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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.
Guy Featherstone: Okay. Good morning, everyone. I'm Guy Featherstone, Investor Relations. Before we start, I'd like to remind you that any forward-looking statements or projections made by Hikma during this call are made in good faith based on information currently available and are subject to risks and uncertainties that may cause actual results to differ materially from those projected. For further information, please see the Principal Risks and Uncertainties section in Hikma's annual report. Thank you for joining this Q&A meeting for Hikma's 2025 full year results. Our pre-recorded presentation is available on our website, and this will be a Q&A session. We're joined today by Said Darwazah, CEO; Mazen Darwazah, Executive Vice Chairman and Deputy CEO; Khalid Nabilsi, Deputy CEO, North America and Europe; Hafrun Fridriksdottir, President, U.S. and Global Head of R&D. We're also joined by Jon Kafer, who heads up the U.S. Injectables Commercial Business. And we have Areb Kurdi recently appointed acting CFO; and Susan Ringdal, Investor Relations, also in the room. And with that, I will hand over to Said. Said Darwazah: Thank you very much, and good morning, everybody, and to my old friends, hello again. The decision for me to take over as CEO again was not really a very easy decision, giving up the beach and the sun and the good life was difficult. But I really felt very strongly compelled to do this, okay? I remember before we IPO-ed, we were discussing the ideas of IPOing and not IPOing and my father saying my worry is that one day, the team we lose sight of the long term and start looking at short-term and short-term wins. This is the only thing that I'm worried about. And frankly, in many ways, this is what happened. I think the company had sort of started looking at short-term wins and fixation on modules of the injectable and so on and really lost track. So that's why I felt very, very strongly about coming back again. And as you know also, I had to -- I decided to give up the Chair position to concentrate 100% for the next 2 years on the CEO role. I want to also remind you that last time when I came in, we had a similar situation with Rx business, the generic business was also doing not very well when I had to step in back again. And for a long -- for a period of a year or so, everybody was on us saying get rid of this division, it's weighing you down. Why are you keeping it? But we said we will do what's required. We set reasonable targets of GBP 100 million to GBP 130 million in EBIT, and we said we will fix it. And here we are, a few years later, we're looking at that business, and it has margins of close to 20% and EBIT of GBP 200 million or so. So we've done this before. And we feel -- I feel, we feel that we know exactly what needs to be done. It really is not a complicated formula. It's a simple formula. You need to do the right investments. You need to get the right people, the right talent, and take quick decisions. So as I've said this morning, my focus is very clear. So number one, you want stability. We want this 2 years where people can relax and focus on what is required for them rather than worry who is going to come in and what's going to happen. So we're reassuring our people, our stakeholders, our investors. This is -- Hikma is a very, very strong company, and we have a slide that shows the CAGR of the last 5-year growth. This company has consistently delivered growth and quite good growth. Also, I'd like to remind you all that we have EBITDA margins of 25% while many of our competitors are striving to get to 22%. The second thing is agility. We want to implement a structure of quick decision-making and to allow people across the Board to take these decisions. We don't want the decision-making to be centralized with one or a few people or the executive committee. Rather, we need to empower people across the Board to take decisions. I've always said companies that empower their youngsters, their under 40 crowd are the ones that will be here tomorrow, those that do not will disappear. So we'll be focusing on empowering everybody across the business so that we take these decisions. And the investment, we have to accelerate the investment. We have to take the investments that we need to do. So one of the first things we've done is we've taken the R&D budget out of the segment. So the segment heads cannot play with R&D budget to achieve their targets. It's now a corporate decision. We have a budget for it, which is an aggressive budget. We have spent last year building the team. As you remember, we acquired a great team in Croatia. Hafrun joined the company 2 years ago now and Hafrun has a long, long track record in R&D, and she is directly in charge of the R&D team. So the other things we need to do is hire the right people. Again, Jon took over as Commercial Head of North America or U.S. injectables and immediately said we need to hire so many people. Well, what are you doing? We need to -- somebody said, Jon, go ahead and do it, and he has already hired so many people and added to the team. We also hired a supply chain. We have now a fantastic supply chain team in place that will be working to make sure that we don't have bottlenecks across the group. And we are still looking to hire some more people like ahead of CMO. We are interviewing now. We want to hire somebody that has a lot of experience in CMO because we feel very strongly that Hikma is well primed to be a major CMO supplier. And finally, what I started by saying the fear of my father when we went IPO-ed, long-term growth, focus on the long term, and that's what we are doing now. We are focused on the long term. We are doing the right investments. We are adding, as we said, the R&D budget is much higher than it was before. I think we're targeting 5% to 6% now to spend on R&D. Hiring the right people. Giving the plant managers the decision to buy the right equipment when they needed, not waiting for central engineering to come before they can buy that. So all these changes that we are taking, all these changes we are implementing, I think, will be excellent for the future. Then I think we have to look at the structure that we are saying, why this new structure? Some people have said it looks too complex. In my opinion, for me at least and for the team, it's a very simple structure. The MENA team is a fantastic team, strong team that has been doing an excellent job for the last 40 years. Hikma this year was #1 company in MENA among all companies, this is a big deal. And it's the MENA team that has delivered this. Mazen and his team have been doing this. So it was a no-brainer that the injectables and the MENA report to them instead of being a distraction for the whole team. And then Europe and, let's say, North America, U.S.A., they share many plants, and they share the products. So although doing businesses in Europe is different, but it's the same products and the same manufacturing teams. Khalid has been with us for quite some time now, and he has shown to be doing a great job. He understands this business, and we believe that it was time for him to step up and take a strong P&L position. I am very comfortable that he will do a great job. And Hafrun since she joined the company, has just [indiscernible] us all. She has done such an incredible job with Rx, such an incredible job with the R&D team and hiring the right people and getting the right things in place and at some point, we will be sharing a clear R&D strategy for everybody. We are more than comfortable that with the help of Jon and his team and the Rx team that has already proven to be an extremely effective team, we are very confident that this is the right way to go. So we believe it's an extremely good company. We're in a very good position. We have a strong track record, a very strong record of growth. We will be investing heavily in the next 2 years. And we know that we will go back to the -- moving forward, we will go back to much stronger growth than what we have shown. Although what we have done is still quite good. We believe that we will do much better than that. James Gordon: It's James Gordon from Barclays. Maybe first question, just on the organizational structure you mentioned, and I do follow the logic about having people in each geography running the geography. But then at least your reporting, I believe, is still injectables, Rx and branded. So might you actually just change the company and make it by the 3 geographies rather than the 3 types of division. Because ultimately, who is ultimately responsible for injectables now because it seems like lots of people have got responsibilities is the first question, maybe if I break them up. Said Darwazah: Well, we said that for this year and maybe for the foreseeable future, we'll continue to report the injectable results because we didn't want to say, why are you running away from that? But reality from a management point of view, when you look at Europe and the U.S.A., it's 90% of the injectable business. And as I said, it is very different from the MENA injectables. The MENA injectables, there's a lot of products that are in-licensed and brought up from outside while the U.S. is much more focused than Europe on manufacturing. So Khalid, Hafrun, obviously, but ultimately Khalid is in charge of the U.S. and Europe and will be in charge. And of course, myself, I will be working very, very closely with them. So I think this gives us the opportunity to really focus on the business rather than -- I think just forget the tail end, which is the MENA injectables. And as I said, I'm very comfortable that the MENA team will do a much better job than before. So the bulk of the business now, there is a clear focus on it. And we will be reporting geographically as well as segmentally for the foreseeable future. James Gordon: Maybe just the second question would be, so what is the outlook now for injectables as in what's going to make it grow faster? And is the idea that now you've reset the margin to the level of this year, but you'd have a similar growth rate on the top line as you were previously hoping for? Said Darwazah: First of all, as we said, the amount -- the budget for the R&D is much bigger than it was the year before. So actually, if R&D growth was similar to the years before, then the results will be much better. But we said, no, we have to do this. We have to take this decision now. We have to invest. So again, it's investing. There's really -- it's not -- you have to invest in the right people. And as I said, we have hired many, many people and there's still more to come. The R&D team, and we will be sharing more about R&D moving forward. And we believe that Hikma is extremely well positioned for CMO business. And we are in the process of recruiting a Head of CMO in addition to the CMO team we have. So all these things will be working together to achieve, let me say, growth in the midterm to long term for the injectables. Khalid Nabilsi: So James, just on the outlook for the injectable business. We know that this is not something that we would like to be growing. It's we have challenges at '25, and this is something that we know that and '26. There are different reasons for this. It's -- as I said in my presentation, is reduced CMO. One of our main customers want to do a domestic manufacturing in the U.S. So we have a reduced contribution from that. This is something that we cannot offer until we have Xellia up and running in 2028. We are less optimistic on, let's say, the biosimilar that we have, although it's a very small part of our business and liraglutide. And one of the product launches -- main product launches has been pushed. So of course, going forward, we are going to go back to return to very good growth for the injectable on top line and in terms of the EBIT. So any company, any business goes into challenges, '25, '26 was a challenging year. I think from here, from '27, we are going to see a different outlook for the injectable business, as we used to see in the past. Susan Ringdal: And just some examples. So of course, TYZAVAN is an important product for us. That will drive some of the growth that we achieved this year, but we expect that to do even better in 2027. So that will be an important growth driver. Some of the products that we expected to launch this year push to next year. So that will be, again, another growth driver for '27. We've got, of course, continued expansion in Europe. That's been an important growth driver for us. That will continue. MENA has been also a good business. We signed 6 new biosimilars in MENA. So there is -- there are a lot of opportunities to grow, but I think as Khalid said, this is sort of a reset. Said Darwazah: So the challenge is, obviously, as you right point out with the injectables and what we're doing with it. But I'd also like to remind everybody, this is a much bigger company than just the injectables, right? We have 3 very strong divisions. Two of them that are doing extremely well. The MENA is growing at a very fast rate with very good margins. And the Rx as I said, has done much better than anybody anticipated 2 years ago, if I told you we'd be doing 20% margins and this kind of EBITDA, people -- why did we keep on pushing you to sell it? So we -- there will be a lot of focus. There will be a lot of investment and we feel very, very strongly that in the medium to long term, this business will -- it is already, in my opinion, one of the best businesses. If you compare our margins to our competitors yesterday who upgraded from 18% to 19%. We are way ahead of them. Again, other competitors saying we want to be at 22% EBITDA, we are at 25% EBITDA. So this is a very good business. It's driven by 3 engines. And as we said, the focus is on long-term cost and total profitability growth in earnings per share rather than just focus on -- keep on focusing. And I think this is what really hurt us the last few years. The over focus on the margins of the injectables where people are saying, don't sell anything less than 32, don't accept anything. If I can get $300 million worth of orders opportunity and 28%, I shouldn't take them. Of course, we need. So that's why the focus will be on top line growth and bottom line growth rather than margin. Hafrun Fridriksdottir: If I may add a little bit about that, how we are going to grow the injectable business moving forward. I don't know if you had the opportunity to listen to our presentation this morning. But I mean we talked -- at least talked a lot about the ready-to-use platform. And even though, of course, the first product is TYZAVAN, as Susan mentioned, but we have multiple others in the pipeline and -- but those products that will be launched probably in early '28. So do you not see short-term, I mean, growth because of those products, but we have multiple products in the pipeline and I talked about, I think, 15 ready-to-use product in our pipeline. And so of course, moving forward, we will see the revenue and we will see the growth from this platform, which I'm very excited about. So I just to revisit, I think it's a really good business. Zain Ebrahim: Zain Ebrahim, JPMorgan. So the first question would just be a follow-up on the previous answer in terms of what you described on the CMO challenges from one of your customers wanting to switch the manufacturing from Europe to the U.S. So how do you see that risk going forward for the rest of the injectables CMO business? And just broadly, how do you see outlook for CMO overall from here, I know you've got the -- there's the small molecule contract in Rx contributing this year, ramping next year. So just to remind us how you're seeing that outlook? Said Darwazah: Well, the first thing we did, we looked at our plants in the U.S.A., for instance, we looked at the Cherry Hill plant. And see -- so what were the bottlenecks, what was needed. Many times, it's a small thing that you need to do to increase capacity. So working on increasing capacity significantly at Cherry Hill and that will help us with the CMO business as more and more companies want to manufacture in the U.S.A. Of course, we'll talk about the Rx later CMO because they already have a lot of orders in business. And then we acquired the Bedford site specifically for this. And it's a big site. It has a lot of equipment in it. It needs to be reengineered in a more modern way. We're working on that diligently, sometimes new lines take a bit long to get -- you need to order them it takes 1.5 years to 2 years for the lines to be again. After they come in, you have to install, qualify and get FDA approval. So it's a bit of a long process, long-winded. That's why we're guiding to '28. But with most of the CMO, the big business you get the order and the expectation as you deliver 2 to 3 years down the road. They don't expect to deliver tomorrow because it's a process of moving products and so on. So that's why we feel very strongly about hiring ahead of CMO, somebody that has already strong experience, has well good knowledge of the industry and has good contacts with the companies that want to have CMO business. So we're very confident like in '28 and forward for the injectables will have a very strong CMO business. For now, we will be showing that the Rx already has very strong CMO business. So overall, it will become a quite significant part of our business, let's say, 3 years down the road. Zain Ebrahim: Very helpful. And second question is on R&D. So an increase of 5% to 6% of group sales. Are you now comfortable with that as a ratio in terms of thinking about that level going forward? And I... Said Darwazah: You ask me or you ask her? If you ask her, she says, no, we need more. If you ask me, it's enough. Zain Ebrahim: And when do we say pay off from those investments? Because I know you mentioned '28 for the ready-to-use but you started something increase in R&D last year. So just to... Hafrun Fridriksdottir: Yes, of course, we slightly increased the investment in R&D last year, but that was I mean, really a slight increase. But we also reorganized R&D organization. So now we have a global R&D organization. And we also moved activity from U.S. into Croatia. So of course, that is clearly helping significantly on the injectable business, but we also have a very strong team focusing on inhalation, semisolid and liquids in Columbus in Ohio and then, of course, our team in Jordan is focusing on solid oral. So I strongly believe that we have the right team in place. Would always like more money for R&D, yes, of course, I would, so Said is correct there, but I feel very confident with 5% to 6% of the revenue in spent of R&D. I think that's just in line with what our competitors are doing. Khalid Nabilsi: And we are going to see these returns coming into the coming years. Some of it will come in '27, some of it to come in '28 or '29 onwards. Hafrun Fridriksdottir: Yes. Of course. R&D takes time, everyone knows that. Beatrice Fairbairn: Beatrice Fairbairn at Berenberg. You discussed the focus on long-term growth. I mean one of the targets out there is this kind of GBP 5 billion 2030 revenue target. My question really was does it still stand? And would you be able to give some color in terms of what is needed to get there and how that looks like over the coming years? And then just on your delay systems timing of some of the product launches and injectables, do you feel like the new time line that you've got are realistic and kind of how confident you that you're going to be able to launch these products on time. Said Darwazah: Why don't you take this first part about the GBP 5 billion? Susan Ringdal: Yes. So the GBP 5 billion, when we set the GBP 5 billion target, we said that this was -- it was an aspirational target, but we felt that it was very achievable with the business plan that we had and our business model, which has been to do bolt-on acquisitions as a matter, of course. So we still do feel comfortable that GBP 5 billion is within reach. It is -- we have -- we definitely see an acceleration of growth after 2026. And I think today, it would require a bit of inorganic growth, but yes, it is very much within the reach. Khalid Nabilsi: [indiscernible] organic growth. It's not like we are talking about transformation, like more of a product acquisition. So we are very close to the aspirational target of GBP 5 billion. And if you look into the 3 businesses, like the branded is delivering very good growth and acceleration. If you look into the past, it was 5%, 6%. Today, we are guiding more at 7% to 8%. This is driving growth, high-value products that we are getting into the MENA region. If you look into the number of licensing deals that we've been signing over the past 5 years has increased significantly. And now we are becoming more and more the partner of choice. So this is going to be a key driver. Rx has grown with the CMO business. We are going to see more contribution coming in '27, '28, '29. So this is as well going to drive the growth. And injectable, of course, with all these RTUs and the products that we are working on, it's going to accelerate the growth for the injectable business. Remember, the injectable business has a large portfolio. So there will be always opportunities. There will always be shortages. Europe, we are seeing a very good growth. Great potential, especially that the market is lacking products. So we are being the, I would say, most reliable hospital supplier in Europe now. All hospitals are coming to us and governments coming to us, say, we want this product. The agility that we have in Europe, providing the products on time is differentiating us versus others. And this is why we've seen 23% growth this year in the injectable in Europe. Same for MENA. It's not just like the 6 biosimilar. We have many products that we have that we are going to launch in MENA for biosimilars. So this is going to be the growth driver and we are very confident of our ability to continue growing the business. As said, '25, '26 might look challenging for the business, but this is a business cycle. But from here, we are going to continue growing. Said Darwazah: The short answer is yes, the GBP 5 billion is very achievable. We are extremely confident in our '26 guidance. And yes, the injectable launches that we'll be seeing in '28 and further will deliver the kind of growth that we need to be there. Victor Floch: Victor Floch, BNP Paribas. Maybe just 1 question on Rx. That one seems to be -- to go pretty well. And it looks like you have like even some room in terms of margin. You've been investing even like more than what you're using -- actively investing for injectables. So can you discuss like the different moving parts this year? I mean the base business, I mean, I think there might be some competition on certain products. On the other -- on the flip side, you have some service payment from your CMO partner. And are you expecting at some point to be able to update the market on was that CMO? What kind of -- what is the product? And what are the economics behind that? I mean, just have a bit more visibility on the CMO because it's a huge moving plant for Rx for sure. Hafrun Fridriksdottir: Yes. So this year, the revenue from the CMO business will probably be around 10% of our business, but our target in 2030 is up to 20%, at least my target. So we are not going to share the name of our customers, but we are working with not only 1 big customer, but actually multiple and some of them were talking about contracts which have not been signed but are in negotiation phase and we will be signing within the next, let's say, next few months. So that's going very well. And you also asked about the base business. For example, a product like Advil has been doing very well last year, and we expect the same this year. Fluticasone, we are the biggest volume driver in U.S. for fluticasone, as an example or for nasals, so -- and that is a business which continues to do very well. And all our base business has been doing really well last year, and we haven't really seen any change at least for the first 2 months of the year. So it's quite -- it's more stable than maybe most people believe it is. Susan Ringdal: And I can just remind people that we have Jon who's the Commercial Head of Injectables on the line; and Mazen, Deputy CEO for MENA. So don't hesitate to address questions to them as well. Hafrun Fridriksdottir: Certainly for Jon. You should really ask him questions now because he woke up very early for you. Christian Glennie: Christian Glennie, Stifel. Again, not to belabor the point, but on injectables and the margin, just to be clear around it's been quite a dramatic shift, right, from mid-30s to high 20s now. There isn't something sort of -- well, combination, one is you talked about the extra investments needed implication potentially maybe that you were underinvested before to some extent. So the margin was sort of where it was at -- and/or is that fair? And then the second part is, is there something more structural around the market from a sort of pricing and competition issue that means margin has -- the direction of travel has gone. Said Darwazah: Okay. So first one, as I said, I mean, clearly, we said we're taking the R&D budgets out of the divisions and putting as a corporate. So clearly indicating that at some point, division heads were sort of reducing R&D expenditure to get higher margins. So by taking that out and having it as a corporate with a fixed number that we agree on, I think that will -- there will be lower margins a little bit to start with. But we are very confident that with the investments they are making in R&D, the new pipeline, the expansion in the manufacturing and the CMO that we will be achieving higher margins mid- to long-term. Okay. The second question was? Christian Glennie: Structural something in the market because you've got [indiscernible]. Said Darwazah: There's always competition. There's always people coming in. You lose a few products. We lost 2 or 3 products that not lost. We have competition coming in 2 or 3 products that we're doing extremely well. And that's why when you have such a well-diversified portfolio and you have so many products, other products can pick up and the new launches can pick up. So the market has always been competitive. It's always been competition is coming in. Do we feel that there's more competition in some areas, yes, in some areas, no. But we are confident that with all the changes we're making, we are fine. Khalid Nabilsi: It's not like structural change in the market. It's the pricing is around, let's say, if we exclude the 2 top products that we have, it's 4% or almost less. So low to mid-single digit plus erosion that we've seen in this business. So nothing is abnormal. Hafrun Fridriksdottir: And maybe if I may add. So I think over the last few years, the supply from third party has increased significantly. And third party, of course, is not as profitable as if you're making the product internally. So I think it has been going from 20% to 30% over the last few years. So that's, of course, affecting the profitability. But also, I mean, there are different part of the business, which has higher profit than other parts. Of course, while you are building the business -- injectable business in MENA, which is less profitable than the business in U.S. and in Europe, of course, that will affect the overall injectable profitability, and that business has clearly been growing as well. So those are at least 2 reasons in addition to... Khalid Nabilsi: If you exclude the MENA margins, both for the Europe and North America injectable business, the margin is not 30%. Christian Glennie: Maybe the natural follow-up, I know you're probably reluctant to guide beyond kind of '26, but just to get a sense for that margin and is '27 to '28 the floor? And then maybe that's similar until you really get into Xellia and then margins to improve? Or is this... Said Darwazah: And again, we're saying we're very comfortable that '28 and further margins improve. I think once we assess everything and we have the plan, the right plan in place. Are we going to be giving... Khalid Nabilsi: May I take this one. In a way we'll be guided to '27, '28. And I said in my presentation this morning, you can assume this is for the coming few years, but it's not like if we have an opportunity that is top 30, we are going to say no to it. So we don't want to be strictly held on these margins because we are going to focus on growing the profits and the EPS rather than just focusing on the margin, as I mentioned. So you can't consider like this '27 or '28 to the next 3 years. But what has changed, just repeating to what I said earlier this morning. From the November, when we said the floor is 30% is literally increased investments in R&D. We are increasing GBP 15 million this year versus last year in injectable. You look into the investments that we are having, as I mentioned, fitting in sales and marketing, so -- and the CMO. This is why we are going down like 2 to 3 percentage points. It's not something structural in the business, but it's more investing for the future. Guy Featherstone: Just going to jump to the line for a quick question. Operator: [Operator Instructions] Our first question comes from the line of Kane Slutzkin of Deutsche Bank -- Deutsche Numis. Kane Slutzkin: Just -- sorry, could you just clarify, I missed the last point on the higher R&D in injectables. But could you just sort of clarify sort of lower guide as sort of those moving factors between higher R&D versus the lower CMO work like in terms of which has moved the needle more there? I assume it's the R&D, but if you could just clarify that. And then just -- you're obviously spending some time doing the strategic review. I'm just wondering at what point do you think you will be able to sort of reinstate a midterm or a new midterm guide? And then just finally, on the buyback, just I guess, why has it sort of taken so long to do it? And could we see a more permanent feature going forward if shares sort of remain where they are? Hafrun Fridriksdottir: I think I can maybe take the R&D question. If I could hear him correctly. I think he was asking for the spending for R&D and the overall increase in spending for R&D this year compared to last year is around $45 million year-over-year. I think that was your question, but I'm not really. Guy Featherstone: Kane, could you just repeat your last question? Kane Slutzkin: Yes, I was just wondering sort of in that lower guide, how much of it is sort of the lower CMO work you referred to versus R&D in terms of what's impacting the guide down? Guy Featherstone: Injectables margin guide, how much is CMO versus [indiscernible]. Susan Ringdal: I think, Kane, it's more evenly split across R&D, sales and marketing and CMO. I would say those are the 3 biggest factors there of more or less the same magnitude. Said Darwazah: And the buyback, I agree with you, is taking too long, but we have taken the decision to do that GBP 250 million this year. Susan Ringdal: In terms of the medium-term guide, I think we'll get back to you on that. We know that it's important for the market. We want to get it right. And so yes, I think we'll come back to you. Operator: Thank you. There are no further questions. I'd now like to hand the call back to the Hikma team. Unknown Analyst: Julie Simmons, Panmure Liberum. Just on a more product-specific basis. I'm wondering with TYZAVAN. Clearly, you've just launched it. It feels like the sort of momentum is pushed out a little bit to '27. Are you noticing anything from the first sales in the market there? Unknown Executive: This is Jon. Said Darwazah: You're on mute Jon. Unknown Executive: No, I am not on mute. Okay, great. Good morning, everybody. So we are an active launch mode for TYZAVAN. Let me just frame the market because this is important to understand because the RTU bag platform will follow a similar pattern. Vancomycin is a widely used product within the U.S., there's about 41 million grams of the product used in multiple forms from a very lyophilized powder to a frozen bag to obviously our ready-to-use bag. What we are selling is a system and a process change, which in large hospital systems and large hospital groups that by default, TYZAVAN would become the vancomycin of choice. So it is really more of a process change. Now to put it in perspective, we have already converted 13% of the entire gram market with our existing vancomycin ready-to-use bag. So we have a platform. We will expand that. Within that network, there's about 22,000 sites of care that use vancomycin within the U.S., all forms, long-term care, hospitals and such. Our existing customer base on the existing bag product represents about 15% of those sites. So there is a very large universe of hospitals and health systems that have not used our historical bag. So there is a large opportunity there. So you have to think in terms of it as a process progression. So we're going to expand our existing base by expanding the usage of the product without restriction, and then we're also penetrating the customer bases that have been -- that have not used our bag in the past. So yes, this is going to be a progression into the back half of the year. But the momentum that we're seeing right now is very active and very encouraging. Unknown Analyst: And just following up on that from a sort of RTU perspective longer term. Do you think once a site has switched over to 1 RTU, it makes it easier to switching to another for a different product? Unknown Executive: Yes. And that's exactly why the way we're approaching this first one is extremely important. We want to make sure we have the processes in place. Hospitals and groups, they have to reprogram medical -- electronic medical record systems, infusion pumps, SOPs, ordering patterns, storage platforms because you're bringing in a new form. So as we work with TYZAVAN as the foundational product, we want to make sure we fully integrate it properly. And I do believe that, that will help us going forward with the additional bags as they come to market. Charlie Haywood: Charlie Haywood, Bank of America. First one is just in our models, would it be reasonable to assume that a I guess, at this stage, mid -- 30% midterm injectable margin is off the table, given focus on profitable growth. And then I'll get to the second one in a sec. Susan Ringdal: Yes. Charlie Haywood: Okay. And then the second one is just on the midterm guide, which obviously since giving you, we've seen 2 cuts too. So first is, I guess, talk through the decision to issue the midterm guide if there were some underlying concerns on the spending, the short-term focus to give that? And then secondly, sort of how can you reassure us and the market that this is sort of the last of the big cuts and we're back to something profitable. We can be returning some in growth from here. Said Darwazah: Again, as I said before, it's not a complicated formula. You do -- you have the right people. You have the right equipment, you have the right facilities, you have the right R&D. All of these things, when you invest properly, you take timely decisions to take -- to move the business forward. This is a formula for success, and we've got this formula for 40 years. So we sort of slowed down decision-making. It became too centralized. We were not investing properly in the right places, and now we're reversing that. So that's why we feel very confident that midterm, we will deliver what we're talking about. Khalid Nabilsi: And this is why, as well, '27 is going to be a year where we -- '27 is going to be as well a year that we'll see a growth. So it's the bottom on the injectable. And from here, we are going to grow the top line and in bottom line. In addition to the other 2 businesses, they continue to grow, as I said earlier. Charlie Haywood: Just a third one if I may. You talked to obviously heavy investment in the next 2 years. How confident are you that this is a 2-year journey of heavy investment, and that won't spill into 3 or 4 as the investments start continuing? Said Darwazah: The investment is -- it's not a short term. It will continue to be, but we will see that -- we'll start seeing the results of what we're doing now, 3 years down the road and will it further, but when we look at our 5-year CapEx, our 5-year R&D orders, all this will continue to grow. Khalid Nabilsi: Maybe just to add to what Said just mentioned. In terms of the R&D, it takes time to see results, as Hafrun said, in terms of sales and marketing, these are quick wins. So you invest today, it's not like going to take so much time till you get the returns. And this is what Jon is focusing on. So you will have these investments and at the same time, give you an example on the supply chain, having somebody now focusing on the global supply chain would reduce our inventory levels will reduce the slow-moving items, which it was very big this year, failure to supply, so the immediate impact will be significant improvement to margins. So this is why we are saying that we are moving in the right direction. And I think the results of this will come in the coming years, and we are confident about our medium-term outlook. Unknown Analyst: Christopher Richardson from Jefferies. A couple if I may. You lowered CDMO or CMO expectations, sorry, for the year as some customers require domestic production, which you said you can't offer. I was just wondering if there are any reasons for that. Khalid Nabilsi: It's -- as we said, in Xellia, our Bedford acquisition is going to be up and running towards 2028. So it's the same machinery, the same lines. It's replicate to what we have in Portugal. Now we couldn't offer because we don't have that facility up and running. So once we have that facility up and running, towards the end of '27, early '28, we'll be able to offer. Said Darwazah: And as I said, again, the Cherry Hill plant and the other plants we looked at optimizing the capacity there looking at the bottlenecks, bringing in the lines that are required to up the manufacturing capacity. Hafrun Fridriksdottir: And if I can add something about the Rx business because we are only talking about injectables and as I mentioned, I mean, we have this huge, I mean, of course, manufacturing site in Ohio, both for solid orals, for nasals, for inhalations. And that site has been getting a lot of attraction over the last year or so since all this discussion about domestic manufacturing started to happen in U.S. So there's a lot of interest in us in producing products for different clients. So I think this is going to be a big opportunity for us moving forward, both in the Rx and also in the injectable business. Said Darwazah: Many times clients come in, let's say, for the solid oil, then they feel you're very comfortable with you and they open up and move injectables and other things to for you. Unknown Analyst: Great. And just the guide cut in November was due to equipment delays. I was just wondering what the situation is now and what caused you to walk away from '27 and whether the timing for Bedford has changed at all? Khalid Nabilsi: There's no change to the guide that we had in late November. So all what we said that we are going to ramp up -- start ramping up towards the end of '27 and the commercialization will start '28. So no change to our plans. Unknown Analyst: Great. And maybe just a quick follow-on. I was wondering if you could comment on the oral generics pipeline and the margins in U.S. Rx excluding any Xyrem impact. Hafrun Fridriksdottir: Excluding, sorry? Unknown Analyst: The impact of Xyrem? Hafrun Fridriksdottir: Sodium oxybate. Okay. So last year, sodium oxybate was dragging down our profitability so the rest of the business was actually compensating for the low profit of that product. We managed to negotiate a better deal, at least for this year and for next year. So we will have slightly better profit on that product. But -- so it will not be dragging down the overall profit for the Rx business. Is it helping this year? It potentially will. Said Darwazah: Zain, some more. Zain Ebrahim: Zain Ebrahim from JPMorgan. Thanks for the follow-up. So on CMO, you mentioned you're looking for a new head of CMO. So just the characteristics you're looking for in the Head of CMO in terms of the type of -- the kind of the profile that you're looking at and when we could expect the appointment? And does this mark a potential shift to making CMO like a fourth division that we source also about in the past in terms of strategically. So integrating the Rx and injectable team. Said Darwazah: Historically, we used to the CMO as a fill-up. So we focus -- this is extra capacity, let's get products to fill it up. And then when we were approached or we found a client to come in and use the Rx side it was more of a long-term agreement. So long-term agreements require dedicated facilities, they require dedicated lines and sometimes dedicated teams, and it's a lot of investment to do that. And it takes time to come in and -- but it's a long term. So this is the right -- this is what we want to do, not just bringing in short-term fixes. So to do that, you need somebody that has been doing that for a very long time that knows which companies require CMO business. And also, I think more importantly, when you do the contract, when you're looking at, let's say, 5 billion tablets or something, $0.05 per tablet extra gives you $50 million in profitability. So having the right negotiation skills, the right contract skills all these things. So this is what we're looking at. Now we have this but we think that getting a very senior person that has done this successfully is the right way to go. And as I said, we are interviewing, there are several people out there that are available with this kind of talent. And yes, it could be a fourth division very much so. Zain Ebrahim: Just a question on the CMO headwind for '26. Is that -- was that 1 customer you lost, that's gone from Europe to U.S. I guess how is that conversation and how are conversations with the remaining customers to ensure that won't happen with someone else before the '28? Khalid Nabilsi: It was 1 of our customers. It's not like they are shying away completely. They still have business with us, but they decided to -- some of their manufacturing for their own benefits. They wanted to have it in the U.S. So it's not like the business is going down. It's to replace, it's going to take some time to get a new customer, but we are confident of our ability to continue growing the CMO business. So it's a matter of time. But when we have the Xellia, of course, up and running, and we will have much more clients, much more capacity to offer as well. Said Darwazah: There's a lot of demand for U.S. manufacturing and I think the Bedford acquisition and what we're doing now although it's going to take a little time. But like I said, if you want to get a client that will work with you long term, anyway, it will take 2 years before you can move in the product. So now is the right time to get the clients and get the orders so you can put the processes in and do the submissions and all these things, the tech transfers and so on and so by '28 and more, you'll be ready to launch. So it's the demand is there, and we are talking to a lot of companies. Hafrun Fridriksdottir: So what they are saying is that if we would have that capacity in U.S. to take on those products in U.S., we could probably potentially have kept that customer. So -- but we didn't have the capacity at that time. So I think that's -- but now we are building that. So moving forward, we are. Susan Ringdal: And if you remember as well, when we did this acquisition and we took the Bedford site on, it was because we were reasonably capacity constrained in our existing facilities. And so we weren't really very actively selling CMO business at the moment because we're pretty much and we don't have a lot of spare capacity for CMO without the Bedford site. Christian Glennie: Christian Glennie. Thanks for the follow-up. Just maybe on Rx and just a couple of ones there on the I think you've alluded to a couple of other things around the moving -- the margin to 20% just to clarify the step-up this year to 20%? And is the 20%, again, another kind of the base for the business going forward, do you think? And then just finally on nasal epinephrine, what's the update there? And obviously, it's been delayed. So what's the expectation around that? I think it had been seen as potentially quite a significant product for you. So just an update there. Hafrun Fridriksdottir: So maybe first on the margin. Is 20% the best we can do? No, I think probably you will probably see some improvement moving forward as, I mean, in '27, even '28 as well. I'm not going to give you any numbers, but I think -- I don't think that's necessarily the top of the pie. With regards to epinephrine as I think we -- I talked about last time when they had this conversation, we -- there were some requirements from FDA to run some additional study. That study is ongoing and we are planning to submit in U.S. in, let's say, after a few months now. And we did file a product in U.K. last year, we will be filing in Europe as well. And we are actively discussing our licensing product in Europe. So that's -- yes, so that's the update. But because we have been working so closely with FDA over the last year or so on the product, I strongly believe that the review time will potentially be shorter than and maybe we thought in the beginning. So it will be an exciting product for us. Said Darwazah: Somebody asked Mazen a question about the MENA. He's bored. James Gordon: James from Barclays again. Just we're talking about margins, and we're talking about generic margin and an injectable margin? Hafrun Fridriksdottir: Rx. Unknown Analyst: Rx, apologies. But then I've also heard effectively, you're going to centralize R&D spend and that we could think of the divisions as being a bit ex R&D. You're going to think about what that ex R&D performance is. So if we're rebuilding our models of today, is that how we should be thinking about Hikma now? And are you going to start giving us then what the margins are for these 3 divisions without R&D and then the central R&D line? What do we do with [indiscernible]? Khalid Nabilsi: Eventually, this year, we did not want to -- too much changes to you -- changing your model. But eventually, next year, you'll start seeing the margin without the R&D. With and without. James Gordon: Bridge this year and then we do a rebuild for our next year. Yes. Susan Ringdal: Mazen, I think it would be great. Maybe I think 1 of the strengths for the business in the MENA in the past year has been all of the partnerships that we've signed. We have excellent momentum in terms of signing new partnerships. Maybe you could just talk a bit about why Hikma seems to be the partner of choice and MENA. Said Darwazah: You are on mute. Mazen, mute. Susan Ringdal: No, he's not. The sound is just very low. Said Darwazah: Looks like he's on mute. Hafrun Fridriksdottir: Luckily, you didn't ask him any questions. Said Darwazah: Okay. Next question till he comes back. Guy Featherstone: [indiscernible] Said for closing remarks at this point. Said Darwazah: Sorry? Khalid Nabilsi: Closing remarks. Said Darwazah: Well, again, it's -- first of all, it's good for me. I'm very happy to be back as CEO, and I'm very happy to give up the Chair position to be able to do this. We have an extremely good team. We work very, very well together. We have, I think, a very, very strong business. As we said, if you look at the last 5-year CAGR and the years before, you've seen how this business continues to grow. We will continue to grow. We are taking quick decisions. We are implementing a culture of quick decision-making. I also talked about the younger people in the company. So for instance, from now on, the executive committees and the leadership council and so on, we will have -- we will mix and match not only beyond seniority, we will be having more younger people join. There is obviously something we didn't talk about, a lot of focus on AI and seeing how AI can be implemented to move the business forward. So all in all, I feel very, very positive about this. This is a strong company that has been growing for a very long term, has very solid foundation as a strong leadership team and a lot of talent across the board. And I'm very confident that we will be delivering the kind of growth that we expect from ourselves and our shareholders expect from us. Thank you. Thank you, everyone. Appreciate you joining us.
