many -- of our initiatives. But on the other hand, we are still reporting negative organic growth because of many of our end markets, which have not been growing. I already mentioned it, exposure to residential, exposure to automotive and destocking in the semicon. So we need to do better on profitable growth. Leadership position, very good progress. I'm really pleased about the shaping of our portfolio, making 3 acquisitions, making 3 transaction in our divestment program, aligned with our strategy, right, progressing in the U.S., entering backend and Southeast Asia in semicon and making a divestment program, mostly in our European footprint for industry and building segment. So good progress for the first year of our strategy. The Aalberts way, a lot of progress in all our functional excellence, driving synergy across our businesses, but also making progress on productivities and synergies. I will show you a few examples later today because I think we've start to see the impact either in our balance sheet or in our P&L. And on sustainable commitment, another year where we made progress, so well aligned with our 2030 and 2050 target. Let me now go through one by one and give you a few highlight about the progress in this four strategic action. So organic growth, this is where we are investing. There was limited impact in '25, but we are more positive about '26 and '27. In building, going from component to system to solution, working on to be able to offer also digital offering linked to connectivity. And this is where the One Aalberts building segment portfolio makes sense. When you put everything we do in our connection system, in our valve, in our prefab solution, in our boiler room technology, we have a unique proposition. Industry, it's continued our geographical expansion. Like Frans mentioned, our greenfield are coming to an end. We have now additional capacity in East Europe, additional capacity in Europe and the U.S. also to support the growth of aerospace. We have also entered Mexico, so all ready to capture the growth. And semicon I mentioned already front-end, we see now potential recovery later on and now also we are exposed to the backend. So global footprint, synergy between all the technologies that we have unique value proposition for our customers. And one example of data center, which is still today quite small when you look at the numbers, only 2% of our building segment revenue is exposed to data center, but it's a $1.5 billion addressable market. And this is where we see double-digit organic growth in the coming years. It's about offering cooling solution. It's about reliability, it's about connectivity. And this is where, as I mentioned before, offering all solution together in term of valve, in term of system, in term of engineering system, prefab solutions, our packing and connection system, we have a unique proposition. And we are working with the big data center OEM, helping them to drive energy efficiency or helping them to have better cooling solutions. So more to come. We will be reporting in our half year result the progress we are making. Of course, the organic growth, it's not only with the geographical expansion, it's not only with capacity expansion, it's also with innovation. And I'm quite pleased actually that we have delivered another year with 20% of our revenue coming from innovation done during the last four years. So at the end, delivering what we call innovation rate at 20%. Even if, as you know, innovating in building, innovating in industry or innovating in semicon is actually quite different. And that's what we continue to do. So good traction also, good progress here. Of course, this is more long term. And once again, we have now to do better on this strategic action to get back to positive organic growth. Portfolio, I mentioned it. We started in '24, fantastic progress in '25 and committed to do more progress in '26 and 2030. So our strategy is the same, our three priority is the same, Good progress in industry with the acquisition of Paulo, and now we want to make further progress in '26 and '27 in aerospace in the U.S.A. Good progress in semicon with the acquisition of GVT. So of course, now the full prioritization is on the integration, on the driving synergies. Good progress in building in the U.S. with the acquisition of Geo-Flo, but this is where we need to accelerate. And this is, of course, top of our mind to continue to drive growth in what we call the source to emitter scope in the U.S.A. We have also water treatment as a key focus area. So this is where we are prioritizing and to do further progress in our building segment in terms of inorganic growth. And divestment, fantastic progress. We are basically halfway with our 2030 target. So still some opportunity to make further progress in our divestment program, especially in our building and industry segment. And just as a nutshell, why I'm so positive, why I'm so excited by the transformation acquisition we did with GVT. Not only we are entering a new part of the semicon value chain, but also we are now entering a new geographical area, and we have now a global footprint between our footprint in Europe, our footprint in Southeast Asia. Having both technology altogether, we are able to provide to all the global OEM exposed in front-end and backend, a unique value proposition. And as you can see in front, in back and also now being exposed to life science with some of the technology, so not only in lithography, but also in advanced packaging, in measuring, in metering and in other key equipment, we are ready for the growth. We have seen already positive momentum in '25 with GVT in only two months, and we are excited by the further progress in 2026. If I go to the third priority, operational excellence, a lot of effort deploying all the lean toolbox, implementing our Aalberts production system, but I'm pleased that we start to see the impact, and it is just the beginning, continuing to optimize our footprint, four site were closed in 2025, and we will continue to optimize major progress in inventory, like Frans mentioned, driving lower days on hand, especially in our building segment. This is where we have the further opportunities. And driving operational productivity to align our capacity, to align our cost based on the customer demand. So a lot of initiatives to reduce fixed cost, secure our added value margin and do better job to do sometimes the same with less or to be ready to do more with the same cost and at the end, support our margin expansion. That's very high for our building segment, industry doing quite well and some opportunities in semicon. And to conclude, on the last strategic action, delivering our sustainable commitment, good progress on Scope 1 and Scope 2, as you can see with our CO2 intensity reduction, where here we have a baseline compared to 2018. And now also doing further progress on Scope 3, where on one hand, we continue to make progress on the purchasing good CO2 intensity. So going down, but also making progress in reporting on the waste, but also here, not so pleased because we have actually an increase in our waste, and this is where also we need to do better, mostly linked to portfolio change, but also because now we have better reporting, so more transparency, which give us opportunity to improve. So well aligned with our 2030 target and definitely on track still to reach our long-term 2050 to be net zero or earlier. That was the update about 2025. You have seen how did we do on operational side. You have seen how did we do on the financial side. So let me tell you how do we see 2026. I mentioned some of the market trend, but let me repeat some of the element segment by segment. It's actually a mixed picture. On building, we continue to see the same trend in 2026. Expect commercial building to continue to grow, expect to continue to see positive momentum in the U.S., but also not yet expecting a recovery in residential and French and Germany market. Still a lot of uncertainty about the U.S. trade, that's what we see for '26 on the building market. In industry, a bit continuation as '25, positive aerospace, power generation, defense, more flattish market trend in automotive and also in the French and German industrial and many uncertainty again in the U.S. But in semicon, it's now very clear. We see growth. We see our order book increasing. We see the customer destocking coming to an end. So backend has been growing very well and I think the growth is not an issue. But now also front-end, we really see an opportunity to have a recovery in the second half of '26. So being more positive. Long term was never an issue in semicon, but now we do see an opportunity to have a recovery in the second half. So based on this market trend, our outlook is actually quite simple, is to improve organic growth and improve EBITDA margin in 2026, improve organic growth, improve EBITDA margin. And on the other hand, continue to deploy our four strategic actions. So in a summary, 2026, we have a key priority is to get back to growth, driving organic growth in our attractive end market with our business development, geographical expansion and innovation. Like I mentioned earlier, you can count on us to continue to drive operational excellence, to improve margins, and should the market increase and improve better than we expect, it will automatically drive even better margins. On the other hand, continue to manage the short-term dynamics. So something I think we have done quite well in '25 is to manage both low case and high case, and we will continue to do that in '26. Be ready for a potential higher growth, but also be ready in case the growth is not that high. Continue to do a good job on free cash flow. After such a good year and always optimize our working capital. And at the end, continue to do what we did very well in '25 to optimize our portfolio, rebalancing between Europe and U.S., rebalancing the end market and divesting when we believe we are not the best owner. So in a nutshell, continuing to strive for the long term, but also now perform and perform for us is what we put in our outlook, better growth and better margins. That's the end of the presentation. Now let's open the Q&A session. Rutger Relker: [Operator Instructions] And I would now like to give the word to David Kerstens from Jefferies. David Kerstens: I've got three questions, please. Maybe first question on semicon. Organic revenues were down 13.8% last year. Yes, the slide shows much more positive outlook for 2026. But did I hear you say you only expect a recovery in the second half of the year? And how should we see that recovery in the light of the much better-than-expected order intake and guidance from your largest customer, ASML? Stephane Simonetta: Yes. Thank you, David. You're absolutely right that we are more positive for 2026 because during the last three, four months, our order book have been increasing month after month. Also, we are getting a lot of requests for additional capacity simulation. So you should expect better numbers also in the first half. But talking about recovery, we see it more in the second half. Also in the second half, we will also have the further organic growth coming from GVT in the backend. So better number in the first half, but the major impact will be more in the second half because it simply take times for the order to go through a customer order book to their customers and then finally to us. So Q1, you should expect, I think, a moderate improvement. Q2 a bit better and definitely second half much positive. David Kerstens: All right. That's clear. That sounds good. And then second question on the margin. I mean, a lot of moving parts in impacting the margin this year with last year's acquisitions of Paulo and GVT and GVT towards the end of the year and then all the divestments announced in December. How will that portfolio optimization impact your EBITDA margin this year? Frans den Houter: Frans here. Yes, we haven't given specific guidance on an EBITDA margin impact for the year '26. But obviously, also visible in the waterfalls that we just showed that these are at the lower margin end of the range, but also the revenue impact totaling EUR 400 million. That was the number that we gave year-on-year with already then the first EUR 60 million in the waterfall you saw in the presentation. So no specific guidance on the exact margin impact, but we did give some numbers there. David Kerstens: Yes. Okay. And maybe finally, on the one-offs in EBITDA before exceptionals. You highlighted the EUR 20 million inventory write-down and a EUR 30 million book gain. Were those all booked in the fourth quarter? Frans den Houter: Yes. Both items were booked. So the EUR 30 million book gain following the divestments we've completed in December, and the inventory correction also a Q4 event in the closing process. Rutger Relker: Thank you, David. Now I'd like to give the word to Chase -- Chase Coughlan from Van Lanschot Kempen. Chase Coughlan: My first question, just regarding the guidance, and I suppose it's more to do with semantics. But when you say you expect improving organic growth, is that an improvement versus what we saw in 2025? Or is that really implying actual organic revenue growth? Stephane Simonetta: It's actually improving compared to what we saw in 2025, and we also mean it for our 3 segment. So we expect better organic growth in our 3 segment compared to 2025. Chase Coughlan: Okay. Yes, that's clear. And I wanted to ask a little bit about your raw material prices. So copper obviously inflated quite a bit alongside some other metals. And I understand you're planning to protect your gross margin and pass that through. What do you think will be the net effect on volumes or the competitive positioning of Aalberts products throughout the course of 2026? Stephane Simonetta: We see a continuation. I think -- 2025 is the best evidence about how well did we manage the situation with our price increase and the added value margin that we sustained at a high level. So we are confident to do it again in 2026. We see definitely an opportunity to have price increase in 2026 and without having an impact to our margin. So monitoring very closely, but we have a good, I think, operator model to manage that and sometimes it gives actually an additional opportunity to improve margin based on the good work we are doing on the purchasing side on the raw material. Rutger Relker: I'd like to give the word to Tijs Hollestelle, ING. Tijs Hollestelle: My first question is about the semicon business that there was an organic decline of about 10% in the fourth quarter and quite a substantial impact already from the Grand Venture Technology acquisition. What is the annual expected euro number from the Grand Venture Technology business in 2026? And is there any seasonality in that business? That's the first question. Stephane Simonetta: You are right that Q4 was around 9%, 10% negative organic growth. But let me remind you that when we report organic growth percentage, it is still excluding GVT, right? So you will see the impact of GVT in our revenue top line increase and I can tell you it's going to be very good in 2026. But the organic growth of GVT, you will see only the impact in Q4 2026 when we have own GVT a full year. So just to manage that. So the number you see in Q4 are pure with the former scope of advanced mechatronics. Tijs Hollestelle: Yes. And let me rephrase it. I understand that the acquisition is not in the organic growth number, but it seems that the Grand Venture Technology already generated almost EUR 30 million of turnover in the fourth quarter based on two months. Is that a fair assumption that it includes the December month, which in my view, a light one. Frans den Houter: So maybe Tijs, the number we put out there, SGD 160 million equaling more than SGD 120 million annual revenue in GVT and it was in our books in the fourth quarter. And then Stephane already mentioned that we see good growth in this company. So that also helps already in Q4, in the top line. But you don't see that, of course, as Stephane explained, in the organic revenue number as a percentage until Q4 next year. Does that clarify? Tijs Hollestelle: Yes. Stephane Simonetta: And coming back to the seasonality to make sure we answer your question. We see more seasonality actually in the front-end with a better second half than first half, like I explained earlier, compared to GVT in the backend, which is actually quite more balanced. Tijs Hollestelle: Okay. Yes. And then I appreciate your additional comments you just made on the recovery in the second half of the semi business. But can you give us a bit more feel for the, let's say, the potential magnitude? What kind of scenarios can we expect there because we have seen massive, let's say, organic declines in some of the quarters earlier in 2025. Is that something we can also expect for, let's say, that recovery? It is not impossible that, for instance, in the third or fourth quarter, organically, the business is coming up by 20%? Or would you say it's more moderate? Stephane Simonetta: I can only repeat what I said that we see second half will be much better than in the first half. And we have decided not to give a specific organic growth outlook by segment. But you are right that Q3, Q4 should be much better because we also see much higher number in 2027. We just need to have more time to see all the orders coming in the value chain, but we don't disclose number by segment. Tijs Hollestelle: Okay. No, that's fine for now. And then if I may, I also have a question about the building division. I was also -- I mean, I think you mentioned back to organic growth, but that was indeed on the full year basis. So there's also a small organic decline again in the fourth quarter. I think underscoring that market conditions remain very volatile, difficult to predict. But what was the impact of the write-downs because I saw a EUR 3.4 million write-down somewhere in the press release. And if I, let's say, apply that to the fourth quarter EBITDA of the building business, it explains, let's say, a more normal margin. But you also mentioned EUR 20 million. So where is the EUR 20 million showing up throughout the year in the building business? Frans den Houter: Yes, that's reported in the inventory line item in the balance sheet and then taken as a cost in our margin. So you don't see it as a separate line item, not as a write-off, Tijs. It's an inventory revaluation. Tijs Hollestelle: But the EUR 38.1 million EBITDA in the building division seems to be very low. Is that -- these write-downs or not? Frans den Houter: Tijs, could you repeat your last question because the line was bad. Tijs Hollestelle: Is the -- let's say, the EUR 38.1 million EBITDA in the building division in the fourth quarter, is that negatively impacted by some inventory write-downs and how much? Frans den Houter: Yes, the EUR 20 million is in there. Yes. Sorry, Tijs, I misunderstood your question -- The EUR 20 million inventory correction is impacting the 11.7% margin in building and has been taken in the fourth quarter. I thought you were asking where -- fully, yes. I thought you were asking where to pinpoint it in the press release, but you don't see it in the numbers on the P&L as a separate line item, of course, I thought that was your question. But it's in the books, in Q4 impacting the building performance. So EUR 20 million one-off noncash if you do your calculations. Tijs Hollestelle: And then the [indiscernible] the 15.5% EBITDA margin, is that kind of the level we should take into account going into 2026? Frans den Houter: Again, sorry, Tijs, the first part is you are -- we lost you and that probably was the most important part of the question. Can you repeat? Tijs Hollestelle: I asked that the fourth quarter, 15.5% margin then adjusted for that, is that also the margin underlying to take with us going into 2026? Frans den Houter: Yes. So that's -- we don't give guidance per quarter per segment, but -- and I think you have to see this in the light of the whole year. There are always quarterly swings, pluses and minuses. But yes, there's no denying that the fourth quarter for building was really strong if you take this one-off out. But I think you should look over the overall picture, 11.7% and put the EUR 20 million as a one-off correction in doing your numbers. Rutger Relker: I'm happy to give the word to Kristof Samoy from KBC in Belgium. Kristof Samoy: Just I want to come back again on semicon and you're quite firm in terms of the anticipated recovery in the second year half. But if you look at the numbers of your largest front-end customer, ASML, from a high-level perspective, you see that their new system sales drop, yes? So they're selling more expensive products. How -- in such an environment, how can this have positive volume impact for a subcontractor such as Aalberts? This is the first question. And then on the portfolio review, you have been very active in the strategy execution in terms of disposals and acquisitions. Can we assume that for 2026, management has enough on its hands and focus will be on post-merger integration, and we should not expect major transformational M&A this year? Stephane Simonetta: Thank you, Kristof. Two great questions. The first one, I would like to say that, first of all, we are not a subcontractor, right? We are a strategic partner of ASML. We are a strategic partner in the whole semicon ecosystem, so much more than a subcontractor, right, just to clarify this point. And you're absolutely right. I think you have a very good point looking at the numbers. That's what also we have been explained in 2025, the link between the number of system shipped and the link to what we produce, right? And then you have, of course, the inventory in the middle. But where we see the highest growth is definitely all the growth expected by our key customers and what they see from their customer on the EUV. And on the EUV, we have unique positioning. This is where also we have the capacity ready. And this is where the AI push would require more and more of this technology. And we will benefit from this growth, and that's why we expect it in the second half, not in the first half because the whole value chain need to ramp up. So we're actually quite bullish for 2027. And like I mentioned earlier, that's what we expect every quarter to improve so that the whole value chain ramp up. So that's why we see it. Even when you look at the last quarter, you are right, there was a mix change between what they ship on high value, between what they do in terms also of services and refurbishment, where we are not exposed, but EUV is definitely more promising in 2026. And on the second point, I will say, definitely, yes, on semicon, you are right that our top priority is post-merger integration, right? Now utilizing our global footprint that we have between Europe and Southeast Asia, now the broadening portfolio that we have with all the technologies that we have from our advanced mechatronic and now from GVT and supporting the customers in their technology road map with this full offering. But on the industry, we still see opportunity to continue to make bolt-on acquisition, especially in aerospace and in the U.S.A. So we have a strong funnel, and we are still active in this segment. And in building, this is where also we see opportunity to make further progress either in our water treatment source to emitter and also in the U.S.A. So you should expect us to be more active in building and industry, but less active in semicon. Rutger Relker: [Operator Instructions] I would like to now already touch two questions which have been sent in via the Q&A form. And the first one is for you, Frans. That's about guidance for CapEx for the year 2026. Could you give us a bit of a comment there? Frans den Houter: Yes. But before I do that, maybe a small correction. I just mentioned for GVT, the Singapore dollar revenue, SGD 160 million, which is correct. The exchange rate would translate into SGD 207 million of revenue, just to make sure that number is accurate out there. Maybe on CapEx, so EUR 189 million this year, which is a good number. I already mentioned in the -- when discussing the slides, assets under construction is quite high, EUR 226 million. And also there, you see a bit of a step-up versus our depreciation, which is EUR 170 million. As we are investing in our business in organic growth in -- also in the new company, GVT that we acquired. So you need to correct, of course, for M&A. If you do all that, based on the current portfolio for the coming year, we are still -- will be around the same level that we spent this year. So circa EUR 190 million as a first number for 2026. Rutger Relker: Okay. Thank you. There's another question I want to -- is coming in now, which I think it's a relevant one for I think for you, Stephane, about the write-off on the semiconductor innovation part of the exceptional. Perhaps you could give a bit of a color on that topic. Stephane Simonetta: Yes. So let me remind you that, first of all, I see the question. It has nothing to do with GVT, right? It's really something we started four, five years ago, right? And when you start to innovate, when you start a new technology, so it was linked to a deposition technology, which was very promising at that time with a lot of opportunity to further commercialize. But after four, five years, we came to the conclusion that there is still not a path to commercialize, and that's why we are putting this cost as an exceptional cost. So not linked with our current business and not linked with GVT. Rutger Relker: Okay. Thank you. I'd like to -- it's a very long question. I can see whether I can summarize it a little bit. Yes, there's a question on the data centers. I think you already gave quite a bit of a color on what we do there. So I think that -- I think that answer -- that question has been answered. Then I find another question on CapEx for you, Stephane, whether you could give a bit of color where you spend the CapEx? Would it be mostly growth, innovation, ESG, capacity? Well, you have a lot of options, I see. If you can give a bit of color there. Stephane Simonetta: Absolutely. I think you have seen in the number that Frans presented, first of all, that our CapEx intensity is quite different by segment due to the nature of the industry, right? Definitely, in semicon, this is where we have been investing a lot for capacity for the long-term growth. So most of the investment we have been doing of the CapEx we have been doing in semicon, it's for capacity, it's for technology. When you look at industry, a big part of the CapEx we do is for repair, it's for maintenance, but also for geographical expansion with new footprints because it's a very local and -- local and local-for-local business. So we follow our customers when there is a need. So a lot of capacity expansion, repair and maintenance. And when you look at building, this is more for efficiency. This is more for productivities because we already have the good footprint, and this is also where we are driving more automation in order to improve the utilization of our assets. And then across the three segment, we continue to invest for our people, working condition, sustainable environment. So quite balanced overall at Aalberts between ESG, between capacity, between operational efficiency and also now more and more on innovation. As I mentioned, I think, already last year, our weight linked to new building and capacity expansion is coming to an end. So we are going to spend more on R&D and on innovation. Rutger Relker: Thank you very much, Stephane. I see also that somebody has joined the queue, which is Philippe Lorrain from Bernstein. Philippe Lorrain: I'm quite new to the case, but I wanted just to ask a question on earnings adjustments. Because I see in the press release and also from what you say that there's a bunch of things that you flagged in the text, which are actually not adjusted from the earnings, i.e., this inventory write-down in Q4 and also the insurance proceeds. But at the same time, you have many different adjustments that you flagged at the back of the press release. So what's your policy on that? And what should we expect going forward? Frans den Houter: Yes. So thank you for the question. Yes, be very clear. So there are -- indeed, there are three items that we earmark as exceptionals. And those we report in a separate section in the press release and also in a separate slide in my presentation. Basically, all the numbers that we see are excluding the impact of the exceptionals. So with that, we want to make sure that the numbers of the company are well comparable year-on-year. So you can do also the underlying performance evaluation in a better way. And that's why we put them in a separate bucket, if you like. We label them exceptionals. And of course, we explained very well what's in there. And then -- there's an operational excellence element in there. There is the innovation in semicon that Stephane just discussed, and we're in an exit of our Russian businesses, yes, which are three very specific one-off items that we label as exceptionals -- And they are not reflected in all the other numbers that you've seen. Is that clear? Philippe Lorrain: Okay. Perfect. Yes, that's clear on that front. And just to follow up on that. So the write-down in innovation in semicon, is it related actually to fixed assets like in terms of PP&E? Or is it more intangible assets? Frans den Houter: It's a combination. So it's intangibles because there's absolutely also development and innovation, intellectual property in there, but also, yes, some other balance sheet items. So it's a combination. We didn't give the breakdown, the total impact. There are also some other elements in there, we said the majority is the semicon items and the total that we disclosed is EUR 28.9 million. Rutger Relker: Then I think there's a follow-up question from Chase coming in. Chase Coughlan: I just wanted to come back quickly on the guidance, particularly to do with the margin. I think it was asked a little bit earlier as well, but I'm trying to understand sort of a large portion of this margin improvement you expect in '26 is probably a result of the divestments, of course. Could you also talk a little bit about what you expect sort of from an organic standpoint as well from a margin level? Stephane Simonetta: Yes. I understand, I think, the question. So we actually see four enabler and why we are confident to say we will improve margins. So let me go through the four points, which we believe will help to have a better margin. First of all, we are planning to get better organic growth. And automatically, that will generate better margin because where we are growing also, this is where we have been investing and all the key verticals we are growing have also better margin profile on commercial building, in aerospace, power generation, defense and semicon. So first, organic growth. Second, you will have indeed the benefit of all the operational excellence program that we did in the previous year of footprint optimization so that you will have the benefit -- the in-year benefit in '25. Third, you have definitely the impact of the divestment that we did, right? So that also will help us to improve the margin. So some -- three elements that will definitely help us. And then -- the last one is that we don't expect another one-off in our building segment. The one we took in Q4, like Frans mentioned, the EUR 20 million, that also will not happen in 2026. So these 4 elements give us confidence that we will improve our EBITDA margin in 2026. Rutger Relker: And then I think the last question of this today Q&A, I'd like to give to Tijs again, also a follow-up. Tijs Hollestelle: Yes. Stephane, I was thinking about what you said on the semi recovery. And I think you also mentioned visibility for 2027. So is it fair to assume that you are very busy with the current planning of the shipment schedules of your clients, and that makes it difficult for you to pinpoint, let's say, an exact recovery trajectory, but you have the orders and you have the client activity. Is that a fair assumption? Stephane Simonetta: Yes and no because I -- we already have some good orders, and that's why we are confident it will be better, but we expect even more order to come, right? So I think '26 looks very promising. Now the question is how will be the ramp-up? I think we have always said over the last year that long term, the growth was never an issue. The only question was when it will be coming. And now we see definitely coming in '27. We are actually quite exciting by 2027. And the question is how much will be already happening in the second half of the year. So we are, of course, now very confident based on the current order book. So we know '26 will be better. We are not getting a lot of capacity simulation request, and that we don't know yet how much of this simulation will become a real order or not. And that's why answering your question, we cannot confirm yet because there are different scenario. But in all scenario, it's a growth scenario. Tijs Hollestelle: Yes. And the current existing capacity of Aalberts is sufficient that you can handle much higher revenue levels? Stephane Simonetta: Again, that's why it's such a good news because it just confirms the strategic investment we did. Our factory in Dronten in the Netherlands has always been there for the growth of EUV. So we see now very good utilization potentially in '27. So perfectly in line. Of course, we will have hoped to have it earlier. But now '27, it will be there. So the question is how big will be the utilization, but we have invested capacity, if you remember, for the '27 2032 growth. So we have -- we are ready for the growth. And now on top of that, you have the backend growth and our footprint in Southeast Asia, so we can also support our current customer, we have also access to all the new customers we didn't have before. And now we can also do load balancing depending on their need. Do they want deliveries in Europe or do they want us to supply from Southeast Asia, we are ready to support them. Rutger Relker: Thank you, Stephane and Frans, for the answers. Yes. As we conclude today's webcast, I would like to thank everybody to join us today. And also please remind that both the presentation and today's recording will be available on the website later today. Thank you.
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.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0. Any member of our team will be happy to help you. Please standby. Your meeting is about to begin. Good morning, ladies and gentlemen. Thank you for standing by. Today's call is being recorded. Welcome to the Ellington Financial Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants have been placed in listen-only mode. The floor will be open for your questions following the presentation. If you would like to ask a question during that time, simply press star then the number 1 on your telephone keypad. If at any time your question has been answered, you may remove yourself from the queue by pressing star 2. Lastly, if you should require operator assistance, please press star 0. It is now my pleasure to turn the call over to Alaael-Deen Shilleh. You may begin. Thank you. Alaael-Deen Shilleh: Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical in nature and involve risks and uncertainties detailed in our annual and quarterly reports filed with the SEC. Actual results may differ materially from these statements, so they should not be considered to be predictions of future events. The company undertakes no obligation to update these forward-looking statements. Joining me today are Laurence Penn, Chief Executive Officer of Ellington Financial Inc.; Mark Tecotzky, Co-Chief Investment Officer; and JR Herlihy, Chief Financial Officer. Today's call will track the presentation. Our fourth quarter earnings conference call presentation is available on our website, ellingtonfinancial.com, and all statements and references to figures are qualified by the important notice and end notes in the back of the presentation. With that, I will hand the call over to Larry. Laurence Penn: Thanks, Alaael-Deen. Good morning, everyone. Thank you for joining us today. I will begin on slide three of the presentation. Ellington Financial Inc. closed out 2025 on a high note, capping a year of consistently strong performance, portfolio growth, and liability optimization. In the fourth quarter, and building on the momentum established throughout the year, our adjusted distributable earnings continue to substantially exceed our dividends. We further expanded our investment portfolio from our unsecured notes offering and from our RTL securitization, which I will discuss later. While we were deploying the proceeds, I am all the more pleased with these results and ADE of $0.47 per share, which once again exceeded our $0.39 per share of dividends. For the fourth quarter, we reported GAAP net income, given that we experienced some short-term drags and we continue to enhance our balance sheet. Our results were driven by exceptional performance in our loan origination and securitization platforms, with outsized contributions once again from our Longbridge segment. Our results were also reinforced by excellent credit performance across our residential and commercial loan portfolios. In early October, we successfully completed a $400,000,000 unsecured notes offering, our largest to date, marking a significant step forward in the evolution of our capital structure, and are encouraged by the significant premium at which the bonds continue to trade today. Consistent with our stated intentions, we used a portion of the offering proceeds to reduce short-term repo financing. During the quarter, we also capitalized on the continued strength of the securitization market, completing seven additional securitizations over the course of the quarter. Most notably, in November, we completed our first securitization of residential transition loans. This securitization carries a revolving structure. So as our securitized RTL loans pay off, we can effectively reuse the securitization debt on a non-recourse, non mark-to-market basis to finance our flow of new RTL originations. Subsequent to year end, we completed our first securitization of agency-eligible mortgage loans. This expansion allows us to term out financing, replacing repo financing and further enhancing balance sheet resilience and capital efficiency. With that securitization, we have now expanded our EFMT-branded securitization shelf to encompass five different residential loan sectors across all of our major residential loan strategies. Since launching our RTL strategy back in 2018, RTLs have generated consistently strong returns on equity for us. The aftermath of 2022 and 2023, however, as credit spreads widened and the yield curve inverted, securitization economics for RTL were typically unattractive relative to simple repo financing. That calculus has now shifted. The yield curve normalized, with securitization spreads relatively tight, and with the rating agencies taking a more constructive view of the product, securitization economics are now superior for RTL. The result is attractive long-term non mark-to-market financing, helping us manufacture high-yielding retained tranches and enhance EFC's overall portfolio returns. As to our agency-eligible loan strategy, we initiated that strategy just last year, adding about $250,000,000 of loans in that sector over the course of 2025. This move reflected a more general theme that we have highlighted on our prior earnings calls: moving into sectors where the GSEs are gradually reducing their footprint, which clears the way for private capital to step in and capture attractive risk-adjusted returns. We view the agency-eligible sector, particularly those subsectors where we think LLPAs are too high, as presenting a potentially significant long-term opportunity for EFC, especially given all the obvious synergies with our underwriting abilities, our sourcing channels, and the quality of our securitization platform. We also believe that the opportunities in the agency-eligible sector space only get better as policymakers appear increasingly receptive to an expanded role for private capital. Shifting over to EFC's balance sheet, we continue to focus on optimizing our capital structure and maximizing our resilience. In the fourth quarter, thanks to our unsecured notes offering, we almost doubled the proportion of our total recourse borrowings represented by long-term non mark-to-market borrowings, and we increased our unencumbered assets by about 45%. Alongside these balance sheet enhancements, we continued to lean into attractive investment opportunities in the fourth quarter. We deployed a portion of the proceeds from the notes offering into new investment opportunities, expanding our portfolio by 9% even after accounting for all our securitization activity. Our portfolio continues to benefit from strong origination and acquisition volumes across non-QM loans, agency-eligible loans, closed-end second-lien loans, proprietary reverse mortgages, and commercial mortgage bridge loans. By year end, we had largely deployed the full proceeds of the notes offering to generate the precise amount of proceeds we needed to redeem our highest-cost tranche, and all this momentum has carried into 2026, positioning the portfolio for continued earnings strength into the new year. In January, with our common stock trading at a premium to book value per share, we raised common equity on an accretive basis, net of all deal costs. The issuance was not only accretive but highly targeted. We sized the offering to announce the redemption of our series A preferred stock, and we announced the redemption of that tranche immediately following the closing of the offering. The coupon on our series A preferred stock was over 9%. So starting tomorrow, when the required 30-day notice period ends and the redemption of that tranche is completed, our common shareholders will immediately see the benefit of a lower overall cost of capital. We will continue to monitor the preferred equity market with an eye toward potentially refinancing that capital at a later date and at a lower cost. With that, please turn to slide five and I will turn the call over to JR to walk through our financial results in more detail. JR? JR Herlihy: Larry. Good morning, everyone. For the fourth quarter, we reported GAAP net income of $0.14 per common share on a fully mark-to-market basis and ADE of $0.47 per share. On slide five, you can see the ADE breakdown by segment: $0.35 per share from credit, $0.04 from agency, and $0.13 from the Longbridge segment. Partially offsetting these results were net realized and unrealized losses on some of our other credit hedges as well as losses on residential REO. On slide six, you can see the portfolio income breakdown by strategy. In the credit portfolio, net interest income increased sequentially, and we also generated net realized and unrealized gains on non-QM retained tranches and forward MSR-related investments. We continue to benefit from excellent earnings from our affiliate loan originators along with strong credit performance across our loan businesses, including sequentially lower 90-day delinquency rates and continued low life-to-date realized credit losses in both our residential and commercial loan portfolios, as shown on slide 15. In the agency strategy, declining interest rate volatility and tightening agency yield spreads were broadly supportive of our portfolio in the fourth quarter. We generated strong results, led by net gains on both long agency RMBS and interest rate hedges. The Longbridge segment had another excellent quarter as well with positive contributions from both originations and servicing. Origination profits were driven by sequentially higher origination volumes, continued strong origination margins, and net gains related to two proprietary loan securitizations completed during the quarter. On the servicing side, steady base servicing net income, net gains on interest rate hedges, and a net gain on the HMBS MSR equivalent all contributed positively. Turning now to portfolio changes during the quarter, slide seven shows a 15% increase in our adjusted long credit portfolio to $4,100,000,000 quarter over quarter. Non-QM loans, agency-eligible loans, closed-end second-lien loans, commercial mortgage bridge loans, ABS, and CLOs all expanded. Our portfolio of retained RMBS tranches also grew, reflecting the securitizations we executed during the quarter. These increases were partially offset by the impact of loans sold in securitizations. Our short-duration loan portfolios continue to return capital at a healthy pace. For our RTL, commercial mortgage, and consumer loan portfolios, we received total principal paydowns of $207,000,000 during the fourth quarter, which represented 12.7% of the client fair value of those portfolios. On slide eight, you can see that our total long agency RMBS portfolio decreased slightly to $218,000,000 coming into the quarter. Slide nine illustrates that our Longbridge portfolio decreased by 18% to $617,000,000, as continued strong proprietary reverse mortgage loan origination volume was more than offset by the completion of two securitizations. Please turn next to slide 10 for a summary of our borrowings. At December 31, the total weighted average borrowing rate on recourse borrowings decreased by 32 basis points to 5.67% overall, as the impact of lower short-term rates and tighter repo spreads more than offset the impact of a higher proportion of unsecured notes. Meanwhile, we lengthened the term of some of our larger warehouse lines, and as a result, the overall weighted average remaining term on our repo extended by 38% quarter over quarter to nearly nine months, which is detailed on slide 24. Quarter over quarter, net interest margin on our credit portfolio decreased by 28 basis points, with lower asset yields more than offsetting a lower cost of funds. Our average asset yield declined, but that was only because we had a higher proportion of our assets constituting loans held in warehouses pending securitization. This larger warehouse portfolio was the result of the deployment of the proceeds from the notes offering. The NIM on agency decreased by nine basis points driven by a decrease in asset yields. At December 31, our recourse debt to equity ratio was 1.9 to 1, up modestly from 1.8 to 1 as of September 30. As noted earlier, we issued $400,000,000 of unsecured notes during the quarter, a portion of which replaced repo borrowings. However, the remaining proceeds were deployed alongside incremental borrowings into new investments and securitizations, and higher total equity, resulting in a modest net increase in the overall leverage ratio. For the same reason, our overall debt to equity ratio increased to 9.0 to 1 from 8.6 to 1. As Larry mentioned, our balance sheet metrics strengthened meaningfully during the quarter. Quarter over quarter, out of our total recourse borrowings, the share of long-term non mark-to-market financings increased to 30% from 17%, and the share of unsecured borrowings increased to 18% from 8%. Unencumbered assets also grew meaningfully, increasing 45% to $1,770,000,000, which was about 90–95% of total equity. Over time, we expect to continue this shift toward a greater proportion of unsecured, non mark-to-market, and longer-term financings through additional unsecured note issuance and securitizations, and the replacement of our highest-cost repo borrowings. We view this transition as a fundamental evolution of our balance sheet that is enhancing risk management and earnings stability, and which we hope will also support stronger credit ratings for EFC and lower borrowing cost over time. As I mentioned last quarter, we selected the fair value option on our notes, as we have for our other unsecured debt. We mark them to market through the income statement. As a result, we expensed all associated deal costs in October rather than amortizing them over the life of the notes. And with credit spreads tightening during the quarter, we also recorded an unrealized loss in the notes for the quarter. These nonrecurring items, together with some short-term negative carry pending full deployment of the new note proceeds, represented a significant drag on our GAAP earnings for the quarter. At year end, book value per share was $13.16, and the economic return for the fourth quarter was 4.6% annualized. With that, I will pass it over to Mark. Thanks, JR. Mark Tecotzky: This was a highly productive quarter for EFC. We continued to execute our loan-origination-to-securitization playbook, completing seven securitizations in Q4 across a variety of loan types, and that momentum has carried into 2026. Over the course of 2025, we expanded our footprint well beyond non-QM where we started. Our securitization platform now encompasses second liens, reverse mortgages, residential transition loans, and agency-eligible loans. Over time, EFC has gotten a lot more efficient at maximizing profitability and managing risk across the full life cycle of a loan. From purchase commitment through securitization exit, we target a gain-on-sale profit to the securitization trust while hedging execution risk along the way. Then at securitization time, we work to create high-yielding retained investments while adding to our growing portfolio of call options. When executed well in a cooperative market, this process is a virtuous cycle that is accretive to earnings at each step and is a key driver of the results we have delivered over time. Another benefit of our large securitization platform is that it allows us to provide consistent, competitive pricing to our origination partners and our affiliated originators. First, we earn a levered return while ramping for a deal; then at securitization, we sell in securitizations which typically comprise more than 90% of a given deal, and we retain things at attractive yields. What is more, the growing value of our stakes in those affiliated originators continued to generate strong results for EFC both during the quarter and throughout 2025. But we were not just productive on the asset side of the balance sheet. As Larry and JR mentioned, we are excited about the long-term benefits to EFC of being a Moody's- and Fitch-rated bond issuer. The combination of the substantial non mark-to-market financing we have built from being an active securitizer and now our latest bond issuance with very broad institutional participation has been important to protect earnings as asset spreads have tightened, and in the fourth quarter, we were able to both extend term and lower our repo financing spreads even further. I do not mean to imply that there is anything wrong with using repo as a financing tool. There is not. Repo markets functioned extremely well throughout 2025. We have also achieved tighter spreads in the investment-grade bonds, steadily reducing our dependence on short-term mark-to-market repo financing. There were several important government policy announcements this past quarter and throughout 2025 that are relevant to EFC. The announcement of $200,000,000,000 of GSE MBS purchases was probably the most prominent. I will not go into details because there are not many, but I will point out that this is not quantitative easing. Unlike QE, it is unlikely to meaningfully reduce duration or negative convexity in the market, and, critically, it does not create bank reserves. What it has done is put a floor under agency MBS spreads and, by extension, other AAA-rated mortgage bonds like non-QM, second lien, and agency-eligible AAA tranches. But perhaps the more important point is that we are operating in a time of heightened policy uncertainty: potential restrictions on institutional purchases of single-family rentals, G-fee reductions, LLPA changes, mortgage insurance premium cuts are all on the table, each carrying implications for prepayment speeds, for the relative attractiveness of private-label versus GSE execution, and maybe even for home prices. We have been focused on thinking carefully about these uncertainties and positioning the portfolio accordingly. As shown on slide four, our strong net portfolio growth was strong in the fourth quarter even after taking into account our strong securitization volume. This reflects years of methodically building out our capabilities to make it easy for partners to sell us loans while continuing to build symbiotic relationships with originators. Our goal is not to compete on price alone, but to differentiate through service quality and creative loan programs that respond to evolving markets. Not everything went according to plan this quarter. There have been some well-publicized challenges with bank loans, and our CLO portfolio, while small, was a modest drag. The RCL strategy also underperformed, weighed by securitization costs and REO workouts. Delinquencies there remain quite manageable, and in fact, we have seen strong resolution outcomes in January. We also had small losses in CMBS and ABS. Given that these kinds of air pockets were spread widely across credit-sensitive markets in Q4, the price drop is well beyond any change in fundamental value. If anything, these dislocations are creating opportunities. Looking ahead, we need to keep our eye on credit. The housing market is showing somewhat broader signs of weakness than a year ago, and more and more borrowers are having trouble staying current. We have kept significant credit hedges in place as shown on slide 20, which I view as idiosyncratic rather than systemic, and we will look to add securities where our analysis indicates attractive value. We continue to invest in our technology and sourcing to grow our loan origination footprint, which has been a key driver of our returns. Now back to Larry. Laurence Penn: 2025 was an important year for Ellington Financial Inc., and I would like to close by highlighting what we achieved and how those accomplishments position us for 2026. I will group 2025's achievements into five categories. First, we covered our dividend—adjusted distributable earnings in each of the four quarters of 2025—marking six consecutive quarters of dividend coverage. That consistency is particularly meaningful given how volatile markets have been. It underscores both the resilience of our earnings engine and the benefits of our diversification. Second, we significantly strengthened our liability structure. Over the course of the year, we completed 25 securitizations compared to just seven in 2024. We added several attractive new facilities. We improved terms on existing secured financing lines. Taken together, these efforts supported not only portfolio growth but also a meaningful and deliberate evolution of our funding profile—one that is more durable, more flexible, and better suited to support our long-term objectives—and set the stage for more notes offerings in the future. We issued $400,000,000 of unsecured notes. Third, our loan originator affiliates had exceptional performance. They grew origination volume, gained market share, and made excellent earnings contributions to Ellington Financial Inc.'s bottom line. Our vertical integration continues to provide us with a tangible competitive advantage, driving loan sourcing, supporting securitization scale, and strengthening our earnings power. Fourth, we continue to keep realized credit losses exceptionally low, which is a testament to our underwriting discipline and the depth of our asset management capabilities. Our delinquent inventory remains modest in size and is resolving nicely. Remember, we mark to market through the income statement, so for any loans that we expect to resolve below par, we have already taken that hit. Fifth, and central to our growth story, we expanded our portfolio by almost 20% year over year to nearly $5,000,000,000 while remaining disciplined on credit and risk management. That growth reflects both the payoff from technology initiatives and the addition of new strategic equity stakes with forward flow agreements to our diverse roster of sellers. The flow we are seeing at Ellington from our residential loan origination portal, which we launched just twelve months ago, is currently around $400,000,000 per month and growing. The success of our loan portal is a powerful demonstration of how Ellington's proprietary technology can scale EFC's sourcing footprint, improve underwriting efficiency, and deepen EFC's vertically integrated model. Complementing our investments in technology, we added two new strategic loan originator equity stakes in 2025, each paired with forward flow agreements that provide high-quality recurring loan flow. As to strategic initiatives, I am pleased to report that we are now in contract to acquire a small residential mortgage servicer, and are awaiting regulatory approval. Once completed, this acquisition will further enhance our vertical integration by bringing more servicing capabilities in-house. While it will take some time to build out the platform and design the servicing protocols, I believe that this acquisition will ultimately provide us with better control over our servicing outcomes and strengthen our ability to manage our loan portfolios across market cycles, especially for delinquent assets. Together, these technology and strategic initiatives were key drivers of our portfolio growth in 2025, and we expect them to continue to support momentum in 2026. Our priorities for 2026 are clear. We are focused on growing our loan origination market share while maintaining strong credit performance, which, together with our securitization platform, should drive disciplined portfolio growth. I am also pleased to report that 2026 is off to an excellent start. We are estimating that EFC generated an economic return of approximately 2% in January, with loan production and portfolio growth remaining strong, particularly in our non-QM, commercial mortgage bridge, and reverse mortgage loan businesses. Over EFC's nearly twenty-year history, I believe that we have consistently demonstrated disciplined stewardship of shareholder capital and a willingness to act opportunistically when market conditions are favorable. The common stock offering we executed efficiently with institutional orders alone and our decision to redeem our series A preferred stock reflect that approach. We evaluated a range of alternatives, including refinancing our series A preferred with new preferred equity, but given the persistent wide pricing we have seen in the preferred market, we felt the choice was clear. Using a targeted common stock offering, which was more than two and a half times oversubscribed, underscored strong market support for the transaction and its rationale. In summary, I believe that expanding our loan sourcing, securitizing frequently and efficiently, strengthening our liability structure, and optimizing our capital base, all combined with our disciplined risk and liquidity management, position Ellington Financial Inc. to deliver resilient earnings and stable dividend coverage over time and across market environments. Our team deserves a lot of credit for all the hard work they have put in to help make this happen. With that, we will now open for questions. Operator, please go ahead. Operator: Thank you. If you would like to ask a question, press 1 now on your telephone keypad. Once again, that is 1 to ask a question. We will take our first question from Douglas Harter with UBS. Please go ahead. Your line is open. Douglas Michael Harter: Thanks, and good morning. Hoping you could talk a little bit more about the decision to buy the servicer. Should we assume that we could get those outcomes without doing it in-house? Or is it more a way to kind of optimize the loan portfolio? And then just a clarification, is this something that would just be used for the Ellington portfolio, or could it be used for third-party clients? And, you know, is this entity owned within EFC, or is it going to be owned at broader Ellington? Laurence Penn: Hey, Doug. So there were really a few considerations. There has been a tremendous consolidation in the servicing industry. You saw Mr. Cooper buy Rushmore, and now Mr. Cooper being bought by Rocket. So the big-box servicers are bigger, and there is less high-touch servicing capability out there to work with borrowers that hit any kind of challenge. If they hit a speed bump, have a loss of income, get behind in a payment, we believe that it is important for us to generate the best risk-adjusted returns, that we have best-in-class protocols and best-in-class technology for handling later-stage collection. So this is not about scaling something to be a low-cost Fannie servicer where you are just dealing with servicing for massive efficiencies. This is just the recognition that as there has been consolidation in the servicing industry, there are not a lot of good alternatives to work with borrowers that hit any kind of challenge. So, you know, we just concluded that if we wanted to achieve that, it was something we had to build. We think that there is not enough of those capabilities out there in the marketplace that we could sort of assume that we could get those outcomes without doing it in-house. Owned within EFC. The way I think about it is our job right now is to build out the technology, to build out the protocols, to have this servicer be what we regard as best in class, and to demonstrate that to ourselves by seeing its servicing metrics—roll-to-delinquency rates and how you deal with borrowers that hit a speed bump—and how well it is operating efficiently. So the first thing, we need to build it, get it to where we want it to be. There is a lot of sort of champion–challenger. Once we do that, I certainly think that there is going to be other investors in the mortgage space that are going to recognize there is not a lot of capability out there now for later-stage collections and might well have an interest in benefiting from what we are building. Operator: Thank you, Doug. We will move now to Eric Hagen of BTIG. Please go ahead. Your line is open. Eric J. Hagen: Can you discuss conditions right now for applying repo to the retained tranches held from securitization for non-QM and RTL? Have the terms improved, and are there scenarios where you could apply even more leverage to the retained tranches, and what would the returns look like? Mark Tecotzky: Sure. I can take it. I mentioned in my prepared remarks, the repo market functioned really well this year. You had a gradually declining fed funds rate, and then the Fed injected some reserves into the system where they thought bank reserves were getting low. So repo functioned extremely well. Financing spreads on retained tranches are relatively low. I would say that those retained tranches are sort of inherently levered. You are dealing with small tranches at the bottom of the capital stack in securitization, where most of the cash flow is coming from excess spread. So those tranches, by nature of the investment and their leverage, already have a lot of price volatility. I do not see us wanting to add more leverage on those tranches. We tend to operate the company very conservatively when it comes to repo. By that, I mean that we have internal haircuts that are significantly higher than the advance rates our repo lenders would give us. So we might have loan strategies where lenders would lend us 90–95 cents on the dollar versus the loan, and internally, we will think that we want to only borrow less than that to make sure we have cash on hand if you have spread volatility, things like that. We have plenty of ability to raise leverage if we want to. I do not feel as though, given the inherent price volatility, the retained tranches are probably a place where we would look to add it. Laurence Penn: I was just going to add that, sure, we have some financing in that. But if you think about our long-term goals around our financing structure, liability structure, think about unsecured notes, which we did a debt deal at 7 3/8, now trading in the high sixes. Think about our preferred equity, eight-ish percent on preferred. It is our unsecured notes. Those are really more the instruments of financing that. Now, of course, those are not as low cost as repo, but remember, we are looking for this virtuous cycle, as Mark said. If we are well into the teens just on an unlevered yield and we are financing at 6–7%, it does not take much leverage, just from those instruments, to have 20% plus ROE. So we do not really need a lot of leverage. And you think about the kind of repo that we said we paid down when we did that notes offering in October in the fourth quarter—it was exactly the higher-cost repo that we would pay down first. Eric J. Hagen: Thank you very much. Thank you. Operator: We will move on to Trevor Cranston of Citizens JMP. Please go ahead. Your line is open. Trevor John Cranston: Hey. Thanks. Mark mentioned the government policy announcements during the quarter and the potential impact they have on Ellington. Can you maybe expand a little bit on specifically how you guys are approaching the agency-eligible market, given the potential for changes to LLPAs or G-fees, which could come about, I suppose, over the course of the year, and sort of how that flows through to pricing, prepay, and convexity risk on those types of loans? Thanks. Mark Tecotzky: Sure. Hey, Trevor. It is a great question. We do not have a crystal ball. We have a lot of resources to monitor potential policy changes, and I would say with this administration, lots of things are on the table. So the genesis of agency-eligible investor loans and second homes getting securitized in the private-label market—you have seen this off and on for the last five years. It certainly has accelerated some. The reason is that the loan-level price adjustments combined with the G-fee are so far in excess of expected losses in those markets that the private-label market has better pricing on the credit risk there, and it is overall better execution for loan originators. So it is flowing that way. Now, if there is a big change in LLPAs, it is possible the math could tilt back to Fannie/Freddie, and you could see a reduction in volume there. I would say right now the execution is not close. So a small change in LLPAs I do not think is going to move the needle. You are still going to see the lion's share of that volume in the higher LLPA category, not the super low LTV stuff, but still go in private label. We have to watch it. That is why I wanted to put that in the prepared remarks: pricing structures in the market are in place now, and if pricing structures in the market change, it can change the economics and the opportunity set and what we do. I would say right now it would take a fairly significant change in LLPAs and G-fees to swing the pendulum back over to GSE execution on those loans. But it can certainly happen, and that is something that we can monitor. We cannot hedge it, and we cannot control it. Now, the other implication is on the prepayment side of things. If you have a big enough change in LLPA—sort of like when people talk about prepayment models, they talk about elbow shifts—and changes in LLPA represent an elbow shift. You basically make certain loans more refinanceable. So when we evaluate either premium investments in that space or the IOs you create, you know, an inverse IO, you have a prepayment model, and the prepayment model is calibrated to current market levels. The prepayment model does not know that an LLPA cut or a G-fee cut can happen in the future. So what we do to take into account that risk right now in those sectors is ramp up speeds higher than what you would get just to a calibrated model now. We think it is enough for risk. That is something we want to manage to and take into account and properly probability-weight when we look at the distribution of recurrent returns. I would say that we are not the only ones in the market to view this as a heightened risk. So you can dial up your prepayment speeds on those sectors and still buy things at market levels with very attractive returns. It is not as though the other market participants are ignoring this risk or turning a blind eye to it in the pricing. Trevor John Cranston: Yep. That makes sense. Okay. Thanks very much. Mark Tecotzky: Thanks, Trevor. Operator: Thank you. We will now move on to Bose George of KBW. Your line is now open. Frank Gilabetti: Good morning, guys. Thanks for taking my question. You had another strong quarter in origination activity. Can you just discuss the current margins year to date, the current competition you are seeing? Laurence Penn: Mark, why do you cover the forward space? I will cover the reverse space. Mark Tecotzky: Sure. So in the forward space—non-QM, second liens, agency-eligible investor—I would say the competitive landscape in 2025 was competitive, but I would not characterize it as cutthroat competition. When we would think about our loan-level pricing that we put out every day, or where we are going to buy bulk packages from either affiliated originators or just originators we partner with, we could price things at levels such that I thought we had a gain on sale securitizing them and retain things at attractive yields. I think that it was competitive, but you could still price things with the margin. It was not the case in 2025 that the pricing pressure seemed cutthroat or that you were not compensated for taking the risk you are having to take on. Laurence Penn: Thanks. And then let me cover the reverse space. Let us separate it into two parts: there is the HECM originations—the FHA-guaranteed product—then there is proprietary. Rates have not changed much recently and are still high relative to 2020–2021. So HECM volume, industry-wide, has not grown a lot recently. If rates do drop, it would have a lot of room to grow substantially. We are—Longbridge has been at times the highest, second highest, always in the top three originators in the HECM space. There is competition. The margins—gain-on-sale margins—are driven to a large extent by spreads in the marketplace as to where you can sell the Ginnie Mae, the HMBS. That was certainly a tailwind in the last half of last year. It has been nice margins. But right now, margins are excellent, and volumes are quite steady. On the prop side, there is competition in the prop space, and again the gain-on-sale margin is going to be driven a lot by the securitization exit spreads. As long as securitization spreads remain tight—which, as I said, we just did record low spreads on our last deal on our AAAs—the gain-on-sale margins there I think will continue to be excellent. The volume there is growing as the products—the proprietary products—are expanding. We make tweaks to them all the time, and we feel really good about volumes there continuing to increase for Longbridge. Frank Gilabetti: Great. That is very helpful. Then I would love to get your thoughts on the potential changes to bank capital standards and whether you think banks could become more active? Mark Tecotzky: You know, it is interesting. All the credible mortgage researchers that have years of experience and access to data expected much more significant bank buying in 2025 than they actually saw. What you have seen them doing instead is, with these big negative swap spreads, just buying treasuries and match funding them with swaps. We have not seen a lot of bank buying in pass-throughs or CMBS holdings as well as their pass-through holdings. In Q4, you saw, I think it was the first time in many years, that banks reduced their pass-through holdings. Spread levels now are tighter than what they were for most of 2025. So maybe these capital regs will change things. I just do not know. I think it is certainly possible you could see them retain more loans. There has been some of that going on, especially the adjustable-rate loans like the 7/1 loans. I know some of these regs are intended to have banks get more involved in the servicing market. I think that is something you could see them do. But the big players in servicing—and the big transactions, the big sales, the big buyers—it has mostly been on the nonbank side for a while. We will have to see. Operator: Thank you. We will now move on to Timothy D'Agostino of B. Riley Securities. Your line is open. Timothy DeAgostino: Yeah. Hi. Thanks for the commentary today. I guess, at the start of '26, it would be great if you could maybe lay out some of the biggest priorities or what is on the top of mind for management in accomplishing in 2026. Understanding that integrating the mortgage servicer, increasing long-term financing, maybe within the portfolio, whether it is the allocation or in the capital stack using more cash to buy back preferred or something like that. It would just be great to get maybe a couple points that you all are looking to accomplish in '26 that are kind of at the top of mind. Thank you. Laurence Penn: Mark, let me handle the capital structure side of it, and then you could talk about what we are looking at in terms of maybe from a portfolio allocation perspective. On the capital structure side, look, we just did redeem that preferred. We have another preferred that is going to become callable at that point, and it becomes callable at that point. Of course, there is a chance we could call that as well. It is something that we would absolutely consider at that time. We also will continue to monitor the preferred market. We saw some of our peers, in terms of where they issued preferred, and we did not like it, did not like the prints that we saw. We did not think that was appropriate for us to issue there. But should an opportunity arise, we could absolutely look to replace the preferred that we redeemed with probably similarly sized preferred. I think that you look at our capital structure right now, and as I mentioned, we think that our marginal use of that capital is better than the coupon on the preferred. There is no reason we are in no sort of real hurry to call it. We have a lot of optionality when that happens. As long as that spread is a little tighter than the last one, we could be in the market with certainly another offering later in the year. We will see. You know, there is no real science around this, but I think most companies would probably look at just a slightly higher percentage of the equity base in preferred as something that was more typical in the space. So I think that is something that we will monitor throughout the year. And then, absolutely, I think if we need the capital—and I mentioned the fact that our unsecured notes, the Moody's- and Fitch-rated notes that we issued early in the fourth quarter—they have tightened. Of course, we would love them to continue to tighten. JR Herlihy: Hey, Tim. Thanks for the question. I would say that those five categories Larry laid out—covering the dividend with ADE and continuing to have consistent and strong earnings; strengthening our liability structure; supporting our originator affiliates, more market share growth; managing through delinquencies—we talked about how delinquencies declined quarter over quarter; make a lot of progress cleaning up sub-performers, continue on that theme; and then continuing to grow—are really key to our performance and growth accomplishments in 2025 and are very relevant to your question for 2026. Just looking at the numbers, we were almost $5,000,000,000 of portfolio holdings at year end. That was $2.5 billion a little more than two years ago, and leverage has actually declined over that same period from 2.3 to 1.9. So we have been able to accomplish that growth without taking up leverage. Looking forward in 2026, I do not want to just say more of the same, but kind of continuing to expand on each of those themes, supplementing them with additional strategic relationships with originators and continuing to add on the technology front, just improving the overall earnings quality, if you will, that we are delivering to shareholders. We want steady earnings, steady book value, dividend coverage, and keep that franchise going. And by the way, think about some of our peers—other mortgage REITs—that have hit some big stumbling blocks where they can borrow money, especially on an unsecured basis, has suffered immensely. We want to be the most attractive for debt investors to place their money in our space. My doubling comment is really about credit and Longbridge. We have taken agency down, and that has taken leverage down, and I am really focusing on the credit and Longbridge portfolios when I give that statistic. Mark Tecotzky: I would just leave you with one thought. What we talk about in the earnings call, what you see in the earnings presentation, is what EFC is currently doing—how we drove returns in 2025 and the focus of this call, Q4 2025. But it is almost twenty-odd years since this company has been around—private and then going public—and over that time, we have generated returns in a lot of areas, and I think it speaks to the breadth of the capabilities of Ellington Management Group. You have seen CRT be a driver from time to time, legacy nonagencies, unsecured consumer, auto, aircraft; you have seen us involved in mobile home lending. We have tremendous capabilities in CLOs, tremendous capabilities in buying distressed commercial loans. There are so many capabilities, skilled PMs, experienced researchers across almost all structured products within Ellington. I fully expect in all these areas that we are not always going to be doing what we are doing right now. The opportunity set for Ellington Financial Inc. will evolve over time. You could see an opportunity in auto; you could see an opportunity in unsecured consumer. Those have been small parts of the portfolio recently, but they can get interesting and exciting and priced really attractively over time. I put in that thing about the policy risk now because it is true. We are thinking about it. We are trying to position for it. We can predict what is likely, but we do not have a crystal ball to predict exactly what is going to happen. The resources and capabilities that Ellington Financial Inc. is able to access by its shared services agreement with Ellington Management Group, I think, gives us a tremendous opportunity set. Laurence Penn: I want to highlight one sector, Mark, which is the small-balance commercial sector. Look, everyone knows that there are sectors of the commercial mortgage market that have been under a lot of stress, and I think we have done a great job in terms of managing our portfolio with really minimal issues there. That has put us in a great position. We are seeing auctions from sellers, and it is such a highly fragmented market. It is a very sometimes geographically localized market. So we do not compete—certainly not with big banks—on those bridge loans. Sure, spreads have tightened overall, but our financing spreads have also tightened commensurately. That has been a growth area for us recently. I think it will continue to be. The technicals are, well, bad for sellers, good for buyers. So I think that is definitely an area where we are going to continue to see stress and opportunity. Timothy DeAgostino: Awesome. Well, quick second question: regarding book value today, I might have missed it earlier, but could you give us an update, whether that be in a dollar figure or just directionally? JR Herlihy: Good morning, guys. Thanks for taking the question. We mentioned an economic return of approximately 2% for the month of January. We have not put out January month-end yet. We should be putting those out again in the next few days—early next week. So that would imply that book value is up one-ish percent, net of the dividend. Those numbers are rough now, but that is the direction. Operator: Thank you. We will now move on to Jason Weaver with JonesTrading. Your line is open. Jason Weaver: Awesome. Thank you again for the time this morning. Congrats on the quarter. Just thinking about—in the prepared remarks, you spoke to the expanded opportunity set, partially due to the expansion of the seller network. Given the growth in size and flexibility of your financing capacity, would it be fair to expect a wider range on intra-quarter recourse leverage and a greater acceleration of securitization activity moving forward? JR Herlihy: Could you repeat that? And a greater acceleration of securitization deals? Jason Weaver: Yeah. So, you know, given how the flexibility and scope of your financing platform has increased markedly, would it be fair to expect a wider range on leverage moving quarter to quarter? JR Herlihy: Yeah. So, certainly, intra-quarter, like if we showed month-end recourse debt-to-equity, it fluctuates. We had two deals that had not closed as of January and closed in early February. Pushing those forward from January would have taken leverage down, but they were still on balance and closed early in the month of February. So there is certainly noise within a quarter. We will see expansion to the extent we can do more. I think thematically, our securitization pace has been really high. We are off to a strong start. We are through six, seven weeks of 2026. We are ahead of the pace of 2025, which was almost above three times faster than 2024. So that acceleration continues, at least so far. I think if something happens where we feel like securitization spreads—let us say they widen out—we do not like them, then I think it is quite possible that we would have more loans in warehouse at quarter end and slightly higher leverage, but that would be somewhat temporary. Jason Weaver: Got it. Thank you for that. And then the new RTL securitization that you priced, can you speak a little bit more to the structure there? Specifically, I was wondering what the reinvestment period window looks like. Laurence Penn: Sure. As I mentioned, it is a revolver. I believe it is a two-year reinvestment period. So every month we can replace basically the loans that pay off with new loans. It is important because the average life is obviously a lot less than two years for those loans, so it makes the financing a lot more efficient. Jason Weaver: Got it. That makes sense. I appreciate the color. Laurence Penn: Alright. I think, operator, I think that is it. Look, I apologize for the delay. Thanks for sticking around for the call. We will make sure that we pay the phone bill on time next time. We appreciate your patience. It was a great quarter. We look forward to a great year. Thank you. Operator: We thank you for participating in the Ellington Financial Inc. Fourth Quarter 2025 Earnings Conference Call. Your line is now disconnected, and have a wonderful day.