Operator: Good morning. We welcome you to EDP's 2025 Final Year Results Presentation Conference Call. [Operator Instructions] I'll now hand the conference over to Mr. Miguel Viana, Head of IR and ESG. Please go ahead. Miguel Viana: Good morning. Thanks for attending EDP's 2025 Results Conference Call. We have today with us our CEO, Miguel Stilwell de Andrade; and our CFO, Rui Teixeira, which will present you the main highlights of our strategic execution and 2025 financial performance. We'll then move to the Q&A session, in which we'll be taking your questions, starting with written questions, you can insert from now onwards at our webcast platform and then by phone. I'll give now the floor to our CEO, Miguel Stilwell de Andrade. Miguel de Andrade: Thank you, Miguel. Good morning, everyone, and welcome to the 2025 results conference call. Just before presenting our results yesterday, I just wanted to address the extreme weather events that impact Portugal. And as you know, Portugal was hit by a series of devastating storms starting at the end of January and then well into February to a certain point, had winds over 200 kilometers an hour, which really caused unprecedented physical damage to infrastructure in the country, including our own network infrastructure and also customers. I think the first thing to say is that we immediately responded with a very coordinated large-scale support from all the internal and external teams. I mean we had people coming in from Spain, Brazil, France and Ireland, and I just wanted to thank also all those teams. The networks and the hydropower teams worked around the clock to limit the damage caused by the storm and to restore power to our consumers. Naturally, the first thing is our thoughts are with the people and the communities affected. We understand the damage that this has caused, the frustration from people that had no power over those weeks. And from the beginning, our first priority was to reestablish power in the quickest, safest and the most effective way possible. We have now recovered 100% of the customers, only a very few specific situations outstanding that will be resolved very shortly. But I think the worst is definitely over. I also wanted to extend a really sincere word of appreciation for the absolutely extraordinary professionalism and dedication demonstrated by the teams, both internal and external across all the country. I mean the response from grid repair to the hydro power management, the community support, emergency logistics. I mean, it was absolutely exemplary. And I think it really showed the best of EDP in terms of the commitment to stand with our customers and with the communities that we serve, especially in the moments where they need us most. So I will come back to this later in the presentation just to talk a little bit about the impact on us in more detail. But I would move now into the bulk of the presentation. And on to Slide 3, which essentially shows an overview of our results for 2025. And I'd start off by saying EDP had a very strong set of results for 2025. The recurring EBITDA reached EUR 5 billion, so outperformed the EUR 4.9 billion guidance. It's mostly on the back of a better-than-expected fourth quarter in the integrated segment in Iberia from above-average hydro resources in the fourth quarter. If we compare that with 2024, EBITDA was up 1% year-on-year. So it reflected a rebound in EDPR's performance, which as you know, had record capacity additions towards the end of last year. Recurring net profit came in at EUR 1.3 billion, so also above the guidance, although it's down 8% versus 2024, and that's mostly explained by higher financial expenses. Net debt ended the year very well. So at EUR 15.4 billion, better than the EUR 16 billion guidance, and that led us to have a great FFO over net debt of 21% compared with the 19% guidance. So the upside versus guidance at all levels allowed us to then increase the shareholder return. So we're proposing a dividend of EUR 0.205 per share. So that's a small increase, which will be paid this year already in 2026, obviously subject to the General Shareholders Meeting approval. If we move forward into the next slide to talk a little bit more detail about the FlexGen and customers. So here, we see a structural uplift in the value flexibility. And I really wanted to highlight, if you see here on the left-hand side, there's a chart from the International Energy Agency recently that shows the capture rates in Spain by technology. And it shows how the market is increasingly rewarding assets that can respond to price volatility and the system needs. And you can see natural gas capture prices obviously rising in 2024 and '25. Hydro with reservoir also trending upwards and more intermittent and less flexible technologies, particularly solar, you see obviously a decline in capture rates in 2025. The takeaway here is that flexibility is being structurally priced in and that we expect that to remain a long-term feature of the market. And you can see that in the figures for EDP for 2025. The hydro net generation was almost 10 terawatt hours. It's down 2% year-on-year, but still a very strong year for them. Hydro premium versus baseload increased to 21%, so reinforcing the value of the flexible output. And on pumped hydro, the pumping volumes increased to 2.3 terawatt hours on the year, so up 24% year-on-year, with the pumping spread versus baseload reaching 75%. If you look at the right-hand side of the slide, and we give there an update on the reservoir levels in 2026. So given the heavy rainfall, reservoir levels are at historically all-time highs. They've reached around 96% in February 2026, up from roughly 76% in January. And that's consistent also with the hydro production index in Portugal, which has doubled its historical average year-to-date. So obviously, that's following the heavy storms, which I just talked about in Portugal in January and February. One important thing to note is that the market consequence of these extreme weather conditions is that we also had abnormally depressed pool prices, which together with higher ancillary services costs in February. It's shown by the Portuguese pool prices going from around EUR 71 per megawatt hour in January to roughly EUR 8 per megawatt hour until mid-February. So more depressed pool prices in February and higher ancillary service costs. If we move forward to the next slide and just in a little bit more detail on the storms here in Portugal in the first half of 1st February essentially. First, as I mentioned, just highlighting the efforts made by the team. So a huge effort done to restore power and to make sure that the dams and that the flooding was limited. The storms impacted around 6,000 kilometers of grid, damaged around 5,800 towers. We had more than 2,000 people mobilized on the ground, around 2,400 people. And as I said, we were able to restore 100% of the customers already by this week. On hydro, we continuously monitor the rainfall. And I think here it was great to see using advanced hydrological model, so we were able to proactively sort of anticipate what was coming down the road and to be able to also anticipate some of the discharges and coordinate that with the environmental authorities. So I think there was a meaningful role in flood control. Then on the practical side with customers and communities, we have put in place schemes to ensure that payments and invoicing support for the customers impacted as well as the assistance with the solar DG reinstallations. On a more social level, we also delivered over 90 tons of essential materials, including fans, roofing tiles, parklands basically to help people protect their homes. And we also helped people in more isolated areas get access to communications, including Starlink devices and power banks. In terms of financial impact, we're expecting that this will result in around EUR 80 million in CapEx with infrastructure to rebuild, will be partially supported by insurance. We're still evaluating additional cost and impact, and we'll update that in the first quarter results, but clearly shows increasing vulnerability that climate change is causing and the importance above all of resilient flexible systems and long-term investment in networks. And that takes me to the next slide, where I wanted to just stress that already before these events as of last year, we're already significantly ramped up the investment to respond to the growing needs of the system. The electrification, the renewables integration, the grid resilience, gross investments for the period '26 to 2030 will reach EUR 4.1 billion compared to the EUR 2.6 billion in the '21 to '25 period. So that's a 58% increase overall in Iberia, slightly more in Portugal than in Spain, although both geographies are contributing significantly to Portugal around 66%, so almost 70% increase. The big part of this is strengthening grid resilience. We're assuming around -- or more than EUR 500 million for grid resilience to ensure that the network is prepared for higher loads, more distributed generation and greater system complexity. And fortunately, this greater investment is underpinned by much stronger regulatory visibility, as we showed here on the right-hand side. So as you know, the new regulatory framework sets up the 6.7% nominal pretax return for this period until 2029 in Portugal. And in Spain, the framework establishes a 6.58% return for the period out to 2031. So importantly, both framings closed as of the end of last year, giving us clarity and stability for the upcoming investment cycle. I think it's also important to note that in Portugal, the 2026 state budget clarifies and -- the conditions under which new investments in the networks are exempted from the extraordinary tax. So that supports really this incremental investment that we're doing in the networks. Still on networks. If we move forward to the next slide, you can see that the new regulatory terms and approval plans will allow an EBITDA growth in Iberia for networks. So it grows to around over EUR 1 billion over this period. We have to consider that in this period in Portugal, there are legacy revenues that end in 2026 worth around EUR 40 million, removing that means that we'd have a normalized 2025 EBITDA of around EUR 0.89 billion and that then reaches the EUR 1.05 billion in 2028. So that's an 18% EBITDA growth for '25 to '28 with -- updated already with the new terms. So this isn't just a one-off to 2028. This then continues to grow beyond 2028, and that's supported by the approved returns and also the investment plans that we discussed on the previous slide. So all of this gives us confidence in the continued momentum well beyond 2028 to 2030 and beyond that. If we move on to the next slide and just talking quickly about Iberia. I think what I'd say here is that Iberia is entering a period of much stronger electricity demand growth, driven by electrification. On the left, you can see the power demand growth in 2025 versus '24. Portugal leads at 3.6%, Spain at 2.8%, which means Iberia clearly outperforming several of the European markets. And it's not just a 1-year effect. I mean obviously, we're seeing strong momentum into 2026. So just in January, the demand was 7.9% in Portugal and 4.8% in Spain already adjusted for temperature. And going forward, we see our estimated 2% CAGR in the Iberian electricity demand over the period leading up to 2030. So demand growth should be supported overall, not just by the economy is doing well, but by more than 18 gigawatts of data center projects pipeline that have been announced or that are publicly available. I'd have to highlight here that EDP is obviously engaging with a lot of these projects, 2 of the more advanced ones that's certainly here in Portugal are the Merlin Data Center, North of Lisbon at 180 megawatt. We had an MOU signed with them back in July of 2025. And also the Start Campus project in Sines with an MOU that we signed yesterday. And the Sines project, as you know, is expected to reach 1.2 gigawatt over the next couple of years. And I can detail a little bit more what that means in the Q&A if you think that's appropriate. If we move forward to still to talking about Iberia. And this is a slide, which I think is also extremely important because it's not just about demand growth. It's also that Iberia combines this demand growth with structurally affordable power prices. And that's supported by improving system fundamentals. And that's really an important advantage for customers, for electrification, for the broader competitiveness of the economy. So when there's so much talk in Europe and elsewhere about affordability and about competitiveness, Iberia has a really distinctive advantage in Europe, and I think we will benefit from that sort of on the electrification front. On the left-hand side, you can see the evolution of the B2C electricity prices. And the key takeaway is that Portugal and Spain fit among the most affordable markets in Europe, around 17% below the European average. Going forward, at the European level, Northern Europe faces higher expected network investments that typically puts upward pressure and then user prices over time. But by contrast, in Portugal and Spain, we have several structural elements that we think will support the affordability. One is that the historical electricity system that is expected to be fully paid by 2028. That means that there will be significant cost reductions in the tariff structure going forward. Second, there's a gradual phase out of legacy support schemes like the Feed in Tariffs in Portugal and the Recore scheme in Spain that also reduces access tariff costs. And so in Portugal, specifically, the regulator has simulated annualized reductions in the B2C reference end user tariffs from 2026 to 2030. So that helps create room to accommodate new system needs like ancillary services, capacity mechanisms, additional investments in networks without compromising competitiveness. So I think it's -- we are able to get the best of both worlds, which is more investment, more ancillary services, more capacity mechanisms to make sure that we have a stronger, more resilient system and still have sort of annualized reductions in the end user tariffs. Moving on to EDPR. Again, you have more detail on that yesterday. So just a quick note here. We are seeing really strong execution momentum and better visibility on the business and plan delivery. Over the last 6 months, EDPR secured 1.3 gigawatts of capacity. And on the left-hand side, you can see the main projects secured during this period. It's a combination of PPAs with utilities, global tech companies. We also have Build and Transfer agreements in the U.S. So it's really a diversified set of offtakers and structures. And across the '26 to '28 period, we already have 2.8 gigawatts secured, and we expect to continue on securing more projects over the coming weeks and months. If we break it down year-by-year, 2026 is already 100% secured. So almost all of that under construction, a couple of projects coming under -- into construction in the very short term. So that gives us very good confidence on the 2026. '27 is already 65% secured and 2028 is at 10% secured. So that gives us roughly already 55% secured for '26 to '28. As I say, we have good visibility on additional projects that are coming down the pipeline to help us meet the rest of this project. And with that, I'd stop here, I pass it over to Rui to go through the '25 results in more detail, and I'll come back for closing remarks. Thank you. Rui Manuel Rodrigues Teixeira: Thank you, Miguel, and good morning to all. So let me start with the EDP's results. Recurring EBITDA reached EUR 5.03 billion in 2025. It's up 1%, but if we exclude asset rotation gains and FX, the underlying growth was 7% year-on-year driven by strong EDPR performance in resilient network space. So looking at the recurring figures by segment, Renewables, Clients and Energy management increased by EUR 65 million year-on-year, reaching EUR 3.4 billion and all represent 69% of group EBITDA. Within this segment, the Hydro Clients and Energy Management declined EUR 216 million year-on-year, mainly reflecting the normalization of gas sourcing conditions in Iberia versus the external environment that we have in 2024. This was more than offset by strong EDPR performance up to EUR 190 million year-on-year, reflecting 2024 record additions translating into higher generation. On the network side, recurring EBITDA stood at EUR 1.54 billion, now representing 31% of group EBITDA. While EBITDA decreased EUR 68 million year-on-year, this is mainly explained by Brazil FX impact and the assets of capital gains, again, excluding FX and asset rotation, the underlying networks EBITDA increased 3%, supported by a positive performance in Iberia, both from a regulatory framework and reinforce operating discipline. So finally, recurring OpEx decreased 2% year-on-year or 5% in real terms, reinforcing also the operational discipline, which I will detail in the next slide. So if you look to the OpEx, this slide highlights an important enabler of our EBITDA performance, which is sustained cost discipline. Recurring OpEx decreased EUR 1.88 billion, trending down year-by-year, a total reduction of around EUR 160 million in '25 versus '23. Over the last 12 months, inflation was around 3%, and yet we still delivered a 2% nominal reduction in recurring OpEx. Excluding FX, OpEx is slightly below, which means that we are effectively absorbing inflation through efficiency and productivity gains. This is translating into improved efficiency ratios. OpEx as a share of gross profit improved from 28% in '23, down to 26% in '25. Key drivers for these, EDPR is delivering efficient growth. We're reducing adjusted OpEx per megawatt by 12% year-on-year to EUR 40,000 per megawatt, this while scaling capacity, a leaner more focused workforce aligned with the company's growth priorities, digital and AI-driven initiatives to improve O&M efficiency, decision-making, customer experience. So I think the message is very clear. We are growing and investing while structurally improving the cost base. And obviously, this supports cash generation as we deliver the plan. So now let me move to FlexGen and Clients segment. EBITDA for '25 stood at EUR 1.46 million. This is down 13% year-on-year, and this reflects the normalization versus an extraordinary 2024, but also flexibility revenues structurally increasing. In Iberia, 2024, as you know, was impacted by extraordinary gas sourcing costs. 2025 baseload hedging price normalized from EUR 90 per megawatt hour to EUR 70 per megawatt hour. However, this was partially offset by stronger flexible generation revenues. Pumping generation increasing by 24%, pumping spreads reaching 75% over baseload prices. Hydro premium improving to 21% and CCGT generation increasing by approximately 3 terawatt hours, reflecting the system operator needs. In Brazil, EBITDA declined from EUR 184 million to EUR 156 million, mainly due to ForEx impact. So overall, while the headline EBITDA reflects normalization, the structural uplift in flexibility was very solid with EUR 0.3 billion contribution to overall group. So now we move to Slide 15, turning to EDPR, which we also commented on yesterday's call, recurring underlying EBITDA ex ForEx grew by 27% year-on-year. This growth, very robust growth reflect a significant step-up in the generation following the record capacity additions in '24, offsetting worse renewable sources and also normalization of selling prices primarily in Europe. Overall, EDPR continues to deliver strong operational momentum and translate to capacity growth into earnings growth. Now looking at the Networks EBITDA on Slide 16. Recurring EBITDA reached EUR 1.54 billion in 2025, representing a 4% decrease year-on-year, but this is primarily explained by devaluation of the Brazilian real. The absence of asset rotation gains in Brazil, which amounted to EUR 71 million in '24, combination of deconsolidation of transmission assets, the decrease on the distribution company's residual value update and transmission inflation update. But this is compensated overall by improving operating performance. Again, excluding FX and asset rotation, underlying EBITDA increased 3%. It has an important contribution of EUR 56 million in EBITDA from Iberia, the following inflation update in Portugal and RAB growth overall. So all in all, the network segment is showing a resilient operational performance with a very supportive regulatory farmwork as Miguel just described going into the future. On financial costs, following slide. Net financial costs increased from EUR 865 million to EUR 989 million. There are 2 mains drivers to this. The first one is that net interest costs, which add about EUR 54 million. They reflect higher average debt and a higher cost of debt in Brazilian reals, where the average cost rose from 11.7% to 14.1%, reflecting the macro conditions in the country. Excluding Brazil, the average cost of debt reduced to 3.3%. Second, lower capitalizations and other effects contributing with an addition EUR 69 million. This is largely explained by the EUR 1.2 billion reduction in work in progress as projects enter the operation, and therefore, reducing capitalizing interest. If you look to the right-hand side, average nominal debt by currency remains broadly stable year-on-year. The portfolio continues to be predominantly euro-denominated with 64%, followed by U.S. dollar, 16%; and Brazilian real at 15%. Finally, in terms of recent financing activity, we issued a 6-year senior bond EUR 650 million in January with a 3.25% coupon. So this confirms the competitive access of EDP to funding in the debt markets. Now let's move to the cash flow on the following slide. Organic cash flow reached EUR 3.3 billion, up EUR 0.5 billion year-on-year, driven by EBITDA improvement in working capital management. Net interest paid amounts to EUR 0.8 billion, partially offsetting the operating improvement. And on investments, gross investments totaled EUR 3.9 billion, mainly EUR 2.4 EDPR and EUR 1.1 billion in Electricity Networks, plus EUR 0.4 billion in FlexGen and Clients. These gross investments were funded through EUR 1.6 billion of asset rotation and EUR 0.8 billion of Tax Equity proceeds. There are also EUR 0.5 billion of other impacts, mainly related with payments to fixed asset suppliers. So as a result, a total of EUR 1.7 billion of net cash investments, of which close to 50% in electricity networks and around 40% in EDPR. Now on Slide 19, net debt stood at EUR 15.4 billion, down from EUR 15.6 billion at the end of 2024 and outperforming EUR 16 billion guidance that we gave to the market. The key drivers for the change in net debt includes EUR 3.3 billion of organic cash flow. Obviously, the EUR 0.8 billion of dividend annual payment and the EUR 100 million share buyback throughout '25. The EUR 1.7 billion of net cash investments that I just explained, also EUR 0.8 billion of regulatory receivables and about EUR 0.3 billion from FX and other, mostly related to U.S. denominated debt. So as a result of cash flow management, balance sheet discipline and obviously, very strong operational cash flow, we do have solid credit metrics with 20.9% FFO net debt and 3.3x net debt EBITDA. Now on the net profit. Net profit reached EUR 1.28 billion. That's a reduction of 8% year-on-year. And this is mostly reflected or driven by the higher EBITDA, EUR 74 million, higher D&A and provisions, increasing EUR 60 million year-on-year, reflecting the investment path, higher net financial costs due to higher cost of debt and lower capitalizations, slightly higher income taxes and noncontrolling interests. Excluding asset rotation gains and the ForEx, the underlying net profit increased 3%, confirming a very solid operational performance, as we just described. Reported terms, net profit reached EUR 1.15 billion, including the negative impact of EUR 130 million, mostly related with some nonrecurring items in EDPR. Year-on-year reported net profit, therefore, increased 44% also driven by EDPR performance rebound compared to a negative 2024. This improvement in net profit supports our proposal to increase the dividend to EUR 0.205 per share, up 2.5% versus the guidance to be paid in 2026, obviously subject to the approval at the shareholders' meeting. And now let me just address a topic, which I think is relevant regarding the net income sensitivity to power prices versus what we presented at the CMD. So on this slide our -- just again to remind everybody. So our exposure to energy market is well diversified. And as you know, we have a very active energy management. The portfolio is predominantly long-term contracted. This provides strong cash flow visibility and obviously reduces short-term impact from price volatility. In Iberia and Brazil, we have a structural short position in generation, which hedged through our supply business, so partially offsetting wholesale price movements. At the CMD, we disclosed that the simultaneous 5 years per megawatt hour movement in all markets, would imply approximately EUR 60 million impact on 2028 net income. Since then, Iberia 2028 forwards have declined around EUR 10 per mega hour. But on the other hand, U.S. and Brazil forward curves are moving upwards. So this portfolio diversification plus an active energy management have actually reduced the sensitivity. So today, the same 5 years per megawatt hour movement across all markets in the same direction would imply approximately EUR 45 million impact on net income 2028 again versus the EUR 60 million that we presented at the CMD, so a reduction on the sensitivity. The merchant exposure split is about 65% Europe, 20% Brazil and 15% North America. So with this, I would hand over to Miguel for final remarks. Thank you. Miguel de Andrade: Thank you, Rui. As you say, I think to push on the sensitivity to power price is an important point to note because I know there are questions on that. Anyway, if we move forward to the final slide, just before we open it up for Q&A. So summarizing the 2025 results and how we're seeing 2026 and beyond. First in relation to '25, I think it's undeniable that it was very strong execution and delivery of what we had promised. Across the group, we delivered ahead of guidance, and we're seeing a clear structural change in FlexGen and Clients with the value flexibility coming through very strongly. At the same time, EDPR also improved its performance, has its continued focus on A-rated markets. It's got better visibility on the business plan execution. In networks, we have significantly improved visibility with the regulatory periods closed in Portugal and Spain, and we also advanced in Brazil with the extension of the concessions. And importantly, all of this was delivered with financial discipline and increased efficiency in Sweden. Spoke about, particularly on the cost side, but also on the debt side, supporting the maintenance of sound credit ratios. Second, looking at the 2026 guidance. We expect to recurring EBITDA of around EUR 4.9 billion to EUR 5 billion, and this is supported by the balanced contribution across the portfolio. We have the networks around EUR 1.5 billion to EUR 1.6 billion. And EBITDA at around EUR 2.1 billion as mentioned yesterday. FlexGen and Clients is around EUR 1.3 billion to EUR 1.4 billion, and we reaffirm our recurring net profit of EUR 1.2 billion to EUR 1.3 billion. On the 2028 targets. And over the course of the next couple of years, we continue to expect around EUR 12 billion of gross investments. And I say this will be funded with discipline and supported by around EUR 6 billion of asset rotations and disposals. We'll keep our balance sheet targets unchanged. So we're targeting FFO over net debt of around 22%. And in terms of earnings delivery, we remain committed to the EUR 5.2 billion of recurring EBITDA and the EUR 1.3 billion of recurring net profit by 2028. So overall, this is consistent. We executed strongly in 2025. We have very clear visibility for '26, and we are reiterating our 2028 guidance. With that, happy to turn it over to Q&A and back to you, Miguel. Thanks. Miguel Viana: We will begin by addressing the questions submitted in writing. After that, we will move on to the live questions by phone. [Operator Instructions] So we'll start with the written questions. And we have for first question from analyst at RBC and the other analysts GB Capital, Deutsche Bank, CaixaBank regarding the guidance for 2026 that we provide. So we are guiding stable EBITDA versus what we present at CMD, while at EDPR, there was a slight revision. So if we can explain this in detail, this better guidance. Miguel de Andrade: Sure. So as I mentioned, I think 2026 we're very comfortable with it. I mean a couple of points that have improved since the Capital Markets Day last November. The regulated rate of return for the distribution in Portugal was better than the initial proposal. So that was an upside. The callback was suspended as of December. And previously, we're assuming that we will have that over the next couple of years. So that's also positive. January and February saw obviously very strong hydro inflows. And I showed you the numbers in terms of how the reservoirs are, they're sort of all-time highs. So full capacity there. So good visibility also in the next couple of months in terms of hydro. On slightly negative low wholesale prices in February and higher than normal ancillary services in terms of supply, also some transmission grid restrictions due to the storms, still be fixed. So that's on the negative side. But we are expecting these to decline over the next couple of months and also the wholesale prices in Iberia to normalize again, also over the next couple of months. On ForEx and FX, we have a slightly lower dollar versus the euro, as we commented yesterday on the EDPR level. But on the other hand, we're seeing a positive rebound of the Brazilian real. So we're now seeing BRL 6 per euro versus our business plan assumptions of BRL 6.6 per euro for 2026. So quite a few positives, a couple of negatives, but all in, quite frankly, we feel very confident with the 2026 guidance. Miguel Viana: Yes. We have then a second question about net debt. So what contributed to the positive deviation of our net debt figure in 2025, so the EUR 15.4 billion versus the EUR 16 billion guidance that we have provided. And also a question around update for net debt expected evolution over 2026. Rui Manuel Rodrigues Teixeira: Thank you, Miguel. So first of all, Q4 was very good in terms of operational call, strong contribution from the integrated segment in Iberia. So that's the first one. Obviously, there is some impact from working capital that we will see then reverting in the -- now in 2026. So what I would say is that, first of all, 2026 we are looking at around EUR 16 billion of net debt towards the year-end. Typically, as you know, we have, during the first half rise in net debt coming either from this working capital. Also, bear in mind that we have the Greek transaction, but also dividend payments in the second quarter. And then as we start having the -- also the cash in from asset rotation tax equity proceeds towards the end of the year, it tends to go down again. So that's why we are looking at around EUR 16 billion by the 2026. Miguel Viana: We have then a question around the news of yesterday regarding memorandum of understanding with Start Campus. What does it mean for EDP and this engagement? So questions from Alex from Bank of America, Fernando, CRBC. Miguel de Andrade: So it's an interesting step. I think it's one of many we've been taking. It's -- essentially the MOU just an interest of both parties to explore the synergies between their activities. I mean, obviously, we as experts on the energy side and them on the infrastructure side. I'd say there's actually 3 parts to the MOU. I think the first is for EDP to be considered the strategic energy partner to the Start Campus projects, whether it's through power supply as is or through additionality of projects, sort of the Start Campus infrastructure to be built out. The second is just synergy between the data campus center or project and the infrastructure that we already manage, for example, in the Sines power plant. So for example, like on the water side in terms of cooling. And the third is really potential collaboration for other data centers in Portugal that campus might want to develop, leveraging on EDP's assets and capabilities of land and generation assets that we own in Portugal and so explore potential collaborations. I think above all, it's opening up the possibility for creating additional value from our existing assets and operations as well as getting additional visibility on future demand volumes, which could support the development of a sizable pipeline of renewable energy projects as we've discussed in the past. So overall, it's just, I think, a step, one of many that we expect to take in this area. Miguel Viana: Then also a question from Pedro Alves, Caixa Bank regarding the effective tax rate evolution. So from the 28% in 2025 and also explaining where do we see -- so explaining the 28% and how we see the evolution for '26. Rui Manuel Rodrigues Teixeira: So 2025, 28% tax rate was primarily driven by the fact that we had lower asset rotation gains and some costs that are not deductible -- tax deductible and that was basically impacted the rate. But if you think about 2026, you could consider as sort of low 20s. And this is because we expect again to increase the capital, the asset rotation gains from the transactions and also the declining tax rate in Portugal, which as you know will be dropping by 1 percentage point every year until 2028. So '26 around the low 20s. Miguel Viana: We have then a question from Pedro from CaixaBank regarding, if we can explain a little bit better the inflation update in terms of real, in terms of the impact in our EBITDA in Brazilian networks in 2025? And how do we see it evolving for '26, '28? Miguel de Andrade: So in '25, we had the extension of the concession in Espirito Santo for another 30 years. And we expect to have that extension as well for Sao Paulo and that's been sort of approved by the regulator. We're just pending the final signature in the next couple of weeks. So there's a positive impact from the inflation update of this residual value, which existed in '25, which becomes immaterial from 2026 onwards. To be specific, in '25 in the Electricity Networks in Brazil, we had around EUR 70 million of EBITDA from inflation updates in both the distribution companies and the transmission companies. And we had around EUR 20 million from EBITDA from the 2 transmission lines that we then sold in the fourth quarter of 2025. So the impact of this inflation update in the networks has declined in 2025 already versus '24, but in '23 -- in '26, it will be immaterial. I think it's important to note the following. We are under discussion with ANEEL and which is the regulator in Brazil. We and the other distributors, but we are more advanced in this process because we're the first ones to have our concessions renewed, but to change the recognition of investments in the company's asset base. As I mentioned, I think, at the Capital Markets Day, and I'll just reiterate, they're currently only recognized every 5 years with tariff provisions. So there's still no conclusion, but we see a positive sign that at least the regulator is willing to consider this and that would allow us to have this intra-cycle recognition of investments rather than having to wait for the end of the regulatory period. So that's work in progress. We're certainly very committed to it, and we think others will be as well as soon as they start seeing our concessions being renewed as well. Miguel Viana: We have a question from Jorge Alonso from Bernstein. Also, regarding the current power price environment, how confident are we to maintain our 2028 guidance. And regarding the assumptions that we provided at CMD and the current forwards as we see the guidance for '28? Rui Manuel Rodrigues Teixeira: So as I also briefly explained with that slide on sensitivity, I mean, effectively, we do have, as you know, short positions in both -- structurally short positions in generation in both Iberia and Brazil. This we hedge primarily through our clients' business, but we also have a very active energy management. And then on the rest of the other markets, as you know, we have from an EDPR standpoint, 85% is actually long-term contracted. On this, basically, what we have done since the CMD is obviously to increase the hedging. So we have been working actively on the hedging on the energy management. So for 2026, 85% of the volumes are hedged at a price which is north of EUR 64 per megawatt hour. For '27, '28, we have about 50% of baseload volumes hedged above the current forward prices. So obviously, this gives us stability and predictability versus the changes in the forward curves. But also on the other markets, U.S., the exposure is mostly concentrated in PJM and MISO. We have -- we are seeing forward prices going up by around $5 per megawatt hour. Also in Brazil, where we have lower exposure, but still relevant, the PLD has been rising significantly since the CMD. So that's why, all in all, again, this portfolio diversification, the very active energy management is giving us confidence towards the 2028 guidance. So more importantly, as I said, we actually reduced the portfolio exposure to these price movements. So at the CMD in November, we were estimating around EUR 60 million. And now we are looking at a substantially lower number. Miguel Viana: We have now question Manuel Palomo, BNP. What is your take about increasing concerns about affordability and the approval of the energy decree to reduce price by the Italian government and if we could expect any contagion effect? Miguel de Andrade: Well, I think this is an important point just to take a step back. I think we are all focused on competitiveness of the economy. And what's good for the overall economy is good for the companies. As I mentioned, most of our exposure is in Iberia, and we specifically put up a slide, which shows that in Iberia, Portugal and Spain, we already have some of the lowest prices in Europe. And they are expected to even trend lower as some of the existing costs in the system come to an end, like the tariff deficit payments, which are being amortized and like the feed-in tariffs, for example. So the trend is -- it's already much lower than the rest of Europe and trending lower. So the affordability and competitiveness, I think, in Iberia is actually a positive. And it means they can take additional investment, they can take sort of some of the ancillary services without impacting the affordability. On the Italian case, I think it still has to go through the, let's say, finally prolongated, and I'm sure you have a lot of discussion at the European level. Conceptually, sort of understands, but disagree with what it's doing. There's been a lot of discussion already 2 years ago about market design, about how to make things -- make the wholesale market work differently. And ultimately, it always comes back to the marginal pricing system is the system that works best. CO2 has to be internalized and that continues to be a key priority for Europe. And so this is something to watch, but we don't expect it to have any material impact in Iberia. Miguel Viana: So we move now to the questions on the phone, and we start for the first question that comes from the line of Fernando from Royal Bank of Canada. Fernando, please go ahead. Fernando Garcia: I'm curious because I am seeing a significant increase in CCGT's output in Portugal and this despite the strong hydro and wind output so far in the year, particularly in February. So my question here is this is explained by the elimination of the Portuguese clawback? And if this could be a potential upside to your estimated positive impact, I think you mentioned EUR 25 million for 2026. Miguel de Andrade: Excellent. So you're right, CCGT output has increased. It's more related to -- so the ancillary services means the system operators wanted to keep these working sort of as backup as the system. So it's already this trend, as you know, following the blackout of last year. It then started to decrease. Now it's increased significantly because of some specific issues here in Portugal relating to all the storms that happened and sort of the disruption to the network. I wouldn't say it's an upside, probably it's a downside in the sense that higher ancillary costs would have a knock-on impact if they're not passed on to the suppliers. So it's something to watch. We expect this to normalize over the next couple of weeks, but it's basically the CCGTs working over time basically over the month of February. Miguel Viana: And we have a final question from the line of Alberto Gandolfi from Goldman Sachs. Alberto, please go ahead. Alberto Gandolfi: So my first question is, I wanted to ask you about Brazil. Is it a region where you think you might be growing exposure? There are potentially assets for sale. You're happy with the status quo? Or is it something that given the better returns in Portugal and the clarity in Spanish networks, you might think about deemphasizing a little bit. The second question is a clarification on Slide 21. Am I right in saying that the EUR 45 million impact on net income is therefore adjusted for 50% hedging. So in other words, without hedging, do we just double the EUR 45 million? Or is it -- so can you maybe help us on that a little bit? And last one, on this data center opportunity, it seems you're very active in this booming Portuguese market. Can I ask you if you are planning to build potentially incremental capacity if you were to sign a PPA there? Or would it be from existing? And would it be done at EDP or EDPR level if it were to happen? Miguel de Andrade: So good questions. I think in relation to Brazil, listen, we have a long track record in Brazil over 30 years. I think we have a great business there. We continue to look at opportunities for growth there to the extent that it makes sense within the overall Brazilian exposure that cap that we've always talked about. Obviously, we continue to see how best to allocate capital. And so we've sold assets in Brazil in the past. I mean, even recently, we did the asset rotation of the transmission lines. We sold the hydro. So we will continue to adjust and fine-tune our exposure to Brazil and obviously, reallocate capital to where we think is best at any particular time, whether it's Europe or the U.S. at the moment. But I'd say that we like having this diversification of geographies because it does allow us to allocate capital quite well, depending on the different cycles in the different geographies. On the third question, and then I'll let take the second question. On the third question, so essentially, what we're seeing is that there's a certain amount of power that can probably be supplied just as is because there's sufficient reserve margin in the system to be able to supply these data centers without necessarily having to go and build new power plants. And so that's a positive, I think, for the system. We just need to make sure the networks are there, but that's essentially the key issue because as long as there's reserve margin, you can feed it. If the demand then starts getting above a certain level and if you start having to Start Campus and Merlin and others, then yes, then we need to think about incremental capacity of different technologies. And then depending on what that incremental technology is, if it's renewables, it will definitely be done through EDP Renewables, which as you know has the exclusivity for renewable development, well, certainly in Nigeria, but elsewhere in the world as well. If it's, for example, if it was to be like a thermal technology, then obviously it would be, for example, with EDP or if it was hydro, for example, would be through EDP. But -- so there's a certain amount that can be done with existing capacity -- supplied with existing capacity and then above that level, then you start getting into having to build incremental capacity, and we're obviously looking at that and thinking about when that would come down the pipeline. But it will depend on also how the demand is evolving. Rui Manuel Rodrigues Teixeira: Alberto, so on the second one, I mean, this is also the result of different diversification effects. So looking at the portfolio as a whole, through the different trends, again, the active management that we run on every single market. This is how we are bringing down the sensitivity from the EUR 60 million to the EUR 45 million. And again, just bearing in mind, this is -- if all the markets would move in the same direction to preserve the plan. So no, you cannot sort of double the sensitivity if the hedging was coming down to 0. It's a bit more complex than that. Miguel Viana: So I'll pass now back to our CFO for final remarks. Miguel de Andrade: So final remarks. I just reiterate, again, 2025 was a great year for EDP. I think we delivered and delivered solidly on all of the different metrics, whether it was on EBITDA, net income, net debt, the credit ratios, improving the dividend. So a really solid, solid year for '25. And I think we come into 2026 also on a good footing with record high hydro levels and reserves with improved regulation, improved perspectives in both Spain and the other geographies we're in like the U.S. So really, I think we are very confident also on the guidance for 2026. And I think that's one of the messages that I really wanted to reiterate. And going forward, we continue to see great projects coming down the pipeline, certainly on the EDPR side, which makes us feel confident in relation to 2028. I mean, obviously, we'll go on monitoring this issues around the power prices. But as Rui has mentioned, we are relatively protected in relation to that. And we think that is a discussion that will play out over the next couple of months in Europe. But at the end of the day, we're all aligned that competitiveness is important, but it's also important to keep the stability of the rules and make sure that there's space to invest or for investors to the capital allocation and feel safe about their investments, whether it's on the network side or on the generation side. So listen, good '25, good prospects for 2026 and reiterating the guidance with confidence and looking forward also to the next couple of years, reiterating also our 2028 guidance. With that, thank you very much. Look forward to seeing you soon and keep in touch.
Operator: Good morning, and welcome to Eos Energy Enterprises' Full Year 2025 Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. [Operator Instructions] With that, I would like to turn the call over to Liz Higley, Head of Investor Relations. Thank you. You may begin. Elizabeth Higley: Good morning, everyone, and welcome to Eos' Fourth Quarter and Full Year 2025 Conference Call. Today, I'm joined by Eos' CEO, Joe Mastrangelo; COO, John Mehas; CTO, Francis Richey; and CCO and Interim CFO, Nathan Kroeker. This call may include forward-looking statements, including, but not limited to, current expectations with respect to future results and our outlook for our company. Should any of these risks materialize or should our assumptions prove to be incorrect, our actual results may differ materially from our expectations or those implied by these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to are described in our SEC filings. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update these statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law. Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to U.S. GAAP financial information is provided in the press release. Non-GAAP information should be considered as supplemental and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same or as comparable to similar non-GAAP measures presented by other companies. This conference call will be available for replay via webcast through Eos' Investor Relations website at investors.eose.com. Joe, John, Francis and Nathan will walk you through our business outlook and financial results before we proceed to Q&A. With that, I'll now turn the call over to Eos' CEO, Joe Mastrangelo. Joseph Mastrangelo: Thanks, Liz. Good morning, everyone, and thanks for joining us. This quarter, we continue to operate in an energy environment defined by one clear trend, the acceleration of demand for power, combined with constrained grid flexibility and reliability. That creates opportunity for a company like Eos. What we've been talking about over the 5 years that we've been a public company is being able to bring a product that was flexible, reliable and can do multiple discharges in a day or long or short discharges with quick response times. That's exactly what the market is looking for. And although data centers are in the headlines and data centers are changing the way that we think about our grid, and data centers are requiring us to make decisions on faster time horizons than we've ever done before in the energy sector, there are other demand drivers in the industry, things like electrification and transport and also electrification of heating and then the increased domestic production in the United States are creating higher load growth for a grid. That fits in perfectly with our technology. We're moving to in energy storage is moving away from managing volatility to providing reliability. What you need is this buffer resource that allows you to keep the grid balanced but also allows you to adapt to quick changes in load growth. But a vision of a product and a vision of a company only goes so far, execution is what counts. And when you look at our quarter and our year, yes, we set records. Our volume was up. Our margins improved sequentially quarter-over-quarter and year-over-year. We had a great quarter as far as orders being booked, and Nathan will talk about how those orders fit into different use cases that are going to provide growth for the company in the future. But the bottom line is we missed our guidance, and that falls on me as the CEO of the company. What John, Francis and Nathan and I will talk about today is building out the capabilities of our team, of our product and of how we bring that product to market and manufacture and install it to be able to provide reliable performance. And it's reliable performance not just to achieve guidance, which is important, but to achieve the operating requirements of our customer as the grid evolves and demand emerges. We think we have the product that meets those future needs. We've got to continue to build the company and continue to smooth out and deliver predictable performance for our shareholders and our customers. I think we have the team that is able to do that, and we'll show the initial results that are beginning to lay out how we can deliver reliably in the future. When you think about on the bottom, yes, 7% -- 7x year-over-year growth on revenue, combined with our highest cash position that we've had in the company's history, along with closing the gap and moving towards profitability, we've removed the going concern language inside of our 10-K filing, which Nathan will talk about in a moment, which really allows us to really says we're operating the company strategically, which is important for the future. At the same time, we launched Indensity, which Francis will give some more details on. But Indensity is really taking the product that we have and finding a way to package it that's easy to operate, easy to service, easy to manufacture and easy for customers to utilize multiple times in the day. It's not starting over, it's improving upon what we already have. At the same time, we're responsible to get our assets in the field up and running reliably, and Nathan and the projects team are doing just that. As we look at the overall results, I'm proud of what we did and disappointed that we didn't meet the guidance, but we are going to work to make sure that, that doesn't happen again in the future. Moving to the next page. Let's talk about how our installed base is expanding. Today, we cover 20% of the United States. We have 20 projects installed. The company continues to expand its footprint and continues to operate out in the field. Today, our Z3 product has discharged nearly 300 megawatt hours of power. Every cycle is a learning opportunity and every cycle is an opportunity for us to get better and to understand our customer requirements, and that's how we use it. At the same time, we do talk about concentration of revenue with a few large customers. But if you look at the lower right-hand side of this page, we had deliveries to 11 different customers, and we had revenue that came in from 18 different customers. The difference in that 7 is either commissioning and installation revenue or revenue from services on installed equipment that we did earlier. When you look at this map, as we come in, in future quarters, we're going to add more states. We're going to target to get to 25% here over the next few months. And then at the same time, we're going to add in a map of Europe as we ship into Germany and wait for the cap and floor program to close in the U.K. We're excited about what the team is doing here. We want to give a picture of how we operate. We've talked about the operating hours out in the field in the past, and that's really where we learned, and that's where Indensity came from. These customers on this map giving us feedback to enable us to deliver a product that's going to meet the future needs of the industry while working with Nathan and John and the teams to make what we have out in the field more rugged to be able to operate flawlessly and to give customers the performance that they require. Let's move to the next page and talk about some operational metrics. I want to start off in the upper left-hand side where we're looking at our quarterly revenue profile. If you go back to Q4 2024 and forward to Q2 of last year, you're looking at quarters that are basically growing 30%. That's basically taking our line, installing it, improving upon it and getting 30% throughput on the same asset base. Then you come into Q3 of 2025, where we started to bring bipolar manufacturing in, and you see a 2x step function from Q2 of '25 into Q2 -- Q3 of '25. Then we double it again, which is, again, bringing more of the bipolar manufacturing online. And by year-end, John will talk through that we achieved our 2-megawatt hour capacity coming out of the facility in Turtle Creek. On an annualized basis, we're up 7x, and our capacity will support the demand that we see. What's important here as we think about capacity management and as John walks through this and I think about this, and you take what John is going to talk about and combine that with what Nathan is going to talk about commercially is you're not running the factory at full capacity at any one point in time. You're creating capacity to be able to create the opportunity for the company to grow and deliver and building in a buffer to be able to manage and weather through the blips that you're going to see in any factory. So anybody that's worked in an industrial process knows that nothing goes perfect and you got to plan for that. And that's what we're building here to get to the stable production that I talked about earlier. We go to the bottom of the page, you're seeing a narrowing of the gap and improvement in margin. We're not at profitability yet, but we're on track. The company is structurally profitable. What we need to do now and what John will talk about is improve the efficiencies and the processes of how we operate the company. Thornhill and bringing our second line up and running is going to show us the full entitlement of how efficient we can be as a company. At the same time, you bring a lean mindset to what you do every day. That lean mindset tells you, I've got to get better in everything I do. There's waste in these numbers today. We know that. We know we have to get better. And when you take all that in and start thinking about driving cost out of our product, taking and becoming more efficient in how we build it, getting out in the field because productivity and profitability go beyond the factory doors, becoming more efficient in how we operate in the field, and proving out and getting installations up and running faster than what we planned, that's how we deliver on profitability. And we have a clear line of sight on how to do that. This is a profitable business when we execute to our capabilities, and that's what we're building right now. And density is a step function change in that, but Z3 Cube is a profitable product, and we will make that profitable. What Indensity does is it allows us to compete in a new way in the marketplace. It delivers better footprint density to customers. It allows us to build out capability faster. It makes it simpler to manufacture the product and Indensity gives us the ability to compete not only on price, but the ability to drive further cost out to deliver the profitability that we expect. I'm excited about the work that John is doing and Francis is doing, and I'm really excited about what Nathan is seeing out in the marketplace. And I'll turn it over to John now to start that off and then hand it off to Francis and Nathan. John Mehas: Thanks, Joe, and good morning, everyone. Great to be here with you all again this morning. Q4 was my first full quarter at Eos, and I'm going to speak candidly about where we are operationally. First, there's a real progress to acknowledge. We completed our subassembly automation, making our battery line fully automated. We closed 2025 with production records across all operations and delivered our fourth consecutive quarter of record revenue. 26 key suppliers supported this ramp to enable us to achieve our 2 gigawatt hour line capacity. That doesn't happen without a committed team doing a lot of things right. At the same time, we fell short of our operational targets, and that's on me. When we spoke last quarter, I felt confident in our ramp plan. We had strong early results and the excess capacity to deliver what we needed to hit our guidance. Ultimately, 3 very fixable issues prevented us from delivering our commitments. First, we had one isolated supplier nonperformance that cost us a week of production. We addressed it directly, working closely with our supplier to quickly identify root causes and corrective actions. We implemented better controls internally and at our suppliers. That specific issue is behind us. Second, the ability for the automated bipolar production to hit quality targets took longer than expected. That drove rework and lost revenue. We improved tooling, reduced variation in the automation process and tightened material specifications to stabilize bipolar production. We have also added laser detection to give us better visibility and control of any process variation. Third, our battery line downtime ran well above industry norms, the design intent of the line and our internal forecast. Best-in-class operations and our expectation is to run at roughly 10% equipment downtime. That's my expectation, and that's the expectation of our automation partners. As we push utilization higher throughout the year and ran the line for more hours, we were closer to the mid-30% range. Working closely with our automation partners, we addressed issues with our robotics, hardware, controls, maintenance schedules and spare parts. We have also improved our technical capability and strengthened our team to improve time to resolution. Downtime has improved significantly in Q1. This is a controllable lever, and we have a path to world-class performance. None of these were demand issues, none were structural. This was a significant ramp of first-generation automation designs. While the magnitude of the issues was unanticipated by me, the resulting learnings, actions and execution are my responsibility. Look, since I've been brought in, a major focus for me has been identifying single points of failure in the system. This was first-generation automation that was being run at high volumes for the first time. In some cases, you don't fully see those weaknesses until you stress the operation. We've now done that. It has allowed us to identify and address gaps in our automation, organization and operating system. We are systematically hardening the process to make sure these failures do not occur in the future. The results of our efforts have driven higher quality, repeatable and predictable operations in early Q1. The biggest structural risk today is a lack of redundancy. If our primary line goes down, production stops. That changes with Line 2. And as I said on the last call, we're making design changes in that line to further improve our performance. Line 2 is progressing well and is preparing for factory acceptance testing in Wisconsin. We've intentionally built redundancy into critical stations. Once operational, eliminates our single largest point of failure and gives us flexibility that we simply don't have today. We're also addressing efficiency. As I've mentioned before, today, materials travel across 3 floors and 2 buildings, over 2 miles from start to finish. That's not a cost-efficient design. With Line 2 and the Thornhill expansion, we're redesigning the layout around single-piece flow, significantly reducing material handling and complexity. As we work to achieve the entitlement for the line output, we have uncovered inefficiencies that result in longer end-to-end production times and higher labor costs to achieve that goal. We are fixing those challenges, and that will allow us to operate at a higher efficiency with a lower cost structure. We expect equipment to begin arriving in Q2 with fully automated production targeted in Q4. Let me close with this. 2025 was a year of heavy automation implementation, capacity expansion and rapid change. Day 1 is never perfect. My job is to turn new capability into repeatable, disciplined operations. We've identified the gaps. We've addressed the root causes, and we're building the redundancy and process rigor required to scale reliably from here. I'm confident in the path forward and confident in the team's ability to execute it. Let me turn this over to someone who's helped me get up to speed quickly, our CTO, Francis Richey. Francis Richey: Thanks, John. It's great to be joining the call today. I'm the Chief Technology Officer, and I've been with Eos for 11 years. I started at Eos when we were a 15-person company, and it's been a rewarding journey with an incredible team of scientists and engineers, developing the chemistry, battery, system and software over multiple product iterations. I'm a chemical engineer by training, and my passion is scaling and optimizing technology to build profitable products, particularly products utilizing electrochemistry. Throughout my time at Eos, the market environment has evolved significantly, and Eos has evolved along with the market. We started with an aqueous zinc-based battery. As our technology continued to advance, we found more efficient ways to configure our systems and implement better power electronics to control performance, most recently with the Eos Z3 Cube. Early customers simply wanted to buy a DC system of batteries, which they would integrate into larger AC systems. Now many want a full system where Eos provides batteries, software, controls, AC integration and site design, a complete project that can be easily installed and operated. Many of these storage solutions also require installation in an urban or suburban environment. For more than 2 years, we've operated Z3 systems in the field and tested them even longer in our Edison test facility, learning how these systems operate in extreme environments. We've operated in very cold climates and also in hot desert environments with high winds that create sand and dust that can impact system operation. Look, the field is the ultimate proving ground, and this has helped us to improve system resilience and reliability as well as our software and controls, which led to the launch of DawnOS. DawnOS enables customers to manage and optimize system performance with individual battery monitoring and control to provide improved operability. This is then where Indensity comes in. This is a product that we've codeveloped with our customers as we discuss their operating requirements and run load profiles in our Edison test facility. The same chemistry, same battery, same software and controls, different packaging and better performance. We're entering a new phase of growth and opportunity, one that differentiates Eos from any other commercially available battery energy storage solution. When we talk about Indensity as a differentiated product, we focus on 3 key elements: serviceability, cost and site energy density. The Indensity core significantly improves ease of serviceability. We took a page from the aviation industry and thought of an Indensity core like an aircraft engine that won't require on-wing service. Instead of disconnecting the entire system to service one piece of it, Indensity is designed for quick disconnect so that individual units can be safely serviced using a simple forklift, avoiding disruption of the entire system and allowing for uninterrupted operations. This is an industry-wide advantage of our solution as we can now service each 133-kilowat-thour Indensity core without needing a crane, whereas competitors usually require a crane and the loss of multiple megawatt hours of energy during service or site-wide power augmentation. The modular core design allows units to be stacked vertically as many as 12 units high, significantly improving site energy density and allowing us to serve customers in areas incumbent technology simply can't access, such as in densely populated space-constrained locations where safety is often a key element in decision-making. This new solution allows us to easily configure systems to customer energy and space requirements. This is an exciting time, and I've had the opportunity to lead Eos' evolution from cell testing to battery manufacturing to now providing battery energy storage systems integrated with advanced controls and software. I couldn't be more excited about the future and how our product meets the needs of our customers. Thanks, everyone. With that, I'll turn it over to Nathan. Nathan Kroeker: Thanks, Francis, and good morning, everybody. Let me start on the commercial front, where we had a very active fourth quarter. And I want to start by looking at the results. We ended the quarter with just over $701 million in backlog, booking nearly 1.1 gigawatt hours across 8 customers and 9 individual projects, representing a 9% sequential increase. During the quarter, we secured more than $240 million in new orders with a healthy diversification across commercial and industrial, distributed generation and front-of-the-meter utility scale applications. Now let me give you some background on 3 of these orders that highlight the operating flexibility of our technology and how we can work across the energy value chain in different customer use cases. First of all, we signed a 50-megawatt hour master supply agreement with a developer in the Midwest to deliver projects that are supported by Commonwealth Edison's Distributed Generation rebate program. This program provides a $250 per kilowatt hour incentive for new energy storage systems, and we have already executed the first purchase order under this agreement with delivery being scheduled for later this year. Now moving on to the second one I want to highlight and just as important, we signed 2 initial projects for systems to be installed at hotels in Florida with a developer that has a robust pipeline of additional projects, and we expect additional projects to materialize over the next 12 to 18 months. And the last one I want to highlight, we secured an order from a global power company that is a focused renewable and energy storage platform to deliver a Z3 system to be installed at a national lab for integration testing. And we are actively working on large-scale opportunities with this customer, so this is a very meaningful project to show the Z3 performance capabilities. All 3 of these projects highlight how we are building long-term partnerships that will scale into larger, more meaningful growth opportunities in the future. Now turning our attention to the broader pipeline. We ended the quarter with a commercial pipeline of $23.6 billion, representing approximately 99 gigawatt hours of opportunity, up 4% sequentially and 64% year-over-year. Hyperscaler and AI-related projects remain a primary growth driver as we see customers looking for firm dispatchable capacity and behind-the-meter load smoothing solutions. Leads specific to data centers increased by 50% quarter-over-quarter, while our active data center pipeline grew by more than 40%. Many of these opportunities are specifically designed for the Indensity solution. As disclosed in our public filings, Eos has been submitted for a 300-megawatt 8-hour project in the Brooklyn Navy Yard under NYSERDA's Bulk Storage procurement program. We also have another project that was submitted under the same Bulk Storage program in ConEd Zone K with the customer that I highlighted earlier that is testing our product at the National Lab. From an application perspective, we are also seeing more opportunities shift toward colocation with generation assets, including both natural gas and renewables. These applications typically require longer discharge durations. And as a result of this shift, we are now seeing 63% of our pipeline consisting of 8-hour or longer systems. I want to highlight PJM for a moment, where we've seen recent capacity market reforms with sustained elevated clearing prices that are improving the economics for long-duration storage. This aligns very well with our framework agreement that we have in place with Talen. In addition, Bimergen, a long-term partner that is publicly traded on the New York Stock Exchange, announced their technical selection of the Z3 system for the 400-megawatt hour Redbird project in ERCOT. Following this project, there is an additional 2 gigawatts of project development pipeline that spans ERCOT, PJM and MISO that we are currently working on. Overall, we are seeing very strong near-term backlog growth, combined with sustained long-term pipeline expansion, both of which are positioning the company very well as demand for integrated long-duration storage solutions continues to accelerate. Now shifting over to the financials. We have a lot to be proud of. And as Joe and John mentioned earlier, we are focused on the work ahead of us that will deliver profitable growth. Now let's step back and look at 2025. It was a year full of real operational progress. We exited the year having full automated battery module manufacturing. We've implemented continuous process improvements. We launched DawnOS, and we executed multiple product component cutovers, all while scaling production significantly. These foundational moves are now clearly translating into financial performance. We delivered our fourth consecutive quarter of record revenue and an additional consecutive quarter of gross margin improvement as production volumes ramped and subassembly automation went into production. In the fourth quarter, we generated $58 million in revenue, nearly double Q3. We exceeded the combined revenue of the first 3 quarters of 2025 as well as all prior year revenue combined since the company went public. We delivered $114.2 million in full year revenue, more than 7x year-over-year growth. As John highlighted earlier, subassembly automation represents a meaningful inflection point in our manufacturing strategy. It expands available capacity, it improves product consistency and quality, and it enhances labor productivity, ultimately lowering overall unit costs. While this is only beginning to contribute late in Q3, what we saw in Q4 reinforces our confidence in how this business scales. As volumes increase, we are seeing improved fixed cost absorption, driving continued margin improvement. Gross loss for the year was $143.8 million, a 408 percentage point margin improvement year-over-year, driven by significantly higher production volumes and continued product cost out. This quarter, we introduced a new non-GAAP metric, adjusted gross profit. This excludes stock-based compensation and depreciation and amortization, and we believe this provides a clearer view of core operating performance and better aligns us with industry peers. And on that basis, adjusted gross loss for the year was $128.5 million. 