Operator: Fourth Quarter and Full Year 2025 Earnings Conference Call. Good afternoon, and welcome to Global Net Lease, Inc. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. I would now like to turn the call over to Jordyn Schoenfeld, Vice President at Global Net Lease, Inc. Please go ahead. Thank you. Jordyn Schoenfeld: Good morning, everyone, and thank you for joining us for Global Net Lease, Inc.’s fourth quarter and full year 2025 earnings call. Joining me today on the call is Michael Weil, Global Net Lease, Inc.’s Chief Executive Officer, and Christopher J. Masterson, Global Net Lease, Inc.’s Chief Financial Officer. The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please review the forward-looking cautionary statement section at the end of our fourth quarter 2025 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. Also during today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. Descriptions of those non-GAAP financial measures that we use, such as AFFO and Adjusted EBITDA, and reconciliations of these measures to our results as in accordance with GAAP are detailed in our earnings release and supplemental materials. I will now turn the call over to our Chief Executive Officer, Michael Weil. Mike? Michael Weil: Thanks, Jordyn. Good morning, and thank you all for joining us. 2025 was a transformational year for Global Net Lease, Inc., as we executed a series of deliberate and highly impactful actions that materially reshaped our financial and operational profile, strengthened the quality and focus of our portfolio, and established a more durable foundation for our company's long-term growth. The centerpiece of our transformation in 2025 was the successful execution of our $1.8 billion multi-tenant retail portfolio sale, which accelerated our deleveraging strategy, materially strengthened our balance sheet, and completed our evolution into a pure-play single-tenant net lease REIT. This portfolio simplification improved the overall efficiency of the company by driving meaningful reductions in operational complexity, which allowed us to lower both G&A and capital expenditures. The multi-tenant retail portfolio sale was a significant milestone in our disposition program launched in 2024, through which we have completed approximately $3.4 billion of sales to date. The disposition program included $995 million of occupied single-tenant non-core assets at a 7.6% cash cap rate and $2.0 billion of occupied multi-tenant assets at an 8.2% cash cap rate, and concluded in December 2025 with the sale of the McLaren campus for £250 million at a 7.4% cash cap rate. The McLaren sale generated approximately £80 million, or $108 million, of value above its original acquisition price and further enhanced the quality and focus of our portfolio, as it increased the proportion of investment-grade tenants among our top 10 tenants to 80% in 2025 from 73% in 2025, while also reducing our exposure to the automotive industry. The net proceeds from these non-core asset sales under our disposition program were deployed with clear priorities. We applied capital directly to deleverage our balance sheet, reducing outstanding debt by more than $2.8 billion since 2023 and improving net debt to Adjusted EBITDA from 8.4x to 6.7x over the same period. This improvement meaningfully enhanced our financial flexibility and positioned us to act from a position of strength in the debt capital markets. This enabled us to further de-risk our balance sheet by executing a $1.8 billion refinancing of our revolving credit facility, which secured improved pricing, enhanced liquidity, and extended the maturity from October 2026 to August 2030, including two additional six-month extension options, and extended the maturity from October 2026 to August 2030. Our decisive actions were recognized by the credit rating agencies, with Fitch upgrading Global Net Lease, Inc.’s corporate credit rating to investment-grade BBB- from BB+, and S&P Global lifting our corporate rating to BB+. These upgrades marked a major milestone for the company and validate the progress we have made in reducing leverage, improving portfolio quality, and strengthening our overall credit profile. Finally, as our disposition program continued to generate incremental proceeds, it provided additional flexibility to pursue other value-enhancing initiatives. Beginning in 2025, this included the opportunistic repurchase of 17,200,000 shares through 02/20/2026, at a weighted average price of $7.88, with continued deleveraging. We have been disciplined in deploying capital in a manner we believe balances accretive share repurchases with continued deleveraging. We repurchased shares representing total repurchases of $135.9 million and an implied AFFO yield of approximately 12%. Our outperformance in 2025 was driven by disciplined execution of our corporate strategy, which translated into meaningful shareholder value creation, reflected by Global Net Lease, Inc.’s total return delivering 32% in 2025 compared to a 6% return for the net lease sector. We have begun to close the valuation gap with our peers through disciplined execution in 2025, and while we are pleased with the results achieved so far, we also believe there is a clear path to continued growth by the execution of our 2026 corporate objectives. We are evolving from a strategy centered primarily on deleveraging and dispositions to one focused on the accretive recycling of capital. This includes remaining selective and opportunistic with asset sales, particularly those that materially reduce our office exposure, and redeploying proceeds accretively into single-tenant industrial and retail acquisitions on a leverage-neutral basis. Importantly, we continue to actively evaluate our office portfolio and are currently marketing the sale of several assets, and we will provide additional details as the transactions progress. At the same time, we are evaluating multiple redeployment opportunities that can be funded within our existing capital framework and meaningfully contribute to earnings growth, executed on a leverage-neutral basis, preserving the balance sheet quality we have worked to establish. Turning to our portfolio, at the end of 2025, we owned 820 properties, spanning nearly 41 million rentable square feet. Our portfolio’s occupancy stands at 97% with a weighted average remaining lease term of 6.1 years, and a high quality of earnings with an industry-leading 66% of tenants with an investment-grade or implied investment-grade rating. It has an average annual contractual rental increase of 1.4%, which excludes the impact of 19.6% of the portfolio with CPI-linked leases that have historically experienced significantly higher rental increases. On the leasing front, we delivered strong results across the portfolio, reflecting the depth of our asset management capabilities and the quality of our tenant relationships. In 2025, we executed leases on more than 3.7 million square feet and achieved renewal spreads of approximately 12% above expiring rents. During the year, we completed multiple lease extensions with high-quality tenants, including Home Depot, GXO, and FedEx, at an office asset. New leases in 2025 carried a weighted average lease term of approximately 5.2 years, and renewals completed during the period had a weighted average lease term of approximately 6.5 years, further supporting cash flow visibility and the durability of earnings. We remain focused on engaging with tenants well in advance of lease expirations to drive occupancy, retention, and rental growth, while maintaining a long-term perspective on portfolio stability. Our continued efforts and results in limiting exposure to high-risk geographies, asset types, tenants, and industries are a testament to our intentional diversification strategy and credit underwriting. No single tenant accounts for more than 6% of total straight-line rent, and our top 10 tenants collectively contribute 29% of total straight-line rent, with 80% being investment grade. We carefully monitor all tenants in our portfolio and their business operations on a regular basis. Everyone can look at the detail of each segment of our portfolio, which can be found in our Q4 2025 investor presentation on our website. I will now turn the call over to Christopher J. Masterson to walk you through the financial results. Christopher J. Masterson: Thanks, Mike. Please note that, as always, a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release, which is posted on our website. For the fourth quarter 2025, we recorded revenue of $117,000,000 and net income attributable to common stockholders of $37,200,000, reflecting a strong finish to the year driven by disciplined execution. AFFO was $48,500,000, or $0.22 per share, exceeding our revised 2025 AFFO per share guidance range of $0.95 to $0.97, and then $0.99 per share for the full year 2025. Looking at our balance sheet, the gross outstanding debt balance was $2,600,000,000 at the end of 2025, a $2,100,000,000 reduction from the end of 2024, and our net debt to Adjusted EBITDA ratio was 6.7x based on net debt of $2,500,000,000, down significantly from 7.6x at the end of 2024. Our debt is comprised of $1,000,000,000 in senior notes, $324,200,000 on the multicurrency revolving credit facility, and $1,300,000,000 of outstanding gross mortgage debt. As of the end of 2025, 98% of our debt was effectively fixed through either contractual fixed rate or interest rate swaps, providing strong visibility into future interest expense. As a result of significant debt reductions from asset sales, refinancing activity, and improved borrowing costs, our weighted average interest rate stood at 4.2%, down from 4.8% in 2024, driving a 45% reduction in quarterly interest expense to $42,600,000 from $77,200,000 a year ago. Interest coverage ratio was 2.9x, reflecting the combined benefits of lower leverage and reduced interest cost. From a debt maturity perspective, we have limited expirations only $95,000,000 of debt maturing in 2026. Given our strong liquidity position, we expect to address this maturity through refinancing onto a multicurrency revolving credit facility. We will continue to manage borrowings effectively on our revolving credit facility to take advantage of its lower interest rate spreads across currencies, generating approximately 170 basis points of interest savings based on rates as of 01/30/2026. As of 12/31/2025, we have liquidity of approximately $961,900,000, and capacity on our revolving credit facility was $1,500,000,000, compared to $492,200,000 and $460,000,000, respectively, as of the end of 2024. Additionally, we had approximately 216,000,000 shares of common stock outstanding and approximately 219,100,000 shares outstanding on a weighted average basis for 2025. Beginning in 2025, and through 02/20/2026, we have repurchased 17,200,000 shares totaling $135,900,000 under our share repurchase program. We repurchased shares at a weighted average price of $7.88, well below recent trading levels, which has since increased approximately 20%. These repurchases were executed and delivered in a highly accretive manner, which we believe created meaningful value for shareholders. We are pleased to establish initial 2026 guidance of AFFO in the range of $0.80 to $0.84 per share and net debt to Adjusted EBITDA in the range of 6.5x to 6.9x. The 2026 guidance assumes a gross transaction volume of $250,000,000 to $350,000,000, inclusive of both acquisitions and dispositions. This initial guidance also reflects our focus on reducing office exposure, along with the optionality to redeploy net sale proceeds in a disciplined, leverage-neutral manner we anticipate would drive earnings growth. I will now turn the call back to Mike for some closing remarks. Michael Weil: Thanks, Chris. The actions we executed throughout 2025 represent a decisive and comprehensive repositioning of Global Net Lease, Inc. as we enhanced the overall quality of the company by simplifying the portfolio, materially reducing leverage, strengthening liquidity, and improving our credit profile, with what we believe is a clear path to earnings growth. These were not incremental changes, but deliberate and coordinated actions taken by Global Net Lease, Inc. to reset the company's trajectory. We look ahead to 2026 from a position of strength and meaningfully expand our strategic flexibility as we enter the next phase of growth. Driven by disciplined capital recycling, alongside a continued emphasis on further deleveraging over the long term. Our strategy prioritizes monetizing select office assets and redeploying capital into accretive acquisitions of single-tenant industrial and retail assets that enhance earnings durability and portfolio strength. We are currently reviewing a number of accretive acquisition opportunities that align with this approach and support our long-term objectives. With a streamlined operating platform and enhanced financial flexibility, we intend to execute this plan with discipline. On behalf of the entire management team and board, I want to sincerely thank all of our shareholders and analysts who have put their trust in Global Net Lease, Inc. as we have accomplished all of these corporate goals. We intend to remain on this path with a continued focus on thoughtful execution and long-term value creation. We are available to answer any questions you may have after the call. Operator, please open the line for questions. Thank you. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question comes from the line of Mitch Germain with Citizens JMP. Please proceed with your question. Michael Weil: Hey. Good morning, Mitch. Mitch Germain: Michael, I would like to get some perspective on the McLaren office sale. Was that a reverse inquiry, or was that an asset that you were marketing? Michael Weil: Good morning or good afternoon, maybe, and congrats on the year. There was just natural interest in that asset. As many people know, it is a very well-known campus. An independent third party having a relationship with McLaren, as I have kind of talked about in the past, I wanted to make sure that they had an opportunity to see the asset before we took any action. And through kind of their ownership structure, it proceeded that way. So, no, it was not a highly marketed transaction. We had an inquiry. Mitch Germain: Do you think that you could replicate that kind of pricing for additional office sales, or do you think that is not representative given the quality of the property and brand that is the tenant of the asset? Michael Weil: Yeah. So we actually believe, Mitch, that the net lease office portfolio within Global Net Lease, Inc. is in many cases equivalent value to what we sold McLaren for. And one of the reasons that we have identified that as a 2026 goal is because we can say that; I think the best way to prove value is to execute on it. So, we are not at a point where we want to disclose specifics, but we have a number of office assets that have significant interest, and I am very comfortable that this is the area of pricing that you will see. We will probably have announcements on several office assets, maybe end of first quarter, but definitely second quarter. Mitch Germain: Great. Last one for me. Just talking about capital allocation. Excuse me. Given the attractiveness or the discount that you could buy your stock back at, I mean, how does that weigh in? Because it definitely seems like there might be a shift in deployment for asset rather than stock here. So just curious in terms of how the buyback fits in your overall strategy on a go-forward basis, please? And thank you. Michael Weil: Sure. Thank you, Mitch. So the buyback remains a very important tool that we have at our disposal. We are going to continue to evaluate opportunities, as I said, but we are certainly not going to just put money out for the sake of saying we bought certain assets. There is still benefit to opportunistically retiring more shares of Global Net Lease, Inc. As you said, and I completely agree, two or three months ago it was a no-brainer. That stock buyback was much more accretive than anything that we could see in the market. There will still be a reasonable expectation this stock is worth buying back. But we will be more active in evaluating acquisitions. Again, I think we have been extremely deliberate and very disciplined in how we have approached this last 18 months of Global Net Lease, Inc.’s performance, and there is nothing that we are more focused on than continuing that. Thank you. Michael Weil: Thanks. Operator: Our next question comes from the line of Upal Dhananjay Rana with KeyBanc. Please proceed with your question. Michael Weil: Hi, Upal. Upal Dhananjay Rana: Hey. How is it going, and good morning out there? Good morning. You know, just on the office asset dispositions, is there a particular strategy you are trying to accomplish there that either improves your portfolio the most or showcases the embedded value in your office portfolio? Michael Weil: Yeah. It definitely—we want to highlight the implied value of the office because I think there is a bit of a disconnect in the market. You know, single-tenant net lease, investment grade with duration is still a valuable asset class. The other thing that we are really focused on is we have heard from a lot of shareholders, and frankly, the feedback is they believe that Global Net Lease, Inc. will be a better portfolio more heavily weighted to industrial primarily, and also retail. So we certainly do not want to dismiss that value either. So we are going to intentionally market the office to really unlock value here. So, you know, as Mitch asked and as you bring up, our asset management team is working very hard on identifying the right brokers, talking to potential buyers, and then we will redeploy into the asset classes of net lease industrial. You know, that is real value. You know, when we can do this in kind of the same—let us just call it mid-7s range, maybe a little lower, maybe right there. Some retail. But right now, I am really focused on industrial. So I think that is the way to proceed into 2026. Upal Dhananjay Rana: Okay. Great. That was helpful. And can you talk about the decision to provide transaction guidance? And maybe you can break down how much are dispositions and how much are acquisitions? Michael Weil: Yeah. So I think that it was important that we make it very clear. You know, we spent the last, call it, 18 months aggressively pursuing a disposition strategy because it was really the important part of what we could do. It was very, very important. You know, we lowered our leverage. We lowered our cost of capital. We sold about $3.4 billion. We are ready now. As I talked about last quarter, kind of just alluding to—but we are really ready to get back on what I think of as the offensive. And we will evaluate opportunities. We will take our time and, as we have done in the past, we will disclose when we believe that the deal is at a point that it has real assurity. But we are also going to, as I said, continue with a few more opportunistic dispositions and beneficial acquisitions for the long term. So, no, we are not at a point right now where we want to break out the transaction volume, but we did want people to know that there will be growth in this portfolio starting this year—earnings growth. But we really also are focused on, frankly, still more focus on continued deleveraging. We are going to do that through the combination of opportunistic share repurchase, the proceeds from dispositions, and then acquisitions itself. We have got— Upal Dhananjay Rana: Okay. Great. That was helpful. And then last one for me. On acquisitions, what cap rates are you eyeing and what investment spreads are you targeting there? And are these acquisitions likely to be in the U.S. or abroad? Michael Weil: Well, we have not provided that level of detail in our disclosure, Upal. So what we are committed to is accretion and AFFO growth. So, you know, as we take a look at cost of debt and cap rates, you know, the market is one where you really have to selectively pick and choose your acquisition targets. It will give us an opportunity to work with developers, with certain brokers in the market, the relationships that we have, as I have said in the past, to make sure that we are able to maintain buying cap rates that allow for that type of growth. So, without giving more detail than I can, that is how we will underwrite the opportunity to buy in the U.S. and the U.K. and Europe. We will certainly consider opportunities in the U.K. and Europe, as well as, of course, the U.S. So the team is busy. Everyone is very excited to be back at that part of the job that, you know, we had kind of put on hold for the last two years. But it will be a very selective process. It will continue to have duration. It will have credit tenants primarily, investment grade or implied investment grade. And I think fair to say predominantly in the industrial space. And thanks, Upal. Talk to you soon. Operator: Our next question comes from the line of John P. Kim with BMO Capital Markets. Please proceed with your question. Michael Weil: Hi, John. John P. Kim: Hey, Michael. Hi, everyone. Just wanted to ask about your strategy change. So over the last few years, you have been prioritizing strengthening the balance sheet, and your stock got rewarded for it last year. With your leverage of 6.7x? And now it seems like you are shifting to offense and focusing more on growth. I guess my question is why stop now? Michael Weil: So we are not stopping, John. I think that is a great question. By no means are we saying, hey, we are now going to just do a 180-degree turn and go 100 miles an hour and just be blind to acquisitions so that we can line the balance sheet and say we bought this and we bought that. We will continue to look at different opportunities, including share repurchase, select acquisitions, etcetera. That will give us an opportunity to continue to take leverage into consideration. So I think for right now, it is important that we have that opportunity to selectively grow. We are going to balance the things that we know are important to the market. But we are going to start putting our foot back in the water on some potential acquisitions. It will still continue to have a focus on leverage. John P. Kim: And you mentioned the office pricing in mid-7s. Is there anything unique about the disposition cap rates? And if there is any secured debt associated with these assets or locationally, are they unique? And if you can give us just a quantum on how much you are looking to sell and buy this year. Michael Weil: So, what is unique about these assets compared to office in general is that the net lease characteristics of office are just stronger than the overall U.S. office market. We have a majority of our tenants that are investment grade. We have got good duration on the portfolio. And these are tenants that people are comfortable with. They are typically, as I have said over many quarters, mission critical to the companies themselves. They are predominantly office, but they have a component of R&D or light assembly and storage. So just for the long-term operation of the tenant’s business, these are important assets. And because of that, they have a successful return-to-office program that has been in place for probably longer than most office properties. It is typically a local buyer who will acquire these properties. It could be a 1031 buyer. But we have sufficient evidence that we will be able to trade at these types of levels and really prove value for these properties. We have not specified dollar value of what we will sell, but we will continue to update quarterly. John P. Kim: And then in terms of acquisitions, your shares are probably trading at approximately an 8.5% AFFO yield. Is that the hurdle rate for acquisitions that you are looking at? Or are there other factors that would lead to different cap rates on acquisitions? Michael Weil: I mean, as I say over and over, because it is the primary focus, it is driven by accretion. So we have those targets. Now we look at everything overall: the proceeds from dispositions, the combination of stock buyback, and then acquisitions itself. We know where we need to be, and that will drive our kind of go/no-go on those acquisitions. John P. Kim: Okay. Thank you. Michael Weil: Thanks, John. Operator: Our next question comes from the line of Jay Kornridge with Cantor Fitzgerald. Please proceed with your question. Michael Weil: Hi, Jay. Good morning. Jay Kornridge: Good morning. No. I guess just sticking with the theme here of the office sales. I guess I just wanted to clarify: are there any other maybe non-office dispositions you would be eyeing to reduce certain tenant exposures this year? And then, what are you trying to get the office segment down towards? Michael Weil: I think that it is important that we evaluate the contribution that the stabilized office portfolio makes to the overall earnings of Global Net Lease, Inc. So I think that if we can take a subset of the office portfolio and prove value, my hope is that it gives people the confidence that there is no reason to sell at a price that we do not think represents the types of values that we are talking about. And we will intentionally continue to lower our exposure to office, but we do not want to get into any kind of rushed sale because then you lose the opportunity to really maximize value. And because of the performance of the office portfolio, we will continue to update our view. You know, right now, I think that to be prudent, we probably are leaning a little bit more towards the U.S. market, just because there is some uncertainty as it relates to U.K. and Europe. We are very comfortable there. We have a great team in place. We know the markets very well. You know, it is just part of the overall 2026 operating plan to do that. As far as other assets, there are certain assets that, for a number of reasons—it could be a tenant’s plan at an asset, potential value from redevelopment, or other factors—yes, we will potentially dispose of certain other assets during the course of the year. Jay Kornridge: Okay. Thanks for that perspective. And then just, as you think about shifting more offensively, you referenced having a priority for industrial and some retail. But as you think about your investment outlook for you guys going forward, do one of those two markets between the U.S. and Europe present a more favorable environment? Michael Weil: You know, as the U.S. is working through tariffs and trade relationships and things like that, for the time being, I think that the U.S. is just a little easier to understand. But, again, by no means do I want to say that we do not value the U.K. and European assets that we own. One of the great things about them is they are typically not export businesses. They are operating businesses that supply their local markets in the U.K. and Europe. So they have not been impacted by recent tariffs and trade agreements. So to come back to what I have already said, Jay, yeah, I think for right now, we are most focused on the U.S. Operator: Our next question comes from the line of Michael Gorman with BTIG. Please proceed with your question. Michael Patrick Gorman: Hi. Good morning. Thanks for the time. Hi, Michael. Just a quick one for me. Fourth quarter run rate would annualize to about $0.88 a share, understanding you have to make an adjustment for the McLaren sale, which was very late in the quarter. When I think about the accretion from capital recycling, it feels like maybe there are a couple of points that we are missing here that would maybe kind of push the guidance down to that $0.82 midpoint from where I would expect it to be. Is there anything else going into guidance in 2026 that might be a headwind against some of the growth metrics that you guys are talking about here? Christopher J. Masterson: Well, I think it is probably worth just pointing out within the fourth quarter, we did have some tax benefits that we identified as part of our year-end process, which did give us a little over $0.01 in AFFO. So that is something that kind of throws off fourth quarter run rate. Michael Patrick Gorman: Yep. That is super helpful. Thank you. And then, Mike, maybe just one quick one. We spent a lot of time talking about the portfolio and asset transactions going into 2026. Are there any potential vacant asset sales that you are targeting for 2026 that maybe could provide funding for acquisitions and also benefit maybe from a debt-to-EBITDA perspective? Michael Weil: You know, the majority of the assets that had that vacant component had been addressed in 2025. There are a few important assets that we are looking at from that disposition standpoint that, yes, will have free cash post-sale that we will be able to deploy. You know, we have taken an approach with the guidance, $0.80 to $0.84, because we are really at the beginning of the year. Those are definitely numbers that are backed up by what we know in the portfolio. But there are certain things that are kind of macro-type events. You know, we think that there could be some benefit in Fed pricing as we come into spring that could open up opportunities in the market that we think we are well positioned to take advantage of. So the overall idea is to continue to execute the business, to be very smart and deliberate, and to look for opportunities that we think are going to be there primarily kind of in the summer and second half of the year. Michael Patrick Gorman: Great. Thank you for the time. Michael Weil: Thanks, Michael. Operator: As a reminder, if you would like to ask a question, press 1 on your telephone keypad. Our next question comes from the line of Craig Gerald Kucera with Lucid Capital Markets. Please proceed with your question. Michael Weil: Yeah. Hey. Good morning, Craig. Craig Gerald Kucera: Mike, you made mention in the past that you were looking to reduce your c-store exposure, and I think you had worked that down from maybe 5% or so of the portfolio last year to maybe a little bit more than 1% through the third quarter. Are you where you want to be on that front, or do you still think you might make some additional sales? I am just trying to get the final breakdown, just one second, on gas and convenience. Michael Weil: Because, yeah, as you said, it was definitely an intentional strategy to reduce our exposure. Gas and convenience is an asset class that has resilience, but it is very operator driven. So we are definitely comfortable at 1%. We have taken the real risk out of what we saw from an operator standpoint. And I think the team did a great job of getting value for those assets, and, you know, let us move into some things that just are a little bit easier to forecast. Craig Gerald Kucera: Okay. That is helpful. Changing gears, I want to talk about your 2026 office lease expirations, which I think are a decent amount of the total in ’26. Are those more concentrated in the U.S. or Europe? And how are those discussions going so far? Michael Weil: They are more heavily weighted to Europe and the U.K. The conversations are going well. Tenants are engaged. We are figuring out opportunities. We know that for the most part, tenants are going to renew. There are a number of conversations that will be playing out over the next one to two quarters. I will be with the team next week in London, and we will be really digging in on some of these conversations. Craig Gerald Kucera: Okay. Great. And just one more for me. I guess as you are thinking about selling office, just given the McLaren sale, it would appear that there is stronger demand in Europe and the U.K. But are you expecting to also be able to sell out of the U.S. portfolio as well? Or is it going to be more heavily weighted overseas? Michael Weil: No. We definitely see the U.S. market equivalently strong. It is just, obviously, McLaren was based in the U.K. And we always felt that McLaren was a special credit in the portfolio. You know, the building was so specifically designed for them. It was a large single-tenant building. So when we had that opportunity, we were thrilled. We loved owning it, and we also loved selling it at that price. But as we think about office opportunities in the U.S., very strong market as well. And, Craig, I am sorry. I just want to go back to your last question and put a little clarification around it. I believe the 2026 lease maturity on office is about 3.1% of straight-line rent. So it is something we are focused on, and we expect to have a lot of success with renewals. Operator: We have no further questions at this time. Mr. Weil, I would like to turn the floor back over to you for closing comments. Michael Weil: Thank you. Great. Well, thank you, everyone. We always appreciate you taking time to join us, not only for what we have accomplished in 2025, but the year ahead. We are very excited about the disproportionate amount of potential in the coming year. This is a business where you come to work every day, and you just grind it out. And that is what we are already doing in 2026. I think that we will have some announcements that are very interesting and beneficial for the company and, most importantly, for our shareholders. So we look forward to speaking again soon. And if anyone does have specific questions for Chris or Ori or myself, please reach out. We are always available for conversation. Thanks, everybody. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Thank you for standing by. My name is Jordan, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Real Estate Finance, Inc. fourth quarter 2025 earnings call. After the speakers' remarks, all lines will be placed on mute to prevent any background noise. There will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Kristen Griffith, Investor Relations. Please go ahead. Thank you. Kristen Griffith: Good day, everyone, and welcome to NexPoint Real Estate Finance, Inc.'s conference call to review the company's results for the fourth quarter ended December 31, 2025. On the call today are Paul Richards, Executive Vice President and Chief Financial Officer, and Matthew Ryan McGraner, Executive Vice President and Chief Investment Officer. As a reminder, this call is being webcast through the company's website at investors.nexpoint.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's Annual Report on Form 10-K and the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect the forward-looking statements. The statements made during this conference call speak as of today's date, and, except as required by law, NexPoint Real Estate Finance, Inc. does not undertake any obligation to publicly update or revise any forward-looking statement. This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company's presentation that was filed earlier today. I will now turn the call over to Paul Richards for the financial results. Please go ahead, Paul. Paul Richards: Thanks, Kristen, and good morning, everyone. I will walk through our quarterly results, cover the balance sheet, and provide guidance for Q1 before turning it over to Matthew Ryan McGraner for a deeper dive on the portfolio and the macro lending environment. Fourth quarter results are as follows. We reported net income of $0.52 per diluted share compared to $0.043 in Q4 2024. The increase was driven by unrealized gains on our preferred stock and stock warrant investments. Earnings available for distribution came in at $0.48 per diluted share, compared to $0.83 in Q4 2024. Cash available for distribution was $0.53 per diluted share, up from $0.47 in the prior quarter. We paid a regular dividend of $0.50 per share in the fourth quarter, which was 1.06x covered by cash available for distribution. The Board has declared a dividend of $0.50 per share for 2026. Book value per share increased 1.4% from Q3 to $19.10 per diluted share, primarily driven by unrealized gains on preferred stock investments and stock warrants. Turning to new investment activity during the quarter, we funded $5.7 million on a loan with a monthly coupon of SOFR plus 900 basis points with a 14% floor, along with $22.5 million on a loan paying an 11% monthly coupon. We also funded a combined $17.4 million across two marina loans at a 13% monthly coupon. On the capital markets side, we raised $60.5 million in gross proceeds from our Series B preferred stock offering. For the full year, we reported net income of $2.09 per diluted share. When we issued our percent notes in October 2020, we were in a zero-interest-rate environment. The new notes carry a two-year term with prepayment flexibility, which positions us well in the declining interest-rate environment. We are pleased with this execution and look forward to terming out the remaining unsecured notes in 2026. On that note, we have $180 million of unsecured notes maturing in May, and we are actively reviewing several options to achieve the best execution and pricing on the refinancing. We also recently launched our Series C 8% preferred stock at $25 per share. Through the end of the year, we sold approximately 80,000 shares for total gross proceeds of $2 million and a total of $14.1 million through today. Lastly, subsequent to quarter-end, we entered into a re-REMIC transaction on our 2017-K62 D/B piece with Mizuho. Under this structure, we are selling the B piece and purchasing a horizontal risk retention tranche, which represents roughly 5.8% of the re-REMICs. This transaction reduces our mark-to-market repo financing. On a go-forward basis, the interest expense savings and reinvestment capacity are expected to be around $0.30 to $0.34 per share accretive to annual CAD. Moving to guidance for the first quarter, debt would be reduced by $75.2 million, and our debt-to-equity ratio would decrease to 0.83x, and the HRR tranche carries an expected yield of 18.5%. Earnings available for distribution are expected to be $0.40 per diluted share at the midpoint, with a range of $0.35 to $0.45. Cash available for distribution is expected to be $0.50 per diluted share at the midpoint, with a range of $0.45 to $0.55. We view this as a compelling example of actively managing our B-piece portfolio to unlock value and improve our capital efficiency. I will now turn the call over to Matthew Ryan McGraner for a detailed discussion of the portfolio and the current market environment. Matthew Ryan McGraner: I am excited to speak to everyone today about NexPoint Real Estate Finance, Inc.'s pipeline and trends in our main verticals. I also want to thank our team here, as Paul just mentioned, and all of our partners for another quality quarter for the business and our shareholders with great execution. As it relates to our main verticals, I am very pleased with our portfolio of assets in this era of major AI disruption. Indeed, NexPoint Real Estate Finance, Inc. has been steady and intentional about our asset selection. Thankfully, NexPoint Real Estate Finance, Inc., and by extension, NexPoint Real Estate Finance, Inc., especially, is not investing in AI scare-trade assets or assets historically levered to these property types. We are intentional about our residential and self-storage exposure, both recession-resilient property types necessary for everyday life. The introduction of AI to these property types has only improved efficiency and margins in these businesses and not rendered them obsolete. Moreover, the demand funnel for our life science collateral is widening to AI companies themselves, which need the purpose-built lab-type buildings to house their compute infrastructure. Our Alewife project is a perfect example. Indeed, the introduction of AI to these property types has only improved efficiency and margins, and the demographic and AI tailwinds are real in elite educational districts producing this AI talent. Even our life science exposures are in first-to-fill assets. Lab and AI tenants could go to older converted assets for half the rent, but they must have the infrastructure and bones of these purpose-built, well-located assets, and they will pay for it. So let me start there with life science. For the quarter, our largest single-asset exposure in life science, Alewife Park, is now 64% leased at a 9% debt yield, with RFPs, LOIs, and leases now totaling 2.8x the square footage of the project. Momentum has materially increased since the Lila leases, and we expect this trend to continue to have the project fully leased in 2026, yielding a debt yield with a 12-handle. More broadly, certainly less expensive alternatives exist in the suburbs or in second-gen space. The first-to-fill buildings in elite academic ecosystems have the infrastructure and specifications tenants require. For one, health, wellness, and longevity of life were already rapidly growing trends before the latest AI disruption. Our basis in our collateral is 30% to 60% below replacement cost for these assets, and that is just replacement cost, let alone the need to justify a profit for a new life science development. In short, we really like our portfolio and where it is positioned, especially relative to comps, and the demographic and AI tailwinds are real. The second tenet of our thesis in leaning in when we did is that new supply over the near term is nonexistent. We believe each of these have a massive tailwind for purpose-built new life science product since the 1980s and do see the new lease inflection this year. On the residential front, we continue to work through the highest supply cycle since the 1980s. I detailed this on prior calls, but just to quickly repeat, we think multifamily rents will inflect positive with most of our market exposure occurring in 2026. We attribute this to four main factors: persistent structural demand; the cost to own a home is three times more than to rent an apartment in our markets; a 60% decline in new market-rate deliveries from the peak; and construction starts running approximately 70% below their 2020 peak, locking in a multiyear supply trough. Advances in health and wellness are adding longevity to the population, creating somewhat of a demographic backstop to demand. On the self-storage front, Q3 REIT earnings came in slightly above expectations, but revenue was flat to slightly negative year-over-year. Q4 and full-year performance are expected to show flat revenue and a 50 to 150 basis point decline in NOI. Occupancy generally remains under pressure, with industry average ending 2025 at 89%, down 210 basis points from the start of the year. The primary culprit is a sluggish housing market as home sales remain near multiyear lows and mortgage rates stay elevated, reducing a key demand driver for self-storage. Rates are the bright spot. However, after two years of falling rates—some down 20% from COVID-era highs—moving rates have been trending up since May 2025 and should help offset some of the occupancy weakness. Also good news: supply remains constrained at just under 3% of existing stock, and material cost inflation and high financing costs are deterring new development. Deliveries are already projected as low as 1% over the next couple of years, which should eventually restore pricing power and return NOI growth to the historical 3% to 5% range. Our NexPoint storage portfolio significantly outperformed the broader industry in 2025, finishing the year at 91.7% occupancy, exceeding its NOI budget by 3.2%, and growing NOI 13% over 2024. Looking into 2026, NOI growth is expected to moderate to 4%, reflecting portfolio stabilization, softer demand, and rate constraints on our two LA properties, but still notably higher than the broader industry. On the SFR and BTR front, fundamentals continue to outperform the broader multifamily segment generally. Our SFR collateral remains some of the best performing within our portfolio, with steady occupancies in the mid-90s, with positive new lease and renewal growth as well. In recent discussion with the agencies, and notwithstanding recent proposed regulation limiting institutional ownership in the sector, Fannie and Freddie remain open to finance build-to-rent assets. Indeed, we believe this is an immense area of opportunity should this void materialize. We have significant relationships and channels available to us to capitalize on these opportunities. We are reviewing approximately $5.555 billion of BTR and $90 million of multifamily product. Again, we are very pleased with the portfolio's performance and look forward to deploying more capital this year in 2026. Again, I want to thank the team here for their hard work, and now we would like to turn the call over to the operator for questions. As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Operator: We will now open for questions. Your first question comes from the line of Crispin Love from Piper Sandler. Your line is live. Ben Graham: Hi. How is it going? Can you hear me all right? Paul Richards: We hear you great. Ben Graham: Awesome. Thank you so much. This is Ben Graham in for Chris Love. Thanks for taking the question. Thank you. When do you believe you could be covering the dividend on a more consistent basis with EAD? I am wondering what the major factors are that are driving the EAD guidance range, and your confidence in the current level of dividend sustainability. Thank you. Paul Richards: Hey. Great getting to talk to you. So, you know, dividend coverage and sustainability—yes, our EAD is a little below our CAD, but the majority of that is, again, the bridge from EAD to CAD and amortization of premium, some accretion of discounts, and depreciation on REO. We believe that CAD is the better indicator of dividend sustainability. We have continued to recommend a $0.50 dividend to the Board, and they have approved it every time. We feel very good on the go-forward, one, from the re-REMIC transaction we discussed; two, from the continued Series C raise and redeployment at a 200 to 400 basis point net interest margin for that number to grow over time as well. We feel well positioned for the future and for dividend sustainability. Matthew Ryan McGraner: I will just add to that. We have consistently out-earned our dividend since our inception and have stable book value. We are going on the offensive and really like our cost of capital again to drive the results that you are seeing here, which, relative to the comps, we think is pretty good. Ben Graham: Awesome. Thank you so much. When you look at your portfolio areas between multifamily, single family rental, self-storage, life sciences, etc., how do you expect the administration's focus on real estate and single-family affordability to impact some of the areas where you are invested? I am wondering what areas you are most excited about today. And then, if I could ask one more question, thank you. Matthew Ryan McGraner: I think, at a time when there was no capital available, we leaned into life sciences when we did last year. Right now, where we are spending the most time is on the BTR and the multifamily front on the new construction and stretched senior side, providing B-notes and selling off A-notes for both new construction and new lease-up deals, both on the BTR front and on the multifamily front. As it relates to the recent proposed regulations, I think it is still too early to tell, but our organization has been involved in some of the regulatory process—if you will, lobbying process—in DC. From our exposure, we feel very good about mainly focusing on built-for-rent assets, which are adding to the housing stock and not detracting from it. We still think that there is going to be a need to provide capital in that space. What is more interesting, and I think more in the bull's-eye of the proposed regulations, are proposals on limiting institutional buyers from purchasing scattered-site SFR. How that all shakes out in terms of the financeability of homes off of the MLS is probably too early to tell, but I think the ABS market on the scattered-site front is still very active and still, I would say, wide open, even post the announcements. I think that market still continues to trade well, and the origination volume is still open. To the extent that it is closed, and scattered-site becomes a little out of favor with the broader lending environment because of political pressure, I do think that is an opportunity for us to enter that market and provide capital and liquidity, because we are obviously very comfortable with it. Ben Graham: Awesome. Thank you so much for taking my questions. Operator: Your next question comes from the line of Jade Joseph Rahmani from KBW. Your line is live. Jade Joseph Rahmani: Thank you very much. Can you touch on the provision for credit loss that took place in the quarter—around $12 million—and what you expect on that going forward? Paul Richards: Absolutely, Jade. This is Paul. We updated our calculation to be, again, more conservative, and now it includes a severe downside scenario to align with our peer group. I would say that one-third of it was just our general reserve component to the CECL provision, and the other, call it, 66% were on deals that we have already taken a CECL reserve on, which were on a few of the pref deals that we spoke about last quarter. On the go-forward expectations, I think we are at that trough, and there really are not any more problem areas on the pref book or in the portfolio. I think this would probably level off in 2026. Jade Joseph Rahmani: Thank you very much. And just on the life science project, which has bucked the trend in the industry of a downdraft in leasing activity, could you give your thoughts as to what the project's specific characteristics are that drove the positive performance? And if you are seeing, outside of this project, any uptick in life science leasing activity that might make you look at other deals in that sector? Matthew Ryan McGraner: Yes, you bet. I would say the Alewife Park project is one of the very few life science, purpose-built, on-grade facilities in West Cambridge on mass transit lines, with all the qualities and infrastructure tenants require. I think when this project—part of it—opened and was CO'd, it was probably into some of the worst market dynamics that we faced historically in life science. Lila Sciences needed space, and we were the only building that could, at that time, house their needs and their infrastructure. Then it is the cluster effect: once you get a good tenant such as Lila, backed by a very well-heeled investor base, those tenants continue to drive more leasing activity, and people want to be around them. So I think we might have gotten lucky, but I will take it. More broadly, across the portfolio, I think activity in the last 30 to 60 days coming out of JPMorgan in San Francisco has shown a lot of optimism. We are seeing more capital, and the CFOs and folks in charge of capital allocation decisions are finally making those decisions. I also think some of the biggest demands are coming from AI-designed life sciences. Whether it is life sciences or AI for life sciences, the widening of the funnel will come from AI. These AI companies with this compute infrastructure need the air quality, the power, and the infrastructure of purpose-built new buildings, and they have to go into purpose-built new buildings with all the specifications. I do not see that waning anytime soon. Jade Joseph Rahmani: Thank you. Thanks. Operator: Your final question comes from the line of Gabe Poguey from Raymond James. Your line is live. Gabe Poguey: Hey. Good morning, guys. Thanks for taking the time. Can you give a little more detail around the loans you made in the quarter—specifically the $22.5 million loan at 11%? I assume the SOFR plus 900 loan is Alewife. Any incremental color around those loans would be helpful. Paul Richards: Sure. As you mentioned, there was the one loan, which was our continued commitment on the Alewife project. The other two loans were roughly $10 million plus for a self-storage deal in Hialeah—very sound, very great attachment point—and a preferred position for two marinas that we really believe in, with the cash flow, etc. The last one covered at 13%. Again, we expect to find these types of deals using more of a rifle-shot approach, as Matthew mentioned, in our sales or pipeline funnels. You can expect to see more of the multifamily and these types of deals in the future. Gabe Poguey: Got it. And then, Matthew, you talked about the potential regulation out of DC, but the opportunity set to go direct on build-to-rent—whether you are that solution capital, pref, mezz, etc. Can you talk about how big that sandbox could be for you as you think about what NexPoint Real Estate Finance, Inc. holistically looks at, what NexPoint Real Estate Finance, Inc. has touched, and how you think about how big that bucket could be over time? Matthew Ryan McGraner: You bet. That is a great question. For our single-family equity business, they have roughly $550 million of BTR under contract and review about $200 million of new build-to-rent construction product in any given month. We are seeing all of that, obviously, in terms of deal flow, and we look at both the debt and the equity. It has been a steady pipeline and an origination funnel for us, and one that we are really trying to get the word out on—with the Walkers and Dunlops, the JLLs, the CBs—and say, “We are open for business on build-to-rent new construction.” We can play up and down the cap stack wherever the opportunity is and take over at CFO financing, or we can finance at CFO. We are not going to go into a greenfield project next to a cow pasture in the middle of nowhere; you have to be smart about the asset selection. We are looking mainly on the smaller side—50 to 125, 150 units—that just feel more like an extension of the community. We certainly think there is plenty to do there in 2026 and beyond. Operator: There are no further questions. I would like to turn it back over to the management team for closing remarks. Matthew Ryan McGraner: Thank you very much for all your interest and participation in NexPoint Real Estate Finance, Inc., and we look forward to speaking with you next quarter. Thanks again.
Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree, I will be your conference operator today. At this time, I would like to welcome everyone to the California Water Service Group Q4 2025 and full-year earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. I would now like to turn the conference over to James Lynch, Chief Financial Officer. You may begin. Thank you, Desiree. James Lynch: Welcome everyone to the fourth quarter and full-year 2025 results call for California Water Service Group. With me today is Martin Kropelnicki, our Chairman and CEO; Shilen Patel, our Chief Business Development Officer; and Greg Milleman, our Vice President of Rates and Regulatory Affairs. Replay dial-in information for this call can be found in our quarterly results earnings release, which was issued yesterday. The call replay will be available until April 27, 2026. The Company has a slide deck to accompany today's earnings call on the Company's website at www.calwatergroup.com. The slide deck was furnished with an 8-K and is also available. As a reminder, before we begin, before looking at our fourth quarter 2025 results, I would like to cover forward-looking statements. During our call, we may make certain forward-looking statements, and because these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the Company's current expectations. As a result, we strongly advise all current shareholders and interested parties to carefully read the Company's disclosures on risks and uncertainties found in our Form 10, Form 10-Q, press releases, and other reports filed with the Securities and Exchange Commission. I will now turn the call over to Martin. Martin Kropelnicki: Thanks, Jim. Good morning, everyone. I cannot think of a more appropriate way to kick off our 100th year of operations as an essential utility than by quickly talking about two deals we announced. First and foremost, yesterday, we executed an agreement to purchase the Nevada and Oregon operations from Nexus Water. We have been busy working with them over the last few months to put that deal together, and we will be talking about the deal later on today. Secondly, in December, we announced we have reached an agreement to purchase the outstanding minority interest in the Texas joint venture that we help start, BVRT Holdings, and become the sole owner of seven Texas water and wastewater utilities. In addition, while we do not have a general rate case decision for the 2024 rate case for California yet, we know it is actively being worked on, and we expect to get a rate decision soon. Based on what we are seeing and where the commissioner is in the process, questions they are asking, etc., we know it is actively being worked on and we know it is a priority within the commission to get that done soon. In addition, during the quarter, we filed and we are expecting a decision for our consolidated rate case in Texas, and we have also filed a rate case in the state of Washington. So if I can get everyone to go to page five, please. We will do a quick recap on what we did for the year. First and foremost, we went into the fourth quarter really ahead of budget and performing well. But I think as many of you saw, we had a major storm on the West Coast in December, and the financial results in December were clearly affected by wet, cold weather. This is really the second time we have had an atmospheric river that really hit the whole West Coast. Normally, if you think about California, it is a long state, and while we might get wet weather in Northern California, the demand for water services stays high in Southern California because it tends to be warmer. This is one of those storms that was from all the way from the Canadian border all the way down to the Baja Coast on the California side, to the Gulf of Mexico, and so we had a pretty big weather impact that Jim will be talking about later. As a highlight for 2025, we invested a record $517,000,000 into our infrastructure systems, and that includes an additional $52,300,000 invested in the fourth quarter alone. In 2025, we increased our annual dividend by a record 10.7%, and that was followed by our 59th annual dividend increase earlier this year in 2026 by an additional 8%. We received, during the fourth quarter, our extension for our cost of capital in the state of California, which allows us to retain a 10.27% ROE until January 2028. I believe this is one of the highest ROEs of a water utility in North America. And we have received approval to increase interim rates by the commission. When the decision did not come out in December, the commission gave us the green light to implement an interim rate increase of 3% that we implemented in January in California. So overall, a busy year from that perspective on the rate side. In addition to that, we also maintained our A+ stable credit rating from S&P, which I believe is one of the highest rated utilities in North America. There is a lot to get into in the details, so I am going to turn it back to Jim to go through some of the details on the financial results. Jim? James Lynch: Great. Thanks, Martin. In Q4 2025, revenue was $220,000,000 and that compares to $222,000,000 in 2024. Net income for the quarter was $11,500,000, or $0.19 per diluted share, compared to the prior year period of $19,700,000, or $0.33 per diluted share. As Martin mentioned, our results in the fourth quarter were negatively impacted by the strong statewide weather pattern over much of California during the month of December that created exceptionally wet and cold weather. Moving to slide six, you can see the impact of this and other activities during the fourth quarter on our earnings results as compared to 2024. While tariff rate changes and other regulatory activities generated an increase of $0.48 per share, the weather-induced consumption decline led to a $0.59 earnings per share decrease. In fact, of the $12,700,000 in consumption decrease experienced in 2025, $14,600,000 of it occurred in the fourth quarter. In addition, the three-year conservation program approved in the 2021 rate case ended in Q4, with final expenses and the expense true-up reducing earnings by $0.10 per share. Slide eight shows our 2025 year-end financial results. As many of you know, the Company's delayed 2021 rate case decision resulted in 2023 interim rate relief, which was recorded in 2024. So in reporting our results, we have presented both the GAAP and non-GAAP measures for 2024, essentially removing the impact of the 2023 interim rate relief from our 2024 results. Operating revenue for 2025 was $1,000,000,000. This compared to $1,370,000,000 in 2024. When compared to non-GAAP 2024 revenue of $949,300,000, our revenue for the year actually increased by $50,800,000, or approximately 5.4%. Net income attributed to Group was $128,200,000 compared to net income of $190,800,000 in 2024. Again, when compared to 2024 non-GAAP income of $126,800,000, our net income increased $1,400,000, or 1%. In 2025, diluted earnings per share was $2.15 compared to $3.25 in 2024. And, again, removing the 2023 rate relief from our 2024 numbers, the non-GAAP 2024 earnings per share was $2.16, which was essentially flat when you compare it to 2025. Turning to slide nine. The primary drivers of our 2025 diluted earnings per share were tariff rate changes and other regulatory activities, consumption decreases of $0.19 per share, and depreciation expense increases of $0.18 per share. Combined, these added $1.05 per diluted share. Turning to slide 10, the increases were primarily offset by wholesale water rates that, net of the volume decreases, reduced diluted earnings per share by $0.27, and by income taxes, which were lower year-over-year due to lower taxable income and the related effects on our income tax rate. We continue to make significant investments in our water infrastructure during 2025 to ensure the delivery of safe, reliable water service. Our capital investments for the quarter and year-to-date were $152,300,000 and $517,000,000, respectively. This record level of annual investment represents a 19.8% increase over construction levels in 2024. As a reminder, our capital investment estimates for 2026 and 2027 presented on this slide do not include $235,000,000 of anticipated remaining PFAS project expenditures, which we expect will be incurred over the next few years. In addition, the estimates do not include any capital investments required in Nevada or Oregon. The positive impact of our capital investment program and what it is having on our rate base is presented on slide 11. If approved as requested, the 2024 California GRC, coupled with planned capital investments in our utilities in other states and our recently announced system acquisitions in Nevada and Oregon, would result in a compounded annual rate base growth of almost 12% through 2027. Moving to slide 12. We continue to maintain a strong liquidity profile to execute our capital plan, to fund BVRT greenfield utility growth, and to integrate Nevada and Oregon systems. At year-end, we had $51,800,000 in unrestricted cash and $45,600,000 in restricted cash, along with approximately $470,000,000 available on our bank lines of credit. We maintain credit facilities totaling $600,000,000 that are expandable to $800,000,000, with maturities extending to March 2028. On October 1, 2025, we issued $370,000,000 in long-term financing, which consisted of a combination of Group notes and Cal Water first mortgage bonds. We also renewed our ATM program in May 2025 with a $350,000,000 shelf registration, and completed $1,500,000 of program sales in the 2025 fourth quarter. Importantly, underscoring the strength of our balance sheet, both Group and Cal Water maintained strong credit ratings of A+ stable from S&P Global. And finally, in January 2026, we declared our 324th consecutive quarterly dividend of $0.33 per share. We also announced our intended 2026 annual dividend of $1.34 per share. The $0.10 per share increase represents an 8.1% increase over 2025. This would be our 59th consecutive announced increase. So we had a lot going on in 2025, and we are really looking forward to 2026. With that, I will turn it back over to Martin. Martin Kropelnicki: Alright. Thanks, Jim. And just to remind everyone, 2025 was the third year of the rate case. When you look at the press releases, people might say, well, you are essentially flat year-over-year. You are off a penny year-over-year, but remember coming out of COVID, there was a pretty big spike in inflation. We have absorbed those costs within that period, and we are waiting for rate relief on that. Historically, the third year of the rate case in California, being approximately 92% of our total operations, we really feel that inflationary lag in that third year. So all in, I am happy with how we ended up the year. We would have ended up stronger if we did not have that atmospheric river really wipe out the West Coast consumption here in December. But, overall, I think we finished the year in a good position as we wait for the rate case in California. I am on slide 13, and I want to talk a little bit more about the deal with our friends at Nexus Water. When you look at slide 13, this acquisition is meaningful because it strengthens our position as a leader in the Western US by adding two additional states and diversifying our geographic footprint. In addition to that, it also increases our regulatory diversification by X. If you exclude BVRT, this adds about 40% to our operations outside the state of California. So the geographical diversification and the regulatory diversification, we think, are really, really important. At year-end 2025, the acquired systems represent about $109,000,000 of rate base and a purchase price of approximately two times rate base, consistent with our allocation of capital and our disciplined approach to looking at acquisitions. In addition, at the proposed purchase price, we believe this deal will be accretive within the first year, backing out some of the one-time integration costs that we will have entering these two new markets, closing the deal, and welcoming the Nexus employees to California Water Service Group once the deal is approved by the regulatory commissions in the appropriate jurisdictions. So overall, we are really happy with this deal. We expect it to be accretive the first year, and we look forward to integrating the systems onto our platform. Moving on to slide 14, it just gives you an illustration of what the footprint looks like as we operate and expand into a total of eight states. So again, diversifying out of California, extending our footprint in these other states, and I was doing some work in preparation with our board and looking back in 1926 when we were founded, and we started with four little water systems in Northern California and how they have grown. At some point, we bought the system called Bear Gulch in the 1920s and early 1930s, and I am sure some people thought, why would they want to buy a system down in Silicon Valley? All it is is farmland down there. So, you know, as we acquire these new systems, you know, we like to think of them as seeds in robust markets that will grow over time, and that is consistent with our capital strategy. Look for systems in growing markets that we can continue to invest capital in and grow out their infrastructure to continue to improve service and spread our baseline cost over a larger base. Both states, Oregon and Nevada, operate under a hybrid ratemaking framework, which really provides some visibility into the future rate relief for capital investments that are needed. In addition, Nevada allows for a DSIC, which we think is a regulatory best practice, and the framework is consistent with our existing long-term infrastructure investment strategy. On slide 14, this deal will add about 36,000 equivalent residential units, so it is water and wastewater. With a larger footprint, we see opportunities to optimize our corporate costs and leverage our base to allow us to lower the overall marginal cost for customers while making sure we meet and exceed water quality standards and build resiliency into the system. We will also benefit from strong regulatory relationships within the states. We were very impressed with the employees and the states of Oregon and Nevada. As we know, we are big believers in strong regulatory relationships, and we believe that is the underpinning of the long-term stability of the system and our success on the regulatory side. In addition, these systems come with embedded growth pipelines, including both tuck-in acquisitions and other opportunities to add around the existing systems to grow out. So we are excited about that. And then finally, we were very impressed with the staff and the asset quality of the systems. When you look at deals, I think most of you know Shilen as our Chief Business Development Officer, but a lot of times you go look at someone and they look different than you or they operate different than you. You know, we were very impressed with the operation in Nexus Water. Looking at slide 16, I am going to hand that over to Shilen. It is not surprising for those of you that know Rob McClain and the management team at Nexus. They do a very good job, not only with their people, but with the quality of their systems that they operate in. So we look forward to a smooth approval process with the commissions in Oregon and Nevada, integrating the systems onto our platform, especially in the state of Nevada, which we deem as a high-growth state. Shilen has also been our General Manager in Texas, managing our Texas operations. Shilen, you want to talk about the transaction we executed and what is going on in Texas? Shilen Patel: Yes. Thank you, Martin. We have entered into an agreement to acquire the remaining outstanding membership interest in BVRT in Texas. As you recall, it was a joint venture, and we are acquiring a minority. Upon closing, we will become the sole owner of seven regulated water and wastewater utilities located in the high-growth corridor between Austin and San Antonio. As you can see on this slide, at 2025 year-end we have more than 19,000 committed customers, about 5,000 are connected currently, with an additional 20,000 likely in the next foreseeable future, and then about 100,000 in the long-term potential customers as our systems grow and mature. The transaction will require our Texas subsidiary to file a change-of-control application, and it is contingent on regulatory approval and other customary closing conditions, including the PUCT and also California Water Service Group board approval once we receive PUCT approval. Strategically, consolidating full ownership enhances governance, simplifies the structure, and allows us to fully capture the long-term growth and infrastructure investment opportunities within this market. We continue to expand through ongoing system buildouts, with sustained customer growth and infrastructure enhancements, really positioning the platform to support that growth. I am really looking forward to continuing to build on the successes that the team locally have put in place for the last six to seven years. Martin, I will turn it to you. Martin Kropelnicki: Sure. Thanks, Shilen. Greg Milleman: Turning to the 2024 California general rate case, we are expecting a proposed decision very soon. As we previously reported, in the case we proposed to invest $1,600,000,000 in water infrastructure in order to continue providing safe and reliable water service to our customers. We also requested revenue adjustments of just a little under $3,000,000 over the three-year period. Given where we are in the process, and given the fact that the commission can vote as early as 30 days after the proposed decision is issued and oral arguments are made, we believe that if the commission were to issue a proposed decision by March 5, there would be adequate time for the commission to consider and adopt the final decision at the next voting meeting on April 9. Obviously, we will provide an update when we receive the proposed decision. Turning to slide 18. I will provide a brief update on regulatory activity across our other jurisdictions, and I will start with Hawaii. In November 2025, we filed a rate case in Hawaii for our Kapalua district requesting $2,200,000 in annual revenues to recover higher operating costs and system improvements. Additionally, in October 2025, the Hawaii PUC approved a $4,700,000 annual revenue increase for Hawaii Water's five Waikoloa systems, with a two-year phase-in that began in October 2025. Moving to Texas, during 2025 interim rates were adopted and implemented in July 2025. These rates are not subject to refund, and we are waiting on a final PUCT approval that is currently pending. Moving to Washington. In September 2025, Washington Water filed a rate case with the Washington Utilities and Transportation Commission requesting a $4,900,000 annual revenue increase to recover costs of system investments and rising operating costs. We expect the case to be completed and new rates implemented in 2026. Overall, these filings demonstrate our continued investment in infrastructure, proactive regulatory engagement, and disciplined efforts to align rates with the cost of providing safe, reliable service. Martin, back to you. Martin Kropelnicki: Thanks, Greg. And I am now on that last page. So what are we focused on in 2026, our centennial year? First and foremost, we are committed to a timely completion with Nexus Water for Nevada and for Oregon and working with Nexus Water to completely transition there, and in a way that is good for customers and good for the employees. We expect to successfully close those transactions on time. We will continue to pursue growth opportunities in these high-growth areas, as well as change-of-control applications that we are working on. And then, of course, once we get the 2024 rate case done, it is a three-year cycle in California, and then we have the rate case that Greg just mentioned in Hawaii and in Mexico—well, it just keeps moving forward. As Greg mentioned, we have a lot of regulatory activities going on, whether it is the acquisitions we announced or planning the 2027 general rate case. Again, just to remind everyone, the primary growth engine at California Water Service Group is really the reinvestment of existing capital into our rate base. And as Jim said, we were just about 10% year-over-year in CapEx. That is the primary growth genetics, any of the PFAS stuff. And then, secondarily, we plan on strategic acquisitions like what we have done here with Nexus that add to the existing platform. But having criteria that we use to evaluate acquisitions is really important because we want to maintain that 10% cadence on the CapEx line, while balancing public health and sustainability and reliability. Affordability continues to be an issue. We know and understand that. We have been able to keep our rates affordable and maintain our rate base growth and ensure our systems are resilient, and we are building resiliency into our systems as we deal with things like climate change. And then, of course, lastly, we continue our disciplined strategy on the regulatory side, working with our regulators, staying focused on the rate cases, getting those to put us to the needs of our customer, and continuing with our capital replacement program. So we will continue looking at that and making sure we are being disciplined. With that, Desiree, we will open it up for questions, please. Operator: We will now open for questions. If you would like to ask a question, press star then the number one on your telephone keypad. Martin Kropelnicki: I would say that the California Water Association over the past three or four years has been really focused on educating the commissioners about the impacts of the delays on customers, and we have seen actions moving to get the cases out on a more timely basis. Second, one of the lead advocates for that is the commissioner that is assigned to our case, Commissioner Matt Baker, and he is very focused on getting decisions out on time. And then the third thing with where we are feeling where our proposed decision should be coming out pretty soon is the water division staff at the commission has been asking us for information to help them process and get to publish the PD. Very similar to what they did in the 2018 GRCs right before the PDs came out. And that long term, the cases will come out on a more timely basis. So that is where I feel. And then short term for our case, we see it coming out in the very near future. James Lynch: We were not getting questions. As Greg said, we got a lot of questions at the very, very end, and then the stuff was submitted, and then we waited and waited and waited and waited. There was not a lot of communication. Martin Kropelnicki: I was being politically correct in my opening comments, Davis. But you know, in the last rate case, it was just kind of like a black hole. The PD came out all of a sudden. It has been really different in this case. The judge, when it was delayed, gave us the 3% interim rate increase right away, which we thought was good. They have been asking questions throughout the process, which is good. And so we have seen a lot of activity, which leads us to believe they are very focused on it. They have not given us any assurances of a date, but it has been very clear that they have made it a priority at the commission. I think the other big thing that has changed now from where it was in the 2021 rate case is affordability is a big issue. And when you deal with things in California like the skyrocketing electric rates that people had to deal with and gas rates that are up, you know, the commissions are getting more scrutiny about rate increases. And so you cannot get a rate case out and have the idea of making our rate increase look worse than what it really is. I do not think the commission likes being in that position. And while you have an assigned ALJ, it can vary commissioner by commissioner. The real hearing officer really is the commissioner because they deal with those complaints from customers when rates go up. And so the commissioner kind of sets the tone in these cases. So I think we are fortunate we have Baker assigned to our case, who used to run the Office of Ratepayer Advocates. He has been setting the tone: we need to get the rate cases out on time and be reasonable and diligent in our approach. So I think for now, I frankly expect to get a decision here relatively soon. Obviously, when it comes out, it is material. So we 18 it right away when it comes out. Davis: That is super helpful, and thank you both for all the details there. Davis: Maybe my second question, Martin, I appreciate you bringing up the DSIC in Nevada. I was just going to ask about maybe the friendliness of operating environments, or specifically any key regulatory mechanisms in either Oregon or Nevada that are worth calling out, either that are in place now or that you might be pursuing. That would be helpful. And I think, Jim, you also mentioned in your comments, CapEx, of course, does not include potential investments in these, and maybe it is too early to say, but any thoughts on what those might look like would be helpful too. Greg Milleman: Yeah. Sure. Let us start with Nevada. Nevada has a very reasonable commission environment, which is positive. They also have decoupling in Nevada. They allow construction work in progress in rate base. They have a mechanism for interim rate memorandum accounts if your case is late. They allow adjustments for changes in your water production costs from your wholesalers, and their cases take about six months to complete. In Oregon, they have a hybrid system of a rate case with a historic test year that allows about a half year of capital improvements in your first year being included in the case. In addition, Nevada allows for a DSIC. They are allowing consolidated or statewide rates to be phased in over six years for the water systems. In Oregon, about half of the systems are nonregulated wastewater systems. Nexus has treated them as they treat their regulated entities, and they file a rate case for those entities. Those are the kind of frameworks in the two states. James Lynch: Yeah. And I think as far as the CapEx goes, Davis, as a result of that, there is kind of a capital plan in their last rate case. So as we move forward and get more familiarity with the systems, that number could change. But I would expect in the first couple of years, somewhere between $20,000,000 to $30,000,000 in CapEx between the two systems. First of all, they are historic. We can clearly work through them, but Nevada did file a pre-approval of what the levels are going to be at least in Nevada. We feel there is also a lot of opportunity there for tuck-in acquisitions around the systems, especially in Nevada. I think there is some great opportunity there that we are going to be able to take advantage of, not only because it provides us the diversification that Martin talked about, but because there is an opportunity for us to continue investment growth. Davis: Super helpful again and thank you. Maybe if I could be greedy and sneak in one more quick one. I saw yesterday the EPA appears to have officially moved forward now with the PFAS push-out that has been talked about for a few quarters. I know we have talked about this before, and Martin, you have said your plans here probably will not change. Continue to make the upgrades as they come. But maybe just give any update on funds that are flowing as a result of the class action suit, and then if that first piece is indeed correct. And thank you very much. James Lynch: Yeah. No. Good question, Davis. I think I have used the example: it is really hard to look at a mother with their child and say, yes, there is something in the water that is not safe, but do not worry about it for three years. That just does not work. And I think consumers have gotten fairly well educated on water, because, you know, as a utility, our product is consumable, and it is ingested. There is no room for error on water quality. It is absolutely critical. That is why it is in our bonus plan. That is why it is published right up front. We show what the ramifications are. Our goal is to meet all primary and secondary water quality standards every moment that we operate in. Obviously, as this becomes a new MCL, we have to be compliant with it. So we are moving forward with our plans. What we have seen when you have had this fight between the states and feds on when does it go, where does it go—if the feds have said, hey, we might delay this three years—we have seen states say, okay, but we are going to make it effective sooner. Because, again, I do not think anyone wants to not protect their citizens. I think that is really important. So we are moving ahead as planned. In 2025, I believe we spent about $20,000,000 on our PFAS programs, and that is really getting all the program logistics up, the planning for all the construction, putting the contracts out to bid, procuring all the materials, and scheduling out. We are running it as a corporate, group-sponsored program. There is a PMO—project management office—with a very good engineer leading that program. The senior management team gets updates on it all the time, and everything is being scheduled out. We are going to continue going full steam ahead. I expect in 2026 we are going to spend between $50,000,000 and $70,000,000 on PFAS. Again, that is incremental to the capital numbers that Jim has shared. In terms of recoveries, what is the net amount that we have recovered so far? Is it forty-some-odd million? James Lynch: The net amount is slightly below $40,000,000 after the attorneys have taken out their share of the proceeds. But we continue to work on other opportunities to fund those investments. We have a pretty strong grant program underway that is really going to help us, I think, in some of our more challenged districts and states. So we are looking at potential grant dollars in addition to the recovery dollars. The other thing I would just add is that $235,000,000 that we are anticipating in terms of spend for PFAS, you have to think of it in two tranches. One is the treatment, and the other is where new wells need to be drilled in order to either replace old wells or to put new wells in where we do not believe there is as big of a contamination problem. The treatment is going to be in place much quicker than the wells. It usually takes us three, four, five years depending upon the permitting process to get those wells going. A majority of the treatment, we anticipate right now, will be put in place by the 2020 step—well, it is phased, but yes. Davis: Outstanding. Thank you very much. Appreciate all the detail. Martin Kropelnicki: Alright, Davis. Have a good day. Please feel free to call with follow-up. Take care. Operator: And, again, if you would like to ask a question, press star then the number one on your telephone keypad. There are no further questions at this time. I would like to turn the call back over to Martin Kropelnicki for closing remarks. Martin Kropelnicki: Alright, Desiree. Thank you everyone for joining us here today. Obviously, 2026 is starting off with a bang. We have plenty to do on our agenda at California Water Service Group, and we will look forward to integrating the acquisitions that we talked about, the Nexus acquisitions as well as the BVRT acquisitions that we announced, getting the rate cases—staying focused on the rate cases, getting those to put us as quickly as possible—and then continuing with the PFAS treatment in our capital program. There will be plenty to talk about at the end of Q1, and we will look forward to giving you an update then. So until then, thanks for joining us today. Be safe, and we will talk to everyone soon. Thank you. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Joining us today are Gregory S. Marcus, Chairman, President, and Chief Executive Officer, and Chad Paris, Chief Financial Officer and Treasurer of The Marcus Corporation. As a reminder, this conference is being recorded. An operator will be happy to assist you. At this time, I would like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir. Thank you, Drew. Chad Paris: Good morning, and welcome to our fiscal 2025 fourth quarter conference call. I need to begin by stating that we plan to make a number of forward-looking statements on our call today, which may be identified by our use of words such as “believe,” “anticipate,” “expect,” or other similar words. Our forward-looking statements are subject to certain risks and uncertainties which may cause our actual results to differ materially from those expected or projected in our forward-looking statements. These statements are only made as of the date of this conference call, and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. The risks and uncertainties which could impact our ability to achieve our expectations identified in our forward-looking statements and our fourth quarter results, are included under the headings “Forward-Looking Statements” in the press release we issued this morning announcing Form 10-Ks, and in the “Risk Factors” section of our annual report, which you can access on the SEC’s website. Additionally, we refer you to the disclosures and reconciliations we provided in today’s earnings press release regarding the use of adjusted EBITDA, a non-GAAP financial measure, in evaluating our performance and its limitations, a copy of which is available on the Investor Relations page of our website at investors.marcuscorp.com. All right. With that behind us, this morning, I will start by spending a few minutes sharing the results from our fourth quarter and the full year, and discuss our balance sheet, liquidity, and capital allocation, and then I will turn the call over to Gregory S. Marcus who will focus his prepared remarks on where our businesses are today and what we see ahead for 2026. We will then open up the call for questions. This morning, we reported a quarter of solid execution and results, with both divisions delivering year-over-year revenue and earnings growth and outperforming their industries. In theaters, a film slate that featured a favorable film mix coupled with strong per-cap growth drove meaningfully improved market share. In hotels, our renovated properties were winning in their markets, attracting increased leisure demand at higher rates that drove our RevPAR outperformance, capping a record revenue and EBITDA year for the division for the 2025. Turning to the numbers and starting with a few highlights from our consolidated results, we generated consolidated revenues of $193,500,000, a 2.8% increase compared to the fourth quarter last year, with revenue growth in both divisions. Our fourth quarter operating income of $1,700,000 was negatively impacted by $5,200,000 of non-cash impairment charges in the theater division, which are excluded from adjusted EBITDA. Excluding the charges, our fourth quarter operating income was $6,900,000, growing 5.2% compared to operating income of $6,600,000 in 2024, excluding impairment charges and nonrecurring expenses in the prior year. We delivered $26,800,000 of consolidated adjusted EBITDA, a 3.6% increase over the prior-year fourth quarter. There is one unusual item in the fourth quarter below operating income that impacted our net earnings and earnings per share that I would like to highlight. Our fourth quarter and full-year income tax benefit includes an approximately $7,600,000, or $0.24 per share, benefit from federal and state historic tax credits earned related to the completion of the Hilton Milwaukee renovation. The impact of the credits is excluded from our adjusted EBITDA operating results. For the full year fiscal 2025, consolidated revenues increased just over 3% from the prior year with revenue growth in both divisions. Consolidated operating income for the year was $17,100,000. Excluding the fourth quarter theaters impairment charges, full-year operating income was $22,200,000 compared to operating income of $25,900,000 in fiscal 2024, excluding impairments and nonrecurring expenses in the prior year. Finally, adjusted EBITDA for the full year decreased 3.1% to $99,300,000. Turning to our segment results, I will start with theaters. Our fourth quarter fiscal 2025 total revenue of $123,800,000 increased 2.2% compared to the prior-year fourth quarter. It is important to note the shift in our fiscal calendar favorably impacted our revenue and attendance comparisons over the prior-year periods. Our fiscal year ended on December 31 this year compared to December 26 in fiscal 2024, resulting in five additional days in our fiscal fourth quarter during the busy week between the holidays compared to the prior year, while removing four days in late September when business is slower, and resulting in one net additional operating day for the quarter. The shift in our fiscal calendar and additional days between the holidays had a 6.8 percentage point favorable impact on admissions revenue growth and a 6.4 percentage point favorable impact on attendance growth compared with the prior-year fourth quarter. On a calendar quarter basis in both periods, comparable theater admission revenue increased 6.1% over 2024 with a more favorable mix of family films that played well in our markets. Comparable theater attendance decreased 5.7% in 2025 compared with the prior-year fiscal fourth quarter, while on a calendar quarter basis in both periods, comparable theater attendance decreased 12.1%. Average admission price increased 12.7% during 2025 compared to last year and was positively impacted by strategic ticket price optimization actions implemented during peak demand periods, changes to promotions during the holiday periods, and a higher mix of 3D tickets. According to data received from Comscore and compiled by us to evaluate our fiscal 2025 fourth quarter results using our comparable fiscal weeks, U.S. box office receipts decreased 1.5% during our fiscal 2025 fourth quarter compared to U.S. box office receipts in 2024, indicating our theaters led the industry, outperforming by approximately 7.6 percentage points. We believe our outperformance is primarily attributed to our strategic pricing actions with the slightly less concentrated film slate resulting in less than a one percentage point decrease in overall film cost as a percentage of admission revenues for the fourth quarter. For the full year, film cost as a percentage of admission revenues was flat compared to fiscal 2024. Per-capita concession, food and beverage revenues increased by 7.2% during 2025 compared to last year’s fourth quarter, which was driven by increases in incidence rate, higher merchandise sales, concessions pricing changes, as well as a favorable film slate that featured multiple titles appealing to family audiences, a genre where our circuit typically performs well. Our top 10 films in the quarter represented approximately 70% of the box office in 2025 compared to approximately 75% for the top 10 films in the fourth quarter last year. On the higher revenues, theater division adjusted EBITDA was $24,100,000, just under a two percentage point increase compared to the prior year. Reimbursements were $60,400,000 for 2025, a 5% increase compared to the prior year. Turning to the hotel division revenues and results, RevPAR for our owned hotels grew 3.5% during the fourth quarter compared to the prior-year quarter, driven primarily by higher revenues, as our newly renovated hotels continue to attract demand and drive higher rates. Our properties continue to perform well against the industry as a whole. Average daily rates grew 5.6% during the fourth quarter compared to the prior-year quarter, with our average occupancy rate for our owned hotels at 60.2% during 2025, a 1.2 percentage point decrease in our occupancy rate compared to 2024. The shift in our fiscal calendar and net one additional operating day in the quarter had an insignificant impact on the hotel division revenues and results. Based on data from STR, when comparing our RevPAR results to comparable upper-upscale hotels throughout the U.S., the upper-upscale segment experienced an increase in RevPAR of 0.8% during the fourth quarter compared to 2024, indicating that our hotels outperformed the industry by 2.7 percentage points. Comparable competitive hotels in our markets experienced a RevPAR decrease of 2% for 2025 compared to 2024, indicating that our hotels outperformed their competitive set by 5.5 percentage points, as well as a heavier mix of transient leisure demand at higher rates. Group demand remained generally steady during 2025, with group rooms representing 35% of our total room mix compared to 36% of our room mix in 2024, with our group mix in 2025 reverting to more typical levels. Finally, hotels’ fourth quarter adjusted EBITDA was $7,300,000, an increase of 3.4% compared to the prior-year quarter. Shifting to cash flow and the balance sheet, our cash flow from operations was $48,800,000 in 2025 compared to $52,600,000 in the prior-year quarter, with the decrease in cash flow from operations due to unfavorable working capital changes related to the timing of payments relative to our fiscal year-end. For the full year, cash flow from operations was $84,200,000 compared to just under $104,000,000 in fiscal 2024. Total capital expenditures for fiscal 2025 were $83,000,000 compared to $79,200,000 in fiscal 2024, which was primarily comprised of Hilton Milwaukee renovation project payments and maintenance projects in both businesses. During the fourth quarter, we repurchased approximately 118,000 shares of our common stock for $1,800,000 in cash. This brings our share repurchases for 2025 to just over 1,100,000 shares, or approximately 3.6% of our outstanding shares at the beginning of the year, returning approximately $18,000,000 in cash. Our cumulative buybacks since resuming share repurchases in the third quarter of 2024 are now over 1,800,000 shares, or approximately 5.7% of our outstanding share count when we began, returning nearly $28,000,000 in capital to shareholders. In total, over the last two years, we have returned over $45,000,000 in capital to shareholders through share repurchases and dividends paid during fiscal 2024 and 2025. We remain committed to returning capital to shareholders through our quarterly dividend and share repurchases. We plan to grow the dividend over time and opportunistically repurchase shares when we generate cash in excess of our near-term ability to reinvest or deploy for strategic growth. We are disciplined in our approach. While we often do not control the timing or availability of deals, we continue to actively search for opportunities to deploy capital to grow our businesses. Looking ahead, an overview of our current capital allocation priorities for 2026: We expect total capital expenditures of $50,000,000 to $55,000,000 based on our current portfolio of assets, with approximately $25,000,000 to $30,000,000 in hotels, and $20,000,000 to $25,000,000 in theaters. The timing of our planned capital projects may impact our actual capital expenditures during fiscal 2026, and we will continue to provide updates as the year progresses. We expect this decrease in capital expenditures to result in a significant increase in free cash flow in 2026, which will be allocated to opportunistic growth investments and returning capital to shareholders. With that, I will now turn the call over to Gregory S. Marcus. Gregory S. Marcus: Thanks, Chad. Good morning, everyone. We delivered another record year in our hotel division. With Chad covering many of the details of the quarter, I would like to start today by reflecting a bit on the year. As is often the case with our two divisions, the story of the year was a bit mixed, while successfully executing on some very big projects that we expect to have long-term returns. In theaters, while the box office came up short of expectations for the year, audiences continue to come out and have strong demand for the theatrical experience. We have periods of steady product supply. Because of the hits-driven nature of the business, the difference between a decent year and what would have been considered a great success was essentially one or two films that did not hit as expected. For our company specifically, our fourth quarter results were quite strong, with both businesses outperforming their industries. Theaters featured a diverse film slate with family content that played well in our markets and helped us achieve strong market share. In hotels, strong leisure demand, particularly at our recently renovated assets, helped us end the year on a high note. Importantly, the fourth quarter film slate featured a diverse mix of films across genres that played well in our Midwestern markets and appealed to wide ranges of audiences, particularly families. I will start today with our theater division. We achieved above-average market share for seven of the top 10 films in the quarter, including particularly strong share from Wicked, Zootopia 2, and Avatar: Fire and Ash. We exit the year with good momentum, and as we look ahead to 2026, we are encouraged by the growth opportunities that we see ahead. Chad went over the numbers for the quarter with you, including our strong per-cap growth for both concessions and food and beverage, as well as average ticket price that drove our outperformance for the quarter. Second-tier films beyond the top 10 also made important contributions to the overall box office, with mid-sized films like Regretting You, One Battle After Another, Marty Supreme, and Song Song Blue delivering compelling stories that audiences wanted to experience on the big screen, rather than sitting at home on their couch. The well-rounded holiday slate offered something for everyone, and it is a great example of when our industry is at its best. While we had great blockbuster films like Avatar and Wicked that drew big crowds, the box office was so much more than the tentpoles, with multiple films working at once that appealed to different types of audiences. Our market share was also strong with several movies in the second-tier films, including double our normal market share for the Milwaukee-based hometown favorite story, Song Song Glu. While the overall industry box office was softer than anticipated, we continue to believe this is largely a function of product supply and individual film performance. October was impacted by softer carryover from September releases than we saw last year, as well as a few titles that did not hit as we hoped. November’s slate had one less tentpole film over the Thanksgiving holiday compared to 2024, when the box office included Wicked, Moana 2, and Gladiator 2. This dynamic continues to illustrate the importance of maintaining consistent and steady product supply that is balanced throughout the year to support the momentum of moviegoing. And we had a more robust film slate in December. We again saw audiences come out as we would expect. As Chad discussed, we saw strong per-capita growth during the quarter, with the average ticket prices benefiting from our ongoing price optimization efforts. As we have discussed throughout 2025, this has been an evolving effort to strike the right balance between capturing price during peak demand periods, as we did during the busy holiday periods in the fourth quarter, and maximizing attendance by having various price points for different types of customers. In addition to optimizing price, we are focused on other opportunities to grow per-capita by looking at every step in the customer journey. During the fourth quarter, we began rolling out a new queuing line system that consolidates multiple concession lines into a single line that is then served by multiple concession attendants. The single line moves faster, improving customer perception, and is proving effective at increasing per-capita candy and merchandise sales. During the quarter, we made progress testing several initiatives that we believe will be drivers of per-cap growth in 2026. First, for a significant majority of our customers, their first interaction with us is the digital ticket purchase. While we have offered web- and mobile app-based ticketing for many years, we saw an opportunity to improve this purchase experience. We have completely redesigned our digital ticketing experience to make the purchasing experience as easy, fast, and frictionless as possible. In November, we launched a new digital ticketing experience for mobile web browsers and our mobile app, followed by the launch of an entirely newly designed marcusleaders.com website in early February. The new site simplifies finding the movie, theater, and showtimes that work for customers, while speeding up the process of seat selection and payments. We are very encouraged by the early feedback from customers. Second, we continue to focus on improving the customer experience for our best-in-class menu of expanded food and beverage options. Again, the goal here is simple. We know from experience that when customers order concessions, food, and beverage on our mobile app, they buy more as they are consistently presented with upsell and cross-sell offers. We are working to significantly improve our mobile web ordering experience and are going to make the ordering process as easy and frictionless as possible. We are well positioned for the ramp-up in business as we head into spring and summer movie season. Third, we are working on improving the digital ordering experience and fast, with integrated digital wallet payment options that significantly speed up the transaction process. In December, we began testing QR code food and beverage ordering for delivery to seats at two of our dine-in Movie Tavern locations, for those customers who want a fast digital ordering experience but have not yet downloaded our app. The QR code ordering is simple, and the early results have shown encouraging growth in F&B per caps at these locations. We are in the process of rolling out QR code ordering to all our 20 Movie Tavern and Dine-In theaters. This will be followed by a redesigned food and beverage digital purchase experience in our mobile web and app for all locations later this year. For those customers who prefer the more traditional purchase experience at the box office, concession stand, and our bars and restaurants, we began rolling out new tap-pay terminals in the fourth quarter, and we expect to have the rollout complete at all points of sale by the end of the first quarter. We expect these investments in technology will not only make the purchasing process easier for our customers and enhance per caps, we expect to get additional data and insight into our customers and their preferences through the new payment technology we are integrating across our various sales channels. We expect to leverage these insights to better tailor our communications and marketing with more customized offers and highlight coming events of interest. We believe it is very important to have programs that promote and incentivize repeat moviegoing, and we have created several with this goal in mind, including Marcus Passports, Marcus Mystery Movie, and Marcus Movie Club. These programs can also have the added benefit of bringing customers out to see a broader range of small and mid-sized films in addition to the blockbuster films, which we believe supports a healthier overall exhibition ecosystem. While these programs offer a lower ticket price in the short term, they are important drivers of long-term future income. In November, we reached the one-year anniversary of Marcus Movie Club, our subscription program that offers monthly or annual memberships with several great benefits for customers, including a 20% food and beverage discount, access to additional companion tickets for $9.99, and waived digital ticketing convenience fees. After our first year of Movie Club, we added free Marcus Mystery Movies as a new benefit for members, and we continue to look for ways to drive membership and usage of the program. Approximately 38% of members have selected the annual membership, which we believe supports our long-term goal of driving repeat moviegoing. Marcus Movie Club is one of several programs that promote and incentivize repeat moviegoing, including Marcus Passports, Marcus Mystery Movie, and our loyalty program Marcus Magical Movie Rewards, which now has 6,900,000 members. As we look ahead, we are very excited by a 2026 movie slate that includes several potentially very strong titles, including Jumanji 3, Toy Story 5, Minions and Monsters, The Odyssey, The Mandalorian and Grogu, Dune: Messiah, Spider-Man: Brand New Day, the Super Mario Galaxy movie, and Avengers: Doomsday, just to name a few. There are many more great films coming, as noted in today’s earnings release. The current slate has a stronger mix of tentpole films, and the grossing potential of 2026 franchises is greater based on their historical predecessor box office performances. Looking even further ahead, the early look at the 2027 film slate also looks strong with major franchises, including Shrek 5, Star Wars: Starfighter, Minecraft 2, Frozen 3, The Batman Part Two, Sonic the Hedgehog 4, Spider-Man: Beyond the Spider-Verse, The Legend of Zelda, Avengers: Secret Wars, and many more. We are excited about the momentum that is building in theaters and the film slate ahead in the coming years, and we remain very positive and optimistic about the long-term future for the industry and our theater business. Moving to our Hotels & Resorts division, you have seen the segment numbers and Chad shared the highlights of our performance metrics for the quarter, so I will focus my comments on the year overall and looking ahead. We are pleased to report that, after another strong quarter to end the year, our hotels team delivered another record-breaking revenue and adjusted EBITDA year in fiscal 2025. This is quite the achievement, given that we are comparing against a record fiscal 2024 that benefited from the Republican National Convention and election-related business that did not recur in 2025. Even more impressive considering that we also completed the largest hotel renovation project in our history at the Hilton Milwaukee, which disrupted operations and negatively impacted results with a significant number of rooms at the hotel out of service during the first half of the year. Even with the negative impact of the renovation, our RevPAR growth outperformed our competitive set for the year by 1.2 percentage points, and we really saw an inflection point once we completed the renovation, as we outperformed the competitive sets by over five percentage points in the second half of the year. The demand environment was mixed in 2025 with group demand generally remaining strong, particularly at our properties that play well to group business. Leisure demand was mixed across our portfolio in 2025 compared to last year, with some markets seeing softness while others were positive. Demand remains strongest at the upper end of the market, and our upper-upscale properties are performing well in an environment where consumers continue to gravitate toward premium experiences. While we have made significant capital investments in our hotels over the few years, we have also been disciplined with the returns required for these projects. Milwaukee is a good example of our approach. The Hilton Milwaukee renovation wrapped up in the fourth quarter with the lobby and lounge, public common spaces, ballrooms, meeting space, and updated 554 guest rooms. It looks fantastic, and it is a convention center hotel that Milwaukee can be proud of. As we chose not to renovate the 175-room west wing of the hotel and remove the rooms from the Hilton system at the end of December. Place. Running approximately 3% of in the year for the year. Place. Running approximately 3% of in the year for the year. Ahead of where we were at this time last year. Looking a bit further out to 2027, group pace is slightly behind where we were at this time last year for the next year out. Banquet and catering pace for 2026 and 2027 is ahead of where we were at this time last year. Based on the current demand environment and our future bookings, our outlook for 2026 remains positive. We are excited about the opportunities for future growth in the hotels business. I would like to once again express my appreciation for our dedicated associates at The Marcus Corporation. Chad Paris: On behalf of our Board of Directors and our entire executive team, thank you to all of our associates. Their outstanding work and commitment to serving our customers is responsible for our success. They are our most important asset, and we appreciate all that they do every day. Operator: Thank you. If you would like to ask a question on today’s call, please press star, and to withdraw your question, it is star followed by 2. We will now open for questions. We will go to Eric Wold from Texas Capital Securities. Your line is open. Please proceed. Eric Wold: Thank you. Good morning, guys. There was a lot of shifts in the pricing strategy last year. I guess, first question on the theater segment. You sounded like you implemented a few more things in the holiday period. Maybe give us a sense of what we should expect throughout 2026 in terms of cadence based on the programs currently in place, what you will come up against in this May, and how that should play out throughout the year? And then on the hotel side, given the comments you made around seeing increased leisure demand and higher ADR as the renovations have come to fruition last year, maybe give us a sense of what you are seeing in terms of bookings in 2025, and then as we look forward, what you are seeing with leisure versus group and if you expect to see more of a shift back to leisure in your mind? And if that is the case, what do you see as the implication of that? Chad Paris: Thanks, Eric. Yes, in terms of the cadence through the year, really, it is going to be the anniversarying of our price changes that we made midyear in 2025. I do not see customer sensitivity to price changes. We do want to continue to drive attendance, so it is really going to be more about per caps in that business on the F&B side, and that is where our focus is going to be. And then on the hotel side, you started lapping some of the headwinds in May. I would say, through the first part of the year, we are trying to be very thoughtful about customer sensitivity to price changes. Maybe give us a sense of what you will come up against in May and how that should play out throughout the year. Got it. Gregory S. Marcus: Let me start with the very last part of your question on group pace. You may recall at the beginning of 2025, we were seeing very significant increases in group pace early in the year, and then that flattened out a bit. We ended the year with growth that was mid-single digits, but we started the year much higher than that, and so we had a huge step-up early in the year last year, which is, I think, in part why our pace for 2026 is at, right at the moment, low single digit, because we had a big step-up last year. Timing of when those events get booked really can vary from year to year, and so I would not read too much into what we are seeing right now for 2027. It is still pretty early. Group overall remains healthy, and as we have said over the last few months, or a few quarters, our renovated properties are winning really well with groups. What we have seen, at least in the fourth quarter, is we are also doing a really nice job, even in the slow season, capturing strong leisure demand around the weekends, and we did that here in the fourth quarter. Upper-upscale continues to perform better than the lower end of the market. The nature of our properties—these “special assets”—is that they play in both the group and leisure. That is the good thing about our properties that we have talked about; our properties play well to that type of customer. If we see softening in one area, we can start to be more aggressive in another. Even in a flat overall demand environment in leisure, we can capture demand there. If you look at them, they are located and demo really well. We see a share nicely. Eric Wold: Got it. Helpful. Thank you both. Operator: Our next question comes from Michael Hickey from Stonex. Your line is now open. Please go ahead. Michael Hickey: Thank you. Hey, Greg, Chad. Congrats, guys, on a great 4Q with outperform. Greg, your 2026 setup here sounds very encouraging on both the theater side and the hotel side. The slate looks exceptional. It seems like it will meet your demand there. Do you see a sort of mid-single digit type growth on the top line, and the premise leverage step up—step up is a big word—relative to 2025 growth on the top line? Do you think you can exceed that and free cash flow conversion? And I have got a follow-up. Thanks, guys. Gregory S. Marcus: Well, you know, hope springs eternal. Hope is going to tell you hope springs eternal in the theater business. Soon. I mean, it certainly, as you said, on paper, looks good. It looks like it plays to our markets, and we talked about it, but this is an art form. We do not know how it is going to turn out. In 2025, we did not have one blockbuster over $500,000,000. That was a challenge, and it looks like the potential for these is better. We have a very significant PLF footprint. It is probably the highest penetration of PLFs in the industry. We are very focused on making sure that our prices are market appropriate and that we are offering the right product for the right customer, so when those customers are there, we are going to be able to capture the top line and the bottom line. Yet, as you know, our pricing strategies have lots on. We are prepared to capitalize and maximize on whatever comes our way. We have programs for the customers that do not want to spend as much—our Tuesday program remains very robust. A big push for us this year is going to be our Movie Club as we continue to really build that base of business. If you are in our theaters now, if you do not join the club, you are not paying attention. I mean, they are just really working hard to build that base of business. It reminds me a lot of the hotel business where you sometimes fill a hotel with a base of customers to sort of shrink the size of your hotel. And I think others in the industry who have seen a significant buildup in membership on the theater side enjoy that benefit of a continued income stream. So we are very focused on that as well. Then on the hotel side, we will continue to see the benefits of all the investment we have made in these properties. They look so good. We should see good performance as long as the economy stays solid, we will be in good shape. The only thing I would add on the film mix is that the family slate that we see ahead for 2026 should benefit a circuit like ours in the markets that we are in. In 2025, we did not really have a family animated film that hit, and we saw the power of that over the holidays with Zootopia. As we look at the slate for summer 2026, I do think that is a net positive for Marcus Theatres. And that dovetails nicely with the Hilton and that line in Milwaukee as our convention center continues to perform better. Chad Paris: Yes, Mike. I will take the last part of this question. In terms of contribution and leverage on the incremental revenue, historically the theater business contributes at around 50% on the contribution margin line to EBITDA. And with our step down in CapEx this year, I think our free cash flow conversion on that is going to be very strong. Michael Hickey: Very helpful. On M&A, you said “actively searching.” I do not know if I have heard that from you before. Are you a little bit more aggressive now looking at maybe some M&A? And I guess, with the Warner Brother deal hanging here, Greg, if that ices theater deals or not. Regardless of that, maybe some color there because I wonder how active the market is, but I do not think it has been great. And then on the hotel side, I am not sure how active the market is. So just curious where you are focusing your attention. Do you see the biggest opportunity, whether it is theaters, hotels, or maybe another area that could be complementary to your overall business today? Gregory S. Marcus: Transaction markets have been pretty slow across the entire industry. As interest rates went up, cap rates got elevated. The economy is strong enough, the businesses are okay, so there were not forced sales. People were doing well enough to wait, or at least they are going to try and wait. It is a waiting game. That has really slowed up that market a fair amount. That is a very good point. You are right. Look, I will sort of work back to this: a lot of private equity investors with a five-year hold write a pro forma and they write a cap rate, and if cap rates are 100 to 200 basis points higher, it messes up the returns pretty significantly. So they can wait. On the theater side, again, there is very, very little transaction activity that we are seeing. We will look at anything that would come our way if we think it makes sense. A big challenge a lot of these guys have are very expensive leases, and a lot of that needs to be figured out. But then you bring up a very interesting point, which we talk about, which is, okay, what other adjacencies can we have? We have worked through these huge capital investments that we have had to go through, and so now when we have free cash flow, we are looking at the leverage we can pull, whether it is buying back stock or dividends. If we can find good investments, we would like to make them. It is very tax efficient to not pay the capital out if we can keep it invested within the company for our investors. That can be a great return. And if we cannot, then we will distribute cash as we have talked about. Michael Hickey: Nice. Thanks, guys. Good luck. Gregory S. Marcus: Thanks, Mike. Operator: Our next question comes from Andrew Edward Crum from B. Riley Securities. Your line is now open. Please proceed. Andrew Edward Crum: Okay. Thanks. Hey, guys. Good morning. I want to ask about the occupancy rate. It was down year-on-year in 4Q. Was that election-related in the year-ago period? Was it the closing of the West Wing of the Milwaukee? Or was it something else? And would you anticipate that rebounding in 2026? Chad Paris: Hi, Drew. Yes, I would start with occupancy in the fourth quarter last year did get a benefit from a bunch of group business related to the election. That definitely provided a tailwind last year. I do think in some of our markets this year, there is clearly some softness. It is very much a mix story that is market-specific and, at times, even property-specific. It is not an obvious softening trend in our markets where we are at, and we are outperforming the softness generally because of the quality of the assets and the investments that we have made. So I think the way to think about it is we should look to outperform what our markets do, even if we see some of the softness. Andrew Edward Crum: Got it. Okay. Thanks, Chad. And then Mike’s last question focused on M&A. Given the opportunity to review the portfolio, in the past you guys have made selective divestitures. Any updates there? Any comments you can give us in terms of how you are thinking about that? Gregory S. Marcus: You know, look, we are always looking at our assets, and we come at it from a strong real estate mentality. One of the things that is important, as you saw in the last few years as the bubble came across the investments, is we have to look and decide, okay, is the investment going to be a good investment for us? And if we do not think the investment is the right investment for us, we can then divest ourselves of the asset, and that will happen occasionally. We do not have any major divestiture planned right this minute, but if something makes sense or the markets get very hot, we are always looking at that and saying, okay, what is the right long-term choice for these assets for our company? Chad Paris: And, Drew, we tend to immediately think about hotels in that context, but we own a lot of theater real estate, and portfolio management is an ongoing process. We are continuously looking at the performance of individual theater locations and highest and best use for the real estate. I would just suggest that store will continue to be part of a potential source of making changes, and we could add some locations too. In the past, we have monetized noncore real estate in our theater business. We might take investment and change some of the uses on some of our theater sites, and we can make investments to do that too. Again, one of our hidden assets is our real estate, and we have come at this for decades from a real estate perspective, and we may make investments on our properties that would maximize the highest and best use of that real estate. Andrew Edward Crum: Got it. Thanks, guys. Operator: As a reminder, if you would like to ask a question on today’s call, please press star. And to withdraw your question, it is star followed by two. Our next question is from Patrick William Sholl from Barrington Research. Your line is now open. Please proceed. Patrick William Sholl: Hi. Thanks for taking the question. Just maybe another question around capital allocation and M&A. Could you maybe discuss some of the differences in underwriting or opportunities in expansion, whether organic or M&A, and the differences in underwriting—just additional new builds versus the I know you talked about the difficulty with some of the leases and potential M&A—but any sort of update on those competing priorities? Chad Paris: Pat, I mean, we have looked at a number of things in the last year plus and done a fair amount of work on different opportunities. In the theater business, the challenge on M&A, consistently, has been the leases and the number of locations in a theater circuit that work and do not work when you look at a circuit overall. That mix of locations that do not work has made it very hard to get deals done if you are going to have to assume the lease. And so it really requires more of a ground game in looking and doing onesie-twosie type deals where you are picking up individual theaters in that space. That is really how we look at the underwriting—at a more granular level than in the past. New builds—we think about it. We think about attractive markets. But right now, with the product supply challenges, it is just tough to get the math to work on new construction. We are going to keep looking at it, but at the moment, it is not something I think you are going to see us do a lot of in the near term. Patrick William Sholl: Okay. And then on concessions, you had mentioned the QR ordering is helping to increase incidence. I was wondering what other components of the per-cap trends in the quarter—was it between pricing or mix and things like that? What else contributed to the per-cap trends in the quarter? Chad Paris: Yes. So in the fourth quarter, the QR code ordering actually had a really small impact. I think that is more of a 2026 benefit. We were doing a handful of test locations late in the quarter, but at those test locations, we are really encouraged by what we are seeing, and I think that is going to be a meaningful piece of our per-cap uplift for our dine-in theaters in the coming year. In the fourth quarter specifically, it was mostly incidence rate and capturing more customers. It was some of the queuing line benefit that Greg talked about and getting the basket size to grow with customers that are going to the concession stand. We have seen some traction with that, which is really encouraging. There was a little bit of price, but price was not really the primary component of what we saw in the fourth quarter. I think there was certainly some benefit in a holiday quarter of people making events of going out to the movies and just generally spending more, and I think that is encouraging to see the health of the consumer that we continue to see in the fourth quarter. Operator: Okay. Thank you. Chad Paris: Thanks, Drew. We would like to thank everybody for joining us today, and we look forward to talking to you once again in May when we release our first quarter 2026 results. Until then, thank you, and have a great day.
Operator: If you need assistance at any time, good day, everyone, and welcome to the Standard Motor Products, Inc. fourth quarter 2025 earnings call. All participants are in a listen-only mode during the question-and-answer session. Please note today’s call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the call over to Anthony Cristello, Vice President of Investor Relations. Please go ahead. Anthony Cristello: Thank you, Chloe, and good morning, everyone, and thank you for joining us on Standard Motor Products, Inc.'s fourth quarter 2025 earnings conference call. With me today are Larry Sills, Chairman Emeritus; Eric Sills, Chairman and Chief Executive Officer; Jim Burke, Chief Operating Officer; and Nathan R. Iles, Chief Financial Officer. On our call today, Eric will give an overview of our performance in the quarter, and Nathan will then discuss our financial results. Eric will then provide some concluding remarks and open the call up for Q&A. Before we begin this morning, I would like to remind you that some of the material that we will be discussing today may include forward-looking statements regarding our business and expected financial results. When we use words like “believe,” “estimate,” or “expect,” these are general forward-looking statements. Although we believe that the statements are reasonable, they are based on information currently available to us and certain assumptions made by management, and we cannot assure you that they will be correct. You should also read our filings with the Securities and Exchange Commission for a discussion of the risks and uncertainties that could cause our actual results to differ from the forward-looking statements reflected in these remarks. Eric Sills: Thank you, Anthony, and good morning, everyone. We are pleased with our results. The strong performance we have been experiencing continued into the fourth quarter, putting a cap on a solid year with good momentum heading into 2026. Our top line grew by over 12% in the quarter and over 22% for the year, and while much of this was from our Nissens acquisition consummated in late 2024, excluding Nissens we are up about 4% for the quarter and the year. Strong sales performance combined with various internal initiatives generated a favorable bottom line, both in terms of earnings growth and EBITDA margin expansion. All of our segments performed well. Let me go through them, starting with North American Vehicle Control. Sales were up a very strong 3.3% against a difficult comparison from the previous year, with several key contributing factors. First, our products are non-discretionary and largely DIFM, and so in general, the category outperforms in uncertain economic times. On top of that, we believe our customers’ success with our well-regarded spread is evidenced by their strong sell-through, and their POS was up in the mid-single digits throughout the year. As you look at the subcategories, you will note that the wire sets are a category in secular decline. Wire sets saw a 27% to 10% drop-off in the quarter, bringing the entire representable percent of the segment down to less than 10% of Vehicle Control. As such, certain customers chose to reset their shelves in the second half, right-sizing their inventories for this mature category. It is important to note that their wire set POS for this period was only down in the mid-single digits, which is more reflective of ongoing demand. Lastly, our sales in the segment benefited in the back half of the year as we began to pass through our tariffs at cost. Turning to Temperature Control, robust sales continued, up nearly 6% over a very difficult comp, though the fourth quarter is the smallest in this heat-related business. In a seasonal category like this, the cadence across orders can vary year to year, so the key measure is full-year sales, and for the full year, the segment was up more than 12%. So what is driving this? As we described on the last call, the air conditioning season seems to be elongating, starting earlier and ending later. Customers are recognizing this and getting their inventory in place ahead of the season to be able to take advantage of early demand. We also believe a key driver is the success of our A/C kit program, where we have all you need to do the repair included in a pre-packed kit. Over the last several years, we have seen increased adoption of our kits, which consist of the replacement of several system components. Not only does this increase the ticket due to more of the related parts getting included, but it also leads to an air conditioning repair done right, and it tends to end with a happier end customer as the repairs are more successful. Lastly, think about our newest segment—Nissens Automotive—which has been a part of Standard Motor Products, Inc. since November 2024. We completed our first full calendar year of ownership, and we are delighted with its performance, both in and of itself and as a complement to our other businesses and the synergies it creates. Sales remained strong, contributing $64 million in the quarter and $305 million for the year, with mid-single digit increases from 2024 in local currency. While there are reports from others with business in Europe of a general softening of the market, Nissens continues to excel. We attribute this to three primary dynamics. First, we participate in many of the same non-discretionary categories as in the U.S., which tend to remain stable in difficult economic times. Second, we enjoy strong sales in Eastern and Southern Europe, which have been outperforming other parts of the continent. But most importantly, we are gaining share. Our preliminary focus was on savings and enhanced pull-through by the workshops that seek best cost on sourced products. We are also deeply engaged in seeking synergies—insourcing as appropriate, leveraging our increased purchasing power on freight and logistics, and so on. We are also focused on cross-selling, adding coverage in new categories on both sides of the ocean. And while these initiatives can take time to show in the numbers, they represent exciting opportunities. Lastly, I will speak to our non-aftermarket segment, Engineered Solutions. It operates out of the same plants producing the same product types. It enhances our quality capabilities and access to new technologies. It provides an OE pedigree to leverage in the aftermarket, and while we can expect the segment to be more cyclical than the aftermarket, it can be subject to more volatility than the aftermarket, as it will rise and fall with demands for new vehicles and equipment across our different end markets. Halfway through 2024, business started to drop off, leading to several consecutive quarters of sluggish demand. I believe this trend reversed mid-2025, and we have experienced sequential improvement. Q4 was up about 6% over the previous year, and although the full year was down slightly, the momentum is stable. Over the past several months, we had entered a more stable environment. Finally, let me speak briefly about the current tariff landscape and its impact on our business. In the fourth quarter, our tariff-related costs were essentially offset by price. Obviously, there have been recent changes where certain tariffs are eliminated and new ones take effect. We are digesting the rules, but we have developed processes and methodologies with our customers that allow for this flexing, and we plan to continue to operate from a successful playbook. Further, we believe that our diverse global footprint will continue to provide us with a competitive advantage. The new rules allow continued exemption for USMCA-compliant goods, which is a significant part of our offer. It is worth reiterating that most of our products are non-discretionary, and as product decisions are typically made by professional repair facilities, they are relatively price inelastic at the end consumer, as our sell-through confirms. I will now turn the call over to Nathan Iles for the quarter’s financial results. Nathan R. Iles: Alright. Thank you, Eric. Good morning, everyone. As we go through the numbers, I will first give some color on the results for the quarter by segment and then look at the consolidated results for both the quarter and year. I will then cover some key cash flow metrics and finish with an update on our financial outlook for the full year of 2026. First, looking at our Vehicle Control segment, you can see on the slide that net sales of $193.7 million in Q4 were up 3.3% while being up against a difficult comparison from a year ago when the segment grew 4.9%. While we continue to see a decline in sales of wire, as Eric noted, we were pleased to see the engine, electrical, and safety categories grow a combined 6.3% versus Q4 last year. Vehicle Control’s adjusted EBITDA in the fourth quarter was even with last year at 11.1%. Adjusted EBITDA margin was flat as higher sales volume was offset by some gross margin rate compression from passing through tariffs at cost, as well as some higher distribution expenses as we transition into our new warehouse. Turning to Temperature Control, net sales in the quarter for that segment of $61.5 million were up 5.9% for the reasons Eric said. Temperature Control’s adjusted EBITDA increased in Q4 to 13%, due to higher sales volumes that led to a higher gross margin rate, as well as improved operating expenses as a percent of sales for the quarter. While adjusted EBITDA was very good in the fourth quarter, keep in mind that the fourth quarter profit is generally lower than other quarters, as it is a low point in the year for sales volume. Next, let me touch on Nissens. This fourth quarter was the first time we have year-over-year results, as we acquired the business on 11/01/2024, and so the fourth quarter was up from last year, partly reflecting an additional month of results in 2025, but also continued strength in the segment. Adjusted EBITDA for Nissens increased to 10.1% of net sales in Q4, and the full-year adjusted EBITDA margin of 15.9% was in line with expectations. As this was our first full year of ownership of Nissens, this was the first year we needed to assess the internal control environment of this formerly private business according to Sarbanes-Oxley requirements. As noted in our 10-K filed earlier today, we disclosed that we identified a material weakness in internal controls in our Nissens segment over financial reporting related to its general information technology controls. We are expeditiously taking action to remediate controls as we do a thorough review of all our numbers, and we received a clean opinion from KPMG. Turning to Engineered Solutions, sales in that segment in the quarter were up 6.3%, and we were pleased to see growth return to the segment as we lap market softness that began in the second half of last year. Adjusted EBITDA for Engineered Solutions in the quarter was up from last year, as higher sales led to better gross margin and operating expense leverage. While we did incur some one-time costs related to winding down certain customer programs in the quarter, these were adjusted for non-GAAP reporting. Let me just say we had a great quarter and year. We were pleased to see both the top and bottom line increase in this segment. Consolidated sales increased 12.2%, and adjusted EBITDA increased to 9.7% of net sales in the quarter. Further, non-GAAP diluted earnings per share were up 19.1% as a result of higher sales and the strength of operating performance. For the full year of 2025, our sales increased 22.4% over last year, and 4% excluding Nissens, helped by strong sales in both our North American aftermarket segments. Our adjusted EBITDA was up 160 basis points, and our non-GAAP diluted earnings per share increased 26.8%. We were pleased to see our top line coming right in line with prior expectations, while our bottom line came in above the range previously provided. Turning now to cash flows, cash generated from operations for the full year of $57.4 million was down $19.3 million from last year. Our cash flow was lower in 2025 mainly due to an increase in inventory during Q4 as our business continues to grow and we prepared for the upcoming selling season. Note that part of the increase in inventory is also due to higher tariff costs during the year. CapEx is slightly lower than last year as capital spending related to the DC is nearing completion. Financing activity shows payments of $27.3 million of dividends, as well as $27.7 million of borrowings on our credit agreement. Note that we repaid $51.4 million on our credit from Q2 through Q4, and with that, our net debt stood at $546.7 million. We finished the quarter with a leverage ratio of 2.7 times EBITDA, and believe we are on track to get to our target of 2.0 times by 2026. Before I finish, I want to give an update on our sales and profit expectations for the full year of 2026. Before I do, let me note that our 2026 outlook does not take into account changes in U.S. tariffs on imported goods. We follow changes closely, but things change continuously, creating uncertainty in the market. Whatever the impact is on our business, we will continue to offset our costs with a dollar-for-dollar pass-through in pricing. We expect sales growth in 2026 to be in the low- to mid-single-digit percentage range, driven by continued momentum in North America and Europe and more stable market conditions in our Engineered Solutions segment. Our outlook for adjusted EBITDA margin is a range of 11% to 12% of net sales and reflects margin benefits of sales growth, but also some continued margin compression from passing through tariffs at cost, and continued investment in our business. Regarding operating expenses, keep in mind these expenses are incurred more ratably across the year and as such will fluctuate with seasonality in the business. In connection with our adjusted EBITDA outlook, we anticipate total operating expenses inclusive of factoring will be approximately $106 million to $114 million each quarter in 2026. We expect interest expense on outstanding debt to be about $30 million for the full year and depreciation and amortization to increase to $45 million to $50 million, as we will have a full year of depreciation on distribution center investments. Finally, as noted, there is a seasonal aspect to our business with regard to Temp Control products we sell in North America and Europe. Our preseason can span across Q1 and Q2 with some variability between quarters, and given we saw a large amount of growth in Q1 last year in these products, we will be going up against a difficult comparison in Q1 2026, so it is important to look at the first half of the year in total regarding cadence of sales. To wrap up, we are very pleased with our sales and earnings growth in 2025 and that we can share expectations for further growth in 2026. We continue to execute on many initiatives, including integration of Nissens, and expect to realize increasing benefits from that in 2026. Thank you for your time. I will turn the call back to Eric for some final comments. Eric Sills: Thank you, Nathan. In closing, let me just spend a moment discussing how we are viewing things in 2026 and beyond. Even in the face of a challenging economic environment, we have enjoyed several consecutive quarters of strong performance and believe that this momentum will continue. Within our legacy business, the North American aftermarket, we operate in strong and stable markets and are outperforming due to a combination of structural advantages, customer relationships, and execution. We target the repair professionals with quality products and brands they trust, and these are the folks making the purchasing decisions, creating pull-through to our channel partners. And we nurture our customer relationships with a program they value and with the execution they rely on. We have made great strides in diversifying our business with new product categories, all with the focus on seeking complementary attributes. Our recent geographic expansion with the acquisition of Nissens is exceeding our expectations. They continue to impress us as terrific operators with strong relationships with their customers. They enjoy many of the same benefits I just described for us here, both in terms of market dynamics and their place in it, and the more we work together, the more we are impressed with their team, their capabilities, and our ability to identify opportunities. Our Engineered Solutions business is on the rebound, and while it can be volatile, it is a strong complement to our core business and generates favorable returns. We continue to gain traction with blue-chip customers around the world, leveraging the breadth of our offering and our capabilities. And as we become known, doors are opening for us. And while we continue to see supply chain complexity, we feel that we can navigate it better than most, and so we remain very bullish about the future. We will now open for questions. Operator: Thank you. If you would like to ask a question, please press star one. Our first question comes from Scott Stember with Roth Capital. Your line is open. Scott Stember: Thank you, gentlemen, and congrats on the very impressive results. Eric Sills: Thank you, Scott. Scott Stember: Eric, in Vehicle Control, in the release it says that your filter or POS was essentially in line with what you had seen through the first three quarters. Does that assume that you were up low- to mid-single digits at sell-through? Eric Sills: Yes, that is correct. And if I was unclear on that, I apologize. The POS was pretty consistent really all year long for the big players, which was in the mid-single digits. Scott Stember: Okay. And very strong growth in the business outside of wire. Maybe just talk about some of that. I know you have been much more focused on increasing your portfolio of products earlier in their life cycle and with more complexity in electronics. Maybe just talk about how that is coming about. Eric Sills: Yes, great question. And that is one of the reasons why we do break the subcategories out the way that we do. We have carved out the wire business to show that it does perform differently just where it is in its life cycle. To the other areas where we do continue to see growth, our Vehicle Control offering is extremely broad, expands many, many categories whether it is addressing conventional engines or safety-related products or other electrical products around the vehicle, and what we are seeing is a proliferation of not only SKU opportunities but also replacement rates on some of the newer technologies. So it is an evolving category. It is a growing category. In the aftermarket, nothing moves very quickly, as you know. Scott Stember: Can you talk about cross-selling, new customers introducing to each other, and, I guess, cross-pollination of products? Some of these initiatives? Eric Sills: In the aftermarket, nothing moves very quickly, as you know. But what we are seeing is that there continues to be opportunities for growth across both conventional technologies and some of the newer ones. Since you started by asking about the growth opportunities, let me respond to that. We have a lot in common product categories. So, for example, we both sell air conditioning compressors. What we did over the course of 2025 was to look first at where we saw gaps for us to expand their North American coverage with what we already had, and some opportunities where they had some SKUs that made sense for us to add. But the bigger area that we are excited about is identifying entire categories that one was in and the other was not, and so we added several of these in 2025 for the Nissens offering, some in Nissens Europe and some in Nissens North America, really capitalizing on product strength that Standard Motor Products, Inc. brought to the table. Ignition coils is a really great category here. It is one we are very strong as a manufacturer of. We manufacture them all in Poland, which is a great selling point in Europe for Europe. We launched in December a line of ignition coils. Now it is about getting out there in the market, getting traction—getting some shelf placement with the distributors—so really 2025 was a year of putting the programs in place. We expanded some of their air conditioning subcategories that they were not in on both sides of the ocean. We are excited about the potential. This is really one of the things we came into this acquisition thinking—that while we have a lot of common categories to seek synergies, we also have these complementary categories to add and seek growth. Scott Stember: Got it. And then one more on the cost side of things, and this is the area you have been talking about all year long, as you have looked at commonizing vendors, beefing up those vendors, and figuring out where there are cost-type synergies. You had talked about an $8 million to $12 million run-rate savings by 2026. Are you still comfortable with that? And then a follow-up on the timing of the remediation of the internal control issue in Europe, with both the technical solution and compensating controls. Eric Sills: We came into this saying that we would have a run rate of $8 million to $12 million in savings by 2026. We are very comfortable with that. We believe we are ahead of that. It is important to note this does not all hit the Nissens P&L. This gets spread across the entire enterprise P&L because, as we have seen, the savings can benefit both sides as we each benefit the other in what we bring to the table. Nathan R. Iles: Yep. And, Scott, like I said, we are working on it. I believe we are making very good progress, and we will update you as soon as we can on that front. Eric Sills: Thank you, Scott. Operator: We will take our next question from Bret Jordan with Jefferies. Your line is open. Bret Jordan: Hey. Good morning, guys. Eric Sills: Good morning, Bret. Bret Jordan: You talked about a tough comp in Temperature Control in the first quarter, but could you maybe give us some color as to the cooling season? Eric Sills: What we are seeing is ongoing good preseason order requirements across the customer base. As Nathan pointed out, this can hit the first quarter, it can hit in the second quarter. A lot depends on when we ship. It usually ends up being right at that crossover point. Last year, we did a lot of them in the first quarter. That is why you saw last year’s Q1 was really very strong. This year, we think it is going to be more normalized. Inventories are up slightly, but they are really tracking with how much their sales are up, so they are prepared versus previous years in terms of readiness for the season. Bret Jordan: A couple of the large parts distributors in Europe are talking about private label programs that they are emphasizing. Can you be a private label supplier via Nissens and pick up share if they gain share with private label? Eric Sills: Certainly. We do a little bit of private label there today. We really have been emphasizing our brands, and the majority of our sales there—about 80% or so of our sales in Europe—are under the Nissens brand. We have two other brands: AVA and one that is more dedicated to commercial vehicles called Highway. So each has its positioning within the space depending on customer need. But we do see private labeling as something that is a successful partnership when it works well for both partners, and so if we see opportunities there, we will certainly capitalize on those and pick up share if they gain share with private label. Bret Jordan: And then, obviously, you get good visibility on tariff outcomes here. Is there any opportunity for tariff rebate collection, or are you just not as exposed to some of that Asian import product? Eric Sills: We are in the same boat as everybody else. I think that is still very unclear. If you are asking about refunds from the AIPA tariffs, I think it is still very unclear how that is going to play out. If there is an opportunity, we will certainly avail ourselves of that, but I think we are aligned with what we are hearing in the broader market. Operator: And once more for your questions, that is star one. We will pause just a moment. At this time, there are no further questions in the queue. I would now like to close the Q&A session. Eric Sills: We want to thank everyone for participating in our conference call today. There was a lot of information presented, and we will be happy to answer any follow-up questions you may have. Our contact information is available with Investor Relations.
Operator: Thank you for your continued patience. Your meeting will begin shortly. As a reminder, please be sure to silence all cell phones and laptops. Stand by, your meeting is about to begin. Good morning, everyone. My name is Beau, and I will be your conference operator today. Welcome to Ecovyst Inc.’s fourth quarter 2025 earnings call and webcast. Please note, today’s call is being recorded and should run approximately one hour. Currently, all participants have been placed in a listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. Lastly, if you should need operator assistance, please press 0. I would now like to hand the conference over to Mr. Gene Shiels, Director of Investor Relations. Gene Shiels: Good morning, and welcome to Ecovyst Inc.’s fourth quarter 2025 earnings call. With me on the call this morning are Kurt J. Bitting, Ecovyst Inc.’s Chief Executive Officer, and Michael P. Feehan, Ecovyst Inc.’s Chief Financial Officer. Following our prepared remarks this morning, we will take your questions. Please note that some of the information shared today is forward-looking information, including information about the company’s financial and operating performance, strategies, our anticipated end-use demand trends, and our 2026 financial outlook. This information is subject to risks and uncertainties that could cause actual results and the implementation of the company’s plans to vary materially. Any forward-looking information shared today speaks only as of this date. These risks are discussed in the company’s filings with the SEC. Reconciliations of non-GAAP financial measures mentioned in today’s call with their corresponding GAAP measures can be found in our earnings release and in the presentation materials posted in the Investors section of our website. I will now hand the call over to Kurt. Kurt J. Bitting: Thank you, Gene, and good morning. Overall, we are very pleased with our fourth quarter results and the execution of our strategic objectives. Regeneration services contributed to a solid quarter. In terms of financial results, the fourth quarter was also a significant quarter in the context of our ongoing portfolio transformation. We completed the divestiture of the Advanced Materials and Catalysts segment earlier than expected for a sales price of $556 million, utilizing $465 million of the net proceeds to pay down our term loan, leading to a net debt leverage ratio of 1.2x at year end. This transaction has transformed the company, initiating a new focus to drive progress by delivering reliable sulfur solutions for clean fuels and critical materials. In 2025, we began executing on our capital allocation strategy with the acquisition of the Wagaman sulfuric acid assets for approximately $40 million and repurchased just under $50 million of common stock. We enter 2026 with a strong balance sheet and significant liquidity that we believe positions us well to continue our capital allocation priorities directed at growth, both organic and inorganic, and the continued return of capital to our stockholders. Turning to the demand trends on slide five, our demand outlook for 2026 remains positive, underpinning the volumetric growth we anticipate. We expect favorable contractual pricing for regenerated sulfuric acid and stable pricing for virgin sulfuric acid. In 2025, U.S. refineries underwent extensive maintenance, including our customers. This year, we expect our refining customers to run at high utilization, benefiting from favorable alkylate economics. With less planned customer downtime than in 2025, we anticipate higher sales for our regeneration services in 2026. We are also anticipating higher sales of virgin sulfuric acid in 2026, with demand growing in mining, which accounts for 20% to 25% of our sulfuric acid sales, especially for copper, to support energy infrastructure in some areas. For 2026, we currently expect sales into the nylon end-use to be relatively flat compared to 2025. And while the balance of our industrial exposures are diversified, further weakening of macro factors could translate into softer demand in some areas. The integration of the Wagaman sulfuric acid production assets acquired in May has enhanced our supply network, allowing us to meet anticipated growth in demand for this year. Looking ahead, we anticipate that mining demand for sulfuric acid will increase as many traditional high-grade ores are depleted. Solvent extraction electrowinning processing of copper, which utilizes sulfuric acid for mineral extraction, is expected to become more prevalent. Ecovyst Inc. is well positioned to support expanding mining applications. Accordingly, we are investing approximately $20 million in growth capital in the Gulf Coast region for projects aimed at increasing storage capacity and improving rail logistics, thereby strengthening our ability to serve the evolving needs of the mining industry. Lastly, the long-term outlook for our Chem32 ex situ catalyst activation business remains positive. With future growth supported by the recently completed expansion at our Orange, Texas site. I will now turn the call over to Michael P. Feehan, who will review our financial results. Michael P. Feehan: Thank you, Kurt, and good morning. We closed out the year with a solid financial performance in the fourth quarter. Delivering full-year adjusted EBITDA of $172 million, ahead of our previously provided guidance. As a reminder, with the divestiture of the Advanced Materials and Catalysts segment, the results for the business are reported in discontinued operations for all periods. My comments this morning pertain to the reported results from continuing operations. Our strong fourth quarter results were driven by continued sales growth in both volume and pricing, resulting in adjusted EBITDA of $51 million, 8% ahead of the prior year. We generated $78 million of free cash flow, of which we used $20 million in the fourth quarter for share repurchases. And with the proceeds from the sale of the Advanced Materials and Catalysts business, we paid down $465 million of our term loan, resulting in a 1.2x net leverage ratio, leaving $265 million of available liquidity. Diving a bit deeper into the numbers, fourth quarter sales were $199 million, up $51 million, or 34%. Excluding the $28 million impact of higher sulfur cost pass-through in price, sales were up 15%. However, this was more than offset by higher sales of virgin sulfuric acid, including the contribution from the acquired Wagaman assets, and favorable contractual pricing for regeneration services, partially offset by higher planned fixed manufacturing costs, including incremental costs of the acquired Wagaman assets, and by unplanned and extended customer downtime. The 8% increase in adjusted EBITDA for the fourth quarter reflects the favorable volume and price impact at the sales level and favorable contractual pricing for regeneration services. While the adjusted EBITDA margin decreased 630 basis points compared to 2024, this reduction primarily reflects a significant increase in sulfur costs, which we passed through with no material impact on adjusted EBITDA. The pass-through effect accounts for approximately 500 basis points of the period-over-period decrease in margin. Turning to the adjusted EBITDA bridge, I will highlight the major components of the change in adjusted EBITDA for the quarter. As previously noted, sulfur costs in the fourth quarter were approximately $28 million compared to the year-ago quarter, with the pass-through having no material impact on adjusted EBITDA. Our price/cost impact was a positive $8 million for the fourth quarter, primarily driven by favorable contractual price in our regeneration services business. And while we had lower regeneration services volume in the quarter due to unplanned and extended customer downtime, higher volume from our virgin sulfuric acid sales, including the contribution from our Wagaman acquisition, drove the nearly $6 million volume benefit in adjusted EBITDA. Other costs increased approximately $11 million, the majority of which reflect incremental fixed cost associated with the acquired Wagaman assets, along with higher planned manufacturing costs associated with general inflation. As we move to cash and debt, for the year, we generated adjusted free cash flow of $78 million, which included both continuing and discontinued operations. We utilized our cash generation to execute on our capital allocation strategy, including the $41 million acquisition of our Wagaman sulfuric acid assets and share repurchases aggregating $47 million for the full year. We currently have approximately $183 million remaining under our share repurchase authorization. With our significantly reduced leverage, our ample liquidity, and in light of our historic cash generation capability, we believe that we have significant flexibility as we look to fund our growth initiatives, both organic and inorganic, and continue to return capital to shareholders through an active share repurchase program. Turning to our 2026 outlook, we currently anticipate full-year sales to be in the range of $860 million to $940 million, with the favorable volume and price impact at the sales level, and the pass-through of higher sulfur costs of approximately $125 million compared to 2025. As we have previously discussed, we expect higher turnaround activity at our manufacturing plants in 2026, in part due to the addition of the Wagaman assets. Given the scope and number of turnarounds planned for the year, we expect turnaround costs to be higher by approximately $8 million in 2026. With the higher expected volume, we expect higher sales volume for both virgin sulfuric acid, driven by higher projected mining demand and sales of oleum grades used in the production of nylon precursors, and higher volume for regeneration sulfuric acid, as we expect less customer downtime compared to 2025. We also anticipate continued favorable contractual pricing in regeneration services. With the favorable volume and price impact at the sales level, partially offset by higher manufacturing and transportation costs and additional turnaround costs, we expect full-year adjusted EBITDA to fall in the range of $175 million to $195 million. We are opportunistically investing growth capital in 2026, including the funding of a number of projects to debottleneck assets and accelerate organic growth. These include the ongoing expansion of tank storage and adding additional rail capacity in the Gulf Coast. As a result of these growth projects, we expect higher capital expenditures this year, approximately $20 million higher, resulting in a range of $80 million to $90 million. As a result of the higher growth capital spending, as well as an expected $10 million increase in working capital, driven by the impact of higher sulfur costs on inventory and accounts payable and the associated pass-through impact on sales and accounts receivable, we expect adjusted free cash flow to be in the range of $35 million to $55 million. In addition, with the significant reduction in our term loan, we expect interest expense to be approximately $18 million to $22 million in 2026. With our current cash balance and expected free cash flow generation, we plan to continue to execute on our capital allocation strategy, driving value for shareholders through growth opportunities and further share repurchases in 2026. As we move to the next slide, I will provide some directional guidance by quarter for next year. As you will recall, our results for 2025 reflected significant planned customer downtime, as well as a higher level of planned turnaround activity at our sites. While we have an active turnaround schedule in the first quarter, with three of our seven planned turnarounds, increasing our expected turnaround cost, we do not expect the same negative impact on sales volume from the customer downtime. For the first quarter, we expect continued favorable contractual pricing, and we expect increased volume for virgin sulfuric acid, driven by high alkylate demand and regeneration activity during the summer driving season. As has been our usual practice, our presentation slides include some commentary around turnaround cadence by quarter for the year. The cost for individual turnarounds can vary by site and scope, and the timing is subject to change. We expect first quarter adjusted EBITDA to be up $8 million to $13 million compared to 2025. We expect the second and third quarters to be peak quarters for adjusted EBITDA consistent with historical experience. I will now turn the call back to Kurt for some closing remarks. Kurt J. Bitting: Thank you, Mike. We are extremely pleased with our progress in 2025, and I want to thank my Ecovyst Inc. colleagues for their efforts in supporting our customers, delivering on our commercial objectives, and for their contributions as we continue to implement our strategic plan. In a challenging demand environment, our business demonstrated resilience in 2025. Sales of virgin sulfuric acid increased, in part driven by the acquisition of our Wagaman sulfuric acid assets. As the integration of the Wagaman site continues, we are benefiting from the positive network effect Wagaman’s assets have on the reach and capability of our supply chain. In terms of demand driven by high refinery utilization, the favorable business fundamentals of our regeneration services business remain unchanged. Although our regeneration services business was adversely affected by a significant number of unplanned and extended customer outages in 2025, in 2026, we are expecting growth for both our virgin sulfuric acid sales and the value represented by alkylate economics for our regeneration services business. With stable pricing expected for virgin sulfuric acid and continued positive contractual pricing for regeneration services, we look beyond 2026 and believe the demand outlook remains positive for all of our businesses. The divestiture of the Advanced Materials and Catalysts business at year end represents a transformative event in our ongoing portfolio optimization. As we move forward, driving growth for the eco services platform, we will do so with a more stable and predictable business profile, a significantly strengthened balance sheet, and with a cash generation capability and liquidity position that we anticipate will provide for significant capital allocation flexibility. This year, we are increasing our capital budget to support targeted organic growth projects that we expect to strengthen our service offering for mining clients. Key initiatives include expanding Gulf Coast storage and optimizing logistics, which will strengthen our service offering. These projects are scheduled for completion in 2027. In 2025, we repurchased approximately $50 million in common stock, and during 2026, we plan to continue this strategy with additional repurchases totaling between $25 million and $40 million. We plan to take a disciplined approach towards inorganic growth, prioritizing accretive acquisitions that extend our reach to customers and end segments. Concurrently, we remain committed to returning capital to stockholders through an active share repurchase program. In summary, our focus this year will remain on driving profitable growth, positioning Ecovyst Inc. for future opportunities, and optimizing value for the benefit of our stockholders. At this time, I will ask the operator to open the line for questions. Operator: Thank you, Mr. Bitting. Ladies and gentlemen, at this time, if you do have a question, please press. We will go first today to John Patrick McNulty of BMO Capital Markets. John Patrick McNulty: Yes, good morning. Thanks for taking my question and congratulations on a solid year. Just wanted to dig into the Wagaman opportunities a little bit more. So you have had the asset for a bit of time, you have made some investments in it. I guess, can you help us to think about how much capacity that has freed up for you and as a result, how much growth you could necessarily get without having to put in much capacity or incremental capacity? Because it sounds like you are even further trying to unlock some flexibility with the storage increase and the rail increase. So I guess, can you help us to contextualize all this? Kurt J. Bitting: Sure. Thanks, John. So the Wagaman sulfuric acid assets that we added last year, of course, added roughly around 10% of volume to the overall network. It came along with its own customer book and sales, which we are obviously servicing. We are really seeing the positive network effect. It is a force multiplier with our Gulf Coast network where all the sites now can back each other up in terms of turnarounds and so forth, and enable themselves to take advantage of additional opportunities that they may have had to pass on if they were on their own. It fills the cracks in terms of the supply network and allows us to take advantage of more opportunities. It also is our only site that has a deepwater vessel dock. We actually did export a ship of sulfuric acid there. It adds a lot of capability to our overall site. As we move forward, the way we look at our Gulf Coast network and the investments that we are making, we clearly want to focus the Houston production more to the West. We are making additional investments that we talked about on our logistics and storage capabilities, which are going to be Houston-based to service more of the Gulf Coast assets with that plant, and the Wagaman assets and the production that that brings allows capacity into our Gulf Coast system, enables us to further service that and take advantage of the rising tide on the mining demand. Does that make sense? John Patrick McNulty: Yes, completely. That definitely helps. And then, I guess, on the regen contract pricing, can you help us to quantify that a little bit? It sounds like you were getting some benefits in 2025. It sounds like that is a continual kind of repricing, but how should we think about the lift in 2026? Michael P. Feehan: Yes, John, thanks for the question. Yes, it is going to be a similar lift. I think, as we have talked in the past, every year the contractual agreements that we have start to roll off. It is usually between 15% to 20% a year; it just depends on the size of the customers and how they shape up. With basic costs going up, with the inflation and how the contracts are structured, with indexing and other factors, it does provide a benefit. So it is a continued benefit similar to what we saw this year. That is going to extend into next year, and again, it just depends on timing of when some of those customer contracts come up and when they are put in place. John Patrick McNulty: Thanks very much for the color. Just regarding the weakness that you are citing in industrial applications—nylon, obviously, we have seen some pretty promising indicators with U.S. PMI inflecting, maybe nylon bottoming out—but are there any specific applications that you want to call out or factors that you would highlight, which is giving you some caution here? Kurt J. Bitting: Patrick, thank you for the question. Our basket of what we call industrial uses spans a very wide spectrum. As you know, sulfuric acid is the most widely used chemical in the world, and there is anything from core alkali production to nylon to other petrochemicals. There are a lot of different things and a lot of different drivers there. We just see some caution in some of those areas. I do not think it is over-caution or a real worry. We service such a wide and diverse basket of folks there that could be impacted by any of the global things going on between tariffs or some of the downturns in some of the chemical end markets. For us, our biggest one is, as you referred to, nylon. As we have clearly pointed out, we expect to be roughly on par with where we were in 2025, so we do not really project any degradation there. Operator: Thank you. We will go next now to Patrick David Cunningham of Citi. Patrick David Cunningham: Hi, good morning. On a go-forward basis, as you think about CapEx or acquisition multiples, how do the economics of greenfield versus debottlenecking compare to current existing virgin facilities? It seems like there is a lot you may want to do or need to do to meet long-term mining demand. Kurt J. Bitting: Yes. That is a great question. I think with the way we have treated our sites over the past, I would say, 10 or 15 years, the demand from the mining sector has risen, and we are going to continue to do that—debottlenecking in our sites from both the production standpoint as well as the logistics standpoint. As that rising tide happens with mining, we are able to stay ahead of it by making the logistics and storage investments that we just talked about. We have got some additional debottlenecking that we can do. We can leverage more of Wagaman’s production into our Gulf Coast system, and we are going to continue that pattern, enabling us to stay ahead of the demand and further service that. Operator: Thank you. We will go next now to Aleksey V. Yefremov of KeyBanc Capital Markets. Aleksey V. Yefremov: Thanks. Good morning, everyone. I just wanted to follow up on the same subject. The expansion that you are undertaking in 2026, is it tied to any specific ramp at your customers in mining or elsewhere that you anticipate? In other words, do you have contracts or some sort of indication from your customers that they will need additional volumes for sulfuric acid, specifically as it relates to copper? Kurt J. Bitting: We have long-term relationships with those customers, and we are confident that the demand will be there. It is a mixed bag of what is driving that additional demand—there are actually some new projects that have come online, and there is also additional demand from existing mines. We have been servicing a lot of these mines. So we feel it is appropriate for us to add this additional capacity. We have the logistics capacity to meet that growing demand long term, coming from our plants in the Gulf Coast. Aleksey V. Yefremov: And as a follow-up, how would you characterize the current state of the merchant acid market either right now or if you have a view on 2026—is the market sort of long, tight, or about balanced from a supply-demand perspective? Kurt J. Bitting: Thanks for the question. I would say it is in a balanced position. In our call, we talked about pricing being stable. I would say it is leaning towards a balanced market, however, there are certain segments of the market that are all over the board in terms of the different end-use applications. Some of those are up, some of those may be down. On the whole, our view at this point is a push in general. Other sectors that use sulfuric, like mining, are obviously rising. The long-term trend, certainly as you look at things like mining, is growing demand there. Operator: We will go next now to David L. Begleiter with Deutsche Bank. David L. Begleiter: Thank you. Good morning. Kurt, on your full-year guidance, the low end looks maybe a little conservative. What would you need to see to get the low end of the range? And conversely, what type of drivers would you expect to see to get to the high end or above that range for the year? Kurt J. Bitting: Thank you for the question. Starting at the high end of the range, if there is a lift in things like virgin acid pricing that comes about because of demand growing and it putting upward pressure on pricing in the virgin sulfuric acid market, that would help. Our outlook on regeneration, as we talked about, is expected to run at pretty high utilization. We expect a pretty healthy year in terms of regeneration. I do not think there is going to be tremendous movement on that because that is a stable, contracted business, and we do not expect spot volumes that become available. On the low end, it would largely be driven by things like unplanned customer outages similar to what we had last year, or potentially a macroeconomic event that causes a deterioration in either pricing or volumes on virgin sulfuric acid. Conversely, if there is some positivity and pricing, or spot, we could trend toward the upper end. David L. Begleiter: Very clear. And, Kurt, now with the balance sheet restored to strength, how do you see Ecovyst Inc. in three to five years? What do you want to be? Where do you want to go? From an inorganic standpoint, in terms of M&A, what could be additive to the portfolio that you are looking at today or maybe down the road? Kurt J. Bitting: Thanks for the question. The Board and the management team are carefully looking at our capital priorities as we focus on maximizing the value for our shareholders over the long run. Number one, we see opportunities in front of us in mining and other spaces. That is going to entail us investing in organic growth as we see the demand for sulfuric acid and the sulfur molecule grow. We want to make investments there and continue to be a leading supplier in that space, so we can further service our existing customers or existing industries that we service in a better way. Number two, growth through sensible and accretive acquisitions—accretive bolt-on acquisitions that make sense that are either adjacent to us from a chemistry standpoint or a service standpoint—to become bigger. And finally, as we have talked about with our flexible capital allocation strategy, we still see value in share repurchases as well as a tool. It is a flexible strategy that allows us to push in all three of those directions, which we think can help us drive better value for shareholders over the long run. Operator: Thank you. We will go next now to Hamed Khorsand at BWS Financial. Hamed Khorsand: Hi. Sorry if I missed this, but are you done with the investments you need to make at Wagaman? And in the near future, as you further integrate it, are you able to deliver the sulfuric acid to mining that might be a little bit higher in demand, or are your contracts pretty much fixed on volume? Kurt J. Bitting: Thank you for the question. Good to talk to you, Hamed. The integration is going well. We talked about it—It has had a positive network effect on our ability to supply our customers in the Gulf Coast. We have owned the site now for about nine months. The site is going to have a maintenance outage this quarter. There are still some additional investments that we want to make in the near future as we further integrate it and try to raise the operating rate on the location. From an operating and integration standpoint, there will be some investments made, and we expect that there will be further investments necessary if the nylon or industrial end markets are as weak as you are expecting. As we have talked about before, and I know people have followed the company, most of our virgin sulfuric acid business is not 100% supply contracts. We have very close relationships with our customers. They provide us great and accurate forecasts into what they are going to do, not only in mining but in some of the other sectors in terms of industrial. That helps us plan as we look at our year and say where we are going to place our volume. If there is a downturn or something unexpected, we do have the ability to place some additional product into different end-use segments and move things around—probably not all of it, but some portion thereof—whether it is into mining or other industrial segments that may be in the Gulf Coast. We have some flexibility to move around net volumes. Operator: We will go next now to Laurence Alexander of Jefferies. Laurence Alexander: Good morning. Just can you give a higher-level view on your M&A opportunity set? When you look at the landscape in terms of other assets producing sulfuric acid, is there any titration in terms of the quality of the assets? Can you separate out the market in terms of the addressable versus the assets that you would just not like—is it 30% to 40% of the market that you would have no interest in? Or is it potentially all of interest? Kurt J. Bitting: Thanks for the question. We would generally be interested in all those types of assets because we would have use for both since we are a leader in both spaces. We are pretty broad in terms of our sulfuric acid and the end uses we service. We service a wide swath of the market. We are not just a regeneration sulfuric acid producer or just a virgin sulfuric acid producer like some of the others out there. I would also say that extends to other exposure in terms of making sulfur derivatives for water treatment or various things where the sulfur molecule is important, as well as services where, obviously, the regeneration services, our hazardous waste services business, our Chem32 businesses all serve very high-value service businesses. Expanding further into those spaces would also be of interest. Laurence Alexander: Thank you. Operator: Ladies and gentlemen, just a quick reminder: any further questions today, please press. And, gentlemen, it appears we have no further questions in queue at this time.