2025 operating expenses came in at $115.4 million, up 26% year-over-year, reflecting the targeted investments to support scaling initiatives and further enhanced product solutions. Throughout the year we've invested in engineering, launched DawnOS and Indensity, we closed multiple financing transactions, all while bringing in high-impact new talent into the organization. Of the $115 million in OpEx, $25 million or 22% was comprised of noncash items, primarily driven by stock-based compensation and depreciation and amortization. The net loss for the year was $969.6 million compared to $685.9 million in the prior year. Importantly, these results included $746.8 million of noncash impacts related to the fair value accounting adjustments, refinancing and other nonoperating items. The largest driver of the loss was from the 135% year-over-year increase in our stock price, which resulted in mark-to-market revaluations of both the warrants and the derivatives. Now as our share price continues to move, this line item will continue to fluctuate, and it is not tied to company operations. And with that, we finished 2025 with an adjusted EBITDA loss of $219.1 million, showing an 812-point margin improvement. While up year-over-year in absolute dollars, the margin improvement and the 632% revenue growth demonstrate improving unit economics and operating leverage as we continue to scale the business. These gains were driven primarily by the operational efficiencies from increased manufacturing capacity and from higher production volumes. Now turning to cash. We ended the year with just under $625 million worth of cash on the balance sheet, the strongest cash position in the company's history. Over the course of the year, we were very intentional about strengthening our balance sheet, and that really culminated with the refinancing that we completed in November, where we retired 80% of our existing 2030 converts, we reduced our interest rate by 500 basis points, and we added $474 million in cash. And we were able to free up an additional $11.5 million in restricted cash. Additionally, with the exercise of our public warrants, we also generated approximately $80 million in gross proceeds. And as a result of all these actions and our current company outlook, we have removed the going concern language that we have had in our filings in prior years. This is a significant milestone that reflects the strength of our cash position and the continued improvements in our underlying operations. Now taken together, 2025 was a foundational year for the business. We expanded customer relationships. We advanced key partnerships. We've scaled our production. We've implemented automation. We've improved our margins, and we've launched both a new software and a product configuration that builds on our existing technology while addressing the evolving market needs. While there's still a lot of work ahead of us, the foundation that we have built positions us well for continued growth, improved profitability and long-term value creation. And with that, I'm going to turn the call over to Joe. Joseph Mastrangelo: Thanks, Nathan. Let me wrap up with our outlook on 2026 as we initiate guidance on revenue. You can see the progression of our guidance from 7x. If you take the midpoint of the guidance range in 2026, it's 3x what we did in 2025. We feel confident about the guidance that we're giving, given what John and Francis have talked about. And when you think about this guidance, think of it this way, the $300 million is coming from backlog. And the range to the $400 million is tied to some of the bigger projects that we talked about as they go through the normal approval processes with the grid operators where our customers will be installing projects. We're excited about the things that you see, the NYSERDA projects that Nathan talked about, working with Talen in PJM, things that we're seeing as far as states like Virginia, ERCOT growth, data center growth. We feel confident that we'll begin shipping Indensity as we get into the second half, later part of this year. And that's how we go from the $300 million to $400 million. As we go through the year, we'll give updates on where we are against that progress. And when you also think about this, one other thing that we've never given official guidance on what we've talked about a few times in earnings, we talked about becoming gross margin positive in Q1. Unfortunately, with where we wound up in volume last year, our material costs pushed out into 1Q. That's going to delay our path to profitability as we get into 2026. But we feel very confident on the projects that Francis is bringing from a technology standpoint that John is driving from a productivity and cost out -- material cost-out standpoint and Nathan delivering better efficiency out in the field that we will be gross margin positive in the second half of 2026. And we feel very confident on the guide that we're giving on the range of $300 million to $400 million. So with that, I want to thank everybody for listening today. Joseph Mastrangelo: And now we'll go to the Q&A portion, where we'll start off with some of our questions that came in over the [ SAE ] tool from our retail shareholder base. Okay. First one, "As part of Project AMAZE's 8 gigawatt hour annual production targets, where does EOS expect to be at the end of 2026 for annualized manufacturing nameplate capacity?" Right now, we're targeting 4 gigawatt hours. That's in line with the customer requirements that we have. We really want to bring -- position Thornhill for rapid expansion. As we think about how we want to do this, the goal here is to be able to bring capacity online within the window of customer demand. And that's what John is trying to do, but it's not just the capacity of the equipment that we're installing, it's other portions of the overall supply chain. I'll turn it over to John here to add some comments. But the target for the year is 4 gigawatt hours of nameplate capacity coming out of 2026. That matches with where we see our backlog. And then from there, we'll be able to add capacity as required. I don't know, John, if you have anything you want to add. John Mehas: Yes. Over the last few months, we've developed multiple automation partners for automation equipment to shrink lead times. We've developed a national building partner that can deliver a building in a short period of time that's in line with our automation commitments from an implementation standpoint. And then we've worked with our suppliers to understand where their inflection points are, where they have to add additional capacity and what their time lines are so that I can stay out ahead of Nathan on from an order standpoint. Joseph Mastrangelo: And I would just add at the end here before we go to the next question. Look, we're not out chasing volume. We're building capability. We're building capability to reliably deliver. When you flip the switch in your home, you want the lights to come on and we want to deliver a product that enables us to do that. So we're going to be very disciplined on how we do that for delivering for customers and also disciplined about how we think about our working capital and cash balances as we also expand. If I move to the second question, "What recent operational metrics and achievements validate achieving your Q1 2026 positive gross margin target? How much of the margin expansion is dependent on the Indensity transition versus efficiency gains on the existing Z3 module automation line?" I think we talked -- I talked about the first part of that question on the last page when we issued guidance. Look, we feel like underlying this is a structurally profitable business that needs to get better at how it executes day by day, and we have a very clear path on how we want to do that. And we've got the leaders and the capability from a team standpoint and the equipment to be able to do that. I think the pages that John talked about and the operational page I had in there shows that structural profitability, we need to just execute to get there. The Z3 Cube is a profitable product. The Indensity core is adding to provide better performance to customers, allowing us to manufacture faster and allowing us to compete on price point head-to-head with any technology out in the market. I don't know, John, if you want to add anything to that as far as how you see profitability evolving? John Mehas: Yes. If I look at it from a lean methodology, all aspects of our operations have waste and opportunity for improvement. So I look at -- I talked earlier about downtime. So reducing downtime and increasing fixed asset utilization and labor utilization. Talked about yields, so improving the yields and reducing scrap. If I look at materials, we've got several projects that are going to reduce material costs, but not only reduce material costs, but also reduce assembly time and manufacturing time. We continue to look at ways to increase run rates, look at ways to increase efficiency. And then as we get into Thornhill, we'll have an optimized cost perspective from a material handling standpoint. We're literally going from 2 miles down to 1,000 feet. So if you consider all the material handling that goes into there, there's a significant opportunity to reduce cost in just that one item. Joseph Mastrangelo: And I think just closing out, like John brings up a great point on Thornhill. Over time, we're going to want to consolidate the footprint into one location to capture all those synergies, and we'll be -- that will be part of the plan as we move forward and think about expanding. With that, we'll wrap up with the SAE questions. And operator, we'll turn it over to our sell side for any Q&A. Operator: [Operator Instructions] Our first question comes from the line of Stephen Gengaro of Stifel. Stephen Gengaro: My first question is on the guidance and maybe 2 parts. One is you, a couple of months ago you had a pretty high expectation for the fourth quarter. And clearly you fell short. And now we're looking at a pretty big ramp in '26. How do you think about the components of guidance and sort of derisking the parameters you put out versus guidance historically? Joseph Mastrangelo: Yes, Stephen, thanks for the question. First, you look at the range, as I talked about when we talked about the guidance in and of itself, we're looking at the improvements that John has implemented coming out of fourth quarter, looking at the backlog of orders that we have to get to the bottom end of the range, then looking at the opportunities that we're working on, the fact that we're bringing a new line in to give us the top end of the range. But we tried to really look at -- we tried to really look at how we can change our discipline as a company to not have happened what happened in 2025. The range is $100 million, the midpoint is $350 million. What hasn't changed about the company is the demand that's out there for the product. We're trying to do in 2026 is better control our scale, get the manufacturing throughput quality and margin expansion that we need and really look at like where we think we can land without going for like a degree of difficulty that's a 10, but coming in with something that we can manage to over time. Stephen Gengaro: Okay. Great. That's helpful. And then just -- I imagine this is correct, but when we think about the quarterly growth, I mean, I would imagine that 1Q would be above 4Q, but the low point and then escalate throughout the year. Is that a reasonable pattern? Joseph Mastrangelo: Yes. Well, look, Stephen, so part of what we have coming in -- and we don't give quarterly guidance, but from a standpoint of coming into the year, we're coming off a high point. We're delivering to customer schedules. I think we'll be around the fourth quarter number as we look at like what we have to deliver to customers, and there's some -- there's also commissioning revenue in there as well and then from there sequentially grow. Operator: Our next question comes from the line of Julien Dumoulin-Smith of Jefferies. Julien Dumoulin-Smith: Quick question. Just going back to the comment about the $300 million to $400 million range. Can you guys comment a little bit about like what exactly those bigger projects that you're talking about are? Like which ones in particular seem particularly right, right, again, just to maybe track against the milestones this year and what would materialize? And also, if you can speak a little bit against, you've got a materially larger backlog in aggregate. What's the duration of that backlog when you think about it, just given that, call it, $300 million of it is burning off this year, if you will? Joseph Mastrangelo: Yes, Julien, great question. Look, I think we go back on the material large stuff. Look, I think we all know the industry needs power, needs power quickly. But at the same time, we still operate in a framework where approvals and queues are long. So we're kind of hedging that. But like Nathan talked about 2 large projects in NYSERDA that when approved by NYSERDA as part of their Bulk Storage buy would go into delivery almost immediately. So like that's 2 of them in there. We've talked about PJM and what we're doing with Talen. There's other projects that we have that we haven't discussed with large hyperscalers that could potentially come in. And then Nathan talked about what appears to be -- when you look on the surface, they look like small projects, but they're small projects with a big pipeline of opportunity that you deliver and grow and continue to deliver. And we just got to work through that. We'll keep everybody updated on that as we move forward from there. Julien Dumoulin-Smith: Got it. And then just if I can follow up there. The defense space seems intriguing here. Can you comment about that end market and the opportunity you see there? What does the project look like in that space, size, duration? And just even elaborate a little bit more about what you guys were talking about a second ago in the timing of seeing some of that come to fruition. Again, how -- what does that look like? Joseph Mastrangelo: So defense, like I think you start off with NDAA, right, which is how the Defense Department of War purchases. In the NDAA, they're being told to buy American products. And I think we have that American product. As we go through that, there's a lot of things we have to go through as far as working with different branches of the government to get approval. I think a big thing that helps accelerate us is the due diligence process that we went through with the Department of Energy to get our loan. But like we're working through across all branches of the military to see what the needs are. And like what we're looking at is what do they need and they also have -- there's also large power growth that they have and how do we meet those needs and then we go through and show them how the product is. But also as you work with the military, there's things that we're doing to make sure that we hit all their requirements because we want to hit the ground running. But that's something that we'll continue to work on, and we are working on, and we do spend a significant amount of time down in Washington walking everyone through what the technology is capable of. Julien Dumoulin-Smith: Got it. Excellent. And then lastly, if I could just ask, just given where you are coming out for '26, how do you think about the ramp of Line 3 and 4, right? So how do you think about when and the timing and scaling of that, right? Obviously, you got Line 1 and now Line 2 here. But 3, 4, it's more of a '27 question, right? Joseph Mastrangelo: Yes. And I think, Julien, like this goes back to disciplined execution, right? It's a great question, right? So John is taking us into a new building. The new building changes the game from a throughput efficiency and cost. Turtle Creek is a fully functioning factory that's up at 2 gigawatt hours of production. It hit its nameplate capacity coming out of 2025. But if you have a lean mindset, you're constantly looking at how to get things better, how to improve on things. That goes with how you operate your manufacturing, but also how you implement capacity expansion. So what we've told John is come up with a plan that we can execute and implement lines within the window of when a customer orders to when they ship. So as things come in, we'll be able to do that. What John has done in his time -- not only did he increase output 80% in the fourth quarter, if you look at quarter-over-quarter sequential manufacturing output, he also went in and revamped our automation partnerships, got us in with Tier 1 automation providers, broke up how we were doing the different pieces of that and positioned those suppliers to be able to come up with a framework agreement approach with them where we can put a signal into them and they can deliver faster than what we're doing on Line 2 today. Line 2 today, part of what's happening there is it's a new building. And there's a lot of work that we got to go through, and we want to make sure that we get that right and we get that ramp right and the transition and balancing between the 2 facilities. Operator: Our next question comes from the line of Mark Strouse of JPMorgan. Mark W. Strouse: Just curious if you can comment on the competitive environment that you're seeing recently. Obviously, you guys are making good progress with your backlog, but there's one of your publicly listed peers that's traditionally in lithium-ion, they have really been talking up their long-duration pipeline in the last couple of quarters. There was a very large project, long-duration project up in Minnesota that just recently got announced. Just kind of broadly speaking, I know those are completely different technologies in both of those cases, but just kind of broadly speaking about the competitive environment would be great. Joseph Mastrangelo: Mark, I think, first off, it points to what we're showing in our backlog about longer duration discharges coming to fruition. I think it's great to have other companies that are doing it because it just goes to show that what we've been talking about for 5 years, the market is now there. I've said this many times, like there's many different use cases, and I always draw the correlation of energy storage is going to look like gas turbine technology over time. You have different types of gas turbines that do different things with different efficiency points. So I think what was announced in Minnesota, delivery in 2028 is a great example of people looking for longer duration energy storage, longer than what we do. At the same time, Nathan showed like our pipeline is up by -- above 40% for longer duration. And we -- and it has now become 40% of our pipeline, sorry, I misspoke, but like it's becoming more and more. And I think like established players, there's a market out there for that product. I think we've come up with the work that Francis has done and the team, we've come up with a solution that delivers in that 4- to 16-hour spot, which is going to be very important. And look, we've been running load profiles here in our test facility in Edison, New Jersey using the load profiles of data centers. And our technology matches up great with that. So we're encouraged by that, but there's a lot of demand out there, and I think it's great. There's other players. It's going to be a competitive marketplace, and I think we have a product that competes. Operator: Our next question comes from the line of Craig Shere of Tuohy Brothers Investment Research. Craig Shere: So first, can you opine on the potential margin deltas, gross margin deltas between U.S. and international orders? Does American Made help in any way internationally to the degree some trading partners want to right-size trade balances on a national level? And can you give some color on the time line for that foreign power company national lab testing and the level of prospective order flow should they deem you're having the most optimal solution? Joseph Mastrangelo: Yes, Craig, just a couple of things inside of that. Like I think where we're seeing interest in our product internationally has less to do with politics and more to do with performance. I think people are looking at what the product delivers and less about trade balances. I think having a product where we go through and talk about the intrinsic value of it is what's attracting our customers, whether that's domestic or international. I think we're starting to plant seeds starting off in Germany. And obviously, we have a big pipeline of opportunity in the U.K. that Nathan talked about. Just on your last point here, like the customer that Nathan talked about is a global utility that's doing testing in the United States at a lab that is tied to a project for the NYSERDA program. So like we're going through that -- and by the way, that testing is great. Like we love doing that because it gives us data to show people about how the product performs and put this through its paces. And that's where doing stuff like this, that's what brings out Indensity and improved performance on the product that we have out in the field. Craig Shere: And would one assume that international sales are going to be slightly lower gross margin? Joseph Mastrangelo: No, I wouldn't assume that. Craig Shere: Okay. And my last question, and I apologize if my quick math is incorrect, but it looks like you burned through maybe $65.75 million in operating cash flow before working capital changes in the quarter. Thoughts about tempering that bleed as you move into positive gross margin in the second half of '26. Joseph Mastrangelo: Yes. Look, look, our goal, as Nathan talked about, like we've capitalized the company. We are focused on being good stewards of that capital. I think as you look at that, one of the reasons why we removed the going concern for the company this quarter is that we see a trajectory to be able to manage the company strategically and for the long term. And then obviously, like there was a ramp into a build plan that then levelizes, but then we'll ramp again. So we manage through that. But like as we look at where the company is, we have cash to be able to grow it over the long term. Operator: Our next question comes from the line of Jeff Osborne of TD Cowen. Jeffrey Osborne: Just a couple of quick ones. I think last quarter you mentioned that the yield on the bipolar line that started, I believe, in July was 98%. I was wondering what the fabrication yields were in the fourth quarter. Joseph Mastrangelo: Go ahead. Yes, John, take that one. John Mehas: So the bipolar yields in the [Audio Gap] growing from there. So we're basically within January hitting the target. We've reduced that significantly, and we'll continue to do so. And we did not anticipate that with the automation. The goal for that automation is 97% first pass yield, and we're well on our way there. Jeffrey Osborne: Perfect. And then can you just touch on -- spend a few seconds on what sort of field performance has been, safety, reliability, commissioning schedules relative to expectations? Operator: We're not hearing a response. [Technical Difficulty] Joseph Mastrangelo: Yes, sorry about that. Don't know what happened. Operator: Okay. Jeff, did you want to repeat your question in case they did not hear that. Jeffrey Osborne: Yes, sure thing. I was asking about, can you just spend a few seconds on sort of field reliability for units that have been shipped over the past 6 to 9 months, what commissioning cadence has been, safety issues, installation timing, et cetera, just as we think about that trend over the past 6 months or so as it relates to the guidance that you've given. I just want to understand what that lag is in reliability and uptime has been. Joseph Mastrangelo: Yes. So Jeff, I don't know if you heard -- I don't know where we dropped off before. Look, we continue to go through and execute on the field, bringing a new product online, operating -- we were doing our operations meeting this morning and continue to see good cycles out in the field, as Francis talked about. We continue to learn on each cycle and incorporate those things back into the installed base from a commissioning cadence standpoint. It's a mix and cadence of things where there's permitting challenges, there's bringing the site up to speed, there's getting our stuff up and running, there's integrating everything, and we work through that with the customer on a customer-by-customer basis. But if you go back to that page I showed, we shipped to 10 customers, recognized revenue on 18 customers, and that ties back to the commissioning that we have. Jeffrey Osborne: Got it. And just very quickly, are you capturing higher price as the duration use case extends out to 6, 8 hours and beyond? Or is pricing consistent with a sub-4 hour relative to longer duration? Joseph Mastrangelo: Well, I mean, Jeff, I think it all depends on how you look at that. I think when you look at the value proposition of Eos and you look at our ASP in the backlog, the ASP in the backlog is higher than what you would expect for a shorter duration product. What we do is we sell on a levelized cost of storage basis, which is a little bit higher on the CapEx side, but a lot lower on the operating cost side, and that's what the customers evaluate to make their purchasing decision. Operator: I am showing no further questions at this time. I would now like to turn it back to CEO, Joe Mastrangelo, for closing remarks. Joseph Mastrangelo: Yes. Thanks, everyone. And again, thanks for the question and the continued engagement. A couple of points I want to close with. First, demand for long duration, domestically sourced energy storage is not a question. The grid is changing. The load growth is real, whether it's AI electrification, industrial reshoring, these are structural changes to the power grid in the United States, and they're not cyclical. The market is moving towards solutions that match what we bring to the market, and that's how we've positioned Eos for the long term. Second, 2025 was building a foundation, strengthening our balance sheet, scaling manufacturing, standardizing our product architecture, improving operational cadence. We delivered great revenue growth. It reflects the progress that we've made. It's not linear yet, but it's directional and it's improving. Third, 2026 is a year where we have to show disciplined execution. Our guidance reflects what we believe we control as we sit here today, and we'll keep everybody updated as we go through the year and where we wind up. I feel good about where the team is positioned. And as execution improves, predictability improves. So we know we've got -- that's what -- that's ultimately where we need to focus on, and that is where the team is focused on a day-to-day basis. And then profitability for the company, look, it's a scaling equation. Automation how we move material, efficiency, bring a lean mindset, finding waste, eliminating waste, resetting it, going back and doing it again and again and again, you see the sequential improvement in margin that we need to continue until we become margin profitable, and that's the goal of the company for -- to deliver long-term value to both shareholders and customers. Look, we strengthened our liquidity. It helps us operate the company more strategically. It gives us runway to be able to execute. Eos is an infrastructure business, right? Infrastructure businesses are built on discipline, consistency and operational trust, that's what we're building, and that's what we have to show and deliver. We appreciate the questions and the focus and really the attention to Eos across the board of all of our stakeholders. And we look forward to demonstrating this continued improvement in progress quarter-over-quarter as we build a great energy infrastructure company. Thanks for listening today. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Heli Jamsa: Good afternoon, and welcome to Qt Group's Q4 2025 Results Presentation. My name is Heli Jamsa, IR Lead. And with me today are our CEO, Juha Varelius; and Interim CFO, Ann Zetterberg, to present the results. After the presentations, we will have Q&A first in the room. And if there's time left, move on to the questions from the lines. Without further ado, please, Juha, the floor is yours. Juha Varelius: Thank you. Thank you. Good afternoon, everyone. And we have a same agenda, as always. I go a bit through what happened on Q4, and then Ann is going to go through the numbers in more detail. I'll talk a bit about the future outlook and then questions. So the Q4, we had a growth of 12.6% or 18.6% comparable currencies. And of course, IAR acquisition, which we completed -- contributed in this development. And IAR was EUR 8.1 million on Q4, and our organic growth was 6.1%. So it was a -- compared to the very difficult year we had last year, it was a decent quarter, and we were happy on that. Our EBITA margin was 35.6% and the EUR 27.5 million, and that's -- there is a decrease compared to last year, but we did have a one-off cost on the acquisition that were burdening that. I'm going to talk more about the overall market environment. But of course, the -- even the year changed, the market environment hasn't changed that much. So we had quite a bit challenges last year which affected our customers in a way that we had tariffs and whatnot uncertainties. So the selling developer licenses last year was slow, if put it on one word. So the -- on the whole year, we ended up on EUR 216.3 million, which is a increase of 6.6% on comparable currencies. So we went pretty much in the middle of our guidance. The distribution license revenue grew very well last year. There were a lot of new things coming into the market, new programs started, which ended up on the 26.4% growth. And of course, the main growth drivers, industries for distribution licenses is the automotive, medical and industrial manufacturing. The whole year EBITA was EUR 51.8 million, and there was a decrease. EBITA margin was 24%. Our personnel increased end of the year to 1,100 out of which 215 are IAR employees. So -- but we did continue our own hiring as well. The one-off costs for IAR acquisition, EUR 5.8 million. We're going to talk that also a bit later, but the -- of course, we all know that the IAR profitability has been less than the Qt. So that affects the overall profitability of the group going forward this year. We haven't disclosed the ARR before. And on the ARR we had a growth of 8.3%. And there on the small print is that the -- it is Qt and the QA developer license base and it does not include the IAR licenses and distribution licenses. So that ARR is the Qt and QA business. We plan to give that ARR number now in the future also in the half year sequence. So you can see that because one of the questions affecting our revenue has always been the shift from 1 to 3-year licenses. Of course, last year, we did see the cautiousness in our customers. So the -- it was slowness in sales, but it was also people shifting from 3 year to 1 year. So now presenting this ARR, we don't have to -- you don't have to worry about the shift from 1 -- 3 year to 1 year because we can follow the ARR. And our plan is to give that number now next time after second quarter and so on. Obviously, it's a number that doesn't change that much. We might even go on a quarterly basis if that's needed. But the -- like I said, it's much slower moving -- slower moving measurement. Well, here are some of the product-related things we did in 2025. There are always questions about AI. Is AI going to eat our lunch in a way that the -- you know that there are a lot of predictions on AI that the -- no developers are needed and AI is going to do all the code. Well, at least as of now, we don't see that development. We do see that there are a lot of AI assistants being used like we are offering them in Qt and our design studios and on Squish. So on writing test scripts, for example, you can use AI and then the Squish does the actual testing. So they help on that. But do we see that the -- specifically on embedded world that the AI would become and replace the developers, that kind of a development, we don't see as of yet. At the same time, of course, it's good to realize that I think that the U.S. companies are planning to invest EUR 500 billion, EUR 600 billion next year. So obviously, they are expecting to get something out of it. But I have -- I don't see that developers would be going away next year or even in the coming years in that sense. On the partnering side, we -- on Axivion, we do have partnerships with NVIDIA CUDA. So the -- when you're doing CUDA code, you can -- or using CUDA, you can use the Axivion. On the R&D, on the defense sector, we did have the FACE certifications and working with Infineon over there, on the AI consumer power devices. And then we are expanding our ecosystem through the Qt bridges, which will enable more languages over there basically. These are just some of the highlights that we are working on the product development. So in general, our product has -- all our products have always been very good. We get a very good feedback. So this is just to show a few examples that we do continue our R&D and we do -- we are on the forefront of product development all the time, making sure that all the Qt products are very competitive in the market, and that seems to be the case on all the customer surveys from our users. With this, Ann, please. Some numbers. Ann Zetterberg: Yes. I am Ann Zetterberg. I am -- I have been the CFO of IAR for -- I'm on my fifth year now. And with the acquisition of IAR, I had the opportunity then to step up and become the interim CFO for Qt. And I'm going to tell you a little about the numbers then for this quarterly report. So delighted to meet you all. There will be a bit of a P&L first, maybe a little repeat on what Juha just mentioned. But we had -- in Q4, we had a growth of 12.6% and after exchange rate impact, it was 18.6% at comparable currencies and the organic growth with removal of IAR revenue, which was EUR 8.1 million, that was EUR 6.1 million. And we -- in -- for 2025, the growth was 3.5%. Exchange rate impact has been pretty bad, both for Q4 and for the full year, especially the dollar has behaved very, very badly for us. And the growth there for 2025 at comparable currencies was 6.6% and the organic growth was 2.6%. But as Juha also said, we plan to show the ARR as that shows better the yearly underlying growth for the company. It doesn't -- it's not affected from which contract length the customers chooses. As we recognize 95% of the contracts upfront, it depends -- it matters a lot if they choose a 5-year contract or a 1-year contract for revenue, but ARR illustrates the underlying growth very stably, and that is growing good for us. It was 8.3% of growth for the Qt part, excluding IAR during the year. And then looking at expenses, the personnel and year-on-year grew by 267 individuals. That's a growth of 31%. But of course, a lot of that relates to the IAR acquisitions, 215 people worked at IAR at the acquisition. And -- so that increased the headcount to 1,136, both on average for the year, but also at the year-end. And IAR contributed EUR 4.8 million in staff costs in the P&L. Under other OpEx, the IAR acquisition had some extra costs then, EUR 4.1 million in Q4 and EUR 5.8 million during the year. And also, I wanted to highlight, even though it's a very small cost, the capitalized asset as IAR has interpreted IAS 38 a bit differently than Qt has and has capitalized R&D assets in the balance sheet. Presently, there is EUR 5.4 million of capitalized unfinished assets in the balance sheet of IAR and those are expected to be finished under 2026. But this means that we will have a small positive effect on the P&L from these capitalizations, removing costs and putting it into the balance sheet. I don't expect any large amounts from this, but it is still good to understand that this is what it looks like now. Over time, there will be some harmonization within the group, so all companies look at this in the same way. And then, of course, the profitability, like Juha just mentioned, has gone down. The EBITA margins are lower both for Q4 and for the year. IAR has a lower profitability. So that contributes to that and as does the acquisition costs. But of course, when you join 2 companies, there are also opportunities for integration, efficiencies and cost reductions, which we are going to work with on starting this year. And this means that the earnings per share has gone down to EUR 0.73 for the quarter and EUR 1.25 for 2025. So then moving on to the balance sheet. A lot has happened to the balance sheet, obviously, from the acquisition of IAR. The preliminary PPA added EUR 204 million in net assets to the balance sheet. Of that, goodwill was EUR 122 million. And then there were identified other intangible assets of almost EUR 90 million. Those were customer relations, technology and trademarks. And those will be written off over 15 years. So the amortization yearly net of tax would be EUR 4.8 million. And also the PPA added, or the acquisition added other net assets of EUR 11.2 million in IAR. Some of those assets on the asset side of the balance sheet and some on the debt side sort of spread over, but the net of them all are EUR 11.2 million. Some of those assets were trade receivables then, which increased the trade receivable balance to EUR 58.7 million in the balance sheet. And there are also other receivables, which could be good to know, one booking of EUR 5.1 million as we have booked the full value, 100% of the shares to the balance sheet, as there is arbitration going on, and we are obligated to buy the rest of the shares. We are not showing any minorities under equity and so because it's only a matter of time until we own 100% of the shares. But that can also be good to know. And then the ending cash balance was EUR 40 million -- EUR 40.1 million, a little lower than compared to last year as we have made this large acquisition. And as the balance sheet has expanded, the equity ratio has gone down from 81% to 50% and also the interest-bearing debt has increased. The interest-bearing debt is EUR 143.2 million. And of those, EUR 134.4 million are debt relating to the acquisition of IAR. So we have paid off some of the debt already. It was EUR 150 million from -- to begin with. And also on the deferred tax on the debt side relating to those intangible assets that were EUR 90 million on the other side, there is also deferred tax booked on the other side which is EUR 18.5 million. So good to understand that also how the PPA affects the balance sheet. And on the short-term liabilities, there is a debt of EUR 5.1 million, which is the amount we expect to pay for the remaining shares of IAR after the arbitration is finalized. And then I can just, as a final note, say that operating cash flow then had gone down a bit, but mainly because of the profitability going down. So nothing strange about that. And with that, I suppose I'm done with the financials, and we will take questions afterwards, but I will then leave to you, Juha, to take the next of the slides. Juha Varelius: Thank you. So 2026. Well, I think the first big thing is that the -- during the next 3 years, as you know, the IAR has been on a perpetual model. And our -- during the next 3 years, we are -- our target is to shift that into subscription model. That's roughly the -- by the way, the same plan we did have the -- early on with Qt when we did this a few years back. And if this goes as planned, the IAR revenue will be going down this year. So it's going to be decreasing this year. And then depending on how aggressively that goes down this year, then the swing back will be bigger next year. So -- but it's the early phases. So we've started the journey. We have now a couple of months behind us. So it's to make -- exact predictions at this point is there is a bit of a room for that estimate still. The -- well, the -- I think it's -- the market has been uncertain so long, that the uncertainty will definitely continue. As we know, there are a lot of global tensions going on as we speak, and that's what we're looking this year. Some of our customers are in a challenging environment. The -- like in automotive, the Chinese automotive manufacturers are putting a pressure on the European manufacturers. And at the same time, there are tariffs that's obviously going to continue all this year. And so on and so forth. So I think that on the industries, the automotive will be in challenge, Medical will not so, and the industry automation seems to be doing pretty well. Defense is doing really well. So in -- if I now look at the 2 of our biggest industries, they are actually medical and defense at this point of time. So they've grown quite substantially over there where they've been. The long-term growth prospects, well, like I said on the AI, this software really defines the value of the products. Each product will have software going forward and the new versions of it we don't see on embedded, that the AI would be eating all that market away far out from that. But we do see AI improving our own products on many respects, and that's what we are implementing. So before we've given our estimates that -- we've given you a range, but we gave up on that range. So now we're saying that the -- our full year net sales will increase at least 10%. So we're saying that, that's the floor, but we are not giving a range. So we're not giving the upper part guidance. So that's a bit different. And we're saying that our operating profit margin will be at least 15%. So again, we're saying that, that's the floor. We're not giving the upper range. So we've -- we're not giving those ranges anymore. Going forward, we're going to start after Q1 or after Q1, we're going to start giving you more info on the -- on how the -- well, we'll start sharing this ARR, which will give you a better understanding. You don't have to worry about the shift on the 3 to 1-year licenses. And then we're looking at the -- we're going to give you more on the revenue per product, so you get a better understanding on the -- how the licenses -- distribution licenses are coming. So we're looking to open up that a bit. I don't know if it's going to make your life any easier because there is a lot of fluctuations. But at least you can then see that fluctuation. So the -- we've been listening -- what you've been asking and -- so that's the -- but more to come on that later. I think the ARR actually will help you more than seeing the license -- distribution license sales and whatnot, but the -- more than that. So do you have any questions? Okay. Matti Riikonen: It's Matti Riikonen, DNB Carnegie. A couple of questions. They are very simple. Do you expect the legacy Qt business to decline in 2026? Juha Varelius: Simple answer, no. Matti Riikonen: Okay. Do you have a rough estimate of how much IAR's revenue would decline in '26 versus '25, if you give a broad range? You say it's going to decline and you say that you don't know yet, but roughly where is -- where are your thoughts at the moment? Juha Varelius: Well, double-digit. Matti Riikonen: All right. Juha Varelius: Low double-digit. Matti Riikonen: And third question before I give the mic to somebody else. How will IAR's fixed cost base develop in 2026? Juha Varelius: Simple question, longer answer. The -- well, I mean, we're not looking to increase the IAR cost base. So what you're going to see now is that the IAR -- the revenue decline really depends on the -- how well can we go on a subscription, and we try to go as aggressive as possible. So the -- if I say low double-digit revenue decline, somewhere there, right? I don't know yet, but somewhere there. And then 2027, I do expect to see a double-digit -- high double-digit growth on the -- maybe close to 20-something, to give you an idea how it's roughly good work, right? On a cost level, when we see costs, obviously, we're not going to be increasing costs because the prices are increasing, right? But the -- we do have some R&D-related initiatives over there where we think that we're going to be increasing cost, and they are related into the fact that the IAR is very much on a functional safety critical environment in automotives and whatnot. We are looking for a product development that we can broaden that segment roughly, to put on a broad perspective. And then we have few places where we're going to -- mainly on sales, we're going to increase sales costs, but we're talking very modest cost increases on the IAR side. So if you look at the old IAR, I know you have the numbers from there, we're looking very -- we're looking some cost increases, but fairly modest over there. But still, if you model that -- the revenue development on IAR numbers with that revenue dip, you're going to be seeing that the EBITA contribution for the whole group this year is going to be pretty much breakeven or even slightly negative. So we're not looking for -- first of all, on the guidance, we are -- those are the bottom lines. They are the floors. They are not the -- we see that, that's the bottom, bottom, right? So we do expect a bigger numbers. And then the IAR negative contribution will be on this year, but when it swings next year, we don't -- there is no need to increase costs for that because it's basically a price increase. So it will swing the IAR EBITA. Well, it's a license sales. So everything that the revenue will be increasing will go directly to bottom line. So that's the implication. On Qt Group, we are -- well, you call it legacy group. So the time changes. But -- so we'll figure out the better name than legacy. Anyway, the old Qt, we're not expecting organic decline, and we're not expecting that the -- what we saw last year, the bottom line, we're not expecting there to see a declining EBITA that we had last year. So the -- and that's the bottom performance, right? So we expect that the bottom performance be last year level and higher from there. So that's kind of the overall picture. So it's maybe not that gloomy than you were first thinking. I don't know how gloomy you were, but that's my educated guess. But thank you for the simple questions. Matti Riikonen: That's all from me so far. Jaakko Tyrväinen: Jaakko Tyrvainen from SEB. On distribution licenses, what happened in the sales in Q4 since I recall that the commentary after the first 9 months performance was rather moderate also in this revenue stream? So I'm curious whether there were some customers filling up their inventories in terms of distribution licenses? And how should we look at the revenue stream for '26? Juha Varelius: Yes. Thanks. So well, maybe later on the first Q when we open up a more broad distribution, you're going to see -- But the distribution licenses is really hard to predict because the -- it's not like this -- I mean, quarter-on-quarter like last year, it went like -- well, first quarter, second quarter boom and then up again, and that changes every year. So the quarters are not alike. So you can't expect that what was last year and second quarter is going to be the same. And that makes it difficult. And as you know, the distribution licenses go that -- some customers buy them afterwards, telling that how much they [ chipped ] and some people buy a chunk on prebuy. And that's why it's hard to predict. On a general level, we can always see that we know that the -- some big new products, productions are coming into the market, then we know on a yearly level, what's going to happen. So last year was on that sense, very good. So if you look last year numbers and distribution licenses for this year, I would take them slightly down. That's my expectation for this year given the market volatility, given the -- what's the customer demand in Europe and whatnot. So the -- I mean, at the end of the day, our distribution license revenue comes from product, what the consumers are buying, right? So the -- that's in a general terms, it follows. And we do have -- we are in 70 industries. We are both on commercial devices like industrial automation, robots and whatnot, stuff that goes into hospitals, stuff that goes into factories, but also on consumer goods like auto, cars and whatnot. So that's where the fluctuation really comes. So I would not put on my model same growth this year than we had last year. This is going to be substantially lower. So same number or a bit below. That would be my best guess. And -- that's a guess. Jaakko Tyrväinen: Understand very well. And just to confirm, Q4 was strong in distribution license? Juha Varelius: Yes, yes, yes, I was a good. So last year, on distribution licenses, Q2 was very good. Q3 was very weak. Q4 was good. Q2 was, if I remember correctly, the best on distribution licenses last year and does not mean that, that's going to replicate. It really goes like this. Jaakko Tyrväinen: Good. Then on the ARR, thanks for sharing that to us and the growth of 8% there. Could you give some color on how much of this was pricing and how much was coming from the effect that customers changed from 3 year to 1 year, which obviously should have kind of positive pricing impact on the ARR number -- annualized ARR number? Juha Varelius: That -- Very good and detailed question that I -- those numbers I don't have. We can come back later, but those I don't have out of my head. But the -- on general level, I can say that there was some shift from 3 year to 1 year, if I look on a whole year number, but it's slowing down. That shift is slowing down. But definitely, what we saw through all the year was the fact that on renewals, the -- what people used to do is that they had something and then they renewed older licenses. Nowadays, customers are counting that how many developers we really have, how many licenses we really need. And in general, money has been very tight. I mean our customers are very -- they're very tight on money. So they are looking all the costs. And on many R&D budgets are such now that the R&D budgets are not growing, but the -- so if they do something additional, they need to stop doing something old. Jaakko Tyrväinen: Good. And then my final one on the possible AI disruption also in the embedded side, I heard what you said. But could you give us for -- kind of for a dummy explanation why the embedded world, what are the barrier entries for AI native solutions to break in? Juha Varelius: Well, as of today, what we see, first of all, that you have lots of safety critical, you have lots of functional safety type of things like car brakes and whatnot, you need certificates and there are -- there is a very tight regulation what you need in order to have software. So you can't just ask AI that do me a car brake system, thank you and implement it, right? The second is that the -- on embedded, the software goes into products, right? And in products if you need to do a product recall, that is really, really expensive. So you have to be fairly certain that what you're doing. The third is that the embedded is fairly slow moving. There are huge companies building these cars and all these devices, medical devices and whatnot. So the time of the change and how secure they need to be that if I'm building this medical device, that nothing really goes wrong. So they change relatively slowly, right? Whereas if you think that on a website that I want to do a mobile application, I do a mobile application, if it works, great. If it doesn't work, it doesn't matter so much. So the -- it's kind of a different environment. And then if you think about coding, just building the software is -- it's one part of the process. You need to define what you want. You need to discuss with people that what are we building, what this product is doing and on and on and on. And AI is definitely not ready for that yet, right? So the -- where it's really going to end, we'll see, but that's what we see as of today. So there are -- we see AI as assistance and the -- like if you're designing something, you can use AI to give you creative ideas because as people, we tend to start looking one-way street. AI can open up your creativity and whatnot, but yet you're still using tools. So my prediction is that the next phase you're going to see on SaaS environment and the products like ours is yet another pricing change. We're doing this just to mess you up, right? So -- but yet another pricing change. And the pricing change is going to be that -- the pricing, I think, is going to go more towards from that the -- what has been built, how much the tool has been used rather than a deficit, right? So that's where I see the AI is going. And I had a -- one breakfast discussion and the person pointed out that the -- remember a couple of years back -- this person said to me that remember a couple of years back, everybody in Finland were talking that the -- even grandmas need to learn coding because software is in every device and everybody needs to learn how to code so that we can use these products, and they were all kind of coding school starts and whatnot. That was 2 years ago. Now everybody is talking that developers are -- nobody needs developers anymore. So there is a bit of a hype on the speed of the change. I mean, over time, of course, AI is going to -- 10 years from now, AI has changed a lot how we work, but -- and live our lives. But in the near future, I don't see much of effect. Then on the -- and this is the Qt development, right? On the IAR compiler business where you need all the certificates and whatnot, there is no way you can use the AI for a long time. And then on our testing tools, well, whatever you do with AI, you need to test. So I see that there's going to be more and more software that needs to be tested because you can't rely on AI. So the testing business is going to grow substantially as a market. Felix Henriksson: Felix Henriksson, Nordea. Three questions. Firstly, on Q4. The revenue growth organically accelerated a little bit, and we discussed about the distribution licenses being strong, but was there anything else that improved? For example, the lack of large deals that we saw in earlier quarters, did that -- did those sort of come back at all? Juha Varelius: No. no. If I look on the regions, the -- I would say that the -- we're doing well in APAC. We're doing okay in Europe. We have room for improvement in Europe in some markets. And then in general, we have lots of room to improve in the U.S. So the majority of our softness has been in U.S. And then we come to the point that the -- if we talk about the AI or if we talk about that the -- is there a competing product or is there a price change? What I see in the market is that we're doing fine in APAC, we're doing fine in Europe and the main softness we have is in U.S. and even in U.S., we have some teams that are doing okay, but then some teams are really suffering in that respect. So that's why I'm fairly confident that it's not about AI eating our market because if it would be, it would be eating our market everywhere globally, right? And this is more a local softness we are having. Same thing for prices and competition because we have same type of -- in APAC, we have the same industries and same type of customers we have elsewhere. So our softness basically has come last year that we've been a bit soft, been a U.S. related, right? And I'm very confident that we can fix that and get the efficiencies over there on a better shape. Felix Henriksson: Right. And then on the guidance, you mentioned that you're no longer giving those ranges, upper end. Can you expand on that a little bit? What's changed with your guidance philosophy in a way that triggered that change? Juha Varelius: Yes. I wasn't very good at that last year. Felix Henriksson: Okay. So maybe more conservatism in that way? Juha Varelius: Yes, yes, absolutely. Yes. Well, hey, we gave 2 profit warnings was not on my plan. Felix Henriksson: Fair enough. And lastly, on distribution licenses, I mean, we've started to see memory prices going up and there are some supply constraints emerging that potentially are impacting your customers, I presume. Do you think that's a sort of potential headwind when you look ahead and what are your customers saying when it comes to this? Juha Varelius: No, that's a downwind because the -- that's where Qt really signs. The fact that if you use Qt, you can do more with less memory. So that's the -- I mean, that's been the basic promise since the beginning. So the -- with Qt, you can have the same performance with the lower-end hardware, and that's the main selling point we are having as of today. And so higher price is better for us because at the end of the day, our customers will have to build those products anyway. So then it's a question of that how -- what kind of performance they want, what kind of end user experience they want. And that's where we sign. And that's where like Android doesn't sign, right? You use Android and you need a lot more hardware than using Qt and so on and so forth. Same goes with Unity. So most of our competitors, they may be in some use cases like Unity, Unreal, they might be able to do a better 3D visualization or it looks better, but it consumes so much hardware that if we go on a lower-end hardware, we can beat them. And you can get good enough, you can get a fairly good performance and a lot lower hardware using Qt. So that works for our benefit. Antti Luiro: It's Antti Luiro from Inderes. One question. We know that the last year's growth was quite sluggish and there is still uncertainty around this year. So is that affecting your own investment plans? Or are you just keep on going with all the growth investments that you have planned before? Juha Varelius: Yes. I mean, yes, we will continue our investments, yes, for sure. That's the -- no doubt about that. And we do have these few areas where we see the -- well, first of all, I think that we wouldn't be here in the first place if our products wouldn't be so competitive. So we need to keep them in that way. And then, of course, we are exploring the opportunities that the AI is opening up, and we need to do product development to have AI agents in our own products and so on and so forth. And you're going to hear product releases as we go forward this year. So yes, definitely, we're going to do that. Then at the same token, like the -- Ann was saying over here that we just merged 2 companies. And of course, we are going through all the processes, we're going through the -- that where can we be more efficient. So we've grown very fast. We are 1,200 people. And the -- so we do have also the efficiency programs, if you like. But it's -- so it's not all more, more, more. It's also efficiencies at the same time, and that's very much on and stable as well. Waltteri Rossi: Waltteri Rossi from Danske Bank. A few questions about AI. Did I hear correctly that you said that you might change your pricing model in the future due to AI? Juha Varelius: Yes. I said that, that's probably going to be the first change that we see on AI that the SaaS models pricings will start changing more from based on the consume of the tool rather than the deficit. I did not say that we're going to do that change, and I did not say that we're going to do that change this year, but I said that, that's what I see that the -- how AI is going to be affecting SaaS companies in general that the pricing will change going forward. I don't see that AI will be taking over the tools business per se. Waltteri Rossi: Yes. I understand, but no time line for that? Juha Varelius: No, no, no, no, no. Waltteri Rossi: Okay. But that would imply in a way that there is at least a big threat on your developer license sales? Juha Varelius: No. No, I don't see it that way. I see it that the -- that's going to be the effect that the SaaS business will go more towards that, that the people are charged at how much you use the tool rather than the per deficit. I see that development coming. But no time line, definitely not this year, next year or so. No. Waltteri Rossi: Okay. Well, next one is still on AI. What would you say is basically Qt's value proposition for the customers because there's the argument that AI will make developers' work more efficient. So that's kind of eating up your -- one of your value propositions. So what else do you basically offer for the customers? Juha Varelius: Well, we offer a tool that they can build their graphical user interface or applications. And as we are here today, AI is not capable of that. So you need the human and you need the tool. And then it's debatable that when will AI be able to do that, if ever. And then we see that if you need certifications, you need -- like on defense, like in automotive, on many industries, on medical, there's a long list certifications you need to meet. So who's going to train an AI that will meet those certifications and make sure that AI does the things every time in that particular manner and everything is met. I mean, that's years away, if ever. Waltteri Rossi: Yes, yes. I agree. But still on that, actually, a follow-up. We know that programmers are already today using AI assistance. But are you saying that you don't see your customers yet using them? Juha Varelius: No. And you see a lot of developers using AI on the web technologies. So if you want to do a simple mobile application, you can do that or you want to do web pages, you want to do your own homepage, you can use AI for that. But of course, they are so simple that you can -- if you want to do your own web pages, you can have -- they are on a web already. So what AI does is that it takes a web page and then it produces a new web page, right, that you can do. But on embedded building on products, no. Waltteri Rossi: One last on AI. So can you please elaborate how Qt is currently using AI in the framework? Or do you have add-on or something? Juha Varelius: Yes, you can have add-ons. You can have assistance over there that helps you getting started. For example, on the -- on testing, you can use AI, that it helps you doing the testing script and these type of things. So it helps you kind of where you can think that it helps you building a bit of a story or text, but yet still you have to read it and modify it. That's what we see as of today. Waltteri Rossi: All right. Then one last question on the usual 1 to 3-year licenses. So do you have a number on how much that shift from 3-year licenses to 1-year licenses impacted last years? Juha Varelius: No, but we're going to give you the ARR, so you can start following that. Matti Riikonen: Matti Riikonen, Carnegie, a couple of questions more. They are even more simple. First of all, you discussed the capital -- capitalized cost policy so that you would basically go towards Qt's policy, which I read that you would not any longer capitalize some costs that IAR has. Should we expect that there would be none whatsoever on the capitalized costs in '26? Ann Zetterberg: Because we have unfinished assets in the IAR balance sheet, and we need to continue capitalizing on those according to IAS 38. So there will be some capitalization of R&D assets during 2026. But we expect that those will be finished under 2026 assets that are not finished. And after that, we will harmonize between the companies so we can find a common application of IAS 38... Juha Varelius: Because -- I want to come over here, so we have you in the camera as well. Ann Zetterberg: Yes, sorry. I apologize. Yes, about the capitalization since Qt and IAR has handled the IAS 38 application very differently. So IAR has been capitalizing R&D assets into the balance sheet, which increases the profitability and then you write off the assets over time. And after the acquisitions, we kind of cleaned out the balance sheet. But the assets that are not finished, they are still there, and we will have to follow IAS 38. We will have to continue to capitalize on those until they are finished. Otherwise, we don't follow the bookkeeping rules correctly, and we don't want to break them. So that will happen. And in that time, we will evaluate and harmonize between the companies so we can have a common approach to this. And then I expect that we will not capitalize anymore, but I cannot 100% tell you that, that will happen. But we will have to have a common approach anyway within the group on how we handle this adjoiner [indiscernible]. Matti Riikonen: What kind of magnitude of capitalizations do you think there would be in '26? Ann Zetterberg: It will not be a lot. Those assets are almost finished. They're EUR 5.4 million there now. So I don't expect there to be any huge capitalizations. As you saw during Q4 on those assets, we capitalized EUR 200,000. So it wasn't a lot. So you can -- then -- it can go up and it kind of go down a little depending on how much work the R&D department puts into various projects. But I don't expect it to be -- I mean, anything that affects the profitability much, but it can be good for an analyst to understand that this is a difference from how Qt has handled it before. Matti Riikonen: Right. That's helpful. Then second question is about the annual recurring revenue disclosure that you plan, which is an excellent idea. How long into the history will you bring that? So is it possible that you would bring maybe a couple of years' history so that we could start to track it already from there and not just from here on because, of course, in the ARR pattern, the history is what counts and current day is less interesting if you don't know the history? Juha Varelius: We already gave the last year number, right? Matti Riikonen: That's not a very long history. Juha Varelius: Well, it's the last year. Well, we'll look into that. Yes, great question. We didn't think it that way, but we'll look into it. And on capitalization, it's like Ann said, that there are a few projects we need to continue. But of course, in general, going forward, on a longer term, we're not looking to capitalize. So we rather implement the Qt policy going forward and not capitalize the development. Yes. It's a better way. Jaakko Tyrväinen: Jaakko Tyrvainen, SEB. A brief follow-up on the profitability dynamics and IAR part of that. Let's say, the revenue is down double-digit something, like you said, Juha, would this imply that IAR as a stand-alone would be at breakeven or even red numbers in '26? Juha Varelius: Red. Ann Zetterberg: This is... Waltteri Rossi: Sorry, one last one from me. You said you are going to continue... Juha Varelius: You were? Waltteri Rossi: Waltteri Rossi, Danske Bank. You said that you are going to continue recruiting this year. So could you elaborate a bit on where exactly are you going to recruit? Or you said invest, but... Juha Varelius: Regionally or by function. Waltteri Rossi: Say again, I didn't... Juha Varelius: I mean regionally. Well, I mean, I think that the -- we do have a few markets where we're going to be increasing personnel, probably the U.K. is one, and these are small numbers, but then they add up for our Italian business. More or less in Japan, we're going to be increasing the personnel, the China probably. And the -- so in particular markets, I think in the U.S., we're pretty much on a headcount we like to be at this point of time. On R&D, there are these new technologies like the one that interests you a lot, which is the AI. So of course, on these new technology areas, we -- instead of trying to learn them ourselves, we are hiring people. So we do have some of these new technology areas. If I look in general on the R&D, the Qt is very well staffed. The QA business function itself, it's still on the investment mode. So over there, you're going to see pretty much on each and every function. So a bit of marketing, a bit of sales, a bit of product management, a bit of the R&D. On IAR, we are strengthening some of the R&D functions over there. So IAR, I would say that the most personnel additions will be on the product R&D side and then some on sales. But when you have so many different locations, you add up and then you get the personnel increase, that's basically what we're looking for. Heli Jamsa: Thank you so much. I believe that concludes all the questions from the room. And as we are running out of time, I give it back to Juha for closing remarks. Juha Varelius: Okay. That came quick. So thank you very much for being here today. And the -- as we go into this year, like I said, the -- one -- the very big item for us this year is going to be the subscription change on IAR. So going from perpetual to subscription, that's the one of the core things we're doing. And of course, integrating IAR into the Qt family. So we're going to be a bigger, happy family. We are also looking forward this year that, yes, it's going to be a challenging year. I'd like to emphasize that the guidance we gave was not a range. So we just gave a bottom line that what is the floor level where we expect to be this year. Of course, we are expecting to be better on those numbers. And the -- on the profitability side, we're not looking on Q2 decrease on profitability nor on sales, but the IAR subscription change will affect our profitability this year. And so that's why the lower guidance. Where it's going to end up then that how aggressive can we be, remains to be seen. In any case, the 2027 for IAR will be a revenue growth year and a profitability year, then the question is that how steep is that curve over there. It's still very early phases to see that how rapidly we can drive this subscription change. I think with these words, thank you very much.
Operator: Good morning, ladies and gentlemen, and welcome to the freenet AG Conference Call on the Preliminary Results for the Financial Year 2025. At this time, all participants are on a listen-only mode. The floor will be open for questions following the presentation. Let me now hand over to Robin Harries, CEO of freenet AG. Robin John Harries: Good morning, everyone, and welcome to our earnings call. I'm Robin Harries, the CEO of freenet. Overall, we are happy about the operational performance and the strong customer growth. We see many opportunities ahead of us, but we are not happy about agreement with the network provider that we have, which was closed in '24. This agreement might lead to a minus EUR 13 million impact in '25 and to up to EUR 50 million negative EBITDA impact for the year '26 to '28. We are at the moment in discussions with the management of the network operator and are negotiating, trying to negotiate a better deal. This is already -- so the risks that I mentioned are already reflected in our numbers. So we are in ongoing discussions and we'll provide an update as soon as we have something. Freenet becomes more lean, focused and effective. We did some nice strategic moves in the last years. One is that we streamlined the executive board. This made us faster, more efficient and we have a clear focus. We optimized a lot in terms of marketing and sales initiatives. We have a clear focus on KPIs and performance. I think we created a lot of transparency within the organization, streamlined the focus. Everybody is on board here and is delivering, and this is I think quite good. And then we acquired the mobilezone last year, and this was one of our competitors, and we are happy about that as well. Another strategic move was that we have started a customer value management project, and this is a really a high-impact project. At the moment, our conversion rates are not great yet, but I think we have a lot of potential here. So when we compare our churn rates with competitors, we are at the moment behind, and this is potential. Because if you think about reasons why customers leave network operators, companies, the top 2 reasons are: first, they find a better deal somewhere else, and the second one is that they are not happy about network performance. Both of these things, I think, doesn't make a lot of sense when you look at freenet, because we have really great deals and we are able to offer products on all networks. So our churn rate should be good. So that's why this project is really important. We made big progress. So we are working on over 50 initiatives. And this quarter or this month, we will bring live our first AI voice bot in the customer service, and we have another AI tool for our call center agents, which will facilitate the selling process. And we are quite confident that we will have -- that we will see better outcomes here in the near future. We have some really great operational highlights. We achieved an all-time high in terms of postpaid net adds. We achieved over 300,000 organic postpaid net adds. When it comes to waipu.tv, that's -- there we achieved over or around EUR 36 million adjusted EBITDA. This is also a big step forward. In the past, we could prove that we can achieve strong customer growth there. Now we also proved that we can become profitable and show nice EBITDA. And we have a record dividend proposal of EUR 2.07. Now let's dive deeper into the mobile segment. We have -- our strongest brand is Freenet and the second one is klarmobil. And we put now a lot of focus on freenet. This is our premium brand. We changed a lot over the last month. For example, we moved the freenet offerings from the domain freenet-mobilfunk.de to freenet.de in the end of January. And so we prepared it over the course of last year. And yes, so this will be our premium brand. We will put our money on freenet. So today starts a new TV campaign and we also invest into digital out-of-home. That's important. We also shifted our marketing budgets to performing channels. We stopped the stuff that doesn't really work and now invested where we have a direct sales impact. And we will invest into our brand and that's a nice opportunity when you look at unaided brand awareness and brand awareness -- aided brand awareness. You can see that many people in Germany know the brand freenet, but when it comes to unaided brand awareness, our numbers are still very low and far below the competition, and that's a huge opportunity. So by investing into brand marketing, so we will be able to increase this, and I think this is also a nice upside potential. Beside our premium brand, freenet, we also launched new branded shops, Unlimited Mobile and Mobilfunk.de. We have a nice portfolio of brands that we position on various platforms and target specific user groups. I think this works quite well. We also relaunched our freenet FUNK app. And what's also very interesting and important is that we started our partnership with 1&1. At the end of last year, we had the first tests in selected shops where we started to sell also 1&1 mobile plans, and this test was very successful. We could achieve incremental sales. That's important for us that we not just replace one partner with another. No, we were able to really generate incremental sales. The partnership with 1&1 I think is very good. We are in the process of scaling this partnership now and roll it out to more and more shops. We have very good relationship to them, also to our partners, Vodafone and Telekom. So I think that we are very well positioned in the market, we showed that we can grow where we're strong, and yes, now we are further optimizing it and scaling the things that work. And the acquisition of mobilezone was also one important step. We could add even more brands, and this will further strengthen our market position. We have -- we are very dominant now on certain channels, and we could also add more marketing channels. And we will grow together as one organization. This will lead to nice synergies, the mobilezone team, very smart, very dynamic, moving fast. So I think that's a very good and cultural fit. The teams already work together closely, and we expect further potential there. On the next slide, this is a really important slide because you know that there's a lot of price competition in the market, a lot of pressure. And what you can see here is the freenet and frontbook pricing over the course of the last 2 years. And you could see that beginning of '24, it went down a lot, also beginning of '25. However, in the end of '25, we were able to do -- to increase it again. This actually is I think very important for us and for the market, and we could already see it during the Cyber Week. This is always a period where it, in the previous years, it became even more aggressive. This was not the case this year. We even increased our prices. This is also what we are doing at the moment. So we keep increasing our prices. We see that this works. In the last 6 months, we tested a lot or we did a lot of elasticity tests on our marketing and sales channels, that we showed our models. We could see that we can achieve very, very strong growth in terms of customer growth, new customer growth. But for us, it's more important to actually do this on a really healthy basis. That's why we started -- in Q4 last year, we started to increase prices, and we'll keep doing this. So for us, it's -- and quality is more important than quantity, and we put a lot of focus on it. So the guidance for '25 was moderate decrease, and this will be still the case for '26, because even though we increase frontbook pricing, we still have impacts from our customer base, and this will take some time. But I think it's very important that we see a shift here and that we will keep focusing on quality and try to further increase prices. On the next slide, you can see that we really gained momentum in the end of last year, we achieved all-time high customer growth, 306,000 customers, this is really outstanding result. And on top of that, we also could add 240,000 net adds from the acquisition of mobilezone. So this led to 546,000 postpaid net adds. So we outperformed our guidance here, which is great. And on top of that, there are also still 95,000 subs from base and tariffs. So overall, I think in the mobile segment, strong growth, many opportunities through our customer value management and through AI, also the marketing channels, and we just started there. I mean, last year, the TV campaigns, we started with klarmobil, now with the move to freenet.de. We also switched our marketing campaigns to freenet, to our core brand. And this is what we are -- that we want to scale this year and also afterwards. Next slide. This is our TV and media business. Media Broadcast shifted to segment orders. In Q1 '26 onwards, here you can see the freenet TV subscribers. The decline continues. And however, we have some stabilization measures. So we increased prices, we introduced a Hybrid TV stick, we prolonged a content contract, so we are working on this side as well. This segment, we also have waipu.tv and the IPTV market grows continuously. It's a strong market. Also the position of waipu.tv is very strong in this market. It was 20% to 25%, and the market will continue to grow. I mean, we are very well positioned in the competition. The product is very strong. When you look at ratings, when you look at reviews, it's an outstanding product, and we believe that we will further grow here and the market will further grow. So this is I think a very good market to be in. On the next slide, you can see our organic growth. We did some cleanups during the last quarters. We always talked about the O2 impact. And so here in this view you can see that now we deducted it, so we cleaned it. And now we have with 1,755,000 customers. We have now a clean base, because we deducted the O2, the O2TV customers. I think the migration will be finalized during this quarter, but we already deducted them in order to have a clean base. And we also deducted further unprofitable subs. So this brought us to the new and clean base. Overall, I think the growth was 152,000, is healthy. And beside this, we could show that we increased the profitability a lot and reached EUR 36 million adjusted EBITDA besides this nice growth. So on the next slide, you can see our priorities and the guidance for full year '26. Our focus areas are to strengthen the freenet brand. We will keep investing into our brand, into performance-based brand marketing campaigns. We have experience with it. It's important to have a clear branding and messaging impact of our campaigns. And then we will further develop our customer base value management and work on our initiatives. We will further optimize the conversion rates on our website. At the moment, when you go to freenet.de, you can see that we moved the domain, but there's still also a lot of room for further improvements in terms of user experience and page speed, conversion rates. So we are working on this. There will be further updates in the next months, which will also lead to further sales potential. And we will keep integrating the mobile phone channels. We work closely together with the teams. We will also reaccelerate the waipu.tv growth and the customer base. So we are -- we see potential in the market. We see potential through the product very good product. And we -- our objective is to become the AI telco company in Germany. So we started our projects in the customer value management, but we will also roll out AI tools to all different areas. It's -- for us, it's really important. We see that this is a huge path. Our guidance for '26 in terms of postpaid subs and moderate growth. I said that we have many opportunities here. But here, for us, it's the ARPU, the quality is more important. So we -- I think we showed that we can grow. We can outgrow the market. But for us, quality is more important. And postpaid ARPU, we expect still a moderate decline because of the impact of the customer base. However, we believe that the pricing for new customers that we are quite confident. In waipu.tv, we expect noticeable growth. With that, I hand over to Mr. Arnold. Ingo Arnold: Yes. Thank you, Robin. So I'll start with the group financials. So yes, to be honest, at the beginning, I'm disappointed by the figures, especially because there's one effect. I think all the figures are quite fine. The performance was quite fine during the year. And a lot of initiatives, what Robin was talking about, they worked quite fine and quite well. And then there is one effect now, which is a little bit disturbing, the picture here, but coming to the details further on. So if we look into the revenues here, yes, I would say, it's nearly stable. What we see here, we sold this WiFi business, which was called the cloud. We sold it mid of the year '25. This was an effect, especially in the second half of the year. If we look into the Q4 revenues, we see the effect from the cloud, the missing revenues. On the other side, if you remember, last year, we sold these IP addresses in Q4 last year, which was a positive effect in revenue of nearly EUR 20 million last year. So more or less, the miss in the revenues in Q4 is explained by these 2 reasons. I think what is important that revenues from high-margin services continue to grow. Switching to the gross profit. Here, what we see, we see a miss in Q4, but we still see that the gross profit is stable. Even with the bad Q4, it is stable for the whole year. What are the effects in Q4? I already talked about the phasing of the sale of IP addresses, which took place in the third quarter in '25 and took place in the fourth quarter in 2024. On the other hand, from the sold business, there was a gross profit contribution last year of something like EUR 5 million. And then Robin was already talking about the effect out of one single MNO agreement, where we chose to be very conservative in our accounting. Robin already mentioned that we are in discussions here, especially about a totally new agreement. These discussions are ongoing. And as we are here, as you know us, we are conservative. We are cautious. Therefore, here in the actuals, we chose to be -- to build up a worst case, and this is what we also did in the figures starting with '26 into the future. Adjusted EBITDA, here again, the reason is this -- especially this MNO agreement, which is a negative effect of nearly EUR 13 million in Q4. What we also saw as a negative effect was this sold business. Again, the cloud, they generated an EBITDA of EUR 2.7 million in Q4 '24. And so if you deduct or if you normalize by these 2 effects, it would be a very good quarter, and it would be a very good full year deeply in the guided range. Moving to the next page, mobile business. We see these -- we see on the one hand, in the revenue in the quarter that we lost some revenues in the segment here, hardware other. It is again this disposal of the WiFi business. But on the other hand, we -- and Robin explained it, we focused or we had to focus in marketing -- in online business, we had to focus on our discount brand, klarmobil. And with the discount brand, klarmobil, I think this is as usual, you do not see a lot of bundles. You see a lot of SIM-Only. So what I do expect for '26 ongoing is that with the new brand, and we just started with the new website, freenet.de, where we can sell the more premium quality tariffs and where we can sell more bundles. I do expect these hardware/other line to increase again. The service revenues, here on this page, not separated the postpaid service revenues, which grew slightly during the year. The miss here in service revenues is based on a reduction in prepaid business. So I think there is still a number of something like 1.5 million prepaid customers, what we do have, but it is reduced step by step. And therefore, we see a reduction of revenues here, but unprofitable revenues. Gross profit in the mobile business, here, you see it even clearer the effect from the conservative accounting of the MNO agreement. So without it and without the effect from the sold WiFi business we would be in the quarter. But definitely, on a yearly basis, we would see at least a stable gross profit. Adjusted EBITDA, again, the same reasons here. I think without the special effect, we would be near to the level -- much nearer to the level what we saw last year, and we would be deeply in the guided range. So moving to some KPIs of the postpaid business. Robin already talked about the growth in the postpaid business. So I think it was a proof of concept in the fourth quarter, especially in the fourth quarter, where we generated this high figure of new customers, but I think also for the full year. So -- but just to make clear here, and I read it from also some of our competitors, but for us, definitely, this is a top priority here for generate customers and to have the priority value over volume. So in the first quarter, I do not expect a comparable figure to what we saw last -- the Q4. But I think this makes a lot of sense because in the middle of this chart we see the ARPU, and Robin already talked about the base effect. We still -- we are happy that the ARPU of the new customers could be stabilized and even increased in the last month. And this is also what we focus on in the first quarter. We try to increase the prices. We would like to have a turnaround here in the ARPU situation. But during '26, it will stay difficult because of the base effect. But I think we are so happy that on the new customer side it was possible to stabilize it now. Digital lifestyle revenues are stable compared to last year. TV and Media, yes, definitely a success story with waipu.tv. Here, this is a page which definitely makes the CFO happy. All figures could be increased, higher revenues, higher gross profit, higher EBITDA, everything inside the range what we guided, even at the upper end of the range, the EBITDA. So I think it's a very good picture. It was possible to prove that waipu could not only grow, but could also generate relevant EBITDA. And so I think it's really a success story what we see. On the next page, financial structure. I think it's no changes to what we had in the other quarters. Still a very low leverage, a very healthy balance sheet. Yes, if you see the debt maturities, it is obvious that we do have to do a refinancing in the first quarter. I think we postponed it to April. It's no reason by market or that it would be difficult, but we will place promissory notes. We just started the process with the banks. So there will -- a refinancing will take place. And I'm optimistic that it will be possible with similar margins what we saw before. Free cash flow, I think we came in -- I think, yes, the EBITDA was lower than expected in our last call because of the now known effect. But all the other buckets are near to what I forecasted during our last call. Net working capital, I think I forecasted minus EUR 45 million. We came in a little bit better. Taxes, I forecasted EUR 60 million. Now we -- EUR 4 million better, EUR 56 million. In the -- on the CapEx side, we instead invested, especially on the AI side, we decided to invest some additional CapEx at the end of the year. Lease, as forecasted. And also, interest nearly as forecasted. And then we have to deduct the EUR 12 million here from the sale of this WiFi business. As you know, we generated sales -- we generated a price of EUR 40 million. So this was the cash in. We are not allowed to show the cash in, in our free cash flow based on our definition. Out of this EUR 40 million, EUR 12 million was relevant for the EBITDA, but we reduced it here again, but the cash is in the company, definitely the EUR 40 million. What we also did to be fair to our shareholders, and we know that a lot of shareholders are shareholders because of our high dividend, and there were some payouts in the second half of the year because we reduced the number of Board members here. And then there were some compensation severance payments, which were necessary in the second half of the year. Yes, it was linked to LTIP programs. This is correct on the chart, but it were compensation payments. And in a normal world, these would not have -- we would not have to pay them in the second half of the year. So therefore, we corrected this figure. And after correcting it, we are on a free cash flow level above EUR 300 million. And on this level, the calculation of the dividend is based and we stick to our promise to pay 80% of our free cash flow as a dividend. This is a calculation now and this leads to EUR 2.07 and the EUR 2.07 will be also proposed to our AGM. And I'm of good mood that they will support it there. Then on the next page, the guidance for '26. I already said that what we built up here in the guidance and also in the ambition for the years, we built up a worst case from this agreement with the network operator where we do have a problem now, where we do have the discussions. And therefore, in the guidance '26 and also in the following years, there is a negative EBITDA effect of EUR 50 million, EUR 5-0 million from this topic. And this is -- and therefore, I think on the first view, the figures may look disappointing. But if you put this into consideration, I think it is clear that basically we believe in the business, we stick to what we promised and we are -- for the underlying business, we are still very optimistic. It is only this one problem what we do have at the moment. And so we had -- we showed in the actual EBITDA of EUR 515 million. You have to add EUR 25 million for mobilezone, then you would have EUR 540 million. But on the other hand, you have to reduce the difference from this network operator agreement. So we already had EUR 13 million in '25 in the figure of EUR 515 million. And so in addition, there is something like EUR 37 million. This is a negative impact. And so therefore, we see EUR 500 million to EUR 530 million on an EBITDA level and free cash flow is corresponding to this. As the free cash flow may be a little bit disappointing. We would like to give some certainty to our shareholders and to make very clear that we believe in the business and that we do not see any negative signs in the business and in the underlying business. And therefore, we decided to promise to pay at least EUR 2 as something like a minimum dividend for the years '26 to '28, payout '27 to '29. But definitely, if the 80% of the free cash flow, what I believe today, if it would be higher than the EUR 2, definitely, this rule is still valid. So maybe these explanations to the guidance here hopefully helpful. Then I would hand over to Robin again to discuss the ambition what we renewed. Robin John Harries: Yes. Thanks, Ingo. So we updated our ambition. We have -- our 2 pillars are the mobile business and the IPTV business. Mobile, I think we have a healthy market share. We have over 8 million postpaid customers. The big advantage is that we offer all networks. So now we also offer 1&1. I think that's a very good value proposition. We have a multi-brand strategy, and we have strong sales channels. We have our own shops around 500. We have exclusive partnership with MediaMarktSaturn. We start brand marketing in TV. We do connected TV. We have many affiliates, online partners, offline partners. We acquired mobilezone. So this really gives us a very, very strong footprint in the market, and I think it's a very strong position. So we will -- and I mentioned it before, it's not only the new customer growth or the new customer potential that we see through our strong offerings. It's also the improvements in our customer base, and we want to reduce churn. So all of that let us believe that we have a potential to grow here, a stable business. It's healthy. And in our second pillar, the IPTV business, we have a product that is really outperforming the market, very strong, very good reviews. So we have a nice market share there as well, highly recommended and we believe that the market will further grow. And so the customer base will grow. On the next page, yes, so you can see our plans to become a leading AI telco in Germany. Our big advantage is that we are the smallest. So we are much smaller than our big partners and big competitors. And so I think that's an advantage. So we have a flat hierarchy. So we can -- we are very strong in decision-making. We can make decisions very fast and we are doing this. So we did this in the customer value management. So this was started last year. So this month, we already bring the first AI tools and agents live. So we are very, very quick here. And we do this in all different areas in the company. So we have customer care, customer base management, then we also bring our AI tools to our shops. So as I mentioned, we have 500 -- around 500 shops in Germany and the tools that our salespeople there use, they will be -- they will get new tools so that they will get information, which are -- they will get AI information. And this will make the user experience within the shops and the experience for our salespeople much better and hopefully also increase conversions. We also keep investing into our staff. So we are -- we have our people here. They are able to adapt quickly. So they have -- I think we have many, many growth mindsets here. They are able to change. And yes, so this is, I think, whenever you do something like a transformational company, 70%, 80% is people. And here, we are, I think, very strong. So -- and besides these big lighthouse projects, we apply AI wherever we can do this. So for example, when you look about -- or when you think about creatives, how to produce creatives for your advertising campaigns, we want to use AI. And when you look into mobile, so I mentioned it, we have a strong customer base. We have strong offerings. All networks makes a lot of sense to come to freenet and to buy products there. And we improve our customer value management. We use AI. So -- and this will lead to a reduction in churn, and we will also increase our sales after service. So when people call our hotlines and they have a service request, we help them. After that, we will also start to do more sales after service and sell family cards, for example, or waipu.tv. Customer acquisition, so a premium strategy that's important for us. We will focus on Freenet, on our premium brand. And when you look into unaided brand awareness, there we are around 10%, which is very low where our competitors like 1&1, they are, I think, around 50 or even higher percent. So there, we have a lot of room to grow. And we will close this gap by investing into smart performance-based marketing campaigns. We know how to do this. We already tested this with klarmobil last year, and those campaigns were very successful. We really saw a nice sales impact and also -- and then that's important. So whenever we do brand marketing invest into TV, we do this with a clear sales approach. So we produce our creators always with a clear focus on a product, on a price, which drives sales. So this is a combination of performance and brand. And yes, so also when you look at our websites, so they are getting better step by step, but there's also a lot of room for improvements. Our conversion rates have become or we already have improved them a lot, but there's still a lot of room for further improvements. This will also help us to further increase performance here. So therefore, we see a potential to an uplift of EUR 30 million by '28. Next slide, IPTV. Waipu.tv is a success story, very strong customer base, strong offerings. And besides this, also the advertising business within waipu, it's growing very strong. We see further potential. We have strong partners here. And we believe that we will further grow our subscribers and we will further grow subscription revenues, advertising revenues. And all of that, I think, is really a huge opportunity, and we expect an uplift of EUR 85 million by '28. As I said, here, the market is healthy. Our customer base, we expect that we will grow very nice until '28. So this is reflected or this is due to our strong products, the outstanding product, but also through the market development. If the market itself will grow, we will grow. Therefore, we are quite confident that we can see nice subscriber growth. And we have strong advertising partnerships with RTL, [ ProSieben ]. And besides this, we will also grow in our advertising business. Ingo Arnold: Yes. Coming to Page 26, I think base information which is relevant when we published the financial ambition for '28, the first time 2 years ago, I think we based it on the EBITDA of '23. Now here, there is a new baseline. The baseline here for this financial ambition is the year 2025. In mobile, yes, we -- Robin already mentioned the plus EUR 30 million, what we see here compared to '25. Here again, we have this negative impact from this MNO agreement. On the other side, we have mobilezone. We have cost efficiency, especially from AI projects. So we see possibilities here to reduce our cost line by something like EUR 10 million. And then from all the initiatives, which we started here and what Robin already talked about, we expect something like EUR 30 million. And this seems possible. We also restarted freenet energy. We restarted freenet fixed net. So I think we -- there are a lot of initiatives. And so we are very confident to reach at least EUR 30 million out of these initiatives in the next years. In IPTV, we slightly increased our ambition compared to what we published 2 years ago. Because what we did that time was only to put into consideration the increase from the subscriber -- from the subscription and from the service revenues. This time, and Robin already showed this, the revenues from advertising, which are increased. So therefore, we increased it here compared to last time. And then in the other holding, there is also an increase compared to the last ambition '28, what we published because of the lower Board salaries. So all in, we increased our ambition from more than EUR 600 million to more than EUR 620 million. And yes, I think it's challenging, but I think especially if we get a solution with one network operator. And if you use it and if you would correct it by this and if we could solve it, then it would be even higher and definitely higher than what we published 2 years ago. Moving to the free cash flow ambition. Yes, I think we have the positive effect from the EBITDA, what I already described. The other items of the EBITDA to free cash flow bridge are more or less unchanged, but we have the negative effect from the taxes. I think everybody is prepared to it because the tax loss carryforward will be -- will fall away in '28, up to the end of '28. And therefore, there will be a higher tax what we will have to pay. So all in, a free cash flow of more than EUR 340 million, which implies a dividend of something like EUR 2.30. And this is still based on the promise that we will pay out 80% of the free cash flow with the addition now what I already mentioned that we pay a minimum dividend or we grant a minimum dividend of EUR 2. And dividend is still the first priority in capital allocation. So no changes here. Second pillar or second priority is growth. And third priority is to do any share buybacks in the future or to reduce the leverage further, but this would not make any sense from my point of view. So therefore, for the last page, I hand over again to Robin. Robin John Harries: So here, you can see what freenet will stand for in '28. Our 2 strong pillars, mobile pillar. We will -- we believe that we can grow our customer base by doing smart performance-based marketing, reducing churn. And we are implementing AI first and tools and want to have an AI first operating model. So we believe there will be steady profitability, and this will lead to highly cash generating -- this will be highly cash generating. In our IPTV business, so here, we see a very strong second -- core business is developing. We believe we will grow the business up to 3 million users. The advertising will be additional revenue stream, and we believe that there will be an EBITDA of at least EUR 120 million in '28. So all of this, I think it's -- we have very healthy financials, low leverage. We are growing free cash flow. We have a nice dividend policy, which I think is a very healthy and attractive business. Ingo Arnold: So therefore, we give back to the operator to start the Q&A, please. Operator: [Operator Instructions] And we have the first question from Polo Tang from UBS. Polo Tang: I have 3 questions. The first question is just about the MNO shortfall. So you highlighted a EUR 13 million profit shortfall with one MNO contract that could rise to EUR 50 million if you do not meet certain volume commitments. However, do your deals with the other MNOs have a similar structure? And is there a risk of further profit shortfalls if you do not achieve volume targets? Second question is really just about the impact of AI. Do you see a risk of the MNOs becoming more efficient at acquiring and retaining customers, meaning they will be less reliant on independent third-party channels like freenet going forward? Alternatively, if you look at it the other way around, do you see AI as an opportunity? Third question is just on waipu.tv. You indicated that your underlying net adds in 2025 were 150,000. Your mid-term guidance indicates that growth will pick up to 300,000 net adds per annum going forward. But can you remind us what caused the underlying slowdown in 2025? And why are you so confident that the net adds will rebound and improve going forward? And who do you think your main competitors are when you look at waipu.tv? And is Vodafone bundling cable TV for free with broadband having any impact on waipu.tv? Ingo Arnold: Yes, your first question, I think we have very favorable contracts with the other MNOs. I think it's only one partner where the agreement is as it is. This was done before Robin started. It was done in '24. So I think we -- and both partners now think that discussions do make sense. So also for the operator, it is not a healthy agreement. And I think we are on the same side there. And so with the other operators, no, we do not have comparable risks what we see at the moment. Then I take the third question about waipu. Yes, I think you linked your question to the 152,000. On the other side, what I would do in my calculation is I think we were free to clean up the unprofitable subs. We decided to clean it up by the 88,000. If you would not do so, then we would have something like 240,000, which is not that far away from what we guided and the 240,000 is something like 15% of growth. And this is something what we also see for the future, something like between 15% and 20%. So I think even in a year where we reduced our marketing spending, where we were not that aggressive, it was possible to grow the business by 15%. So therefore, we are optimistic here for the future. The IPTV market is growing. And I think you also asked about bundles. It is possible. We are in discussion here with different suppliers in the market for fiber, for broadband, etc. And so I think maybe -- and also in the mobile area, maybe there it will be possible in the -- maybe in the second quarter to another contract with one of the big players. But I think I do not want to promise anything today. Discussions, negotiations are ongoing. But I think we are -- basically, we are happy now with the waipu base because it is clean. I think we do not have to discuss in '26 about Telefonica customers. We just can show the growth, and we are very optimistic already for the first quarter to be on a relevant growth path again. And then we had this AI question. Robin John Harries: I'm happy to take it. So for us, AI is an opportunity, it's not a threat. And to be clear here, so when you talk about direct, freenet is direct. Freenet is no comparison website. Freenet is no intermediary. We are direct. People come to us, customers come to us, they book with us, they become our customers. And so we compete like with all the other direct players, the network operators. And when you look at our offering, so we offer all networks and we offer this to very nice prices. So -- and I mean, AI should be smart. And if you look at the benefit of companies and products, I think we are in a very good position to benefit from this. So I see this really as an opportunity because of the very attractive offerings. And we also have a multi-brand approach. It's not just one brand. So we have premium brands. We have brands for pricing. We have budget brands. So we are very well positioned through the offerings of our brands and through the massive footprint that we have in all marketing and sales channels and then through the attractive price and because we are direct, we are no intermediary, no comparison website. Operator: The next question comes from Ulrich Rathe from Bernstein. Ulrich Rathe: 3 questions for me as well, please. So again, on the MNO contract, could you talk a little bit about when this became apparent during 2025? It sounds like this became apparent only during the fourth quarter. How is that possible? I mean, the market trends have been unfolding throughout the year. So it's a bit difficult for us to understand how only in the fourth quarter you suddenly see something developing that costs you EUR 13 million this year and EUR 50 million next year. That will be -- and with regard to the mitigation for this issue, is there a precedence for such a contract renegotiation? Or are there any other reasons for confidence you can give us that the renegotiation would be successful? My second question is on the waipu outlook for 2028, which you have raised. Could you talk a little bit about your level of visibility here in terms of the customer revenue and margin outlook? I mean, there is -- it is very optimistic, but I suppose I'm trying to sort of gauge to what extent you're guiding for things that you feel are very achievable compared to sort of a little bit like a moonshot kind of guidance on waipu. And my third question, if I may, you pointed to a voice robot launch in the context of this better customer value management. Now my question on that is, why would be an AI robot, a voice robot be better at customer value management than engaging with a person? I understand why AI is cheaper. I also understand why it might help your sales force to put the right information in front of them when they deal with the customer. But do you actually believe that a voice robot has the ability to manage customer value better than a person? Ingo Arnold: Ulrich, from my side to the MNO topic, I think at the end of the third quarter, we were still optimistic to have no gap in '25. We already started some discussions with the network operator, but with the former management of it. And so yes -- and therefore -- and I think the conditions what we get for the tariff plans, the margins, this all was not sufficient to promote this network. And therefore, we reduced it during the fourth quarter, and therefore, we saw the effect. So it's -- and now we are in these discussions to make, but to make it clear. And you asked about some -- I cannot give you a confidence level to it, how -- what level -- how the success rate could be of these discussions, what we do have there. But what we -- what I can definitely say is if the discussions would not be possible, then we would also take legal actions against it because we think the behavior of the network was not fair to us here. Then about the waipu outlook, maybe I take it also, Robin, if you're fine. I think it is -- the increase versus the ambition what we gave 2 years ago. The increase is based on the advertising contract what we could close with the big TV channels here in Germany. And on the other side, and it refers to the question of Polo, we think that it is possible even on the reduced base what we see today to increase the customer base to 3 million customers up to the end of '28. And this is also -- this is another effect. If you have more customers, then your advertising revenues are also higher. And if you have more customers, definitely, your service revenues are higher. So I think we did the calculation. And yes, it works if we have the increase by something like 15% to 20% in the customer base year-by-year. And this looks for us -- and I think this is the key to the ambition here. But I think I tried to make clear already with Polo's question or with the answer to Polo's question that even in a year where we focused on EBITDA, it was possible to grow the base by something like 15%. And so I'm optimistic that this could also work in the future. Robin John Harries: And related to your question regarding the voice bot, so it will be an AI voice bot. We will start the first test this month in our service line. And you -- so normally in the service line, you get many requests that you could also answer if you go through the FAQ section. So at the beginning, we are building our knowledge base. This is important. So this is the fundament for the AI bot. And so the benefits of the AI bot is that it's available 24 hours, 7 days. It's very efficient in terms of cost. It has a huge knowledge base. So the knowledge is -- I mean, it's huge, so it can answer many, many questions. And it's continuously improving and learning. So calls will be transcripted, they go back into the machine, they will learn, they will develop. The AI bot will also do sales after service afterwards. So for example, if like by the way, her name is Ginnie. And if you, for example, have a service request, you talk to the very friendly Ginnie. So afterwards, she might ask you, okay, now that we've solved your problem, I see that you also have 2 kids. And may I also offer you like a family card for your kids, stuff like this. And I think this is -- that's the future, and we have made huge progress during the last weeks, months with also with the help of external consultants. And that's a huge workforce here internally is working on this. And I'm sure that we will make a big step forward this year. Operator: We have the next question from Florian Treisch from Kepler Cheuvreux. Florian Treisch: I have to ask a question on the MNO agreement. My one is on the EUR 50 million headwind you mentioned. I think in your remarks, you phrased it as a worst case. I just want to double check. Does it really mean EUR 50 million is the absolute worst case in a way it cannot get lower? And what is, to be fair, a base assumption we have -- we can make for '26, i.e., a lower number than the EUR 50 million you have mentioned? The second one is on mobilezone. Can you give us a feeling what is the implied EBITDA contribution in '26? And are you expecting already a net positive synergy effect, i.e., after the integration cost in '26 or is it something more likely for '27? And the last one, you just mentioned that you are restarting freenet energy, the broadband operations. I mean there was a reason to shut it down in the past. What has changed here? Ingo Arnold: Florian, your answer about the worst case, I think what is the worst case in the world? I think, yes, I would say from -- and I called it worst case and I mean it is a worst case. We do not know what happens in the world. But if the framework is as it is today, yes, it's definitely a worst case. I think there is only a possibility to optimize it. And therefore, definitely, it is a worst case, EUR 50 million. Mobilezone, I think for the year '26, we used an EBITDA of EUR 25 million. We have not calculated or put into consideration any synergy effect. I think the team is working hardly to get synergy effect. And so yes, there is an additional chance. But yes, I would support your idea that it makes more sense to show the synergies or to get the synergies then in '27. I think that we'll -- we will start in '26. We will -- there will be some low-hanging fruits. This is what we already saw. but we have not calculated these synergies. I think we have to get more knowledge of the business of mobilezone. We just started at the beginning of January to discuss with all the operating with the finance people. So I think it is too early to put any synergies in our forecast, but I'm optimistic that we will have some. And so there will be additional chances definitely compared to the plan for '25 and for our guidance. Robin John Harries: Yes. And related to the other products, broadband and energy, so we are on it. We are calculating cases. We are talking to partners. So for us, that I think it's obvious that it makes a lot of sense to sell broadband and fiber. So we have a strong footprint with our owned shops, almost 500 in very good areas. And if you want to sell broadband, it's important that you have a face to the customer, that you can talk to them, that you can explain them about the process, how to get fiber in your home. So that's the opportunity. And we are -- also there, we are in discussions with all the important players. They are all very interested in us supporting them. You can see that for all of them, fiber is, I would not say, a pain, but it's a top priority. And it's really difficult to do advertising and marketing and sales for broadband because you really have to talk to people, explain that to them. And we are there in a very good position. So this is -- it's not so easy to develop the product. So from the IT, from the technical side, yes, broadband is complicated. But -- and therefore, we are looking into solutions, how we can get there, external solutions, internal solutions, talking to partners. So -- but makes a lot of sense. We are quite confident that this will be an opportunity for us. In energy, it's the same. I think it's also obvious if you think about our shops and if customers come to our shop or to buy a mobile, so then it also makes sense to ask them, okay, where do you buy your energy? And if you have a good offer, so why would you or why shouldn't you try to sell this as well? So I think this is something where at the moment we are -- where we small, tiny, but we are working on changing this. Operator: The next question comes from Karsten Oblinger from DZ Bank. Karsten Oblinger: I have 2 questions. The first one is a follow-up question on the waipu outlook for '28. So how much of the advertising business with ProSieben and RTL is included in the guidance? So is it EUR 10 million, EUR 20 million? So could you give us a rough idea here? And the second question is related on the new business with 1&1. Could you give us an idea on the magnitude of the business so far? Ingo Arnold: Karsten, I would say, from the advertising side, as we had an EBITDA forecast or ambition in the last time of EUR 100 million without marketing revenues. Now it is without additional marketing revenues or advertising revenues. Now it is including advertising revenues. So it is something like the EUR 20 million. Robin John Harries: Yes. And related to the 1&1 partnership. So we started it in Q4. So we started it in the first shops. We selected some shops in order to have a test group. And I mean, for us, it makes sense to sell 1&1 if we get incremental sales. And yes, so the test was successful in the first stage. So that's why we scaled it. We are in the process of scaling this. Overall, I mean, we want to be the place where you get all networks, also 1&1. We want to have an offering for the customer, the best out of all worlds. And so therefore, 1&1 is important for us. But it's also -- I mean, they have attractive products. They have a strong brand. They do a lot of brand advertising as well. That's good. So people know the brand. If they see that they can get it also in our shops, they will come to our shops. This might further increase the frequency. And then on the other hand, Mr. Dommermuth, I mean, he's a smart guy, and it's always possible to make smart deals with him. So therefore, we are quite confident that this can become a fruitful partnership for the future. Operator: We have the next question from Joshua Mills from BNP Paribas. Joshua Mills: A few questions from me. I wanted to come back to the MNO shortfall and the rationale you have for how you could renegotiate that contract. So my understanding is that the freenet position is we're not being given the right kind of tariffs in order to meet the volume commitments with an operator, which would be necessary. So if that operator isn't giving you those tariffs and without them you can't hit the target, what levers and what legal backing or support do you have to demand access to those tariffs? I would assume that given you're accounting for the headwind now and you're putting into guidance, there's at least a degree of uncertainty to whether you do have any of those levers. And can you also confirm that beyond 2028, you'll roll on to a new contract with that MNO? And if so, should we expect to see a similar kind of setup or similar headwind? I just really want to understand what your negotiating position is on this if they decide that they don't want to use your services as much going forward? And secondly, you did mention that if the negotiations broke down, you could resort to legal action. Can you remind us what the legal backing for freenet's role as a reseller in the German market is today? I believe it is that MNOs must negotiate with freenet in good faith. But as far as I'm aware, there's no guarantee on paying a certain amount to freenet or giving them access to all tariffs. So if you could clarify that would be helpful. And then finally, on the waipu subscriber guidance, I think comparing to the 2024 guidance update, it looks like you have scaled back the subscriber target somewhat even with the 300,000 run rate, which you're looking for. Is that right? I know there's been some adjustments with the O2 sub base. And I just want to understand whether the better waipu TV EBITDA assumption is in part driven by the fact you expect to deliver fewer subscribers than previously under the old plan? Ingo Arnold: Maybe I'll start with the waipu question. I think it's still 3 million. I think in the last quarter, we already forecasted something like 3 million as a customer base for 2028. And so there's no relevant change. About the legal actions and possibilities, I do not want to talk about. I think this is something -- I think this is not what both parties want to have. We want to have a solution in the discussions and in the negotiations. But if these negotiations fail, then we have to think about legal possibilities and legal actions. And we see possibilities there, but I think it's -- you would understand that we do not want to talk about it. And I think first priority for all parties is to find a partnership solution. We want to have a good partnership with all networks. And I think we -- in the talks, we see a very good mood. We see that all -- both parties are interested in a solution. So we are very optimistic to find a solution. But I think we have to wait and see what happens. And after -- I think we have to wait what happens after '28. I think we give an ambition and an outlook up to the year '28 and then the other years have to be negotiated. So this is what I can comment on it or what we want to comment on it. I think we have discussed it in depth now. And I think I do not want to give further information about it from our point of view. I think we said what has to be said. And then I think we have -- action has to follow. Joshua Mills: And maybe just one follow-up. So if we assume that this particular MNO contract expires in 2028, could you just update us on when the other 2 MNO contracts expire? I think one -- another one is in 2028 as well and then one in 2030, but just to get some clarity on that. Ingo Arnold: I have not said that it ends in '28. Operator: And we have one question from Siyi He from Citi. Siyi He: I have 2, please. The first question, I just want to go back on the waipu.tv 2028 guidance. And it's just looking at your guidance for '26, and it seems that there will be a quite big step-up on EBITDA growth for '27 and '28. Just wondering if you can help me to understand why the acceleration? And I think you mentioned that advertising revenue would be EUR 20 million. Do you expect the full impact of that EUR 20 million to start hitting from '27 onwards? And my second question is on the synergies you talked about regarding mobilezone. I'm just wondering you can give us a little bit more details of where are the low-hanging fruit? And also what would be the ultimate situation for you when you're looking at potential synergies with mobilezone? Ingo Arnold: Yes, I think waipu, I already tried to explain that we saw on an adjusted base, we see already a growth of 15% we saw in '25. And so this is something what we do expect for the following years. The IPTV market hopefully grows again further, then we could grow further. We think a similar market share, stable market share is possible with a very good product what we offer. So I think we are -- it's -- yes, it's a forecast, it's an ambition, but we think this looks possible to us. With the synergies at mobilezone, yes, I think we -- what we did is we had a lot of meetings with the management first, but then we connected all the people who do similar jobs. And so we have a lot of small teams now and they are looking into their business. This is different thing. This is the HR department. This is the marketing department. All departments are talking with each other. And then you have some small low-hanging fruits, you have some bigger low-hanging fruits and then you have the operational business. And on the operations side, sometimes we have the same partners. So we -- it's like scaling the business with the partners. You talk with the partners, what could be possible. We talk with the MNOs, which could be possible, which is their interest, which is our interest. And so -- and also on the side, they have in an Apple contract to buy iPhones directly. This is something what we did not have in the past. So we can use this channel now to buy iPhones, to buy Apple products. And so I think there's a lot of fast development in all these conversations what we do have with all these discussions. And as I said, I do not want to -- I gave you some examples, but I think if we would talk to the teams now, you would have 50 examples where the synergies could be possible. And a lot of them could be get fast. But I think it's too early. I think we will keep you informed in the upcoming quarters. And then I think we will see how it develops. But I think we already have a lot of initiatives which are started. So we are on the way to generate it. Robin John Harries: Yes. So yes, thanks for your -- thanks for attending this call. I think we are happy about the operational progress. We have many, many initiatives. We have a very motivated team here, and we are working on this and try to deliver step by step. We are not happy about the current situation with the network provider, but we are working on this. And as Ingo said, we are in fruitful discussions. Both parties share the view that we have a sick agreement there that we need to change it, that we have to work on a new agreement. We are doing this. But yes, I see like many, many opportunities, and I'm really happy to be here in this company. It's a lot of fun. We are working on this. And yes, thanks for your time. Wish you a great day.