Operator: Good day, and thank you for standing by. Welcome to the U.S. Physical Therapy, Inc. second quarter 2025 Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. In order to ask a question during the session, please press star followed by the number one on your telephone keypad. Please be advised that today's conference call is being recorded. If you require any further assistance, please press star 0. I would now like to turn the call over to Christopher J. Reading, Chairman and CEO. Please go ahead, sir. Christopher J. Reading: Thank you. Good morning, everyone, and welcome to U.S. Physical Therapy, Inc.’s second quarter 2025 Earnings Call. With me on the call are Carey P. Hendrickson, our Chief Financial Officer; Eric Joseph Williams, our President and Chief Operating Officer in the East; Graham Reeve, Chief Operating Officer in the West; Rick Benstein, our Executive Vice President and General Counsel; and Jason Curtis, our Senior Vice President, Accounting and Finance. Before we begin today’s call, we need to cover a brief disclosure, which I will ask Jason to go ahead and read. Jason Curtis: Thank you, Chris. The presentation includes forward-looking statements, which involve certain risks and uncertainties. These forward-looking statements are based on the company's current views and assumptions. The company's actual results may vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information. This presentation also contains certain non-GAAP measures as defined in Regulation G, and the related reconciliations can be found in the company's earnings release, and the company presentations on our website. Christopher J. Reading: Thanks, Jason. So, I am going to do this, I think, a lot like I did it last time—more of a candid overview—which allows me to tell the story a little bit better. I want to start out by thanking our partners, our staff, and our home office support around the country for just doing an excellent job. I am going to share with you some statistics that we do not normally share, we have not shared before. That relates to patient sentiment around our care. So the clinical staff, our partners, they are doing a wonderful job. We have had good strong focus and execution in a number of areas this quarter. We will talk about that. I also want to mention our industrial injury prevention partnerships. Both are really firing on all cylinders at this point. We have added a number of very large opportunities, some of which have not even started yet. And we continue to be very, very bullish about that part of our business. As we go through the stats, you will understand why. So for the second quarter—talk about physical therapy first and volumes—record second quarter for us. As you all know, the second quarter is typically our busiest quarter in terms of peak volume. And so every second quarter, pretty much—you know, last year the same was a record quarter for us a year ago. This year, our visits per clinic per day jumped to 32.7, up really nicely from, again, last year's second quarter record of 30.6. The drivers around this I think, more than anything, are happy patients who love us at the end of their care, who refer their family and friends and neighbors to us, and when pickleball happens, you know, a year or two down the road, they come back and see us. This is the stat I want to share with you that we really have not talked about before. Not a new stat for us. We measure every quarter. We have an outside company tabulate our surveys. This is company-wide. Our Net Promoter Score is 93.5. Now, just to give you some perspective, before this call, I googled what a good Net Promoter Score for a health care company is, and I got two answers. Good was 30, and excellent was 50. And so the way that we get these results tabulated, we are able to see what percentage of patients are active promoters of our business, and we are at 95%. Only 1% of our patients is a negative or detractor. So that puts us in amazingly good standing and an amazing category. Part of the reason for our success, obviously, is what we try to do every day. On the injury prevention side, again, I cannot say enough good things about our teams. Both partnerships are doing really well. Revenue is up 22.6%. Gross profit up 25.8% compared to the prior year quarter. And again, we are working on some really large contracts—one new in the auto industry, actually several new, many. One really large one and one very large one to come later in the year. Revenues in PT were up 17.3%. We added over 50 net clinics compared to the prior year period. And for the first time through this first six months, we exceeded 3,000,000 visits on a year-to-date basis so far. We were also able to drive a slight increase in our net rate, despite the Medicare headwinds, which you all know all too well about. And I just want to point out that if you go back to the period before these Medicare cuts started—which have been sequential layered cuts for a number of years—the impact in this year on those stacked cuts is right around $25,000,000. That is straight off the profit line. It has been a huge impact. It has been a major headwind. On a year-over-year basis, I cannot remember exactly—Carey can tell us—but between $5,000,000 and $6,000,000 compared to last year and this year. 8%–8.5% of our earnings on last year's number, maybe even a little bit more than that. And so to grow over 20% with that kind of a headwind consistently, we are really happy about right now. Things are coming together. Our salaries and related cost was up on a per-visit basis ever so slightly, less than 1%. But our overall cost per visit was down slightly. And really, I think beginning in March and continuing forward, we are beginning to get traction on a number of the initiatives that we have been working on that will help us impact cost, that will help us continue to drive more volume. And we are feeling better about things right now than we have in some time. When you look at PT, our gross profit margin—and we are going to say adjusted very, very slightly, I think around a couple of hundred thousand dollars only relating to an incentive payment that Metro had as a result of closing that deal—our gross profit margin came in at 21.1% for the quarter. So that is a nice move forward as well. On the development front, we have added home care business, a couple of physical therapy acquisitions. We have more to come for the remainder of the year. We intend to focus hard on our injury prevention business, given the organic and the overall growth elements in that business, the margins, just the performance of both those teams. We widened our industry verticals in that space. We widened our service offerings in that space. We are competing and winning large contracts. We are able to do that with some margin improvement as well. And so that business is very strong for us and has continued to be strong, really, for a very long time. The combination of these positive factors has caused us to look out over the remainder of the year and increase guidance, which is now between $93,000,000 and $97,000,000 adjusted EBITDA. And then before I turn it over to Carey—because I skipped through a lot of things, I wanted to tell the story—Carey is going to go through the numbers with a little bit more granularity. Again, I just want to thank our teams. At times, we endeavor every day to try to make a difference, to try to make a positive impact in patients' lives, or within the injury prevention space, in the lives of the workers who are working at our nation's largest companies, most prestigious companies, and we are having an impact. We are making the world in our little way better. And we feel really good about that. And so I want to thank everybody that is involved in that. It is making a difference, and we appreciate it very much. Carey, if you would, go ahead. Carey P. Hendrickson: Great. Thank you, Chris, and good morning, everyone. As Chris mentioned, we are very pleased with our second quarter results. A few performance metrics that stood out to me: we achieved a new company record—32.7 average visits per clinic per day. That was the highest in our history. Our salaries and related costs, as Chris mentioned, increased slightly—just 0.7% compared to the prior year. That is the smallest increase in that metric we have had since 2023. Our total operating cost per visit actually decreased year over year. Our PT margin, as Chris noted, improved to 21.1%, up from 20.1% in the second quarter of last year. Our IIP revenue, excluding acquisitions—so on an organic basis—grew 18.4%. Our IIP gross profit increased 21.8% on an organic basis. Our adjusted EBITDA increased to $26,900,000 in the second quarter of 2025, which was up $4,700,000 from the second quarter of last year. And then our adjusted EBITDA margin expanded to 17.5%, up from 16.4% in the second quarter of last year. So all of those metrics I was really pleased with. Turning to patient visit volumes, our average visits per day were 33 in April, 32.9 in May, and 32.3 in June. That slight taper in June is consistent with our historical summer patterns, when volumes dip slightly in the summer months before rebounding again in mid-August. We recorded 1,532,263 clinic visits in the second quarter and then also had 28,493 home care visits. This is the first time we have reported home care visits separately from our in-clinic visits. They stem from the home care business that we acquired through the Metro PT transaction in New York in the fourth quarter of last year. We will continue to report those separately going forward. For reference, we had 22,943 in-home visits in the first quarter of this year. And that number—the year-to-date number—is in the release too, just so you will have that for going forward. Our net rate per patient visit was $105.33. That is ahead of the $105.05 we achieved in the second quarter of last year, but it is slightly less than what we had in the first quarter at $105.66. As a reminder, we absorbed a 2.9% Medicare rate reduction that took effect at the beginning of the year. And also our largest payer in Michigan, which is our third-largest state with 56 clinics, implemented a policy change on April 1 that negatively impacted our net rate a little bit in that state. So that was a bit of a headwind too. Even with those headwinds though, our net rate held up well in the second quarter, and we expect it to grow from there. We continue our efforts to have a strategic focus on increasing reimbursement rates through targeted contract negotiations, as well as efforts to grow our higher net rate workers’ comp business. Workers’ comp represented 10.4% of our net patient revenues in the second quarter, with visits increasing 8.4% year over year. We remain fully committed to all of our rate-enhancing initiatives, and we are working on those every day. Physical therapy revenues were $168,300,000 in the second quarter of 2025, which represented a $24,800,000, or 17.3%, increase compared to the same period last year. The majority of that growth was driven by acquisitions completed since the second quarter of last year—most notably that Metro acquisition that we made in New York last November—that was $19,600,000 of the $24,800,000. Physical therapy operating costs were $133,100,000. That was an increase of $18,400,000, or 16%, over the prior-year quarter. Importantly, we managed costs effectively. Our salaries and related costs, as I mentioned, were just up 0.7%, at $60.08 per visit. And our total operating costs, as I also mentioned, were actually down year over year per visit. Our physical therapy profit margin, I noted already, is 21.1%. That is our highest quarterly margin since 2023. And that, of course, reflects solid revenue growth and the cost management. Our IIP delivered another strong performance in the second quarter. Our IIP net revenues increased $5,300,000, or 22.6%, compared to the second quarter of 2024, and income rose $1,300,000, or 25.8%, over the prior-year quarter. Then I gave the organic numbers earlier: IIP revenues increased 18.4% and gross profit up 21.8%. The IIP margin for the second quarter was 22%, which is up from 21.4% in the same quarter last year, reflecting strong top-line growth and continued focus on operational execution. Our corporate costs remained in line with expectations. They were 8.7% of net revenue in the second quarter compared to 8.5% in the second quarter of last year. We are in the early stages of implementing a new enterprise-wide financial and human resources system. Implementation costs related to that project will continue through 2026. And consistent with our practice for similar nonrecurring costs, we will add those costs back in our adjusted EBITDA calculation. Year to date, we have incurred $221,000 in implementation costs. That was really related to the selection part of our implementation. And we will start full-bore on our implementation in the third quarter. And that will always be itemized on our non-GAAP reconciliation page. Operating results were $12,400,000, up from $11,000,000 in the second quarter last year. And on a per-share basis, we were $0.81 versus $0.73 in the prior-year quarter. Our balance sheet remains in excellent shape. We currently have $135,000,000 in our term loan. A swap agreement in place fixes that interest rate at 4.7%. That extends through mid-2027. In addition, we have a $175,000,000 revolving credit facility that had $245,000,000 drawn on it at 06/30/2025. We ended the quarter with $34,100,000 in cash. As disclosed in our earnings release, the Board of Directors authorized a share repurchase program this week providing us the flexibility to repurchase up to $25,000,000 of our shares through 12/31/2026, if market conditions are appropriate. We view this as a prudent tool to have at our disposal. However, acquisitions will continue to be our primary capital allocation priority consistent with our strategic growth strategy. Our performance in the first half of the year has been strong, exceeding our expectations coming into the year. And we believe we are well positioned for a solid second half as well. And as a result, we have raised our full year 2025 adjusted EBITDA guidance from a range of $88,000,000 to $93,000,000 to the new range of $93,000,000 to $97,000,000. In effect, the high end of our prior range becomes the low end of our new range, with a $4,000,000 increase at the top. So with that, I will turn the call back over to Chris. Christopher J. Reading: I want to mention one more thing. We are happy with where we are this quarter and the progress—still have plenty of things to work on, which to me is also encouraging because we are not there yet. We have room for improvement. One of those things I want to point out, as a matter of perspective, relates to our same-store growth in mature facilities, which this quarter was a little bit lighter than maybe everybody expected. It was over 1%, but not in what I would call our normal range. Still a few markets where staffing is a little tight, and with cost control, it probably put a little bit of a damper on us. I want to point out one thing, though. Back in the spring, we initiated a staged rollout of cash-based programs. We have not spent a lot of time talking about it. As with anything, it takes a little time to get traction. We are getting real traction with that now. And so in our other income line—this does not show up as additional visits, although some are patients who are coming in for these cash-based services—we have generated about $900,000 worth of additional revenue, a lot of that coming from our cash-based services, which are continuing to ramp up as we go forward. And so that is an added benefit that we really have not had before. We are seeing some of our partnerships do extraordinarily well with that. So with that, that concludes our prepared and our candid comments, and we would like to go ahead and open it up for questions. Operator: Thank you. You may remove yourself from the queue at any time by pressing star 2. We will now open for questions. Our first question will come from Brian Gil Tanquilut with Jefferies. Your line is open. Brian Gil Tanquilut: Hey, good morning, guys, and congrats on a solid quarter. Maybe I will start with a follow-up or a question around your last comment. So as I think about your same-store outlook, how would you characterize demand for your services or just broadly in the market versus, like you were saying, kind of pulling back and managing the cost because of the clinician, the labor situation? And then maybe how do I think about your capacity versus thinking about maybe de novo builds in the future as you start bumping up against capacity constraints potentially? Christopher J. Reading: Yeah. Well, demand is really, Brian—demand is really solid pretty much everywhere. Now, there is a little push-pull we have to manage always when trying to get costs under control, and so you are trying not to be fat, to use that term—to have too many slack resources—yet you are still trying to meet demand. And we certainly—it is not perfect—have some markets where the market is still a little tight, where we have additional FTEs we need to hire where the demand is strong and yet, you know, we need some more resources. Other places are being dialed in where they need to be. So, that is a work in progress. The cash-based programs are helping us to generate additional revenue. And so that has been kind of a net add for us that we have not had before. And I am trying to remember the second part of your question. Brian Gil Tanquilut: Just as you think about capital deployment into maybe de novos as you start bumping up against capacity constraints. Christopher J. Reading: Yeah. On the de novo side, look, we are going to—We have had this market where we have had some headwinds, and we have had to deal with that. This is going to be probably the strongest de novo year that we have had since I have been with the company, so de novos are going to be good this year. They are on a really good pace. We are making adjustments and have made adjustments on the recruiting side of the house, on the residency side, which gets more students into our programs. So we think we will be able to continue to ramp into the demand. We just have to keep it dialed in right now, but I do not see it impacting our de novo openings. Frankly, in markets like New York, where net rate is considerably higher than most of our competition, particularly our small competition, we are able to do these small “AquaNovos,” which frankly we do not even announce. But we are able to do those at very, very nice multiples and get a nice rate lift as a result and a lot more resources to help them grow and scale. And so that is going to continue to be strong as well. Brian Gil Tanquilut: Chris, to follow up on that, I mean, as we think about capital deployment—obviously, the announcement of the dividend is positive—so just curious how you and the Board thought about that decision to introduce a dividend just when it sounds like this is going to be one of your best de novo years. Just thinking about the balance sheet, the cash generation, and then, yeah, just the decision to do the buyback. Christopher J. Reading: Yeah. So you mentioned dividend. The dividend is ongoing. And so we have been paying the dividend for a long time. Brian Gil Tanquilut: Sorry, sorry, my bad. I meant the buyback. Christopher J. Reading: The buyback is new. Look, we feel like the stock has been undervalued for some time. We understand health care services and having a little bit of a tough year, and we have had some Medicare headwinds, and we are making progress and continuing to grow the company. We wanted to be in a position to have flexibility at, you know, at a certain level where we could go in and demonstrate our belief that we are going to continue to grow this company and do well over time. So it gives us flexibility. As Carey mentioned, it is not our first preference for capital deployment. I would say our first preference right now, frankly, is directed toward injury prevention, where the embedded organic elements of that business are really, really strong. The next would be PT, and then, you know, on from there. We will be disciplined about any share buyback, and it is going to be dependent on other capital demands and really where the stock is at any given time. Brian Gil Tanquilut: Got it. Chris, if I may throw one more question. As I think about just the efficiency of your physical therapists, we hear about AI tools in the market aimed at physical therapists. I mean, is that something that you are throwing in the mix that is helping you out? And then maybe kind of related tangentially, you talked about your home PT business. Just if there is anything out there that you can share with us in terms of the dynamics there because, obviously, it is new to us investors, on what that business looks like. Thank you. Christopher J. Reading: Yeah. There are some cool AI tools right now. We are deploying AI-backed technologies for clinical documentation, which is helping people get through their least favorite thing of the day if you are a clinician, which is to document all the cool stuff that you did with somebody in physical therapy. You have to document a lot of things—sets and reps and weight, and motions and, you know, joint-related movements. And so it is tedious and it takes time. And so this ambient listening AI-driven assist is helping our clinicians get through that much quicker, much more efficiently. We are just on the front end of rolling that out, but that has been well received. We are rolling out what I would call, broadly, you know, a semi-virtualization of the front desk, which enables us not to go completely virtual, because I do not think we are ready for that yet—not in order; I do not think patients are ready—but an augmented situation, where we are able to focus efforts from across multiple clinics through one individual that may be on-site or remote somewhere and be much, much more efficient and save the number of front desk FTEs, which continue to be a labor challenge for us just in terms of longevity. Unlike our PT group, which, frankly, right now, is having the least amount of turnover that we have seen in maybe my recollection—really good right now. These tools are helping us get some margin and efficiencies in areas where we just have not been able to do that in the past. And we are early, but it is directionally encouraging. Thank you. Brian Gil Tanquilut: Thanks, Brian. Operator: Thank you. Our next question will come from Joanna Sylvia Gajuk with Bank of America. Your line is open. Joanna Sylvia Gajuk: Hi. So maybe first on the metric that really stood out besides the visits per clinic, but the cost per visit by a decline at all costs, right? So maybe in that context, can you walk us through or give us some update on your labor management strategies, the wage—maybe talk about turnover and other metrics you can share? Because it sounds like you are doing a pretty good job there. Christopher J. Reading: Yeah. Eric, you want to go ahead and take that, talk about turnover and some of the things we are working on and what we are seeing? Eric Joseph Williams: Yeah. This is—you know, again, you will recall from our quarterly conversations here, we made a lot of investments in systems and resources in 2024 that are really starting to pay dividends for us in 2025 as it relates to recruiting and retention. We have seen a 25% increase in student clinical rotations across our partnerships in 2025. Part of that was participating in a student rotation matching program with software—the exact software that is being used by all of the PT schools out there. So we have seen almost a 200-student pickup this year. We put in a new applicant tracking system in 2024 that has also given us better company-wide visibility across our partnerships to all the applicants who are applying for jobs. It gives us a better opportunity to follow up with these applicants, track them pre-hire, post-hire. And then for the ones, of course, that do not take jobs with us, we have this huge database that we are building of people that we can go back to when we do have job openings. So systems have made a big difference. Putting in some additional resources to help us on the recruiting front made a big difference for us. And the mentorship piece has been a major focus for us, and we really push that hard with our partners to make sure that we are connecting and spending time with the younger therapists that we bring on board in order to reduce turnover rates. As Chris mentioned, these are the lowest turnover rates we have seen for the six months this year—January through June—the lowest numbers we have seen in the last seven years. So it is absolutely making an impact for us. The pieces that we are really excited about—and Chris referenced one of them; I will touch base on that in a second—this mentorship piece, while we are really focusing it on a partnership level, which is where our clinical staff goes to work, we are in the process of building out a software platform that is going to allow us to expand our mentorship programs beyond the four walls of the clinic and beyond the existing partnership. It is going to give us the ability to connect clinicians across our company with each other, let people that have particular interests or specialties have an opportunity to connect with people that might not have that specialty within the partnership but have that expertise, and we can take advantage of that across our entire company. So we are excited about that. We think that will pay dividends for us as it relates to our ability to retain and staff. Those are the big ones. Chris, you mentioned AI—I will talk about that as well. We are in the early innings of using that voice recognition technology that Chris talked about. I think we have that in the hands of 200 or 250 PTs right now. It has been really, really well received. And I think that is going to have an impact for us over time with retention as well. I mean, you can reduce documentation as to things that clinicians hate to do the most. And right now, there are a lot of people dabbling in it. I think we are farther ahead than most. I think we are farther ahead than most large platforms experimenting with that right now. And I think that is going to help us attract and retain staff going forward. So I hope that gives some context. Joanna Sylvia Gajuk: Are you willing to share the actual turnover number that you track? Eric Joseph Williams: We actually will—we post that. We will report that publicly at the end of the year, and you will find that in our ESG. Christopher J. Reading: Yeah. Joanna, I do not want to be in a position quarter to quarter to add to our already exhaustive list of metrics, but we are in a good spot right now. In a really good spot. Joanna Sylvia Gajuk: Yes, sounds like no. Thank you. And if I may, another topic—Medicare rates—right? Been a headwind for a couple of years now, but it sounds like for 2026 there is going to be rate updates. So the overall physician fee schedule is going up between 0.5% or more—3.6%, 2.8%. And then we had an estimated like 2.5% or so for physical therapy codes. Can you talk about your estimate for your company in terms of how the rate increase would translate for your portfolio into next year? Thank you. Christopher J. Reading: Yes. Let me make a quick comment, and then I am going to kick it to Carey and help get you through the specifics. This year—and this is the proposed rule, so there is going to be a lot of commentary and certainly a lot from the PT industry—this year was the most complicated of any year that I can remember literally in my career. They changed kind of metaphorically a lot of knobs. The thing about turning knobs—they turned a lot of different knobs for RVUs, for work values, for geographic index factors. And there were particularly large swings on the geography side—so much that both us and the APTA thought that some of the tables were not correct. And so our overall assessment is—Carey can get into the specifics—but we think there is more work to be done, obviously, with CMS. Carey P. Hendrickson: Yes. Thank you. So, Joanna, we have looked at it, looking at the various geographies and what the changes were in those geographies based on where we are and the rate increases in those geographies. I think we are probably going to see somewhere between a 1% and a 1.75% increase—something like that. For us, again, positive. We are just happy to have a positive increase and not be looking at negative numbers for next year. So we are really pleased about that. If it is in that 1% to 1.75% range, that would be somewhere between $2,000,000 and $3,000,000 of a positive for us next year on the top line. And then from an EBITDA standpoint, it would translate to somewhere between $1,500,000 and $2,500,000. Again, this is a preliminary ruling. We will know the final ruling in December, and we will see if anything changes. But that is kind of where we see it today. Christopher J. Reading: Yeah. We certainly hope that it will be positive, no longer a headwind. The irony is, unfortunately, when you get under the hood and see how the sausage is made, the specialties that have the most extraordinary increases in the cost of equipment—so very expensive equipment—and have the most highly litigated areas where there are exposures to litigation and other things, which you just heard, you know, the number of patients that love us on a percentage basis. So physical therapy in general does not have that problem. And so we are making a decided push where we know that we save the system a lot of money. In fact, in the state of Maryland, where physical therapy, on a pilot program of CMS, is in the position as kind of a primary care for musculoskeletal, they determine—the physical therapists do—what happens. There is a massive annual aggregate savings. We think we should be front and center on that. So yes, we are pushing. We hope it gets better. We think there are some flaws in the existing methodology, and beyond the state of Maryland—which could be a big pay-for with CMS—to extend that to a reasonable, rational cost-of-living increase for the fee schedule. We are going to be working on that between now and year-end, and we are hoping to use those results. Joanna Sylvia Gajuk: Great. Appreciate the color. Thank you so much. Christopher J. Reading: Thanks, Joanna. Operator: Thank you. Our next question will come from Benjamin Michael Rossi with JPMorgan. Your line is open. Benjamin Michael Rossi: Hi, good morning. Thanks for taking my question here. Christopher J. Reading: Good morning, Ben. Benjamin Michael Rossi: So turning to the IIP segment performance. You mentioned adding some services here over the course of the year. Certainly seems to be off to a strong start to the first half with margins expanding year over year. Is it fair to say that that segment is coming in ahead of your initial expectations as we head into the seasonally stronger 3Q? Christopher J. Reading: Yes. I do not have in front of me exactly what our budget was, but we are definitely ahead of budget. There is a little different seasonal pattern with injury prevention. We tend to be a little light in January like everywhere else, and a little light in December where, in some of the big auto manufacturers and some of the nation's biggest manufacturers, there is an early shutdown in December. So that impacts our earnings a little bit. But if you go back, not just for this first half or this quarter, but on a year-over-year-over-year basis, injury prevention has really done well for us and had really strong organic growth. We continue to be bullish. We are spending more time in development in that area. And we are identifying good companies. And, of course, like anything else, we have got to get things done. But we expect to continue to deploy capital directionally there. Benjamin Michael Rossi: Got it. And I guess this is a follow-up to your comments on Medicare PFS rates. Obviously, it seems like the change for 2026 is kind of amounting to more of like a one-time fix, and it does not necessarily address anything in 2027 and does not obviously take you out of that $25,000,000 hole you described after decreases in recent years. Can you just walk us through where your conversations stand with your counterparts at the federal level and maybe how they are framing the decision to include that one-time fix for 2026 in the OPBBA? Christopher J. Reading: Yeah. I think it depends on who you talk to, but nobody in Congress is happy that this is an annual issue. It seems like that is how we fund the government each year—through this crisis management process that eventually ultimately gets done. A lot of chicken on both sides. And so it is certainly not the optimal way to do anything. It is certainly not fair to providers to have a one-month runway, basically, where you are notified in December what the final decision is, and then you have until all of January—through the holiday—to get things ready to go. We should have a multiyear plan. It should be locked. All of the lawmakers believe that is the way it should be. And yet, you know, let us call it a ten-year kind of permanent fix on the physician fee schedule—about a $100,000,000,000 event. And so they need savings to be able to do that. One of the big areas that we think is a saver—and we are going to use an outside Beltway analytics group to take the results that we have seen from the EQUIP study in Maryland and extrapolate those real results over the nation and create what we think is a massive savings for the system—with physical therapists in that key role, as kind of the primary care director of the musculoskeletal case. And so that is a possible pay-for—a physician fee schedule fix. It has gotten a lot of very positive attention among our lawmakers, our Congress, on both sides. CMS, I would tell you, is kind of a difficult place to be because it is so siloed. And so people have one small fraction of what amounts to a very complicated series of areas and rules and responsibilities. So we will see. But we need more than a one-year fix for sure. Each year, we hear about tariffs and all the revenue that is created. We have AMA and the hospital association—everybody else wants more than a year-to-year fix. It is unsustainable. Benjamin Michael Rossi: Great. Thanks for the additional commentary here. Operator: Thank you. Our next question will come from Lawrence Scott Solow with CJS Securities. Your line is open. Lawrence Scott Solow: Good morning, guys. Thanks for taking the question. Most of my questions have been actually answered. Just a couple. I am just curious—so the 7%, or nearly 7%, year-over-year increase in visits per day per clinic, and then the modest growth in labor and then overall operating expenses per visit—how much of that just relates to the acceleration in closures last year? I know you closed like 30 clinics, I think back in Q3. So it feels like a lot of that is just more efficiencies driving these gains. Is that fair to say? And then second part of the question is, I know you sort of discussed last year some cost-cutting initiatives. You never really put a number on it, but you thought you could add up to maybe even double-digit millions over time. I am curious how that has played into the good performance this quarter. Christopher J. Reading: There are relative pieces and parts of every one of those that go together and, you know, at the end of the day, it is like baking a cake. There are a lot of ingredients, and you hope it tastes good. I do not have in front of me the exact ingredients. In fact, some blend together, so it is a little bit hard to measure. Cost efficiencies, you know, on one hand, create both challenges and opportunities sometimes in terms of volume-related aspects. And so we are trying to do the best we can to balance technology efficiency, appropriate levels of labor—which minute to minute are never perfect—perceived demand, expansion. It is pretty complicated. It is running a business, and there are a lot of moving parts. And so all those things are coming together. What you are hearing is we are feeling more confident that the things that we have done, which again, as you point out, are multifaceted—they are coming together in the right way. But as I pointed out earlier, it is not perfect. We still have plenty to work on. There is still plenty of opportunity. The team is focused on it. But where we are feels a little better than where we have been for maybe a while now. Carey P. Hendrickson: Right. And in terms of factors in the visits-per-day growth, one of the drivers is the addition of Metro in November. And so it has been higher since that point. We were probably running at about 31 before, and then that has kicked up a little bit because Metro averages about 45 visits per clinic per day. So that does a little bit, but there is still really good growth in that overall visits per clinic per day. Lawrence Scott Solow: Well, that is a good segue then, Carey, into Metro. So curious—it sounds like that is progressing really well. And I know when you acquired—at the time of the acquisition—you spoke about a lot of opportunities, and I guess these Aqua de novo openings sound like that is happening at Metro. And I assume since New York has one of the better rates, that probably benefits you guys disproportionately too. Christopher J. Reading: Yeah. We have a strong team there. Michael and his team are strong. Clinically, they are strong operators. They are strong in development. And so we have plenty of opportunities to chew on and work our way through for what should be a long period of time. So they are doing well. AquaNovos being just one of those. Carey P. Hendrickson: And one of the things that has been really positive there—and we have talked about this before—is the net rate increase we have seen at Metro since we acquired them. That is one of the things we do with acquisitions. We look at trying to improve their contracts as we bring them over. When we first acquired Metro, the first month for Metro was around a $101 net rate. That averaged $104.50 in the first quarter, and that was $107.50 in the second quarter. So we have really seen some nice rate improvement there. That does not show up in the majority clinics line; instead, it shows up in the clinic additions line. But I just wanted to point out that we are seeing really good net rate increases there at Metro. So that is helpful as well. Lawrence Scott Solow: And could you just walk through the pricing breakout in the quarter? I guess, do you discuss that? Usually, you give us kind of what commercial pricing was in the quarter. I know I heard you discuss the workers’ comp piece. Did you give any more detail on the commercial side? Carey P. Hendrickson: Sure. Happy to. So the $105.33 overall—commercial rates were around $105.50, so that was a nice increase in commercial rates. Workers’ comp was still a little bit north of $150. Medicare is a little north of $92 per visit, which is really good. Those are the three primary categories. The others were relatively stable as well—Medicaid, personal injury, self-pay. Lawrence Scott Solow: Great. Okay. Appreciate it. Thanks, guys. Operator: Thank you. Our next question will come from Jared Phillip Haase with William Blair. Your line is open. Jared Phillip Haase: Hey, good morning. Thanks for taking all the questions. And nice to see the continued momentum there. I think you mentioned a number of larger opportunities that have not started yet. So I am wondering if there is any way that you can contextualize what that backlog looks like or any way to frame up what the incremental revenue opportunity is and how that might compare to prior years? Christopher J. Reading: Yeah. I do not have it in front of me. And my preference—and maybe I need to be a little bit careful—my preference is to not constitute revenue ahead of when we have generated it, either in development or otherwise. And so we are definitely making progress. We are having a good year. I am not prepared to get into the potential because, frankly, it is all about staffing, and the team has done a fantastic job both with the auto industry major contract that we got where we needed to hire 50 FTEs to staff that. If we had not hired 50—if we had only hired 20 or 30—the revenue generation would have been different. So I really cannot afford to be that far out on a limb, and I do not want to be in that position, so we are not going to do that. But as that comes about and we are realizing it, I am happy to talk more about it—once it actually happens. Jared Phillip Haase: Yeah. That is fair. That totally makes sense. Maybe I will ask a follow-up. And I think you all have made some public comments in the past about some of the virtual PT applications that are out there. And I think recently, one of the larger ones announced they are building out sort of a network of in-person providers as a way to kind of supplement their digital offering. So I am wondering if you have any more that you can say about that. Would you consider participating in a network like that with a virtual partner? You know, how are you thinking about maybe the potential opportunity in terms of, call it, patient acquisition or opening up any referral channel? Christopher J. Reading: Yeah. Again, I do not want to speculate too much in hypothetical situations. And I say that because a lot of the virtual providers have sold a very low-cost, per-member, generic, “PT service-level” solution—not delivered by therapists. It is delivered either through an app or backed up by call center employees who, for the most part, are not licensed clinical folks. They follow the script. And so what has been sold is they can take all comers and any diagnosis and very complicated things—post-op reconstructions and rotator cuff repairs—and, frankly, I will tell you my opinion is that cannot be done efficiently or effectively. So I think they are in a tough spot where they have to figure out whether it is the bricks-and-mortar solution to add to a virtual offering. Have we had discussions with one or more providers about that? Yes. It remains to be seen whether that is something that the industry is accepting of or not. Reciprocally, we are now using technology—an augmented solution—that we use with our patients through companies like Limber, who has been a nice partner for us, that has objective measures of motion and activity and other things which help us be better informed to guide that care. And there will be a point in time—and we are not there yet because we are working on some really important things—there will be a time when we focus more on a broader digital solution and, in some cases, that I think will help to augment what we do for our patients, make us a little bit more geographically flexible. But we are going to approach it very differently than groups that have done it so far. I think they have tried to do too much, and I think they are finding out it is not possible to deliver it that way. Jared Phillip Haase: Okay. That is great. Thank you. I appreciate all the color. Operator: Thank you. Our next question will come from Jiten Sanghai with Quarry Partners. Your line is open. Jiten Sanghai: Hey, guys. Congrats on a great quarter and appreciate the questions and answers. Maybe two for me. You know, clearly, the volume growth—the record Q2—is great, but one is, is there a theoretical capacity we should think about? Because is the system operating at 90% or some x percent? And then related point, if you think about the de novos, what is the staffing environment like? How will you recruit x number of FTEs? I think, Chris, you mentioned maybe a record year for opening de novos. So how will you attract the number of FTEs? And, you know, finding them is hard, but the question is not just finding them. It is what you pay them and how the economics work. So I think two parts to this. If you could address both, that would be super helpful. Thank you. Christopher J. Reading: Yeah. So on the capacity side, think of it this way—our capacity really is not limited by physical footprint. Generally speaking, a typical clinic may be open from 7 to 6, but we have the ability in that same physical footprint—which has peak times and also has slower times—to fill in certainly some of the slower times. Then we have the ability to extend hours and do other things. So our visits-per-clinic-per-day number can continue to grow. It is not constrained by our physical footprint, so our constraint correlates with our staffing. And so we have to have the staff available. As you mentioned, it may be a little bit over time—as we have shown—ultimately getting that number up the next five or ten visits per day. That will not happen overnight, but there really is the possibility to move forward as long as we can continue, as you mentioned, to find staff. And I would point you back to Eric’s comments around the investments that we have made in recruiting and retention, and school affiliations, residency programs, mentorship, and other things to try to have a stable bench from which to draw to backfill a clinic with a lot of people with tenure so they can grow and learn. And it is easier to absorb that way. The more senior therapists are the ones that go and open the next adjacent clinic—not the new grad, but the more senior person—and that more senior person then gets backed up maybe by somebody more junior. So again, it is not perfect. The market is competitive and in some cases it is tight. But we are finding people, and we are growing, and we expect to continue to be able to do that, particularly with the investments that we have made over the last six to nine months. Jiten Sanghai: And, Chris, that is super helpful because what it sounds like is there is no theoretical capacity. So whatever your margin guide suggests for this year using your updated EBITDA range, as we think about next year or beyond, there should be some flow-through or increase in EBITDA. So your margins should expand over time as you have incremental volumes. Is that the right general lens? I do not know if you can quantify that or if that is just a good sound bite to end on from my perspective. Christopher J. Reading: No, I think it is a reasonable sound bite. There are certainly points of inflection where when you have to level up, you may go back a little bit before you can go forward again. But generally, you are right. The last few patients of the day are incrementally more profitable. Your fixed costs are covered. That is one of the reasons why you see our total cost per visit come down a bit this quarter—because of the jump in visits per clinic per day. Hopefully—with particularly continued commercial rate wins, continued war comp and other payers—we get more than enough to offset what might be a little bit of wage pressure year to year. That wage pressure for us—preferably getting that with some efficiencies. And again, I would point to some of the initiatives around AI and virtualization at the front desk, which are really just now getting started, but should give us some additional lift as we go forward. And Metro, with wins like we are seeing in rate growth—we are well below right now the $7 more a visit, but that combination gives us more than enough to offset the average increase that people got at the end of the year—five, six, seven dollars a visit. You have to deliver it. You have to make it happen, but I am hopeful at this point that we can continue to execute on that. Jiten Sanghai: Great. Thank you for your time, guys. Appreciate it. Carey P. Hendrickson: Thank you. Eric Joseph Williams: Thank you. Operator: Our next question will come from Michael John Petusky with Barrington Research. Your line is open. Christopher J. Reading: Hey, Mike. Michael John Petusky: Hey, good morning. Christopher J. Reading: Hey, good morning. Michael John Petusky: You gave sort of the hard numbers on the rate per visit. I am just curious—commercial pricing—I am assuming that was up a little bit in the quarter. Do you have a percentage that was up versus the comparable period a year ago? Christopher J. Reading: Carey. Carey P. Hendrickson: Sure. It was up about 1% to 1.5% versus last year’s second quarter. The second quarter of last year is actually the strongest quarter for commercial rates last year. It is up 2.2% from the first quarter. So we had a nice bump in the second quarter versus the first quarter in that commercial rate. Michael John Petusky: Okay. And the issue in Michigan with the large payer—how much impact did that have on the commercial pricing overall? I mean, did that take it down 20 basis points—more than that? Carey P. Hendrickson: Yes. It was a payer rule change. Let me calculate just a second. I know the impact is about a $0.30 per-visit impact or so. So it would have been—we would have been kind of right at the first quarter number had it not been for that Michigan rule change. Michael John Petusky: Okay. So is there anything to suggest that what is going on in terms of that payer in Michigan could be an issue elsewhere? Or do you really feel like this is sort of an isolated situation? Christopher J. Reading: Mike, I mean, I wish it was uniform. Maybe I should not wish that. I mean, we have got—each year—people are going to try different things. Michigan has had some ebb and flow with this payer. On a number of different fronts, utilization caps and other things have been challenged and even litigated. So it has bounced around a bit at different points in time, and we do not see it, as Carey said, as a contagion kind of thing at all. I do not see a contagion problem necessarily. And it is really no different this year than prior years. But that is one that we have called out this year, which is a little bit of a headwind—where in 48 or 49 other states it is not an issue. Carey P. Hendrickson: Yeah. And, Mike, as Chris said, there are always puts and takes on the net rate. And, you know, you will have things like that. But then we have got other things that are overcoming it in others. Michael John Petusky: Okay. Great. That is what I was trying to get at. So, Chris, earlier, you said that IIP felt like it was a top priority in terms of capital allocation. When you were talking about that, were you sort of talking about it in terms of internal investment—hiring trainers and such? Or are we talking about more in terms of external assets that you may try to sort of build on the base of business—or both? Thanks. Christopher J. Reading: Yeah. Well, it is always internal, but that is really not a problem, and I really do not think about that. Maybe I should, but when I talk about capital allocation, that is just a matter of course. What I am talking about is investing in additional companies to continue to fill in our service complement, to build on what we have, give us more opportunities for cross-sell, and to continue to grow as we have the last few years. It will be ongoing, but we are actively involved, and we spent more time this year, I think, probably than ever before, attending conferences and getting face-to-face meetings and being active in the space. People now kind of know who we are. And while it is a much smaller space in aggregate than the PT world, we are making some progress. And so do not be surprised if we are active and continue to be in that area. The team is doing a really good job, and we like the embedded growth elements in this business—particularly, I think—not to make any kind of a political statement—but if manufacturing is going to increase in this country, and I think just with the announcement yesterday on Apple and others, there is going to be a push to onshore manufacturing, and we are positioned pretty well to benefit from that. Michael John Petusky: Absolutely. Hey, let me just sneak one last one in, and then I will let the next person ask questions. Because you mentioned on the last conference call that you guys had been involved in sort of a deep operational review with your top 40 partnerships. I am just wondering—anything interesting, surprising—anything come out of that that you would be willing to share that might matter? Christopher J. Reading: Yeah. The only thing that I will share is that those calls have been important. What partners have appreciated—it is a couple of things. One, beginning with COVID and the year after COVID, we were both lean and busy. And it was kind of a good year to benchmark against. But, you know, I use the analogy—it is like your weight may fluctuate since college days. If you use your college days as the yardstick to see change, this is a great comparative point—or maybe a difficult comparative point. As you go forward, the change over time—you lose track of where you were, and pretty soon your belt does not fit the same way anymore. And you lose where you are in space a little bit. And, you know, that is one measure where it is kind of pretty easy to keep track of, but we are measuring a bunch of different things in this business—visible, tangible tools that our partners get every month that compare where they are now to where they were at the most efficient point and how things stack against that. There have been a lot of influences that have caused certain things to happen that are just part of the reality. But I think having now a really good yardstick to see change has been kind of a really good tool. And so we have used that, and we are making progress. And I think our partners have been very understanding and appreciative, and we are seeing change as a result. Eric Joseph Williams: Thank you. Christopher J. Reading: Sure. Operator: Thank you. It appears we have no further questions at this time. I will now turn the program back over to management for any additional or closing remarks. Christopher J. Reading: Look, it has been a good call. Thank you all for your questions—a lot of really good questions. Carey and I are available for the rest of the day. And whenever you need us, we appreciate your time and attention, and particularly your support. We hope you have a great day. Thanks. Carey P. Hendrickson: Thank you. Operator: Thank you, ladies and gentlemen. This concludes today's event. You may now disconnect.
Operator: Please continue to stand by for the Loar Holdings Inc. Q4 conference call. We will begin momentarily. Greetings, and welcome to the Loar Holdings Inc. Q4 and Full Year 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 anyone requires operator assistance during the conference, as a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ian McKillop, Director of Investor Relations. You may begin. Ian McKillop: Thank you, Brock. Good morning, everyone, and welcome to the Loar Holdings Inc. Q4 and Full Year 2025 Earnings Conference Call. Presenting on the call this morning are Loar Holdings Inc.’s Chief Executive and Executive Co-Chairman, Dirkson R. Charles; Executive Co-Chairman, Brett N. Milgrim; Treasurer and Chief Financial Officer, Glenn D’Alessandro; as well as myself, Ian McKillop, the Director of Investor Relations. Please visit our website at loregroup.com to obtain a slide deck and call replay information. Before we begin, we would like to remind you that statements made during this call, which are not in fact, are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to the company’s latest filings with the SEC available through the Investor Relations section of our website or at sec.gov. We would also like to advise you that during the call, we will be referring to adjusted EBITDA, adjusted EBITDA margin, and adjusted earnings per share, each of which is a non-GAAP financial measure. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and applicable reconciliations. To begin today, I will now turn the call over to Dirkson. Dirkson R. Charles: Thanks, Ian. Good morning to my mates and all our partners participating on this call. I am Dirkson, Founder, CEO, Executive Co-Chairman of Loar Holdings Inc. As you all know, Loar Holdings Inc. was founded fourteen years ago with the mission of building an aerospace industrial cash compounder, wrapped in a culture that all our mates can be proud of. Fourteen years into our journey, I am as excited about our future as I have ever been. In 2025, we once again delivered predictable and consistent financial performance, exceeding all our key annual financial goals. Sales, adjusted EBITDA, adjusted EBITDA margins, and free cash flow were all annual records for Loar Holdings Inc. But my excitement really comes from looking forward to 2026 and the opportunity to break all those records we set last year. Look. Looking into the future, all our end markets have strong tailwinds. The commercial aftermarket has experienced an increase in the average age of the in-service fleet. Pre-COVID, the average was approximately 11 years. Today, it sits at fourteen-plus years. The older the fleet, the more demand for aftermarket parts. We love that. This is a trend we can expect to continue well into the 2030s, as delivery of new aircraft continues to fall short of demand. In addition, the commercial aftermarket has witnessed a decrease in the number of aircraft retired each year. Historically, 2.5% of the fleet is retired. However, from 2022 through 2025, the retirement rate has continuously decreased, reaching a low of 1.5% in 2025. Aging fleets, reduced retirement, all lead to one thing: greater demand for our parts into the future. With regards to the equipment manufacturers, who are sitting on record backlogs of orders for future delivery, they have done an excellent job in addressing ongoing supply chain challenges, shortages of skilled labor and raw materials, constrained production, and geopolitical uncertainty to now be able to increase production. For example, Airbus and Boeing plan to produce approximately 1,900 and 1,300 aircraft over the next two years, respectively. This would represent a compound annual growth rate increase of 15% over 2025 production rates. Our proprietary products that align fit on these aircraft will generate increased sales for us as production ramps. Now, with regards to the defense market, which has been heavily influenced by the current geopolitical environment, European nations have increased their military spending to the highest percentage of GDP in decades. In the U.S., there is talk of a $1.5 trillion defense budget. Combined, these trends will lead to greater opportunities for us to provide more products and solutions. So given our balanced portfolio, 50% OE, approximately 50% aftermarket, the broad spectrum of our products across all end markets, combined with executing all along all our value drivers, we expect to continue to grow sales at 10%+ organically and adjusted EBITDA at 15%+ annually into the foreseeable future. We continue to grow inorganically as well. Every time we add a new member to our family of companies, we view it as adding capabilities to the Loar Holdings Inc. toolkit. The larger the toolkit, the larger the revenue synergies. I am pleased to welcome our new mates from L and B and Harper. L and B brings new capabilities to our toolkit and we are excited to add our new mates to the team. Harper is a company I have personally known for eighteen years and could not be happier knowing that this once employee-owned company chose us to carry their brand into the future. No option, just a good old-fashioned getting to know each other and realizing that our culture is made for a perfect match. Bob and Carla, welcome to team Loar Holdings Inc. With that said, Loar Holdings Inc. is a family of companies with a very simple approach to creating shareholder value. First, we believe that providing our business units with an entrepreneurial and collaborative environment to advance their brands, we will generate above-market growth rates. Since our inception in 2012 through the end of calendar year 2025, we have grown sales and adjusted EBITDA at a compound annual growth rate of over 30–40%, respectively. Second, we executed along four value streams. We identified pain points within the aerospace industry and look to solve those problems through organically launching new products. In calendar year 2026, we expect that new product growth will be the number one driver of our organic growth as we qualify new parts in the first half of the year, fueling increased sales starting in 2026. As you all know, we track this pipeline of opportunities monthly. This pipeline represents a list of opportunities derived from listening to our customers, identifying their pain points, and developing direct solutions for them. These solutions are created from the sharing of ideas, best practices, and customer synergies across the group, which directly results in a high degree of collaboration that we foster across our business units. The pipeline represents over $600 million in sales over the next five years without including the benefit of top-line synergies we expect to achieve since adding the capability to produce fans, motors, interior latching mechanisms, and C-track fittings to our toolkit through the additions of L and B and Harper. We are focused on optimizing the way we manufacture, go to market, and manage our companies to enhance productivity. Each year, we will identify initiatives that will allow us to continually improve our performance, with a focus on one or two major efforts that can be expected to expand margins. We continuously investigate ways to improve our mine collect, gather, and utilize data. Enhancing our management ERP and other systems and processes allows us to efficiently leverage data and drive financial and operational efficiencies. Each year, we achieve more price than our cost of inflation, which is one of the levers we use to continuously improve margins year after year, except for the occasional temporary dilution due to acquiring a business with diluted margins or incurring costs because of being a public company. Regardless of these temporary headwinds, we continue to improve our margins. Most importantly, we are committed to developing and improving the talent of our mates because our success is solely, solely a result of their dedication and commitment. To all my mates, as always, thank you so much for your commitment and hard work. I will now turn it over to Brett to walk you through the key characteristics of our portfolio and our commitment to our inorganic growth. Brett N. Milgrim: Thanks, Dirk, and good morning, everybody. One of the key drivers of our exceptional performance this quarter and this year, and maybe more importantly our consistent performance over a very long period of time, is because we have a very diverse portfolio of products that covers virtually all end markets, platforms, customers, and is balanced across the OE and aftermarket spectrum. Said another way, we have content on virtually anything that flies today, and that is by design as opposed to relying on any particular platform, end market, or specific product line. We just want to have exposure to and be balanced across a very large and growing overall aerospace and defense market. We accomplish this through a very broad portfolio, the vast majority of which consists of proprietary products, which allows us to drive growth, achieve value pricing, and create strong customer relationships and corresponding cross-selling opportunities. Effectively, we have positioned ourselves to capture the 20-, 30-, 40-, or even 50-year annuity that any one particular platform may provide, whether it is a commercial aircraft, military aircraft, or in part of its OE or aftermarket portion of its life cycle. Our proprietary products are not only growing as a percentage of our total portfolio, but also growing in the aggregate, as we have a long history now supplementing our organic growth with M&A activity and a large pipeline of opportunities. What we are seeing today with M&A is a very active market with many willing potential sellers, but as such, we think a market like this requires an appropriate amount of discipline, whether it is related to price or just the quality of the assets for sale. That discipline is something we have been very focused about in creating the portfolio we have today, and as a result, we have done one to two deals a year for a fairly long time now, irrespective of macro conditions or the like. So we remain a very active and consistent acquirer of assets and fully expect 2026 to be another active year. In fact, since going public less than two years ago, we have invested over $1.1 billion of capital in M&A, which is far and away our greatest use of free cash flow and, along with strong organic growth, has resulted in us doubling the size of the business in two years as a public company when you include our latest announced deals. To Dirk’s earlier point, we feel very confident in a business model that, through organic means and acquisition-related growth, can at least triple every five years, and we are certainly ahead of that pace since becoming a public company. Our newest family members, L and B and Harper, both represent the type of businesses that we want in the portfolio. Obviously, we have not had the chance to speak since announcing the closures of either L and B or Harper, but we are really excited about both. I think these companies represent what I was mentioning earlier—two very different product lines serving different end markets and customers—but both are right down the middle of the types of businesses we want to own: proprietary content in niche markets with meaningful aftermarket opportunities. Just to review two of the names that are on this page here, LMB—I think most of you know because that is a business that we announced many, many months ago—we are very glad to finally have closed that, I think, in December. LMB is a business located in the southern portion of France. It is a great business that manufactures what we call engineered cooling devices and solutions. Said another way, think customized and ruggedized fans, and motors and systems that go into niche applications in military content, whether it is an aircraft or a ground vehicle. It is a 100% proprietary product portfolio with what we think is a very, very meaningful opportunity to increase the aftermarket side of the business today, which is less heavily weighted towards currently. It also serves an end market that we have not really had a lot of exposure to, but it has a lot of tailwinds today, which is the European defense market. So we think that is going to be very strong for the next couple of years. And it is a business that today is margin accretive to overall Loar Holdings Inc., and it has a real growth opportunity to enter the world’s largest military market here in the U.S., which it does very, very little of. So we are very excited about the opportunities in front of us. Harper, as Dirkson referenced, is actually a business that we have been familiar with since our days at McKechnie. This is a business that, again, we call interior securing components, but think interior latching mechanisms and the like. We are familiar with it through McKechnie because we had a latching business called Hartwell back in the 2007 to 2010 time frame, and we are very familiar with Harper due to its stellar reputation, high-quality products, and excellent, excellent relationship with Boeing. So Harper serves a completely different market than LMB in that it primarily serves the commercial market. Like I said, it has an excellent, excellent representation with Boeing. They have been recognized as one of Boeing’s most trusted suppliers, and we think that relationship can foster further cross-selling opportunities with Boeing, with other parts of the commercial market, and really be a value-added piece of the portfolio. We are really, really excited about both LMB and Harper. We can already see the collaboration with other business units, as we think these new products are going to be value added to the overall portfolio, which Ian will tell you about next. Ian McKillop: Every quarter, we share this slide about highlighting our products, but the real power of this portfolio is not just any one of these products. It is the combined capabilities that Dirkson spoke about earlier. We have added two new capabilities: interior latching assemblies, as you can see in the top right; hyper fans and cooling devices, with our acquisition of LMB. This product offering, with over 25,000 SKUs, of which no one SKU makes up more than 3% of our overall revenue, brings our customers something that is incredibly unique: a set of capabilities that can serve them and can be adjusted to meet their needs. I will now pass the call back to Glenn. Glenn D’Alessandro: Thank you, Ian. Good morning, everyone. Let me start by discussing sales by our end markets. This comparison will be on a pro forma basis as if each of our businesses were owned as of the first day of the earliest period presented. This market discussion includes the acquisition of Applied Avionics in Q3 2024 and BeeLite in Q3 2025. It does not include our latest acquisitions of L and B Fans and Motors or Harper Engineering. We achieved record sales during calendar year 2025. In total, our sales increased to $500 million, which is a 15% increase as compared to the prior year. Our Q4 sales were also a record, increasing 17% versus the prior-year quarter. These increases were driven by strong performances in commercial aftermarket, commercial OEM, and defense. Our commercial aftermarket sales saw an increase of 19% in calendar year 2025 versus 2024. It increased 34% in Q4 2025 versus Q4 2024. This is primarily driven by the continued strength in demand for commercial air travel and an aging commercial fleet. Our total commercial OEM sales saw an increase of 11% in calendar year 2025 versus 2024. It increased 8% in Q4 2025 versus Q4 2024. This increase was driven by higher sales across a significant portion of the platforms we supply, along with an improvement production environment for commercial OEMs. The increase of 19% in our defense sales in calendar year 2025 versus 2024 and 14% in Q4 2025 versus Q4 2024 was primarily due to strong demand across multiple platforms and an increase in market share as a result of new product launches. Defense sales will continue to be lumpy given the nature of the ordering patterns of our end customers for our products. Let me recap our financial highlights for 2025. Sales increased 19.3%, or 16.9% excluding acquisition sales, over the prior period. Our gross profit margin for Q4 2025 increased by 320 basis points as compared to the prior-year period. This increase was primarily due to our operating leverage, the execution of our strategic value drivers, as well as a favorable sales mix. Our increase in net income of $9 million in Q4 2025 versus Q4 2024 is primarily due to lower interest. Adjusted EBITDA was up $10 million in Q4 2025 versus Q4 2024. Adjusted EBITDA margins were 38.7% due to our operating leverage, the execution of our strategic value drivers, and a favorable sales mix. This was partially offset by additional costs associated with being a public company, including Sarbanes-Oxley compliance, and additional organizational costs to support our reporting, governance, and control needs. For the full year of 2025, sales increased 23.2%, or 12.7% excluding acquisition sales. Our gross profit margin for the full year was 52.7%, which is up 330 basis points as compared to the prior-year period. Our net income increased $50 million in calendar year 2025 versus 2024. This was driven by lower interest expense and higher operating income. Our adjusted EBITDA was a record $189 million in calendar year 2025. This is up $43 million versus 2024. Adjusted EBITDA margins were up 180 basis points due to our operating leverage, the execution of our strategic value drivers, and a favorable sales mix. This was partially offset by the additional costs associated with being a public company. We do not see an increase in these types of public company costs going forward. We believe the run rate of these costs is fully reflected in our calendar year 2025 results. Our free cash flow conversion, which is defined as cash flow from operations less capital expenditures, was 138% for calendar year 2025, and it is 160% if you exclude a one-time $10 million tax benefit we received from the One Big Beautiful Bill Act. Let me now turn the call back over to Dirkson to share our outlook for 2026. Dirkson R. Charles: Thanks, Glenn. Look, we are extremely excited to share upward revisions to our 2026 outlook. As I said earlier, each of our end markets is experiencing strong demand tailwinds. So our focus is on executing our value drivers to continue to position us to at least, as Brett said earlier, at least triple adjusted EBITDA every five years including acquisitions, as we have done consistently since our inception except during COVID. As always, our view is on a pro forma basis assuming we own all of our business units since the beginning of 2025. With that said, we still expect commercial OEM and aftermarket growth will be low double digits in 2026 for all of the reasons I highlighted earlier, while our defense end market sales will be up mid-single digits, as we come off a fantastic year of 19% growth in 2025 over 2024. As we have always said, growth in the defense end market will be choppy. These market assumptions, along with the additions of L and B and Harper to our family of companies and our continued execution of our value drivers, allow us to meet or exceed the following for calendar year 2026: net sales between $640 million and $650 million; adjusted EBITDA between $253 million and $258 million; adjusted EBITDA margin of approximately 40%. Once again, we demonstrate our ability to continually improve margins. Net income between $59 million and $63 million, while adjusted EPS between $0.76 and $0.80 per share, which is a reduction in our guide only because of the incremental non-cash depreciation and amortization related to the acquisitions of L and B and Harper, as well as the interest associated with funding those acquisitions. As we discussed earlier, capital expenditures will be in line with our historical rate of approximately 3% of sales, at $19 million. We have increased full-year interest expense to $80 million because of the funds we borrowed to fund the acquisitions of L and B and Harper. We expect both acquisitions to meet our investment hurdle of doubling adjusted EBITDA in three to five years and to be accretive to earnings in calendar year 2027. Our effective tax rate 25%, depreciation and amortization of $75 million, and non-cash stock-based comp of approximately $17 million. Share count remains the same, 97 million. So look. Please note that all of the amounts I have just outlined for you relating to calendar year 2026 performance assume no additional acquisitions. However, as Brett said earlier, our drumbeat is to complete one or two acquisitions each year. We just cannot predict the timing of such acquisitions, and I will add that the activity around acquisitions is even at a higher level than it was when we chatted last quarter. So we are excited about that also. Operator: Okay, with that, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star-one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star-two if you would like to remove your question from the queue. If using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question today comes from John Gordon of Citi. Please proceed with your question. John Gordon: Hey, guys. Thanks for taking my question. I have one clarification and one kind of more real question. The clarification is obviously we see the revised outlook and across all the metrics that I think drive the stock most, it has gone up—margin, you know, EBITDA, etc. And I think the analysts that are close to the name kind of understand what is going on here. But I wanted to just give you a chance to spend an extra second on the adjusted EPS kind of revision lower and what is driving that, and just make sure that it is super clear for everybody. Yeah. Glenn D’Alessandro: John, thank you for asking the question. I really appreciate that because we realized that can be a little bit confusing for folks. Look. When we gave our guide last quarter, we did not have the acquisitions included in it, right. So that did not include LMB and it did not include Harper. And happens always when you are doing an acquisition, you incur accounting, legal fees, and the like—let us call it, we call those transaction expenses, right. That is incurred, that affects EPS. In addition—those are one-time in nature though—yeah. In addition, we are required for accounting reasons to write up the assets and also write off some of the intangible assets to amortization. All non-cash that gets charged against net income. All of those are what is driving the change, including the additional interest, to the EPS. So non-cash mostly is the biggest driver. John Gordon: Got it. Thank you. Sorry for a second there. That is very helpful. My sort of more real question is you sounded very optimistic about the M&A pipeline. And that is something we have heard from other companies as well. And we have seen it in rising deal activity across A&D. You mentioned one to two M&A deals a year. I wanted to just sort of press on that. And the question is could we see an elevated rate above that range for a bit? Could we see deal size go up? You know, how do you think that this kind of more active and maybe more interesting deal environment manifests itself for Loar Holdings Inc. versus historical norms? Brett N. Milgrim: The short answer, John, is yes and yes. Meaning we are seeing more deal flow. We are seeing more active sellers. We are just overall seeing a more active market in this space, given what we see as good visibility, good performance, and quite candidly, good valuations, which makes for active sellers. Like I said before, though, that also means that we need to have more discipline because we need to make sure that we see the requisite returns in anything we do. So we talk about one to two deals a year simply as a proxy, given the historical trends. In any given year, it could be significantly more. It really just depends on the opportunities in front of us, and we will always, always be opportunistic and always, always be disciplined such that if prices get too high or quality of assets for sale are too low, or there are things that we do not see the return in, we are not going to do it simply and exclusively because it is an “active market.” We have been very, very consistent over, I think, a relatively long period of time now. And I think our track record kind of speaks for itself. So I use the one to two deals as a proxy and nothing more. And we are going to be opportunistic as we go here in 2026. John Gordon: Appreciate it. Great color. Thanks, guys. Brett N. Milgrim: Yeah, no problem. Thanks, John. Thanks, John. Thanks, John. Operator: The next question is from Kristine Liwag of Morgan Stanley. Please proceed with your question. Kristine Liwag: Hey, good morning, everyone, and thanks for all the color you have provided. You know, in the quarter, you guys called out 17% organic sales growth. I was wondering if you could talk about the building blocks of that organic growth. It is pretty robust above industry market. So if you were to look at, you know, on a same-store, you know, apples-to-apples, volume, what would it have been? And then also how much of this growth was from your new product introduction? And how do we think about this throughout 2026? Dirkson R. Charles: Hi, Christine, and thanks for asking the question. In terms of what is driving our—I will use your terminology—organic growth. Look, I think I have said this before. Prior to the most recent time, I would say volume was the biggest, the biggest driver, if you break it up between volume, price, and new business. But as we think about 2026 and going forward—and 2025—the new product introduction is really the largest driver of our organic growth and which is where we think we actually differentiate ourselves from others, because that is $600 million of opportunity that I talked about earlier. We are actually at the cusp now of really starting to get the benefit of that. So in 2026 and beyond—so since 2026, 2027—we expect that will be the largest driver of organic growth going into, you know, the next 12, 24 months. Brett N. Milgrim: Yeah. And just to add something, you know, for the calendar year 2025, I think our quote-unquote organic growth is actually better than as represented as the number we put in the Q, and you saw it on what Glenn’s slide—pro forma growth, which really is the more appropriate measure to measure organic because it gives us credit for the organic growth in the acquisitions we did—was actually closer to 15% relative to the 12.9% as reported. So 15% organic pro forma growth, as if we had owned all the businesses at the beginning of the initial period, I think, is really, really spectacular and something that we are very proud of. Kristine Liwag: Thanks for the color, guys. I mean, these are standout numbers. And, you know, following up on the deal dynamics, being able to close LMB fans and motor, you know, being a French asset. You know I think it seems like a pretty incredible way to close that kind of deal, especially with the French government ownership. When you are looking at the pool of available assets, how much more interest do you have in expanding out international capabilities? Is there more of a potentially roll-up fragmented pool you can pull from in the European market? And how does your ability to close LMB give you confidence that maybe, hey, you have got another rich pool to pull from. Yeah. Brett N. Milgrim: Excellent question. So look, as you guys know—and you know, particularly Christine—it is a global industry, aerospace that is. And so I think over time you will see us continuing to do more and more outside the borders of the U.S. specifically. That being said, the opportunity set remains huge, particularly for the size deals that we are looking to acquire. We have more opportunities than we will ever get to. I have said that many, many times. And in Europe in particular, now that we have four businesses over there, which really serve as a base of infrastructure and management, talent, and resources that we never had before, it exponentially increases our ability to build off those things, to own more assets. So Europe obviously is a very big market. We are just getting started there. So whether it is Europe, the U.S., or elsewhere, I think you are going to continue to see us expand internationally and, you know, mirror the footprint of the overall industry. Kristine Liwag: Super helpful. And if I could sneak a third one in, you know, we mostly focus on your commercial aerospace business, but defense has been also seeing significant increases. You know, Dirkson, you talked about the potential $1.5 trillion. And look, in Europe, if they want to increase to 5% of GDP, you are seeing fairly large numbers across the board. What we have seen is that the concern about the ability of the supply chain and the industrial base to support this growth has been a priority. When you look at your role as a supplier in this environment with strong operational skills, I mean, look at your margin and your ability to deliver to your customers. How do you see yourself in that ecosystem? What problems could you incrementally solve and could you see outsized growth in your defense business versus what top lines are just from that vertical integration and the supply chain and your ability to be able to get product in the hands of your customer? So not to lead the witness, but—and maybe I did a little bit—it would be helpful to understand how you think about that defense growth. Ian McKillop: Yeah, I mean, you know, Christine, this is Ian. We always view defense growth as lumpy, right. But I think that actually, given that fact, we have a very strong operational mindset that we can react when our customers need us to react. So I think that is positioned us well because you are right. I mean, across the global environment, everything is pointing to strong tailwinds in defense. And our team is ready to meet that need, should it be there or when it is there. So I think we are well positioned to capture those things. And I think, you know, to Dirkson’s point on that $600 million list of opportunities, right? Defense opportunities are in there. And so we are focused on helping support our customers in the way they need it. And we welcome any new opportunities as they come. Dirkson R. Charles: If I can add. And by the way, Christine, that is another really, really great, great question. I just want to piggyback a little bit on what Ian was leading you. So yes, we think that we could solve a lot of the supply chain—I will use your terminology—issues relative to the plethora of capabilities that we have, right, which is why we think about our toolkit. And I will tell you that we have had numerous conversations with customers that lead to opportunities that are not adding to that $600 million at this point. So I will just give you an example. LMB—there are a number of opportunities where we could solve issues on this side of the pond that are not being solved overseas because of the lack of the customer synergies that LMB had existing by itself, right. So we will be able to solve a lot more issues with the supply chain because we can now introduce that capability to customers on this side of the pond. That is just one. There is a plethora of others. And so I would not be surprised if—giving a little bit of guidance here—if that $600 million went up significantly by the time we get to the next quarter in terms of the opportunity set, driven by your question. There is going to be a number of defense opportunities that we can be helpful with, adding those capabilities. So great, great question. And by the way, congratulations on the promotion. I heard. Thanks, Erickson. Operator: The next question is from Sheila Kahyaoglu, Jefferies. Please proceed with your question. Sheila Kahyaoglu: Good morning, guys, and thank you so much. I have three questions, if it is okay. So maybe I will start on the acquisitions—Harper and LMB. I know you guys have given lots of color, and I appreciated on LMB what it does. And Harper too, given it is such a great supplier to Boeing. Maybe can you clarify the 100% proprietary products? How much are the process? Do you own the manufacturing, the IP? It all? As I have been asked a few times, and I think, you know, there are some misconceptions around the type of assets you guys buy and what proprietary means. And then as you think about the scope, I think LMB makes a lot of sense. As you answered to Christine on expanding it, how do you think about other markets Harper or other suppliers Harper could get into? Thanks. Dirkson R. Charles: No. Another really good question. Let me, let me, let me start from your last and I will go to your initial question. Okay. Let us start with Harper—100% proprietary. 99.9%. Some of them are listening, so I will be totally straight. 99.9% proprietary. And the way we think about proprietary—I will use this terminology. I know there are lawyers listening—but we think of it as where you are the primary source. I will use that terminology of the product that you are supplying. It is your design. 99.9% for Harper. Their design, their names on the drawing. You cannot go anywhere else to get that part than to go to Harper. So let us take that definition and expand it to the total portfolio of Loar Holdings Inc., because we get this question a lot. When we did our S-1 two years ago, we said 85% of our portfolio was proprietary. I will tell you this today, because we just recently did that math: 85% is now 89%. So it is all heading in the right direction. And the reason being is because that is where the growth is coming from—our proprietary products. And that is where we are investing our capacity, and not just inorganically, but also organically. So that has grown tremendously. And the other place you can see it—and you can check the box as to whether or not you have a business or a portfolio that is really proprietary—is to look at margins. That is one of the reasons—we do not talk about it a lot—but it is one of the reasons why our margins continuously go up and to the right, right, because we are investing in the proprietary nature and products where we are solving issues for our customers, using those proprietary products. So it is increasing tremendously. Now I will go back to Harper. Harper is one of four companies—four out of thousands of suppliers to Boeing—that has a collaborative agreement. Now what does that mean? That means they are joined at the hip. That means Boeing has an issue, they pick up the phone and they call Harper relative to capabilities that Harper has. Here is the beauty of what we have just done by adding them to the Loar platform: they now pick up the phone and call Harper; Harper calls the group and says, can you solve any of these problems? So we have expanded that collaboration with Boeing to include all of the Loar business units. That is the way we think about it. So no, we are excited about it for the reasons I just answered—that Christine’s question—but I am super, super excited about Harper and the relationships and synergies I am going to get from adding the company. Its reputation, its capabilities, and most importantly, the talented folks in that building to our team. Sheila Kahyaoglu: It makes a lot of sense. I am going to ask another one. You know, on these two deals, how do we think about the pathway to accretion on EPS? And how do we think about accretion on cash EPS? Brett N. Milgrim: Well, it is very simple—growth, and growth is a function of all the things that Dirkson Charles just spoke about. So in every deal we do, as I think you know, we have said many, many times, we look to see a path to doubling EBITDA, at least, in no more than three to five years. Quite frankly, in certain cases—and I will use one that you all know, since it was the first deal we did going public—Applied Avionics is well ahead of that schedule. We think for LMB and Harper—and quite frankly for any deal going forward which we use debt financing for, which by definition will make it dilutive to net income—we think most of these deals, but in particular Harper because you asked about it, will be accretive within a year. So in 2027, on a net income basis, we think Harper will be accretive. And that is a function of growing the earnings, growing the EBITDA, and, you know, doing all the things that we do to add value for these businesses. Does that answer your question? Sheila Kahyaoglu: Yes, it does. Thank you. And then last one, the 34% commercial aftermarket growth was pretty stellar. Any way to parse that out? Dirkson R. Charles: Let me start with this. So I am—a little bit about who I am. So my lucky number is 13. Everybody is going to go, why are you saying this? I am saying it for one reason—born January 13th. So 13 is my lucky number. The only time I do not like 13 is when I have to report earnings every 13 weeks. That is the only time I do not like 13. So there is good and bad to reporting 13 weeks at a time, right? The great news is we have proprietary products in the aftermarket. That is a high demand, right. We have customers who—I will give you an example—distributors who want to be exclusive. And we 100% say no, right. But again, the demand exists. What we saw in the fourth quarter—tremendous demand for our parts. Folks placing orders. It actually, I would say, positively surprised me—again, it is only 13 weeks, right—because usually at the end of the calendar year, most people are trying to manage inventory. In this case, we have customers who want to distribute our products, and we are just seeing more of it. Now, going forward, as I said earlier, where we see growth and where we really put our foot down on growth is on new business introductions. And I will use two examples—the only two I ever use—brakes. We got about a dozen programs that we are working on. Half of them are now certified. The other half we hope to have done by the end of the year. That is why I am excited about the second half of the year growth rate. I will go back to Harper one last time. Harper makes the locking mechanisms that go in the cockpit door barrier for Boeing aircraft. Now, you always hear us say we are so, so awesome on Airbus. Nobody ever asks about Boeing. Boeing. Yeah. So Boeing—Boeing—now having Harper as part of us, it gives us the opportunity in the aftermarket to really chase those parts, right, in terms of cockpit barriers. So as we think about growth in 2026, commercial aftermarket will continue to be low double digits for the year. Maybe a little choppy. But really, really strong given the strength in the fourth quarter that we have seen this year. So, Sheila, if I can just say this—because thanks for asking the question—we see no slowdown in demand for commercial aftermarket. And I think it is reflected in our numbers. Sheila Kahyaoglu: Great. Thank you guys so much. Operator: The next question is from Ken Herbert of RBC Capital Markets. Please proceed with your question. Ken Herbert: Yeah, hey, good morning, everybody. As I think about—just to follow up on that point—and maybe as we think about, you know, call it double-digit organic growth in your commercial markets in the guide for 2026, can I interpret what you are saying that new business will be the largest contributor to that growth relative to volume and price? Dirkson R. Charles: Yes. Okay. Can I—can I? That is the right short answer. So let me just say something relative to that, right, because we say this all the time and this is probably a good time to really send this message across. Brett always says—I listen to him say it all the time—that we use price as just the filler. Discretionary, right. It is discretionary. Can we increase price significantly? 100%—every day of the week, all day long. That is what proprietary means—going back to the previous question. We want to grow—five years from now, we will be three times the size. Check, check, check that box. We want to grow up to be a company that people do not point at and go, you are gouging me, right. You are chasing price above everything else. We want to truly partner with our customers, right. And so yes—Ken, the answer to your question is yes, we are focused on new business and that is going to be a big driver. Brett N. Milgrim: Yeah. And just as it relates to price, you know, again, with the caveat being that we want to drive margins only one way. So I think there is a slide in our investment deck that we put in the appendix that shows you over the last five, six, seven years, margins have only gone one way. We will have our margins start with a four in front of it. I think everybody on the IPO road show had asked us, when are we going to reach 40% EBITDA margins? And of course, you know, at the time we cannot give specific guidance in that regard. But here we are just two years later, and I can tell you unequivocally, margins are only going one way—and that is up. That Brett. Ken Herbert: Hey, maybe just to—yeah—just to clarify one other point, the up 34 in the fourth quarter, I think, Dirkson Charles, was any part of that from, like, new distribution agreements or maybe any pull forward ahead of either price increases or inventory build in the channel? I just want to make sure there was not—not anything unusual, but understand the dynamics of that 34%. Dirkson R. Charles: No. No. Great, great question. The short answer, again, is no. No pull forward, no special distribution agreements. I will tell you that we have distributors that are fighting over their end customer and wanting to be good, you know, suppliers to them. And again, whether it is a kit that they are trying to put together and our parts are included, or they want to be able to say, I can sell that part that no one else can, right? We are just seeing more demand, Ken. But no, no pull ahead. None of that. Ken Herbert: Okay. Perfect. And just one final question on the 2026 guide. Do you have any—how would you frame the risk around the commercial aftermarket versus OE growth? And to what extent maybe have you sort of de-risked the guide relative to what could be choppiness on the OE side versus what sounds like pretty consistent sort of aftermarket performance? Dirkson R. Charles: Great question. So let us start with OE. So on the OE side, what we have done—if you take Boeing and Airbus build rates—depending on the product line that we are producing, we have discounted it anywhere from 10% to 20%—10% at the low end, 20% at the high end—relative to the build rates that people are projecting. So could there be upside there? Absolutely. With regards to the aftermarket, yes, I do agree with you that we believe that that is going to continuously grow significantly double digits. Again, the only problem I have is reporting every 13 weeks, right. Can we have a period of time where it is 14% and then the next quarter it is, you know, 9.5% or whatever? Absolutely. But over the year and the long term, double-digit growth is what we seek. Ken Herbert: Thanks, Dirkson Charles. Dirkson R. Charles: Thank you, sir. Thanks, Ken. Additional questions. Operator: At this time, I would like to turn the floor back over to Dirkson Charles for closing comments. Dirkson R. Charles: Look. Thanks, everyone, participating on today’s call. I love it when we can share our story. We are super, super excited about our future. I will say for the third time, maybe the fourth. Given what we have done over the last 14 years, we expect to continue to do the same, which means adjusted EBITDA goes from $1 today to $3 five years from now. That is our focus and that is how we want to build this business. And we want to build it in a very special way. We want to have great mates living in a great environment, not being gouged customers, but growing the business consistently. We want to build this aerospace and defense cash compounder for a very, very long time. So look, with that I have two things to say. One. Happy birthday, Ellen. Thanks for participating on the call. You know who you are. And two, I look forward to talking to you guys in 13 weeks—even though you know it is 13 weeks. Thanks, guys. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference.
Operator: Good morning, ladies and gentlemen. Welcome to the RBC's 2026 First Quarter Results Conference Call. Please be advised that this call is being recorded [Operator Instructions] I would now like to turn the meeting over to Asim Imran. Please go ahead. Asim Imran: Thank you, and good morning, everyone. Speaking today will be Dave McKay, President and Chief Executive Officer; Katherine Gibson, Chief Financial Officer; and Graeme Hepworth, Chief Risk Officer. Also joining us today for your questions, Erica Nielsen, Group Head, Personal Banking; Sean Amato-Gauci, Group Head, Commercial Banking; Neil McLaughlin, Group Head, Wealth Management; Derek Neldner, Group Head, Capital Markets; and Jennifer Publicover, Group Head, Insurance. As noted on Slide 2, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. [Operator Instructions] With that, I'll turn it over to Dave. David McKay: Thank you, Asim. Good morning, everyone, and thank you for joining us. Today, we reported record earnings of $5.8 billion and adjusted earnings of $5.9 billion. Pre-provision pretax earnings were nearly $8.5 billion and were up 14% from last year. These strong results were underpinned by record revenue of nearly $18 billion and a 5% operating leverage. Both Wealth Management and Capital Markets reported record revenue and pre-provision pretax earnings benefiting from a constructive environment for our market-related businesses. Personal Banking and Commercial Banking reported record results underpinned by growth in [ money and balances ], higher margins and strong operating leverage as well. This was achieved even as housing conditions and uncertainty around trade policies continue to temper loan growth in Canada. Our return on assets increased to nearly 90 basis points and we bought back over 4 million shares this quarter for approximately $1 billion. Our performance delivered a return on equity of 17.6% on the foundation of a robust 13.7% common equity Tier 1 ratio. This powerful combination drove 9% growth in retained earnings. Before covering client activity and business results, I'll briefly discuss the macro environment shaping our revenue drivers. The Canadian economy remained resilient through the elevated uncertainty from persistent and evolving geopolitical and trade tensions. GDP and job growth continued despite lower immigration levels and household balance sheets are improving. That said, the impact from tariffs on the economy varies depending on the clients or sectors. We are seeing strong profitability and improving productivity for many of our corporate clients, while commercial clients and tariff-impacted sectors and geographies are facing headwinds. And the impact of the K-shaped economy continues to bifurcate Canadian. Going forward, we expect increased fiscal [ stemness ] and the diversification of new trading relationships to create a multiplier effect of supporting economic growth and client activity over the near to medium term. With this context, I will now speak briefly to key trends we are seeing across our businesses as seen on Slide 5. In Personal Banking, mortgage growth remained modest as housing demand remained soft in key regions. This was due to the affordability challenges, economic uncertainty and a pullback in immigration levels. Looking forward, given weaker demand, we reiterate our low to mid-single-digit mortgage growth guidance for the year. This growth will be supported by proprietary mortgage specialist sales force, capturing switch opportunities and driving strong retention through increased investments in channel capacity. Further, our recently announced strategic partnership with realtor.ca, will create new top-of-funnel opportunities. The strength of our money in franchise was on display again this quarter. We saw growth across demand deposits and mutual funds as many of our clients sought higher returns amidst term deposit renewals. The aggregate flows to personal savings accounts, GICs and mutual funds increased almost 50% from last quarter, driving strong revenue growth. Commercial Banking loans were up 4% with strength in health care and agriculture. Growth was moderated by a tariff-related slowdown in supply chain sectors and demand-driven headwinds in commercial real estate, which represents approximately 40% of the portfolio. On a provincial level, Ontario continues to experience tariff-related headwinds, while we are seeing resilience in the Prairies. Even though larger clients are cautiously returning to growth mode, we expect commercial loan growth to stay closer to the lower end of our mid- to high single-digit range for the year, the longer we go without clarity on the CUSMA trade negotiations. Deposit growth was stronger, up 5% year-over-year, reflecting broad-based expansion across nearly all sectors amidst the competitive landscape. To build on this momentum, we continue to invest across our sales force capacity and enhanced digital and AI-driven underwriting capabilities while elevating our transaction banking offerings. Our Wealth Management segment had a very strong quarter, generating over $6 billion in revenue, $1.7 billion in pre-provision pretax earnings and $1.3 billion in net income. Growth in fee-based assets benefited from market appreciation as North American equity markets rose double digits year-over-year and bond indices also moved higher. In addition, we recorded strong net new assets over the last 12 months, benefiting from clients moving back into the markets as well as continued adviser recruitment. Assets under administration were up 13% year-over-year in Canadian Wealth Management, surpassing $1 trillion for the first time. U.S. Wealth Management AUA was up 12% to USD 777 billion and RBC GAM assets under management were up 11% to $796 billion. Furthermore, City National's earnings continued to grow with both pre-provision pretax earnings and net income more than doubling year-over-year. This quarter, wealth management announced the expansion of RBC Echelon, our premier platform for a growing base of ultra-high net worth U.S. clients. We're also addressing the needs of new and aspiring self-directed investors by launching GoSmart, an intuitive mobile-first platform integrated within the RBC mobile app. Capital Markets also had a record quarter with revenue of $4 billion, pre-provision pretax earnings of $1.9 billion and net income of $1.5 billion. Global Markets generated record revenue of $2.2 billion with robust client activity amidst a constructive environment. We benefited from notable performance in equities, where we've made strategic investments to bolster our equity derivatives and financing capabilities. Corporate & Investment Banking benefited from higher debt and equity origination activity, higher M&A activity and higher North American lending revenue with average loans up 8% from last year. We continue to have a healthy M&A and origination pipeline as the macro and regulatory environment is expected to support growing fee pools. I now want to talk about our focus on compounding long-term shareholder value. Our philosophy has remained consistent. As noted last quarter, we constantly evaluate opportunities to optimize shareholder value, not to just maximize ROE. We concurrently want to enhance client-driven profitable growth while upholding our disciplined risk appetite and we have done both. This requires both the deployment of capital as well as leveraging our structural advantages in funding and noninterest expenses, along with our leading franchises, distribution and technology. On dividends, we look to progressive increases underpinned by sustainable earnings growth as we strive towards the midpoint of our 40% to 50% medium-term objective. When it comes to the level of share buybacks during times of uncertainty and volatility, we are aware of our book value multiples and intend to maintain capital levels near the higher end of our targeted range. Similarly, we have a high bar when it comes to acquisitions and we'll continue to be patient for the right opportunities to accelerate growth instead of solving capability gaps. Our priority continues to be investing to organically grow our businesses. The on [ top left ] side of Slide 6 highlights the organic RWA deployed to support our clients' financing needs and growth aspirations discussed earlier. We have increased the level of client-driven growth given an expanding suite of opportunities. Organic RWA growth this quarter was greater than the quarterly average of each of the last 3 years. Our diversified business model allows us to strategically grow RWA through a changing macro environment. We took advantage of constructive opportunities to utilize our resources to grow access across our capital markets businesses over the past year and reduced client demand and lower growth in commercial banking. The bottom left charts on Page 6 illustrates growth by ROE bands across our segments and sub lines of business. When it comes to allocating capital to drive client growth, we don't just allocate capital to grow the highest ROE businesses, we also look to strengthen market share and invest in new technologies and lay the foundation for new growth verticals to enhance future value and diversification across One RBC. These create a flywheel multiplier effect for driving durable ancillary revenue streams. Important point to make is that some of our largest businesses are inherently capital-light and do not need a lot of capital to grow. These are mostly funded by noninterest expenses, growth in less capital-intensive higher ROE businesses is a key driver of our revenue mix and growth. A relatively equal weighting between capital-light fee-based revenue and more capital-intensive net interest income provides us an attractive business mix as well as a lower credit risk profile. While some of our capital-intensive businesses generated returns below our expectations in fiscal 2025, this was partly due to several headwinds, which we expect to reverse over time. These include elevated PCL on performing loans, higher wholesale PCL, elevated spend in the U.S. and lower mortgage spreads due to increased competition. Furthermore, we look to offset any dilution from growing businesses with a lower stand-alone ROE by deepening client relationships to drive improved revenue productivity while also becoming more efficient. We also won't grow for the sake of growth, as evidenced by our discipline on mortgage growth and pricing amidst intense competition. We target profitable revenue growth that drives future value. Looking forward, we see momentum and significant opportunities to organically deploy capital across our diversified business model to accelerate profitable revenue growth. We are growing capital markets, corporate loans, which would initially generate a lower stand-alone ROE. However, this growth creates opportunities to add on higher ROE revenue such as transaction banking and investment banking fees. Additionally, we will continue to support client activities by deploying RWA into our financing businesses, which can further monetize sales and trading intermediation activities. A combination of growth and deepening relationships drives a higher segment and client relationship ROE. Another strategic initiative is to align transaction banking with our growing City National Bank commercial loan book as we build out teams while launching U.S. mortgage and credit card products to increase penetration within a high net worth client segment in U.S. Wealth Management. We also expect meaningful opportunities in commercial banking when we have certainty around CUSMA and when we start seeing the execution of large-scale infrastructure projects highlighted in the Canadian federal budget. The segment's ROE of over 16% this quarter highlights the power of the franchise when PCLs normalize. We are applying similar approaches across our strategic initiatives, some of which are listed on the right-hand side of Slide 6. We're not trying to just acquire loans, we are building relationships, and there are a lot of opportunities to grow without diluting our ROE. To close, we are focused on creating sustainable shareholder value by accelerating our ambitions to drive both profitable growth and a premium ROE underpinned by our Investor Day targets, including improving revenue productivity and cost efficiencies. We also remain committed to using our strong internal capital generation to return capital to shareholders through both dividends and buybacks. Our future success will include opportunities to turn our highest potential AI use cases into solutions that bring value to clients. To do that, we recently announced that our group head, technology and operations, Bruce Ross, will lead our newly created AI group to accelerate our AI ambitions. Moving into the group head technology and operations role is Naim Kazmi, a transformational leader who has held multiple leadership roles as most recently, the technology lead for the successful close and convert integration of HSBC Canada. We look forward to their continued success. And with that, Katherine, over to you. Katherine Gibson: Thanks, Dave, and good morning, everyone. Starting with Slide 8. This quarter, we reported strong results with diluted earnings per share of $4.03, adjusted diluted earnings per share of $4.08 was up 13% from last year, reflecting solid revenue growth and adjusted all bank operating leverage of 4.3%. Turning to capital on Slide 9. The CET1 ratio of 13.7% was up 20 basis points from last quarter, reflecting strong internal capital generation of 79 basis points underpinned by our 17.6% ROE. A modest benefit from changes in regulatory updates and market-driven OCI gains also contributed to the increase. This was partly offset by higher dividends as announced last quarter and higher RWA from the strong client-driven business growth that Dave just spoke to. Share buybacks of 4.2 million shares for approximately $1 billion, largely in line with last quarter's pace also had an impact. Moving to Slide 10. All bank net interest income was up 8% from last year or up 7%, excluding trading revenue, reflecting strong growth in Personal Banking and solid results in Commercial Banking and Capital Markets. All banks net interest margin was down 7 basis points from last quarter, largely due to seasonally higher financing activities in capital markets. All bank NIM, excluding trading revenue, was up 1 basis point from last quarter largely due to higher net interest income on certain transactions in capital markets, which were offset in noninterest income. Canadian Banking NIM was flat relative to last quarter largely reflecting favorable product mix, driven by growth in non-maturity deposits. Continued benefits from our structural tractor hedging strategy also contributed due to a combination of beneficial 5-year swap [ spread rule on ] trends and continued growth in notional balances. This was offset by pricing competition and lower purchase price accounting accretion benefits related to the acquisition of HSBC Bank Canada, which we guided to last quarter. Excluding the PPA accretion roll-off impact, Canadian Banking NIM would have been up [ 2 ] basis points. Moving to Slide 11. Reported noninterest expense was up 2% and adjusted noninterest expense was up 3% from last year. Adjusted expense growth was largely driven by higher variable compensation consistent with higher revenues in Wealth Management and Capital Markets. Higher salaries and pension and benefits-related costs also contributed to the increase, largely driven by a net increase in headcount. This was offset by the impact of FX translation and lower share-based compensation, which was driven by changes in equity markets and our own share price. Our expense growth also reflected the realization of cost synergies from the acquisition of HSBC Bank Canada and higher severance last year. Excluding these impacts, our expense growth would have been in the mid-single-digit range. On taxes, the adjusted non-TEB effective tax rate of 21.9% was up approximately 1.5 percentage points from last quarter, reflecting changes in earnings mix. I'll now turn to our Q1 segment results beginning on Slide 12. Personal Banking reported record results of approximately $2 billion this quarter. Focusing on Personal Banking in Canada, net income was up 18% from last year, and the segment generated operating leverage of 9%. Revenue growth was 9% with net interest income up 10% reflecting higher margins and volume growth. Noninterest income was up 8% from last year, largely reflecting higher mutual fund revenue. Loan growth of 4% was driven by growth across all portfolios. Deposit growth was flat as growth in lower cost demand deposits was offset by a decline in term deposits, concurrent with lower interest rates. However, this quarter, we generated over $2 billion in retail mutual fund net sales compared to the $5 billion we generated in all of fiscal 2025, reflecting the strength of our money in franchise. We expect this momentum to continue next quarter, including benefits from the seasonally active retirement contribution period. Turning to Slide 13. Commercial Banking reported record net income of $863 million, up 11% from last year. Pre-provision pretax earnings was up 5% from last year, driven by revenue growth from higher volumes and well-managed expenses. Deposits increased 5% from last year or 2% sequentially, driven by growth in non-maturity deposits, partly offset by a decline in term deposits. Loan growth continued to moderate to 4% year-over-year or 1% sequentially with tariff-related uncertainties impacting demand in key sectors and geographies. Turning to Wealth Management on Slide 14. Net income of $1.3 billion was up 32% from last year, reflecting record revenue. Noninterest income was up 11% reflecting higher fee-based client assets driven by market appreciation as well as net new assets. Strong retail mutual fund net sales over the last 12 months, including this quarter, were partly offset by outflows in short-term institutional mandates, which can be lumpy in nature. Transactional revenue, driven by client activity in U.S. Wealth Management also contributed. Net interest income was up 4% from last year, driven by higher deposit growth in Canadian Wealth Management as well as higher spreads and loan growth in U.S. Wealth Management, including City National Bank. City National's net income increased to USD 143 million. Record revenue this quarter was partly offset by higher expenses, including higher variable compensation and staff costs, including adviser recruitment. Turning to our Capital Markets results on Slide 15. Net income of $1.5 billion increased 3% from last year. Record pre-provision pretax earnings of $1.9 billion were up 11% from last year, partly offset by higher variable compensation. Global Markets revenue was up 7% from last year, reflecting record equity trading as well as strength in repo products, partly offset by softer credit trading results. Corporate and Investment Banking revenue was flat year-over-year. Investment banking revenue was down 6% from last year, offsetting lending and transaction banking revenue that was up 6%. Turning to Slide 16. Insurance net income of $213 million was down 22% from last year, reflecting a $65 million reinsurance recapture gain in the prior year. Return on equity for the business was 24.9%, reflecting the increase in attributed capital for insurance as guided to in our fourth quarter call. We continue to target a mid- to high 20% medium-term ROE. The U.S. region net income of USD 716 million was up 2% from last year, driven by a pickup in client activity in both capital markets and wealth management, including City National as well as some benefits of strong markets and improved operational efficiency. This was partly offset by higher PCL. I'll now spend a few minutes updating our outlook for 2026. Consistent with last quarter, we expect annual all bank net interest income growth, excluding trading, to be in the mid-single-digit range. This includes the majority of the remaining $80 million PPA accretion roll-off next quarter, which translates to approximately a 4 basis point impact to Canadian banking NIM. Noninterest income is expected to benefit from robust client activity in market-related businesses. That said, capital markets is seasonally stronger in the first quarter, particularly in certain trading businesses, consistent with increased client activity. As a reminder, starting next quarter, we'll also begin to see the modest impact of reduced fees in personal banking in line with regulations set out in last year's federal budget. Also recall the second quarter has fewer days than the other quarters. We continue to expect all bank expense growth to be in the mid-single-digit range for the year due to the realization of previously committed costs and ongoing investments. This includes the growth initiatives that Dave spoke to earlier. Investments in technology and safety and soundness framework of the bank continue to be a priority, given emerging opportunities and risks where we spend approximately $1 billion annually. Nonetheless, we continue to expect positive all-bank operating leverage for the year, including 1% to 2% for Canadian Banking as we continue to focus on efficiencies across the bank, including AI-related benefits. We expect the adjusted non-test effective tax rate to move towards the higher end of our 21% to 23% previously guided range over the next 12 months. In contrast, we expect corporate support segment losses to now trend closer to the lower end of the $100 million to $150 million range per quarter. On capital, we expect a modest 10 basis point negative impact to our CET1 ratio next quarter, reflecting changes to retail capital parameters. To conclude, we remain focused on continuing to drive sustainable shareholder value through capital allocation, centered on client-driven organic growth within our risk appetite, along with returning capital to shareholders. With that, I'll now turn it over to Graeme. Graeme Hepworth: Thank you, Katherine, and good morning, everyone. Starting on Slide 17, I'll discuss our allowances in the context of the macroeconomic environment and ongoing trade uncertainty. We remain cautiously optimistic on the outlook for the Canadian economy. We expect to see mild growth and continued stabilization in the economy, supported by prior rate cuts, ongoing trade diversification initiatives and targeted fiscal measures. Looking ahead, while we believe the Canadian economy has demonstrated resilience, factors such as U.S. trade policy, the upcoming CUSMA joint review and geopolitical tensions add ongoing uncertainty to our outlook. Against this backdrop, we have maintained a prudent approach with our allowances. While our base outlook assumes that current CUSMA exemptions and tariffs are maintained going forward, to reflect the uncertainty of outcomes, we have retained elevated [ weightings ] to our downside scenarios consistent with the last three quarters. As a reminder, in the second quarter of 2025, we introduced a trade disruption scenario into our IFRS 9 framework. This scenario captures the risk of Canada facing significantly higher tariffs across all exports but also reflects the potential for a severe North American recession driven by escalating global trade wars. When certain trade conditions have widened the range of possible outcomes, we feel the potential downside risk of a CUSMA [ trial ] been appropriately captured in our allowances supporting our financial resilience through the cycle. Turning to Slide 18. We took a total of $28 million or 1 basis point of provisions on performing loans this quarter, reflecting unfavorable changes in credit quality and portfolio growth partially offset by a favorable impact from our macroeconomic forecast. Moving to Slide 19. PCL on impaired loans of 40 basis points was up 2 basis points or $84 million relative to last quarter with higher provisions in Capital Markets and Personal Banking, partially offset by lower provisions in Commercial Banking. In Capital Markets, provisions on impaired loans were up $130 million from the prior quarter. Most notably, we incurred a large provision related to a borrower in the consumer discretionary sector as well as to a previously impaired borrower in the financial services sector. We also continue to see provisions in the commercial real estate sector consistent with ongoing headwinds in that space. In our commercial banking portfolio, PCL on impaired loans was down $73 million compared to last quarter, reflecting lower provisions on larger borrowers. While we saw a better performance in Q1, we expect losses to remain elevated in the coming quarters given the ongoing soft economic conditions, particularly in cyclical industries. As a reminder, impairments and recognized losses in our wholesale portfolios are inherently more difficult to predict and can be more episodic quarter-to-quarter. In Personal Banking, PCL on impaired loans increased by $27 million, driven by higher provisions in residential mortgages and credit cards partially offset by lower provisions in personal lending. We continue to see a more localized impact in our retail portfolios with higher provisions driven by softness in Ontario and the Greater Toronto region. Residential mortgage provisions are increasing as expected due to these regional factors and pressures from higher payments at mortgage renewal. We expect these pressures to abate as they exit 2026 with average payment increases at renewal decreasing substantially in 2027. We remain confident in the quality of our mortgage portfolio, underwriting and collateral. Moving to Slide 20. Gross impaired loans of $9.2 billion were up by $485 million or 3 basis points from last quarter, largely driven by 3 segments. In Personal Banking, gross impaired loans increased by $294 million quarter-over-quarter, largely driven by new formations in the Canadian residential mortgage portfolio. In Wealth Management, gross impaired loans increased by $90 million, driven by CNB with newly impaired loans in the commercial real estate and consumer staple sectors. In Commercial Banking, gross impaired loans increased by $88 million quarter-over-quarter, [ largely formations ] in the quarter related to borrowers in the transportation and industrial product sectors. To conclude, despite higher episodic losses in capital markets this quarter, we remain confident in the overall quality, diversification and resilience of our portfolios. We still expect full year 2026 provisions on impaired loans to remain within the guidance previously provided. Credit outcomes will continue to depend on the extent and duration of tariffs, the performance of labor markets, interest rates and real estate prices, factors we are actively monitoring as the trade and geopolitical landscape evolves. As always, we continue to proactively manage risk through the cycle and evaluate multiple scenarios across our credit and stress testing frameworks. We remain well provisioned and capitalized to withstand a wide range of macroeconomic and geopolitical outcomes. With that, operator, let's open the lines for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: Yes. So I wanted to go back, the Slide 6 is extremely helpful. So thanks for laying it out that way. But there's something you said like around that slide around profitable growth at a premium ROE. From an investment standpoint, it comes down to a relative game. So when we look at that Slide 6, maybe just talk to us about -- there are lots of tailwinds in capital markets today that the industry is benefiting from. As we think about the advantage that Royal has because of scale, because of market leadership position in many businesses, what are things that Royal can do that some of your peers may not be able to do as [ profitably ] that we, as investors, should think about? David McKay: That's fair. Maybe I'll ask Derek to start because you referred specifically to capital markets. And then myself, Sean or Erica will maybe answer that question in the context of Canadian Banking. So Derek, maybe the scale advantage that you have in capital markets. Derek Neldner: Sure. Thanks for the question, Ebrahim. So as you know, we've obviously been investing in the capital markets business now for many decades and have established very much a global footprint with today, about 70% of our revenue coming from outside of Canada. I think those investments over multiple decades have really put us in a position where we do bring advantages in terms of our global footprint, the diversification of our business, both across client segments sectors and products. And then obviously, the scale that, that brings, not just the scale within capital markets, but the scale of RBC that we can more broadly leverage. So what does that allow us to do from a competitive advantage perspective? I think, first, you've really seen that come through in the sustainability of our results. That breadth across geographies and products and client segments has allowed us to deliver. We believe, very sustainable results at lower volatility than some of our industry peers. Importantly, from a client perspective, the cross-border platform we have allows us to serve our clients across multiple markets, whether that be in financing or advisory or sales and trading intermediation which is very important as our clients get bigger and scale themselves and are looking for partners that can serve them across all their needs and allows us to pursue and support them in larger transactions, which again, scale is a theme we're seeing across industries, and our clients are looking for partners that can support them. And then finally, I would just say, very importantly, the scale advantages that we have and the sustainability and diversification of our business allows us to continue to invest very consistently over the cycle. And we're not going to chase certain themes at a certain point in the market cycle but allows us to pursue a very consistent strategy, make the investments in talent, technology with our balance sheet resources to really build long-term durable client franchises. And then finally, it allows us to do that without stretching on risk. So we've got lots of different avenues where we can invest organically, continue to build the business. We want to be thoughtful, particularly at this point in the cycle. And so we feel we can do that without compromising our risk appetite in any way. David McKay: Thanks, Derek. Ebrahim, when we think about scale, we think about in the context of operating scale, brand scale, data scale among a number of dimensions. And when you think about the operating scale of the Canadian Bank, Consumer and Commercial Banking operating at a combined productivity ratio, I think, 35%, 36%, it allows us to compete for business and drive a high ROE at the same price, same risk level allows us to price more flexibility. When you have a 30% advantage over your competitors are [ when they're in the ] mid-40s, it allows us enormous flexibility within our risk appetite to earn a higher ROE on the same piece of business or price more aggressively if we want to serve that client. So on the operating scale side, it's clear the advantages that gives us and it drives that consistent premium ROE -- operating ROE that we've driven. And maybe I'll turn it to Erica because it's such an important question, right, go on and spend a little more time on it. It's a great question, maybe about data scale and brand scale, Erica, [ in your business ]? Erica Nielsen: Thanks, Dave. So maybe just a comment on the data scale. One of the most important things that we see going forward as we serve more Canadians in the Canadian marketplace is our ability to understand and understand what those consumer needs are, understand the everyday financial of those consumer needs and then use that information to build models that allow us to further grow our business, further penetrate that business. When we look at the ability of our models, particularly those AI-based models that we're looking at. Now we can see very different outcomes based on the scale of consumers that we see in the Canadian marketplace. And so we look at that as a significant opportunity for us to grow our businesses differentially based on the data scale and the activity scale that we see in our client franchise. David McKay: Thanks. So that's a big part of our Investor Day thesis. I think -- we probably have a long queue, we should move on, but I appreciate that question. Operating data, balance sheet, brand scale are a big part of how we drive consistent premium growth in ROE. Operator: Your next question comes from the line of John Aiken with Jefferies. John Aiken: I was hoping to drill down a little bit on City National. I think Katherine mentioned in her commentary that there were a bit of headwinds in terms of provisions. I wanted to discuss the outlook for '26, '27 and how much work is left to be [indiscernible]? Or have we finished with most of the heavy lifting? David McKay: I think you heard incorrectly, there's a tailwind from [indiscernible], not a headwind. We're having great credit experience in City National. We serve a premium, affluent and entrepreneurial commercial customer. Any other clarity on that, Katherine? Katherine Gibson: No. I would just say in my comments, I was just calling out the strength of their earnings this quarter and In addition to the clean credit book growth, the really strong loan growth, deposit growth, profitable growth, and we're really pleased with the results that we see now on a continued basis over a few quarters. So as we go forward, really seeing them deliver against the targets that they have set out almost a year ago with that profitable top line growth, driving the efficiencies and it's really materializing with more to come. David McKay: Yes. And we are well on our way to meeting and exceeding our Investor Day targets in City National. We are very excited about being on a growth front footing right now with that business, profitability-wise and customer growth-wise. So I don't foresee the credit headwinds that you mentioned. Operator: Your next question comes from the line of Gabriel Dechaine with National Bank Financial. Gabriel Dechaine: Katherine, can you repeat what you said about the Canadian banking NIM and the impact of HSBC? That accretion runoff and stuff in Q2? Katherine Gibson: Yes, happy to. So what we saw as an impact this quarter was the PPA rolling off related to HSBC and so it's starting to roll off this quarter, which was the 2 basis points impact, and we're going to see it largely kind of fully roll off. There's a little bit that will last throughout the rest of the year, but it will be a 4 basis point impact. Having said all that, we're still seeing like a positive momentum from our tractor strategy we're seeing positive impact from the deposit mix shift as we're seeing those flows move into non term. We're also, as I said in my comments, seen really positive flows into mutual funds. So I know that doesn't necessarily show up in NIM, but it's showing up in overall revenue growth. And then you would have seen in the charts that we've included, there is still competitive pressure that is a bit of an unknown going forward. But we're seeing that on GICs and we're also seeing in the commercial book and a little bit still on the mortgages as well. Gabriel Dechaine: So margin down for the next quarter? Katherine Gibson: Yes, not -- the impact will be 4 basis points, and we don't give specific guidance out on NIM. We kind of pushed towards the guidance on the NII, excluding trading. But I would say you could look to kind of track to a stable expectation on NIM as we go forward. Gabriel Dechaine: Got it. And for Dave, just -- we hear this comment every now and then like pressure to deploy capital, which -- I don't think that applies to Royal. You got a lot of capital but you're going to nearly an 18% ROE. I didn't see a huge boost from capital markets that helped, but it wasn't like outsized this quarter. So are you just willing to sit on excess capital and wait for the organic growth to come, and then we'll see like a leg up then that type of thing? David McKay: That's a great question as we are put our third quarter consecutively of 17-plus percent ROE. It's driven from the strength of the business, not largely from buybacks. We haven't seen the benefit of our AI benefits that we discussed the $700 million to $1 billion benefits as we've invested that money and are still on track to deliver that for investors. So we're excited about that. We do, to your point, have significant capital to buy back shares. And we're certainly looking to continue to do that and grow into that. So we will be able to improve that ROE through some share buybacks. And then from an organic perspective, we want to spend more time talking about it. We do see more growth coming from a significant number of projects that are going to get built in this country, whether it's deployment of our defense industry spend, it's the energy infrastructure we need to be, the Arctic infrastructure, the minerals infrastructure, all these multiple use capabilities that the Prime Minister and the government has talked about is going to require a significant amount of domestic and foreign capital. One of the reasons we're looking to intermediate that capital from places like the Middle East as well into the country. So I think from that perspective, we see an acceleration of growth opportunities coming at us on the organic side that we're trying to anticipate the timing on that. It's hard to predict some of these larger projects. But again, we anticipate good growth coming. And the third thing I'd say we continue to be on the lookout for the right acquisition. It's not that we're avoiding them. Just none have met our hurdles at the end of the day and the hurdles that we promised you to drive accretion. At the end of the day, they are all significantly dilutive, and that's not acceptable to us. We don't grow for the sake of growth. We're here to create shareholder value. So it's not that we're not looking, that we understand the business we want to grow. They're all in the businesses that we talked about. What's global wealth, U.S. wealth, commercial banking, those are the types of acquisitions we would look at and nothing's met our hurdle rate. So we continue to be active in all fronts in creating shareholder value. And I think that you should get comforted by the number of levers we have to pull to enhance ROEs and create growth at the same time. Operator: Your next question comes from the line of Paul Holden with CIBC. Paul Holden: A question for Graeme. So Dave talked about loan growth being near the bottom end of the guidance range for the year due to sort of softer economic conditions in Canada persisting. What does that imply for the PCL guidance? I know you've restated the PCL guidance. Does that mean, should be assuming something at the upper end of the range, would you assume? And then sort of tied to that, I'm really curious by [ the good ] slide on -- I think it's Slide 34 where you show the mortgage portfolio, sort of the component of the higher risk where LTVs over [ 80 ] and credit bureau score below [ 6.85 ], and we saw some change in that number quarter-over-quarter. So maybe just on the question is talk to us about Canadian consumer risk and what that might mean for PCLs. Graeme Hepworth: Thanks, Paul. I think the comments they made around kind of softness on the growth side is quite consistent with the guidance we've given in Q4, and we're persisting into Q1. We continue to see the