Operator: Thank you for standing by. My name is Janice, and I will be your conference operator for today. At this time, I would like to welcome everyone to the ACI Worldwide Inc. Fourth Quarter and Full Year Ended 2025 Financial Results. [Operator Instructions] I would now like to turn the call over to John Kraft. Please go ahead. John Kraft: Thank you, and good morning, everyone. On today's call, we will discuss ACI Worldwide's Fourth quarter and full year 2025 results as well as our financial outlook for 2026. We will then open the line for your questions. The slides accompanying this webcast can be found at aciworldwide.com under the Investor Relations tab and will remain available after the call. As always, today's call is subject to safe harbor and forward-looking statements. You can find the full text of these statements in our earnings press release and in our filings with the SEC. These documents describe important risk factors that could cause actual results to differ materially from those indicated in any forward-looking statements. Joining me this morning are Tom Warsop, our President and CEO; and Bobby Leibrock, our Chief Financial Officer. Tom will begin with an overview of our Q4 and full year performance, strategic highlights and the progress we're making against our long-term plan. Bobby will then review our financial results in more detail, including segment performance, cash flow and our outlook for 2026. We will then open the line for questions. With that, I'll turn it over to Tom. Thomas Warsop: Thanks, John, and good morning, everyone. I appreciate you joining our Q4 and full year 2025 earnings call, and let me start with the headline. 2025 was a very strong year for ACI. We delivered another year of double-digit revenue growth, improving margins and solid free cash flow, all of which are consistent with or better than the long-term financial framework we outlined at our Investor Day 2 years ago. For the full year 2025, we delivered $1.76 billion in total revenue. That's up 10% from 2024, and that was our second consecutive year of double-digit revenue growth. Adjusted EBITDA increased 9% to $507 (sic) [ 506 ] million, and our adjusted net EBITDA margin expanded to 42%. We also continue to execute against our capital deployment strategy. Our balance sheet remains exceptionally strong, and we ended 2025 with $196 million of cash on hand, net debt leverage ratio of 1.2x. This gives us significant flexibility to continue executing on our growth agenda while also returning capital to shareholders. In 2025, we repurchased 4.2 million shares, about 4% of the outstanding shares at the beginning of the year for $203 million. This strong performance is a direct reflection of our committed focus to our multiyear value creation strategy. As a reminder, our strategy emphasizes growth within our core vertical markets, disciplined operational execution and a return-driven approach to capital allocation. I also want to take a moment to discuss some of the important strategic successes we had at a segment level during 2025. First, in our Payment Software segment, in 2025, we took a major step forward in scaling our Bank and Merchant businesses by unifying them into a new segment, we call Payment Software. This increases efficiency, accelerates innovation, and it simplifies our operating structure. This part of our business delivered 9% revenue growth and 10% adjusted EBITDA growth. Demand was broad-based with Issuing and Acquiring Solutions growing 11%, building on strong double-digit growth in 2024. The year also saw meaningful growth in real-time payments with new contracts for both central infrastructure and bank solutions. In the fourth quarter, we signed a large European bank to Connetic, our cloud-native payments hub. This was the second Connetic signing in 2025, and that's further validation of its differentiated architecture and our long-term modernization vision. Customer interest continues to accelerate. Connetic is central to our long-term strategy. It offers customers both the immediate stability of proven technology and a path to modernization through a modern cloud-native architecture. Connetic's combination of capability, ACI's proven reliability and future readiness are major differentiators. Earlier in the year, we also signed one of our largest competitive takeaways in the Asia Pacific region in our Issuing and Acquiring segment. We're making progress on getting this customer live, and we fully expect to use them as a reference as we actively pursue other potential customers with outdated systems. In real-time account-to-account payments, we continue to sign new logos and extend our reach with existing customers. In Q4, we signed an important expansion with PayNet, Malaysia's real-time account-to-account national infrastructure. In the fourth quarter, we also went live with Banco de la Republica, the Central Bank of Colombia, which was a very strategic regional win for ACI. We also renewed and expanded our relationship with Canada's leading digital payments network. In the U.S., FedNow and RTP adoption is slowly increasing, and we're optimistic that volumes will continue to grow and be material. In 2025, ACI's Biller segment delivered another year of strong, consistent performance with full year revenues growing 13% and segment adjusted EBITDA expanding year-over-year, reflecting continued transaction growth and investment in advancing our market-leading Speedpay platform. The segment benefited from sustained momentum across core electronic bill payment transaction growth and ongoing customer adoption of ACI's go-forward platform, Speedpay One. We added many new biller logos and expanded relationships with many other customers, including one of the country's largest insurance billers and a top credit union to add new payment types and an upgraded modern payment experience. ACI is gaining share in the Biller market as more billers consolidate onto modern outsourced digital bill pay platforms. ACI is increasingly the partner of choice. I'll let Bobby cover the financials in a moment. But first, I want to address a topic that's top of mind for many investors, the impact of generative AI on the software industry and the volatility that has come with this. At ACI, we view generative AI as a significant opportunity, not a threat. We are already deploying it across the enterprise to improve engineering productivity, to enhance customer outcomes and to reduce structural costs, all while supporting our strong margins and cash flow profile. There's been a lot of speculation about whether AI could fundamentally disrupt software. While modern AI tools are very effective at generating code, and we use them extensively for this, ACI's platforms are not simply collections of software modules or computer programs. They're large-scale, mission-critical transaction processing systems operating at global scale, built on decades of payments expertise, deeply embedded regulatory and network rules and proprietary data derived from billions of transactions. Generative AI is a powerful tool, but is only one component of what's required to design, operate and continuously evolve industrial-grade payments platforms. From a technical perspective, our advantage rests on 3 foundations: transaction level data at massive scale, deep domain expertise in payment message flows and exception handling and highly resilient infrastructure engineered for always-on high-throughput environments. AI augments these foundations. It does not replace them. And when combined, those 3 foundations are difficult to replace and they provide ACI with durable, long-term competitive advantage and they lead to strong, sticky relationships. We at ACI are applying AI in 3 primary ways: first, engineering productivity. Our development teams are using a combination of industry standard and proprietary AI tools to accelerate design, coding, testing and maintenance across extremely complex code bases. These platforms involve thousands of interdependent components, integrations and country-specific variations and AI helps our engineers move faster while maintaining the reliability and security our customers require. As adoption deepens and training completes, we expect these productivity gains to compound over time. Second, operational efficiency. We're using AI to automate and scale knowledge-intensive workflows across our business. One example is our ability to index, query and analyze our entire corpus of customer contracts in real time. This allows us to instantly assess regulatory impacts, contractual obligations and pricing terms across the installed base, and that dramatically increases productivity in legal and compliance functions while lowering costs as we scale our business. Third, and I think most importantly, enhanced customer value. I want to give you an example within ACI Connetic, we're applying AI models trained on data from billions of historical transactions to address one of the most complex and costly problems in payments, exception handling and payment repair. Today, many large institutions employ hundreds of people to manually resolve errors in high-volume payments. By embedding AI-driven intelligence directly into the transaction flow, we are able to automatically identify likely corrections when there is an error and dramatically reduce manual intervention. The result is lower operating costs, faster settlement and a materially better customer experience. This capability cannot be created by an LLM, Large Language Model alone. It requires deep domain expertise, purpose-built software and of course, unmatched data at scale. In short, while we understand the broader concerns around AI and software at ACI, we're leaning in. We have an AI-first approach across the company that's coordinated through what we call our Velocity program, and we are already seeing tangible benefits across productivity, efficiency and [ customer ] outcomes. And quite simply, the combination of our resilient infrastructure, our extensive proprietary data and our unique domain expertise will allow ACI to continue delivering mission-critical payment and billing software that is deeply embedded in our customers' operations and very difficult to replace. We believe this positions ACI to remain a leader as payments technology continues to evolve. And one last important item before I turn it over to Bobby. I'm pleased to share that as part of our ongoing Board refreshment process, we announced today the appointment of Kim deBeers, whose unique skill set and deep professional and advisory experience will further strengthen the Board of Directors' governance approach and risk culture, complementing the backgrounds of our other directors. This appointment follows the previously announced additions of Didier Lamouche and Todd Ford back in October of 2025. And as part of a planned succession, Jan Estep and Charlie Peters have transitioned off the Board. I would personally like to welcome Kim and of course, thank Jan and Charlie for their many years of helpful service. I've enjoyed our time together, and I look forward to hearing about your future endeavors. In summary, 2025 was another year of significant progress for ACI Worldwide. We had strong balanced growth, expanding profitability and broadening global demand for all of our solutions, including our cloud-native Connetic platform. And we continue to invest in our AI-first road map, including Connetic capabilities such as real-time payments and digital currency connectivity, including Stablecoins, reflecting the themes we've talked about throughout 2025. I'm proud of our team, and I'm excited for the opportunities ahead to continue our shareholder value creation journey. I'll hand it over to Bobby to talk more about our financial results and the outlook for 2026. Bobby? Robert Leibrock: Thank you, Tom, and good morning, everyone. I'll begin with a brief review of our fourth quarter results, then focus primarily on our full year 2025 performance, reflecting our long-term full year approach to managing the business. I'll close with our outlook and capital allocation priorities for 2026. The fourth quarter was a solid close to a year of strong execution. Total revenue in the quarter was $482 million, up 6% year-over-year, and recurring revenue was $304 million, up 13%, reflecting continued strength across both segments and growing demand for our recurring software-led offerings. For the full year, total revenue was $1.76 billion, representing 10% growth versus 2024. Recurring revenue was $1.21 billion, up 11%, underscoring the durability and quality of our revenue base. We delivered adjusted EBITDA of $506 million, an increase of 9% year-over-year and expanded net adjusted EBITDA margin to 42%, reflecting disciplined execution and the operating leverage inherent in our software model, which provides flexibility to continue investing in the business while returning capital to shareholders. Net new ARR bookings increased 7% to $70 million, while new license and services bookings were $255 million, down 12%. This year-over-year comparison primarily reflects the timing of contract signings between periods. With 2025 representing a more normalized Q4 to Q1 booking cadence and no change in underlying demand or deal quality. As Tom outlined, our results reflect broad-based demand across both segments and continued customer adoption of our modern payment and bill pay platforms. In Payment Software, revenue increased 9% to $942 million, and adjusted EBITDA grew 10% to $544 million. We continue to see increasing demand for our cloud-based offerings with SaaS revenue growing 15% in Q4 and 11% for the full year, alongside continued strength across our broader Payment Software portfolio. Growth was broad-based across issuing and acquiring, real-time payments, fraud management and merchant solutions. We also continue to make progress advancing ACI Connetic, including the key customer wins Tom referenced as part of our long-term platform and modernization strategy. As payment complexity increases globally, our large bank and [ processor ] customers continue to expand their relationships with ACI over time. Turning to Biller. Revenue increased 13% to $818 million, and adjusted EBITDA grew 7% to $141 million. Growth was driven by continued transaction volume with existing customers and strong new business momentum across utilities, government and consumer finance as more billers consolidate on to modern digital bill pay platforms. The segment continues to perform consistently with a revenue profile and margin structure that are well understood and predictable. We also continue to make progress advancing Speedpay One, our next-generation biller platform, which supports our long-term modernization strategy for the segment. Both segments provide a balanced growth profile with recurring revenue and exposure to multiple end markets, while each continues to invest in modern platforms and capabilities to meet evolving customer needs. Turning to cash flow and the balance sheet. Cash flow from operating activities in 2025 was $323 million compared to $359 million in 2024, reflecting normal timing differences in working capital, including receivables and deferred revenue. Underlying cash generation remains strong. We ended the year with $196 million of cash on hand and total debt of $823 million, resulting in a net debt leverage ratio of 1.2x adjusted EBITDA, below our targeted leverage range of 2x. Our balance sheet remains a significant strategic asset and provides flexibility to invest in growth while returning capital to shareholders. Capital allocation continues to be a core component of our value creation framework. In 2025, we returned $203 million to shareholders through the repurchase of approximately 4.2 million shares or about 4% of shares outstanding. We ended the year with $456 million remaining on our current share repurchase authorization. Turning to our outlook for 2026. Building on the momentum Tom described, our guidance reflects the durability of our recurring revenue base and continued growth driven by new customer wins, share of wallet expansion and increasing adoption of our cloud-native and real-time payment capabilities. For the full year, we expect revenue growth of 7% to 9% on a constant currency basis or $1.88 billion to $1.91 billion. For the first quarter, we expect revenue in the range of $405 million to $415 million. In terms of revenue phasing, we continue to expect a more second half weighted revenue profile with approximately 44% of full year revenue in the first half of 2026 and 56% in the second half, consistent with historical seasonality. We expect adjusted EBITDA of $530 million to $550 million for the full year and $88 million to $93 million in the first quarter. This outlook reflects continued cost discipline while reinvesting in high-return initiatives and maintaining flexibility to support our long-term road map. As we look at capital deployment for 2026, our approach reflects the strength and flexibility of our current financial position. We expect to allocate approximately 50% to 60% of our cash flow from operating activities to share repurchases in 2026, subject to market conditions and business needs, while continuing to invest organically and preserving capacity for disciplined strategic M&A within our targeted leverage range. To provide additional transparency and support investor understanding below adjusted EBITDA, our current expectations include net interest expense of approximately $30 million for the full year, depreciation and amortization of approximately $90 million, noncash compensation expense of approximately $65 million to $75 million and an effective tax rate of approximately 25%. We also expect capital expenditures of approximately $45 million in 2026 and cash taxes in the range of $80 million to $90 million. On share count, we expect diluted shares outstanding of approximately 105 million, excluding any impact from future share repurchase activity. Stepping back from detailed guidance, I want to put both our 2025 performance and our 2026 outlook into broader context. Since joining ACI last year, the consistency of execution and financial discipline across the organization has been clear. In 2025, we delivered double-digit revenue growth, expanded margins, strong cash flow generation and meaningful capital returns. Looking ahead to 2026, we enter with solid momentum, strong customer demand and a position of financial strength that allows us to both return capital to shareholders and invest in a compelling innovation agenda to support continued execution. With that, Tom and I would be happy to take your questions. Operator: [Operator Instructions] Your first question is coming from the line of Jeff Cantwell with Seaport Research. Jeffrey Cantwell: I think you answered the big questions that are out there right now about AI in your prepared remarks. I wanted to ask you a question on your revenue guidance for 2026. Can you just go through the building blocks and cadence? By building blocks, I'm curious how you get to an acceleration in the back half of the year? Is that coming from the Payment Software segment or from Biller? And what are those drivers under the hood? And then kind of second, what gives you the confidence that you can accelerate revenue growth in the back half? I know you tend to have a lot of visibility. So I want to kick the tires on that back half acceleration and what you see as the drivers? Robert Leibrock: Jeff, it's Bobby. I'll jump in. So I appreciate the question. And to put it in context, if I zoom out and look at 2025, we delivered 10% growth. We had a strong start to the year, as we talked about at 15% in first half '25 and then delivered 10% in the full year. So some of this, as you point out, is going to be how the phasing 1 year compares to the next. But I appreciate the question because it really shows the strength that we see entering 2026. Think about our guidance of 7% to 9% growth. I'll start with a statement of that's pretty balanced across both of our segments. We see both Biller and Payment Software with strength to contribute into that high single-digit model. We have, as you mentioned, given our high recurring revenue model, we've got great visibility in this guidance looking at this year. And as you think about the first half versus the second half, a lot of that's going to do with the renewal fees phasing we see in that visibility and as we see the implementations and the new bookings and such that we've signed this year. So we feel good about the demand we're seeing across the board and how that plays out throughout the year. Thomas Warsop: Yes. And Jeff, this is Tom. The -- Bobby already said this, but I'll just say it a little bit differently. We have a lot of visibility, as you highlighted, and not -- not just on the renewal book. Just as a reminder for everybody, I know you all know this, but when we sign a renewal, it doesn't matter when you sign it, the book -- the revenue gets recognized on the date of renewal. So that -- we can do a lot to accelerate signing. We can't do much to -- we can't do anything really to change when that revenue gets recognized. So we have a lot of visibility there. We also have a great deal of visibility to the deals that we talked about a few of them specifically, deals that were signed in 2025 and being implemented in 2026. And so revenue recognition typically happens when you go live and you start to see volume in the Biller and Merchant part of the business, especially. And so we have a lot of visibility there. We -- those deals are on track to implement as expected, and then we have high confidence in the revenue coming through. And we have very strong and growing pipeline in our key products, especially our Connetic products. So all of that gives us a lot of confidence, and it's a little bit more back-end weighted than last year, but that's sort of a normal thing that it fluctuates a little bit year-to-year, largely based on that renewal book, but also in tandem with the deals that we signed and expect to implement. Jeffrey Cantwell: Got it. And then this is a little technical, but if we take the midpoints of your 2026 guidance, it does look like adjusted EBITDA, while it tracks revenue growth more or less, it does imply a slight compression. So my question is, can you talk about why, meaning what's in the business plan for this year? Or maybe should we chalk that up in some of the conservatism you guys have shown over the past couple of years. What are the main call-outs for adjusted EBITDA margins for this coming year? Robert Leibrock: Yes, I'll jump in. So as you point out, on the revenue, as I mentioned, we're guiding 7% to 9% growth. We feel good about that, the visibility of it. And we feel good about the operating leverage we're seeing in the business. The guide on EBITDA is -- on a growth basis is about 6% to 9% as well. So both kind of straddling at high single-digit range. As you think underneath of it, we expanded about 100 basis points of margin in 2025. That's, I think, about 300 basis points in 2024. We're showing the operating leverage. And if I look at this past year, 2025 is going to play out -- or 2026 will play out similar to 2025, where we're re-purposing these investments for our new platforms like Connetic and Speedpay One. If I comment on 2025, the 100 basis points of margin, underneath of that, we doubled our investment in our Connetic platform by re-prioritizing that. We have similar focus around productivity entering this year. And some of this is the flexibility to invest throughout the year as we continue to build that out, Jeff. But I think we feel good about that. The other thing I'd mention, I hope you appreciate the additional transparency below the EBITDA line items. We tried to give you our visibility there. We have to model that out. And I think what you'll see is good double-digit growth on top of that high single-digit EBITDA is possible when you get into the other components that would drive EPS and other pieces, too. Thomas Warsop: Yes. And Jeff, just to comment on your comment about conservatism. I think I hope that everyone agrees that over the last several years, we've tried to always do what we say. And so you could call that conservatism. We call it prudence, I think. We want to make sure that we give you guidance that we feel highly confident in. And we want to make sure that we continue to deliver on the commitments we make to you. Operator: Your next question is coming from the line of George Sutton with Craig-Hallum. George Sutton: And first, Tom, that was as impressive an explanation of the AI relevance to what you do that I've heard. So I think that was helpful. I wanted to address Connetic in terms of the pipeline. You continue to reference a growing pipeline. Obviously, prior to what you said today, you had signed just one bank with a small use case, but it sounds like there's more significant things coming in addition to the bank you just announced today. So can you walk through the pipeline there? Thomas Warsop: Sure. So yes, you're absolutely right. We expected to have a relatively longer ramp of new signings. I always expected that you might remember, we can go back a year or more, and I was -- I think I was telling everyone on our earnings calls that I had actually not given the sales team permission to sell Connetic because we wanted to make sure we were ready and that the product was there, and we started actively selling last year first -- in the first quarter of last year. So we're actually quite pleased with the traction that we've gotten, the sales that we have. They're as expected, and that's great. but the real question is what about the pipeline. And we feel very good about the pipeline. Connetic is the fastest-growing portion of our overall pipeline by a significant margin. And that's exactly what we expected. It's exactly what we want. And another important point is we did start -- you mentioned, I think you said a limited use case. It was a very important use case for a European bank was the first signing that we had. And again, we understood that because there's a lot of pressure and focus on financial institutions in Europe around instant payments. We knew that customers would need that help, and that's why we built -- completely built out that portion of Connetic's capabilities. We continue to expand and Bobby was just talking about the continued investment in future products, and Connetic is a big part of that. We continue to expand the functionality and very shortly, we will be launching the card portion of ACI Connetic. And that will significantly expand the use cases that we can support with our general availability versions of Connetic. So that's exciting. But even before we launched that portion, we're seeing significant growth month-on-month on the pipeline. Now these are long sales cycles. These are big decisions for these financial institutions. And again, we expected that, but we are making excellent progress. Pipeline is growing. We continue to add functionality and will continue to add functionality, which continues to increase the level of interest. And then one, I think, quite important point, when I look at the pipeline overall for Connetic, the 2026 potential closes, about 2/3 of those opportunities on a numbers basis are mid-tier financial institutions. So remember, if we go back, you will probably recall that we made a very specific point of saying that we were targeting the mid-tier, which is something we've never targeted as a company before. And so that pipeline, that is actually growing even faster than the total pipeline. And again, 2/3 of the opportunities we're working on right now are in that mid-tier segment, which is completely net new for us. So it's good news all the way around. We're excited about it. Our sales teams are very excited about having these really compelling value propositions for our customers. George Sutton: One other thing on real-time payments. You mentioned the addition of some additional logos. As a golfer, I'll ask it in this context. What hole are we on in your view relative to real-time payment -- penetration? Thomas Warsop: Yes. I like that analogy, George. We're -- I think we're still pretty early in the cycle. We've done a good job at ACI over the last 3 or 4 years of planting flags on the real-time payment side. As I mentioned, we had all the different flavors of real-time payments wins. We had some really important implementations, for example, in Colombia that I specifically mentioned. And we're seeing growth in transactions, and that will ultimately lead to growth in revenue. In 2025, that part of our business grew about 8%, and we expect it to continue to be a significant contributor to our growth overall. But I'd say we're still early days. We've talked a lot about it. We've had good growth. We have a lot of wins to show across the world. But I think in terms of overall adoption and volumes, we're still in relatively early innings. Sorry, you said golf. So on an early hole. Front line, George. Operator: Your final question is coming from the line of Charles Nabhan with Stephens. Charles Nabhan: I want to put a finer point on some of the 2 earlier questions. In the past, you've called renewals as an uplift upon renewals as a tailwind. You've called out CPI, you've called out pricing. You've called out an uplift coming from volumes. Could you maybe touch on that tailwind? And if you're seeing any change in the uplift you're seeing upon renewals? It sounds like we're still early days in terms of the RTP adoption. But any -- are you seeing any changes in that uplift upon renewals? It sounds like we're -- again, it sounds like we're still on the front line, but I wanted to get a little clarity about that as we think about the building blocks for '26 and '27. Robert Leibrock: Yes. I'll jump in, Chuck. I appreciate the question. It's Bobby. And I'll talk about it across both businesses. And I think a lot of the times when we talk about those 4 or 5 areas, we've talked about Payment Software, which I'll come to. And -- but first, I'll start on the Biller business that grew 13% last year. In that business, recurring revenue business, processing model, cloud-native model, that 13% really had a couple of buckets there. One would be the high retention rates we're seeing and the new logos underneath of it and the transactions. We see opportunity to continue to grow in that business, one, through price and also through value-added services we can put into there. And that business model, I see the first 3 buckets more around retention rates, transactions and new logos. I think we have opportunity for the fourth and fifth, which would be price and value-added services. So that 13% very solid. The second part and a lot of the question, you're mostly asking a Payment Software question where we grew 9% last year. Really happy with that off of a double-digit growth in the prior year in 2024. Underneath of that, similar to the Biller business, our retention rates are very nice. You add on top of that the transactions we're seeing, which continue to grow in mid-single digit across the market in terms of transaction base. We get respectable price in this area. And then I think we're in the early innings in terms of the lift you're going to see in there across real-time payments, especially fraud and the payment intelligent capabilities that we're investing in that will continue to grow those customer relationships and then Connetic. So those are the pieces. I will say the fifth though is always new logos. And this is an area where we had much better progress in 2025. And the focus that Eric and the team have across this, our General Manager for this space on new logo, new logo pipeline is only intensifying. So I see good upside in those last 2 buckets in this business around expansion into the rest of the portfolio and new logos. Thomas Warsop: Yes. And Chuck, just one thing to add there. You specifically asked about uplift on renewal. And we continue to see very strong performance in that area. We're extremely good at driving cross-sell, upsell, price and which -- all of which contribute to that uplift on renewal. So we're very good at it. We expect -- we're not seeing -- we're seeing upside there, not downside. Charles Nabhan: Got it. And as a follow-up, I wanted to ask about strategic M&A. You mentioned that in your prepared remarks. I wanted to get a sense for -- and you did a deal -- a small deal last year. I wanted to see if there's any particular areas of interest you could point to with respect to inorganic growth. Thomas Warsop: Yes, absolutely. So we -- I have the same comment I've had for quite some time on this. There are 2 main areas where we're focused, and we will be opportunistic on this. We're not -- this is not something where we're out there every day seeking something to buy. But there are a couple of areas. One would be an ability to accelerate what we're doing with Connetic because as I mentioned before, we continue to add features, functions, capabilities into Connetic. And if we find a technology, and it would likely be a technology acquisition, we buy it because we like the technology. If we found something that would enable us to go faster in building out the -- what we think are the market-leading capabilities of Connetic, that would be very interesting for us. And we certainly have capacity if we find the right opportunities. That's one, accelerate Connetic. Number two, would be if we can -- if we found something that would enable us to expand geographically, for example, there aren't many areas around the world where we don't have a significant presence, but there are a couple of holes, and that could be interesting for us to take a bigger focus on a particular geography, could be interesting. So those are the 2 primary areas that we've been open to, and I think we still are open to those, but with a lot of focus in making sure that we are really pushing on Connetic, accelerating that as much as we possibly can, both with our organic investments that Bobby mentioned before and then potentially inorganic. Although there's nothing -- I don't have anything to announce, but that would be interesting to us. Robert Leibrock: And I think, Tom, if I could add, let me put it in context, Chuck, of our broader capital allocation strategy. So last year, we generated $323 million of cash flow from operating activity, and we returned over $200 million of that to shareholders through share repurchase. We continue to invest in the business. We paid down our debt to 1.2x leverage. What we wanted to do is get out in front of that this year and give investors the confidence that we have similar levels of planning to deploy 50% to 60% of our cash flow from operating activity, which tends to convert at about, call it, 60%, 2/3 of our EBITDA to return that to shareholders this year. In addition to that, that gives us the flexibility to do exactly what Tom just said around opportunistic M&A. And as I said in the comments and you saw it in our press release, and we think we can do that within our 2x leverage that we see. So looking across the market, I think we've tried to give a lot more transparency in how we plan to deploy capital this year and be opportunistic to invest in the business organically like Connetic, continue to look at inorganic opportunities, but maintain our commitment to shareholders with that 50% to 60% return to shareholders through share repurchase. Operator: Currently, we don't have any other questions in queue. I'll turn the call back over to Tom for closing remarks. Please go ahead. Thomas Warsop: Thanks, Jess. And thank you all for joining us, and thanks for the insightful questions. I just want to make a couple of comments to close. We feel great about 2026. We feel great about the momentum we're seeing. Our guidance reflects the clear visibility we have into pipelines, renewals and implementation schedule. We've talked quite a bit about that this morning. We're taking an AI-first approach across the company. We're already seeing tangible benefits in customer outcomes and productivity. And at the same time, we're very clear-eyed about what creates durable advantage in our industry. The platforms we operate are mission-critical. Obviously, they're highly reliable, and they need to continue to be so. They're deeply embedded in our customers' critical workflows, and we sit at the center of payment flows that are global, highly regulated and increasingly complex. From our cloud-native orchestration with Connetic to Speedpay's never miss a payment standards, ACI's leading domain expertise and unrivaled global data has earned us trust over many decades. With a clear strategy, resilient portfolio, accelerating growth and significant financial flexibility, we're well positioned to continue delivering long-term value for our shareholders. Thank you very much again for joining us. Have a wonderful day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Neinor Homes Full Year 2025 Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, José Cravo. Please go ahead. Jose Cravo: Hi. Good morning, everyone. My name is José Cravo, and I'm the Head of Investor Relations at Neinor Homes. Today, we are going to go over results for the fiscal year 2025. And as usual, we are here with Borja Garcia-Egotxeaga, our CEO; Jordi Argemí, our Deputy CEO and CFO. We will start the presentation with the key highlights in Section 1. Then on Section 2, we will provide an update on the closing of the AEDAS transaction. On Section 3, we will review financial results. And on Section 4, we'll finish with key takeaways. After the presentation, there will be a Q&A session to answer any questions you may have. Now I hand over the presentation to our CEO, Borja Garcia-Egotxeaga. Borja Garcia-Egotxeaga Vergara: Thank you, Jose. Good morning, and thanks, everyone, for joining. Let me be very clear about the most important message we want to convey during this presentation. We are executing today, and we are accelerating tomorrow. That is the story. Let's break it down. First, results. Full year 2025 is the seventh year in a row that we delivered on our operational and financial targets, 7 years, not 1 or 2, 7. In a fragmented market through cycles and through volatility, we have consistently done what we said that we would do. That is the value created by this management team. It's discipline, it's execution and focus. Second, AEDAS. In less than 8 months, we have secured full control, doubled the scale of the platform. This is not incremental. This is transformational. With AEDAS, we created the national champion in a highly fragmented market. We moved from being a strong operator to being the clear consolidation leader. Third, the market. The macro is strong. GDP in Spain is growing fast. Employment is solid. Population is increasing and household leverage remains low. At the same time, supply is structurally tight. And when supply is scarce, price move up. But -- and this is important, affordability for our clients remains healthy. We operate in a market where demand fundamentals are real and sustainable, not speculative. That is what we call HALO, Heavy Assets, Low Obsolescence in a structurally scarce environment. That combination creates resilience and long-term value. And fourth, Grow. We are very well positioned. We have a scale. We have the best land, we have visibility, and we have a proven capital allocation framework. We will continue to grow, but we'll do so the same way we have delivered 7 consecutive years of results with discipline, with focus, and with equity-efficient execution. So again, we are executing today. We are very focused in AEDAS integration, and we are accelerating tomorrow. Now let's move to Slide #5, and let's see the numbers. We have closed the year with a land bank of almost 38,000 units. Around 25,000 of those are currently under production and more than 12,000 are in work-in-progress or already finished. That is production capacity. That's multi-year visibility. Our order book stands at record levels of nearly 9,000 units, representing more than EUR 3 billion of future revenues. And during the year, we have delivered close to 3,000 homes to our clients. On the right side of the slide, you have the financials. Jordi will go through them in detail later, but let me highlight 3 points. First, we reached the high end of our guidance. Second, operating margins remained solid with 27% gross margins. Third, at the bottom line, net income came in 7% above guidance, excluding AEDAS. On the balance sheet, leverage increased versus last year as expected, but it remains fully aligned with our strategy and supported by a strong cash flow visibility. Finally, shareholder value creation has been strong with 25% growth in NAV per share plus dividends distributed. So when we say we are executing today, this is exactly what we mean. Please follow me to the next slide to see how the platform has transformed in just 3 years. Now let's zoom out. The Spanish residential market is highly fragmented. Even the largest players have a very small market share. Neinor's platform today is 2, 3 or 4x larger than most of our peers. And in a fragmented market, a scale wins. Look at the evolution since 2023. Our order book is up by almost 7x. Our units under construction tripled. Our active portfolio is up by 4x, and our total land bank has more than doubled. This is not incremental growth. That is a structural expansion. But let me be clear, this is not growth for the sake of growth. It's rooted in a disciplined strategy. It's grounded on our equity-efficient model, and it is designed to create value for our shareholders. Yes, the scale is important, but quality is even more. Please, let's go to next slide. Now let's turn to the quality because scale with the quality doesn't create value. More than 80% of our GAV is concentrated in 8 regions. These are the areas with the strongest economic growth, the strongest demographics and the tightest supply in Spain. This quality land bank is worth more than EUR 10 billion in future revenues. And more important, it was acquired through a disciplined investment strategy. This provides meaningful downside protection and a clear upside in the current market environment. It is important to highlight also the segment in which we operate. We focus on the mid- to mid-high segment, selling homes at EUR 300,000 to EUR 400,000, more than 90% to Spaniards who are buying a residence where they will live. Around 30% of our clients buy with cash, while those that use leverage do so conservatively with an average loan-to-value of 65%. As a result, our buyers enjoy structurally strong affordability metrics with house-price-to-income 40% below the national average. Moreover, in recent years, when house prices started to accelerate due to the structural imbalance of demand and supply, affordability for Neinor clients remains at the same levels or even is improving a little bit. This combination of premium locations, disciplined land acquisition and resilient demand positioning underpins the quality of our earnings profile. Please follow me to next slide so that we can explain why Spain continues to be one of the safest residential markets worldwide, which further strengthens our current setup. For many years, we have been saying that Spain is one of the safest residential markets worldwide. And we say so for a structural reasons. It is true that most residential markets in developed countries are undersupplied. Spain is not unique in that sense. Their real difference lies on the demand side and in the financing structure. The Spanish economy is performing well. Employment is growing. Population is increasing. But more important, the Spanish housing market is much less leveraged than the others. In Spain, typical loan-to-value ratios are around 70% to 80%. While in many other countries, it is normal for buyers to get 90% of the purchase price. Moreover, the cost of financing is also very different. In Spain, our clients are signing long-term fixed mortgages close to 2%, while in other markets, mortgage rates can easily be double that level. So lower leverage and lower financing costs make the Spanish market more resilient to shocks. So when we think about the housing cycle and evolution of house prices, the key variable is not only supply, it is affordability under stress. In markets with high leverage and higher mortgage rates, affordability can deteriorate quite quickly when interest rates move. In Spain, the impact is much more limited. Buyers use 20% to 30% less leverage when buying. They lock in long-term fixed rates 30 years versus mixed rate to more short term in U.K., for instance. And household balance sheets are stronger than in previous cycles. That is why we believe Spain is structurally more resilient. And that is why we believe this market can sustain moderate price growth without undermining affordability, especially in our segment. Now let me step back and explain why we believe Spain offers structural growth opportunities beyond the economic cycles. Over the last years, Spain has accumulated a housing production deficit of more than 800,000 units. To put that into perspective, this deficit is equivalent to roughly 8 years of current annual housing production. As you can see on the chart, household formation is exceeding year-by-year housing production, especially after '21. The gap keeps increasing, and it is expected to do so in the following years. This tells us something fundamental. Spain simply doesn't build enough homes to meet underlying demographic demand. And as population growth accelerates and household formation continues, this deficit does not correct itself. That's why we believe Spain residential is supported by structural fundamentals, not just macro momentum. For a scaled industrial platform like ours in a quality land bank and embedded execution, this creates a long runway for disciplined growth and value creation. And now let me pass the word to Jordi to see a little bit more of AEDAS transaction and financials. Jordi Argemí García: Thank you, Borja. Let's go through the key milestones of the AEDAS transaction, which we have successfully executed in just 8 months. In December, we acquired almost 80% of AEDAS by purchasing the stake from Castlelake. At the end of January, the CNMV authorized the mandatory tender offer and confirmed the price as equitable. Shortly after, we reorganized the Board of Directors, securing full operational control of the company. And since then, we have already implemented decisive actions. First, we have restructured the corporate debt using the Bolus facility. Second, we signed a management agreement so that we are in charge of the key strategic decisions and have full control of cash management. And third, we canceled AEDAS shareholder remuneration policy to fully align capital allocation with Neinor strategy. As you know, the acceptance period of the mandatory tender offer will finish tomorrow, and the final results will be published next week. Regardless of the final percentage that we will own, the strategic objective of this transaction has already been achieved. We have control, integration is well advanced and synergies are underway. With that said, let's move to Section #3 to review the 2025 financial results. On the left-hand side of the Slide 13, you see 3 columns. First, our original guidance for the year. Second, the reported results, excluding AEDAS, which are fully comparable to our guidance. And third, the actual results, including the impact of AEDAS from the 22nd December onwards. Let's start with deliveries. We neutralized around 1,900 units, out of which 1,565 units correspond to build-to-sell projects with an average selling price of EUR 421,000 and 352 units correspond to build-to-rent projects. As anticipated during the year, the higher average selling price reflects the delivery of Santa Clara development, where units are sold above EUR 1 million each. In addition, the build-to-rent projects divested were for an amount of EUR 70 million. And remember that these are recorded directly as margin in the P&L due to the applicable accounting standards. As you can see, revenues from the asset management business are amounting around EUR 20 million, while construction and other revenues contributed approximately EUR 30 million. In total, revenues reached close to EUR 700 million. And this is basically the higher end of our EUR 600 million to EUR 700 million guidance range. In terms of profitability, gross margin stood at 27%, also above our 24%, 25% objective. EBITDA reached EUR 110 million, also at the high end of guidance. And at the bottom line, net income came in at EUR 70 million, representing a 7% beat versus guidance of EUR 65 million. Regarding leverage, we closed the year with an LTV of 16%, which is below our target of 23% and this already includes the dividend distribution executed earlier this month of EUR 92 million. So overall, solid operational execution and cash flow generation from the underlying business. Now looking at the third column, which includes the impact of the transaction, you can see that AEDAS contributed 26 units at an average selling price of EUR 412,000. Basically, it adds EUR 12 million of revenues and bringing group revenues to EUR 709 million. At EBITDA level, the impact is minimal, around negative EUR 1 million, mainly due to the structural costs and the margins for finished products, which are lower. The most relevant impact is at net income level, I would say, due to the purchase price allocation accounting with a positive contribution net of transaction costs and net of one-offs of EUR 52 million. That implies that the net income increases from EUR 70 million Neinor stand-alone to EUR 122 million at a consolidated basis. Note that this is a non-cash item that was triggered by the badwill arising from the M&A transaction. This extraordinary profit represents an anticipation of the EUR 450 million target net income we announced in June of last year. And if you look at the net debt, it increases to EUR 1.1 billion. This basically implies a loan-to-value of 36%, which again is slightly below to our 37.5%, 40% target, including guidance. So with that said, let's move to the Slide #14. Let' s zoom out for a moment and go back to basics. We operate a highly industrialized and scalable platform in a fragmented market. Our business consists of buying raw land and transform the plots into new homes for our clients. And as you can see, over the last 9 years, we have perfected this model, delivering more than 16,000 homes across Spain. Financially, this translates into more than EUR 5 billion of revenues, industry-leading gross margins of 28%, more than EUR 900 million of EBITDA and more than EUR 600 million of net income. And that profitability has not remained in our balance sheet. It has been returned to shareholders through dividends and share buybacks. If we focus on our strategic plan, we have distributed EUR 450 million with a further EUR 400 million forecasted for the upcoming 2 years. In practical terms, these companies will return approximately 80% of its market cap as of March 2023 to shareholders in only 5 years. And we have done this while doubling the size of the company. Originally, the plan contemplated to reduce the size of the company by 30%, but instead, we are doubling earnings per share. So we have demonstrated that we are disciplined and be sure we will continue being. And now I hand over the presentation back to Borja for the key takeaways. Borja Garcia-Egotxeaga Vergara: Thank you, Jordi. So let me close by summarizing the investment case in 4 clear points. First, our positioning. We operate in heavy tangible assets, land and housing. These are real assets with very low obsolescence risk. In a world increasingly exposed to technological disruption, our business is structurally protected. People will always need homes and the real raw material is the land, not the metaverse. Second, our asset base. We control the largest and highest quality land bank in Spain. Fully permitted land in prime regions is scarce. Scarcity protects value and scarcity embeds margins. When you own the right land in the right locations with permits in place, you control both timing and profitability. This is a structural competitive advantage. Third, the market environment. As we have seen, Spain is structurally undersupplied. At the same time, the housing market is under leveraged with conservative mortgage structures and resilient affordability. That combination makes the Spanish residential market one of the safest globally. And importantly, this structural imbalance does not disappear if GDP moderates. Supply constraints are long term. Demand fundamentals are demographic. This is not a short-cycle story. And fourth, growth. We will continue to grow, but with discipline. Every investment must be equity efficient. Every transaction must be value accretive. Scale is important, but discipline is what creates value. That is why we believe Neinor is positioned not just for this cycle, but for the long term. Thank you very much. Jose Cravo: Operator, we can now start the Q&A session. Operator: [Operator Instructions] We will take our first question. And the question comes from the line from Ignacio Domínguez from JB Capital. Ignacio DomÃnguez Ruiz: I have a question on outlook for the next few years. What gross development margins do you expect to deliver on a consolidated basis, particularly as the combined Neinor, AEDAS platform stabilizes? Jordi Argemí García: Everything regarding the business plan and the future, we prefer to wait because, as you know, we are in the middle of the Mandatory Tender Offer. So results should come -- will come next week. And after it, we try or our intention is to present the business plan and all the guidance at the AGM that will be in April. So a few weeks from that. We don't expect any changes to what we presented in the tender offer in all the guidance for the JVs. But in any case, it's better to wait for the final result of the tender offer to answer. Operator: We will take our next question. The question comes from the line of Fernando Abril-Martorell from Alantra. Fernando Abril-Martorell: I have 3 questions, please. First, on execution. So what is your target for new housing starts in your fully owned portfolio in 2026? And also would like to -- if possible, if you can elaborate a little bit on the constraints you may be facing in launching new developments and whether you see any change in the stance from public authorities regarding permits and approvals. Second, on land purchases. I don't know, you've raised -- you've done another capital increase aiming for new growth opportunities. So I don't know if you can comment a little bit more on this. And if you have any -- I don't know if you have any land acquisition target for this year as well. And third, maybe you will not answer much on this based on what Jordi just said. But if we assume that you paid the remaining EUR 150 million dividends this year, I don't know if you can comment on your year-end net debt target or loan-to-value based on this assumption. Borja Garcia-Egotxeaga Vergara: I will start with the first question that was regarding -- I understood about what we are going to launch in this year for the year '26 which target. As we said during the tender offer, the new size of the company of the whole group between Neinor and AEDAS will lead us into a situation where we will be delivering between 5,000 to 6,000 units per year. So right now, we are just closing, as Jordi was saying, the business plan. And