Canadian economy in particular not certainly weakening into a recessionary [ state of point ], but struggling with kind of pretty modest growth. And there's certainly regional effects, particularly when we talk about the consumer side of our portfolio, we particularly see weakness in Ontario consistent with kind of the elevated levels of employment we see in the region. And I think when we talked about in our guidance previously and that persists into Q1 is that we really kind of saw 2026 being a year where we were going to kind of be in this plateau of relatively elevated credit losses. And as things are really kind of trending sideways, there's some near-term headwinds that haven't changed that are still playing out. Those are headwinds like the increasing payments that many of our mortgage clients are going through. We've got the kind of ongoing kind of trade and tariff uncertainty. And again, that's impacting many sectors that we've talked about in the commercial side, but that does play through into the consumer side as well. And again, a lot of that is centered in the GTA in Ontario as well. So overall, I wouldn't say -- I think our view on the consumer has changed a lot in Q1 versus Q4. We're seeing a lot of the things we talked about then persist into Q1. When we look at the different products, I would say we see some indicators of stability and kind of early delinquencies in products like our mortgage product, [indiscernible] our unsecured lending products. Areas like indirect auto where we've seen maybe some recent trends in impairments that were improving, but the earlier delinquencies there are showing a bit of a [ softening ]. And so there's some pluses and minuses there, and we pull that together. That's what's kind of leading to us persisting kind of our view that the forecast and guidance we provided in Q4 still holds now. That's kind of the rough view of the consumer side. I'd say. The wholesale side is where we see more volatility, right? And I think we kind of called that out in Q4, and we're seeing that play out pretty much in Q1. Wholesale is by nature are just going to -- is going to be more volatile quarter-to-quarter. Interesting in our portfolio, you've seen kind of that play out in both directions. I think in capital markets, we obviously saw elevated levels of impairments and risk playing through in the quarter. Let me kind of compare that against a lot of the forward-looking metrics we look at in the wholesale book, things like our watch list and we've been into our special [ home group ] ratings migration. Those are all stable, if not improving. And so we don't see this as a new indicator that capital markets is resetting at a higher level. Likewise, Commercial Banking had a much improved quarter this quarter. But that's a business where, likewise, the indicators are still high and risk is still elevated. And so when you put wholesale together, we still think we're going to be in an elevated environment for the year, but it's going to be pluses and minuses as we work our way through each quarter. So -- and overall, very consistent, I would say, with Q4, but a few pluses and minuses as we look throughout the portfolio. Operator: Your next question comes from the line of Sohrab Movahedi with BMO Capital Markets. Sohrab Movahedi: Okay I just wanted to go back to Slide 6 and ask a question of there, in particular, [ maybe Graeme ]. You're kind of listed a couple of times as both capital-intensive and moderate capital intensive use of, I guess, resources here. So when you go to grow your corporate lending, for example, before some of the benefits come through, should we be expecting a bit of a, I don't know, moderation or mellowing in your segment ROE before it picks up. And as you do more corporate banking, Graeme, do we need to think about Royal's through the cycle average PCL with a greater volatility around it, even if it comes in around the same. So if you could just provide some color as to what the outlook may look like, not necessarily over the next 12 months, but over the next 24, 36 and beyond. Derek Neldner: Sure. Thanks, Sohrab. It's Derek. I'll start and then Graeme can obviously chime in on the second part of your question. Just a few things I would highlight. So on that Slide 6, as you know, Capital Markets has a broad portfolio of businesses. Some are more capital intensive, such as the corporate banking loan book. Some are moderate being parts of our Global Markets business. But I would also highlight, we have some very low capital intensity businesses, such as investment banking and transaction banking that are key growth areas for us as well. And so when we look at how we might deploy organic capital, it's really across all of these areas. For the more capital or moderate capital intensity through direct capital employment through financing and lending. And then through the less capital-intensive areas, it's really through NIE as we invest in talent and technology. To your specific question on what should you expect from the ROE, we would not expect a deterioration in our ROE. We think we can deploy capital, while at the same time, do that across the portfolio to continue on the trajectory of moving our ROE target higher consistent with what we articulated at Investor Day, and you've obviously seen that in the last two quarters as our ROE has continued to trend upwards. So it's a balance between ROE and growth we think we can invest across the portfolio, drive accelerated growth while continuing to migrate our ROE higher. Graeme Hepworth: Maybe just sort of add on the kind of risk element to that question, just kind of say a few things on that. I think while capital markets has been growing and there are plans to grow, if you kind of pull up and look at what [ tapped ] over the last 3 to 5 years, and you use kind of a metric like RWA as an indicator. We've actually seen the RWA footprint of capital markets kind of abate or kind of remain a stable proportion of RBC's overall risk profile. And so no, I don't expect it will kind of dramatically change kind of the volatility of our credit book per se. [ Look ], where the growth is happening, say, on the loan book or off the markets business on the financing side, it tends to be kind of higher grade corporate relationships that we're driving more of. And so I wouldn't expect it to be kind of driving volatility in a really distinct or unique way there. So as it stands, again, in the plan, we have a kind of a very well-articulated risk appetite. I don't think anything that we're laying out here has us changing our risk appetite. That's consistent with what we messaged at Investor Day. So no change in approach on that at this point. Operator: Your next question comes from the line of Mario Mendonca with TD Securities. Mario Mendonca: Dave, perhaps just a quick question. I was intrigued by a comment you made in your prepared remarks. You said -- and it was in the context of returning capital in the form of buybacks. You said something to be effect of, "And we acknowledge where the price of the book is." And I may have misheard you, but what message were you trying to convey if I did, in fact, head you correctly? David McKay: Just as we came out of Q4 into Q1 and saw the significant run-up in the share price, we looked at the volatility in the marketplace. And I think we tempered some of our buyback activity through Q1. As you saw, we maintained a kind of consistent level as we had in previous quarters between [ $800 billion ]. It was probably more most attributable to the uncertainty in the marketplace. And we exited the quarter thinking we'd be buying back shares at a certain level and ended up having a target much higher. So it's just a combination of events. I wouldn't attribute anything specific to the share price because we continue to buy back at $225, $230, $235 a share throughout the quarter. So we maintained an even cadence to the quarter versus an acceleration through the quarter. So I wouldn't attribute anything. It's more the uncertainty of the geopolitical situation that caused us to hedge a little bit through the quarter. Mario Mendonca: And then when you made reference to wanting to be at the high end of your target capital range, just remind me is [indiscernible] the high end? Or would you take -- that's the high end? David McKay: [ You ] let it run up a little bit. We had a significant quarter where we earned a great return, and we're very capital efficient and it moved up to [ 13.7 ]. It just gives us more flexibility to deploy that into buybacks and growth in the coming quarter. Mario Mendonca: And then just maybe I think one other thing. When you think about your U.S. franchise, I think CNB went through a rough patch. It's clearly out the other end, things are looking much better than they were a couple of years ago. Does that give you the confidence? And maybe this is the right way to ask it, is does the institution have the stomach for another meaningful U.S. banking transaction? David McKay: Does it have the stomach? Absolutely. Accretive shareholder value and the synergies lead to that shareholder value. It's all about your business case. And can you extract synergies versus the price and the competition. I mean we expect to have significant competition for any commercial property that we'd be looking at or wealth management property. And therefore, does your synergy start compete and can you earn a return on it. So we spent all our time building hypothetical synergy cases for each of these opportunities, and we talk about them, what would we do with this franchise differently than the current management team does. How do you put a valuation on that, and that leads us to be disciplined in any approach. So we know we have capital strength. We know our currency is strong, and therefore, we want to grow, but we're going to grow and create shareholder value at the same time. Operator: Your next question comes from the line of Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: Just a quick follow-up maybe for Erica and Sean, as we think about the margin outlook for the Canadian banking business, maybe just talk to what you're seeing on deposit pricing on term deposits versus acquiring new households I'm just trying to get a sense of what the competitive dynamics look on both fronts and the implications that may have as we think about just margins over the next year or two? Erica Nielsen: Yes. Thanks, Ebrahim, for the question. It's Erica. Maybe just a couple of reflections. As it relates to the pricing and the competition that we're seeing on our deposit franchise, particularly with GIC, I would say that it still continues to be a competitive market. And that is coming from a group of clients who are largely in 1-year term deposits, and they're looking now to make the determination of is it time for equities or is it time to remain in the GIC portfolio. And so we are watching that portfolio and trying to guide clients appropriately. So we want to make sure that, a, first and foremost, as we retain the dollars at RBC to grow our money in franchise. And then we follow what the client need is based on, should they remain in the GIC portfolio or should they largely move into the mutual fund portfolio. We see increasing, as Katherine talked about in her remarks, increasing rotation into mutual funds. But at the end of the day, our core metric is that we keep the dollars in the RBC franchise. And then as it relates to client acquisition, as you can imagine, there is -- client acquisition is challenged for all of us in this market at this point given the rollback in immigration in Canada. And so we are competing aggressively in that marketplace to switch Canadians across the different institutions and win, and we have had good success in our business at attracting with our value propositions, RBC Vantage, the Avion portfolio, acquiring clients into our core checking and savings businesses so that we can continue to grow that franchise. But that is -- remains competitive across all of our peer set. Sean Amato-Gauci: It's Sean. So on the commercial side, we are seeing continued mix -- product mix shift from term into demand as kind of the clients perceive the opportunity cost of holding excess liquidity to be low and are giving up some yield to maintain flexibility in this current environment. Just to give you some context there, we saw term obviously peak in 2023 or so at peak levels of rate increases at approximately 20% of the portfolio. The trough was about 8% to 9% in the early stages of COVID. We're in the close to the 14% range now. So while there's potential tailwind opportunity, we think that will continue to abate over the coming quarters. But we do see customers being more liquid and especially at the upper end of the portfolio, keeping sort of powder dry as we see investment activity starting to pick up on the lending side by the same clients who are being much more active than sort of the core commercial and smaller base. David McKay: Thanks, Sean. I think that's our last question. And I know you need to jump to another call, so maybe I'll wrap up here. So a strong quarter for RBC across all our businesses client-driven growth. As you heard Katherine say, we earned through some margin headwinds from the PPA. We earned through some tax increases. We earned through some PCL increases. So it just talks to the earnings power of the organization and what -- where headwinds will become tailwinds. You saw the very strong capital efficiency well into -- well on our way to, as one of you referred to at 18% with tailwinds as well, as I highlighted around, we haven't seen the AI benefits yet, which are coming and are on track, or we're confident of. We haven't really bought back shares that are utilizing the capital surplus capital that we have that creates opportunities there and the growth that's coming to deploy that organically as well. And I'm going to finish where we started with Ebrahim's question on scale. I mean when you're looking at these lower capital-intensive businesses that are so important in driving our business, whether it's wealth, or the transaction banking opportunity. The operating scale we have allows us to invest in this type of growth and get ahead of the curve. When you deploy $0.5 billion into your transaction banking platform because it's essential to your [ competitors ] in the future, but also the profitability that's going to come from that platform in the future. I think it's very significant. We've absorbed all that into our current run rate. So as you think about the ability to invest our NIE organically into growth. Neil's GoSmart initiative, which you didn't have a chance to talk about today, creating higher ROE, lower capital growth largely comes from your NIE efficiency and your NIE scale. And I think we -- that is the characteristics of our platform, and that's the benefits you see in getting ahead of these and creating revenue growth and [ profit and growth ] from that. So thank you for your questions. I know you have another call. Appreciate your interest and questions, and we'll see you next quarter. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Welcome to Arkema's Full Year 2025 results and outlook conference call. For your information, this call is being recorded. [Operator Instructions] I will now hand you over to Thierry Le Henaff, Chairman and Chief Executive Officer. Sir, please go ahead. Thierry Le Hénaff: Thank you very much. Good morning, everybody. Welcome to Arkema's Full Year 2025 Results Conference Call. With me today are Marie-Jose, our CFO; and the Investor Relations team. As always, the slides used during this webcast are available on our website. And together with Marie-Jose, we will be available to answer your questions at the end of the presentation. In 2025, the macroeconomic environment was, as you know, particularly challenging, probably one of the most difficult our industry has faced in the last 20 years. The second part of the year, in particular, was marked by subdued demand across many end markets. The slowdown in the U.S., while Europe remained at low levels. This reflected ongoing cautiousness of economic factors as well as tight year-end inventory management at many of our customers. On the other hand, Asia continued to be the most dynamic region for the group, in particular, China, where we could see an acceleration in certain sectors like electric mobility, advanced electronics and sustainable consumer goods as well. As you could expect in this context, the group focused on its fundamentals of customer proximity and innovation while strengthening its cost and cash initiatives. The teams have been fully mobilized on a daily basis to best address the environment and strictly control the operations. As a result, we generated a high level of cash at EUR 464 million, well above our revised guidance of EUR 300 million. This performance was also better than last year's level despite the significant EBITDA decrease. EBITDA stood indeed at EUR 1.25 billion with a margin of 13.8%, so close to 14%, not living up to our expectation at the beginning of our year, but not different from what most of our peers have experienced. We were able to offset fixed cost inflation and delivered around EUR 90 million of fixed and variable cost savings in 2025, nearly doubling our initial annual target set at CMD. This work will be pursued in 2026 as we strive to offset against the inflation, and we should, therefore, be able to deliver the 2028 cumulative cost savings target of EUR 250 million, 2 years in advance. As you can see in Slide 7, the group has launched a number of new initiatives to make the organization even more efficient, leading to more than 2% headcount reduction in 2025, and we anticipate a further reduction of around 3% per year over the next 3 years. Our performance continued to be supported by several of our key attractive markets, namely batteries, sports, 3D printing, healthcare and new generation fluorospecialties with low global warming potential, which benefited from strong dynamics with sales up 16% year-on-year. This market will continue to grow in the future and contribute to the ramp-up of our major projects listed on Slide 5. These projects delivered around EUR 60 million additional EBITDA in 2025, and we expect this trend to continue in 2026. The group will benefit from the ramp-up of the recent investment in the U.S. and Asia, successfully started in 2025 and early 2026, namely our new 1233zd and the DMDS unit in the U.S. as well as the Rilsan Clear transparent polymer capacity downstream of the polyamide 11 plant in Singapore. In addition, our investment in PVDF in the U.S. is planned to start up in the first half of 2026, increasing our capacity by 15% in the region. PIAM should continue to benefit from the launch of new smartphones, notably foldable and ultra slim models in which polyamide is becoming essential to answer their higher requirements in terms of reliability and thermal management. PIAM should also start benefiting from successful diversification into new high-end application in industry markets. After this important wave of organic projects, offering significant room for growth midterm, Arkema will further reduce its CapEx envelope to EUR 600 million in 2026. This level will enable the group to continue investing in targeted projects with high returns and fast payback. We did not only focus on the very short term but continue to build Arkema for the future by developing strategic partnership with leaders in their domain in order to strengthen our positioning in key markets such as batteries or sports. Maintaining our efforts in R&D is key in order to stay differentiated and accelerate our growth in high-end applications. We stay focused on sustainable innovation. We leverage our competencies by collaborating with doctors, OOYOO in carbon capture is a good example. Coming back to our 2025 EBITDA performance, outside of the negative currency impact, the low cycle in upstream acrylics and the decline of old generation refrigerant explained most of the decrease. The rest of Arkema's business was far more resilient, but this performance to a certain extent, was overshadowed by these other activities. That's why in order to improve the reading of the group's results, we have decided to implement a new segmentation starting in 2026 to better highlight the distinct dynamics and business models of the resilient and fast-growing platforms within Specialty Materials compared to the most cyclical and last industrial activities, which will be rebooked in a new segment called Primary Materials. The global Arkema polyamide business will be included in this new segment. This business has been much more volatile in recent years than it used to be, as you can see Slide 21. However, looking back since the acquisition of our American assets in 2010, this activity has been tremendously cash generative, largely contributing to further growth portfolio transformation over the past year. So we continue to leverage our strong industrial and commercial position in acrylics to generate solid cash generation and capital returns over the cycle. The new segmentation will also bring more visibility to our next-generation low GWP solution for air conditioning, which were actively managed to enhance our prospects. They will now be integrated into the fluorospecialties portfolio and will benefit from accelerated growth in applications like heat pumps and data centers. On the other hand, old generation refrigerants that have been a highly profitable and cash-generative business since 2020, probably exceeding potential proceeds from a disposal will join the Primary Material segment. While this business will quickly fade over the coming years, Arkema will benefit on the other end and within the Specialty Materials from the ongoing growth of the low GWP solution, generating substantial value. I believe this new segmentation will provide the financial community with greater transparency on Arkema's portfolio business drivers and Specialty Materials performance. Finally, I think it's important, I also want to quickly highlight some of our CSR results where we made again strong progress and achieved quite good performance in 2025. This is the case for our climate plan, where the group's numerous initiatives to reduce its carbon footprint are paying off. We reduced our Scope 1 and 2 emissions by 48.7% at the end of 2025 compared to 2029, fully in line with our target. And we have also decided to strengthen our ambition in water withdrawals and introduced a new target on waste treatment, another key priority for Arkema. Lastly, given the strength of the group's balance sheet, the Board has decided to propose a stable dividend of EUR 3.60 per share to the Annual General Meeting despite the challenging macro, which is a sign of confidence, both in the quality of the portfolio and in the relevance of the strategy. Thank you for your attention. I will now hand over to Marie-Jose, who will review in more detail the financial results before I come back to discuss the outlook with you. Marie-José Donsion: Thank you, Thierry, and good morning, everyone. So as commented by Thierry, 2025 was a challenging year. Starting with revenues of EUR 9.1 billion. Sales were down 5% year-on-year that were impacted by a negative 2.9% currency effect reflecting mainly the weakening of the U.S. dollar against the euro, but also from other currencies, including the Chinese Yuan and Korean Won. The scope effect at plus 1.6% reflecting the integration of Dow's laminating adhesives. Volumes were down 1.6%, reflecting the overall weak demand environment in Europe and North America as well as a tight inventory management by customers in the fourth quarter. On the other hand, we continue to benefit from a positive dynamic in Asia and more particularly in China, mainly driven by high-performance polymers. The price effect was a negative 2.1% impacted essentially by the acrylics cycle and by the refrigerant gases that are transitioning from old to new generation. Our other activities showed a more limited price decrease of 0.9% in the context of declining cost of raw materials. The group EBITDA came in at EUR 1.25 billion, including EUR 40 million negative currency effect. Let's mention first, Q4, which is a seasonally low quarter. The decline in EBITDA in the fourth quarter reflected the overall weak demand environment in Europe and in the U.S. as well as the strong destocking due to tight year-end inventory management at our customers and ourselves, actually, which impacted particularly our Adhesives and Advanced Materials segment. Looking now at the full year performance by segment. Adhesives margin came in at around 14% if we exclude the dilutive effect of Dow's laminating adhesives business still in its integration phase. Full year EBITDA reflected the weak demand in industrial additives and the slowdown in the U.S. in the second half, notably in flexible packaging, transportation and construction. Positive performance continues to be supported by our ongoing work on efficiency and our price discipline. Advanced Materials resisted well with a broadly stable volumes and prices, delivering an EBITDA margin of 17.9%. High Performance Polymers in particular, showed a 2% organic growth on the year, supported by new business developments in batteries, sports and 3D printing and the ongoing positive dynamic in Asia. The segment's EBITDA was nonetheless impacted by the negative currency effect by an unfavorable mix in performance additives as well as by lower volumes in Europe and in U.S. In Coatings, EBITDA was impacted by the low cycle conditions in the upstream acrylics as well as by the weak demand environment in coating market. Construction and decorative paints market in Europe and U.S. were subdued. The performance of the segment was therefore significantly lower than last year despite the resilience of downstream activities. Lastly, Intermediates EBITDA was mostly impacted by the decline in refrigerants in the first half of the year, while acrylics in Asia improved slightly. The group's recurring EBIT amounted to EUR 564 million, which corresponds to a recurring EBIT margin of 6.2%. It takes into account EUR 687 million of recurring fixed asset depreciation, higher than last year due to the integration of Dow's laminating adhesives and to the starting amortization of new production units, which came online during 2025. Nonrecurring items amounted to EUR 276 million. They include EUR 144 million of PPA depreciation and EUR 132 million of one-off charges, notably the restructuring costs linked to the hydrogen peroxide site in France. Financial expenses stood at minus EUR 125 million. The increase versus last year reflects the increased interest costs of our bonds on one hand and the lower interest on invested cash on the other hand. All in all, adjusted net income amounted to EUR 328 million, which corresponds to EUR 4.34 per share. Moving on to cash and debt. Arkema delivered a strong cash flow generation with recurring cash flow standing at EUR 464 million. This reflects our continuous initiatives to tightly manage our working capital. Working capital ratio on annualized sales reached 12.5% from EBITDA. And the EBITDA to operating cash conversion rate stood at 88%. Our spend in capital expenditure amounted to EUR 636 million, below the level of our recurring depreciation in . Free cash flow amounted to EUR 390 million, including a nonrecurring outflow of EUR 74 million, linked essentially to restructuring costs. Taking into account these elements, Arkema's net debt and hybrid bonds were slightly down at EUR 3.2 billion, which includes a EUR 1.1 billion hybrid bonds. The group continues to enjoy a strong balance sheet with a net debt to last 12-month EBITDA ratio of 2.5x. Note that our 2026 maturities were all prefinanced till 2025. The EUR 300 million outstanding hybrid bond issued in January 2020 was redeemed in January 2026. So our portfolio of hybrid bonds at the end of this month -- end of Jan is back at EUR 800 million. I hand it over back to Thierry now. Thierry Le Hénaff: Thank you, Marie-Jose, for this explanation. So if we exchange all the outlook for this year. So at the beginning of the year, the environment remains and there is no surprise to find the continuity of the second half of last year, with limited visibility and weak demand. The currency effect, you saw it continues to be a headwind following the further weakening of the USD and Asian currencies against the euro. In this context, as we said already, our first priority will continue to focus. And I think we did a good job last year, and we'll continue to do a good job this year on the elements under our control. This means, in particular, optimization of fixed costs, optimization of variable costs, CapEx and working capital. Besides, we continue to rely on the progressive ramp-up of our major project and it's slower than expected because of the macro, but is still material for the company, and it will support the Arkema growth in the long run. So for '26 versus '25, we expect this project to contribute around EUR 50 million of additional EBITDA. It will continue to help us this year and in the following year to reinforce our geographical footprint, since we anticipate more long-term development potential in Asia and in the U.S. In light of these elements for 2026, the group aims for its EBITDA to grow slightly at constant FX, and we prefer, obviously, to reason at constant FX, given the unusual volatility of exchange rates against the euro, not only the USD, as I mentioned, but also most of the Asian currencies. The year-on-year comparison will be more challenging in H1, and more particularly in Q1 since last year profile was more weighted on the first semester with significant destocking in the second half. Besides the currency effect on Q1 should be negative estimated at EUR 25 million. If we put the currency effect aside, we expect in 2026, the macro more or less similar to '25. The comparison with last year should ease progressively until the end of the year, including specifically to Arkema, the ramp-up of our major project. As a result, we anticipate the performance of the 2 halves more balanced in '26 than in '25. So thank you very much for your attention. And together with Marie-Jose, we are ready to answer the questions you may have. Operator: [Operator Instructions] The first question comes from Tom Wrigglesworth with Morgan Stanley. Thomas Wrigglesworth: Two, if I may. First, could you talk a little bit about the construction end markets by region? And how -- and kind of help us understand how much step down you saw in the U.S. in the second half and how much weight that weighs on 2026? And conversely, there are expectations that construction refurbishment improves in Europe in '26. Do you see anything in your order books or in your discussions with customers that kind of talk to that? And then secondly, if I may, just around obviously very strong free cash flow in the fourth quarter. How much of that was your decision to really cut the working capital versus the pricing element rolling through working capital, i.e., as we look at working capital for '26, if we do start to see some volume improvement at some point, do you need to see a rapid increase in working capital to meet that demand? Thierry Le Hénaff: Okay. I will let Marie-Jose answer on the working capital. On the construction market, it's an interesting question because, as you know, we have -- compared to other peers, we have more -- we are more weighted in construction, especially Europe and U.S. and in Asia is less than that. I would say, and it joins your question, in fact, to a certain extent, the answer is in your question. Europe, we have reached certainly a bottom. I'm quite cautious on the signals because we have been caught several times by surprise. My feeling is that let's say, there is a little bit of incremental improvement, but to be confirmed, okay? So Europe is like the bottom, it does not decrease anymore. And if there was a trend, it would be incrementally slightly better. In the U.S., clearly in second semester, it was one of the bad surprise. We are down in terms of business development. I would be -- I know the elasticity and the agility of the U.S. economy. So I would not extrapolate necessarily what we saw in the second semester in the U.S. with what it could be this year. What is clear is that -- and this is a difference with Europe, U.S. decreased second semester of last year in construction, while Europe gave the impression, it was more at the bottom and with a little bit more positive. So U.S. we will see. I know that the administration -- Trump administration is trying to put in place some measures in order to support construction-related activities. We'll see if it brings -- it brings some support, but there are so many variables that are difficult to know today. So I would be cautious as I am on the macro -- overall macro economy, let's take month by month and see how things are developing. Marie-José Donsion: On the cash? Thierry Le Hénaff: Yes, the cash. Marie-José Donsion: A few comments. So basically, you saw the working capital landed at 12.5% of our annual sales, frankly, reflecting the similar work that our customers have been doing on their end. For 2026 at constant macro, I would expect, frankly, a flat working cap. In case of a rebound, then for sure, working cap should increase in a commensurate way versus those 12.5% or 13% of our sales. Thomas Wrigglesworth: Okay. Just as a quick follow-up. I mean, do you think that the industry or the supply chain has overcut inventories and working capital? It just feels like everybody has cut aggressively at the end of last year and then aggressively cut again in the end of 2025 -- sorry, '24 and '25. I guess investors are surprised as to how much destocking has taken place. So any commentary or color there as to the level of inventories in the system would be very helpful. Thierry Le Hénaff: Certainly, this question is worth a lot of money. The difficulty, as you know, and you know as much as I know, Tom, is in the supply chain in chemicals, they are complex and they are longer. So it's -- and fragmented, so it's very difficult to have a clear view what is sure is that. And it has been, to a certain extent, a little bit of a mystery for all of us because normally, when you have a cycle in chemicals doesn't last so long. It's clear that we see destock. Now we are already talking about end of destocking, 18 months ago, we thought it was already long. So -- but it's clear that the stock for most of the chain seems to be rather low, but they are low if there is a rebound, if there is no rebound, certainly, the chain can live with that. So my theory is still the same. It does not change. And is that at a certain point, you will get a rebound. We don't know when it will happen. We don't know when and when the rebound will come, the chain will be under big pressure. This is obvious, but we don't know when. And there will be nuances depending on which region, which end market, which product line, et cetera. But basically, this is a typical cycle of chemicals, where you have volume and pricing on the both directions depending on the -- if it goes down or it goes up, always amplifying the industry. Then we have to be a bit patient, but it will come at a certain time. We don't know we'll see. So your question is valid. Certainly stock are less at the end of this year than they were at the end of '24, '24 was less than end of '23. But now this is a demand which will be the main driver of the stock. Operator: The next question comes from Matthew Yates of Bank of America. Matthew Yates: I'd like to ask about the new structure, the divisional restatement. Not the first time the company has done that since its creation. And I heard your introductory remarks about the benefits of transparency. But I would put it to you that there is an argument that it highlights a lack of industrial logic to the portfolio that you can move things around so frequently. It hurts investors' ability to track performance over time because we lose that transparency. So can you just elaborate a little bit more as to why you think this is a good decision. And by association, have you changed reporting lines or management structure? I had a quick glance at your exec committee on the website, which hasn't changed. But is there going to be a change in roles and responsibilities that may help us bring some better operational performance and some genuine benefit of this move? Thierry Le Hénaff: First of all, Matthew, we don't change so often. And here, we are talking about an incremental change. I think the difficulty we had and hopefully, it was well explained in our -- and we are completely open to discuss more with you and who wants. The difficulty we had were 2 things. The first one, we got the impression that on the Specialty Material business, which is whatever definition, by far, the large majority of Arkema portfolio. We are really doing a great job and this year, we were frustrated by the fact that we could not read it and you could not read it simply. And the reason was that we have -- things have changed over the past 3 years, the world has changed. I think maybe we change, but I think it's good to be agile and to try to be as transparent and as clear as possible in a world which is changing a lot, where yourself, ourselves, all our stakeholders are trying to understand what is happening and on what you can really rely and build for the future. And what we saw is that in fact on the refrigerant gas, while we saw that we were mostly old generation gases and little development in new generation, and this is why we wanted to sell it because we saw that there was no future and it was far from our sustainable strategy. What we saw is 2 things: that the old generation that we know already, were going to -- were phasing out or fading out and with an acceleration in the past 2 years. But on the other side, we're far stronger, far better, far quicker in the development of new generation, not for the traditional application in refrigerant, but for new application, heat pump, data center, energy efficiency in the buildings, which were really completely core in terms of the strategy of Arkema with some of niches, same end market, same kind of growth pattern, et cetera. So we wanted absolutely to recognize that. And this is why a part of this we split between old and new generation, and it makes completely sense from a portfolio standpoint that this new generation joins them. We have already started to do it, join the HPP. The second thing with regard to acrylics, for a long time, and we had -- I know discussion together on that. We are absolutely convinced that we would be able, for Europe and U.S., to stabilize their volatility by developing the downstream. It was true for Asia, but Asia, we knew that it would be quite limited. But Europe and U.S., we thought we could go at further on this path to balance the upstream and the downstream. But in fact, we have seen that the targets were not so many. In fact, we bought already most of this target with Sartomer and Coatex. And the second thing was that not only we were -- we decided when we bought Bostik to put most of our allocation of cash for acquisition for adhesives. And the second trend that we see, which is linked to the fact that the world is becoming far more volatile than it was in the old time. You can see on every parameter, the FX, the -- also the macro figures in this or that market, et cetera, or the brand evolution. In fact, it reinforces the volatility of the acrylic acids, the acrylics monomers. And we wanted to also to -- so we decided to put back China, Europe and U.S. together, and to recognize that in the portfolio, we have a minority, a small minority, which around 15% of the portfolio which is really in nature, more volatile. Even if on the -- over the cycle, we still generate a lot of a lot of cash. And for acrylics, it's normal because the upstream goes with this downstream. The upstream is a basic material. We know that basic material. So we think that with this evolution of the world that we want to recognize, the more volatility of what is now in primary materials, we are able really to be -- to show you that all the jobs that we have been doing on the Specialty Materials is really bearing its fruit with quite a resilience and the growth over time. And it was in this context of '25, which was completely atypical and unexpected. They were able to deliver minus 5% EBITDA evolution, which, frankly speaking, given the level of the context or the challenges of the context was quite a good performance. So for us, it was far easier to explain it like this. So you have to take it as a better reading now. This is why we did it. So hopefully, it will -- and we are ready to discuss with any of you. For us, it reinforced the quality of the reading on the performance and also of the benefit of the strategy we have been leading over the past 10 years. Matthew Yates: Okay. Can I ask a follow-up? Because from your answer, it sounds like the concept of integration across the value chain hasn't worked and is no longer valid. So this goes above and beyond simply the way you're reporting it. It questions the actual strategy of the company. Are you open to the idea of exiting the 3 upstream acrylics plants if there were to be a possible buyer out there? Or are they still core to the broader group? Thierry Le Hénaff: No. I would say that we have to take it for what it is, which is a better reading and reporting of where we are. Acrylics remains a backbone, which is important of the downstream. So, so far, I would say, is really part of the portfolio. And anyway, the results are quite low. So it's not at all even beyond what you say, the topic of disposal. Now as you say and you have seen the history of Arkema, there is never any taboo. So I think that for the time being, it's quite a reporting topic, and we have to take it as such. Operator: The next question comes from Laurent Favre of BNP. Laurent Favre: My first question, I guess, is on HPP where we had a stable Q2, stable each Q3 and Q4, I think a bit of a collapse down -- sales down 15%. We saw something similar with your peer this morning. And I was wondering if you could talk about what you're seeing on beyond, I guess, destocking, what you're seeing on competitive pressures and in particular, maybe some kind of commoditization risk? That's question number one. And the second one just to echo the comments from Matthew. I think best practice for us, especially if you're talking about adding transparency would be to have sort of restatements for the divisions going back to at least 2023. That would be really, I think, helpful for investors and for us. But a question related to the restatement is around acrylics. EU, U.S. I think it looks like you had EUR 13 million of EBITDA in 2025. And I was wondering how you're thinking about this going forward? It seems that we still have capacity additions in the industry in 2026 and maybe 2027. So are you expecting acrylics EU, U.S. to still be around that sort of breakeven EBITDA for '26 before we eventually see a recovery? What did you bake in the guidance? Thierry Le Hénaff: Okay. So with regard to the first question, I really think that the end of the year and you mentioned also our peers on the -- on the HPP is really driven by the destock of customer. When I saw -- we saw in detail, you can imagine the dynamics to really understand the results beyond the fact that the impact of the FX was more important in Q4. Don't forget that. What we saw is that the impact of destock was quite high. And destock, it happened less in Asia, where by culture, they don't stock a lot, but in Europe and U.S. So in fact, not only we have destock globally, but the fact that the destock was more pronounced in Europe and U.S., where culturally, our customers have more stock changed the geographical mix, okay? And it weighs on the profitability evolution. So the geographical mix was especially this low sales in the U.S. was a little bit of a surprise and that was linked to the destocking. We have spent a lot of time, as you can imagine, in this kind of contact with our customers. We knew, we understood that they would be very cautious in terms of stock at the end of the year. So this destocking topic is not just a matter of the chemical industry. Our customers, they destock, our suppliers, they destock, everybody try to finish the year with stock, which was, I would not say minimal, but more reasonable than they were given the level of the demand. So for me, it's not a matter of more competition or anything special sort of change in evolution, we would have seen in Q4. It's really a matter of customer by customer destock, as you can imagine, we check our market shares very precisely also, no. So -- and you know Q4 is the last quarter of the year. So sometimes you can have certain years, you can have a little bit of amplification of the low demand. But I would not consider this sort of new trend at all. It's not my feeling. And as you know, in HPP, we put a lot of efforts on the new business development, innovation and I think this is a paradox. I think we have been good on that. And so the growth is there. We are able to differentiate versus competition. And the market is not easy, but we are not particularly concerned for the next few years. On restatement, so I pass the message to the Investor Relations team will do what we can, but the idea is certainly not to lose you on the contrary, is to help you. So don't worry on that. We'll do our best. Yes. And with acrylics, yes, EBITDA, you could make the math, at least maybe we're not -- it's complicated for you. But as you could see, you could try to find some new information that you had not before. So it helps you also. I can see you started to work on the acrylics. Clearly, we are surprised by the, let's say, the depth of the cycle of acrylics is something. In fact, we have to go back to 2010 and the acquisition of the acrylics from Dow where the cycle were more or less that one. And I don't know if it makes you more comfortable. A year after, it was our one of best product line. So I think everybody has to be modest on anticipating. So I think that acrylics was under -- in Europe and U.S., was more under pressure than expected clearly in '25. We expect for the time being, something in, hopefully, a little bit of improvement, but something not far from what we saw in '25. Operator: The next question comes from Emmanuel Matot of ODDO BHF. Emmanuel Matot: Three questions for me. First, does that make sense to believe that H2 could be in line with H1 in terms of EBITDA? Is that the seasonality you are factoring into your guidance for 2026 because it's quite unusual historically? Second, given the ramp-up of your major projects , why do you expect those projects to have a lower additional contribution to the group's EBITDA in 2026? Because you are mentioning only EUR 50 million contribution compared to EUR 60 million last year. It seems to be cautious. And last question. Do you feel that the authorities in Europe are more willing than in the past to help you and the sector regain competitiveness significantly and protect you more from unfair competition, in particular, from China? Thierry Le Hénaff: Thank you, Emmanuel, for the question. On the first one, we didn't say it would be equal, we say it will be more balanced. So because on the contrary, in '25 was atypical, in terms of seasonality, but I'd say it would be at par H1 and H2. It's just the imbalance we had in '25 would be more back to normal, I would say. On the project, it's just -- in fact, there is no -- maybe it's counterintuitive, but it's not because you do a EUR 60 million in one year and EUR 50 million the following year. We are talking about incremental, as you know, additional EBITDA, okay? It depends on the momentum of the project. If in '24, you had a project which was started with the first step in '25, with the first step, which was very high in terms of contribution, the year after the same project can deliver far less on top of it. So you can deliver on a project. I don't know I will give you an example. You deliver on 5 years EUR 100 million. You can have the first year of EUR 40 million, the second year EUR 20 million and then EUR 10 million, et cetera. So it's not linked. So what is important is cumulative, and it depends on the phasing of the projects. Some have started 3 years ago. Some will after -- have just started at the end of last year. So don't -- there is no relation, I would say. What is important is accumulation. If we are cautious so much the better, it will depend on the macro. But I think that we should count on the EUR 50 million, I think it's reasonable. But the projects are -- what is more important beyond the figures is that we confirm that the positioning of the project is still completely valid from a strategic standpoint, from a geographical standpoint. And I think this is good news. This means that since the world is changing, your question could have been also, do you think that some of the projects are not relevant anymore because there were a change. It's not the case. We really confirm the quality of the projects. They are all meaningful even if it takes more time to develop than we would have thought at the beginning. On the last question, yes, we think that -- so first of all, we are a global company. So this is not Arkema protected. This is the assets of Arkema in Europe, but we have assets everywhere. And we will be pragmatic at the end, even if we like our region our country, we put our money where we believe we can be competitive and we can develop. And now with regard to Europe, yes, authorities have understood the danger for the industrial assets of chemical company, but also beyond chemicals in Europe. This seems to be more aware of the danger, more protective, think more about competitiveness. So in terms of let's say, awareness and intent, I would say, is positive in terms of act for the time being, we see nothing. Operator: The next question comes from Chetan Udeshi of JPMorgan. Chetan Udeshi: I had maybe 2, maybe 3, I don't know, but I'll try. The first one was just I'm looking at your Advanced Materials Q4 numbers. And I mean you're saying you had destocking, but then your revenue in Q4 is actually above Q3 and your EBITDA has been -- I mean it seems revenue is up EUR 10 million versus Q3. EBITDA is down EUR 40 million versus Q3. So I'm just curious what happened there? And maybe just to challenge your comment that Arkema is doing very well in Specialties. It doesn't seem like when I look at your numbers in Adhesives or Advanced Materials that's really coming through in terms of numbers. The EBITDA in both these divisions are down quite dramatically year-on-year. So just curious why you think we should think Arkema is doing well, and this is not a competitive pressure that is coming through in the business? And the last question I had was just in Q1 -- sorry, Q1 guidance. Historically, if I go like many years back, your typically, Q1 will be up 20% to 30% versus Q4. But in the last 2 years, we've had a more modest improvement of 1% to 5%. What should we think in terms of the magnitude of that seasonal rebound that we should have in mind for Q1? Thierry Le Hénaff: Okay, Chetan. I try to understand your -- the rationale of your questions. When you compare Q4 with Q2 with -- on Advanced Materials or no, I think on Advanced Materials, this is the answer to Laurent. This is a destock. So the destock -- as I said, which was not the case in Q3 happened mostly in Europe and the U.S. We have strong destocking in the U.S., and this is where in terms of added value, we are higher than in Asia. So the geographical mix is working against us. That's all. You have all the figures. So at the end, but it's more -- it's really the destock and the geographical mix. We have some high-value applications in Europe and U.S., which really completely destock. And sometimes just in December, you have no order because your customers are just optimizing their stock. So this is what happened. But from what I see with other peers that I know that you have some peers you especially follow. You can see that we -- destock was all across the board by many peers. So I would say no, no, I confirm what we say. Then your second question that is... Marie-José Donsion: It's the seasonality between Q1. Thierry Le Hénaff: No, there was another one. Marie-José Donsion: We said we are doing well in Specialty, but Chetan seems to flag that Adhesives and Materials were not so great. Thierry Le Hénaff: No, I think what we -- I don't really understand what your question. But what we say is that I'm sure you are referring to my point to Matthew on the transparency, why we changed segmentation. I think what we see very clearly is that the EBITDA of the Specialty Material over the year has declined by 5%, which we consider in macroeconomic, which is one of the worst we have seen in 30 years is performance, which show the quality of this portfolio. That's all. For the rest, you have your own opinion as the rest. But we consider that we have minus 5% EBITDA in really more than trough conditions. On 85% of the portfolio is a performance which need to be appreciated and to be highlighted. This is what we do. This is -- we think it was worth doing it. With regard to the Q1 guidance, we will not enter into precise figures. The only thing that we can say is that Q1 will be above Q4. There is a seasonality. The macro is comparable, certainly destocking should be less and the seasonality, typical, is better in Q1. We agree that in the recent years, it has been a bit less higher compared to Q4 than it was before. So you have some reference points that you can take. But I think this is a qualitative element that it will certainly not be the kind of seasonality you could find a few years ago. It's more typical of the more recent years, but Q1 will be above Q4, no surprises there. The macro should be quite comparable, but the destocking will be less also. Okay. And don't forget the FX impact of EUR 25 million that we have mentioned. Operator: The next question comes from James Hooper of Bernstein. James Hooper: Can we go into a little bit more detail around the outlook, please? Specifically, kind of division through division, if that's possible? And another thing I'd like to try and understand is, obviously, you're guiding for the EUR 50 million cumulative effect from the projects. But is there a cannibalization impact on some of the existing revenues? Because I'm just trying to bridge to the kind of the -- how this -- and also the kind of impact of the specialty groups versus refrigerants? Thierry Le Hénaff: With the outlook, I think we -- you got our press release and -- and what we can say at this stage on the outlook. So we are not given -- I think we have never given any guidance by division. We give a guidance for the whole company. Now I would say the macro and this is -- this was our feeling in '25, especially if you look at the new segmentation, I would say the macro is similar for each of the business, and there is there geographical footprint is quite comparable. The end markets are a little bit different, but they are all diversified in terms of end market. So I would not make a big difference by division. And there was a question of Laurent on the primary products materials with the weight of acrylics, et cetera, where we think it will stay at least for the first part of the year at a low level. But for the rest, I think the macro should be similar. Now on HPP, you will benefit more of Advanced Materials. You will benefit more from the projects than the rest -- than the other division. You could see that in -- if you take the list of the project is more in Advanced Materials and in Adhesives, but certainly Advanced Materials than the other division. Construction in Europe, we mentioned that I think, should more help the Adhesives and the Coating. So I'm sure you factored also old generation refrigerant and the primary material. So you have some nuances depending on which division you are talking about. So overall, a similar picture, but with some nuances that you know pretty well if you take our slide because you have where the projects are located. You have this discussion on construction, the discussion on old generation refrigerant and the acrylics. On the project, the EUR 50 million, I don't know what you mean by cannibalization, but there is no cannibalization. So this means this is a really -- at least it does not cannibalize other product line, if it is your question, a new product line would replace another one. No, it's not the case, except with refrigerant, where refrigerant is -- that is one project. And in fact, it's not for us in the case of the new refrigerant business, the end market is not the same. So it's not a cannibalization, but we know that old generation disappear, new generation are coming. But for the rest, no, I didn't see any cannibalization coming from the projects. James Hooper: And can I just ask a quick follow-up as well in terms of the cash outlook as well? Because I don't think you've given formal guidance for cash. Marie-José Donsion: So on the cash outlook, as we said at, let's say, comparable macro, cash performance should be quite comparable, let's say, provided that you take into account that the working capital would remain flat. So you see, in fact, for 2025, the contribution of the working capital variance. If we assume macro remains comparable, then there is no change in working capital expected in '26. Operator: Mr. Le Henaff, there are no more questions registered right now, so back to you for any closing remarks you may have. Thierry Le Hénaff: Yes. So first of all, thank you very much for your attention. I think this new year will be quite interesting as was the previous one. I think the team is really focused on the 2 time horizon, as you know, and as you could appreciate the efforts, cash, fixed costs, which are very important, so we'll continue then with a lot of engagement, and we still are confident on our major projects. It's a very important part. It takes more time than expected to develop them in the current macro, but it will really be a very material contributor in the coming years. And for the rest, we confirm that we have really strong positioning on most of our business lines. And even if the macro for the time being, remain rather weak, we think that our leadership position is really a support in this kind of environment. So looking forward to meeting you at different occasions. And have a good day. Thank you. Operator: Ladies and gentlemen, this concludes this conference call. Arkema thanks you for your participation. You may now disconnect.
Reese McNeel: Hello, everyone, and welcome to this Q4 2025 results presentation for Prosafe. My name is Reese McNeel, and I am the CEO. I'd like to just highlight here to start off where we are. Prosafe, we are the largest operator in the accommodation market. I think we have a very strong high-end fleet of 5 units, a leading position in Brazil. I think there's very strong market fundamentals. And today, I want to spend a little bit more time on talking about the market that we're in. And we have a really strong focus, particularly the last quarters, on cost and improving our strategic position. Coming back a little bit to Q4. I was very happy with the Q4 results. I think Q4, if I look back to get to the EBITDA that we had in Q4, we have to go back to 2022. So I think it was one of the strongest quarters we've had in many years. It's also a quarter where we had all 5 of our rigs operating and all 5 of our rigs earning. I think again, we got to go back quite a while since we've seen that. And I think that's a reflection of how strong the market is. Also had a very strong operating performance with 100% fleet utilization. So basically, essentially no downtime. So really strong operations and also good safety performance. A little bit on the marketing side, very important, of course, as well. We did sign an LOI for the Caledonia for 2027, very happy about that. I think as part and parcel of that LOI, also, we will -- we have agreed to sort of an upfront payment structure. So I think that's also going to be beneficial for us. And of course, we're looking for additional work for the Caledonia to fill the gap, but very happy that we were able to secure something for the Caledonia. When we come to sort of CapEx and looking at CapEx going forward, we did move the SPSs, which we had originally planned in 2025. They have now been moved into 2026. And actually, we'll be starting those SPSs here very shortly in the coming weeks, and that is both for the Safe Zephyrus and the Safe Notos. I'll let Halvdan talk a little bit more about the financials when we come to that, and I will go through on the next few slides a little bit more in depth on how I see the market and maybe what our strategic focus is. Again, largest operator of the offshore accommodation, where are our units today, 3 in Brazil, 1 in Australia. And the Caledonia, which we just demobilized, she was off contract on the 22nd. We're very happy with that. We actually got all the options exercised, which we had on that contract. It was originally a 6-month contract with 3 months options. We got all the options exercised. We're very happy about that and really safe and well, she performed extremely well on this contract, but she has now been demobilized and will -- is laid up in Scapa Flow. Looking a little bit at the backlog picture. You'll see this last year, we did successfully extend the Safe Notos. She will go on to her new contract from the 1st of September. One thing that we're actually very happy about there is that we have been able to organize it such that during this SPS period, we will also do any contract modifications that need to be done. So we do not need to bring the rig in between the 2 contracts. That is something that we often see in Brazil is that you need to go in between contracts, but we will avoid that. We will do all this work now in this SPS period, and she will be on the newer day rate of close to $140,000 a day from 1st of September. Safe Boreas, also very pleased. We got to Australia, we got there on time. Client was not quite ready for us so we have actually agreed with the client that the fixed -- the 15-month firm period for Boreas will only start when she has the gangway down, and the gangway is not down yet although we're expecting that quite soon now. So in essence, we have gained a little bit more fixed term on that Boreas contract. Caledonia, as I mentioned, the LOI, let's see if we can fill the space. There are some opportunities out there, but I would categorize this as cautiously optimistic, just given kind of the time where we are already for 2026, a lot of clients have already locked in their work programs for summer of '26. A very key strategic focus for us in the coming months. And I think if -- those who are following us, you will know that I have said many times that I think H1 is going to be the time frame when I think we will know more about the Safe Zephyrus and the Safe Eurus. I'm still very much there. They're running off contract in April, May '27, and then in the fall of '27, Petrobras has been very clear that they wish to extend the units that are rolling off, not only ours but others, extend or recontract. So we are expecting to see some tender activity, but I'll come on to that. There's also opportunities with other providers in Brazil. And I think one of our key competitors also has demonstrated that by putting together a good work from other players in Brazil. A little bit more on the market. Again, I very much like where we are. We are not -- so we are very much a late cycle provider. We're very much focused on the brownfield and very much focused on maintenance to FPSOs. We do, do some hookup work. That's why it's here, 20%. A good example of that is Boreas. She's doing actually a hookup job. She's not doing a maintenance job. But the 3 in Brazil and Caledonia, they were all in this category, I would say, of operations, maintenance, tie-back, doing this type of life extension type work. And I think I'll touch a little bit on that, but I think with the increasing number of FPSOs and increasing number of on water assets, I think there's strong demand in that area. Some may be familiar with this slide. This is a bit how we look at the market and where rigs are positioned. The market hasn't grown in the last quarter from our perspective, it's still sitting at 31. There are a couple of these heavy lift units, which are on their way. They won work in Brazil so they're on their way so there might be some shift in where the assets are located. But generally, the market has been flat. And again, you see that South America, and that's largely Brazil is the main market for these assets. We continue to have a leading position with the largest player, one of the largest players in this market. And I continue to believe, a firm believer that this is a market which needs to -- which would significantly -- would need to and would significantly benefit from consolidation. All the players here, we're all sitting on $15 million, $20 million of SG&A alone. So I think there would be a strong benefit. So I think as the market improves, that's something that we've been quite vocal about that we continue to focus and see what kind of opportunities may be out there to play a role in that consolidation. Demand and supply, I think demand is actually at a 10-year high in this market. We got to go back to the last peak before we can see where the demand is. You see that on the graph here on the side there. When we look at the higher-end units, we're close to 90% utilization. So there's very little supply available. When I'm talking about high-end units, I'm talking about DP3 semi-submersible vessels. I think maybe some here in Norway will -- have heard the news that there's a proposal to walk to work on FPSO in Norway. That was rejected by the unions, but there is actually no available DP3 Norwegian compliant rig to actually do that work in '26. So the market is very tight. Also recent tender out in Brazil for this summer. And also if they want a high-end unit, there's actually no supply readily available. So I'm very positive about the market, and that is actually flowing through into higher and higher day rates. So our Safe Notos is on $75,000 a day. That was a contract obviously entered into 4 years ago. New contracts, $140,000. Latest done is actually $150,000, and we actually see in the North Sea, of course, for a shorter -- not a 4-year contract, a shorter contract, we see rates going above now the $200,000 level. So again, we got to go back quite a bit of time before we have seen those rate levels. And I listed out here also on the side of the slide a little bit because a lot of people ask me, they say, Reese, you're solely dependent on Petrobras in Brazil. I said, well, we are working a lot for Petrobras, but actually, there is quite a lot of other work now in Brazil as well. So I listed out some of the names, but I think PRIO has been using, Brava, I think you see some of these announcements from our competitors. SBM, MODEC, I think there's many of the players in Brazil, large FPSO operators who are now also using accommodation. And I think this trend is definitely going to continue. It's a trend which we have seen and actually recently even is picking up. West Africa, we also see quite a few opportunities, rigs going to Nigeria. We even see some opportunities in the Mediterranean. There's a working rig, working in Libya, there's one working in Israel. So I think the market has more depth than just Brazil. And I think there is also more demand out there than simply Petrobras. So I'm very optimistic on the market. I think we will continue to see day rates, solid day rates here going forward into the next couple of years. And just again to reiterate, that's a similar rate trend. It's not only Brazil where we see rates going up, but we see the same in the rest of the world. And if I look at even the latest done in the last quarter, we haven't seen any sign of this trend sort of lagging. In fact, it continues to be very strong. I'd like to talk a little bit about kind of the operations. I mentioned some of that already before, 100% utilization in Q4. I think that was great, great achievement to get all the rigs working again. If I roll back to when I joined, we had a couple of rigs still sitting idle. I think we've cleaned up the fleet. We've sold some of the assets. We've got all the rigs back working. So I think really good achievement from everybody. And if I look into Q1, I think the biggest impact that you see there on the bar chart -- on the line chart here, the biggest impact here is, obviously, we are taking rigs to SPS. We got 2 rigs that have a bit of time out, and the Caledonia is obviously rolling off. So we will see a little bit lower utilization with the Caledonia coming off and also with the rigs working -- with the rigs out on SPS. Yes, on the SPS, yes, 40 days for Zephyrus, 50 days for Notos, doing a little bit more work than simply an SPS. Some people ask me, "Do you need that much time to do only the special survey?" Well, actually, we are using this opportunity as well to do modifications that are required for the new contract, but also to do some exchange and overhaul some thrusters. The rigs are approaching the 10-year mark. So there is a need actually to do a little bit more maintenance, and this is the ideal opportunity. Backlog, probably no surprise when you see the high utilization backlog also at close to a 10-year high. And I think, again, the Caledonia LOI, very happy with that. And I think our focus really in the coming quarter, as I mentioned, is very much on Eurus and Zephyrus extensions. That's really the key going forward here and to successfully execute, of course, these SPSs. So with that, I'll hand over to Halvdan, who will talk you through a few of the financials. Halvdan Kielland: Okay. Thank you. Great to be here. As Reese mentioned, EBITDA in the quarter has been fantastic, one of the best we've had in a while, almost tripled year-over-year. You'll see a significant increase in charter income. This is mostly due to the fantastic utilization we've had and the Boreas on full rate from 15th of December. Other income of $20 million, this is largely cost reimbursements that's coming from -- out of the Boreas contract in Australia, and we expect kind of a limited EBITDA margin contribution from that going forward. No real surprises on the income statement, significant step-up in net profit in the quarter, $5.3 million, kind of the important part here, interest expense, this reflects the full interest expense, including the PIK interest. So you'll see that on the next slide, the actual cash interest is slightly lower. The full year 2025 includes a significant portion of the recapitalization gain. Other than that, again, just a fantastic quarter on the income side. Now moving on to the most important part, the cash flow. CapEx of $9 million. This is mostly related to the tail end of the Boreas contract and the start-up of the Safe Zephyrus SPS. The large shift in working capital here is very natural with the beginning of the Safe Boreas contract, and we do expect kind of looking forward into 2026. Of course, we see that there's a large negative shift here, but we expect a lot of this to be recouped during 2026, and will have a significantly positive impact for the year. Cash position of $65.3 million. I think the important thing is here that we feel very comfortable that we are well covered on our liquidity to go into these 2 SPSs and for all our projects going forward. Strengthened balance sheet. Of course, we do see that we are in the best position that we have been for a while. As I said, liquidity that we feel very comfortable with going forward. Significant reduction even just quarter-over-quarter in net debt to EBITDA. Of course, this is largely due to the step-up in EBITDA. We would also like to see both sides of the fraction decrease on this. And yes, much better equity ratio. In terms of capital structure, no real changes. The only thing is we've repaid a small portion of the Eurus seller's credit, and we've added on the PIK interest for the senior secured facility. And we currently are paying that as PIK interest and we'll continue to do so as long as we feel the need to. Worth mentioning here, currently, the way this is structured, the whole debt stack is due in August 2028 at the same time as the Eurus facility. There is an option to push this out if the Eurus facility can get extended. The main tranche of $233 million can be pushed out until latest 31st of December 2029. Now we talked a little bit about where we are and where we've come from, going into where we'd like to go, $40 million of EBITDA in the year. Of course, as those of you who follow the company will know, we are still working on some legacy rates, specifically for the Eurus and the Notos. We see that the step-up on these, the Notos will go -- have that step-up expected around September onwards. But of course, for the Eurus and even the Zephyrus, this will be a massive increase. So we see that the potential on these new contracts should be able to bring us to around $90 million to $100 million of EBITDA, which on our current debt stack would bring us from around 6 to closer to 2. And of course, this is just on the increase in EBITDA. Of course, as a company, we'd like to get to the point where we can start to deleverage our balance sheet as well and bring both sides down. Talking a little bit about asset values. I think you can pretty comfortably say that if we start a replacement cost, there's not going to be any -- I mean I can't say for certainty, but looking at the value and looking at the cost, there's not going to be any new builds of these kind of vessels anytime soon. The market, we're very comfortable in saying that the market would have to have a substantial rate increase for people to even start considering it. In terms of broker valuations, we feel that is significantly above where the market is today. So we do feel that in terms of asset valuation, we do have some room to grow. Now to give you a little bit about our thoughts for the future, here is Reese. Reese McNeel: Thank you, Halvdan. I'll wrap it up here a little bit, and then I think there's also some questions that I have received. So I think a little bit on the outlook and the guidance. We gave guidance last year, $35 million to $40 million of EBITDA. We ended up in the higher range of that guidance, again, driven largely by the fact that we had all the units working and working well. Looking into 2026, we've given quite a large guidance range, $45 million to $55 million on the EBITDA. We do expect obviously an improvement of earnings. We'll have Boreas on contract throughout the full year, and we will also have the Notos rolling on to a new contract. So we do expect a little bit of an uptick in that. And as Halvdan said, we expect a pretty strong improvement in working capital. We had, obviously, the ramp-up of Boreas in the fall, and we had some of the SPS costs, which we took also in the fall, which had a negative working capital impact, but we're going to see a positive working capital impact throughout 2026. So all in all, I think we'll see an improvement in 2026. And the real key focus for me looking ahead is very much on to the new contracts and what we can secure with Eurus and Zephyrus. So with that, I'll end the formal part of the presentation. Reese McNeel: I do have a few questions, which I have received. So I will read them out here to the audience and then answer some of them to the best that I can. One of the questions was a question regarding Nova and Vega. I think we've talked about Nova and Vega several times. These are 2 rigs, which were actually built in 2015, 2016 by Axis Offshore and acquired by Prosafe. They're actually the last 2 remaining semi-submersible accommodation -- accommodation rigs, if you will, or specifically built for accommodation. I had the luxury of actually going on board a few weeks ago. They do actually look very nice. The takeout delivery price plus the cost to -- obviously, they've been sitting there for 10 years, so you need to spend some money to take care of obsolescence. And then you would also need to mobilize them to a location, most likely would be Brazil or West Africa. So our sort of take is if you added up that delivery price plus all that, you're probably in the range of $230 million to $250 million for each rig. It's probably not a lot of science behind if you look at sort of our EV per rig, we're probably more like 80-ish to 90-ish, depending a bit on which rig you're talking about. Broker values is around $100 million, $130 million, $150 million. So clearly, the sort of takeout delivery price or the all-in price for these rigs is quite high relative to where things are trading. We have had a consistent dialogue with the yard, and we continue to have that to see if we can find an amicable solution to get us into a position to take delivery of these rigs. We've continued to market them. So we have bid them in all the last tenders. But I think the key to sort of unlocking this is, of course, to see a continued improvement in the market, but we probably also need to -- we need to come to some kind of a structure with the yard, which we haven't to date. So hopefully, that gives a little bit of color on Nova and Vega. Back to a couple of other questions here. Yes. Another question was, give a little bit more color on Safe Caledonia and our plans. The way that I see Safe Caledonia is very much sort of, if we have worked for her, that's great. We keep her in the fleet. She's actually a pretty old vessel. She's 40 years old. So she's -- I like to make a joke that she's older than probably many of the guys in our office. But she was -- she had a significant renewal program in 2012, well over $100 million was put into her then. So she's actually a very nice rig. I've had the fortune to be on board a few times. And I think what we saw now with her performance for Ithaca was really strong. She had really good connectivity even through a large part of the winter. And I think the client was extremely happy with the unit and her performance. So on the back of that, we won a new contract in '27. And as I mentioned, Ithaca is actually funding or prefunding, subject to us signing the final contract, which we expect now in Q1. They will actually be funding a lot of that upfront. So in essence, we are not putting in a lot of our capital to keep her there and to keep her well ready for 2027. So for me, that's a perfect situation. We're not having to necessarily put out money. We've got a good contract for her, and we actually see now in '26 that she was one of our better earners. So I'm actually a bit more optimistic on Caledonia than I was if I roll myself back a couple of years. And I also see that in the U.K. market, there is work actually coming up. So I'm relatively optimistic, but we are very much taking this year by year. We got a job for '27. We basically got it funded through to '26, and we'll take a view. We'll try to find her some work in '28 or '29, but she's obviously not an asset that we are going to take a ton of risk on, if you want to put it like that. But I think there's a good market at the moment. I think we can actually keep her quite busy. The final question I saw popping in was with regards to my belief in FPSOs and the need for these units to supply FPSOs, the continuing need and how -- and a bit more color on that. And I guess, again, I've had the luxury and the opportunity to actually be offshore in Brazil on several of our units and the opportunity to actually see some of the FPSOs we're working against. And I think the corrosion level in Brazil, if you talk to some of our clients, they talk about 4 to 5x the corrosion level that you would see in the North Sea. These units need a lot of maintenance, whether it's Petrobras units or MODEC units or SBM units or any of them. There's a big maintenance need. And I think we have also seen actually ANP, the regulator in Brazil also shutting down some units. If we look at Peregrino, it was actually shut in by the regulator with a need for maintenance. So what we're hearing from our clients is they need the maintenance. And also what we are seeing is, again, as I mentioned, with Brava using PRIO using Petro Rio, I think there's a number of MODEC, there's a number of clients in Brazil. So I think there's clearly not only sort of the sort of theoretical that they need -- they're getting older, they're high corrosion, but actually, we actually see clients using. And I think interestingly enough, we see a bit the same in Norway. If you look where the accommodation units are working, they're largely working now this against FPSOs rather than, again, new installations. And I don't see this FPSO trend declining. There's many FPSOs on order into Brazil, but also Guyana. And I guess if we're looking even further down the line, then we're talking Namibia. But I'm very optimistic about sort of the underlying demand driver for our units. I'll just take one last check. I think that was it from questions, unless there's any questions from the audience here. Go ahead, Lucas. Unknown Analyst: So what kind of OpEx number for Caledonia did you bake in, in your guidance number? Reese McNeel: Yes. So Caledonia has about $35,000 OpEx when she's working and she has about $20,000 when she's going to be laid up. And of course, we also have some costs associated with laying her up. So we will have a few million dollars of cost just to get her, of course, get her property laid up. Unknown Analyst: And your CapEx expectations beyond '26. I mean you are doing 2 major SPSs in '26. So '27, '28, what's kind of the run rate that you are looking at? Reese McNeel: Yes. No, that's a very good question. I think what we're seeing is SPS costs tend to be in the sort of $20 million to $30 million range. So we're doing this. We've done quite a few of the SPSs. So if we can -- we're going to have another 5 years on Notos, another 5 years on Zephyrus. Eurus is coming up, I think, end of '28, '29. So I think -- but those are kind of $20 million to $30 million chunks per rig, but they are all kind of now in the 2031, 2029 time frame. And I think one of the key questions here, of course, is always when you're getting on to new contracts, is there going to be a requirement for contract-specific modifications or CapEx. So a good example is now, when we transition Notos onto her new contract with Petrobras, there is some CapEx, which is required according to the contract. In exchange, we did get a mob fee from Petrobras. So you match them off. But I think what exactly the CapEx will be in the coming '27, '28, leaving aside SPS, I think that's a little bit dependent on which contracts and the contract structure that we enter into. But generally, we're looking at $2 million to $4 million a rig outside of SPSs. Unknown Analyst: Okay. And the kind of reimbursables that you incurred in the Q4, is it going to continue in '26, given the structure of the contract? Reese McNeel: Yes. I think the reimbursables will continue to be quite high, but Q4 was particularly high because the heavy lift vessel itself, the entire chartering of the heavy lift vessel from Norway to Brazil was a reimbursable. And that was a double-digit million figure. So we won't see the same level of reimbursables. But we'll continue to see some reimbursables. But the market is -- the markup is sub-5%. Okay, with that, thank you very much, everyone, for coming and for listening in. Thank you.
Operator: Welcome to Arkema's Full Year 2025 results and outlook conference call. For your information, this call is being recorded. [Operator Instructions] I will now hand you over to Thierry Le Henaff, Chairman and Chief Executive Officer. Sir, please go ahead. Thierry Le Hénaff: Thank you very much. Good morning, everybody. Welcome to Arkema's Full Year 2025 Results Conference Call. With me today are Marie-Jose, our CFO; and the Investor Relations team. As always, the slides used during this webcast are available on our website. And together with Marie-Jose, we will be available to answer your questions at the end of the presentation. In 2025, the macroeconomic environment was, as you know, particularly challenging, probably one of the most difficult our industry has faced in the last 20 years. The second part of the year, in particular, was marked by subdued demand across many end markets. The slowdown in the U.S., while Europe remained at low levels. This reflected ongoing cautiousness of economic factors as well as tight year-end inventory management at many of our customers. On the other hand, Asia continued to be the most dynamic region for the group, in particular, China, where we could see an acceleration in certain sectors like electric mobility, advanced electronics and sustainable consumer goods as well. As you could expect in this context, the group focused on its fundamentals of customer proximity and innovation while strengthening its cost and cash initiatives. The teams have been fully mobilized on a daily basis to best address the environment and strictly control the operations. As a result, we generated a high level of cash at EUR 464 million, well above our revised guidance of EUR 300 million. This performance was also better than last year's level despite the significant EBITDA decrease. EBITDA stood indeed at EUR 1.25 billion with a margin of 13.8%, so close to 14%, not living up to our expectation at the beginning of our year, but not different from what most of our peers have experienced. We were able to offset fixed cost inflation and delivered around EUR 90 million of fixed and variable cost savings in 2025, nearly doubling our initial annual target set at CMD. This work will be pursued in 2026 as we strive to offset against the inflation, and we should, therefore, be able to deliver the 2028 cumulative cost savings target of EUR 250 million, 2 years in advance. As you can see in Slide 7, the group has launched a number of new initiatives to make the organization even more efficient, leading to more than 2% headcount reduction in 2025, and we anticipate a further reduction of around 3% per year over the next 3 years. Our performance continued to be supported by several of our key attractive markets, namely batteries, sports, 3D printing, healthcare and new generation fluorospecialties with low global warming potential, which benefited from strong dynamics with sales up 16% year-on-year. This market will continue to grow in the future and contribute to the ramp-up of our major projects listed on Slide 5. These projects delivered around EUR 60 million additional EBITDA in 2025, and we expect this trend to continue in 2026. The group will benefit from the ramp-up of the recent investment in the U.S. and Asia, successfully started in 2025 and early 2026, namely our new 1233zd and the DMDS unit in the U.S. as well as the Rilsan Clear transparent polymer capacity downstream of the polyamide 11 plant in Singapore. In addition, our investment in PVDF in the U.S. is planned to start up in the first half of 2026, increasing our capacity by 15% in the region. PIAM should continue to benefit from the launch of new smartphones, notably foldable and ultra slim models in which polyamide is becoming essential to answer their higher requirements in terms of reliability and thermal management. PIAM should also start benefiting from successful diversification into new high-end application in industry markets. After this important wave of organic projects, offering significant room for growth midterm, Arkema will further reduce its CapEx envelope to EUR 600 million in 2026. This level will enable the group to continue investing in targeted projects with high returns and fast payback. We did not only focus on the very short term but continue to build Arkema for the future by developing strategic partnership with leaders in their domain in order to strengthen our positioning in key markets such as batteries or sports. Maintaining our efforts in R&D is key in order to stay differentiated and accelerate our growth in high-end applications. We stay focused on sustainable innovation. We leverage our competencies by collaborating with doctors, OOYOO in carbon capture is a good example. Coming back to our 2025 EBITDA performance, outside of the negative currency impact, the low cycle in upstream acrylics and the decline of old generation refrigerant explained most of the decrease. The rest of Arkema's business was far more resilient, but this performance to a certain extent, was overshadowed by these other activities. That's why in order to improve the reading of the group's results, we have decided to implement a new segmentation starting in 2026 to better highlight the distinct dynamics and business models of the resilient and fast-growing platforms within Specialty Materials compared to the most cyclical and last industrial activities, which will be rebooked in a new segment called Primary Materials. The global Arkema polyamide business will be included in this new segment. This business has been much more volatile in recent years than it used to be, as you can see Slide 21. However, looking back since the acquisition of our American assets in 2010, this activity has been tremendously cash generative, largely contributing to further growth portfolio transformation over the past year. So we continue to leverage our strong industrial and commercial position in acrylics to generate solid cash generation and capital returns over the cycle. The new segmentation will also bring more visibility to our next-generation low GWP solution for air conditioning, which were actively managed to enhance our prospects. They will now be integrated into the fluorospecialties portfolio and will benefit from accelerated growth in applications like heat pumps and data centers. On the other hand, old generation refrigerants that have been a highly profitable and cash-generative business since 2020, probably exceeding potential proceeds from a disposal will join the Primary Material segment. While this business will quickly fade over the coming years, Arkema will benefit on the other end and within the Specialty Materials from the ongoing growth of the low GWP solution, generating substantial value. I believe this new segmentation will provide the financial community with greater transparency on Arkema's portfolio business drivers and Specialty Materials performance. Finally, I think it's important, I also want to quickly highlight some of our CSR results where we made again strong progress and achieved quite good performance in 2025. This is the case for our climate plan, where the group's numerous initiatives to reduce its carbon footprint are paying off. We reduced our Scope 1 and 2 emissions by 48.7% at the end of 2025 compared to 2029, fully in line with our target. And we have also decided to strengthen our ambition in water withdrawals and introduced a new target on waste treatment, another key priority for Arkema. Lastly, given the strength of the group's balance sheet, the Board has decided to propose a stable dividend of EUR 3.60 per share to the Annual General Meeting despite the challenging macro, which is a sign of confidence, both in the quality of the portfolio and in the relevance of the strategy. Thank you for your attention. I will now hand over to Marie-Jose, who will review in more detail the financial results before I come back to discuss the outlook with you. Marie-José Donsion: Thank you, Thierry, and good morning, everyone. So as commented by Thierry, 2025 was a challenging year. Starting with revenues of EUR 9.1 billion. Sales were down 5% year-on-year that were impacted by a negative 2.9% currency effect reflecting mainly the weakening of the U.S. dollar against the euro, but also from other currencies, including the Chinese Yuan and Korean Won. The scope effect at plus 1.6% reflecting the integration of Dow's laminating adhesives. Volumes were down 1.6%, reflecting the overall weak demand environment in Europe and North America as well as a tight inventory management by customers in the fourth quarter. On the other hand, we continue to benefit from a positive dynamic in Asia and more particularly in China, mainly driven by high-performance polymers. The price effect was a negative 2.1% impacted essentially by the acrylics cycle and by the refrigerant gases that are transitioning from old to new generation. Our other activities showed a more limited price decrease of 0.9% in the context of declining cost of raw materials. The group EBITDA came in at EUR 1.25 billion, including EUR 40 million negative currency effect. Let's mention first, Q4, which is a seasonally low quarter. The decline in EBITDA in the fourth quarter reflected the overall weak demand environment in Europe and in the U.S. as well as the strong destocking due to tight year-end inventory management at our customers and ourselves, actually, which impacted particularly our Adhesives and Advanced Materials segment. Looking now at the full year performance by segment. Adhesives margin came in at around 14% if we exclude the dilutive effect of Dow's laminating adhesives business still in its integration phase. Full year EBITDA reflected the weak demand in industrial additives and the slowdown in the U.S. in the second half, notably in flexible packaging, transportation and construction. Positive performance continues to be supported by our ongoing work on efficiency and our price discipline. Advanced Materials resisted well with a broadly stable volumes and prices, delivering an EBITDA margin of 17.9%. High Performance Polymers in particular, showed a 2% organic growth on the year, supported by new business developments in batteries, sports and 3D printing and the ongoing positive dynamic in Asia. The segment's EBITDA was nonetheless impacted by the negative currency effect by an unfavorable mix in performance additives as well as by lower volumes in Europe and in U.S. In Coatings, EBITDA was impacted by the low cycle conditions in the upstream acrylics as well as by the weak demand environment in coating market. Construction and decorative paints market in Europe and U.S. were subdued. The performance of the segment was therefore significantly lower than last year despite the resilience of downstream activities. Lastly, Intermediates EBITDA was mostly impacted by the decline in refrigerants in the first half of the year, while acrylics in Asia improved slightly. The group's recurring EBIT amounted to EUR 564 million, which corresponds to a recurring EBIT margin of 6.2%. It takes into account EUR 687 million of recurring fixed asset depreciation, higher than last year due to the integration of Dow's laminating adhesives and to the starting amortization of new production units, which came online during 2025. Nonrecurring items amounted to EUR 276 million. They include EUR 144 million of PPA depreciation and EUR 132 million of one-off charges, notably the restructuring costs linked to the hydrogen peroxide site in France. Financial expenses stood at minus EUR 125 million. The increase versus last year reflects the increased interest costs of our bonds on one hand and the lower interest on invested cash on the other hand. All in all, adjusted net income amounted to EUR 328 million, which corresponds to EUR 4.34 per share. Moving on to cash and debt. Arkema delivered a strong cash flow generation with recurring cash flow standing at EUR 464 million. This reflects our continuous initiatives to tightly manage our working capital. Working capital ratio on annualized sales reached 12.5% from EBITDA. And the EBITDA to operating cash conversion rate stood at 88%. Our spend in capital expenditure amounted to EUR 636 million, below the level of our recurring depreciation in . Free cash flow amounted to EUR 390 million, including a nonrecurring outflow of EUR 74 million, linked essentially to restructuring costs. Taking into account these elements, Arkema's net debt and hybrid bonds were slightly down at EUR 3.2 billion, which includes a EUR 1.1 billion hybrid bonds. The group continues to enjoy a strong balance sheet with a net debt to last 12-month EBITDA ratio of 2.5x. Note that our 2026 maturities were all prefinanced till 2025. The EUR 300 million outstanding hybrid bond issued in January 2020 was redeemed in January 2026. So our portfolio of hybrid bonds at the end of this month -- end of Jan is back at EUR 800 million. I hand it over back to Thierry now. Thierry Le Hénaff: Thank you, Marie-Jose, for this explanation. So if we exchange all the outlook for this year. So at the beginning of the year, the environment remains and there is no surprise to find the continuity of the second half of last year, with limited visibility and weak demand. The currency effect, you saw it continues to be a headwind following the further weakening of the USD and Asian currencies against the euro. In this context, as we said already, our first priority will continue to focus. And I think we did a good job last year, and we'll continue to do a good job this year on the elements under our control. This means, in particular, optimization of fixed costs, optimization of variable costs, CapEx and working capital. Besides, we continue to rely on the progressive ramp-up of our major project and it's slower than expected because of the macro, but is still material for the company, and it will support the Arkema growth in the long run. So for '26 versus '25, we expect this project to contribute around EUR 50 million of additional EBITDA. It will continue to help us this year and in the following year to reinforce our geographical footprint, since we anticipate more long-term development potential in Asia and in the U.S. In light of these elements for 2026, the group aims for its EBITDA to grow slightly at constant FX, and we prefer, obviously, to reason at constant FX, given the unusual volatility of exchange rates against the euro, not only the USD, as I mentioned, but also most of the Asian currencies. The year-on-year comparison will be more challenging in H1, and more particularly in Q1 since last year profile was more weighted on the first semester with significant destocking in the second half. Besides the currency effect on Q1 should be negative estimated at EUR 25 million. If we put the currency effect aside, we expect in 2026, the macro more or less similar to '25. The comparison with last year should ease progressively until the end of the year, including specifically to Arkema, the ramp-up of our major project. As a result, we anticipate the performance of the 2 halves more balanced in '26 than in '25. So thank you very much for your attention. And together with Marie-Jose, we are ready to answer the questions you may have. Operator: [Operator Instructions] The first question comes from Tom Wrigglesworth with Morgan Stanley. Thomas Wrigglesworth: Two, if I may. First, could you talk a little bit about the construction end markets by region? And how -- and kind of help us understand how much step down you saw in the U.S. in the second half and how much weight that weighs on 2026? And conversely, there are expectations that construction refurbishment improves in Europe in '26. Do you see anything in your order books or in your discussions with customers that kind of talk to that? And then secondly, if I may, just around obviously very strong free cash flow in the fourth quarter. How much of that was your decision to really cut the working capital versus the pricing element rolling through working capital, i.e., as we look at working capital for '26, if we do start to see some volume improvement at some point, do you need to see a rapid increase in working capital to meet that demand? Thierry Le Hénaff: Okay. I will let Marie-Jose answer on the working capital. On the construction market, it's an interesting question because, as you know, we have -- compared to other peers, we have more -- we are more weighted in construction, especially Europe and U.S. and in Asia is less than that. I would say, and it joins your question, in fact, to a certain extent, the answer is in your question. Europe, we have reached certainly a bottom. I'm quite cautious on the signals because we have been caught several times by surprise. My feeling is that let's say, there is a little bit of incremental improvement, but to be confirmed, okay? So Europe is like the bottom, it does not decrease anymore. And if there was a trend, it would be incrementally slightly better. In the U.S., clearly in second semester, it was one of the bad surprise. We are down in terms of business development. I would be -- I know the elasticity and the agility of the U.S. economy. So I would not extrapolate necessarily what we saw in the second semester in the U.S. with what it could be this year. What is clear is that -- and this is a difference with Europe, U.S. decreased second semester of last year in construction, while Europe gave the impression, it was more at the bottom and with a little bit more positive. So U.S. we will see. I know that the administration -- Trump administration is trying to put in place some measures in order to support construction-related activities. We'll see if it brings -- it brings some support, but there are so many variables that are difficult to know today. So I would be cautious as I am on the macro -- overall macro economy, let's take month by month and see how things are developing. Marie-José Donsion: On the cash? Thierry Le Hénaff: Yes, the cash. Marie-José Donsion: A few comments. So basically, you saw the working capital landed at 12.5% of our annual sales, frankly, reflecting the similar work that our customers have been doing on their end. For 2026 at constant macro, I would expect, frankly, a flat working cap. In case of a rebound, then for sure, working cap should increase in a commensurate way versus those 12.5% or 13% of our sales. Thomas Wrigglesworth: Okay. Just as a quick follow-up. I mean, do you think that the industry or the supply chain has overcut inventories and working capital? It just feels like everybody has cut aggressively at the end of last year and then aggressively cut again in the end of 2025 -- sorry, '24 and '25. I guess investors are surprised as to how much destocking has taken place. So any commentary or color there as to the level of inventories in the system would be very helpful. Thierry Le Hénaff: Certainly, this question is worth a lot of money. The difficulty, as you know, and you know as much as I know, Tom, is in the supply chain in chemicals, they are complex and they are longer. So it's -- and fragmented, so it's very difficult to have a clear view what is sure is that. And it has been, to a certain extent, a little bit of a mystery for all of us because normally, when you have a cycle in chemicals doesn't last so long. It's clear that we see destock. Now we are already talking about end of destocking, 18 months ago, we thought it was already long. So -- but it's clear that the stock for most of the chain seems to be rather low, but they are low if there is a rebound, if there is no rebound, certainly, the chain can live with that. So my theory is still the same. It does not change. And is that at a certain point, you will get a rebound. We don't know when it will happen. We don't know when and when the rebound will come, the chain will be under big pressure. This is obvious, but we don't know when. And there will be nuances depending on which region, which end market, which product line, et cetera. But basically, this is a typical cycle of chemicals, where you have volume and pricing on the both directions depending on the -- if it goes down or it goes up, always amplifying the industry. Then we have to be a bit patient, but it will come at a certain time. We don't know we'll see. So your question is valid. Certainly stock are less at the end of this year than they were at the end of '24, '24 was less than end of '23. But now this is a demand which will be the main driver of the stock. Operator: The next question comes from Matthew Yates of Bank of America. Matthew Yates: I'd like to ask about the new structure, the divisional restatement. Not the first time the company has done that since its creation. And I heard your introductory remarks about the benefits of transparency. But I would put it to you that there is an argument that it highlights a lack of industrial logic to the portfolio that you can move things around so frequently. It hurts investors' ability to track performance over time because we lose that transparency. So can you just elaborate a little bit more as to why you think this is a good decision. And by association, have you changed reporting lines or management structure? I had a quick glance at your exec committee on the website, which hasn't changed. But is there going to be a change in roles and responsibilities that may help us bring some better operational performance and some genuine benefit of this move? Thierry Le Hénaff: First of all, Matthew, we don't change so often. And here, we are talking about an incremental change. I think the difficulty we had and hopefully, it was well explained in our -- and we are completely open to discuss more with you and who wants. The difficulty we had were 2 things. The first one, we got the impression that on the Specialty Material business, which is whatever definition, by far, the large majority of Arkema portfolio. We are really doing a great job and this year, we were frustrated by the fact that we could not read it and you could not read it simply. And the reason was that we have -- things have changed over the past 3 years, the world has changed. I think maybe we change, but I think it's good to be agile and to try to be as transparent and as clear as possible in a world which is changing a lot, where yourself, ourselves, all our stakeholders are trying to understand what is happening and on what you can really rely and build for the future. And what we saw is that in fact on the refrigerant gas, while we saw that we were mostly old generation gases and little development in new generation, and this is why we wanted to sell it because we saw that there was no future and it was far from our sustainable strategy. What we saw is 2 things: that the old generation that we know already, were going to -- were phasing out or fading out and with an acceleration in the past 2 years. But on the other side, we're far stronger, far better, far quicker in the development of new generation, not for the traditional application in refrigerant, but for new application, heat pump, data center, energy efficiency in the buildings, which were really completely core in terms of the strategy of Arkema with some of niches, same end market, same kind of growth pattern, et cetera. So we wanted absolutely to recognize that. And this is why a part of this we split between old and new generation, and it makes completely sense from a portfolio standpoint that this new generation joins them. We have already started to do it, join the HPP. The second thing with regard to acrylics, for a long time, and we had -- I know discussion together on that. We are absolutely convinced that we would be able, for Europe and U.S., to stabilize their volatility by developing the downstream. It was true for Asia, but Asia, we knew that it would be quite limited. But Europe and U.S., we thought we could go at further on this path to balance the upstream and the downstream. But in fact, we have seen that the targets were not so many. In fact, we bought already most of this target with Sartomer and Coatex. And the second thing was that not only we were -- we decided when we bought Bostik to put most of our allocation of cash for acquisition for adhesives. And the second trend that we see, which is linked to the fact that the world is becoming far more volatile than it was in the old time. You can see on every parameter, the FX, the -- also the macro figures in this or that market, et cetera, or the brand evolution. In fact, it reinforces the volatility of the acrylic acids, the acrylics monomers. And we wanted to also to -- so we decided to put back China, Europe and U.S. together, and to recognize that in the portfolio, we have a minority, a small minority, which around 15% of the portfolio which is really in nature, more volatile. Even if on the -- over the cycle, we still generate a lot of a lot of cash. And for acrylics, it's normal because the upstream goes with this downstream. The upstream is a basic material. We know that basic material. So we think that with this evolution of the world that we want to recognize, the more volatility of what is now in primary materials, we are able really to be -- to show you that all the jobs that we have been doing on the Specialty Materials is really bearing its fruit with quite a resilience and the growth over time. And it was in this context of '25, which was completely atypical and unexpected. They were able to deliver minus 5% EBITDA evolution, which, frankly speaking, given the level of the context or the challenges of the context was quite a good performance. So for us, it was far easier to explain it like this. So you have to take it as a better reading now. This is why we did it. So hopefully, it will -- and we are ready to discuss with any of you. For us, it reinforced the quality of the reading on the performance and also of the benefit of the strategy we have been leading over the past 10 years. Matthew Yates: Okay. Can I ask a follow-up? Because from your answer, it sounds like the concept of integration across the value chain hasn't worked and is no longer valid. So this goes above and beyond simply the way you're reporting it. It questions the actual strategy of the company. Are you open to the idea of exiting the 3 upstream acrylics plants if there were to be a possible buyer out there? Or are they still core to the broader group? Thierry Le Hénaff: No. I would say that we have to take it for what it is, which is a better reading and reporting of where we are. Acrylics remains a backbone, which is important of the downstream. So, so far, I would say, is really part of the portfolio. And anyway, the results are quite low. So it's not at all even beyond what you say, the topic of disposal. Now as you say and you have seen the history of Arkema, there is never any taboo. So I think that for the time being, it's quite a reporting topic, and we have to take it as such. Operator: The next question comes from Laurent Favre of BNP. Laurent Favre: My first question, I guess, is on HPP where we had a stable Q2, stable each Q3 and Q4, I think a bit of a collapse down -- sales down 15%. We saw something similar with your peer this morning. And I was wondering if you could talk about what you're seeing on beyond, I guess, destocking, what you're seeing on competitive pressures and in particular, maybe some kind of commoditization risk? That's question number one. And the second one just to echo the comments from Matthew. I think best practice for us, especially if you're talking about adding transparency would be to have sort of restatements for the divisions going back to at least 2023. That would be really, I think, helpful for investors and for us. But a question related to the restatement is around acrylics. EU, U.S. I think it looks like you had EUR 13 million of EBITDA in 2025. And I was wondering how you're thinking about this going forward? It seems that we still have capacity additions in the industry in 2026 and maybe 2027. So are you expecting acrylics EU, U.S. to still be around that sort of breakeven EBITDA for '26 before we eventually see a recovery? What did you bake in the guidance? Thierry Le Hénaff: Okay. So with regard to the first question, I really think that the end of the year and you mentioned also our peers on the -- on the HPP is really driven by the destock of customer. When I saw -- we saw in detail, you can imagine the dynamics to really understand the results beyond the fact that the impact of the FX was more important in Q4. Don't forget that. What we saw is that the impact of destock was quite high. And destock, it happened less in Asia, where by culture, they don't stock a lot, but in Europe and U.S. So in fact, not only we have destock globally, but the fact that the destock was more pronounced in Europe and U.S., where culturally, our customers have more stock changed the geographical mix, okay? And it weighs on the profitability evolution. So the geographical mix was especially this low sales in the U.S. was a little bit of a surprise and that was linked to the destocking. We have spent a lot of time, as you can imagine, in this kind of contact with our customers. We knew, we understood that they would be very cautious in terms of stock at the end of the year. So this destocking topic is not just a matter of the chemical industry. Our customers, they destock, our suppliers, they destock, everybody try to finish the year with stock, which was, I would not say minimal, but more reasonable than they were given the level of the demand. So for me, it's not a matter of more competition or anything special sort of change in evolution, we would have seen in Q4. It's really a matter of customer by customer destock, as you can imagine, we check our market shares very precisely also, no. So -- and you know Q4 is the last quarter of the year. So sometimes you can have certain years, you can have a little bit of amplification of the low demand. But I would not consider this sort of new trend at all. It's not my feeling. And as you know, in HPP, we put a lot of efforts on the new business development, innovation and I think this is a paradox. I think we have been good on that. And so the growth is there. We are able to differentiate versus competition. And the market is not easy, but we are not particularly concerned for the next few years. On restatement, so I pass the message to the Investor Relations team will do what we can, but the idea is certainly not to lose you on the contrary, is to help you. So don't worry on that. We'll do our best. Yes. And with acrylics, yes, EBITDA, you could make the math, at least maybe we're not -- it's complicated for you. But as you could see, you could try to find some new information that you had not before. So it helps you also. I can see you started to work on the acrylics. Clearly, we are surprised by the, let's say, the depth of the cycle of acrylics is something. In fact, we have to go back to 2010 and the acquisition of the acrylics from Dow where the cycle were more or less that one. And I don't know if it makes you more comfortable. A year after, it was our one of best product line. So I think everybody has to be modest on anticipating. So I think that acrylics was under -- in Europe and U.S., was more under pressure than expected clearly in '25. We expect for the time being, something in, hopefully, a little bit of improvement, but something not far from what we saw in '25. Operator: The next question comes from Emmanuel Matot of ODDO BHF. Emmanuel Matot: Three questions for me. First, does that make sense to believe that H2 could be in line with H1 in terms of EBITDA? Is that the seasonality you are factoring into your guidance for 2026 because it's quite unusual historically? Second, given the ramp-up of your major projects , why do you expect those projects to have a lower additional contribution to the group's EBITDA in 2026? Because you are mentioning only EUR 50 million contribution compared to EUR 60 million last year. It seems to be cautious. And last question. Do you feel that the authorities in Europe are more willing than in the past to help you and the sector regain competitiveness significantly and protect you more from unfair competition, in particular, from China? Thierry Le Hénaff: Thank you, Emmanuel, for the question. On the first one, we didn't say it would be equal, we say it will be more balanced. So because on the contrary, in '25 was atypical, in terms of seasonality, but I'd say it would be at par H1 and H2. It's just the imbalance we had in '25 would be more back to normal, I would say. On the project, it's just -- in fact, there is no -- maybe it's counterintuitive, but it's not because you do a EUR 60 million in one year and EUR 50 million the following year. We are talking about incremental, as you know, additional EBITDA, okay? It depends on the momentum of the project. If in '24, you had a project which was started with the first step in '25, with the first step, which was very high in terms of contribution, the year after the same project can deliver far less on top of it. So you can deliver on a project. I don't know I will give you an example. You deliver on 5 years EUR 100 million. You can have the first year of EUR 40 million, the second year EUR 20 million and then EUR 10 million, et cetera. So it's not linked. So what is important is cumulative, and it depends on the phasing of the projects. Some have started 3 years ago. Some will after -- have just started at the end of last year. So don't -- there is no relation, I would say. What is important is accumulation. If we are cautious so much the better, it will depend on the macro. But I think that we should count on the EUR 50 million, I think it's reasonable. But the projects are -- what is more important beyond the figures is that we confirm that the positioning of the project is still completely valid from a strategic standpoint, from a geographical standpoint. And I think this is good news. This means that since the world is changing, your question could have been also, do you think that some of the projects are not relevant anymore because there were a change. It's not the case. We really confirm the quality of the projects. They are all meaningful even if it takes more time to develop than we would have thought at the beginning. On the last question, yes, we think that -- so first of all, we are a global company. So this is not Arkema protected. This is the assets of Arkema in Europe, but we have assets everywhere. And we will be pragmatic at the end, even if we like our region our country, we put our money where we believe we can be competitive and we can develop. And now with regard to Europe, yes, authorities have understood the danger for the industrial assets of chemical company, but also beyond chemicals in Europe. This seems to be more aware of the danger, more protective, think more about competitiveness. So in terms of let's say, awareness and intent, I would say, is positive in terms of act for the time being, we see nothing. Operator: The next question comes from Chetan Udeshi of JPMorgan. Chetan Udeshi: I had maybe 2, maybe 3, I don't know, but I'll try. The first one was just I'm looking at your Advanced Materials Q4 numbers. And I mean you're saying you had destocking, but then your revenue in Q4 is actually above Q3 and your EBITDA has been -- I mean it seems revenue is up EUR 10 million versus Q3. EBITDA is down EUR 40 million versus Q3. So I'm just curious what happened there? And maybe just to challenge your comment that Arkema is doing very well in Specialties. It doesn't seem like when I look at your numbers in Adhesives or Advanced Materials that's really coming through in terms of numbers. The EBITDA in both these divisions are down quite dramatically year-on-year. So just curious why you think we should think Arkema is doing well, and this is not a competitive pressure that is coming through in the business? And the last question I had was just in Q1 -- sorry, Q1 guidance. Historically, if I go like many years back, your typically, Q1 will be up 20% to 30% versus Q4. But in the last 2 years, we've had a more modest improvement of 1% to 5%. What should we think in terms of the magnitude of that seasonal rebound that we should have in mind for Q1? Thierry Le Hénaff: Okay, Chetan. I try to understand your -- the rationale of your questions. When you compare Q4 with Q2 with -- on Advanced Materials or no, I think on Advanced Materials, this is the answer to Laurent. This is a destock. So the destock -- as I said, which was not the case in Q3 happened mostly in Europe and the U.S. We have strong destocking in the U.S., and this is where in terms of added value, we are higher than in Asia. So the geographical mix is working against us. That's all. You have all the figures. So at the end, but it's more -- it's really the destock and the geographical mix. We have some high-value applications in Europe and U.S., which really completely destock. And sometimes just in December, you have no order because your customers are just optimizing their stock. So this is what happened. But from what I see with other peers that I know that you have some peers you especially follow. You can see that we -- destock was all across the board by many peers. So I would say no, no, I confirm what we say. Then your second question that is... Marie-José Donsion: It's the seasonality between Q1. Thierry Le Hénaff: No, there was another one. Marie-José Donsion: We said we are doing well in Specialty, but Chetan seems to flag that Adhesives and Materials were not so great. Thierry Le Hénaff: No, I think what we -- I don't really understand what your question. But what we say is that I'm sure you are referring to my point to Matthew on the transparency, why we changed segmentation. I think what we see very clearly is that the EBITDA of the Specialty Material over the year has declined by 5%, which we consider in macroeconomic, which is one of the worst we have seen in 30 years is performance, which show the quality of this portfolio. That's all. For the rest, you have your own opinion as the rest. But we consider that we have minus 5% EBITDA in really more than trough conditions. On 85% of the portfolio is a performance which need to be appreciated and to be highlighted. This is what we do. This is -- we think it was worth doing it. With regard to the Q1 guidance, we will not enter into precise figures. The only thing that we can say is that Q1 will be above Q4. There is a seasonality. The macro is comparable, certainly destocking should be less and the seasonality, typical, is better in Q1. We agree that in the recent years, it has been a bit less higher compared to Q4 than it was before. So you have some reference points that you can take. But I think this is a qualitative element that it will certainly not be the kind of seasonality you could find a few years ago. It's more typical of the more recent years, but Q1 will be above Q4, no surprises there. The macro should be quite comparable, but the destocking will be less also. Okay. And don't forget the FX impact of EUR 25 million that we have mentioned. Operator: The next question comes from James Hooper of Bernstein. James Hooper: Can we go into a little bit more detail around the outlook, please? Specifically, kind of division through division, if that's possible? And another thing I'd like to try and understand is, obviously, you're guiding for the EUR 50 million cumulative effect from the projects. But is there a cannibalization impact on some of the existing revenues? Because I'm just trying to bridge to the kind of the -- how this -- and also the kind of impact of the specialty groups versus refrigerants? Thierry Le Hénaff: With the outlook, I think we -- you got our press release and -- and what we can say at this stage on the outlook. So we are not given -- I think we have never given any guidance by division. We give a guidance for the whole company. Now I would say the macro and this is -- this was our feeling in '25, especially if you look at the new segmentation, I would say the macro is similar for each of the business, and there is there geographical footprint is quite comparable. The end markets are a little bit different, but they are all diversified in terms of end market. So I would not make a big difference by division. And there was a question of Laurent on the primary products materials with the weight of acrylics, et cetera, where we think it will stay at least for the first part of the year at a low level. But for the rest, I think the macro should be similar. Now on HPP, you will benefit more of Advanced Materials. You will benefit more from the projects than the rest -- than the other division. You could see that in -- if you take the list of the project is more in Advanced Materials and in Adhesives, but certainly Advanced Materials than the other division. Construction in Europe, we mentioned that I think, should more help the Adhesives and the Coating. So I'm sure you factored also old generation refrigerant and the primary material. So you have some nuances depending on which division you are talking about. So overall, a similar picture, but with some nuances that you know pretty well if you take our slide because you have where the projects are located. You have this discussion on construction, the discussion on old generation refrigerant and the acrylics. On the project, the EUR 50 million, I don't know what you mean by cannibalization, but there is no cannibalization. So this means this is a really -- at least it does not cannibalize other product line, if it is your question, a new product line would replace another one. No, it's not the case, except with refrigerant, where refrigerant is -- that is one project. And in fact, it's not for us in the case of the new refrigerant business, the end market is not the same. So it's not a cannibalization, but we know that old generation disappear, new generation are coming. But for the rest, no, I didn't see any cannibalization coming from the projects. James Hooper: And can I just ask a quick follow-up as well in terms of the cash outlook as well? Because I don't think you've given formal guidance for cash. Marie-José Donsion: So on the cash outlook, as we said at, let's say, comparable macro, cash performance should be quite comparable, let's say, provided that you take into account that the working capital would remain flat. So you see, in fact, for 2025, the contribution of the working capital variance. If we assume macro remains comparable, then there is no change in working capital expected in '26. Operator: Mr. Le Henaff, there are no more questions registered right now, so back to you for any closing remarks you may have. Thierry Le Hénaff: Yes. So first of all, thank you very much for your attention. I think this new year will be quite interesting as was the previous one. I think the team is really focused on the 2 time horizon, as you know, and as you could appreciate the efforts, cash, fixed costs, which are very important, so we'll continue then with a lot of engagement, and we still are confident on our major projects. It's a very important part. It takes more time than expected to develop them in the current macro, but it will really be a very material contributor in the coming years. And for the rest, we confirm that we have really strong positioning on most of our business lines. And even if the macro for the time being, remain rather weak, we think that our leadership position is really a support in this kind of environment. So looking forward to meeting you at different occasions. And have a good day. Thank you. Operator: Ladies and gentlemen, this concludes this conference call. Arkema thanks you for your participation. You may now disconnect.
David de la Roz: Good afternoon, everyone, and thank you all for joining us today for the Q3 fiscal year 2026 results presentation for the 9 months ending 31st of December 2025. I'm David de Roz, the Director of Investor Relations at eDreams ODIGEO. As always, you can find the results materials, including the presentation and our results report in the Investor Relations section of our website. I will now pass you over to Dana Dunne, our CEO, who will take you through the first part of the presentation. Dana Dunne: Thank you, David, and good afternoon, everyone. Thank you for joining us today. We're going to discuss 3 things. The first is I'll do a brief update of our first 9 months' results of FY '26 and the outlook, which we are on track. Second, David Elizaga, our CFO, will take you through the Prime model and how it continues to drive very strong growth. Third, I will then share some closing remarks on why we think we are significantly undervalued. Please turn to Slide 4, which is a summary of our performance for the first 9 months of fiscal year 2026. We're firmly on track to deliver on our new guidance. In the first 9 months, adjusted EBITDA increased 74% year-on-year to EUR 138.4 million. Adjusted EBITDA isolates operational performance from cash timing effects of the move from annual subscription to annual subscription with monthly installments. So this 74% increase of adjusted EBITDA shows the strength of the underlying business absent the cash timing effects. Prime membership. We reached 7.7 million members, up 13% year-on-year. As of January, we hit 7.8 million subscribers and reaffirm our FY '26 target of 7.9 million. Cash EBITDA improved by 2% to EUR 126.7 million compared to the 9 months of FY '25, which was partially impacted by the investments we are making in the new businesses, the temporary instability in our Ryanair content, and the timing impact of the move from annual subscription to annual subscription with monthly installments. Despite this, growth resulted in a substantial expansion of our profit margins and is also on track to meet our FY '26 target of EUR 155 million cash EBITDA. In terms of revenue mix, Prime-related revenue now accounts for 75% of cash revenue margin and grew 7% year-on-year. I will cover this in my closing remarks, but it's important to briefly highlight that our strategy review update back in November 2026 was done from a position of strength and is a high conviction move based on solid data from extensive live operations. All in all, we will deliver a much better business, faster growing, more profitable, and more diversified, and we are significantly undervalued. Moreover, we are committed to shareholders' returns, and a proof of this is that we've repurchased 23 million in shares this quarter, with EUR 100 million committed through September 2027. We have already amortized 12 million shares, which is 9.4% of the share capital. And at today's prices, 24% share of eDO's market capitalization is pending to be repurchased between January 2026 and September 2027. And this represents a yield to our shareholders of around 33%, and very few companies out there are doing the same. Now I'll pass this over to David, who will take you through our Prime model strong growth. David Corrales: Thank you, Dana. If you could all please turn to Slide 6 of the presentation, I will take you through the Prime model. In the last 12 months, Prime cash revenue margin grew 7%, with Prime now representing 75% of the total. Even more impressive is the Prime cash marginal profit, which grew 18%, with Prime contributing a dominant 89% of our total cash marginal profit. This reiterates the fact that IDO is a subscription business focused on travel and that the strong growth of Prime more than offsets the anticipated decline in the non-Prime side of the business. If you could all please turn to Slide 7 of the presentation, I will take you through the key highlights of our Prime P&L. Looking at the 9-month P&L, our cash EBITDA reached EUR 126.7 million, that's a 2% increase. This was achieved despite headwinds, including investments in new products, temporary instability in Ryanair content, and the timing impact of moving to annual subscription with monthly installs. Notably, our cash marginal profit margin expanded by 5 percentage points to 42%. Looking at Prime's impact on profitability and the drivers behind that growth. Our cash marginal profit, a key measure of profitability, grew by 3%, reaching EUR 207.8 million. This shows that our business is not just growing, but each transaction is becoming more profitable. This improvement is due to the maturity of our Prime member base. As members stay with us longer, their profitability grows, which is evident in the 7% increase in cash marginal profit for Prime and its margin increasing by 4 percentage points over the past year. This is having a positive ripple effect on our entire business as our overall cash EBITDA margin improved by 3 percentage points from 23% in the 9 months of fiscal '25 to 26% in the 9 months of fiscal '26. Cash EBITDA for the 9 months reached EUR 126.7 million, marking a 2% year-on-year increase. Adjusted EBITDA, which isolates operational performance from cash timing effects of the move from annual subscription to annual with monthly installments, increased 74% to EUR 138.4 million. Looking at revenue performance. In the 9 months of fiscal '26, we have observed a few key changes in our revenue margin. Cash revenue margin for Prime decreased by 1% versus the 9 months of fiscal '25. While member growth was a positive factor, it was offset by an enlarged test in the first quarter of fiscal '26 and the move from the second quarter of fiscal '26 to the annual with monthly installment subscription fees and the progressive implementation of this option in the current quarter. Please turn to Slide 8 of the presentation. Revenue margin, excluding the adjusted revenue items, increased by 3% versus the 9 months of fiscal '25 to EUR 502.8 million. This improvement was driven by a substantial 16% increase in revenue margin for Prime, resulting from expansion of our Prime member base. The growth in revenue margin for Prime, as anticipated, was partly offset by the revenue margin for non-Prime, which decreased 24% versus the 9 months of fiscal '25, due to the switch of our customers from non-prime to prime and more generally to the focus on the prime side of the business. Variable costs decreased by 15% despite revenue margin is 3% above the 9 months of fiscal '25, as the increase in maturity of the Prime members reduces acquisition costs. Fixed costs increased by EUR 3.3 million, driven primarily by an increase in provisions and higher external fees costs. As a result, adjusted EBITDA, which isolates the operational performance from the cash timing effects of the move from annual subscription to annual with monthly installments, increased 74% to EUR 138.4 million from EUR 79.7 million in the 9 months of fiscal '25. Adjusted net income stood at EUR 63.8 million in the 9 months of fiscal '26. Turning now to Slide 9. I will take you through the cash flow statement. Our cash generation remains robust despite the transition to the annual with monthly installment subscription program. In terms of the operations, the cash flow from operating activities rose by EUR 31.1 million to EUR 79.1 million. In the working capital, we saw an outflow of EUR 42.9 million compared to an outflow of EUR 27.3 million in the 9 months of fiscal '25, primarily driven by a decrease of EUR 55 million in the variations of the prime deferred revenue. This variance is largely attributable to the timing impact of transitioning the subscription model from upfront annual payments to an annual subscription with monthly installments. This impact was partially offset by an improved working capital performance, notably driven by the hotel segment. In financing, we used EUR 96.3 million in financing activities, which includes significant acquisition of treasury shares as part of our buyback of EUR 55.9 million for the 9-month period. I will now turn the presentation back to Dana to do some closing remarks. Dana Dunne: Thank you, David. Please turn to Slide 11 of the presentation. I'll take you through some of our closing remarks. Let me start by reiterating that our strategic review update back in November 2025 was done from a position of strength, and it is a high conviction move based upon solid data from having done this for over 1 to 2 years, and in fact, having run Prime now for well over 8 years. First, we are accelerating the growth and the profile of the business. We expect record net adds of 1.5 million to 2 million per year between FY '28 and FY '30. These are growth rates of 15% to 20% per annum, which is much higher growth profile than the trajectory that we were on. Second, we have derisked the business model. The new guidance is built on conservative high certainty foundations. We have built our new guidance on conservative foundations by lowering expectations for Ryanair content and pivoting to annual commitment with monthly installment subscription fees. And third, this is a team that delivers. It is not just the first time we have announced a long-term plan. And in fact, each time we have announced one, we have met our 3-year guidance. We did this in 2017 to 2019. We did this in 2021 to 2025. All in all, while we face a temporary timing impact on cash metrics as we move to an annual subscription with monthly installments, this shift allows us to capture a much larger market share and higher-quality and more diversified revenue streams. And we are still guaranteed to get this money from customers. It is merely a timing difference in recognition of the money. If you could please move to Slide 12. We are positioning for accelerated growth with a team that delivers. We are setting targets that are very clear, 13 million Prime members and EUR 270 million in cash EBITDA by FY '30. Our growth trajectory will deliver record net adds of 1.5 million to 2 million per year between FY '28 and FY '30. Cash EBITDA margins will dip to roughly 15% in FY '27 during the peak investment phase and will return to 23% by FY '30 as these new members mature. And to be very clear, the anticipated decline in EBITDA margin over the next few years is solely due to expansion into new products and geographies as a result of the initial investment to support the company's future growth. You saw exactly this in FY '22 to FY '25, and you'll see this again in the coming years. Please turn now to Slide 13. We've done this before. eDO is a team that delivers. It's not the first time we've announced a long-term plan, and each time we have met our 3-year guidance. We have clearly demonstrated our ability to deliver on our long-term plan, such as the very aggressive targets we put in November 2021 or March 2025. That strategic shift involves significantly more risk than this latest one, and yet we still delivered on the previous one despite headwinds like Omicron, Ukraine, Middle East wars, double-digit inflation, and consumer confidence below pre-pandemic levels. So the market should have no doubt that we will again meet or exceed all of our long-term plan targets. Furthermore, the current strategy is more conservative and designed to ensure future growth, building upon the existing solid foundation. If you could please move to Slide 14. We believe there is a significant disconnect between our performance and our valuation. In terms of the implied multiples at current prices, we are trading at 4.4 and 4 FY '26 cash EBITDA and adjusted EBITDA. The opportunity, if we apply the average multiples of other OTAs or B2C subscription companies, they trade at roughly 8.3 and 11, respectively. So there's a massive upside potential as we hit the lowest point of our investment plan in FY '27 and accelerate thereafter. Please turn to Slide 15. We think it's important to highlight that we are not alone. Other successful subscription companies like Netflix broadened their business, but yet it caused a share price decline, and then the share price rerated as the company executed on their plan. Again, we have a track record in 8 years' history of doing this. If you could please turn to Slide 16. In sum, we are delivering a much better business, and we believe we are significantly undervalued. We are achieving higher growth with a 15% to 20% Prime member CAGR between FY '27 and FY '30. We are seeing higher customer lifetime value and stronger loyalty with a 10%-plus increase in NPS. By FY '30, 66% of our volume will be diversified away from the core European flight market. So we're inviting you to join us as we believe the current share price is significantly undervalued as we execute this final stage of becoming the world's preeminent travel subscription platform. The market is currently using conservative assumptions and high discount rates, valuing us at an implied 6.4x EV to cash EBITDA for FY '26, well below the 8.3 and 11x average for global OTAs and B2C subscription businesses. The onetime cash unwind is planned, but we are still guaranteed to get the cash. Growth will accelerate, and the valuation gap represents a massive upside for investors who recognize the strength of the world's leading travel subscription platform. I will reiterate once again, this is a high conviction move based upon solid data from extensive time of running this business and not a defensive move. It was a change to a higher growth strategy done from a position of strength and confidence. And I will conclude by saying that we will continue the share buyback as we are committed to shareholders' returns. If you could please turn to Slide 17. A proof of it is that we repurchased $23 million in shares this quarter, with $100 million committed from October 2025 through September 2027. We have already amortized 12 million shares. That's 9.4% of the share capital. And at today's share price, 24% share of eDO's market capitalization is pending to be repurchased between January 2026 and September 2027. This represents a yield to our shareholders of around 33%. There are very few companies out there doing the same. This concludes my closing remarks, and I will now pass it back to David. David Corrales: Thank you, Dana. With that, we will now take your questions. David Corrales: [Operator Instructions] Should we not have time to respond to questions from the webcast, the Investor Relations team will make sure those are answered afterwards. Now I'm going to start reading the questions. The first set of questions comes from Carlos Crevigno of Banco Santander. The first one says, how has your access to Ryanair's content evolved over the last 3 months? I'll take it. Dana Dunne: [indiscernible] Ryanair, this situation is similar to the one that we announced back in November 2025, the last time we spoke. We still do have access to Ryanair, albeit at significantly lower levels than what we've had historically. I want to really point out this does not affect our new strategy plan, as we have derisked this plan as we explained in November '25 and use much lower assumptions. We are absolutely 100% focusing on our growth plan and really making this fundamental transformation switch from annual to annual commitment with monthly, quarterly, and growing in all of the new markets and the new product categories, which in turn has real upside for shareholders. David Corrales: The second question from Carlos today is, could you comment on initial progress of Prime introduction in your new markets? I think this one is as well for you, Dana. Dana Dunne: Sure. Let's see. Let me take us back to what we said in November 2025, is that we've been in these markets now for 12 to 18 months. And we know absolutely what the results are. And this is no different than having run Prime for actually over 80 in so many other markets. Now in these specific markets, the test -- sorry, the results are positive. We've concentrated on 5 key countries. And all of them today continue to perform extremely well as planned and as announced back in November as well, but even what we've seen over the past kind of 1 to almost 2 years now. We see very significant growth. We see very good attachment. We see very good NPS. We see very good LTV to CAC. All of our key metrics are absolutely on track. David Corrales: The next question comes from Luis Padrón de la Cruz of GVC Gaesco, and it says, when you use OTAs ratios to your own valuation, you assume that OTAs are well valued, undervalued, or overvalued at current market prices. I'll take that one. We actually made no judgment in that assessment as to if either the OTAs or the B2C subscription companies are undervalued or overvalued. We're just taking a view of what we think should be at the very least a floor valuation to ourselves, to eDreams. And if you notice, we take the lowest point in our projections to act as the driver of the valuation. We're taking the fiscal year '27. So the worst possible year that we could choose, and we're taking the 2 sets of comparables that we have. Even if you take the lowest point, the current valuation of the share doesn't make any sense. If I had done that same graph, I don't know, 1 month ago, the multiples would have been higher. That's to say independent from this. And maybe those multiples increase in the future. That's also independent of this. Even with our lowest point of financial projections, and you apply a multiple to it, the current share price doesn't make any sense. That's the point that we're making in that slide. We now have a set of questions from Nizla Naizer from Deutsche Bank. The first one says, can you share some thoughts on how you view the threat from agentic AI agents that search, book, and pay for travel on behalf of individuals. Would you consider also launching an app within ChatGPT? Dana Dunne: Absolutely. So let me take it. Overall, we believe that we're well-positioned for this, and I'll explain why. But I can understand that from a broader context, even though Nisla didn't actually use this, there's other questions as well from investors that say, are you concerned about LLMs, disintermediating, et cetera. And so let me kind of cover Nizla's and the broader question here. And in fact, I'm also going to weave into my answer how we even see opportunities within this for us. So let me cover 3 things or 3 parts to this. The first part would be around complexity. It's really critical to understand how complex the business actually is. There are huge amount of technicalities like different IATA licensing, financial agreements -- sorry, financial guarantees, complexities and servicing, including delays, cancellation, amendments, refunds, different payments, et cetera. Remember also, there's post bookings, prebooking, people can be in airports, et cetera. There's huge amounts of complexities within there. And it's really important to focus on the key buying criteria of a customer so that they feel delighted on that. And there's a lot of price and non-price things within that in there. Now that complexity is extremely difficult to get right even from a price point of view, for an LLM. And that is where it really plays to, in essence, our advantage, but on all the non-price, all the technicalities, complexities, it really does play to us. Let me just give you some simple examples on this. So you see lots of airlines are not even set up to offer advanced booking and post-booking capabilities. And even the large, let's say, call them legacy carriers also struggle to offer a seamless online booking flow. And we have built a business by offering a better user experience. When you look at the NPS of us versus anybody else, we have the best in the industry, and there's a big delta between us and everybody else. And we're years ahead. And we do that already, already today by using AI and agentic AI. Many of you that have known us for a while know that we were one of the first companies over 10 years ago investing in AI, and we leverage it. Let me just also make the statement that, look, we've heard this hype about blockchains are really going to disintermediate us. Voice assistants are going to disintermediate us. Google, in general, is going to disintermediate us and not only travel, but in all other industries. And it's simply not true because people don't appreciate the amount of complexity and making certain that you meet the consumers' key buying criteria for it and do it in a better way than anybody else. The second part to this equation is around distribution and how an LLM and the business is monetized, which again relates to the concept of lifetime value of a customer. Now the LLMs need to make money. Many of them actually don't today. And the proven monetization model is one that Google has used for search. And most of them have said that they will pursue a similar type of model as well. And so that means that they'll pass on the transaction to a merchant like an OTA, for example. And so in this, let's say, emerging environment where the LLM passes on the transaction, a new option will be set up. Now we have subscription, and we have a better consumer proposition and higher monetization per customer. And so that means that we're able to outcompete most players in this distribution race. We see this, in fact, as playing more to our strengths for it. Lastly, consumer. We have a cutting-edge platform, and we have the high levels of customer NPS, I mentioned. So what that has also translated into when we focus on the key buying criteria of customers, we have created new and unique products and offerings that either very few or in many cases, no one else in the industry does and create. And so that takes it one step further to even delight and provide even more value to customers. I would say just lastly is that our platform, because it is one of the leading-edge AI platforms, we are well prepared. We already get traffic from some of the LLMs, and we're absolutely set up to distribute our content through emerging agentic channels, regardless of what those would absolutely be, be it on an app, et cetera. Let me stop there. David Corrales: The next question from Nizla Naizer is, can you give us an update on the rail product offered within Prime? Has this helped drive engagement and customer acquisitions already? Dana Dunne: So let me take that, David. I think rail is absolutely performing very well for us. It's fully rolled out in Spain. There's also on our plan to do even more feature functionality changes because we think that we can actually create even more competitive advantage, even more barriers to entry, so to speak, even more stickiness and unique differentiation with our rail product in Spain and other countries. But already today it is highly competitive. I shared with you in November about how we're doing from a distribution and capturing customers. We're doing very well. I shared with you, I believe, on the NPS, and the NPS is extremely good for it. So overall, it is absolutely doing well. David Corrales: And the last question from Nizla says, the Prime net adds in January of about 70,000 appear to be quite strong. Was there anything incremental driving this performance? Are you expecting this momentum to continue for the rest of the quarter? So yes, yes, the performance has been good on the first month of, say, the quarter from January to March, but that was as expected. The seasonality of our business is one in which the quarter from October to December is overall a low seasonality quarter, whereas the quarter from January to March is a high seasonality quarter. So yes, the performance has been very good, but we continue to stick by our numbers of reaching 7.9 million card members by the end of March, which is 600,000 net adds. The next set of questions come from [indiscernible] of Al Maria Funds. The first question says, looking at your strategic growth plans through fiscal '30, the cash EBITDA margins imply that you're still investing for Apple growth in fiscal '30 without providing official fiscal '31 numbers, and you talk at a high level for post fiscal '30 growth. How does a new plan with expanded markets and services compare to the previous post-fiscal '30 plan? So let me remind first that what we have said. And what we have said is that from fiscal '28 to fiscal '30, we will grow the Prime member base by between 15% and 20% per annum. That is between 1.5 million and 2 million net adds per annum. and that we will grow the cash EBITDA by 33% per annum over that period. So as you can see, the cash EBITDA is going to grow more than the Prime member base. The reason for that is that as we incorporate a lot of new year 1 members in all of the areas of expansion that we're going into the new geographies, the new products like train, those in the first year have relatively low margins. And then when they go into the second and the third year, they come to much higher margins. So the same way that it happened in the cycle from 2021 to 2025, in which you saw top-line volume growth and you saw a much higher increase in the margins that compounded and get you much higher absolute EBITDA growth, you're going to see that as well in the cycle from fiscal '27 to fiscal '30. Now you're asking about fiscal '31, now I get into the heart of your question. You're going to have in fiscal '31, still high top-line growth. I'm not going to venture a number, but you will still be in the double digits for sure. And you will have, at the same time, a continued expansion in the margins. We have said that the margins will go from a 15% cash EBITDA margin in fiscal '27 to about 23% cash EBITDA margin in fiscal '30. For fiscal '31, you should continue to expect an expansion of the margins. So you're going to have, again, a growth in EBITDA in '31, which will be higher than the top line growth with an expansion of the margin. The second question has already been answered. It was about AI. The third question says, eDreams headcount is up 5% year-over-year. This is obviously to support future growth. There is a narrative that people in technology positions can be replaced. Can you talk about your experiences with this and thoughts on continued headcount growth to support the growth of eDreams? I'll take that. I think if you look again, there's a very useful parallel in the cycle from '21 to '25 and how we executed that and the way we're going about the execution of this upcoming cycle. In the process going from '21 to '25, we went from 2 million members to 7.25 million members. And in order to achieve that growth and go to all of the markets in which we expanded Prime, we increased the headcount from roughly 1,000 employees to about 1,800 employees. So that's an 80% increase in the headcount. We're now going into a cycle in which we're going to go from 7.5 million, 7.6 million, like we were a quarter ago to more than 13 million members. That's actually in absolute and in percentage higher than the growth from 2 to 7. And we're going to do it by increasing the headcount, like you're saying, only by single digits. That tells you that the leverage that we're getting from the new AI technologies that facilitate the coding make our software development workforce much more productive than what it was before. So absent that improvements in productivity, we would have had all other things being equal, to increase the headcount a lot more. So you already probably saw a press release that we did, I think, a few weeks ago, in which we let the market know that already, as of today, 30% of the software code that we put into production has been written by AI, supervised by a human, but it has been written by AI. The fourth question says, in December, the Italian Competition Authority fined Ryanair EUR 0.25 billion for withholding content from OTAs and degrading the OTAs, including eDreams. Where are you at with Ryanair content? Does this ruling help speed up getting full access to the content? And lastly, the Italian authority unearthed evidence that the Ryanair CEO, in communications to the Board and shareholders, blamed their sales declines associated with blocking OTAs on a boycott from the OTAs and not an action taken by management. Do you think there will be any ramifications for Ryanair given this evidence unearthed by the Italian Competition Authority? Dana Dunne: So let me take that. So I think I mentioned in terms of the access for Ryanair continues to be volatile. But I also want to just highlight to everybody, again, our results no longer depend upon Ryanair's meaning hitting our guidance, as we've derisked that in our projections. Now in terms of the question, the AGM ruling, yes, does confirm that Ryanair used massive disparaging campaigns to coerce OTAs into restrictive agreements. It's important to note that eDreams maintains its legal right to distribute flights without such agreements, and this has been confirmed by European high courts. In terms of the denigration, as you may know, we have secured a significant legal win with an unfair competition condemnation against Ryanair in Spain, and we will continue to defend our business and seek enforcement of the ruling. At the heart of our business, though, is we have access to Ryanair on a volatile basis. We are absolutely on plan and derisk our plan. And we have a consumer-led business, which we've demonstrated again and again that consumers hold us in really high NPS and our existing base of customers, we have demonstrated and shared data repeatedly with investors and analysts that Ryanair-like customers stay with us irregardless of whether we have full access or not of Ryanair and that they have extremely strong retention rates, renewal rates and satisfaction Prime. Now obviously, in terms of the ramifications of the evidence that you talked about, we've commented on those when the ruling came out, and we'll continue to monitor closely the situation to see if other authorities or anybody else takes actions on them. David Corrales: The next set of questions come from Guilherme Sampaio of CaixaBank. The first one says, do you still see no changes in churn or bad debt in the movement to a more phased payment scheme? I'd say that what we have seen in the 3 months since November is perfectly in line with the results of the test that we conducted for a period of 2 years. So no news. The second question from the same analyst is there are EUR 4 million nonrecurring items booked in the Q3 on those attached to LTIP. Could you provide more detail of the nature of this? And what is the level of nonrecurring costs that we should expect for fiscal '26? This EUR 4 million are tied to legal proceedings in Germany. There's a note that describes them. It's note 22.14 in the financial statements. So for full details, you can go in there. These are nonrecurring in nature, and you should expect that the level of nonrecurring items in the Q4 would be in line with other quarters, Q1, Q2, et cetera. Let me go now to the next investor. The next investor is [indiscernible] from Barclays. Could you touch on average order basket trends in the quarter? And any color on current Prime booking volumes, it would be helpful. Look, I would separate the 2 things. On the one hand is the booking volumes of the Prime members, and those continue to evolve according to the historical track record and in line with the increases in the Prime members. A different aspect is what we call the average basket size. And what we see in the comparison versus the past for this quarter is that we see a continued decrease in the average basket size. There are a couple of elements in the in which we are noticing changes in behavior from the customer. There is less percentage of the bookings on intercontinental routes, which are migrating to continental routes. So those are, if you want to simplify, Europeans preferring to go to European destinations as opposed to cross the ocean or going to Asia, let's say. And then on the other hand, what we see as well is more occasions in which people break down the return flight from the original flights, and they book, let's say, 2 one ways instead of aggregate, and they disperse those in time, and that also affects the average basket value of each one of the individual bookings. The next set of questions, although one is already answered. So the next 2 questions come from [indiscernible]. The first one says, can you provide more color on churn for Prime members and give us an idea on the split of monthly versus annual members, new versus existing Prime members, and number of products used by members? Well, that's a rather long question. Let me try to take it in a fashion. The churn we don't disclose, but there's nothing new about the churn of the Prime members. In terms of new versus existing Prime members, of course, in a period in which we show less increase in the net adds, like this year, which we're going to have 600,000 net adds versus the previous year at 1 million net adds, you have more existing. And you can see that in the progression of the margins, right? The progression of the margins is because you have more members in the year 2, 3, 4, 5, which would have higher margins than the members in the first year. In terms of the products used by members, let's say, there's no change there in terms of the frequency of the bookings that we see. T he second question says what metric or trigger would result in the business stopping share buybacks during the expansion phase. I'd say that as long as we continue to see performance in line with our expectations of the plan, so if we deliver the cash EBITDA that we have forecasted, and therefore, the cash flows that follow, there is going to be no change in the share buyback. So share buybacks are financed by the cash flows produced by the business. So as long as the business produces the same level of cash flows, we are going to have the same plan of repurchases. What we are not going to do, I mean, just be triple clear, is to incur additional debt in order to fund purchases of shares. The purchase of shares are funded with the cash flows produced by the business. Next question from Lazar is actually repeated from the previous one. The next question from Martinez [indiscernible] Capital is what is driving the ARPU decline? Okay. Let's remember what the ARPU -- how the ARPU is calculated. The ARPU is the cash revenue margin over the last 12 months divided by the average number of Prime members over that same period of time. So therefore, it is a cash metric. So one of the consequences of starting to incorporate into our member base, those that get into an annual subscription, but with monthly payments is that for people that joined, let's say, 6 months ago, we have received 6 monthly payments but not 12 monthly payments, whereas when you had the whole member base being on annual upfront payment, even if they join on day 365 of the period, they still pay you the full subscription fee. So you're going to see a natural softness in the ARPU going until the end of fiscal '27 derived precisely for this. And this is already a guidance that we gave to the market, and we said that the ARPU was going to go to a range between 60 and 65, and then after that would start to increase in fiscal '28 and beyond. There's another question that says from Cos of Swiss Life. Don't you think that it makes more sense from a stakeholder perspective to buy back your bonds roughly 50 points below par at 8% plus yield level versus continuing share buybacks? Well, I disagree, and the math is not very complicated to do. You point to an 8% plus yield level. I'd say the free cash flow yield from our projections is well in excess of that 8% plus. And therefore, it is a better financial investment to repurchase shares than to repurchase bonds. The next question comes from Linda from [ Arc ]. It says in terms of maintaining and defending your credit rating, which actions are currently on the table? Among others, would you consider the suspension of share buybacks? I'd say that the rating agencies have just refreshed their assessment on us based on the strategy that we communicated in November. And that strategy included inside the plan to repurchase 100 million of shares over a period of 24 months. So that's already factored in. It doesn't -- therefore, to defend the current rating, we don't need to change the action plan for that. The next question comes from [ Alice Stack ] of DB. You report 11,000 net adds in the Q3 compared to around 70,000 net adds in January alone from the fourth quarter so far. What reason would you attribute to this inflection in membership growth? Sorry, this is a repeated question. We already responded this question in the set of question from [indiscernible]. The next question from BNP Paribas is also answered. The next question has also been answered. It's a question from Giacomo Fumagamani of Arm. And it says, when you say that hotel performance was weak, what specifically do you mean? Less hotel supply, users changing habits, et cetera? I'm very confused about the question because we have never said that the hotel performance is weak. Actually, we're very satisfied with the performance of our hotel segment. And it continues to make very good progress. The penetration of how many hotels do we sell for every flight that we sell continues to increase. The amount of customer satisfaction of the members that use the hotel product is superior to the customer satisfaction of those that only use the flight product. So I actually don't know what this investor is referring to. The next question says, what has been the trend -- is from the same investor, what has been the trend in user base for Prime users in terms of age and user type? Dana Dunne: I'll do that. Yes. So first of all, overall Prime pretty much represents the market. So when you try to segment the market and look at, let's say, age distribution or socioeconomics, or you can think about even long-haul, short-haul, et cetera, many different types of things. We pretty much represent the online market with the following exception, we skew positively in a couple of segments and quite strongly in 1 of the 2 in particular. And that's obviously Gen Z. We over skew versus the market and also in millennials as well. David Corrales: Yes. I'm going to jump over several questions, which are repeated with the ones that have already come up. I'm going over to -- this one is new to Bharath Nagaraj from Cantor Fitzgerald. It says, how is the health of the consumer currently and travel still high on priorities for consumers despite worries about job losses, fears from AI generating job losses, et cetera. I'd say it's very consistent with the trends that we have seen in the previous quarters. If you look at public data out there that anyone can look at, you see, for instance, the data that IATA publishes on a monthly basis about the number of flights which are booked by people, or you look at another source is Eurocontrol that reports about the number of planes that actually fly in discount. It's another angle of the same thing. You can see that there are increases in volumes of about mid-single digit year-on-year, and that has been consistent over the last 2, 3 quarters. So in terms of leisure travel, I'd say that nothing has really changed upwards or downwards. It is a very resilient category in which people prefer to give up other discretionary expenses before they give up travel, and we continue to see that with the behavior of the consumers. And the next question is from Serena Mont of Santander. It says the recent legal requirement in Spain for subscription services to inform a customer whether he or she wants to renew or not. Could this have an impact in churn rate in your opinion? Have you noticed some early signals on that? Dana Dunne: Absolutely. So first of all, obviously, we're fully compliant with local regulations in each markets where we operate. We're fully transparent. We're transparent with our customers. We have not seen a structural churn deterioration from increased transparency. And I think we've even made comments about how, actually, in the sense our retention of customers is increasing. If you look at our NPS scores also, they continue to increase in these markets, including in Spain. And that all supports the fact that we have a strong offering is valued by customers, and we have as good, if not even better retention of customers than what we had, let's say, a year ago. David Corrales: The next question comes from -- it's a new question from an investor that already asked before [indiscernible] and it says, can you comment why other OTAs are not following a similar subscription business model? Dana Dunne: Yes, absolutely. So let me take that. So there's a couple of things. The first one is that we've been at this for over 8 years. Now in that period of time, there have been other companies that have come into the market and then have exited from a subscription-based business. And I think there's a lot of things that one really needs to do in order to get it right. And you've seen the NPS is very high for us. And you've also seen that our margins are good in the first year when you acquire a customer initially, and you have the CAC, obviously, the margins are very low. But assuming you have a really strong, good proposition, then you get into the year 2 plus, where you have very good margins. And that's what you've seen. And you've seen that like, for example, in '21 and 2025, as we grew the base of year 2-plus customers as a proportion to year 1, our margins continue to grow, and you even see that in our most recent results. And that also links with obviously the investment phase, as we acquire more year 1 customers proportion than what we had in the past, it does put some pressure in our margins, and then it comes back as we move the proportion of the year 2 plus customers, and we get to higher basis of those customers. That whole dip or that funding, a lot of companies don't want to go through. They also need to transform their business because subscription is fundamentally different offering, and you have to do things from the different types of, let's say, pricing, marketing, customer servicing, even cash management, every aspect of the company has to be transformed. Now we've done that, but it's a massive company transformation. So these are probably some of the reasons why some companies either have decided not to do it and/or some of the companies that did decide to try to do it have pulled back. David, back to you. David Corrales: Yes. There is a second question. Can you comment on the mix of products customers use? I understand holiday packages to be more profitable compared to just flights. Where do you see the mix shifting over your expansion phase? Will there still be a high focus on flights? Or is there an expectation that this will evolve over time? Dana Dunne: Yes. Why don't I take it? A couple of things. One is that we're really a consumer-led subscription-led consumer business. So we focus on that individual consumer. And so the most important driver for us is obviously the number of members, and then obviously moving those into year 2+, which we do very well. In terms of the individual product categories, we don't make, let's say, more money or less money on a certain product category. What we did when we set up our model a long time ago is we said that we're going to set up a model that's very similar to Costco in the sense that you don't try to price really a profit margin into your daily transactions of it. And instead, if I call it the profit pool is your subscription. Now because you don't price in a profit margin there, obviously that gives -- it meets a key buying criteria of the customer, and it delights them and they'll be coming back and coming back at the end of, let's say, the year period, they'll be more likely to renew because they've been relying on one of their key criteria for it. So that's where we've set up our model. So it's important to focus much more on the NPS that we have on the satisfaction of the customers and on the number of customers we actually have. David Corrales: The next question comes from [indiscernible]. Says you're currently executing a share buyback, of which EUR 77 million remain until September of 2027. Why don't you consider a tender offer at, say, EUR 5? This company should be trading between EUR 10 and EUR 15. This is a very low, low price. Of course, I agree with you, we've said repeatedly that the share price is severely undervalued. But then let me bring back together a couple of things that I said to separate questions today that I think are going to help you to understand the path that we're taking. The commitment to invest EUR 100 million over a period of 24 months is one in which we, let's say, face the repurchases with the production of the cash flows. So we first generate the cash flows, and then we invest the cash flows. And another thing that I've said today is that we do not intend to increase debt to fund repurchases of shares. So if we wanted to invest tomorrow, EUR 77 million, we would have to incur that to then do the tender offer and then repay the debt over the next 20 months or so as we generate the cash flows. That's the path that we said that we are not comfortable taking. So we will continue to buy progressively according to the generation of the cash flows. I think we're out of time. Thank you very much for a lot of interest in the business and joining our webcast today. Before we conclude the call, I would like to inform you that on Thursday, the 28th of May, we will be hosting our conference call for the full year 2026 results presentation. In the meantime, we will be very happy to receive your questions via our Investor Relations team or in the investor e-mail address, which is investors@edriimsolidia.com. Have an excellent rest of Thursday and rest of the week, and looking forward to speak soon. Thank you.