therefore, all the portfolio is being adapted into that metrics that I'm telling you. So more or less, you can consider that during the year, we should launch enough to recover in year '28, '29 those 5,000 to 6,000 units. Regarding the situation with the politics and the permissions, well, you know that in Spain, the situation with the house crisis is getting louder year-by-year. And this is making most of the regions we are seeing in all the regions, in fact, where we are working, how the rules are changing. Basically, what all the regions are trying to do is to do it easier to get the licenses to short times and to try to increase the supply. All of this is good for our business. So we are happy with the situation in terms of the action of the politicians that we have been asking for, for so long. Regarding your second question, the land purchase, I give the word to Mario. Mario Lapiedra Vivanco: Okay. Well, as mentioned, we are closing the investment strategy. And in the coming weeks, we will provide further details. But as of today, we can say that we have a good pipeline of above EUR 500 million in the different living verticals, both in build-to-sell in Senior, in Flex and in strategic land. We will keep discipline. So we know that today, we are the rock stars of the sector, but our main mantra is to keep the discipline that has allowed us in the last years to invest more than EUR 3 billion, but providing IRRs of above 20%. So that's a bit of what we can say today. Jordi Argemí García: I take the last one, the net debt target. As I said before, Fernando, we prefer not to close down mandatory tender offer, and we will come back in a few weeks to explain the business plan in details. In any case, as I was saying before, whatever comes will be aligned with what we presented in June. And remember that the debt target there was 20% to 30% Neinor HoldCo Level on a consolidated basis should be around 40%. Then it will go down because we will deleverage AEDAS. Fernando Abril-Martorell: Okay. Just a quick follow-up on the politics. Are you willing to play via affordable housing or not it's not a priority for the moment? Borja Garcia-Egotxeaga Vergara: Well, Fernando, regarding the affordability houses, we must say that right now, more or less every year, we are delivering around 200 houses of protection. We are delivering, for instance, last year, we did 500 units that we deliver what we call affordable housing that at the end is houses that instead of EUR 300,000 to EUR 400,000 case, as I have said in the presentation, cost between EUR 225,000 to EUR 275,000 and we deliver this type of houses, for instance, near Madrid in the places where we can get to buy land at cheap price. Regarding affordable housing in the rental segment, we have an active program now with Llei de l'Habitatge de Catalunya that we are building for them 4,700 units. We keep looking the different opportunities that we are seeing with Plan Vive Madrid and others in Valencia or in Navarra. Basically, we need to be very sure before we enter into these operations that we have a clear exit when we get in and that the rentability -- the profitability of the transaction is enough for that exit. So being a priority to contribute in the affordable housing solution in Spain, we are also very close to the design of these programs in order to try to make them, I think, more profit -- a little bit more profitable and it's something that, for sure, Neinor will play an important role in the following years. Today, it's not in our business plan, but it's something that we work with. Operator: [Operator Instructions] We will take our next question, and the question comes from the line of Manuel Martin from ODDO BHF. Manuel Martin: Gentlemen, just one follow-up question and then 2 other questions from my side, please. The potential 5,000 to 6,000 units deliveries per annum, more or less. Just to make sure, this is build-to-sell and from your own portfolio as far as I understood. Borja Garcia-Egotxeaga Vergara: Yes. Basically, right now, we are delivering more than just small amounts of affordable housing that are more for the rental segment that both Neinor and AEDAS we are doing, but not too many units. Most of it is build-to-sell product. build-to-rent, private build-to-rent, we are not launching many, many developments because there was a loss of interest in the markets. Manuel Martin: The 2 other questions, one general question. I don't know if you can answer that before your AGM comes. In terms of future growth, would it be able for you to indicate whether you would like to grow through JVs or through other acquisitions in the future? Do you have a preference there, which you can share? Or is it a bit too early? Mario Lapiedra Vivanco: I'll take this one, Manuel. Mario here. Well, we are monitoring always the full on balance investment and the JV co-investment vehicles. We have a queue of investors in our offices. That's the reality because there are less players and the appetite has increased in the last months. So we are selecting very well, which deals we do directly and which ones we prefer to do on that vehicles. So we have flexibility in the budget depending on the best option for our shareholders. Manuel Martin: I see. Okay. And third and last question, actually, maybe a bit technical and for curiosity, the Purchase Price Allocation gain you had for 2025, the EUR 50 million to EUR 60 million roughly. Can you give us an insight how you arrived to that amount? Why is it EUR 50 million? Why not EUR 150 million, just for curiosity? Jordi Argemí García: It's a good curiosity. The only thing that this is -- for us, this is not good because as I said before, this is a non-cash item. We -- this implant anticipate part of the future revenue, accounting revenue that we set in the guidance. So for us, the preference was to be at 0 being honest. But this is impossible because accounting rules do not allow that. So what we have done is working with the auditor to try to minimize as much as possible this level or this amount. It comes from the difference between the valuation from third party, in this case, Savills, non-CBRE and the purchase price finally paid, but also we have included additional structural costs because obviously, one thing is the asset value. Other thing is a corporate company, a corporate that needs to deliver those units. And obviously, we have some structure. So it's a combination. But again, our preference was to be at 0 being honest. Operator: There seems to be no further phone questions, if you wish to proceed with any webcast questions. Jose Cravo: Thank you. So we'll go with the webcast now. We have here only one question. It's with regard to the results of the tender offer, the mandatory tender offer that will come out next week. If we can give some details on what is the strategy if we don't reach the squeeze out. Jordi Argemí García: Okay. I take it. I mean, let's see what happens next week. If we get the squeeze out, fantastic. If we don't get the squeeze out as you are questioning, for us, it's also fantastic. I mean, for us, the deal is completed already independently on the percentage that we finally own by next week. We control the company. We control all the policies that's what matters to us. So once the mandatory tender offer is finished and imagining a scenario in which we don't get the squeeze-out -- our focus day after will be the activity of the company. We will not be there trying to buy again those minority shareholders that want to keep and be in the company, fantastic, we welcome them. But our priority will be completely on activity. That's the reality. Also, that means that the dividend we canceled because we prefer to use the cash to deleverage the company. So dividend distribution is not something relevant today at AEDAS level. This doesn't mean that in Neinor Homes, we will have capacity to reach the guidance we set, and we don't need actually the cash coming from AEDAS to accomplish with these targets for the next 2 years. Remember that AEDAS has around EUR 300 million of corporate debt; that is the bond plus the commercial paper. As I was saying, that's our priority for the coming 1 year or even 2 years. So whoever is there because we don't reach the squeeze-out, should be a medium- to long-term investor together with us. And one last comment from my side is that in a delisting tender offer, normally, the company, the buyer needs to allow during 1 month potential purchases if minority shareholders want to sell 1 month later, the tender offer. In this case, it's not a delisting. So Neinor is not obliged to continue buying once the mandatory tender offer is fully completed. Jose Cravo: Thank you, Jordi. We have no further questions on the webcast. So that concludes the conference call. Thanks, everyone, for joining. Jordi Argemí García: Thank you. Borja Garcia-Egotxeaga Vergara: Thank you. Mario Lapiedra Vivanco: Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning. We welcome you to EDP's 2025 Final Year Results Presentation Conference Call. [Operator Instructions] I'll now hand the conference over to Mr. Miguel Viana, Head of IR and ESG. Please go ahead. Miguel Viana: Good morning. Thanks for attending EDP's 2025 Results Conference Call. We have today with us our CEO, Miguel Stilwell de Andrade; and our CFO, Rui Teixeira, which will present you the main highlights of our strategic execution and 2025 financial performance. We'll then move to the Q&A session, in which we'll be taking your questions, starting with written questions, you can insert from now onwards at our webcast platform and then by phone. I'll give now the floor to our CEO, Miguel Stilwell de Andrade. Miguel de Andrade: Thank you, Miguel. Good morning, everyone, and welcome to the 2025 results conference call. Just before presenting our results yesterday, I just wanted to address the extreme weather events that impact Portugal. And as you know, Portugal was hit by a series of devastating storms starting at the end of January and then well into February to a certain point, had winds over 200 kilometers an hour, which really caused unprecedented physical damage to infrastructure in the country, including our own network infrastructure and also customers. I think the first thing to say is that we immediately responded with a very coordinated large-scale support from all the internal and external teams. I mean we had people coming in from Spain, Brazil, France and Ireland, and I just wanted to thank also all those teams. The networks and the hydropower teams worked around the clock to limit the damage caused by the storm and to restore power to our consumers. Naturally, the first thing is our thoughts are with the people and the communities affected. We understand the damage that this has caused, the frustration from people that had no power over those weeks. And from the beginning, our first priority was to reestablish power in the quickest, safest and the most effective way possible. We have now recovered 100% of the customers, only a very few specific situations outstanding that will be resolved very shortly. But I think the worst is definitely over. I also wanted to extend a really sincere word of appreciation for the absolutely extraordinary professionalism and dedication demonstrated by the teams, both internal and external across all the country. I mean the response from grid repair to the hydro power management, the community support, emergency logistics. I mean, it was absolutely exemplary. And I think it really showed the best of EDP in terms of the commitment to stand with our customers and with the communities that we serve, especially in the moments where they need us most. So I will come back to this later in the presentation just to talk a little bit about the impact on us in more detail. But I would move now into the bulk of the presentation. And on to Slide 3, which essentially shows an overview of our results for 2025. And I'd start off by saying EDP had a very strong set of results for 2025. The recurring EBITDA reached EUR 5 billion, so outperformed the EUR 4.9 billion guidance. It's mostly on the back of a better-than-expected fourth quarter in the integrated segment in Iberia from above-average hydro resources in the fourth quarter. If we compare that with 2024, EBITDA was up 1% year-on-year. So it reflected a rebound in EDPR's performance, which as you know, had record capacity additions towards the end of last year. Recurring net profit came in at EUR 1.3 billion, so also above the guidance, although it's down 8% versus 2024, and that's mostly explained by higher financial expenses. Net debt ended the year very well. So at EUR 15.4 billion, better than the EUR 16 billion guidance, and that led us to have a great FFO over net debt of 21% compared with the 19% guidance. So the upside versus guidance at all levels allowed us to then increase the shareholder return. So we're proposing a dividend of EUR 0.205 per share. So that's a small increase, which will be paid this year already in 2026, obviously subject to the General Shareholders Meeting approval. If we move forward into the next slide to talk a little bit more detail about the FlexGen and customers. So here, we see a structural uplift in the value flexibility. And I really wanted to highlight, if you see here on the left-hand side, there's a chart from the International Energy Agency recently that shows the capture rates in Spain by technology. And it shows how the market is increasingly rewarding assets that can respond to price volatility and the system needs. And you can see natural gas capture prices obviously rising in 2024 and '25. Hydro with reservoir also trending upwards and more intermittent and less flexible technologies, particularly solar, you see obviously a decline in capture rates in 2025. The takeaway here is that flexibility is being structurally priced in and that we expect that to remain a long-term feature of the market. And you can see that in the figures for EDP for 2025. The hydro net generation was almost 10 terawatt hours. It's down 2% year-on-year, but still a very strong year for them. Hydro premium versus baseload increased to 21%, so reinforcing the value of the flexible output. And on pumped hydro, the pumping volumes increased to 2.3 terawatt hours on the year, so up 24% year-on-year, with the pumping spread versus baseload reaching 75%. If you look at the right-hand side of the slide, and we give there an update on the reservoir levels in 2026. So given the heavy rainfall, reservoir levels are at historically all-time highs. They've reached around 96% in February 2026, up from roughly 76% in January. And that's consistent also with the hydro production index in Portugal, which has doubled its historical average year-to-date. So obviously, that's following the heavy storms, which I just talked about in Portugal in January and February. One important thing to note is that the market consequence of these extreme weather conditions is that we also had abnormally depressed pool prices, which together with higher ancillary services costs in February. It's shown by the Portuguese pool prices going from around EUR 71 per megawatt hour in January to roughly EUR 8 per megawatt hour until mid-February. So more depressed pool prices in February and higher ancillary service costs. If we move forward to the next slide and just in a little bit more detail on the storms here in Portugal in the first half of 1st February essentially. First, as I mentioned, just highlighting the efforts made by the team. So a huge effort done to restore power and to make sure that the dams and that the flooding was limited. The storms impacted around 6,000 kilometers of grid, damaged around 5,800 towers. We had more than 2,000 people mobilized on the ground, around 2,400 people. And as I said, we were able to restore 100% of the customers already by this week. On hydro, we continuously monitor the rainfall. And I think here it was great to see using advanced hydrological model, so we were able to proactively sort of anticipate what was coming down the road and to be able to also anticipate some of the discharges and coordinate that with the environmental authorities. So I think there was a meaningful role in flood control. Then on the practical side with customers and communities, we have put in place schemes to ensure that payments and invoicing support for the customers impacted as well as the assistance with the solar DG reinstallations. On a more social level, we also delivered over 90 tons of essential materials, including fans, roofing tiles, parklands basically to help people protect their homes. And we also helped people in more isolated areas get access to communications, including Starlink devices and power banks. In terms of financial impact, we're expecting that this will result in around EUR 80 million in CapEx with infrastructure to rebuild, will be partially supported by insurance. We're still evaluating additional cost and impact, and we'll update that in the first quarter results, but clearly shows increasing vulnerability that climate change is causing and the importance above all of resilient flexible systems and long-term investment in networks. And that takes me to the next slide, where I wanted to just stress that already before these events as of last year, we're already significantly ramped up the investment to respond to the growing needs of the system. The electrification, the renewables integration, the grid resilience, gross investments for the period '26 to 2030 will reach EUR 4.1 billion compared to the EUR 2.6 billion in the '21 to '25 period. So that's a 58% increase overall in Iberia, slightly more in Portugal than in Spain, although both geographies are contributing significantly to Portugal around 66%, so almost 70% increase. The big part of this is strengthening grid resilience. We're assuming around -- or more than EUR 500 million for grid resilience to ensure that the network is prepared for higher loads, more distributed generation and greater system complexity. And fortunately, this greater investment is underpinned by much stronger regulatory visibility, as we showed here on the right-hand side. So as you know, the new regulatory framework sets up the 6.7% nominal pretax return for this period until 2029 in Portugal. And in Spain, the framework establishes a 6.58% return for the period out to 2031. So importantly, both framings closed as of the end of last year, giving us clarity and stability for the upcoming investment cycle. I think it's also important to note that in Portugal, the 2026 state budget clarifies and -- the conditions under which new investments in the networks are exempted from the extraordinary tax. So that supports really this incremental investment that we're doing in the networks. Still on networks. If we move forward to the next slide, you can see that the new regulatory terms and approval plans will allow an EBITDA growth in Iberia for networks. So it grows to around over EUR 1 billion over this period. We have to consider that in this period in Portugal, there are legacy revenues that end in 2026 worth around EUR 40 million, removing that means that we'd have a normalized 2025 EBITDA of around EUR 0.89 billion and that then reaches the EUR 1.05 billion in 2028. So that's an 18% EBITDA growth for '25 to '28 with -- updated already with the new terms. So this isn't just a one-off to 2028. This then continues to grow beyond 2028, and that's supported by the approved returns and also the investment plans that we discussed on the previous slide. So all of this gives us confidence in the continued momentum well beyond 2028 to 2030 and beyond that. If we move on to the next slide and just talking quickly about Iberia. I think what I'd say here is that Iberia is entering a period of much stronger electricity demand growth, driven by electrification. On the left, you can see the power demand growth in 2025 versus '24. Portugal leads at 3.6%, Spain at 2.8%, which means Iberia clearly outperforming several of the European markets. And it's not just a 1-year effect. I mean obviously, we're seeing strong momentum into 2026. So just in January, the demand was 7.9% in Portugal and 4.8% in Spain already adjusted for temperature. And going forward, we see our estimated 2% CAGR in the Iberian electricity demand over the period leading up to 2030. So demand growth should be supported overall, not just by the economy is doing well, but by more than 18 gigawatts of data center projects pipeline that have been announced or that are publicly available. I'd have to highlight here that EDP is obviously engaging with a lot of these projects, 2 of the more advanced ones that's certainly here in Portugal are the Merlin Data Center, North of Lisbon at 180 megawatt. We had an MOU signed with them back in July of 2025. And also the Start Campus project in Sines with an MOU that we signed yesterday. And the Sines project, as you know, is expected to reach 1.2 gigawatt over the next couple of years. And I can detail a little bit more what that means in the Q&A if you think that's appropriate. If we move forward to still to talking about Iberia. And this is a slide, which I think is also extremely important because it's not just about demand growth. It's also that Iberia combines this demand growth with structurally affordable power prices. And that's supported by improving system fundamentals. And that's really an important advantage for customers, for electrification, for the broader competitiveness of the economy. So when there's so much talk in Europe and elsewhere about affordability and about competitiveness, Iberia has a really distinctive advantage in Europe, and I think we will benefit from that sort of on the electrification front. On the left-hand side, you can see the evolution of the B2C electricity prices. And the key takeaway is that Portugal and Spain fit among the most affordable markets in Europe, around 17% below the European average. Going forward, at the European level, Northern Europe faces higher expected network investments that typically puts upward pressure and then user prices over time. But by contrast, in Portugal and Spain, we have several structural elements that we think will support the affordability. One is that the historical electricity system that is expected to be fully paid by 2028. That means that there will be significant cost reductions in the tariff structure going forward. Second, there's a gradual phase out of legacy support schemes like the Feed in Tariffs in Portugal and the Recore scheme in Spain that also reduces access tariff costs. And so in Portugal, specifically, the regulator has simulated annualized reductions in the B2C reference end user tariffs from 2026 to 2030. So that helps create room to accommodate new system needs like ancillary services, capacity mechanisms, additional investments in networks without compromising competitiveness. So I think it's -- we are able to get the best of both worlds, which is more investment, more ancillary services, more capacity mechanisms to make sure that we have a stronger, more resilient system and still have sort of annualized reductions in the end user tariffs. Moving on to EDPR. Again, you have more detail on that yesterday. So just a quick note here. We are seeing really strong execution momentum and better visibility on the business and plan delivery. Over the last 6 months, EDPR secured 1.3 gigawatts of capacity. And on the left-hand side, you can see the main projects secured during this period. It's a combination of PPAs with utilities, global tech companies. We also have Build and Transfer agreements in the U.S. So it's really a diversified set of offtakers and structures. And across the '26 to '28 period, we already have 2.8 gigawatts secured, and we expect to continue on securing more projects over the coming weeks and months. If we break it down year-by-year, 2026 is already 100% secured. So almost all of that under construction, a couple of projects coming under -- into construction in the very short term. So that gives us very good confidence on the 2026. '27 is already 65% secured and 2028 is at 10% secured. So that gives us roughly already 55% secured for '26 to '28. As I say, we have good visibility on additional projects that are coming down the pipeline to help us meet the rest of this project. And with that, I'd stop here, I pass it over to Rui to go through the '25 results in more detail, and I'll come back for closing remarks. Thank you. Rui Manuel Rodrigues Teixeira: Thank you, Miguel, and good morning to all. So let me start with the EDP's results. Recurring EBITDA reached EUR 5.03 billion in 2025. It's up 1%, but if we exclude asset rotation gains and FX, the underlying growth was 7% year-on-year driven by strong EDPR performance in resilient network space. So looking at the recurring figures by segment, Renewables, Clients and Energy management increased by EUR 65 million year-on-year, reaching EUR 3.4 billion and all represent 69% of group EBITDA. Within this segment, the Hydro Clients and Energy Management declined EUR 216 million year-on-year, mainly reflecting the normalization of gas sourcing conditions in Iberia versus the external environment that we have in 2024. This was more than offset by strong EDPR performance up to EUR 190 million year-on-year, reflecting 2024 record additions translating into higher generation. On the network side, recurring EBITDA stood at EUR 1.54 billion, now representing 31% of group EBITDA. While EBITDA decreased EUR 68 million year-on-year, this is mainly explained by Brazil FX impact and the assets of capital gains, again, excluding FX and asset rotation, the underlying networks EBITDA increased 3%, supported by a positive performance in Iberia, both from a regulatory framework and reinforce operating discipline. So finally, recurring OpEx decreased 2% year-on-year or 5% in real terms, reinforcing also the operational discipline, which I will detail in the next slide. So if you look to the OpEx, this slide highlights an important enabler of our EBITDA performance, which is sustained cost discipline. Recurring OpEx decreased EUR 1.88 billion, trending down year-by-year, a total reduction of around EUR 160 million in '25 versus '23. Over the last 12 months, inflation was around 3%, and yet we still delivered a 2% nominal reduction in recurring OpEx. Excluding FX, OpEx is slightly below, which means that we are effectively absorbing inflation through efficiency and productivity gains. This is translating into improved efficiency ratios. OpEx as a share of gross profit improved from 28% in '23, down to 26% in '25. Key drivers for these, EDPR is delivering efficient growth. We're reducing adjusted OpEx per megawatt by 12% year-on-year to EUR 40,000 per megawatt, this while scaling capacity, a leaner more focused workforce aligned with the company's growth priorities, digital and AI-driven initiatives to improve O&M efficiency, decision-making, customer experience. So I think the message is very clear. We are growing and investing while structurally improving the cost base. And obviously, this supports cash generation as we deliver the plan. So now let me move to FlexGen and Clients segment. EBITDA for '25 stood at EUR 1.46 million. This is down 13% year-on-year, and this reflects the normalization versus an extraordinary 2024, but also flexibility revenues structurally increasing. In Iberia, 2024, as you know, was impacted by extraordinary gas sourcing costs. 2025 baseload hedging price normalized from EUR 90 per megawatt hour to EUR 70 per megawatt hour. However, this was partially offset by stronger flexible generation revenues. Pumping generation increasing by 24%, pumping spreads reaching 75% over baseload prices. Hydro premium improving to 21% and CCGT generation increasing by approximately 3 terawatt hours, reflecting the system operator needs. In Brazil, EBITDA declined from EUR 184 million to EUR 156 million, mainly due to ForEx impact. So overall, while the headline EBITDA reflects normalization, the structural uplift in flexibility was very solid with EUR 0.3 billion contribution to overall group. So now we move to Slide 15, turning to EDPR, which we also commented on yesterday's call, recurring underlying EBITDA ex ForEx grew by 27% year-on-year. This growth, very robust growth reflect a significant step-up in the generation following the record capacity additions in '24, offsetting worse renewable sources and also normalization of selling prices primarily in Europe. Overall, EDPR continues to deliver strong operational momentum and translate to capacity growth into earnings growth. Now looking at the Networks EBITDA on Slide 16. Recurring EBITDA reached EUR 1.54 billion in 2025, representing a 4% decrease year-on-year, but this is primarily explained by devaluation of the Brazilian real. The absence of asset rotation gains in Brazil, which amounted to EUR 71 million in '24, combination of deconsolidation of transmission assets, the decrease on the distribution company's residual value update and transmission inflation update. But this is compensated overall by improving operating performance. Again, excluding FX and asset rotation, underlying EBITDA increased 3%. It has an important contribution of EUR 56 million in EBITDA from Iberia, the following inflation update in Portugal and RAB growth overall. So all in all, the network segment is showing a resilient operational performance with a very supportive regulatory farmwork as Miguel just described going into the future. On financial costs, following slide. Net financial costs increased from EUR 865 million to EUR 989 million. There are 2 mains drivers to this. The first one is that net interest costs, which add about EUR 54 million. They reflect higher average debt and a higher cost of debt in Brazilian reals, where the average cost rose from 11.7% to 14.1%, reflecting the macro conditions in the country. Excluding Brazil, the average cost of debt reduced to 3.3%. Second, lower capitalizations and other effects contributing with an addition EUR 69 million. This is largely explained by the EUR 1.2 billion reduction in work in progress as projects enter the operation, and therefore, reducing capitalizing interest. If you look to the right-hand side, average nominal debt by currency remains broadly stable year-on-year. The portfolio continues to be predominantly euro-denominated with 64%, followed by U.S. dollar, 16%; and Brazilian real at 15%. Finally, in terms of recent financing activity, we issued a 6-year senior bond EUR 650 million in January with a 3.25% coupon. So this confirms the competitive access of EDP to funding in the debt markets. Now let's move to the cash flow on the following slide. Organic cash flow reached EUR 3.3 billion, up EUR 0.5 billion year-on-year, driven by EBITDA improvement in working capital management. Net interest paid amounts to EUR 0.8 billion, partially offsetting the operating improvement. And on investments, gross investments totaled EUR 3.9 billion, mainly EUR 2.4 EDPR and EUR 1.1 billion in Electricity Networks, plus EUR 0.4 billion in FlexGen and Clients. These gross investments were funded through EUR 1.6 billion of asset rotation and EUR 0.8 billion of Tax Equity proceeds. There are also EUR 0.5 billion of other impacts, mainly related with payments to fixed asset suppliers. So as a result, a total of EUR 1.7 billion of net cash investments, of which close to 50% in electricity networks and around 40% in EDPR. Now on Slide 19, net debt stood at EUR 15.4 billion, down from EUR 15.6 billion at the end of 2024 and outperforming EUR 16 billion guidance that we gave to the market. The key drivers for the change in net debt includes EUR 3.3 billion of organic cash flow. Obviously, the EUR 0.8 billion of dividend annual payment and the EUR 100 million share buyback throughout '25. The EUR 1.7 billion of net cash investments that I just explained, also EUR 0.8 billion of regulatory receivables and about EUR 0.3 billion from FX and other, mostly related to U.S. denominated debt. So as a result of cash flow management, balance sheet discipline and obviously, very strong operational cash flow, we do have solid credit metrics with 20.9% FFO net debt and 3.3x net debt EBITDA. Now on the net profit. Net profit reached EUR 1.28 billion. That's a reduction of 8% year-on-year. And this is mostly reflected or driven by the higher EBITDA, EUR 74 million, higher D&A and provisions, increasing EUR 60 million year-on-year, reflecting the investment path, higher net financial costs due to higher cost of debt and lower capitalizations, slightly higher income taxes and noncontrolling interests. Excluding asset rotation gains and the ForEx, the underlying net profit increased 3%, confirming a very solid operational performance, as we just described. Reported terms, net profit reached EUR 1.15 billion, including the negative impact of EUR 130 million, mostly related with some nonrecurring items in EDPR. Year-on-year reported net profit, therefore, increased 44% also driven by EDPR performance rebound compared to a negative 2024. This improvement in net profit supports our proposal to increase the dividend to EUR 0.205 per share, up 2.5% versus the guidance to be paid in 2026, obviously subject to the approval at the shareholders' meeting. And now let me just address a topic, which I think is relevant regarding the net income sensitivity to power prices versus what we presented at the CMD. So on this slide our -- just again to remind everybody. So our exposure to energy market is well diversified. And as you know, we have a very active energy management. The portfolio is predominantly long-term contracted. This provides strong cash flow visibility and obviously reduces short-term impact from price volatility. In Iberia and Brazil, we have a structural short position in generation, which hedged through our supply business, so partially offsetting wholesale price movements. At the CMD, we disclosed that the simultaneous 5 years per megawatt hour movement in all markets, would imply approximately EUR 60 million impact on 2028 net income. Since then, Iberia 2028 forwards have declined around EUR 10 per mega hour. But on the other hand, U.S. and Brazil forward curves are moving upwards. So this portfolio diversification plus an active energy management have actually reduced the sensitivity. So today, the same 5 years per megawatt hour movement across all markets in the same direction would imply approximately EUR 45 million impact on net income 2028 again versus the EUR 60 million that we presented at the CMD, so a reduction on the sensitivity. The merchant exposure split is about 65% Europe, 20% Brazil and 15% North America. So with this, I would hand over to Miguel for final remarks. Thank you. Miguel de Andrade: Thank you, Rui. As you say, I think to push on the sensitivity to power price is an important point to note because I know there are questions on that. Anyway, if we move forward to the final slide, just before we open it up for Q&A. So summarizing the 2025 results and how we're seeing 2026 and beyond. First in relation to '25, I think it's undeniable that it was very strong execution and delivery of what we had promised. Across the group, we delivered ahead of guidance, and we're seeing a clear structural change in FlexGen and Clients with the value flexibility coming through very strongly. At the same time, EDPR also improved its performance, has its continued focus on A-rated markets. It's got better visibility on the business plan execution. In networks, we have significantly improved visibility with the regulatory periods closed in Portugal and Spain, and we also advanced in Brazil with the extension of the concessions. And importantly, all of this was delivered with financial discipline and increased efficiency in Sweden. Spoke about, particularly on the cost side, but also on the debt side, supporting the maintenance of sound credit ratios. Second, looking at the 2026 guidance. We expect to recurring EBITDA of around EUR 4.9 billion to EUR 5 billion, and this is supported by the balanced contribution across the portfolio. We have the networks around EUR 1.5 billion to EUR 1.6 billion. And EBITDA at around EUR 2.1 billion as mentioned yesterday. FlexGen and Clients is around EUR 1.3 billion to EUR 1.4 billion, and we reaffirm our recurring net profit of EUR 1.2 billion to EUR 1.3 billion. On the 2028 targets. And over the course of the next couple of years, we continue to expect around EUR 12 billion of gross investments. And I say this will be funded with discipline and supported by around EUR 6 billion of asset rotations and disposals. We'll keep our balance sheet targets unchanged. So we're targeting FFO over net debt of around 22%. And in terms of earnings delivery, we remain committed to the EUR 5.2 billion of recurring EBITDA and the EUR 1.3 billion of recurring net profit by 2028. So overall, this is consistent. We executed strongly in 2025. We have very clear visibility for '26, and we are reiterating our 2028 guidance. With that, happy to turn it over to Q&A and back to you, Miguel. Thanks. Miguel Viana: We will begin by addressing the questions submitted in writing. After that, we will move on to the live questions by phone. [Operator Instructions] So we'll start with the written questions. And we have for first question from analyst at RBC and the other analysts GB Capital, Deutsche Bank, CaixaBank regarding the guidance for 2026 that we provide. So we are guiding stable EBITDA versus what we present at CMD, while at EDPR, there was a slight revision. So if we can explain this in detail, this better guidance. Miguel de Andrade: Sure. So as I mentioned, I think 2026 we're very comfortable with it. I mean a couple of points that have improved since the Capital Markets Day last November. The regulated rate of return for the distribution in Portugal was better than the initial proposal. So that was an upside. The callback was suspended as of December. And previously, we're assuming that we will have that over the next couple of years. So that's also positive. January and February saw obviously very strong hydro inflows. And I showed you the numbers in terms of how the reservoirs are, they're sort of all-time highs. So full capacity there. So good visibility also in the next couple of months in terms of hydro. On slightly negative low wholesale prices in February and higher than normal ancillary services in terms of supply, also some transmission grid restrictions due to the storms, still be fixed. So that's on the negative side. But we are expecting these to decline over the next couple of months and also the wholesale prices in Iberia to normalize again, also over the next couple of months. On ForEx and FX, we have a slightly lower dollar versus the euro, as we commented yesterday on the EDPR level. But on the other hand, we're seeing a positive rebound of the Brazilian real. So we're now seeing BRL 6 per euro versus our business plan assumptions of BRL 6.6 per euro for 2026. So quite a few positives, a couple of negatives, but all in, quite frankly, we feel very confident with the 2026 guidance. Miguel Viana: Yes. We have then a second question about net debt. So what contributed to the positive deviation of our net debt figure in 2025, so the EUR 15.4 billion versus the EUR 16 billion guidance that we have provided. And also a question around update for net debt expected evolution over 2026. Rui Manuel Rodrigues Teixeira: Thank you, Miguel. So first of all, Q4 was very good in terms of operational call, strong contribution from the integrated segment in Iberia. So that's the first one. Obviously, there is some impact from working capital that we will see then reverting in the -- now in 2026. So what I would say is that, first of all, 2026 we are looking at around EUR 16 billion of net debt towards the year-end. Typically, as you know, we have, during the first half rise in net debt coming either from this working capital. Also, bear in mind that we have the Greek transaction, but also dividend payments in the second quarter. And then as we start having the -- also the cash in from asset rotation tax equity proceeds towards the end of the year, it tends to go down again. So that's why we are looking at around EUR 16 billion by the 2026. Miguel Viana: We have then a question around the news of yesterday regarding memorandum of understanding with Start Campus. What does it mean for EDP and this engagement? So questions from Alex from Bank of America, Fernando, CRBC. Miguel de Andrade: So it's an interesting step. I think it's one of many we've been taking. It's -- essentially the MOU just an interest of both parties to explore the synergies between their activities. I mean, obviously, we as experts on the energy side and them on the infrastructure side. I'd say there's actually 3 parts to the MOU. I think the first is for EDP to be considered the strategic energy partner to the Start Campus projects, whether it's through power supply as is or through additionality of projects, sort of the Start Campus infrastructure to be built out. The second is just synergy between the data campus center or project and the infrastructure that we already manage, for example, in the Sines power plant. So for example, like on the water side in terms of cooling. And the third is really potential collaboration for other data centers in Portugal that campus might want to develop, leveraging on EDP's assets and capabilities of land and generation assets that we own in Portugal and so explore potential collaborations. I think above all, it's opening up the possibility for creating additional value from our existing assets and operations as well as getting additional visibility on future demand volumes, which could support the development of a sizable pipeline of renewable energy projects as we've discussed in the past. So overall, it's just, I think, a step, one of many that we expect to take in this area. Miguel Viana: Then also a question from Pedro Alves, Caixa Bank regarding the effective tax rate evolution. So from the 28% in 2025 and also explaining where do we see -- so explaining the 28% and how we see the evolution for '26. Rui Manuel Rodrigues Teixeira: So 2025, 28% tax rate was primarily driven by the fact that we had lower asset rotation gains and some costs that are not deductible -- tax deductible and that was basically impacted the rate. But if you think about 2026, you could consider as sort of low 20s. And this is because we expect again to increase the capital, the asset rotation gains from the transactions and also the declining tax rate in Portugal, which as you know will be dropping by 1 percentage point every year until 2028. So '26 around the low 20s. Miguel Viana: We have then a question from Pedro from CaixaBank regarding, if we can explain a little bit better the inflation update in terms of real, in terms of the impact in our EBITDA in Brazilian networks in 2025? And how do we see it evolving for '26, '28? Miguel de Andrade: So in '25, we had the extension of the concession in Espirito Santo for another 30 years. And we expect to have that extension as well for Sao Paulo and that's been sort of approved by the regulator. We're just pending the final signature in the next couple of weeks. So there's a positive impact from the inflation update of this residual value, which existed in '25, which becomes immaterial from 2026 onwards. To be specific, in '25 in the Electricity Networks in Brazil, we had around EUR 70 million of EBITDA from inflation updates in both the distribution companies and the transmission companies. And we had around EUR 20 million from EBITDA from the 2 transmission lines that we then sold in the fourth quarter of 2025. So the impact of this inflation update in the networks has declined in 2025 already versus '24, but in '23 -- in '26, it will be immaterial. I think it's important to note the following. We are under discussion with ANEEL and which is the regulator in Brazil. We and the other distributors, but we are more advanced in this process because we're the first ones to have our concessions renewed, but to change the recognition of investments in the company's asset base. As I mentioned, I think, at the Capital Markets Day, and I'll just reiterate, they're currently only recognized every 5 years with tariff provisions. So there's still no conclusion, but we see a positive sign that at least the regulator is willing to consider this and that would allow us to have this intra-cycle recognition of investments rather than having to wait for the end of the regulatory period. So that's work in progress. We're certainly very committed to it, and we think others will be as well as soon as they start seeing our concessions being renewed as well. Miguel Viana: We have a question from Jorge Alonso from Bernstein. Also, regarding the current power price environment, how confident are we to maintain our 2028 guidance. And regarding the assumptions that we provided at CMD and the current forwards as we see the guidance for '28? Rui Manuel Rodrigues Teixeira: So as I also briefly explained with that slide on sensitivity, I mean, effectively, we do have, as you know, short positions in both -- structurally short positions in generation in both Iberia and Brazil. This we hedge primarily through our clients' business, but we also have a very active energy management. And then on the rest of the other markets, as you know, we have from an EDPR standpoint, 85% is actually long-term contracted. On this, basically, what we have done since the CMD is obviously to increase the hedging. So we have been working actively on the hedging on the energy management. So for 2026, 85% of the volumes are hedged at a price which is north of EUR 64 per megawatt hour. For '27, '28, we have about 50% of baseload volumes hedged above the current forward prices. So obviously, this gives us stability and predictability versus the changes in the forward curves. But also on the other markets, U.S., the exposure is mostly concentrated in PJM and MISO. We have -- we are seeing forward prices going up by around $5 per megawatt hour. Also in Brazil, where we have lower exposure, but still relevant, the PLD has been rising significantly since the CMD. So that's why, all in all, again, this portfolio diversification, the very active energy management is giving us confidence towards the 2028 guidance. So more importantly, as I said, we actually reduced the portfolio exposure to these price movements. So at the CMD in November, we were estimating around EUR 60 million. And now we are looking at a substantially lower number. Miguel Viana: We have now question Manuel Palomo, BNP. What is your take about increasing concerns about affordability and the approval of the energy decree to reduce price by the Italian government and if we could expect any contagion effect? Miguel de Andrade: Well, I think this is an important point just to take a step back. I think we are all focused on competitiveness of the economy. And what's good for the overall economy is good for the companies. As I mentioned, most of our exposure is in Iberia, and we specifically put up a slide, which shows that in Iberia, Portugal and Spain, we already have some of the lowest prices in Europe. And they are expected to even trend lower as some of the existing costs in the system come to an end, like the tariff deficit payments, which are being amortized and like the feed-in tariffs, for example. So the trend is -- it's already much lower than the rest of Europe and trending lower. So the affordability and competitiveness, I think, in Iberia is actually a positive. And it means they can take additional investment, they can take sort of some of the ancillary services without impacting the affordability. On the Italian case, I think it still has to go through the, let's say, finally prolongated, and I'm sure you have a lot of discussion at the European level. Conceptually, sort of understands, but disagree with what it's doing. There's been a lot of discussion already 2 years ago about market design, about how to make things -- make the wholesale market work differently. And ultimately, it always comes back to the marginal pricing system is the system that works best. CO2 has to be internalized and that continues to be a key priority for Europe. And so this is something to watch, but we don't expect it to have any material impact in Iberia. Miguel Viana: So we move now to the questions on the phone, and we start for the first question that comes from the line of Fernando from Royal Bank of Canada. Fernando, please go ahead. Fernando Garcia: I'm curious because I am seeing a significant increase in CCGT's output in Portugal and this despite the strong hydro and wind output so far in the year, particularly in February. So my question here is this is explained by the elimination of the Portuguese clawback? And if this could be a potential upside to your estimated positive impact, I think you mentioned EUR 25 million for 2026. Miguel de Andrade: Excellent. So you're right, CCGT output has increased. It's more related to -- so the ancillary services means the system operators wanted to keep these working sort of as backup as the system. So it's already this trend, as you know, following the blackout of last year. It then started to decrease. Now it's increased significantly because of some specific issues here in Portugal relating to all the storms that happened and sort of the disruption to the network. I wouldn't say it's an upside, probably it's a downside in the sense that higher ancillary costs would have a knock-on impact if they're not passed on to the suppliers. So it's something to watch. We expect this to normalize over the next couple of weeks, but it's basically the CCGTs working over time basically over the month of February. Miguel Viana: And we have a final question from the line of Alberto Gandolfi from Goldman Sachs. Alberto, please go ahead. Alberto Gandolfi: So my first question is, I wanted to ask you about Brazil. Is it a region where you think you might be growing exposure? There are potentially assets for sale. You're happy with the status quo? Or is it something that given the better returns in Portugal and the clarity in Spanish networks, you might think about deemphasizing a little bit. The second question is a clarification on Slide 21. Am I right in saying that the EUR 45 million impact on net income is therefore adjusted for 50% hedging. So in other words, without hedging, do we just double the EUR 45 million? Or is it -- so can you maybe help us on that a little bit? And last one, on this data center opportunity, it seems you're very active in this booming Portuguese market. Can I ask you if you are planning to build potentially incremental capacity if you were to sign a PPA there? Or would it be from existing? And would it be done at EDP or EDPR level if it were to happen? Miguel de Andrade: So good questions. I think in relation to Brazil, listen, we have a long track record in Brazil over 30 years. I think we have a great business there. We continue to look at opportunities for growth there to the extent that it makes sense within the overall Brazilian exposure that cap that we've always talked about. Obviously, we continue to see how best to allocate capital. And so we've sold assets in Brazil in the past. I mean, even recently, we did the asset rotation of the transmission lines. We sold the hydro. So we will continue to adjust and fine-tune our exposure to Brazil and obviously, reallocate capital to where we think is best at any particular time, whether it's Europe or the U.S. at the moment. But I'd say that we like having this diversification of geographies because it does allow us to allocate capital quite well, depending on the different cycles in the different geographies. On the third question, and then I'll let take the second question. On the third question, so essentially, what we're seeing is that there's a certain amount of power that can probably be supplied just as is because there's sufficient reserve margin in the system to be able to supply these data centers without necessarily having to go and build new power plants. And so that's a positive, I think, for the system. We just need to make sure the networks are there, but that's essentially the key issue because as long as there's reserve margin, you can feed it. If the demand then starts getting above a certain level and if you start having to Start Campus and Merlin and others, then yes, then we need to think about incremental capacity of different technologies. And then depending on what that incremental technology is, if it's renewables, it will definitely be done through EDP Renewables, which as you know has the exclusivity for renewable development, well, certainly in Nigeria, but elsewhere in the world as well. If it's, for example, if it was to be like a thermal technology, then obviously it would be, for example, with EDP or if it was hydro, for example, would be through EDP. But -- so there's a certain amount that can be done with existing capacity -- supplied with existing capacity and then above that level, then you start getting into having to build incremental capacity, and we're obviously looking at that and thinking about when that would come down the pipeline. But it will depend on also how the demand is evolving. Rui Manuel Rodrigues Teixeira: Alberto, so on the second one, I mean, this is also the result of different diversification effects. So looking at the portfolio as a whole, through the different trends, again, the active management that we run on every single market. This is how we are bringing down the sensitivity from the EUR 60 million to the EUR 45 million. And again, just bearing in mind, this is -- if all the markets would move in the same direction to preserve the plan. So no, you cannot sort of double the sensitivity if the hedging was coming down to 0. It's a bit more complex than that. Miguel Viana: So I'll pass now back to our CFO for final remarks. Miguel de Andrade: So final remarks. I just reiterate, again, 2025 was a great year for EDP. I think we delivered and delivered solidly on all of the different metrics, whether it was on EBITDA, net income, net debt, the credit ratios, improving the dividend. So a really solid, solid year for '25. And I think we come into 2026 also on a good footing with record high hydro levels and reserves with improved regulation, improved perspectives in both Spain and the other geographies we're in like the U.S. So really, I think we are very confident also on the guidance for 2026. And I think that's one of the messages that I really wanted to reiterate. And going forward, we continue to see great projects coming down the pipeline, certainly on the EDPR side, which makes us feel confident in relation to 2028. I mean, obviously, we'll go on monitoring this issues around the power prices. But as Rui has mentioned, we are relatively protected in relation to that. And we think that is a discussion that will play out over the next couple of months in Europe. But at the end of the day, we're all aligned that competitiveness is important, but it's also important to keep the stability of the rules and make sure that there's space to invest or for investors to the capital allocation and feel safe about their investments, whether it's on the network side or on the generation side. So listen, good '25, good prospects for 2026 and reiterating the guidance with confidence and looking forward also to the next couple of years, reiterating also our 2028 guidance. With that, thank you very much. Look forward to seeing you soon and keep in touch.