Remon Vos: Good morning, everyone, from CTP here in Prague, Czech Republic. Excited. And thanks for dialing in. It's good to have you on the call. We are going to talk about the 2025 results, which are good. But before we start, I'd also like to look back. 2025, you could say, has been 25 years of growth. We have completed our first building in 2000 here in the Czech Republic in Humpolec, where we did our first CTPark model. The CTPark Humpolec was the first site we acquired, initially 10 hectares, and later on we had the opportunity to grow that park. So that's where we first started with a club house where we looked for people and did establish a small team and did then develop a number of properties, and those buildings are still fully leased and many of the tenants which we initially had actually, they're still there, and they have been able to grow their business. So 25 years of continuous growth, which started with nothing, with a piece of land, and then building and second, et cetera, et cetera. So thank you very much to all the very loyal clients, all those companies who we have been working with, the companies who gave us the opportunity to work for them outside of the Czech Republic later on. And of course, thank you very much to all people we've been working with a lot over the past 25 years. And thank you to all other partners and of course, the fantastic team here at CTP, which in the meantime is 1,000 people, more than 1,000 actually nowadays. So that has been 25 years of continuous growth, good times, bad times with all kind of different opportunities along the way. So '25 has been a strong year, has been a good year with good results, which illustrates also the growth engine, the thing we like to do, we like to grow and the largest growth engine in the business here in Europe. So last year has been also an important year for us, because we added another country. We opened up business in Italy. In the meantime, we have more than 200,000 square meters of projects under construction in Italy, mostly pre-leased, 70%. We do that in south of Milan, close to Piacenza, Castel San Giovanni, but also in Padua, and we have other projects underway. At the same time, we set up a team of people in Italy, and we have a land bank to build an average of, we thing, 200,000 square meters of properties over the next years, and we hope within 5 years to hit the 1 million square meter lettable area target in Italy as well. We see good opportunities in Italy. Overall, we see opportunity in Europe over the next years. So we're quite happy with the entry so far, and we're making good progress. The land bank, mostly North Italy, but also strategic sites in the region of Rome. So there's also other places where we believe we will be successful in the development of our industrial properties, again, mostly for existing clients, so the companies who are already renting from us in other markets. For those clients, we plan to develop properties in Italy. And the amount of business we do for existing clients is approximately 70%, 7-0 percent of the total amount of business we do. When we look at drivers for Europe, it's definitely near-shoring Asian companies coming a setup shop in Europe for Europe. I mentioned defense, but also technology, semiconductor industry, consumer goods. People have more free time, so they go out biking, running. Pets, massive industry. We do multiple facilities for pet food producers, pharmaceuticals. So there's a whole of consumer spending, means people have more money to spend than they had 25 years ago when we started here, and we see that in other markets in Serbia, in Slovakia, in Romania, where we came initially maybe for low-cost manufacturing and later turned into manufacturing for domestic market. And nowadays, Central Europe is the engine of Europe. Here is where you go for manufacturing. And yes, it's all positive. So relatively good outlook, and we have a number of growth drivers. We are not in it for the short, we're in it for long. So we have plans for the next 25 years. And those plans are definitely to make CTP a global player and to grow with our clients and to use all the experience we have building business parks. Last year, we signed 2.3 million square meters of new leases, 2.3 million, which is a bit more than we did the year before. In '24, we did some 10% less. Rental rates were a bit higher last year in '25 compared to '24, approximately almost 5% higher rents than same building in a year earlier, in 2024. So a bit rental growth, 10% more deals, and still around 10% yield on cost. Target, midterm ambition, continue to grow with existing clients, which we have a lot of them. Good companies. They pay on time. 99.7% is rent collections of money which we charge to tenants, which is paid. And as I said, most of them on time, good companies. 70% of all new business we do with existing clients have 80% retention rate. And this is also important to mention, 75% of all the projects we do are being built within existing business parks. So we don't do stand-alone boxes. We really create an address, a park, an environment, an ecosystem with sufficient infrastructure and manage these facilities for people to work, develop themselves, to create business together, to work together, to grow stronger, and to have a stable business park. Also not overexpose to one specific industry, you want to mix it up with different industries. It's also good for labor market. We see a lot of automatization among our tenants. So they continue to invest in their facilities, in their production lines, in their technologies, which is good as well. We break it down at CTP, as you know. We talk about 3 things. We have the operator, which is the income-producing part. So the part of the company will look after the buildings which we have built over the past 25 years, with EUR 840 million of rental income, on the way to hit EUR 1 billion rental income next year. So it's the operator with good occupancy level, always above 90%, between 93%, 95%, depends a little bit on the market and the location where you are. It depends also on how much property we actually build to enter a market and you need time for the market to absorb all those buildings, but remain at the target around 93%, 95%. That's the operator. Then we have the developer. Those are the people at CTP who develop properties or who build business parks and properties. Quite active now also with inventing new type of properties, adjustments, constantly working on making these buildings better, both the existing refurbishment upgrades, but also new properties. And better means flexibility. So we have generic designed buildings for multiple generations, energy consumption, maintenance, those things are important when you design a property. That's what these guys are busy with. Some highlights as well what we've done in terms of completions last year, 1.3 million square meter, 180,000 square meter in Bucharest; 65,000 square meter in the CTPark Budapest in Hungary, but also, of course, in Brno, Czech Republic, yes, the home of CTP, where we have built millions of square meters. Last year, we did a deal with FedEx, for example, just to mention one. Part of our 30-30 plan, right, to grow to 30 million square meters. 2 million square meters under construction this year, which is good for EUR 150 million of rental income. Another highlight, maybe if you talk about those 2 million, we do a lot in Poland, the largest economy, largest country in Central Europe, very dynamic. Can do, a lot of support from the government, very good locations, I think we have secured a good team on the ground. So there we invest a significant amount of money now building properties, mostly leased, in and around Warsaw, but also Upper Silesia, Katowice, Zabrze, as well as along the German border on the west side of Poland. So we see there good opportunity, as well as in Gdansk, by the way. Another highlight, I would -- yes, Bucharest, Romania has been good, is still strong. Serbia is strong. Germany this year is important to get things going in Mülheim. Some of you have been on the Capital Markets Day event last year, we looked at Mülheim Energy Park with E.ON, Siemens and more to come. So that's happening, making good progress in Düsseldorf as well as in Wuppertal. So overall, quite positive about Germany as well. I think, yes, well established and good position. Last but not least, the growth engine, the third activity, we look globally at opportunities in different countries. And how does this work? Well, it comes from clients. Clients tell us, okay, we are going to that market, because we see growth. We need properties. Are you there? Sometimes we are, sometimes we are not. If we are not, then we have a closer look at such a market. We think shall we go there? Does it make sense now? And we constantly do that. Sometimes we do not enter. Sometimes we have a closer look. Now we always have the desire, as you know, to also become active outside of Europe, because we see other opportunities in other markets. And we found good opportunities in Vietnam and strong demand from existing clients. So we continue to have a closer look. We announced it last September. And so far, we've been making some good progress, having a closer look at the market and the opportunity. We have a few people in the meantime on board. So we have a CTP Vietnam, and we have there a small team of experienced industrial property people. Vietnam, obviously strategically located, 100 million people, very productive workforce, but also quite young people, around 30 years of age. So in the future also, you will see consumer spending. Well connected to the rest of the world. And that will also give an opportunity to get us feet on the ground in Asia and also closer to other Asian companies who look at coming to Europe. And then we'll keep you up to date on developments we are making. Yes, it's not only about getting bigger, we need to also get a better company. So we are obviously constantly working on getting a better company with maybe doing more buildings with less people, more efficient, more effective, different processes and procedures. We automatize. For example, when it comes to property management, when it comes to energy consumption, we know exactly how much energy tenants consume in their buildings. We can help them again with energy management with clear understanding of the condition of the building, and when there are issues, property management related, then we can fix that. We have a clear system for that in place in the meantime to monitor all the maintenance and repairs, which potentially are needed. So both energy consumption as well as maintenance and repairs to make sure buildings are in good condition and remain in a good condition. That's one example. And there's many other things we've done, whereby we've introduced new processes, better, and software and automatize, standardize, digitalize the company, and that makes us think better and quicker and more efficient to continue to grow our business. Yes. So we're looking forward very much to the next 25 years. Thank you for your attention. I will hand over to Rob. Some of you know Rob. He's not really new to CTP, but as IR, we are happy to have him on board and look forward to answering your questions. Robert Jones: Turning to the financial highlights. Net rental income increased by an impressive 14.1% to EUR 738 million, driven by record leasing of 2.1 million square meters, excluding Italy. Like-for-like rental growth came in at 4.5% in FY '25, accelerating from the 4% we delivered in FY '24, and this was driven by indexation and positive rent reversion capture. We also delivered record development completions of over 1.3 million square meters with occupancy at the year-end still remaining stable at 93%. Annualized rental income increased by 13% to EUR 840 million, illustrating the strong cash flow generation of our portfolio and locked-in growth profile of our business for 2026. Company-specific adjusted EPRA earnings increased double digit by 11.3% year-on-year to EUR 405 million. CTP's company-specific adjusted earnings per share amounted to EUR 0.85, an increase of 6.3% year-on-year, as we also made positive progress on our debt refinancing during the period. This EPS figure was just EUR 0.01 variance to guidance, driven by the timing of development completions in Q4 '25 with some moving to Q1 '26. As we look forward, the important message here is that our medium-term double-digit annualized growth trajectory is unchanged, as Richard will highlight shortly. Now looking at the valuation results. The revaluation of the portfolio for 2025 came to over EUR 1.1 billion, a key contributor to our leading total accounting return for the period. Of this positive portfolio performance, EUR 422 million was driven by the construction and leasing progress on our developments, while EUR 649 million came from the revaluation of our standing portfolio with the balance from our land bank. As at the year-end, the total portfolio gross asset value now stands at EUR 18.5 billion, up 15.6% from FY '24. CTP's reversionary yield stood at a conservative 6.9% at full year '25. For '26, we expect further selective yield compression and positive ERV growth in line with inflation. This is also illustrated by the new leases that we signed in '25, where rents were a solid 4% higher than 2024, adjusting for country mix. The supportive demand drivers of our business remain present, whether that be near-shoring, manufacturing in Europe for Europe, businesses upgrading their supply chains or reacting to the changing global landscape alongside increasing deglobalization of political agendas. Our core CEE markets, where industrial and logistics space per capita is half of that of many of other Western European markets, continues to benefit from these supportive trends alongside our own Western European markets and our opportunities being assessed outside of Europe. We are not short of opportunity, nor are we short of capital, with that opportunity driven primarily by the embedded value to be unlocked from CTP's existing land bank of more than 33 million square meters with the majority next to our existing CTParks. This land bank that we have on our balance sheet allows us to facilitate our tenants growth as a solution provider for their real estate needs. We remain active in the market for the acquisition of land, especially in Poland and Germany, and we replenish and, in a number of cases, grow the land bank in existing markets where returns are the most attractive. Now as Remon mentioned, we also continue to look to enter markets such as Vietnam, following on from our successful CTP Italy market entry at the back end of last year. Our EPRA NTA per share increased from EUR 18.08 at year-end '24, up to EUR 20.39 FY '25, and this represents a strong increase of 12.8% during the period. With this NTA growth, in conjunction with our dividend distributions, we delivered a total accounting return to our shareholders of 16.1% over the past 12 months, highlighting our superior total return profile, which is underappreciated by the equity market within the real estate sector. I now hand over to Richard. Richard Wilkinson: 2025 was another year of solid growth for CTP as we continue on our journey to 30 million square meters of GLA, a doubling of the current portfolio. The company's interconnected business units, the operator, the developer and the growth engine are all supported by our strong access to debt capital markets, diversified funding structure and multiple sources of liquidity provided from across the globe. 2025 saw us receive an investment-grade credit rating upgrade to BBB flat from Standard & Poor's. Moody's also have a positive outlook on our credit rating, confirming the growth trajectory of our business. This January, we again evidenced the high institutional demand for our debt, issuing a 4.5-year bond at a spread of only 92 basis points with a peak order book of over EUR 4 billion. Looking forward, we will continue to diversify our sources of debt funding as well as managing our liquidity to ensure we do not hold material excess cash. We also target growing our share of unsecured debt towards 80% of total outstanding debt. Turning to the key credit metrics. Our interest coverage ratio was unchanged quarter-on-quarter at 2.5x, and we expect this level to be the bottom. Our normalized net debt-to-EBITDA remained broadly stable at 9.3x and our loan-to-value stood at 46.1%. This LTV is marginally higher than our 40% to 45% target due to us seizing the acquisition opportunity in Italy at the end of 2025. In Italy, we will deliver 200,000 square meters of GLA in 2026, more than 10% of our annual target. And with a land bank of over 8 million square meters, we have a long runway for growth in Italy, a country with a significant undersupply of modern A-class industrial and logistics space. As our development pipeline is completed and over 10% yield on cost and revaluation gains are fully booked, we expect loan-to-value to move back towards our target range. To complete our development pipeline of 1.4 million to 1.7 million square meters in 2026, we do not need additional equity capital due to our sector-leading yield on cost around 10% from projects to be delivered in 2026. Every euro we invest in our pipeline increases our ICR and decreases our net debt-to-EBITDA as our leasing income comes on stream. This allows us to grow group rental income at double-digit rates while simultaneously improving the most important credit metrics. In 2025, we signed EUR 1.7 billion of unsecured debt to fund our development business, debt refinancing and our growth engine. We continue to demonstrate our ongoing strong market access whilst actively managing our funding costs. During the year, we renegotiated or repaid EUR 1.6 billion of our most expensive bank loans. Looking through 2026 and beyond, CTP maintains a conservative debt maturity profile. We repaid EUR 350 million of bonds maturing in January, and our only remaining bond maturity in 2026 is EUR 275 million maturing at the end of September. Looking further ahead, maturities remain limited over 2027 and 2028 with less than EUR 1 billion in total outstanding. Our liquidity at the end of 2025 stood at EUR 2 billion, comprised of EUR 700 million of cash and our EUR 1.3 billion RCF, more than sufficient to meet our cash needs for the next 12 months. The average debt maturity stands at 4.8 years, and the weighted average cost of debt was 3.3%, which represents only a marginal increase compared to year-end 2024. We do not expect a material increase in our average cost of debt as our marginal cost of funding is currently below 3.5% for the 5-year midterm period. Regarding the midterm outlook, a key message here is that the medium-term growth outlook for CTP remains unaltered. At our 2025 Capital Markets Day, we introduced our ambition to double the size of our portfolio to 30 million square meters. We expect to grow top line income around 15% per annum, driven by rental growth in our operator business alongside double-digit organic GLA growth from our developer business as we build on our unrivaled land bank at 10% yield on cost, supported by our growth engine as it seeks attractive global investment and growth opportunities. Digging deeper into those attractive return drivers. Firstly, we have the operator, over 1,500 supportive tenants who pay on time, stay with us and grow with us. Secondly, we have our development business, led by the strategic land bank of more than 33 million square meters, either on balance sheet or under option, located mainly around our existing parks. This is the key component of our portfolio growth ambition. And thirdly, we have the growth engine, the global identifier of shareholder value-accretive land-led acquisition opportunities to continue to deliver high returns well above our cost of capital. We also continue to see above inflationary rental growth across our markets, supported by income reversion capture, positive near-shoring trend, production in Europe for Europe, and ongoing e-commerce growth driven by rising disposable incomes across our strong Central Eastern European region and our Western European markets. Previously, unlike the rest of the sector, we did not capitalize interest on development activities, which made comparability between companies for investors more difficult and made CTP appear more expensive on a simple earnings multiple basis. Going forward, we now capitalize interest to provide reporting harmonization with all other European real estate companies. Following this change, we now set our company-specific adjusted EPRA earnings per share guidance for 2026 at EUR 1.01 to EUR 1.03. This implies year-on-year growth of 9% at the lower end of the range, rising to 11% at the top end of the range when compared to the 2025 result. In summary, CTP delivers leading shareholder returns as a growth business with income and cash flow growth, development profit growth and the growth engine lever through expanding our global exposure. Thank you for your attention. We now welcome your questions. Operator: [Operator Instructions] With that, we'll take our first question from Marios Pastou from Bernstein. Marios Pastou: I've got 2 questions from my side, one on the development pace and then one on capitalized interest. Just firstly, on development. So you had some delays in 2025. You also then added Italy. I'm just questioning why there isn't any upgrade really to the guidance range for the development targets for 2026, and whether there's any kind of room to beat on this going forward? And then secondly, on capitalizing interest, I suppose another question really on why you've decided to implement this change now. Not all companies do this, and whether you'll continue to headline both numbers going forward? Richard Wilkinson: Yes. Thanks, Marios. I'll take the interest capitalization question first. look, as we've been on the market now for 5 years, if someone wants to look at the real estate sector, they fire up their Bloomberg and they sought companies by earnings multiples, if everyone else is capitalizing interest and we are not, we screen expensive compared to the market. So basically, what we're doing is we're just aligning ourselves with the standard market practice of all the logistics players. And the timing, we think that -- we've increasingly heard from investors that when they look at us first, they think you screen expensive. And then when we dig in, we understand better why that first look isn't always helpful. We understand investors are time poor. So we want to try and make it easy for them to have a simpler comparison going forward. And on that basis, we will publish the EPS targets and results, including the capitalization, not excluding it. Regarding the development pace, maybe I start and then Remon maybe comes in. Regarding the guidance for 2026, we're coming out with something that we are very confident that we can deliver. We think the 1.4 million to 1.7 million is something that is very achievable with us. The lower end of that range would be a new record for deliveries for us, but we're confident that we can reach that. We know we missed on the EPS guidance for last year, and we don't want to disappoint the market in any way going forward. Operator: Our next question comes from John Vuong from Kempen. John Vuong: Just on the pre-let for 2026, could you elaborate a bit more on the mix of developments in existing and new locations and how that compares to last year? And have you started relatively more developments in existing locations essentially? Or did leasing start a bit slower than last year's pipeline given the 30% pre-let rate? Richard Wilkinson: Yes. Thanks for the question, John. Yes, regarding the overall pre-let, we stand at 30% at the start of the year, which is in line with our 30% to 35% range that we've been doing over the last years. In terms of the existing parks, the pre-let is 23%; in new parks, the pre-let is 62%. So consistent with what we've been doing over the last years and what we've been reporting in parks, where we know the demand, where we understand the tenant requirements coming up, we are willing to start with a lower pre-let ratio. And finally, I would also highlight that we have another 175,000 square meters of pre-let projects that we have not started yet. So you don't see those in the pre-let ratio. Robert Jones: John, this is Rob Jones. The other thing to add is, we're still very comfortable on our 80% to 90% target for pre-letting at delivery for '26. We obviously delivered 88% in 2025, so very much towards the top end of that range, and are happy to guide for that 80% to 90% again for 2026. So yes, we're pretty comfortable there. Operator: Our next question comes from Jonathan Kownator from Goldman Sachs. Jonathan Kownator: Just coming back to the guidance, please. So 2 questions really. The first one, I think your guidance previously excluded Italy. Now it does include Italy for EUR 200,000. So overall, the entire amount has not changed, meaning that it's probably a bit lower for the rest of the business. Is it just risk management; ultimately, that's the amount of space you're comfortable having to let or deliver as a package? Or are there differences that you've noticed in terms of appetite for different countries? That's the first question. The second question, please. The growth implied by your guidance from the top line seems to be a bit stronger than the growth at the bottom line, and yet you highlighted that your marginal cost of debt is pretty close to the in-place. So is there something that we're missing here? Or are you expecting some additional costs that we need to be aware of? Robert Jones: Jonathan, I can touch on both of those, and I'll pass over to Richard for part of the second half, the second question. So on the guidance for deliveries for '26, you're absolutely right, 1.4 million to 1.7 million square meters. We initially announced that '26 guidance, obviously, towards the second half of last year prior to the Italy transaction. But it's important to understand that we obviously had a high degree of probability internally that we were going to complete on that Italy transaction. So when we gave that raised guidance, and as Richard touched on earlier, even at the bottom end of the range, it's still a record in terms of what we've delivered in previous years. That included our expectations for the Italy deliveries of 200,000 square meters, which, of course, is already substantially pre-let for '26. And when you think about Italy going forward in your model, we are guiding to 250,000 to 300,000 square meters of deliveries from 2027 looking forward, so an increase thereafter. So I guess the takeaway from that is, do we think that there's further upside in the 1.4 million to 1.7 million? No, very comfortable with the range and it includes Italy. Just on the top line growth versus bottom line, so you're right in your assessment. But I think one important point to make is, yes, our weighted average cost of debt today, which is about 3.3%, is very similar to our marginal. We did debt issuance at the start of the year where we issued 4.5-year money at 3.375%. So very, very close to our weighted average cost of debt. But don't forget, we do have a debt instrument bond that matures in September this year. I think, remember, the coupon on that is 0.625%. If we refinance that with, say, 5-year money today, that would probably cost 3.4%, 3.5% all in. So it's important to be aware of that. But obviously, then looking thereafter, from '27 onwards, we're then in a position where we've got no refinancing upcoming that has a notably different coupon to our marginal cost of debt. Richard, I don't know if you want to add anything to that? Richard Wilkinson: No. I mean, unfortunately, we never see the top line flowing one-to-one through to the bottom line. Of course, we would love to see that. I think one of the things to please bear in mind in this year is, also we'll be building up a team in Italy and there's some costs associated with that. And although we have the pre-let deliveries to come, they're coming in Q4. So there's not going to be a lot of income to offset the ramp-up in the costs. Secondly, we've continued to investigate the opportunities in the Vietnamese market and are looking to build up a team there over time as well. Robert Jones: And of course, as you -- sorry, go ahead. I was going to say, as you say, despite those points that Richard makes, we're still in a position where at the midpoint of our earnings guidance for '26, it still represents double-digit EPRA EPS growth year-on-year despite that investment we're making in the business. Remon Vos: And maybe to add also for you, Jonathan, it's also -- for the cost of debt is also the annualized impact from '25. So you cannot only look at '26, because, yes, as Rob explained, we had, of course, the bonds in January and then in September, but it's also the annualized impact of '25, which is, of course, reflected already in the average cost of debt, but still has an impact on our '26 EPS. So if you do the math, and you can do it relatively easily, also if you look to the refinancings we have done in '25, you see that the impact is still a few cents on the overall EPS. Jonathan Kownator: Okay. So if I understand correctly, cost of debt and admin cost you're building as opposed to being a bit less confident on the top line, right? Remon Vos: Correct. Richard Wilkinson: Yes, absolutely correct. Remon Vos: If you want, I can add something on the supply, because it keeps coming back, this question. So first of all, we look after the income-producing part of the portfolio. We make sure that we are happy with the occupancy rate. And then we will continue to build if we can lease. So we are going to not build buildings if we are not confident we can lease those buildings. So we balance between supply and demand. And while doing that, we do gain market share. So if there's an opportunity to develop and to lease properties, we do. And that's what Rob explained in his presentation, as we've been doing over the past years, we do gain market share. So we build as soon as we believe we can lease. Operator: Our next question comes from Frederic Renard from Kepler Cheuvreux. Frederic Renard: First of all, let me flag that your line is not really great. So I'm not so sure it's just me. So just flagging. Then I would like to comment on 2 elements. First, on the long-term guidance of 30 million square meters. Even with Italy today, the pace of growth is important, but far from the level which would bring you to a portfolio of 30 million square meters by 2030. So it seems basically that your existing market is not absorbing what you are delivering at the moment from an external point of view. Can you comment on that first? And then maybe on the second question, if I compute your vacancy in terms of square meters, it looks like your portfolio is at 1 million square meters of vacancy, which is quite sizable. What is structural here in the mix? And finally, on the pre-letting, you mentioned 88%. But actually, if you compute the pre-letting in Q4, it came close or slightly below 80%. So can we conclude that there is some kind of a softer demand in the market at the moment versus what you had in mind 1 year ago? Richard Wilkinson: Yes. So in terms of our midterm ambition, I mean, we said 30 million we would like to achieve target. It's an ambition, we want to get to 30 million square meters by 2030. If you compound our portfolio by 12.5% per year for the next 5 years, you're going to get to somewhere around 26 million, 26.5 million square meters. And there's a small gap there, but we think that there may be opportunities or there will be opportunities to find one or the other attractive acquisition over the next 5 years. We talk about a relatively midterm perspective there, Fred. So I think we're comfortable with that level of ambition and our ability to realize that. If we can do 15% a year, which would be the top of our organic growth rate, then we get almost to the 30 million square meters. But it's our ambition and we're comfortable with that at the moment. In terms of the vacancy, as Remon just said, we're always balancing supply and demand in our parks and in and around our parks. Our business model is to run a vacancy of -- we target around 95% occupancy going forward. And as the portfolio grows, that means the absolute square meters of vacancy increases. So yes, at some stage, that gets to 1 million square meters, that's simple math. That's part of our business model that we live with, we accept that vacancy rate, because we feel that gives us a competitive advantage when tenants are looking for space in the short term, because not everyone is planning years in advance. Sometimes people need space quickly, and then the ability to act quickly and grab a tenant and meet their demand puts you in a better position to retain and grow with them then also going forward. And regarding the pre-let for Q4, look, across the year, we delivered 88% towards the top end of our 80% to 90% guidance. We try not to get too hung up on the volatility of any one quarter. Short-term trend is not our target. As Remon said in his presentation, we're in it for the long term. That's why we have the land bank that we have mostly in existing parks or with the potential to build a new park of more than 100,000 square meters for each park. That's the real value driver for us and... [Technical Difficulty] Operator: It seems we have lost audio with our speakers. Please stand by whilst we're getting them reconnected. Robert Jones: Yes. Let me continue. I think Richard dropped out. Operator: Okay. Hold on. I'll just transfer you back over, because I've moved you out of the main room. I'll transfer you back over now. Remon Vos: Okay. I'm still here as well. Operator: We'll now continue. Robert Jones: Sorry for the connection drop. I think Richard dropped out, but let me continue on where he stopped. So if you look to the pre-letting as always, so I think last year, when you look to the Q3 of '24, we were at 95%. At the end of the year, we came also within the range. So there is always a bit quarter-by-quarter movements and that comes indeed back to our business where we are mostly developing in our existing business parks. If you also look to the quantum of leasing that we are doing, yes, 1 million of vacancy might seem a lot, but we sign 2.3 million square meters of leases each year. So if you look to the overall amount of leasing that we are doing, 1 million square meters is less than half a year for us. So yes, of course, with the scale of the portfolio, that becomes a larger number. But in our overall leasing capacity, that's ultimately important for us, because it all comes back to tenant demand. That is ultimately the key thing when we are looking for, are we starting the next development, where are we starting the next development, and where do we see growth. Operator: We'll now take our next question from Vivien Maquet from Degroof Petercam. Vivien Maquet: I think your line dropped again, but I hope you will hear me. A couple of follow-up questions from me. Maybe when it comes to the deliveries, can you quantify the volume of deliveries that was moved to Q1 2026? And if possible, what kind of level of pre-let do you have on this project? And maybe I ask my other question afterwards, if you can hear me? Robert Jones: Yes, sure. So if you look to the deliveries, we came out on the lower end, of course, of the 1.3 million to 1.6 million that we guided for. We were planning to be more in the middle or the higher end of the range, but that's business. So if you look to what has shifted, that's basically, say, 150,000 square meter or so to the next year. So that's also -- it's reflected in the overall pre-letting, of course, for this year, the 30%. But like Richard mentioned, actually, the 30% might look a bit low compared to previous years. But on top, we have the 175,000 square meter of projects leased that haven't started yet. Some of that also will be delivered in '26. So it's always a mix of those elements. So that is basically the impact on the shift of deliveries, and that will help a bit in '26, and that's why we are so comfortable with the 1.4 million to 1.7 million for this year. Remon Vos: And let me add to that, maybe an important one, is structural vacancy. There is nothing like that. There is not buildings which are empty for years and years and years, okay? So it's just adding supply to the market and then you need the market, you need some time for the market to absorb all that space, and that's what we are doing. So when it comes to buildings which have been vacant for a longer term, then I can think of properties in Germany. As you remember, we entered the German market through an acquisition of buying Deutsche Industrie, which is a mix of some fantastic locations, redevelopment opportunity, but all the buildings, so there is some vacancies, and we need time to refurbish those buildings, which have started, but that takes a bit of time. It's all part of the budget and it makes a lot of commercial sense. But then you have buildings which will not produce income for a while because you're doing some refurbishments now. And there's some vacancy in the German portfolio, you can see, but our core portfolio, all of the stuff we built, there's no structural vacancies. There are some vacancies here and there because of the supply. But again, this goes down to CTP's business model. So I suggest you have a good look and listen to all the nice videos we have done to understand the way we run it. It took us more time to get to 15 million square meters. It took us 25 years to get to 15 million square meters. It's going to not take us 25 years to add another 15 million square meters, to grow to 30 million, because we know the game of how to develop and with whom, and with all of the clients we have, that gives us great opportunities to continue to do what we do. But yes, 5% from 30 million is 1.5 million square meters. Operator: Our next question comes from Eleanor Frew from Barclays. Eleanor Frew: One question, please, on the reconciliation between your company-specific EPRA EPS and EPRA EPS. The adjustment this year was a lot larger than last year. Can you talk us through the reasons for that? And also, what should we expect on that adjustment moving forward? Is this the new run rate? Robert Jones: There were some one-offs in that adjustment. And I think we already discussed that in the H1 and Q3. I think on the tax side, you saw a positive, especially in the first half of the year. So the tax adjustment for '26 will be lower. That's one. There are also some in the other expenses where there were some one-off adjustments, for example, related to some transaction that in the end did not take place, which is booked in the other expenses and therefore, adjusted, of course, in the recurring elements. So there are some of the one-offs in '25, which are slightly higher than I would expect on a run rate basis. So that should be less in '26. Operator: Our next question comes from Steven Boumans from ABN AMRO - ODDO BHF. Steven Boumans: Some technical questions for me. What's the assumptions on the capitalized interest? So what's the interest rate that you use and what loan on cost do you assume? Second, what's the impact on the average yield on cost for the change there due to the capitalized interest? Can I assume that will increase the cost of development? And last one, do you assume a similar number of shares year-end '26 as in '25? Robert Jones: Yes, Steven. So in terms of -- go on. Marios, do you want to go -- we had a problem with our line. Yes. So apologies for that. And I hope that you can hear us properly, because Fred was saying that he couldn't hear us and then we dropped. So apologies for that technical lapse. In terms of the capitalized interest, what level do we use? We use the actual cost in the balance sheet, so the average cost of debt. So for this year, it's 3.3%. In terms of the yield on cost impact, that would be somewhere around 30 basis points. And there was a third question as well, but I lost the connection on that one. I'm sorry, Steven. Steven Boumans: So the last one, the number of shares you assume in your full year '26 outlook, is that the same as in '25? Robert Jones: Yes, we're not -- yes, it's slightly higher because it incorporates the dividends that we're paying. As you know, we proposed a final dividend of EUR 0.32 for the full year. We'll also have an interim dividend later in the year. Based on past behavior of the shareholders and expected behavior, we would expect the majority of that to be taken up in scrip. So there will be an increase in the number of shares as a consequence of the scrip dividend. But otherwise, we're not planning on an increase in the share capital. As I said in the presentation, we don't need to raise equity to fund the development pipeline, the 1.4 million to 1.7 million that we're very confident to deliver. Operator: Our next question comes from Suraj Goyal from Green Street. Suraj Goyal: Hope you can hear me. The rent levels for new leases in '25 were around 4% higher compared to 2024, but I noticed it was lower in Bulgaria, Serbia, Hungary and also flat in Romania. I wanted to find out what the reason for this is, and if this is reflective of some of the softness or normalization in operating fundamentals across Eastern Europe. And then are you able to give any color on the market split of the 3.8% ERV growth that you quote? Robert Jones: Yes. So maybe I'll deal with the technical part, maybe Remon will pick up on the overall tenant demand and how we see rents going overall. Yes, I mean, it depends a little bit country by country as to where we're leasing within that country. So certain parks have higher rent levels than others. So if you're very close in town -- in the capital, you're going to get a higher rent than if you're leasing in one of the regional cities. So the mix there across the countries is generally to do with where we're doing the leasing in that specific quarter or in that year. So generally speaking, if we look at our ERVs, the ERVs across the portfolio are increasing. So location for location, like-for-like, we're seeing across the portfolio, a general increase in the rent levels. But we don't expect that to -- that's different location for location, depends on the supply, on the demand in the individual location at the time. Overall, you will see rents continuing, we think, to grow inflation plus over time. There will be markets where it's going quicker, at a point in time markets where it's going slower. But overall, we're very happy with the rent level development that we're seeing across the whole region. Operator: Our next question comes from Vivien Maquet from Degroof Petercam. Vivien Maquet: Sorry, I had 2 other questions that was skipped. First is on the retention rate. Just trying to understand the decline to roughly 81%, if I recall. And how do you see a normalized retention rate going forward? Robert Jones: Yes. Look, I think our retention rate historically has been 80% to 85%. There have been times where it's been a bit higher. There have been times where it's been a bit lower. We would think that generally, if we look, 70% to 75% of our new leasing, last year was 71%, is done with existing tenants. So we would think that 80% to 85% is a reasonable rate to expect in terms of tenant retention. So you're retaining the vast majority of your tenants, but you won't never keep everyone. Vivien Maquet: All right. And then one last question on the goodwill impairment. Can you comment on that one? Robert Jones: Yes, sure. That goes to our German acquisition back in 2022. And what we see -- last year we saw a nice uptick in the valuations of our portfolio in Germany. And as the valuations increase, then the goodwill that we recognized at the time of the acquisition decreases. Operator: Our next question comes from Bart Gysens from Morgan Stanley. Bart Gysens: Quick question on the dividend payout ratio. So you're saying that for '26, the dividend payout ratio remains unchanged. But of course, the accounting policy of starting to capitalize interest increases your reported EPS by 10%. So will you now start paying a higher percentage of this previously more cash EPS? Or will you gravitate towards the lower end of that range to reflect this accounting policy change? Robert Jones: Yes. Bart, good question. Yes, I think that we'll end up gravitating towards more 70%, 72%, 73% rather than historically, we've been 75%, 76%, 77%, something like that. Bart Gysens: But that would still mean a higher percentage payout, right, on the previous... Robert Jones: No, you end up -- if you're 70%, you're almost the same. There shouldn't be a material increase in cash out as a consequence of the capitalization of the interest. Operator: We'll now take some questions from the webcast. Our next question comes from Laurent Saint Aubin from Sofidy. Can you please comment on the decline in your client retention rate to 81%? Robert Jones: So we already answered that question. So yes, look, like I said, we're targeting generally expecting to be between 80% and 85% in our tenant retention. In '24, we were 84%; in '25, we're 81%. So very comfortable with that. Operator: And then our next question is from Wim Lewi from KBC Securities. What is expected impact of the capitalization of interest costs on your yield on cost expectation? Robert Jones: Yes. Again, that's another question I answered earlier. It's around 30 basis points. Operator: And then our next question from Crispin Royle-Davies from Nuveen. Are you going to keep the same payout ratio against the new definition of earnings, or adjust this downwards to keep cash payout ratio the same? Robert Jones: Yes. So payout ratio will stay within -- or move towards the bottom end of the 70% to 80% payout range. Cash outflow for the business remaining relatively unchanged given the majority of our divi is taking scrip. Operator: With that, we have no further questions in the queue at this time. So I'll hand back over to the management team for some closing comments. Remon Vos: Yes. So thank you very much, everyone, for your questions and your interest. I'd just like to underline that we continue to see really attractive midterm growth potential, primarily in and around our existing CTParks, but also with the addition of Italy and hopefully an addition in Vietnam, we think that we have everything in place for the next leg of growth. And we wish you all a good day. Thank you very much for your attention. Robert Jones: And you're invited for the Capital Markets Day in September, right, in Warsaw. Remon Vos: Yes, of course. Sorry. Thanks very much. Richard Wilkinson: Thank you very much, everybody. Operator: Thank you all for joining. That concludes today's call. You may now disconnect your lines.
David de la Roz: Good afternoon, everyone, and thank you all for joining us today for the Q3 fiscal year 2026 results presentation for the 9 months ending 31st of December 2025. I'm David de Roz, the Director of Investor Relations at eDreams ODIGEO. As always, you can find the results materials, including the presentation and our results report in the Investor Relations section of our website. I will now pass you over to Dana Dunne, our CEO, who will take you through the first part of the presentation. Dana Dunne: Thank you, David, and good afternoon, everyone. Thank you for joining us today. We're going to discuss 3 things. The first is I'll do a brief update of our first 9 months' results of FY '26 and the outlook, which we are on track. Second, David Elizaga, our CFO, will take you through the Prime model and how it continues to drive very strong growth. Third, I will then share some closing remarks on why we think we are significantly undervalued. Please turn to Slide 4, which is a summary of our performance for the first 9 months of fiscal year 2026. We're firmly on track to deliver on our new guidance. In the first 9 months, adjusted EBITDA increased 74% year-on-year to EUR 138.4 million. Adjusted EBITDA isolates operational performance from cash timing effects of the move from annual subscription to annual subscription with monthly installments. So this 74% increase of adjusted EBITDA shows the strength of the underlying business absent the cash timing effects. Prime membership. We reached 7.7 million members, up 13% year-on-year. As of January, we hit 7.8 million subscribers and reaffirm our FY '26 target of 7.9 million. Cash EBITDA improved by 2% to EUR 126.7 million compared to the 9 months of FY '25, which was partially impacted by the investments we are making in the new businesses, the temporary instability in our Ryanair content, and the timing impact of the move from annual subscription to annual subscription with monthly installments. Despite this, growth resulted in a substantial expansion of our profit margins and is also on track to meet our FY '26 target of EUR 155 million cash EBITDA. In terms of revenue mix, Prime-related revenue now accounts for 75% of cash revenue margin and grew 7% year-on-year. I will cover this in my closing remarks, but it's important to briefly highlight that our strategy review update back in November 2026 was done from a position of strength and is a high conviction move based on solid data from extensive live operations. All in all, we will deliver a much better business, faster growing, more profitable, and more diversified, and we are significantly undervalued. Moreover, we are committed to shareholders' returns, and a proof of this is that we've repurchased 23 million in shares this quarter, with EUR 100 million committed through September 2027. We have already amortized 12 million shares, which is 9.4% of the share capital. And at today's prices, 24% share of eDO's market capitalization is pending to be repurchased between January 2026 and September 2027. And this represents a yield to our shareholders of around 33%, and very few companies out there are doing the same. Now I'll pass this over to David, who will take you through our Prime model strong growth. David Corrales: Thank you, Dana. If you could all please turn to Slide 6 of the presentation, I will take you through the Prime model. In the last 12 months, Prime cash revenue margin grew 7%, with Prime now representing 75% of the total. Even more impressive is the Prime cash marginal profit, which grew 18%, with Prime contributing a dominant 89% of our total cash marginal profit. This reiterates the fact that IDO is a subscription business focused on travel and that the strong growth of Prime more than offsets the anticipated decline in the non-Prime side of the business. If you could all please turn to Slide 7 of the presentation, I will take you through the key highlights of our Prime P&L. Looking at the 9-month P&L, our cash EBITDA reached EUR 126.7 million, that's a 2% increase. This was achieved despite headwinds, including investments in new products, temporary instability in Ryanair content, and the timing impact of moving to annual subscription with monthly installs. Notably, our cash marginal profit margin expanded by 5 percentage points to 42%. Looking at Prime's impact on profitability and the drivers behind that growth. Our cash marginal profit, a key measure of profitability, grew by 3%, reaching EUR 207.8 million. This shows that our business is not just growing, but each transaction is becoming more profitable. This improvement is due to the maturity of our Prime member base. As members stay with us longer, their profitability grows, which is evident in the 7% increase in cash marginal profit for Prime and its margin increasing by 4 percentage points over the past year. This is having a positive ripple effect on our entire business as our overall cash EBITDA margin improved by 3 percentage points from 23% in the 9 months of fiscal '25 to 26% in the 9 months of fiscal '26. Cash EBITDA for the 9 months reached EUR 126.7 million, marking a 2% year-on-year increase. Adjusted EBITDA, which isolates operational performance from cash timing effects of the move from annual subscription to annual with monthly installments, increased 74% to EUR 138.4 million. Looking at revenue performance. In the 9 months of fiscal '26, we have observed a few key changes in our revenue margin. Cash revenue margin for Prime decreased by 1% versus the 9 months of fiscal '25. While member growth was a positive factor, it was offset by an enlarged test in the first quarter of fiscal '26 and the move from the second quarter of fiscal '26 to the annual with monthly installment subscription fees and the progressive implementation of this option in the current quarter. Please turn to Slide 8 of the presentation. Revenue margin, excluding the adjusted revenue items, increased by 3% versus the 9 months of fiscal '25 to EUR 502.8 million. This improvement was driven by a substantial 16% increase in revenue margin for Prime, resulting from expansion of our Prime member base. The growth in revenue margin for Prime, as anticipated, was partly offset by the revenue margin for non-Prime, which decreased 24% versus the 9 months of fiscal '25, due to the switch of our customers from non-prime to prime and more generally to the focus on the prime side of the business. Variable costs decreased by 15% despite revenue margin is 3% above the 9 months of fiscal '25, as the increase in maturity of the Prime members reduces acquisition costs. Fixed costs increased by EUR 3.3 million, driven primarily by an increase in provisions and higher external fees costs. As a result, adjusted EBITDA, which isolates the operational performance from the cash timing effects of the move from annual subscription to annual with monthly installments, increased 74% to EUR 138.4 million from EUR 79.7 million in the 9 months of fiscal '25. Adjusted net income stood at EUR 63.8 million in the 9 months of fiscal '26. Turning now to Slide 9. I will take you through the cash flow statement. Our cash generation remains robust despite the transition to the annual with monthly installment subscription program. In terms of the operations, the cash flow from operating activities rose by EUR 31.1 million to EUR 79.1 million. In the working capital, we saw an outflow of EUR 42.9 million compared to an outflow of EUR 27.3 million in the 9 months of fiscal '25, primarily driven by a decrease of EUR 55 million in the variations of the prime deferred revenue. This variance is largely attributable to the timing impact of transitioning the subscription model from upfront annual payments to an annual subscription with monthly installments. This impact was partially offset by an improved working capital performance, notably driven by the hotel segment. In financing, we used EUR 96.3 million in financing activities, which includes significant acquisition of treasury shares as part of our buyback of EUR 55.9 million for the 9-month period. I will now turn the presentation back to Dana to do some closing remarks. Dana Dunne: Thank you, David. Please turn to Slide 11 of the presentation. I'll take you through some of our closing remarks. Let me start by reiterating that our strategic review update back in November 2025 was done from a position of strength, and it is a high conviction move based upon solid data from having done this for over 1 to 2 years, and in fact, having run Prime now for well over 8 years. First, we are accelerating the growth and the profile of the business. We expect record net adds of 1.5 million to 2 million per year between FY '28 and FY '30. These are growth rates of 15% to 20% per annum, which is much higher growth profile than the trajectory that we were on. Second, we have derisked the business model. The new guidance is built on conservative high certainty foundations. We have built our new guidance on conservative foundations by lowering expectations for Ryanair content and pivoting to annual commitment with monthly installment subscription fees. And third, this is a team that delivers. It is not just the first time we have announced a long-term plan. And in fact, each time we have announced one, we have met our 3-year guidance. We did this in 2017 to 2019. We did this in 2021 to 2025. All in all, while we face a temporary timing impact on cash metrics as we move to an annual subscription with monthly installments, this shift allows us to capture a much larger market share and higher-quality and more diversified revenue streams. And we are still guaranteed to get this money from customers. It is merely a timing difference in recognition of the money. If you could please move to Slide 12. We are positioning for accelerated growth with a team that delivers. We are setting targets that are very clear, 13 million Prime members and EUR 270 million in cash EBITDA by FY '30. Our growth trajectory will deliver record net adds of 1.5 million to 2 million per year between FY '28 and FY '30. Cash EBITDA margins will dip to roughly 15% in FY '27 during the peak investment phase and will return to 23% by FY '30 as these new members mature. And to be very clear, the anticipated decline in EBITDA margin over the next few years is solely due to expansion into new products and geographies as a result of the initial investment to support the company's future growth. You saw exactly this in FY '22 to FY '25, and you'll see this again in the coming years. Please turn now to Slide 13. We've done this before. eDO is a team that delivers. It's not the first time we've announced a long-term plan, and each time we have met our 3-year guidance. We have clearly demonstrated our ability to deliver on our long-term plan, such as the very aggressive targets we put in November 2021 or March 2025. That strategic shift involves significantly more risk than this latest one, and yet we still delivered on the previous one despite headwinds like Omicron, Ukraine, Middle East wars, double-digit inflation, and consumer confidence below pre-pandemic levels. So the market should have no doubt that we will again meet or exceed all of our long-term plan targets. Furthermore, the current strategy is more conservative and designed to ensure future growth, building upon the existing solid foundation. If you could please move to Slide 14. We believe there is a significant disconnect between our performance and our valuation. In terms of the implied multiples at current prices, we are trading at 4.4 and 4 FY '26 cash EBITDA and adjusted EBITDA. The opportunity, if we apply the average multiples of other OTAs or B2C subscription companies, they trade at roughly 8.3 and 11, respectively. So there's a massive upside potential as we hit the lowest point of our investment plan in FY '27 and accelerate thereafter. Please turn to Slide 15. We think it's important to highlight that we are not alone. Other successful subscription companies like Netflix broadened their business, but yet it caused a share price decline, and then the share price rerated as the company executed on their plan. Again, we have a track record in 8 years' history of doing this. If you could please turn to Slide 16. In sum, we are delivering a much better business, and we believe we are significantly undervalued. We are achieving higher growth with a 15% to 20% Prime member CAGR between FY '27 and FY '30. We are seeing higher customer lifetime value and stronger loyalty with a 10%-plus increase in NPS. By FY '30, 66% of our volume will be diversified away from the core European flight market. So we're inviting you to join us as we believe the current share price is significantly undervalued as we execute this final stage of becoming the world's preeminent travel subscription platform. The market is currently using conservative assumptions and high discount rates, valuing us at an implied 6.4x EV to cash EBITDA for FY '26, well below the 8.3 and 11x average for global OTAs and B2C subscription businesses. The onetime cash unwind is planned, but we are still guaranteed to get the cash. Growth will accelerate, and the valuation gap represents a massive upside for investors who recognize the strength of the world's leading travel subscription platform. I will reiterate once again, this is a high conviction move based upon solid data from extensive time of running this business and not a defensive move. It was a change to a higher growth strategy done from a position of strength and confidence. And I will conclude by saying that we will continue the share buyback as we are committed to shareholders' returns. If you could please turn to Slide 17. A proof of it is that we repurchased $23 million in shares this quarter, with $100 million committed from October 2025 through September 2027. We have already amortized 12 million shares. That's 9.4% of the share capital. And at today's share price, 24% share of eDO's market capitalization is pending to be repurchased between January 2026 and September 2027. This represents a yield to our shareholders of around 33%. There are very few companies out there doing the same. This concludes my closing remarks, and I will now pass it back to David. David Corrales: Thank you, Dana. With that, we will now take your questions. David Corrales: [Operator Instructions] Should we not have time to respond to questions from the webcast, the Investor Relations team will make sure those are answered afterwards. Now I'm going to start reading the questions. The first set of questions comes from Carlos Crevigno of Banco Santander. The first one says, how has your access to Ryanair's content evolved over the last 3 months? I'll take it. Dana Dunne: [indiscernible] Ryanair, this situation is similar to the one that we announced back in November 2025, the last time we spoke. We still do have access to Ryanair, albeit at significantly lower levels than what we've had historically. I want to really point out this does not affect our new strategy plan, as we have derisked this plan as we explained in November '25 and use much lower assumptions. We are absolutely 100% focusing on our growth plan and really making this fundamental transformation switch from annual to annual commitment with monthly, quarterly, and growing in all of the new markets and the new product categories, which in turn has real upside for shareholders. David Corrales: The second question from Carlos today is, could you comment on initial progress of Prime introduction in your new markets? I think this one is as well for you, Dana. Dana Dunne: Sure. Let's see. Let me take us back to what we said in November 2025, is that we've been in these markets now for 12 to 18 months. And we know absolutely what the results are. And this is no different than having run Prime for actually over 80 in so many other markets. Now in these specific markets, the test -- sorry, the results are positive. We've concentrated on 5 key countries. And all of them today continue to perform extremely well as planned and as announced back in November as well, but even what we've seen over the past kind of 1 to almost 2 years now. We see very significant growth. We see very good attachment. We see very good NPS. We see very good LTV to CAC. All of our key metrics are absolutely on track. David Corrales: The next question comes from Luis Padrón de la Cruz of GVC Gaesco, and it says, when you use OTAs ratios to your own valuation, you assume that OTAs are well valued, undervalued, or overvalued at current market prices. I'll take that one. We actually made no judgment in that assessment as to if either the OTAs or the B2C subscription companies are undervalued or overvalued. We're just taking a view of what we think should be at the very least a floor valuation to ourselves, to eDreams. And if you notice, we take the lowest point in our projections to act as the driver of the valuation. We're taking the fiscal year '27. So the worst possible year that we could choose, and we're taking the 2 sets of comparables that we have. Even if you take the lowest point, the current valuation of the share doesn't make any sense. If I had done that same graph, I don't know, 1 month ago, the multiples would have been higher. That's to say independent from this. And maybe those multiples increase in the future. That's also independent of this. Even with our lowest point of financial projections, and you apply a multiple to it, the current share price doesn't make any sense. That's the point that we're making in that slide. We now have a set of questions from Nizla Naizer from Deutsche Bank. The first one says, can you share some thoughts on how you view the threat from agentic AI agents that search, book, and pay for travel on behalf of individuals. Would you consider also launching an app within ChatGPT? Dana Dunne: Absolutely. So let me take it. Overall, we believe that we're well-positioned for this, and I'll explain why. But I can understand that from a broader context, even though Nisla didn't actually use this, there's other questions as well from investors that say, are you concerned about LLMs, disintermediating, et cetera. And so let me kind of cover Nizla's and the broader question here. And in fact, I'm also going to weave into my answer how we even see opportunities within this for us. So let me cover 3 things or 3 parts to this. The first part would be around complexity. It's really critical to understand how complex the business actually is. There are huge amount of technicalities like different IATA licensing, financial agreements -- sorry, financial guarantees, complexities and servicing, including delays, cancellation, amendments, refunds, different payments, et cetera. Remember also, there's post bookings, prebooking, people can be in airports, et cetera. There's huge amounts of complexities within there. And it's really important to focus on the key buying criteria of a customer so that they feel delighted on that. And there's a lot of price and non-price things within that in there. Now that complexity is extremely difficult to get right even from a price point of view, for an LLM. And that is where it really plays to, in essence, our advantage, but on all the non-price, all the technicalities, complexities, it really does play to us. Let me just give you some simple examples on this. So you see lots of airlines are not even set up to offer advanced booking and post-booking capabilities. And even the large, let's say, call them legacy carriers also struggle to offer a seamless online booking flow. And we have built a business by offering a better user experience. When you look at the NPS of us versus anybody else, we have the best in the industry, and there's a big delta between us and everybody else. And we're years ahead. And we do that already, already today by using AI and agentic AI. Many of you that have known us for a while know that we were one of the first companies over 10 years ago investing in AI, and we leverage it. Let me just also make the statement that, look, we've heard this hype about blockchains are really going to disintermediate us. Voice assistants are going to disintermediate us. Google, in general, is going to disintermediate us and not only travel, but in all other industries. And it's simply not true because people don't appreciate the amount of complexity and making certain that you meet the consumers' key buying criteria for it and do it in a better way than anybody else. The second part to this equation is around distribution and how an LLM and the business is monetized, which again relates to the concept of lifetime value of a customer. Now the LLMs need to make money. Many of them actually don't today. And the proven monetization model is one that Google has used for search. And most of them have said that they will pursue a similar type of model as well. And so that means that they'll pass on the transaction to a merchant like an OTA, for example. And so in this, let's say, emerging environment where the LLM passes on the transaction, a new option will be set up. Now we have subscription, and we have a better consumer proposition and higher monetization per customer. And so that means that we're able to outcompete most players in this distribution race. We see this, in fact, as playing more to our strengths for it. Lastly, consumer. We have a cutting-edge platform, and we have the high levels of customer NPS, I mentioned. So what that has also translated into when we focus on the key buying criteria of customers, we have created new and unique products and offerings that either very few or in many cases, no one else in the industry does and create. And so that takes it one step further to even delight and provide even more value to customers. I would say just lastly is that our platform, because it is one of the leading-edge AI platforms, we are well prepared. We already get traffic from some of the LLMs, and we're absolutely set up to distribute our content through emerging agentic channels, regardless of what those would absolutely be, be it on an app, et cetera. Let me stop there. David Corrales: The next question from Nizla Naizer is, can you give us an update on the rail product offered within Prime? Has this helped drive engagement and customer acquisitions already? Dana Dunne: So let me take that, David. I think rail is absolutely performing very well for us. It's fully rolled out in Spain. There's also on our plan to do even more feature functionality changes because we think that we can actually create even more competitive advantage, even more barriers to entry, so to speak, even more stickiness and unique differentiation with our rail product in Spain and other countries. But already today it is highly competitive. I shared with you in November about how we're doing from a distribution and capturing customers. We're doing very well. I shared with you, I believe, on the NPS, and the NPS is extremely good for it. So overall, it is absolutely doing well. David Corrales: And the last question from Nizla says, the Prime net adds in January of about 70,000 appear to be quite strong. Was there anything incremental driving this performance? Are you expecting this momentum to continue for the rest of the quarter? So yes, yes, the performance has been good on the first month of, say, the quarter from January to March, but that was as expected. The seasonality of our business is one in which the quarter from October to December is overall a low seasonality quarter, whereas the quarter from January to March is a high seasonality quarter. So yes, the performance has been very good, but we continue to stick by our numbers of reaching 7.9 million card members by the end of March, which is 600,000 net adds. The next set of questions come from [indiscernible] of Al Maria Funds. The first question says, looking at your strategic growth plans through fiscal '30, the cash EBITDA margins imply that you're still investing for Apple growth in fiscal '30 without providing official fiscal '31 numbers, and you talk at a high level for post fiscal '30 growth. How does a new plan with expanded markets and services compare to the previous post-fiscal '30 plan? So let me remind first that what we have said. And what we have said is that from fiscal '28 to fiscal '30, we will grow the Prime member base by between 15% and 20% per annum. That is between 1.5 million and 2 million net adds per annum. and that we will grow the cash EBITDA by 33% per annum over that period. So as you can see, the cash EBITDA is going to grow more than the Prime member base. The reason for that is that as we incorporate a lot of new year 1 members in all of the areas of expansion that we're going into the new geographies, the new products like train, those in the first year have relatively low margins. And then when they go into the second and the third year, they come to much higher margins. So the same way that it happened in the cycle from 2021 to 2025, in which you saw top-line volume growth and you saw a much higher increase in the margins that compounded and get you much higher absolute EBITDA growth, you're going to see that as well in the cycle from fiscal '27 to fiscal '30. Now you're asking about fiscal '31, now I get into the heart of your question. You're going to have in fiscal '31, still high top-line growth. I'm not going to venture a number, but you will still be in the double digits for sure. And you will have, at the same time, a continued expansion in the margins. We have said that the margins will go from a 15% cash EBITDA margin in fiscal '27 to about 23% cash EBITDA margin in fiscal '30. For fiscal '31, you should continue to expect an expansion of the margins. So you're going to have, again, a growth in EBITDA in '31, which will be higher than the top line growth with an expansion of the margin. The second question has already been answered. It was about AI. The third question says, eDreams headcount is up 5% year-over-year. This is obviously to support future growth. There is a narrative that people in technology positions can be replaced. Can you talk about your experiences with this and thoughts on continued headcount growth to support the growth of eDreams? I'll take that. I think if you look again, there's a very useful parallel in the cycle from '21 to '25 and how we executed that and the way we're going about the execution of this upcoming cycle. In the process going from '21 to '25, we went from 2 million members to 7.25 million members. And in order to achieve that growth and go to all of the markets in which we expanded Prime, we increased the headcount from roughly 1,000 employees to about 1,800 employees. So that's an 80% increase in the headcount. We're now going into a cycle in which we're going to go from 7.5 million, 7.6 million, like we were a quarter ago to more than 13 million members. That's actually in absolute and in percentage higher than the growth from 2 to 7. And we're going to do it by increasing the headcount, like you're saying, only by single digits. That tells you that the leverage that we're getting from the new AI technologies that facilitate the coding make our software development workforce much more productive than what it was before. So absent that improvements in productivity, we would have had all other things being equal, to increase the headcount a lot more. So you already probably saw a press release that we did, I think, a few weeks ago, in which we let the market know that already, as of today, 30% of the software code that we put into production has been written by AI, supervised by a human, but it has been written by AI. The fourth question says, in December, the Italian Competition Authority fined Ryanair EUR 0.25 billion for withholding content from OTAs and degrading the OTAs, including eDreams. Where are you at with Ryanair content? Does this ruling help speed up getting full access to the content? And lastly, the Italian authority unearthed evidence that the Ryanair CEO, in communications to the Board and shareholders, blamed their sales declines associated with blocking OTAs on a boycott from the OTAs and not an action taken by management. Do you think there will be any ramifications for Ryanair given this evidence unearthed by the Italian Competition Authority? Dana Dunne: So let me take that. So I think I mentioned in terms of the access for Ryanair continues to be volatile. But I also want to just highlight to everybody, again, our results no longer depend upon Ryanair's meaning hitting our guidance, as we've derisked that in our projections. Now in terms of the question, the AGM ruling, yes, does confirm that Ryanair used massive disparaging campaigns to coerce OTAs into restrictive agreements. It's important to note that eDreams maintains its legal right to distribute flights without such agreements, and this has been confirmed by European high courts. In terms of the denigration, as you may know, we have secured a significant legal win with an unfair competition condemnation against Ryanair in Spain, and we will continue to defend our business and seek enforcement of the ruling. At the heart of our business, though, is we have access to Ryanair on a volatile basis. We are absolutely on plan and derisk our plan. And we have a consumer-led business, which we've demonstrated again and again that consumers hold us in really high NPS and our existing base of customers, we have demonstrated and shared data repeatedly with investors and analysts that Ryanair-like customers stay with us irregardless of whether we have full access or not of Ryanair and that they have extremely strong retention rates, renewal rates and satisfaction Prime. Now obviously, in terms of the ramifications of the evidence that you talked about, we've commented on those when the ruling came out, and we'll continue to monitor closely the situation to see if other authorities or anybody else takes actions on them. David Corrales: The next set of questions come from Guilherme Sampaio of CaixaBank. The first one says, do you still see no changes in churn or bad debt in the movement to a more phased payment scheme? I'd say that what we have seen in the 3 months since November is perfectly in line with the results of the test that we conducted for a period of 2 years. So no news. The second question from the same analyst is there are EUR 4 million nonrecurring items booked in the Q3 on those attached to LTIP. Could you provide more detail of the nature of this? And what is the level of nonrecurring costs that we should expect for fiscal '26? This EUR 4 million are tied to legal proceedings in Germany. There's a note that describes them. It's note 22.14 in the financial statements. So for full details, you can go in there. These are nonrecurring in nature, and you should expect that the level of nonrecurring items in the Q4 would be in line with other quarters, Q1, Q2, et cetera. Let me go now to the next investor. The next investor is [indiscernible] from Barclays. Could you touch on average order basket trends in the quarter? And any color on current Prime booking volumes, it would be helpful. Look, I would separate the 2 things. On the one hand is the booking volumes of the Prime members, and those continue to evolve according to the historical track record and in line with the increases in the Prime members. A different aspect is what we call the average basket size. And what we see in the comparison versus the past for this quarter is that we see a continued decrease in the average basket size. There are a couple of elements in the in which we are noticing changes in behavior from the customer. There is less percentage of the bookings on intercontinental routes, which are migrating to continental routes. So those are, if you want to simplify, Europeans preferring to go to European destinations as opposed to cross the ocean or going to Asia, let's say. And then on the other hand, what we see as well is more occasions in which people break down the return flight from the original flights, and they book, let's say, 2 one ways instead of aggregate, and they disperse those in time, and that also affects the average basket value of each one of the individual bookings. The next set of questions, although one is already answered. So the next 2 questions come from [indiscernible]. The first one says, can you provide more color on churn for Prime members and give us an idea on the split of monthly versus annual members, new versus existing Prime members, and number of products used by members? Well, that's a rather long question. Let me try to take it in a fashion. The churn we don't disclose, but there's nothing new about the churn of the Prime members. In terms of new versus existing Prime members, of course, in a period in which we show less increase in the net adds, like this year, which we're going to have 600,000 net adds versus the previous year at 1 million net adds, you have more existing. And you can see that in the progression of the margins, right? The progression of the margins is because you have more members in the year 2, 3, 4, 5, which would have higher margins than the members in the first year. In terms of the products used by members, let's say, there's no change there in terms of the frequency of the bookings that we see. T he second question says what metric or trigger would result in the business stopping share buybacks during the expansion phase. I'd say that as long as we continue to see performance in line with our expectations of the plan, so if we deliver the cash EBITDA that we have forecasted, and therefore, the cash flows that follow, there is going to be no change in the share buyback. So share buybacks are financed by the cash flows produced by the business. So as long as the business produces the same level of cash flows, we are going to have the same plan of repurchases. What we are not going to do, I mean, just be triple clear, is to incur additional debt in order to fund purchases of shares. The purchase of shares are funded with the cash flows produced by the business. Next question from Lazar is actually repeated from the previous one. The next question from Martinez [indiscernible] Capital is what is driving the ARPU decline? Okay. Let's remember what the ARPU -- how the ARPU is calculated. The ARPU is the cash revenue margin over the last 12 months divided by the average number of Prime members over that same period of time. So therefore, it is a cash metric. So one of the consequences of starting to incorporate into our member base, those that get into an annual subscription, but with monthly payments is that for people that joined, let's say, 6 months ago, we have received 6 monthly payments but not 12 monthly payments, whereas when you had the whole member base being on annual upfront payment, even if they join on day 365 of the period, they still pay you the full subscription fee. So you're going to see a natural softness in the ARPU going until the end of fiscal '27 derived precisely for this. And this is already a guidance that we gave to the market, and we said that the ARPU was going to go to a range between 60 and 65, and then after that would start to increase in fiscal '28 and beyond. There's another question that says from Cos of Swiss Life. Don't you think that it makes more sense from a stakeholder perspective to buy back your bonds roughly 50 points below par at 8% plus yield level versus continuing share buybacks? Well, I disagree, and the math is not very complicated to do. You point to an 8% plus yield level. I'd say the free cash flow yield from our projections is well in excess of that 8% plus. And therefore, it is a better financial investment to repurchase shares than to repurchase bonds. The next question comes from Linda from [ Arc ]. It says in terms of maintaining and defending your credit rating, which actions are currently on the table? Among others, would you consider the suspension of share buybacks? I'd say that the rating agencies have just refreshed their assessment on us based on the strategy that we communicated in November. And that strategy included inside the plan to repurchase 100 million of shares over a period of 24 months. So that's already factored in. It doesn't -- therefore, to defend the current rating, we don't need to change the action plan for that. The next question comes from [ Alice Stack ] of DB. You report 11,000 net adds in the Q3 compared to around 70,000 net adds in January alone from the fourth quarter so far. What reason would you attribute to this inflection in membership growth? Sorry, this is a repeated question. We already responded this question in the set of question from [indiscernible]. The next question from BNP Paribas is also answered. The next question has also been answered. It's a question from Giacomo Fumagamani of Arm. And it says, when you say that hotel performance was weak, what specifically do you mean? Less hotel supply, users changing habits, et cetera? I'm very confused about the question because we have never said that the hotel performance is weak. Actually, we're very satisfied with the performance of our hotel segment. And it continues to make very good progress. The penetration of how many hotels do we sell for every flight that we sell continues to increase. The amount of customer satisfaction of the members that use the hotel product is superior to the customer satisfaction of those that only use the flight product. So I actually don't know what this investor is referring to. The next question says, what has been the trend -- is from the same investor, what has been the trend in user base for Prime users in terms of age and user type? Dana Dunne: I'll do that. Yes. So first of all, overall Prime pretty much represents the market. So when you try to segment the market and look at, let's say, age distribution or socioeconomics, or you can think about even long-haul, short-haul, et cetera, many different types of things. We pretty much represent the online market with the following exception, we skew positively in a couple of segments and quite strongly in 1 of the 2 in particular. And that's obviously Gen Z. We over skew versus the market and also in millennials as well. David Corrales: Yes. I'm going to jump over several questions, which are repeated with the ones that have already come up. I'm going over to -- this one is new to Bharath Nagaraj from Cantor Fitzgerald. It says, how is the health of the consumer currently and travel still high on priorities for consumers despite worries about job losses, fears from AI generating job losses, et cetera. I'd say it's very consistent with the trends that we have seen in the previous quarters. If you look at public data out there that anyone can look at, you see, for instance, the data that IATA publishes on a monthly basis about the number of flights which are booked by people, or you look at another source is Eurocontrol that reports about the number of planes that actually fly in discount. It's another angle of the same thing. You can see that there are increases in volumes of about mid-single digit year-on-year, and that has been consistent over the last 2, 3 quarters. So in terms of leisure travel, I'd say that nothing has really changed upwards or downwards. It is a very resilient category in which people prefer to give up other discretionary expenses before they give up travel, and we continue to see that with the behavior of the consumers. And the next question is from Serena Mont of Santander. It says the recent legal requirement in Spain for subscription services to inform a customer whether he or she wants to renew or not. Could this have an impact in churn rate in your opinion? Have you noticed some early signals on that? Dana Dunne: Absolutely. So first of all, obviously, we're fully compliant with local regulations in each markets where we operate. We're fully transparent. We're transparent with our customers. We have not seen a structural churn deterioration from increased transparency. And I think we've even made comments about how, actually, in the sense our retention of customers is increasing. If you look at our NPS scores also, they continue to increase in these markets, including in Spain. And that all supports the fact that we have a strong offering is valued by customers, and we have as good, if not even better retention of customers than what we had, let's say, a year ago. David Corrales: The next question comes from -- it's a new question from an investor that already asked before [indiscernible] and it says, can you comment why other OTAs are not following a similar subscription business model? Dana Dunne: Yes, absolutely. So let me take that. So there's a couple of things. The first one is that we've been at this for over 8 years. Now in that period of time, there have been other companies that have come into the market and then have exited from a subscription-based business. And I think there's a lot of things that one really needs to do in order to get it right. And you've seen the NPS is very high for us. And you've also seen that our margins are good in the first year when you acquire a customer initially, and you have the CAC, obviously, the margins are very low. But assuming you have a really strong, good proposition, then you get into the year 2 plus, where you have very good margins. And that's what you've seen. And you've seen that like, for example, in '21 and 2025, as we grew the base of year 2-plus customers as a proportion to year 1, our margins continue to grow, and you even see that in our most recent results. And that also links with obviously the investment phase, as we acquire more year 1 customers proportion than what we had in the past, it does put some pressure in our margins, and then it comes back as we move the proportion of the year 2 plus customers, and we get to higher basis of those customers. That whole dip or that funding, a lot of companies don't want to go through. They also need to transform their business because subscription is fundamentally different offering, and you have to do things from the different types of, let's say, pricing, marketing, customer servicing, even cash management, every aspect of the company has to be transformed. Now we've done that, but it's a massive company transformation. So these are probably some of the reasons why some companies either have decided not to do it and/or some of the companies that did decide to try to do it have pulled back. David, back to you. David Corrales: Yes. There is a second question. Can you comment on the mix of products customers use? I understand holiday packages to be more profitable compared to just flights. Where do you see the mix shifting over your expansion phase? Will there still be a high focus on flights? Or is there an expectation that this will evolve over time? Dana Dunne: Yes. Why don't I take it? A couple of things. One is that we're really a consumer-led subscription-led consumer business. So we focus on that individual consumer. And so the most important driver for us is obviously the number of members, and then obviously moving those into year 2+, which we do very well. In terms of the individual product categories, we don't make, let's say, more money or less money on a certain product category. What we did when we set up our model a long time ago is we said that we're going to set up a model that's very similar to Costco in the sense that you don't try to price really a profit margin into your daily transactions of it. And instead, if I call it the profit pool is your subscription. Now because you don't price in a profit margin there, obviously that gives -- it meets a key buying criteria of the customer, and it delights them and they'll be coming back and coming back at the end of, let's say, the year period, they'll be more likely to renew because they've been relying on one of their key criteria for it. So that's where we've set up our model. So it's important to focus much more on the NPS that we have on the satisfaction of the customers and on the number of customers we actually have. David Corrales: The next question comes from [indiscernible]. Says you're currently executing a share buyback, of which EUR 77 million remain until September of 2027. Why don't you consider a tender offer at, say, EUR 5? This company should be trading between EUR 10 and EUR 15. This is a very low, low price. Of course, I agree with you, we've said repeatedly that the share price is severely undervalued. But then let me bring back together a couple of things that I said to separate questions today that I think are going to help you to understand the path that we're taking. The commitment to invest EUR 100 million over a period of 24 months is one in which we, let's say, face the repurchases with the production of the cash flows. So we first generate the cash flows, and then we invest the cash flows. And another thing that I've said today is that we do not intend to increase debt to fund repurchases of shares. So if we wanted to invest tomorrow, EUR 77 million, we would have to incur that to then do the tender offer and then repay the debt over the next 20 months or so as we generate the cash flows. That's the path that we said that we are not comfortable taking. So we will continue to buy progressively according to the generation of the cash flows. I think we're out of time. Thank you very much for a lot of interest in the business and joining our webcast today. Before we conclude the call, I would like to inform you that on Thursday, the 28th of May, we will be hosting our conference call for the full year 2026 results presentation. In the meantime, we will be very happy to receive your questions via our Investor Relations team or in the investor e-mail address, which is investors@edriimsolidia.com. Have an excellent rest of Thursday and rest of the week, and looking forward to speak soon. Thank you.