Operator: Good morning, ladies and gentlemen, and welcome to the Teleflex Incorporated Year End 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note that this conference call is being recorded and will be available on the company's website for replay shortly. The press release and slides to accompany this call are available on our website at teleflex.com. In addition, we have provided supplemental non-GAAP income statement information for continuing operations for 2025, which can be found on our Investor Relations website. Those wishing to access the replay can refer to our press release from this morning for details. I will now turn the call over to Lawrence Keusch, Vice President of Investor Relations and Strategy Development. Lawrence Keusch: Good morning, everyone, and welcome to the Teleflex Incorporated Year End 2025 Earnings Conference Call. Participating on today's call are Stuart Randall, Interim President and Chief Executive Officer, and John R. Deren, Executive Vice President and Chief Financial Officer. Stu and John will provide prepared remarks, and then we will open the call to Q&A. Before we begin, I would like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events as outlined in the slides posted to the Investor Relations section of the Teleflex website. We wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties factors referenced in our press release today, including our Form 10-K, as well as our filings with the SEC, which can be accessed on our website. Actual events or results may differ materially. I will now turn the call over to Stu for his remarks. Stu? Stuart Randall: As a reminder, the board made its decision to transition the Chief Executive Officer position following the announced sale of our acute care interventional urology and OEM businesses, and as Teleflex enters its next phase as a more focused, higher growth organization. We remain grateful for Liam J. Kelly’s impactful leadership and the significant contributions he made during his tenure. The board is actively conducting a CEO search with the support of Spencer Stuart, a leading executive search firm who is evaluating external candidates. While we are moving with urgency, we are taking a disciplined and thorough approach to ensure we identify the right leader with the experience and capabilities to guide Teleflex in the future, and ensuring continuity across the organization. At the same time, it is critical that we maintain momentum across our strategic priorities during this transition period. As interim CEO, my immediate focus is on execution. In January, I stepped into the role of interim CEO, and I bring more than three decades of experience in the medical device and health care industry. By way of background, I have had the privilege of serving on Teleflex’s board since 2009, working closely with our leadership team to keep the business moving forward aligned with our strategic objectives. With that context, let me expand on the key elements of our strategy. In December, we signed definitive agreements to sell the acute care, interventional urology, and OEM businesses to two separate buyers. The strategic divestitures will result in total cash proceeds of $2.03 billion with net after-tax proceeds of approximately $1.8 billion. As an update, we are working through the regulatory and other conditions to closing and continue to expect the sales to close in 2026. To be clear, our value creation strategy is unchanged. And we intend to use these net proceeds to return significant capital to shareholders through our previously announced share repurchase authorization of up to $1.0 billion while also reducing debt to enhance our financial flexibility and support future growth and value creation. These planned actions signal our commitment to disciplined capital allocation and shareholder returns. We will continue to evaluate additional opportunities to return capital to shareholders as appropriate, consistent with our focus on long-term value creation. We are positioning Teleflex as a medical technologies leader with increased flexibility to invest in innovation, and compete in these priority markets. Specifically, product innovation will be a strategic priority for investment going forward, and we expect R&D expense for RemainCo to represent approximately 8% of sales compared to approximately 5% of revenue that Teleflex spent historically. The creation of Teleflex RemainCo, which represents our continuing operations, resulted in a more focused and optimized portfolio centered on highly complementary businesses: Vascular, which now includes the emergency medicine portfolio; Interventional, which no longer includes the intra-aortic balloon pump portfolio; and Surgical. A couple of comments regarding our 2026 adjusted EPS guidance. For 2026, our adjusted EPS guidance is in the range of $6.25 to $6.55. However, it is important to note that there are a number of assumptions included in this guidance that will have significant impacts on our EPS as we move through 2026 and into 2027. First, this guidance range includes the full-year negative impact of stranded costs related to our strategic divestitures, which we estimate to be $90 million. Stranded costs are necessary to support both continuing and discontinued operations that will come into effect on the closing of the strategic divestitures. Second, to fully offset the aforementioned stranded costs, we expect the transition services (TS) and manufacturing services (MS) agreements to fully offset stranded costs on an annualized basis from the recognition of TS and MS agreements during a transitionary period of time. Furthermore, we are taking action on reducing expenses and have announced an initial restructuring plan to mitigate approximately $50 million of cost to right-size the organization post divestitures. Finally, our 2026 adjusted EPS guidance does not include the anticipated positive impact from our announced plans to repurchase $1.0 billion of our common stock and repayment of debt with remaining proceeds from the strategic divestitures, both of which we intend to execute following the closings of the transactions. We anticipate these actions will result in a meaningfully lower share count and significantly reduced interest expense. Although we have not included the benefits of these actions in our 2026 adjusted EPS guidance, we continue to anticipate closing of the strategic divestitures in 2026. Taken together, we expect these factors will contribute to significantly higher adjusted EPS in 2027 and beyond. Now moving to the agenda for the remainder of this morning's call. First, we will discuss our continuing operations results, then conclude with our financial guidance for 2026. Before I begin, please note that we have reclassified the assets associated with our pending strategic divestitures of acute care, interventional urology, and OEM businesses as discontinued operations to reflect the strategy to separate the company and provide a clear view of the ongoing performance of RemainCo, and in accordance with accounting guidance requirements. I will limit my comments to the continuing operations for 2025 inclusive of the acquisition of Biotronik’s vascular intervention business. All growth rates that I refer to are on a year-over-year adjusted constant currency basis unless otherwise noted. Pro forma adjusted constant currency growth excludes the Italian payback measure in 2025 of $9 million, and the impact of approximately $14 million in RemainCo product revenue by global product category that was discontinued in 2025 due to a strategic realignment. Pro forma adjusted constant currency growth guidance includes revenue generated by the acquired vascular intervention business for the prior year period. Now let's move to the second half 2025 continuing operations revenue by global product category. Commentary on global product category growth from continuing operations for 2025 will also be on a year-over-year pro forma adjusted constant currency basis unless otherwise noted. Starting with Vascular. Revenue increased 2.4% year over year to $472.7 million, an increase of 8.1% was primarily driven by growth in our central access, hemostatic, and atomization products, in part due to military surge orders that did not repeat in 2025. Moving to Interventional, the strong performance for the second half was driven by a broad interventional portfolio. For 2025, reported vascular intervention revenues were $202 million. In our Surgical business, revenue was $219.3 million, an increase of 3.2% reflecting impact of volume-based procurement in China, offset by a tough comparison from the prior year period. Underlying trends in our core surgical franchise continued to be solid with strong double-digit growth from the majority of our franchises. This completes my comments on the second half revenue performance. Now I would like to turn the call over to John for a more detailed review of our financial results. John? John R. Deren: Thanks, Stu, and good morning. All results that I speak to will be on a continuing operations basis for 2025. Due to the reclassification to discontinued operations, historic continuing operations reflect the impact of stranded costs in all periods presented. Given Stu's previous discussion of revenue, I will begin with margins. For 2025, adjusted gross margin was 63.7%. A 200 basis point decrease year over year was primarily due to the adverse impact of tariffs, the addition of the vascular intervention acquisition, which has a slightly lower gross margin than the corporate average, higher operating expenses associated with the acquisition of the vascular intervention business, and a negative impact of foreign exchange rates. Adjusted net interest expense totaled $93.6 million for 2025 as compared to $77.4 million in the prior year. The year-over-year increase is primarily due to the borrowings used to finance the vascular intervention acquisition, and to a lesser extent, increased logistics and distribution costs and foreign exchange. Full year adjusted operating margin was 22.7%. For 2025, our adjusted tax rate was 12.6% compared to 13.4% in the prior year. The year-over-year decrease is primarily due to the beneficial tax provisions included in the recently passed One Big Beautiful Bill Act, including the ability to deduct U.S.-based R&D expenses. At the bottom line, 2025 adjusted earnings per share was $6.98, representing an 8.7% increase year over year. The increase is primarily due to higher revenue and adjusted operating income, including the impact of the vascular intervention acquisition, a lower tax rate and share count, partially offset by negative impact of interest expense and foreign exchange. At the end of the fourth quarter, our cash, cash equivalents and restricted cash equivalents balance was $402.7 million as compared to $285.3 million as of year end 2024. As we have indicated, 2026 results include a number of transient factors related to our strategic divestitures that will impact our near-term results, which we expect will be mitigated with the close of both transactions, ultimately building a clearer financial profile with significant improvements in margins, interest expense, and adjusted earnings per share. With that context, I will go over items that will impact our 2026 results. First, we will incur approximately $90 million of stranded costs associated with the classification to discontinued operations throughout 2026. Once the strategic divestitures close, which is still expected to be in 2026, transition service and manufacturing service agreements are estimated to fully offset the stranded costs on an annualized basis. Of note, until the divestitures close, cash generated by the discontinued operations will accrue to RemainCo, thereby reducing the economic impact on the company from the stranded costs until fully offset by the transition service and manufacturing service agreements. Accordingly, our initial 2026 guidance reflects the fully burdened cost structure for RemainCo inclusive of approximately $90 million in stranded costs. Second, the exact timing of the closings of the strategic divestitures will pace our ability to deploy capital during 2026. As we receive these proceeds, we will execute on our capital deployment initiatives. As a reminder, we expect to receive net proceeds of approximately $1.8 billion after tax from the divestitures. We remain committed to returning significant capital to shareholders through our previously announced $1.0 billion share repurchase authorization and our intention to repay debt with the remaining proceeds from the strategic divestitures. As we look forward to 2027 and beyond, we anticipate these capital deployment actions, in combination with the impact of the transition service arrangements and manufacturing service arrangements and our efforts to further mitigate stranded costs and right-size the organization, will result in a significant increase in our adjusted EPS. Moving to a review of our 2026 guidance. Please note that our 2026 guidance is provided on a continuing operations basis and excludes the acute care, interventional urology, and OEM businesses. For year-over-year comparison purposes, 2026 guidance is based on a pro forma adjusted constant currency growth that excludes the Italian payback measure in 2025 of $9 million, the impact of foreign exchange of $14 million, and the impact of approximately $14 million in product revenue that was discontinued in 2025 due to a strategic realignment. Pro forma adjusted constant currency growth guidance for 2026 includes vascular intervention revenue. We expect pro forma adjusted constant currency revenue growth for 2026 to be in the range of 4.5% to 5.5%. To put the 2026 growth outlook into context, continuing operations delivered 4.7% pro forma adjusted constant currency revenue growth in 2025. This performance establishes a solid foundation for our future mid-single-digit revenue growth profile, and we remain confident in our ability to achieve this goal as we move forward. Turning to adjusted earnings per share. We expect the range of $6.25 to $6.55 in 2026. Again, this reflects a set of assumptions and excludes a number of factors as already discussed. Additionally, for modeling purposes, you should consider the following. We expect 2026 adjusted operating margin to be approximately 19%, which reflects the full impact of approximately $90 million in stranded costs associated with the separation activities and no offsetting benefit from transition service and manufacturing service agreements during 2026. In addition, I would also note that our 2026 operating margin is inclusive of R&D investment of approximately 8% of sales. Of note, when taking into account the positive impact of transition service arrangements and manufacturing service arrangements, we estimate that our underlying steady-state adjusted operating margin will be approximately 23%, which is 400 bps above our fully burdened adjusted operating margin guidance for 2026. Once the strategic divestitures close, we expect at least $90 million on an annualized basis from the recognition of transition service and manufacturing service agreements to fully offset stranded costs, which will be netted in our expenses. As a first step in the process to mitigate the approximately $90 million in stranded costs, a restructuring, as disclosed in today's press release, has been approved by our board to eliminate a portion of these stranded costs, streamline global operations, and improve our long-term cost structure, primarily through workforce reductions and capital asset rationalization reducing costs and increasing operational efficiency. These actions are expected to be substantially completed by mid-2028. We expect the restructuring to result in approximately $50 million in annual pretax savings. Looking forward, we see opportunities over the next several years to improve adjusted operating margin through leverage from revenue growth and other cost saving initiatives above our steady-state margin profile of approximately 23%. Moving to assumptions below the line. Net interest expense is expected to approximate $105 million for the full year 2026. Our estimate reflects a refinancing of our $500 million 4 5/8 senior notes, which are due in November 2027. Finally, we are assuming a 2026 tax rate of approximately 13.5%. For shares outstanding, we are not assuming any share repurchases in 2026 guidance, implying a share count largely consistent with 2025. Nonetheless, we are committed to executing our $1.0 billion share repurchase program upon the closing of each of the strategic divestitures and will provide updates to our guidance throughout the year. That concludes my prepared remarks. I would now like to turn it back to Stu for closing commentary. Stuart Randall: Thanks, John. In closing, I will highlight our three key takeaways from the fourth quarter. First, Teleflex is in the midst of a transformation that optimizes our portfolio, creates a more focused medical technologies leader, and positions our company for meaningful value creation opportunities going forward. It is energizing to see how focused and committed our team has been to delivering for customers, patients, and shareholders. Second, RemainCo delivered strong pro forma adjusted constant currency growth of 4.7% year over year in 2025. This growth performance over 2025, which reflects the period in which we have owned the vascular intervention business, and our 2026 pro forma constant currency growth guidance of 4.5% to 5.5% are in line with our mid-single-digit growth profile and represent a strong reflection of the stable growth potential of our go-forward business. We continue to expect our two strategic divestitures to close in 2026. And we remain committed to using the estimated $1.8 billion in after-tax proceeds from the transactions to return significant capital to shareholders through a $1.0 billion share repurchase program while also reducing debt to enhance our financial flexibility and support future growth and value creation. Third, the closing of the transactions will also enable us to recognize TS and MS fees, which are expected to be at least $90 million and fully offset the stranded costs on an annualized basis. We are also actively engaged to reduce our costs with today's announced restructuring that is targeting approximately $50 million in savings. With the more streamlined portfolio and clear strategic priorities, we will be well positioned to drive durable performance and long-term value for shareholders. We expect our financial performance to improve through 2026 and more fully reap the benefits of our efforts in 2027 and beyond with meaningful increases in adjusted earnings per share. That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q&A. Operator: Thank you. We will now open for questions. We ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star one. Please ensure your mute function is turned off to allow your signal to reach our equipment. Our first question today comes from the line of Michael Stephen Matson with Needham & Company. Michael, please go ahead. Michael Stephen Matson: Yeah. Thanks. So just in terms of the use of proceeds from the divestitures, you have the $1,000,000,000 share repurchase authorization, and I think I heard you guys saying that you are planning to fully utilize that. Maybe you could just comment on what $1,800,000,000 is going to look like between share repurchases and debt repayment. And then just in terms of the restructuring savings, the $48,000,000 to $52,000,000 I believe the press release said. Was any of that baked into the $6.25 to $6.55 EPS guidance range? John R. Deren: Well, yeah. If you got me started already. So it is $1,000,000,000 for the share repurchase. And that other $800,000,000, we are committed to paying down debt. So the deferred draw revolver we put in place for the Biotronik acquisition is about $700,000,000, and then we will put the other $100,000,000 towards our revolver. On your restructuring question, the current restructuring has some savings in 2026 that are already baked into the guidance. And there is some nuance. We also announced another restructuring in Q4 for the Biotronik acquisition, and that is going to go towards additional post-2026. So we also have line of sight on $50,000,000 post 2026 between the two restructurings. Lawrence Keusch: Great. Thanks for the questions, Mike. And our next question comes from the line of Jayson Tyler Bedford with Raymond James. Jayson, please go ahead. Jayson Tyler Bedford: Good morning, and thank you for all the detail here. I appreciate there are a lot of moving parts, and I wanted to ask about the pro forma 4.7% growth in the second half. Do you have either a first half number or a full-year number, just trying to think apples to apples here? And then just on Surgical, you mentioned double-digit growth in most franchises. What is driving the double-digit growth, and how much of the VBP impact is left for 2026? John R. Deren: Jayson, I think we think the 4.7% is the most representative of the growth profile where we own Biotronik. I think this is an opportunity for you to model off that 4.7% along with our guidance. Lawrence Keusch: For the full year, we will not be getting into organic growth. We have put everything into the pro forma number for strength really across the portfolio. One standout has been our instrument portfolio, which is seeing strength now for many quarters. We have a refreshed instrument line there. And keep in mind, this instrument portfolio is really aimed at ear, nose, and throat procedures. Of course, ligation continues to be a good driver of growth, with the exception of China where the VBP has been hitting. So that is kind of the key drivers within Surgical. Stuart Randall: Yeah. And I would say too as we get into 2026, we have an automatic appliers that can show some nice growth, and there is some real opportunity for that growth in EMEA. Great. Operator: Thank you for the questions, Jayson. And our next question comes from the line of Bradley Bowers with Mizuho. Bradley, please go ahead. Bradley Bowers: So first one on cost. We are getting the full sales profile. Just wanted to hear where we are in the pro forma cost profile, if there are any stranded costs to speak to? John R. Deren: So first on costs, you are getting the full sales profile. On the pro forma cost profile, there are items you cannot directly attribute to the disposition but nonetheless you need to run the whole company. So that is some of the overhead burden that exists, and the accounting unfortunately does not allow you to allocate it; it makes you keep it in continuing operations. And as we said, there is $90,000,000 worth of stranded costs sitting in our P&L. We are still managing that business, and while it sits in discontinued ops, we still have the opportunity to use those cash flows. And as we have disclosed and discussed, we are looking for opportunities to fully mitigate that—in the beginning with the TSA and MSA arrangements, and then finally, through restructuring programs. It is our intention to go after that entire $90,000,000. Lawrence Keusch: And I would just add that as you look at the 2025 adjusted income statement that we have provided, that also is inclusive of the stranded costs for the continuing operations. So that is already in there as well. Operator: And our next question comes from the line of Shagun Singh with RBC Capital Markets. Shagun, please go ahead. Shagun Singh: Thank you so much. So, you know, obviously, 2026 is a transition year, but can you give us a look into what the company might look like in 2027 and beyond? Maybe touch on strategic priorities, how we should think about sales growth, margin profile, and where the company could go beyond that. And then my second question is just on the CEO search. Who is the right leader for this role, and what qualities or experience are you looking at? Thank you. John R. Deren: I will start with your first question and think about the mid-single-digit growth. If you start and think about 2027 with our ability to take out the stranded costs, our ability to pay down a significant amount of debt, and then buy back shares, with your own math, I think you will find a really nice underlying op margin. And then with the share buyback, you should find yourself coming up with a significant uplift in the EPS. I do not have guidance for 2027, but I will let you do that math. Stuart Randall: On the CEO search, as we have previously reported, we are working with Spencer Stuart on the search. We are really focused on people who have demonstrated experience operating a mid-size, high-growth organization on a global basis, really focused on high-acuity hospital settings. Operator: Alright. Thank you for the question, Shagun. And our next question comes from the line of Ravi Misra with Tru Securities. Ravi, please go ahead. Ravi Misra: Hi. Great. Thanks for taking the call. So this is a couple of questions. Given the recent rulings on tariffs, help us think about maybe what gets this back to that mid-20s and above range. Thank you. Help us think about maybe how quickly the pace of that could come in, and this kind of cost reduction program that you have implemented and the mitigation that is coming in the following year. We are kind of in the low-20s. Is the new base that we should be thinking about? John R. Deren: Yeah. I think operating leverage—so if you start and you take out these stranded costs, you back in the mitigation for the stranded costs, you will have to decide how you model that. As for tariffs, our plan does contemplate tariffs that were expected last week before the Supreme Court's decision. And now there is certainly some significant uncertainty whether the additional tariffs will come in 10% tariff or 15% tariff or wherever it may land. We did consider that we have additional tariffs of about $18,000,000 this year on top of a lot of what is in our plan is already sitting on our balance sheet. I think with all the uncertainty, we have left our plan where it is at before the Supreme Court decision. So there is likely some upside. But again, I cannot tell you that for sure. Of course, the savings get much less if you are in the 10% to 15% realm, and then the question becomes is this 150 days the end of it? Is the administration going to find another opportunity to push tariffs? Despite anybody's guess right now, many think it is going to be very, very difficult to get a refund from the federal government. When we pay tariffs, they get capitalized in inventory. So that would happen and will come to find its way into the P&L. You are typically looking at at least two quarters before you start seeing some relief. We will continue to update everyone as we know more as the days progress. Operator: And our next question comes from the line of Matthew O'Brien with Piper Sandler. Matthew, please go ahead. Matthew O'Brien: Just to be more direct on this, John, you do not want to talk about 2027 too much. But as I do the math on the stranded cost, the potential benefits from the debt pay down and then the share repurchase as well for this year—and I know it is all pro forma and you are not doing it all this year—but I am getting more like $9.5, almost $10 in earnings this year. Is that a fair way to think about what the pro forma 2026 number could look like? Then I do have a follow-up. Thanks. John R. Deren: Yeah. I do not want to confirm your model. I think there is some opportunity in there too, and the reality is we are also going to have some of the restructuring benefits happening at the same time. So there is the restructuring, there is the covering the TSA, MSA costs. If you are modeling 2027, I assume you should be able to come up with some leverage if you are thinking mid-single-digit growth. So you have that opportunity, and I cannot speak for how you are coming up with your shares. That is going to be a debate on share price to be sure, but I would think you would find yourself closer in that $10 or more range is what I would think. And I would say you have significant interest savings you should be modeling for 2027. Lawrence Keusch: And I would just again reiterate that we absolutely intend to deploy the proceeds from the transactions—$1.0 billion for the share repurchase and the remaining $800 million is debt paydown. Operator: And our next question comes from the line of Larry Biegelsen with Wells Fargo. Larry, please go ahead. Larry Biegelsen: Hey, guys. Can you hear me? Operator: We are having trouble hearing you, Larry. We will move to the next question and circle back. Operator: Our next question comes from the line of Michael K. Polark with Wolfe Research. Michael, please go ahead. Michael K. Polark: Hi. Good morning. I did not hear a ton about Biotronik integration. Can we just get an update on how that is going? Salesforce? Retention, cross selling U.S. versus Europe, what have been the highlights so far? Any challenges that have popped up? As a follow-up, I want to ask about R&D as a general concept—8% as a portion of revenue for RemainCo. Can you just remind us, is that step up versus historical Teleflex entirely explained by Biotronik and some of the pipeline there? Or does RemainCo expect to increase investment in Surgical, existing Interventional, and Vascular? For probably, what, two years. But once those go away, do you have enough kind of juice in the bag, I guess, to continue to expand margins once the TSAs go away in a couple years? John R. Deren: You know, I think it is going well. The Salesforce integration is taking place. The bags have been combined for the Salesforce, and we think there is some significant opportunity for revenue synergies moving forward. We have been able to retain, so no big regrettable losses from our standpoint. If you go back to Q4, we did announce a restructuring related to the VI acquisition. That has kicked off well. We expect very much back half of the year and a little bit into the first half of Q1. It is going well. On R&D, yes, Biotronik came with a higher amount of R&D. We were, as total Teleflex, about 5%. Now, with the discontinued business, we are about 5%. In addition to what Biotronik was spending, we have made some decisions to put in additional R&D resources for the Interventional space, and then second to that would be in the Vascular space, we have increased our R&D as well. Surgical, I would say, to a lesser extent. There are much bigger investment opportunities in the Interventional and Vascular spaces. When the TSAs go away, there is going to be a little bit of overlap here with some of the restructurings and while we are getting TSA revenue. In fact, it may give us a little bit of a headwind as we get into later years because we will have a little bit of both happening at the same time. But our goal is to completely mitigate and offset those stranded costs. Keep in mind, the op margin profile with the growth profile should also contribute to some significant leverage over time to continue to move up that op margin on its own. We will continue to look at cost-saving initiatives. As an organization, we have been very lean on the OpEx side, and we will continue to be looking for those opportunities. That is kind of our long-term thinking, if you will. Again, we do not have a long-range plan in place yet, but I think that is the real opportunity. Stuart Randall: And I would say these organizations are fully integrated and are working together. Putting good marketing plans in place. So I feel really good about the integration of the sales forces and the opportunities that lie in front of them. This is Stu. I would just add I was at our Asia and North America sales training meetings the last couple weeks. Operator: Alright. Thank you for the question, Michael. And our next question comes from the line of Travis Steed with BofA Securities. Travis, please go ahead. Travis Steed: Hey, everybody. I guess looking ahead a little bit, obviously the TSAs are going to offset a lot of the onetime stuff. It sounds like you probably have an ability to continue to grow earnings and get EPS leverage going forward. Can you talk about 2027 plus and beyond? John R. Deren: To be sure. Once you kind of cover those costs, your real opportunities are that P&L leverage as you continue to grow—you keep a big base of that OpEx the same, and you end up with a much better op margin. And that is kind of our long-term thinking. And I think some of that opportunity for leverage exists in 2026 as well and 2027. It is not just resetting the base in 2027. Operator: Great. Thanks for the questions, Travis. And we have a follow-up question from Larry Biegelsen. Larry, please go ahead. Larry Biegelsen: Alright. Thanks. Sorry about that, dropped a couple times. Hopefully, I do not think this was asked yet. Just on revenue for 2026, you grew 4.7% in 2025. The guidance calls for similar growth in 2026. So what is giving you the confidence to start the year there, given that you guys have had some missteps recently, and you do not have a permanent CEO? Thank you for taking the questions, guys. That is my first question. Maybe just a second, John. Just any phasing considerations for 2026 for revenue and margins. John R. Deren: Sure. And Larry can spend some time with you later on some of the cadence, but there will be a step up over the four quarters from the beginning of the year, with the recent integration and the new combining of the bag. There is also some step up as you move through the year for that sales synergy to take place. And again, the VBP impacts in 2025 were more pronounced in the second half because of the comps, so the comps get a little easier in the second half. We will still have some VBP impacts in 2026, likely in our Surgical business. But we think the lion's share of VBP is behind us now. Operator: Great. Thank you for those follow-ups, Larry. And that is all the questions we have today. So I will now turn the call back over to Lawrence Keusch for closing remarks. Lawrence? Lawrence Keusch: Thank you, and thank you to everyone that joined us on the call today. Operator: You may now disconnect your lines. Thanks, everyone. Lawrence Keusch: This concludes the Teleflex Incorporated Year End 2025 Earnings Conference Call.
Operator: Good morning, everyone, and welcome to D-Wave Quantum Inc.'s fourth quarter fiscal year 2025 earnings conference call. Today's conference call is being recorded. At this time, I would like to turn the call over to Kevin Hunt, Senior Director of Investor Relations. Please go ahead. Thank you, and good morning. With me today are Dr. Alan Baratz, our Chief Executive Officer, and John Markovich, our Chief Financial Officer. Kevin Hunt: Before we begin, I would like to remind everyone that this call will contain forward-looking statements, which are subject to risks and uncertainties and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports. During today's call, management will provide certain information that will constitute non-GAAP financial measures under SEC rules, such as non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA loss, adjusted net loss, and adjusted net loss per share, as well as operating metrics such as bookings. Reconciliations to GAAP financial measures, definitions, and certain additional information are included in today's earnings release and are available in the Investor Relations section of our company website at www.dwavequantum.com. An on-demand webcast and a transcript of the conference will be posted on the Investor Relations section of the website within 48 hours after the call. Given that D-Wave is now fortunate to have 15 sell-side security analysts publishing research on the company, we may have to limit each analyst to one question during the first round and, time permitting, proceed to a second round of questions. I will now hand the call over to Alan. Alan Baratz: Morning, and thank you all for joining us today. Fiscal 2025 was not just a strong year for D-Wave. It was an inflection point for the company and for the quantum computing industry. For years, this sector has been defined by unrealized promises, dependence on government grants, and an inability to deliver customer value. In 2025, D-Wave separated itself from that narrative. We delivered proof. We delivered revenue. And we delivered real-world advantage. While 2025 was declared the International Year of Quantum Science and Technology, for D-Wave, it was something more important: the year quantum computing moved decisively from research to real-world impact. 2025 was a year of objective proof, evidence of D-Wave's technical and commercial progress. We began the year by closing our first Advantage quantum computer system sale to the Jülich Supercomputing Center, marking the first time a commercial annealing quantum computer was purchased for integration into a national supercomputing facility. We then became and remain the only quantum computing company to demonstrate quantum supremacy on a useful real-world problem. That result, which was achieved natively on our Advantage2 quantum processing unit, has not been successfully challenged for nearly two years after the paper's initial publication. This demonstration was an entirely quantum computation, not a hybrid computation. Moreover, no other companies other than D-Wave, Google, and Quantinuum have achieved quantum supremacy on any problem. Not Rigetti, not Infleqtion, not Xanadu, not IQM, not IBM, not IonQ. All attempts other than D-Wave, Google, and Quantinuum have been spoofed. Critically, we transitioned that technical leadership into commercial performance. With record revenue of $24.6 million in fiscal 2025, up 179% year-over-year. Then in May, we launched general availability of our Advantage2 system, the same system that achieved that supremacy milestone, and our sales opportunity pipeline expanded by nearly 1,500% year-over-year. Bookings were the second highest quarterly bookings in the company's history and up 471% from the immediately preceding third quarter to $13.4 million in Q4 bookings. In an industry long on promises, D-Wave is delivering measurable results. And now we have entered 2026 with extraordinary momentum. In January alone, we generated more bookings than in the entirety of fiscal 2025. We closed a $20 million system sale with Florida Atlantic University. We signed a two-year $10 million enterprise quantum compute-as-a-service agreement with a Fortune 100 company, one of the largest enterprise quantum computers-as-a-service deals in the history of the quantum computing industry. We completed the acquisition of Quantum Circuits. It has been our strategy for five years to position D-Wave as the world's leading quantum computing company and the only dual platform quantum computing company. Our dual platform approach is important because it allows D-Wave to be a one-stop shop capable of solving the full range of the complex problems customers face. This approach is not new, but let me be clear. The acquisition of Quantum Circuits fundamentally changes the competitive landscape. We dominate optimization today with annealing. And now by combining Quantum Circuits' industry-leading dual-rail qubit technology with D-Wave's proprietary on-chip cryogenic control, we are also positioned to be the leader in error-corrected gate-model systems. Annealing quantum computing remains a strategic focus for D-Wave. Optimization is one of the largest and most immediate commercial opportunities in quantum computing. It spans logistics, defense, telecom, manufacturing, finance, and energy—virtually every major industry. D-Wave has demonstrated material performance advantages over classical systems for optimization. To our knowledge, no gate-model quantum computing company has demonstrated a practical advantage over classical systems for optimization. They likely never will. Academic literature suggests optimization problems require annealing quantum computing. It is a commercially proven architecture with expanding performance gains. We are running production workloads today across a multitude of optimization use cases. Annealing dominates optimization today, and we believe that it will continue to dominate as the market expands. With our Advantage3 system in development, we expect to further extend that performance gap. Now let's talk about gate-model. Most superconducting competitors are pursuing legacy transmon architectures that require massive physical qubit overhead for effective error correction and complex wiring schemes that will struggle to scale economically. With Quantum Circuits, D-Wave takes a different path. The dual-rail technology is transformational. With it, we believe that D-Wave gains a decisive architectural advantage. Dr. Rob Schoelkopf, the inventor of the transmon qubit, developed dual-rail qubits to move beyond that architecture with built-in erasure detection that identifies 90% of errors that occur. Our erasure detection and our observed erasure rate of 0.5% allow us to deliver logical qubits with an order of magnitude fewer physical qubits compared to architectures without this capability. With erasure detection, this technology delivers gate fidelities that exceed 99.9%, bringing trapped-ion fidelities along with superconducting execution speeds to today's gate-model algorithm developers. Error correction is essential to unlocking broad quantum utility, and we believe that the dual-rail technology offers the fastest path to large-scale error-corrected architectures. I cannot emphasize this enough. The dual-rail technology allows us to achieve superconducting speed with the fidelity of ion-trap or neutral-atom approaches. That is a fundamental improvement in the metrics that matter. Speed matters. Error-correction overhead matters. Scalability matters. Our approach achieves logical qubit ratios of roughly one logical qubit for every 100 to 200 physical qubits compared to about one logical qubit for every 1,000 to 2,000 physical qubits in conventional superconducting designs or neutral-atom systems. What is equally remarkable are the gate speeds. Dual-rail gate speeds are 1,000 times faster than high-fidelity ion-trap systems. And D-Wave now holds advantages in each. But our gate-model innovations do not stop there. In January, D-Wave demonstrated that the on-chip cryogenic control currently being used in its Advantage annealing quantum computers can be used to control gate-model qubits without loss of fidelity. This industry-first milestone advances the development of commercially viable gate-model quantum computers by providing a path to significantly reduce the wiring to control large numbers of qubits. We are now working on leveraging this technology to provide full qubit control at scale. This would ultimately enable the ability to control gate-model qubits with multiple orders of magnitude fewer control lines than required by competing superconducting gate-model systems. That difference is not incremental. It is architectural. It is essential. As we discussed at the time of the Quantum Circuits acquisition, we have an eight-qubit gate-model system available to select customers today, and we expect to start generating some quantum compute-as-a-service revenue from our gate-model systems this year and expect the 17-qubit system later in 2026. We have already seen tremendous interest from customers, and we expect our gate-model offering to deliver a small but growing stream of revenue in 2026, while also building a pipeline of gate-model system sales opportunities for delivery beginning in 2027. We believe that the Quantum Circuits acquisition positions D-Wave as the leading contender to deliver the first fully error-corrected, scalable superconducting gate-model quantum computer. This effectively doubles our long-term addressable market by delivering both annealing and gate-model quantum computing solutions. What is also particularly noteworthy is our rapidly accelerating commercial traction, which reflects a differentiated strategy from most all other quantum computing companies. At our Qubits conference in January, our largest and most successful user conference ever, we announced a $20 million Advantage2 system sale with Florida Atlantic University, as well as a two-year $10 million enterprise QCaaS agreement with a Fortune 100 company, one of the most significant enterprise deals in the history of the quantum computing industry. This is not research revenue. It represents commercial adoption and more. The U.S. government is also taking note. We recently launched a dedicated U.S. government solutions business unit. Unlike other quantum companies that are focused primarily on securing federal R&D grants and characterizing those as commercial revenue, our strategy is very straightforward: solve real mission-critical problems now and derive government revenue today. At Qubits, we demonstrated a missile defense simulation in collaboration with Davidson Technologies and Anduril. For a 500-missile attack simulation, we showed a 10x faster time to solution, a 9% to 12% improvement in threat mitigation, and 45 to 60 additional missile intercepts. As complexity increased, D-Wave's technological advantage increased. This is operational relevance. Anduril's President and Chief Business Officer, Matthew Steckman, spoke during my Qubits keynote and indicated that he was surprised at how fast and mature D-Wave's technology is. We believe that there is significant opportunity in U.S. government applications across both our annealing and gate-model platforms. We are also seeing growing interest in system sales. We continue to advance discussions in South Korea, as well as with additional HPC systems in Munich in Germany, Q Alliance in Italy, and Florida Atlantic University in the U.S. In addition to annealing and gate-model quantum computing system-related agreements with academic and government institutions, these are premium-priced systems with high gross margin profiles. On the gate-model side, we expect to see the development of a multimillion-dollar R&D system sales pipeline for collaboration going forward. Underpinning all of D-Wave's technical and commercial traction is a very strong leadership team with decades of deep expertise in their respective areas of focus. We recently brought on Jack Sears Jr. to lead U.S. government solutions; Stan Black as our Chief Information Security Officer; and, as I previously mentioned, Dr. Rob Schoelkopf, who brings world-class superconducting leadership and maintains strong ties with Yale University. Our Chief Development Officer, Dr. Trevor Lanting, will oversee product development across both annealing and gate systems, ensuring integration, speed, and execution. The strength of our management team and its track record of success and execution continue to expand with the announcement that D-Wave's headquarters and operational footprint will relocate from Palo Alto, California, to Boca Raton, Florida, later this year, where we will also open a major U.S.-based R&D center. We are building a distributed innovation footprint designed to attract top-tier quantum talent and ultimately provide bicoastal redundancy in case of disaster recovery, with three main R&D hubs: Burnaby, British Columbia; New Haven, Connecticut; and Boca Raton, Florida. We are building a distributed innovation footprint designed to attract top-tier quantum talent and ultimately lead the next era of computing. Near-term opportunities and long-term growth are key to maximizing D-Wave's sustained capital market support. Let me close with a broader industry observation. Quantum computing is entering a new phase. The first phase was scientific exploration. The second phase was capital formation. The next phase will be commercial separation. Over the next several years, we expect that this industry will consolidate around a small number of companies that can demonstrate three things: real performance advantage, real commercial adoption, and a scalable, economically viable architecture with a credible pathway to full error correction. Many will not make that transition. D-Wave already has. We are the only company running production applications for 2,000 enterprise customers. We are the only dual platform quantum computing company with a commercially proven annealing quantum computer generating meaningful revenue and a differentiated superconducting gate-model platform. We are the only company to demonstrate real-world quantum supremacy on a useful problem. We have proof of commercialization with contracts and expanding bookings. Others are still pursuing proof of concept, government funding, or long development timelines. Others have made product development decisions that focus on either superconducting speed or ion-trap and neutral-atom fidelity. We can deliver both. As the market matures, capital will flow toward companies with operating leverage, commercial validation, and technical defensibility. We believe D-Wave is uniquely positioned at that intersection. The quantum industry will not support dozens of long-term winners. It will support a handful of durable platforms, and we intend to be one of them. Fiscal 2025 marked the moment when D-Wave moved from participant to front-runner. The momentum we are seeing in early 2026 suggests that this gap is widening. With that, I will hand the call over to John to provide a review of our fourth quarter and fiscal 2025 results. Kevin Hunt: Thank you, Alan, and thank you to everyone for taking the time to join today's call. Alan Baratz: John? John Markovich: I will begin with the non-GAAP financial measures for the most part, as we believe these metrics improve investors' ability to evaluate our underlying operating performance. These measures are defined in the tables at the bottom of today's earnings press release and include non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA loss, adjusted net loss, and adjusted net loss per share, adjusting for non-cash and non-recurring expenses. In my review of the fiscal year 2025 and fourth quarter results, I will be providing non-GAAP operating metrics, including bookings, as well as non-GAAP financial measures that include non-GAAP gross profit, non-GAAP gross margin, adjusted net loss, and adjusted net loss per share. Revenue for fiscal 2025 totaled $24.6 million, an increase of $15.8 million, or 179%, compared with fiscal 2024 revenue of $8.8 million, with fiscal 2025 revenue including $16.2 million in systems sales revenue, $5.5 million in QCaaS subscription revenue, and $2.7 million in professional services revenue. I would like to highlight several aspects of D-Wave's revenue that clearly distinguish the company from a number of other so-called quantum computing companies. First, all of our revenue is derived from selling, providing access to, or providing services for quantum computing systems. We do not recognize any revenue from any products or services that are not directly related to quantum computing, such as quantum sensing, quantum networking, and encryption systems that rely on quantum physics but not on quantum computing. We defined quantum computing systems as computing systems that harness superposition and entanglement to solve complex computational problems. In addition, we do not give, grant, invest, or lend funds to any of our customers that they utilize or intend to utilize towards the purchase of our products or services. Fiscal 2025 bookings were $18.7 million, a decrease of 22%, or $5.2 million, from fiscal 2024 bookings of $23.9 million, keeping in mind that the 2024 bookings included an eight-figure booking of the company's first system sale. Subsequent to the end of fiscal 2025, D-Wave has closed over $32.8 million in additional bookings that includes a $20 million system sale to Florida Atlantic University, and a $10 million two-year enterprise license deal with a Fortune 100 company. With respect to the diversity of our customer base, in fiscal 2025, D-Wave recognized revenue from over 135 individual customers, encompassing over two dozen Forbes Global 2000 enterprises. The average revenue per commercial customer increased by 20% over fiscal 2024, and the total revenue recognized from Forbes Global 2000 customers increased by 70% on a year-over-year basis, with the average Forbes Global 2000 deal size up 90% on a year-over-year basis. GAAP gross profit for fiscal 2025 was $20.3 million, an increase of $14.7 million, or 265%, from fiscal 2024 GAAP gross profit of $5.6 million, with the increase due primarily to a higher-margin quantum computer system sale during the year. Non-GAAP gross profit for fiscal 2025 was $21.1 million, an increase of $14.7 million, or 229%, from the prior year non-GAAP gross profit of $6.4 million. GAAP gross margin for fiscal 2025 was 82.6%, an increase of 19.6% from fiscal 2024 GAAP gross margin of 63%, with the increase again due primarily to a higher-margin quantum computer system sale during the year. Fiscal 2025 non-GAAP gross margin was 86%, an increase of 13.2% from the prior year non-GAAP gross margin of 72.8%. Net loss for fiscal 2025 was $355.0 million, or $1.11 per share, compared with the fiscal 2024 loss of $143.9 million, or $0.75 per share. The increase in net loss was primarily driven by $250.5 million in non-cash, non-operating charges related to the remeasurement of the company's warrant liability as well as realized losses stemming from warrant exercise, both directly related to the increase in the price of the company's warrants and common stock. Excluding this non-cash remeasurement charge, the adjusted net loss for fiscal 2025 was $84.5 million, or $0.26 per share, an increase of $8.9 million, or 11.8%, when compared to the fiscal 2024 adjusted net loss of $75.6 million, or $0.39 per share. The reduction in net loss per share was due to a higher issued and outstanding number of common shares in 2025 when compared to 2024. Adjusted EBITDA loss for fiscal 2025 was $71.8 million, an increase of $15.8 million, or 28%, from the fiscal 2024 adjusted EBITDA loss of $56.0 million, with the increased loss due primarily to higher operating expenses, partially offset by higher gross profit. Now we move on to the fourth quarter. Revenue in the fourth quarter totaled $2.8 million, an increase of approximately $0.5 million, or 19%, from the prior year fourth quarter revenue of $2.3 million, with fourth quarter 2025 revenue including approximately $1.1 million in systems sales revenue, $1.0 million in QCaaS subscription revenue, and approximately $0.7 million in professional services revenue. Bookings for the fourth quarter were $13.4 million, a decrease of $4.9 million, or 27%, when compared to the year earlier quarter of $18.3 million that included the eight-figure system sale that I referenced earlier. On a sequential quarter-to-quarter basis, bookings increased $11.0 million, or 471%, from the immediately preceding fiscal 2025 third quarter bookings of $2.4 million, with the increase due primarily to the previously announced €10 million booking for a multiyear 50% capacity commitment for a D-Wave Advantage2 annealing quantum computing system to support the development of a Lombardy, Italy-based state-of-the-art quantum computing and research facility. GAAP gross profit for the fiscal 2025 fourth quarter was $1.8 million, an increase of approximately $0.3 million, or 21%, from the fiscal 2024 fourth quarter gross profit of $1.5 million, with the increase due primarily to the growth in revenue. For the fourth quarter, non-GAAP gross profit was $2.0 million, an increase of approximately $0.3 million, or 17%, from the prior year fourth quarter non-GAAP gross profit of $1.7 million. GAAP gross margin for the fiscal 2025 fourth quarter was 64.8%, an increase of 1.0% from the fiscal 2024 fourth quarter GAAP gross margin of 63.8%. For the fourth quarter, the non-GAAP gross margin was 71.8%, a decrease of 1.2% from the fiscal 2024 fourth quarter non-GAAP gross margin of 73.0%. Net loss for the fourth quarter 2025 was $42.3 million, or $0.12 per share, a decrease of $43.8 million, or $0.25 per share, from the fiscal 2024 fourth quarter net loss of $86.1 million, or $0.37 per share. The decrease in net loss was primarily due to a decrease of $57.7 million in non-cash, non-operating charges related to the remeasurement of the company's warrant liability, partially offset by higher operating expenses. Excluding this charge, the fourth quarter adjusted net loss was $31.8 million, or $0.09 per share, an increase of $14.0 million, or $0.01 per share, from the fiscal 2024 fourth quarter adjusted net loss of $17.8 million, or $0.08 per share. Adjusted EBITDA loss for the fourth quarter was $25.0 million, an increase of $9.7 million, or 63%, from the prior year fourth quarter adjusted EBITDA loss of $15.3 million, with the increase due primarily to higher operating expenses, partially offset by higher gross profit. Now I will address the balance sheet and liquidity. As of 12/31/2025, D-Wave's consolidated cash and marketable securities balance totaled $884.5 million, representing a 397% increase from the year earlier consolidated cash balance of $178.0 million, and a 6% increase from the immediately prior fiscal 2025 third quarter consolidated cash balance of $836.2 million. During fiscal 2025, D-Wave raised over $800.0 million in gross proceeds from the issuance of equity under two ATM programs, an ELOC program, and from the exercise of warrants and stock options. During the fourth quarter, the company received $63.7 million in cash proceeds from the exercise of warrants. As previously announced, subsequent to year-end, we invested $250.0 million in cash in conjunction with the acquisition of Quantum Circuits, and we believe that our remaining liquidity is sufficient to support a fully funded plan to profitability. With respect to 2026, we will continue our practice of not providing formal financial guidance. However, I would like to provide some parameters. As we have previously noted, the system sales process is fairly complex and the sales cycle is usually lengthy in duration, not only for our Advantage2 annealing system, but also for our dual-rail gate-model quantum systems. With respect to bookings, we are obviously off to a tremendous start, with fiscal 2026 year-to-date bookings already exceeding our annual bookings for any year in the company's history. As Alan noted earlier, our sales opportunity pipeline entering 2026 was up nearly 1,500% to 2025. That includes a 700% increase in the total number of prospective sales transactions. We continue to see interest in potential system sales, and we continue to see interest in potential system sales as well as QCaaS and professional services deals. With respect to revenue recognition on system sales, please keep in mind that most of these transactions will involve site preparation, installation, calibration, and other key steps before the systems are fully operational that are likely to encompass multiple months and possibly quarters depending on the unique elements of a particular system transaction. As a result, our revenue recognition on system sales is on a percentage-of-completion basis. In addition, we anticipate that most system sales transactions will involve a multiyear service and maintenance revenue component, and some may include a multiyear LeapCloud access component, which we expect will be in the second half of this year. The €10 million booking in Italy will be recognized ratably over five years commencing once the system is fully installed. With respect to the recently announced $10 million enterprise QCaaS agreement, this revenue will be recognized ratably over a two-year timeframe commencing in the current quarter. To summarize, we expect incrementally higher revenue growth in the second half of this year when compared to the first half. With respect to operating expenses, we intend to continue to invest aggressively in both our annealing and gate-model technology development initiatives that consist primarily of research and development headcount, fabrication expenses, and to some degree, capital expenditures. As we previously outlined, approximately 65 research and development professionals joined D-Wave through the Quantum Circuits acquisition, and we intend to expand this New Haven, Connecticut-based gate-model team by at least 50% over the course of this year. In addition, we will be making significant headcount and capital investments at our recently announced U.S. R&D facility in Boca Raton, Florida, to support our LeapCloud service offering. Over the course of fiscal 2026, we expect to increase quarterly operating expenses by approximately 15% sequentially over the immediately prior fiscal quarter. Lastly, given the recent formation of our government business unit, we will be making meaningful investments in this area given the magnitude of opportunities that we see here. In conclusion, as we have previously stated, we continue to believe that D-Wave has the opportunity to be the first independent publicly held quantum computing company to achieve sustained profitability and to achieve this milestone with substantially less funding than required by other independent publicly held quantum computing companies. With that, operator, please open the call for questions. Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing any keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. As a reminder, please limit yourself to one question and requeue should you have a follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Harsh Kumar of Piper Sandler. Please go ahead. Harsh Kumar: Alan, I had one for you. I wanted to ask about the gate model, particularly. Can you help us think about the advantage with the built-in error correction that you have? And I am asking specifically from a time-to-market standpoint and all the progress you are making on technological achievements. Should I just think of this as you need a lot less, like 10x fewer qubits to get to a commercial system? I have to believe this translates to some kind of a timing advantage for you as well. Alan Baratz: Yes, it absolutely translates into a timing advantage. The reason it translates into a timing advantage is because the complexity of building a fully error-corrected system and scaling it to the size needed to achieve quantum utility is much lower, given the dual-rail technology combined with our cryogenic control technology. The dual-rail technology gives us very high gate fidelities, on par with some of the best in the industry, including trapped ion and neutral atom, while preserving the thousand-times speed advantage of superconducting over the other modalities. Because of the higher fidelities, we are able to error correct with many fewer physical qubits per logical qubit. That is a complexity reduction advantage. Then you add the on-chip cryogenic control, which will ultimately allow us to control qubits with just hundreds of I/O lines versus hundreds of thousands of I/O lines, as with other superconducting approaches. Again, we believe that combination will allow us to build and deploy scaled error-corrected superconducting gate-model systems ahead of anybody else. We believe that, ultimately, superconducting will lead because of the speed advantage and the reduction in the complexity. Operator: Our next question comes from Quinn Bolton of Needham & Company. Please go ahead. Quinn Bolton: Hey, guys. I will also offer congratulations on a great 2025. John, I just wanted to come back. I know you are not giving guidance per se for 2026. But as we think about the integration of QCI now into the business, can you give us any sort of points as to how much OpEx you would expect to incur for the year now that the QCI acquisition is closed? Is the incremental OpEx for that team sort of fully factored into that 15% OpEx quarter-on-quarter increase that you talked about for March? Just trying to think about if we had a base model for D-Wave prior to the QCI acquisition, how much additional OpEx would you think we would be putting into the models in 2026 with that acquisition? John Markovich: Quinn, my comments earlier in terms of the sequential 15% growth in OpEx include the incremental costs associated with QCI. The answer to your question is yes. That includes expansion in not only their R&D team, but other expenses including fabrication expenses, as well as some capital expenditures. Operator: Our next question comes from William Kingsley Crane of Canaccord. Please go ahead. William Kingsley Crane: Congrats on the really strong momentum. John, for you, QCaaS has moderated a bit the past year with system sales driving growth. I am wondering if you have a sense of what you think an ideal net retention rate for that segment can be or what that could be this next year. And then if Stride Hybrid Solvers and new ML integration capabilities could change that upsell conversation at all with existing customers? John Markovich: We have not published retention rates, but what I can tell you is when you take a look at the composition of the QCaaS in 2024, a significant component was Jülich, and that transitioned to a system sale. And when you take a look at the bookings that we recently announced, including the €10 million booking for a multiyear 50% utilization of the system in Italy, as well as the enterprise QCaaS deal, we are starting to see substantially larger transactions in the overall QCaaS than what we have seen in the past that give us incrementally more visibility on the growth. Alan Baratz: Kingsley, we have been saying all along that system sales and QCaaS are very complementary models for us. System sales for now are larger deals, with earlier revenue recognition than the QCaaS deals, which are a bit smaller and recognized ratably over a multiyear period in general. However, we are beginning to see an increase in the size of QCaaS deals. I started signaling this last year when I said we are now looking at larger companies doing larger deals with us, including potentially enterprise all-you-can-eat licenses. That is starting to transition QCaaS into larger enterprise license deals. The two-year $10 million Fortune 100 company deal that we closed at the beginning of this year is the first example of that. Now, revenue for those deals still gets recognized ratably, so the revenue recognition is generally over a longer period of time than the system sales. But I think we are going to really start to see QCaaS picking up the pace as we begin to do more enterprise licenses. Operator: Our next question comes from Joe McCormick of Evercore. Please go ahead. Joe McCormick: Yes. Thanks for taking the question on for Mark Lipacis. Maybe just around Quantum Circuits and how it is playing into that sales pipeline increase that you are talking to. I saw that you closed a little bit north of $2 million in bookings for QCI in January. Can you speak a little bit to the levels of engagement that you are seeing, and if there is any qualification around what that book of business looks like from a backlog perspective that is folding in as we enter the 2026 year? John Markovich: I am happy to. As we articulated when we first announced the transaction, we do expect revenue contributions from Quantum Circuits this year on the professional services and QCaaS side. They also have a book of business that is government-related, and they actually have some revenue last year that was government-related. Then, as we have previously outlined, we also expect to start to develop a sales pipeline over the course of this year for potential system sales. Alan Baratz: The only other thing I will say is we are seeing a lot of interest in the dual-rail systems, including the eight-qubit system that we have operational today with some early customers using it, and the 17-qubit system we expect later this year. A number of our current annealing customers have expressed interest in that system in addition to the annealing system. We are quite encouraged by the interest that we are seeing. Operator: Our next question comes from Krish Sankar of TD Cowen. Please go ahead. Krish Sankar: Yeah. Hi. Thanks for taking my question. I just wanted to find out, like, one of your competitors is buying one of your foundries. Kind of wondering how you are looking at risk mitigation. And also, does QCI use the same foundry as D-Wave, or is this a different foundry? Alan Baratz: Okay. So currently, the dual-rail technology is not fabricated at SkyWater. For our annealing technology, SkyWater does fabricate the wiring, but they do not fabricate the active components—the Josephson junctions—which is the most important fabrication component from an IP perspective. The active components we fabricate ourselves in our R&D facilities, and SkyWater does the wiring. On dual-rail technology, SkyWater is not involved at all. So my view on the IonQ acquisition of SkyWater is that, on the one hand, they are saying all the right things relative to continuing to work together exactly as we have been, and we should not be concerned about anything changing as a result of this transaction. On the other hand, we are skeptical and we are concerned. And so we are actively working on other sources of fab support for our systems. Operator: Our next question comes from Kevin Garrigan of Jefferies. Please go ahead. Kevin Garrigan: Good morning, and thanks for the question. You mentioned commercial value and production use. How are customer conversations evolving, and what metrics are customers really focused on when evaluating quantum as a solution? Is it all about speed-up time, or is it convenience, or just that your quantum annealer is far better than anything out there? Alan Baratz: First of all, the annealing quantum systems are the only ones that can actually deliver any commercial value today. They are the only ones that are used in production by customers today. No other quantum computer is capable of that level of computation and commercial ROI on real-world problems. The way this evolves is that we basically engage a customer on an initial application, and we have gotten very good at being able to identify up front whether the application will benefit from our systems or not. When we start an initial application development with a customer, we have a very high degree of confidence that they are going to be able to see a very strong ROI. That allows us to move more quickly to getting that initial application into production. Then, that is what generates interest in other applications. The Fortune 100 deal that we did started with a first application. They were blown away by the results that we achieved, including a dramatic improvement in their bottom line based on using this technology. Then they came back and said, “Okay. We have quite a few other applications. We want an all-you-can-eat license.” We are now starting to see some other large companies see similar benefits from the initial application and talking about similar kinds of engagements. Operator: Our next question comes from Ruben Roy of Stifel. Please go ahead. Ruben Roy: Alan and John, congrats on the progress. These are probably a little bit longer-term in nature questions. With your annealing customers, obviously you have a lot of success stories on the annealing side. With the dual platform approach, are there opportunities in your view to combine annealing and gate-model quantum computing? Again, it is probably pretty early here, but are there opportunities longer term to have hybrid solutions or whatnot to even expand the TAM further? Have you started to have some conversations on potential commercial customers on the gate-model side? Alan Baratz: First of all, yes. A number of our annealing customers have approached us and said, “Look, we have some other use cases here that we would like to look at in the context of your gate-model technology.” Our customers understand the difference between annealing and gate. We have educated them on that. They understand the types of problems that require annealing versus the types of problems that require gate. They recognize that they have other problems that potentially could demonstrate benefit from gate, and they have started to engage us on those discussions. The only other thing I will say relative to your second question is that there is some early evidence based on the fact that we have integrated some digital controls into our annealing systems. Maybe read that as some gate operations in our annealing systems. We are seeing some very interesting scientific results based on that. But it is way too soon to be thinking of that as a viable commercial opportunity. Operator: Our next question comes from Troy Jensen of Cantor Fitzgerald. Please go ahead. Troy Donavon Jensen: Hey, gentlemen. Congrats on all the momentum here. My best takeaway from Qubits 2026 was there are dozens of customers out there that have piloted programs and seem ready to move forward. So my question: on multiple eight-figure enterprise QCaaS deals, can you talk about how much capacity you have with your existing annealing computers, and the time that they take to launch more if you need to ramp quickly? Alan Baratz: We have plenty of capacity in our Leap Quantum Cloud service to support minimum tens of enterprise deals. We have four of our quantum computers available today. Our quantum computers are very capital efficient. Each quantum computer can support $25 million to $30 million of revenue per year. The capital cost is only about a couple of million dollars. The build time, once we have the componentry, is like three to four months. With some lead time, we have no problem deploying additional systems for these kinds of deals. Operator: Our next question comes from Craig Ellis of B. Riley Securities. Please go ahead. Craig Andrew Ellis: Yeah. Thanks for taking the question, and guys, congratulations on the real strong execution. Alan, I wanted to ask you a higher-level question, and I will rewind the clock a little bit. I think it was three quarters ago, you told us to expect increased R&D and go-to-market spend, and here we are now. We start the year with, I think, around $45 million in trailing bookings. The pipeline is extremely robust. So as we start the year, if you can give us any color on what you see in the pipeline on the system side and with that all-you-can-eat newer offering, are we seeing signs of execution of what you were pointing to, or were you expecting something else? It would be greatly appreciated. Thank you. Alan Baratz: The short answer is yes. On the R&D side, our investments were designed to accelerate work on the gate-model system—one of the key elements that we uniquely were bringing to the table was on-chip cryogenic control—and to really start accelerating work on our Advantage3 system, which includes analog-digital capability as well as multichip for scaling to 100,000 qubits. The investments are playing out as we had planned. On the go-to-market side, you said it. We are making really good progress. It is robust at this point in time. Our pipeline has grown significantly, and we are feeling quite good about what we can expect to see this year. So the investments in go-to-market are playing out exactly as we expected as well. Craig Andrew Ellis: I like what you are doing. A question on Advantage3. Could you give us any more information about circuit tests that incorporate Advantage3? Any information that you could give us relative to how you are progressing there and what the capabilities might be compared to Advantage2? Thank you. Great work. Alan Baratz: I called out the two key elements. Functionally, the big things for Advantage3 are putting some digital controls into the annealing fabric, as well as a multichip for scaling far more rapidly. With each generation of system, it is more qubits, more connectivity, and higher coherence times. We have our first chips back that demonstrate the analog-digital controls, and we are close to having our first chips that demonstrate multichip interconnect. We are making good progress on all fronts. Operator: Our next question comes from David Williams of Benchmark. Please go ahead. David Williams: Hey. Good morning. Let me also echo my congrats on the execution here. Maybe, Alan, can you speak to some of the pipeline that you talked about? In the script, just the strength there, where that is coming from, and really what you are hearing from customers, and how quickly can this pipeline turn into confirmed revenue or when those orders could come in? Just kind of that life cycle of that pipeline. Alan Baratz: Honestly, we have a strong pipeline for both system sales, QCaaS, and professional services deals. I am not going to address the revenue piece because that is all based on the revenue recognition policies of the company, and different deals have different recognition timelines. But as far as closing the deals, our pipeline for system sales right now is very robust. When we talked about this at the beginning of last year, I said expect maybe one a year for the foreseeable future. We are beyond one a year at this point in time. The same is true on QCaaS. We are closing deals with much larger companies—one of the world's largest airline companies, one of the world's largest health care companies, largest chemical companies. These are much larger deals from the outset, and we are progressing through them much faster. Very strong go-to-market environment for us right now. Operator: Our next question comes from Antoine Leblond of Wedbush Securities. Please go ahead. Antoine Leblond: First, let me echo my congratulations on the progress in 2025. There have been reports that the Pentagon's budget would increase significantly into fiscal 2027, with some of that budget likely to be allocated to Quantum Technologies. Can you tell us a bit more about the magnitude of the opportunity ahead and how that might benefit you, particularly given your new government business unit? Alan Baratz: First of all, we are not primarily pursuing R&D research grants to be able to fund our R&D roadmap. This is not about the government funding us to build our systems. We have plenty of liquidity. What we are focused on is helping the government solve their hard computational problems today. We have a very interesting pipeline there. I will be very frank with you. When we talked about the Davidson-Anduril deal at Qubits, and Anduril talked about what they had seen in using our system, that generated a very significant inflow of interest in leveraging our systems to solve hard problems within the U.S. government. With Jack Sears on board and building the government business, we are feeling quite good about the opportunity. Operator: Our next question comes from Richard Shannon of Craig-Hallum. Please go ahead. Tyler Anderson: Hi, guys. This is Tyler Anderson on for Richard. Thank you for taking my question. You mentioned that you have 50% of the capacity of your system booked. When we are thinking about future new systems that are coming online for the Advantage3 and beyond, is there a potential where we see multiple of those systems come online right away and have that capacity reserved for customers that you are talking to today? Are you having those conversations? Just want to get some color on that. Alan Baratz: Yes. So, Tyler, first of all, when you say 50%, the only time we have talked about 50% of capacity was in the QAlliance deal in Italy. They purchased 50% capacity of an Advantage2 system. In general, in our cloud service today, we are not yet even at 50% capacity. We have plenty of capacity in our LeapCloud service to support our professional services engagements and quantum computers-as-a-service customers. When we bring a new system to market, we try to upgrade all our cloud systems as quickly as possible. We do installation so that we can upgrade all our cloud systems as quickly as possible. Operator: Our next question comes from David Liu of Mizuho. Please go ahead. David Liu: Hi. I am going for Vijay. Thanks for taking the question and congrats on strong momentum here. You called out the interest and momentum in system sales growth going into 2026, as well as the enterprise traction for QCaaS. How should we think about QCaaS and sales mix going forward? And in relation to that, the OpEx number as well for the year? Alan Baratz: In the past, because the numbers have been small, we have just done them one at a time. However, now that we are seeing a lot more interest in system sales, we are making some investment in the team and the capabilities so that we do not have to serialize. We can do more in parallel going forward. So the answer is yes. John Markovich: With respect to the OpEx number, as I articulated earlier, my comments were based upon our consolidated OpEx. My comments were that we are expecting OpEx to grow at 15% sequentially quarter to quarter over the course of the fiscal year. With respect to the mix, the mix is going to be lumpy for the foreseeable future, where we could have a substantially higher QCaaS enterprise mix in any given quarter than we have systems bookings, or vice versa. It is entirely a function of the composition and elements of the bookings, which, as we have articulated in the past, could have unique revenue recognition elements to it—for instance, the percentage of completion on a system installation. This concludes our question and answer session. Operator: I would like to turn the conference back over to Dr. Baratz for any closing remarks. Alan Baratz: D-Wave is different. We are pulling away from the quantum computing pack, as demonstrated by our undeniable commercial traction and our remarkable technical leadership. D-Wave is the only dual platform quantum computing company capable of delivering both annealing and gate-model systems. The only company with quantum computers that have demonstrated quantum supremacy on a useful real-world problem. The only company that has customer applications in production now. The only company with highly differentiated gate-model technology that delivers the remarkable speed of superconducting and the fidelity of ion-trap or neutral-atom approaches, a powerful combination that positions D-Wave to win in the error-corrected gate-model race. 2026 is the year of D-Wave Quantum. The year we emerge as a defining company in the quantum era. Thank you all for joining us today, and we look forward to updating you on D-Wave's progress in the coming months. Operator: Thank you for participating, and have a pleasant day. You may disconnect your lines. This concludes today's conference call.
Operator: Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the ACADIA Pharmaceuticals Inc. Fourth Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Al Kildani, Senior Vice President of Investor Relations and Corporate Communications. You may begin. Albert Kildani: Good afternoon, and thank you for joining us on today's call to discuss ACADIA's fourth quarter and full year 2025 financial results. Joining me on the call today from ACADIA are Catherine Owen Adams, our Chief Executive Officer, who will provide some opening remarks; followed by Tom Garner, our Chief Commercial Officer, who will discuss our commercial brands, DAYBUE and NUPLAZID. Also joining us today is Elizabeth Thompson, Ph.D, Executive Vice President, Head of Research and Development, who will provide an update on our pipeline programs; and Mark Schneyer, our Chief Financial Officer, who will review the financial highlights. Catherine will then provide some closing thoughts before we open up the call to your questions. We are using supplemental slides, which are available on our website under the Events and Presentations section. On today's call, both GAAP and non-GAAP financial measures will be discussed, including non-GAAP NUPLAZID net sales and non-GAAP total revenues. The non-GAAP financial measures that are also referred to as adjusted financial measures are reconciled with the most directly comparable GAAP financial measures in our earnings press release and slide presentation, which has been posted on the Investors page of the company website. Before proceeding, I would like to remind you that during our call today, we will be making several forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including goals, expectations, plans, prospects, growth potential, timing of events, future results and financial guidance are based on current information, assumptions and expectations that are inherently subject to change and involve several risks and uncertainties that may cause results to differ materially. These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today's date, and we assume no obligation to update or revise these forward-looking statements as circumstances change, except as required by law. I'll now turn the call over to Catherine for opening remarks. Catherine Owen Adams: Thanks, Al, and good afternoon, everyone. I'm pleased to report that ACADIA delivered another strong quarter, capping off a milestone year for our company. We achieved adjusted total revenues of $298 million in the fourth quarter, up 16% from the prior year. And for the first time in our company's history, annual revenues exceeded $1 billion, reaching $1.08 billion in adjusted 2025 revenue, which represented 14% growth from the prior year. This achievement underscores the strength of our commercial execution and positions us for sustained growth in the coming years. We are presenting adjusted revenues because during the fourth quarter, we received our Inflation Reduction Act invoices from CMS for NUPLAZID, which were higher than anticipated and required a nonrecurring accounting change in estimate that you see reflected in our financials. Mark will walk you through the details later in the call. As a result, we delivered adjusted NUPLAZID net sales of $189 million in the fourth quarter and $692 million for the full year. These results were up 17% and 15%, respectively, and in terms of volume represented 13% in the fourth quarter and 9% for the full year. together demonstrating the continued strength of NUPLAZID and further reinforcing our confidence in its long-term growth trajectory. So now looking forward to 2026, we expect NUPLAZID net sales of $760 million to $790 million, which would represent between 10% and 14% growth over 2025 adjusted net sales, placing the brand on a strong trajectory towards our expectation of achieving blockbuster status with $1 billion of net sales in 2028. Turning to DAYBUE. We delivered net product sales of $110 million in the fourth quarter and $391 million for 2025, representing 13% and 12%, respectively, year-over-year sales growth. This growth was driven primarily by our expanded reach into the community physician setting in the U.S. and our ex-U.S. named patient supply programs, including countries outside the European Union, where we're seeing strong interest to access DAYBUE. We're excited about the launch of DAYBUE STIX, our new powder formulation, which is still in the very early stages, but already generating significant interest from both health care providers and caregivers. Tom will share more details on how this new formulation is being received and the opportunities we see ahead. I do want to briefly address the regulatory developments in the EU. As we shared, following our oral explanation to the Committee for Medicinal Products for Human Use, or CHMP, which we gave to support our trofinetide marketing application, we were informed that the outcome was a negative trend vote. Liz will provide details on our plan to request a reexamination subject to the formal opinion. Our commitment to advancing access to trofinetide in the EU remains unchanged. Importantly, our named patient supply programs remain active, ensuring patients maintain access to treatment as we move through the regulatory process. For our 2026 DAYBUE guidance, we expect global net sales between $460 million and $490 million, which would represent between 18% and 25% growth over 2025, driven by contributions from the STIX launch in the U.S. and continued growth of our named patient supply outside the U.S. Due to the current status of our application within the EMA, this 2026 guidance does not include potential commercial sales that would result from this regulatory approval. However, it does include contributions from our global named patient supply programs, including countries within the EU where we continue to see strong interest. Longer term, we continue to project 2028 global net sales for DAYBUE of $700 million, inclusive of the EU, and we'll update our expectations after clarity on the final EMA opinion. Just for perspective, of our projected $700 million in 2028 sales, the EU sales represent less than 15% of the total, meaning we have ample opportunity for growth ahead under any scenario. Turning to our robust R&D pipeline. We are excited for the Phase II readout of remlifanserin in the August through October 2026 time frame as this presents a key event for our company this year. Beyond that, we see several important catalysts, which Liz will detail. Importantly, we have 4 unique molecules targeting large addressable markets with a combined full peak sales potential of $11 billion. Approximately $4 billion of that potential is specifically attributable to remlifanserin across both the Alzheimer's disease psychosis and Lewy body dementia psychosis indications, highlighting the transformative potential this asset represents for ACADIA's future growth trajectory. I'll now turn the call over to Tom for an update on our commercial brands. Thomas Garner: Thank you, Catherine. I'm pleased to share the strong fourth quarter performance delivered by our commercial portfolio, beginning with NUPLAZID. NUPLAZID delivered another outstanding quarter with adjusted net sales of approximately $189 million in the fourth quarter. Importantly, as Catherine mentioned, underlying quarterly volume growth remained exceptionally strong at 13%, accelerating the momentum we've built throughout the year. This growth was broad-based with strength across all channels. For the full year, volume increased 9%, reflecting sustained and durable demand for NUPLAZID. Several key metrics underscore this commercial momentum. New prescriptions led the way, growing 18% year-over-year in the fourth quarter. This performance reflects continued traction in the marketplace and validates the effectiveness of our commercial strategy to improve awareness and diagnosis of Parkinson's disease psychosis while positioning NUPLAZID as the preferred treatment option earlier in the course of the disease. This has been supported by a refined approach to targeting and segmentation. While on the direct-to-consumer front, our new branded campaign launched in the fourth quarter, and we expect pull-through benefits to build throughout 2026. From an execution standpoint, we have now completed a 30% expansion of our customer-facing teams to better support our evolving prescriber base with representatives now fully deployed in the field. Based on our experience with DAYBUE, we expect a 6- to 9-month ramp before the full impact of this investment is reflected in results. Our expanded team is now equipped with enhanced tools and resources to engage a broader and evolving prescriber base. Notably, 40% of NUPLAZID's prescribers in fiscal year 2025 were new to brand, and we are now even better positioned to meet the needs of this growing group of HCP writers. Overall, 2025 was a very strong year for NUPLAZID, and we are well positioned to build on this momentum in 2026 and beyond. As reflected in our guidance, we expect another year of solid growth. And as Catherine noted, we remain confident in NUPLAZID's path to approximately $1 billion in annual sales by 2028. Now turning to DAYBUE. We delivered another quarter of meaningful progress across multiple growth drivers. Fourth quarter sales were approximately $110 million, driven primarily by strong U.S. performance with growing contributions from our rest of world programs. This represents 13% year-over-year sales growth, supported by 12% volume growth. In the fourth quarter, 1,070 patients received DAYBUE shipments globally, which represents record highs in both the U.S. and outside the U.S. This milestone highlights our continued success in reaching more patients who can benefit from therapy. As the business matures, we expect to increasingly emphasize sales-based metrics over patient counts as our primary performance indicator. Core business fundamentals remain consistent with what we reported last quarter, including strong persistency, low discontinuation rates and continued penetration within the approximately 6,000 diagnosed Rett syndrome patients in the United States, reinforcing the significant opportunity that remains. We continue to see growing momentum from our community expansion strategy. In the fourth quarter, 76% of new prescriptions originated from community-based physicians, validating our strategy on expanding access beyond specialty care centers and bringing DAYBUE closer to where patients receive their ongoing care. Now turning to DAYBUE STIX, one of our most exciting recent developments. In December, the FDA approved this new formulation of DAYBUE, a powder for oral solution. We believe this represents a meaningful advancement in how we can serve patients and families. DAYBUE STIX has been developed based on the feedback we've heard directly from caregivers and HCPs. The powder formulation allows flexibility in mixing with different liquids and adjusting volume based upon patient preference. It requires no refrigeration, offers enhanced portability through compact packaging and contains low sugar and carbohydrate content with no red dye or preservatives. Based on our analysis, we believe there's an incremental opportunity of over 400 patients, including treatment-naive and those who have previously discontinued DAYBUE due to formulation concerns. We've been very encouraged by the early response to the approval of DAYBUE STIX across the Rett community. Initial product is already in channel, and the first patients have already begun receiving shipments. Early patient mix is tracking in line with our expectations, and we remain on track for a broader commercial launch in early Q2 as we ensure appropriate inventory levels and a smooth transition for patients. Outside the United States, we continue to make progress expanding global access to trofinetide. DAYBUE liquid is now approved in 3 markets, including Israel, following recent approval by the Ministry of Health, further expanding our international footprint. Looking ahead, we see a strong growth outlook for DAYBUE reflected in our 2026 guidance. Key drivers include the U.S. launch of STIX, continued benefits from the expansion of our customer-facing teams and ongoing contributions from the named patient supply programs internationally. Overall, the fundamentals of the DAYBUE business remains strong with multiple demand drivers in the U.S., coupled with a runway for continued growth as we expand access globally. I'd like to thank the ACADIA commercial organization for their outstanding commitment to both NUPLAZID and DAYBUE in 2025. I look forward to further building on the strong momentum we've established as we head into 2026. And with that, I'll turn the call over to Liz. Elizabeth Thompson: Thank you, Tom. I'm pleased to have the opportunity to discuss progress on our robust R&D pipeline, where we continue to see real momentum building across multiple programs and to provide some regulatory updates. As we updated last month, across our 8 disclosed programs, we anticipate initiating 5 additional Phase II or Phase III studies by the end of 2027, demonstrating the breadth and depth of our development portfolio. Over recent quarters, we've achieved several important milestones with new study initiations. Among these, we initiated a Phase II study of remlifanserin in Lewy body dementia psychosis, initiated a Phase III study of trofinetide in Japan and launched our Phase II study of ACP-211 in major depressive disorder. Soon, we expect to initiate our first-in-human study of ACP-271 in healthy volunteers, marking an important advancement for this novel asset into clinical development. As a reminder, our current target indications are tardive dyskinesia and Huntington's disease. We continue to expect to deliver 4 Phase II or Phase III study readouts by the end of 2027. The next milestone will be top line results from our Phase II study of remlifanserin in Alzheimer's disease psychosis. Based on the pace of enrollment, we remain confident in the updated August to October 2026 time line we shared last month. Recruitment in our remlifanserin study for Lewy body dementia psychosis is getting off to a solid start and is tracking in line with our expectations. Turning to our trofinetide regulatory and international development updates. As we announced earlier this month, we were informed of a negative trend vote from the CHMP. We expect to receive the final opinion this week, which we expect will be adopted following the CHMP meeting currently taking place. Based on the trend vote, we do anticipate that final opinion to be negative. We are currently intending to follow the normal regulatory process for reexamination. In total, this process would be expected to take approximately 120 days from the adoption of the negative opinion. Assuming that time line holds, we would expect the reexamination process to lead to a new final CHMP opinion around the end of Q2. Again, our intention to request reexamination is based on our current understanding of the trend vote, but we will need to review the final opinion to determine our optimal path forward. While we look to bring trofinetide to patients in the EU, we continue to make progress on other fronts. In Japan, as I mentioned, we recently initiated our Phase III study, which represents an exciting opportunity to bring trofinetide to Japanese patients with Rett syndrome. We anticipate results from this pivotal study between Q4 2026 and Q1 2027, which would position us for a potential regulatory submission in 2027 in this important market. The strength and diversity of our pipeline continues to position ACADIA for sustained growth with multiple potential opportunities to bring truly meaningful innovation to underserved patients living with rare and neurological diseases. 2025 was a milestone year for ACADIA in many ways, and I am particularly proud of what the R&D team has done to continue to move our science and our pipeline forward. And with that, I hand the call over to Mark. Mark Schneyer: Thank you, Liz. I'm pleased to walk you through our strong financial performance for the fourth quarter and full year 2025. Fourth quarter total revenues were $284 million and for the full year were $1.07 billion on a GAAP basis. Turning to NUPLAZID. Fourth quarter GAAP net product sales were $174 million and for the full year 2025 were $680 million. We are also reporting results on a non-GAAP basis to adjust for the accounting impact on NUPLAZID from receiving our first invoices for inflation cap rebates under the Inflation Reduction Act, or IRA. While we've been accruing for inflation cap rebates since Q4 2022 based upon historical data that we received from the federal government and our customers, the invoices we received from CMS indicated that our Medicare volume for NUPLAZID was higher than we had been accruing for. This volume difference required us to make a change in estimate for our IRA rebate accruals in fiscal year 2025, which is accounted for as an increase in gross to net and resulted in a nonrecurring $20 million reduction in net sales. A reconciliation from our GAAP results to non-GAAP adjusted NUPLAZID net sales and total company revenues is presented on Slide 15. The adjusted net sales methodology apportions the previously described $20 million change in estimate to the years in which the applicable NUPLAZID net sales volumes occurred. As you can see on this slide, the change in estimate is only a modest change in net sales when looking over the entire 4 fiscal year period. For the fourth quarter, adjusted NUPLAZID net sales were $189 million, up 17% year-over-year. For fiscal year 2025, our adjusted NUPLAZID net sales were $692 million, up 15% year-over-year. For the quarter, gross to net for NUPLAZID was 29.4% on a reported basis and 23.6% on an adjusted basis. Our gross to net for NUPLAZID for the full year was 25.9% on a reported basis and 24.6% on an adjusted basis. For DAYBUE, we achieved $110 million in net sales in Q4, up 13% year-over-year, demonstrating continued strong momentum in this brand. The gross to net adjustment for DAYBUE in the quarter was 19.5%. Full year DAYBUE net sales were $391 million, up 12% year-over-year. DAYBUE gross to net was 22.3% for the year. Turning to our operating expenses. R&D expenses for the fourth quarter were $85 million, down from $101 million in the fourth quarter of 2024. The decrease was primarily attributable to the $28 million upfront payment for ACP-711 in the fourth quarter of 2024. SG&A expenses for the fourth quarter were $156 million, up from $130 million in the fourth quarter of 2024, primarily driven by increased marketing investments to support NUPLAZID and from our DAYBUE field expansion and marketing investments. With regard to taxes, we released the valuation allowance on the company's deferred tax assets, resulting in a onetime noncash income tax benefit of approximately $250 million in the fourth quarter. Our cash balance at the end of 2025 was $820 million. Looking ahead to fiscal year 2026, I'm pleased to provide our financial guidance, which reflects our confidence in the continued growth trajectory of both NUPLAZID and DAYBUE. While we will be making some foundational SG&A investments this year, we expect them to deliver meaningful top line and operating income growth as we move forward into 2027 and 2028. For total revenues, we expect to achieve between $1.22 billion and $1.28 billion, representing meaningful year-over-year growth that builds upon our strong 2025 performance. For NUPLAZID, we're guiding to net sales between $760 million and $790 million Sales growth is primarily expected to be driven by expanding volume. Gross to net is expected to be in the range of 22% to 24%, and this aligns with the Medicare volume mix implied by our IRA inflation cap invoices received from CMS. For DAYBUE, we're guiding to net sales in the range of $460 million to $490 million, driven by DAYBUE STIX and continued growth in our named patient supply programs. Given the delay to any potential EMA approval, this guidance range does not assume EU commercial sales. Gross to net is expected to be in the range of 22% to 24%. We expect R&D expense to be between $385 million and $410 million. The increase in R&D spend expected in 2026 compared to 2025 is primarily attributable to an increase in clinical and personnel costs as we advance and have broadened our R&D portfolio. Our R&D expense guidance assumes our remlifanserin program continues into the Phase III portion of the program. We expect SG&A expense to be between $660 million and $700 million for the full year. The growth in SG&A year-over-year is primarily due to our expansion of customer-facing personnel and marketing investments for NUPLAZID and increased spend to support the launch of DAYBUE STIX as well as the annualization of our DAYBUE field force expansion that took place in Q2 2025. This guidance reflects our confidence in the underlying strength of our business and positions us well for continued growth as we advance towards our 2028 objectives. And with that, I'll turn the call back to Catherine. Catherine Owen Adams: Thank you, Mark. Looking ahead, in addition to the strong revenue growth we've highlighted on this call, we have a series of exciting milestones to support our growth in 2026 and beyond. Our most significant catalysts arrived later this year with top line results from the Phase II study of remlifanserin in Alzheimer's disease psychosis expected between August and October, an opportunity with the potential to meaningfully shift our long-term growth profile. We also plan to initiate our first-in-human study of ACP-271 before the end of the first quarter. With a strong balance sheet, we also have the flexibility to pursue business development opportunities that complement and support our future growth. Taken together, our commercial execution, advancing pipeline and financial strength, ACADIA is well positioned for sustained growth and value creation. And with that, I'll turn the call back to the operator to begin our Q&A session. Operator: [Operator Instructions] Your first question comes from the line of Tess Romero of JPMorgan. Tessa Romero: So how should we be thinking about ramp to your 2028 global net sales targets that you outlined at our conference last month? Any additional color you can give us now that your 2026 guidance has been outlined for both DAYBUE and NUPLAZID? Catherine Owen Adams: Thanks, Tess. I'll give you a top line view and then maybe ask Tom to add some specifics. So if we take NUPLAZID and we look at our midpoint guidance for '26 at $775 million, that's about 12% above this year's growth on the adjusted basis. And so would indicate we're expecting low to mid-teens growth out to the $1 billion. So we feel very confident in that incremental growth that we see, and Tom will explain maybe a bit more about how that tracks through to the marketing execution. And then with DAYBUE at the midpoint of our guidance, 21% over last year, again, expecting for next year and out to '28 sort of low 20% growth to continue. So those -- that's how we bridge between today and our guidance for 2028. Overall, the company's CAGR during that time will be about 16%. But Tom, in terms of the confidence to ramp, perhaps you'd add some stuff for Tess. Thomas Garner: Sure, absolutely. So as you can see by our results through 2025, both brands are coming off a very strong year. And just looking at NUPLAZID and in particular, our Q4 performance, you can see the acceleration that we actually saw in some of our metrics through Q4. This gives us real confidence going into 2026 but now with our 30% expansion of the field force in place, we can really begin to further capitalize upon the underlying demand that we are seeing in the market for NUPLAZID. Obviously, we mentioned on the call that we are really kind of positioning NUPLAZID earlier in the treatment paradigm for these patients with PDP. We are continuing to focus on our unbranded efforts. We think awareness for this patient population is incredibly important. And as we begin to tap into just some of the underlying dynamics that we see on a weekly and a monthly basis, especially as it relates to kind of our expanding a new writer base, that gives us real confidence that our strategy moving forward is going to continue to pay dividends for us. Turning to DAYBUE. We obviously got the approval for DAYBUE STIX back in December. We've been really encouraged by the early signals that we're seeing through January. And just recall, we're not anticipating a full launch for that formulation until Q2. But what we're seeing already, I think, really underpins the excitement that we had leading up and then through that approval just given the encouraging stories we're hearing both from caregivers, but also HCPs and their interest in continuing to use DAYBUE and try the new formulation, either for those patients who are naive to therapy or potentially may have discontinued due to formulation concerns. So there's 2 big opportunities that we see for DAYBUE in the U.S. Outside of the U.S., obviously, it's going to be a continuation as we further bolster our named patient supply programs. So we continue to see plenty of inbound interest from across the various countries where those programs are available, and we'll support those patients where we can. Operator: Your next question comes from the line of Ritu Baral of TD Cowen. Ritu Baral: I wanted to ask the team what good remlifanserin ADP data will look like later this year. What are you hoping to show on the primary endpoint that SAPS-HD at week 6? And if you could go through some of the powering. And in the January presentation, you noted a key exploratory endpoint of the NPIC. Is there anything in particular that you're looking for in that exploratory endpoint of note that sort of fills out the clinical story of what remlifanserin benefit in this population could be? And then I have a quick follow-up. Catherine Owen Adams: I'll get Liz to give you her response. Elizabeth Thompson: Sure. Thanks for the question, Ritu. So broadly speaking, what we're looking for in our Phase II study with remlifanserin is continued evidence that we are developing a molecule that's in line with our target product profile, what we think a drug really needs to be meaningful in this patient population. And that has a number of different components to it. And then I promise I will come to your questions about powering. But some of the components are, we know that we think it's important here to have a drug that's going to be easy for people to take and easy for them to be compliant with, particularly in this patient population. You can imagine the challenges in having people take their medicine appropriately and the potential big impact if they don't. And so something that is once a day, something that can be taken with or without food, something that doesn't have significant DDIs with other medicines or beyond. Those are all things we think are important that we feel pretty good about with remlifanserin to date. We think it's going to be important, obviously, to show efficacy and a good safety profile. And frankly, if we see something that's in line with the established NUPLAZID safety profile, I think we'll be very pleased with that. And finally, certainly, we're not going to answer this just with this Phase II trial, but we think it's going to be important to see data that's directionally supportive of other things that we think matter that we're not going to have a negative impact on motor, for example, that we're not going to have a negative impact on cognition. So those are all the kinds of things that we're going to be looking for in this study. In particular, around powering and the SAPS-HD, from a primary endpoint perspective, what we have powered for here is a moderate effect size, so 0.4 in particular. We'll be pleased, of course, if we see statistical significance on that at week 6. Around NPIC, I'm not really ready at this point to comment on specifics of what we're looking for there. That is a more recently added endpoint, and so we certainly did not power the study around that. So it's more exploratory in nature, and that's reflected in where it is in our hierarchy at this point. Operator: Your next question comes from the line of Marc Goodman of Leerink. Marc Goodman: Yes. Can you just give us a sense of what's going on behind the scenes with DAYBUE and just the persistency and how patients are being compliant with the drug, just how that's changed? We haven't heard you talk about that at all today. Catherine Owen Adams: Yes. I think Tom talked to it at a high level in his comments. So Tom, do you want to add any more color for Marc? Thomas Garner: Yes. I mean, essentially, Marc, everything is kind of in line with what we shared in previous quarters. Our discontinuations remain in the pretty low single-digit range. They've really stabilized. Consumption kind of remains as we've shared before, which I think for the full year was kind of the high 60% range. Yes, I mean, our story really now is -- now we've stabilized the business. I think now we're kind of back on a growth trajectory. Now we're kind of really seeing the benefits from the expansion that we made back in Q2. And our strategy as we expand into the community is working for us. It's really now a case of utilizing STIX to really unlock that next wave of growth, and that's what we anticipate doing as we head into 2026. Marc Goodman: It's been single digits all year. Is that what you're saying, all 4 quarters? Catherine Owen Adams: Yes. Thomas Garner: Yes. Operator: Your next question comes from the line of Rudy Li of Wolfe Research. Guofang Li: I have a follow-up question for the upcoming Phase III trial in ADP. Can you maybe just talk about the time line, how long it would start -- it would take you to start and finish the trial? And a second question regarding the EU opinion for DAYBUE. What specific concerns regarding the pathway? And how do you plan to fix that with the upcoming request for reexamination? Catherine Owen Adams: So Liz, I think that's clarity on the ADP II/III enrollment time line and then you can fill them in on EU. Elizabeth Thompson: Sure. Rudy, welcome and thanks. So first, on the remlifanserin Phase II to Phase III. So when we originally designed this program, we were building it on a wealth of information from pimavanserin. And so we took an assertive approach to clinical development, where we've got a combined program, a master protocol that includes the Phase II and 2 Phase IIIs. And the advantage of this is that they're statistically separate. So I've been talking about how we're going to provide detail or we're going to provide top line results on the Phase II in the August to October time frame, but they are operationally seamless. And so what that means is that as soon as we stop enrolling in the Phase II portion of the ADP program, sites can start enrolling in the Phase III portion of the ADP program. So we look to move from Phase II to Phase III enrollment later in the course of this year. Switching over to the reexamination. So we don't have the final opinion in hand. We expect that to show up over the course of the coming days. So I can't tell you exactly what is going to be in it. What I can say is that we do anticipate, throughout the process, we have gotten questions on things like the relevance of the endpoints to the patient population, the clinical meaningfulness of the results that we saw on our endpoints, the duration of therapy and the mechanism of action of DAYBUE and how that could be extrapolated to the kind of impact you might expect to have on the disease. So those are the types of things that we anticipate we're going to see in the final opinion. But again, that's going to come in the following days, and we'll put out a press release that provides more information on it when we have more information on it to share. In terms of -- I think there was also embedded in there a question about what we might do differently this time around. Some of that is going to depend on the nature of the questions that we actually wind up seeing. But I will say in terms of reason to believe, there is precedent for reexaminations taking a negative opinion and turning it into a positive opinion. If you look over the last 5 years, depending on how you cut it, you get something like 20% to 30% of reexaminations result in a positive opinion. There are a number of factors that can go into this. Certainly, part of the process is that you do have a new rapporteur and co-rapporteur. You have an opportunity to come in specifically addressing only those grounds that are the grounds for refusal of the application, and we have an opportunity to potentially bring some new voices into it. We're really committed to the EU patient population and are looking for ways to get our way through this regulatory process. Operator: Your next question comes from the line of Yigal Nochomovitz of Citi. Unknown Analyst: This is Caroline on for Yigal. Could you tell us how remlifanserin is differentiated from Cobenfy, which has upcoming Phase III readouts in ADP this year? Elizabeth Thompson: Sure. So mechanistically, these are different approaches to coming at psychosis. Overall, psychosis is really understood to result from an excessive ratio of your serotonergic -- sorry, I'm having a hard time talking today, serotonergic versus your cholinergic signaling, neurotransmission pathways. And we come at that from sort of different angles of the seesaw, if you want to think of it that way. One is taking down one side versus increasing the other side. So there's reason to think that either could be impactful in psychosis. Certainly, there are going to be a number of differentiators in terms of how the drugs are taken. We have a good understanding, I think, of what the dosing paradigm looks like for remlifanserin as well as what it's likely to look like for Cobenfy. And you need to think about the profile of each of these in the context of an elderly frail patient population. So we think that remlifanserin could be a good treatment option for patients if we see a safety profile that continues to be consistent with what we've seen for NUPLAZID. Operator: Your next question comes from the line of Sean Laaman of Morgan Stanley. Sean Laaman: As DAYBUE STIX rolls out more broadly in early -- I think it's early Q2 '26, you said, how should we think about net new patient capture versus switching? And do you think STIX meaningfully expands the addressable Rett population over time? Thomas Garner: Yes. Sean, it's Tom here. Thanks for the question. Yes, I mean, first off, just to reiterate, we've been really, really encouraged by the early excitement that we're seeing from the Rett community regarding STIX. As we mentioned on the call, by our own internal estimates, we think there's around 400-plus patients that we could unlock in addition to just having the liquid on the market with the STIX formulation. And that's made up of both patients who are naive, but also those that may have discontinued or maybe never started due to formulation concerns. So you take that in totality, and we believe that there is clearly additional upside that we can capture over the next few years. Worth noting that, that 400 patients that we're talking about, we don't think we're going to see all of them in 2026. We anticipate unlocking those over the next 2 to 3 years. But taken together, coupled with all of the efforts that we've already employed in 2025, obviously, we have the expanded field team. We now are doing more in terms of direct-to-consumer, we've been doing a significant amount of education, especially as we move into the community setting, we believe that there is an opportunity to further penetrate the Rett marketplace with DAYBUE, and potentially continue to expand it further. We now estimate that there's around 6,000 Rett patients diagnosed in the U.S., which is a modest increase in what we've shared previously. So I think taken together, absolutely, we believe in the long-term growth outlook for DAYBUE. Catherine Owen Adams: Thanks, Sean. We are excited about STIX and getting patient stories in already with a few -- the patients now in the channel and look forward to really giving you a full insight into DAYBUE STIX at our next call. Operator: Your next question comes from the line of Brian Abrahams of RBC Capital Markets. Nevin Varghese: This is Nevin on for Brian. Just a couple of questions on 204 remlifanserin. So I think at the R&D Day last year, you had shown that there was a dose dependence in the exposure response signal with pimavanserin in the ADP and Lewy body patients where some of that higher exposure have correlated to greater symptom reduction. So I guess what drives your confidence that the 30 mg and 60 mg doses of remlifanserin would reproduce that exposure response relationship in the same way in the RADIANT trial. And is there any way to maybe quantify that target gap or target efficacy gap versus pimavanserin's marketed dose based on some of the preclinical and Phase I PK data that you have? Elizabeth Thompson: So all right. Let me think how to come at this one. So yes, first off, we do -- part of our reason to believe with remlifanserin is based on the fact that with PIM, we did see what appears to be an exposure response from an efficacy perspective. And in neither ADP nor Lewy body, do we appear to be at the maximum or near maximum plateau level of that efficacy. I will say that, frankly, even if we were able to just reproduce similar levels of efficacy with remlifanserin that was seen with 34 milligrams of pimavanserin and do it in a more robust study that is focused specifically on the Alzheimer's population, we think that, that would be meaningful in and of itself. And so additional efficacy, I would say, is sort of the cherry on top. We do think that there are good reasons to believe that, that exposure response relationship is true and will play out when we're able to really actually test it with 2 different doses, but we do have to do that test. So I would say that even if we don't see as much of a differentiation between the 30 and the 60 as you might expect based on that exposure response, we still could have a meaningful therapy here just in the context of a more robust, more specifically designed therapy or designed trial. Operator: Your next question comes from the line of Ash Verma of UBS. Ashwani Verma: So as we think about the increase in the OpEx this year, does that mostly now enable you to get to your 2028 goals? Or is there more incremental investments coming in the subsequent years that would be key to delivering that? And then just secondly, I know like on Cobenfy ADEPT-2 trial, there's been just a lot of focus on the irregularities that they saw in terms of clinical trial execution. Just can you give us some confidence that when you look at your study execution, you don't necessarily see any type of an issue like that? Catherine Owen Adams: Thanks, Ash. I'm going to get Mark to talk about the OpEx strategy and then Liz can further discuss Cobenfy. So Mark? Mark Schneyer: Yes. Thanks, Ash, for the question. So I would say that from an SG&A standpoint, kind of you'll see incremental increases from here. this is kind of the foundational investments that we're making to achieve our goals in 2027, 2028 and beyond. From an R&D standpoint, it certainly is how the portfolio advances as it continues to be successful with the broader and bigger portfolio, it can increase. And if we see normal rates of attrition, it will increase less. We do think our margin achievement will significantly expand from here. And our expectation is really depending upon how the R&D portfolio evolves that we could see kind of mid-teens operating margins with no attrition. But if you think about normal rates of attrition in the R&D portfolio, you'd be in the low 20% operating margin in 2028. Elizabeth Thompson: As far as the question about the BMS situation and the irregularities, I mean, I'll note, like everyone else, we don't know the specifics of the irregularities that we're seeing in the BMS situation. That said, on an ongoing basis, we do look at blinded data in a number of ways. And what I can say is, at this point, we're not aware of any substantial irregularities that suggest that we have a problem. Obviously, this is an ongoing thing. We're very committed to good clinical practice. And so we do continue to look on an ongoing basis, but so far, so good. Operator: Your next question comes from the line of Evan Seigerman of BMO Capital Markets. Malcolm Hoffman: Hi, I'm Malcolm Hoffman on for Evan. I know this study is early, but can you take a second to talk about what you are looking to see from the Phase I ACP-271 healthy volunteer study that you expect to initiate this quarter? Given the mechanism and preclinical work, it seems obvious that you want to see improved levels of sedation relative to the VMAT2 inhibitors. But I just want to get a sense of whether there's other key measures you're looking to assess here. Elizabeth Thompson: Very exciting. This may be the first 271 question I've gotten, well, maybe ever. No, thank you for the question. So it is early here. But what I will say is we're -- this is some of the most novel biology we've got in the pipeline. And so part of it is we're just -- it's -- this is the first step of a GPR88 agonist into humans in clinical trials. So we are interested in understanding overall how that behaves in humans. We're interested in understanding PK and to whatever extent we can, the PK/PD disconnect that we did seem to see in some of our animal models, suggesting the potential for a long PD effect that outlasts the PK. So some initial exploration there. And yes, obviously, understanding what this looks like from an adverse event potential profile is going to be important in terms of the degree to which it bears up our hypothesis of how this could work in people. So thank you for your interest. Looking forward to talking more about this as we go through the upcoming months and years. Operator: Your next question comes from the line of Sumant Kulkarni of Canaccord Genuity. Sumant Kulkarni: I know you mentioned a couple of times today that you're running 2 Phase III trials for ACP-204 in Alzheimer's disease psychosis. But what does the FDA's recent publication of its official position on needing one robust pivotal trial plus confirmatory evidence mean for ACP-204 in ADP and Lewy body dementia psychosis, especially if your Phase II data turn out to be "very good." Elizabeth Thompson: That is -- sorry, shall I just go -- that is a great question. We are obviously really excited to see any regulatory innovation that could mean that safe and effective products could get to patients faster. That is great. There's a lot that at this point, this has been discussed in a journal article and certainly in some presentations, there are a lot of questions that I think we don't know the answer to yet that makes it hard to know exactly what this could mean for ACADIA's future development program. So obviously, we're watching this very closely. Things like what the impact is on the required safety database as an example. And of course, we always do have to think of this in terms of globally acceptable development program. So there is a fair bit to work through there. That said, I do think this, I would always want in a situation where one had amazing data to think about whether there were ways to bring something to patients further, faster. I think this gives us a little bit of additional reason to think we should try having those conversations, if nothing else. Catherine Owen Adams: That's great. And just to reiterate, as we come through our top line results in between August and October and Liz and team develop the Phase III protocol from those results, we will continue to inform you how those Phase III trials will be redesigned or designed according to what's happening in the policy environment as well as also what's driven by the data. Operator: Your next question comes from the line of David Hoang of Deutsche Bank. David Hoang: So maybe first, just one on remlifanserin commercial opportunity. I think you've mentioned a potential $4 billion peak sales number for ADP and LBDP combined previously. Could you just help put some arms around that number in terms of anything like what would be the split between ADP and Lewy body? Is that just the U.S. market? Does that contemplate competition from Cobenfy? What would ramp to peak sales potentially look like? And then just to come back on the IRA rebate accrual for NUPLAZID. Could you just help reconcile what is actually cash versus noncash for the quarter and full year? And is this a situation that may repeat in the future and would require another reconciliation? Catherine Owen Adams: So let me just talk to ADP and LBDP in terms of the $4 billion, and then we'll move to the next part of the question. So we haven't disclosed the split that we see exactly between the 2 indications, but we have said that they're roughly equally weighted. Obviously, the populations are slightly different in the U.S. and the unmet need is different as well as the population fragility. So there are some differences between the 2 indications that we will work through both commercially and financially as we come through our clinical trials. But overall, we feel this is a very strong opportunity for us in much larger markets than we are in now. And with the confidence that we have behind the design of remlifanserin for these specific populations, we feel like if the data bears out, they're going to make a huge difference to this patient population and provide us a robust value story for both our health care environment, but also patients more broadly, both in the U.S. and hopefully beyond the U.S. In terms of NUPLAZID and the IRA, do you want to talk a little bit more about it, Mark? Mark Schneyer: Sure. Thanks for the question. As far as kind of cash versus noncash, we did pay our invoice in the quarter. And for the first 2 years of the program, that was $108 million payment that went out. Over the course of the year, if we factor in the payment plus additional accruals that we made, it was kind of a net cash flow over the year of about $30 million. The adjustments that we made to net sales, those are all kind of noncash adjustments, but they're meant to be reflective of our operational performance so you can compare periods when we shared the data going back to 2022 that if we had full information, these were the accruals that we would have made rather than needing to make the change in estimate that we made now that we got the information from CMS for the first time this year. Catherine Owen Adams: Hopefully that answers the questions, David. Operator: Your next question comes from the line of Jason Butler of Citizens. Jason Butler: Just understanding it's still early. Any initial comments you can speak to out of the increased NUPLAZID field force? And how are you on an ongoing basis, assessing ROI on the full commercial investment for NUPLAZID, specifically the non-field force components? Catherine Owen Adams: I'm going to get Tom to talk to you about the field force. But just to reiterate that we assess ROI on our marketing and commercial mix on a very regular basis. That's the basis of how we manage the business and the decisions that we make in order to ensure that our investments are really driving both efficiency and effectiveness. But in terms of the team, Tom, why don't you share a little bit more about how it's going? Thomas Garner: Sure. So as we mentioned, Jason, we fully executed the expansion of the field team in January of this year, and I'm very pleased to announce, obviously, that the team are now out in the field. We've actually been really encouraged that they've hit the ground running, probably in a manner that was maybe kind of earlier than we thought, quite honestly. I mean, we are already seeing a very nice uptick in terms of their activity. Just as a reminder, with this expansion, we're able now to kind of capitalize on or meet the needs of around 60% of the overall PDP market in terms of prescribers. So we've kind of increased our target universe from about 7,000 writers to about 11,000 writers. And we believe that, that additional 4,000, 5,000 that we're now going to be targeting is really going to help us unlock this incremental growth that we anticipate seeing through 2026, '27 and '28. So I think very pleased with the early activity, early metrics that we're seeing. And we're following our top of the funnel metrics very tightly, as you would imagine, and we're actually beginning to see already a noticeable increase just in terms of referral volumes. So excited to see that, that will carry on through the year and looking forward to seeing the continued impact of that expansion and that investment over the next 2 to 3 years. Catherine Owen Adams: Yes. And just to reiterate, you can see the step-up in SG&A for 2026 versus '25, and that is being contributed by both the annualization of the DAYBUE expansion as well as the NUPLAZID expansion. And as Mark said on a previous question, we don't expect that to continue to ramp at the same rate. We expect this to be the step-up this year and then a more sort of incremental increase as we head into '28. We sort of feel like we've got a good base right now. And this will be our base with minor adjustment moving forward. So again, just to reiterate that point in terms of the OpEx to support this incremental growth. Operator: Your next question comes from the line of Jack Allen of Baird. Jack Allen: Congrats on the progress made over the course of the quarter. I wanted to ask on DAYBUE and the $700 million in sales expectations by 2028. Can you just help us understand a little bit more about the assumptions that are going in behind that number that you're throwing out there, $700 million? Does that include ex U.S. sales? And what are your thoughts around potential competition for gene therapies within that period? Catherine Owen Adams: Yes. So I'll answer it at a high level and then maybe either Tom or Liz can have a response on gene therapy. So the $700 million consists mainly of the U.S. business, which is driven through growth of STIX and liquid and expanding the patient population from where we are now into the community. It does include global sales from the named patient programs. And so that is within there where we have the ability legally and through the regulatory framework to supply the named patient programs. And it does include EU commercial sales for now. Our current assumption is that we will have an EU approval before 2028. However, obviously, once we get the decision from the final decision, we will reguide for that 2028 number. But to reiterate, now the EU commercial sales within that $700 million number is less than 15%. I hope that's a good explanation. And then... Elizabeth Thompson: I can make a couple of comments and then if there's anything you want to add, Tom. So generally, I guess there's a couple of components to your gene therapy question. One is it's probably better for you to ask the gene therapy companies when they're speculating that they're coming to market. I'll just note that the developmental milestones do take some time to mature. So whether that's going to feature into 2028 or not, we probably should leave for them to comment. In terms of the, I guess, the implied idea of whether there is room for more than one type of agent out there. I mean, I think what I'd say is that the data that we've seen so far suggests that there is -- while we all wish that these would be cures, I don't think that the data so far suggests that they are. And so I think that the predominant likelihood is that patients are going to require more than one aspect to their care. Operator: Your next question comes from the line of Paul Matteis of Stifel. Julian Hung: This is Julian on for Paul. Just wondering what you guys think is the biggest risk to the ACP-204 readout? And are there different sort of indication-specific considerations for ADP versus LBDP that you've thought of? Any chance that you plan on sharing baseline information ahead of the Phase II or anything else that you could share would be helpful. Elizabeth Thompson: Okay. So a few things here. So we're not currently anticipating that we would be sharing baseline information prior to the readout. So just to get that out there. In terms of any specifics of ADP versus Lewy body, I think there are a few things that we think about, one, of course, is psychosis is obviously impactful in both patient populations, but it is very frequent in Lewy body. So I think we do see that being a much more substantial proportion of that patient population. That's something that's important to keep in mind. And I think that while in both cases, you're generally dealing with obviously a more elderly population, I think it is also considered that the Lewy body population may be a bit more frail. And so we are especially mindful of appropriate safety profiles in that patient population. In terms of biggest risks, I mean, I think that we have done a great deal to build upon pimavanserin in terms of how we put the molecule together, how we put the program together. In these kinds of spaces, of course, you always have to be concerned about placebo effect. We are doing what we can to manage it in terms of good training of investigators, looking for outliers, all that good stuff. But that is something that you always have to be mindful in these kinds of trials. Operator: We've run out of time for any further questions. I will now turn the conference back over to Al Kildani for closing remarks. Albert Kildani: Thank you, everyone, for joining us today. We look forward to speaking to you on our next conference call. Operator: This concludes today's conference call. You may now disconnect.
Operator: To withdraw your question, please press 1 again. To withdraw your question, please press 1 again. This call is being webcast and can be accessed in the Investor Relations section of ir.priviahealth.com along with today’s financial press release and slide presentation. Some of the statements we will make today are forward-looking in nature based on our current expectations and view of the business as of 02/26/2026. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risks and uncertainties that may cause actual results to differ materially. As a result, these statements should be considered along with the cautionary statement to today’s press release and the risk factors described in our company’s most recent SEC filings. Finally, we may refer to certain non-GAAP financial measures on the call. Reconciliations of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation on our website. I will now turn the call over to Robert P. Borchert. Please limit yourself to one question only and return to the queue if you have a follow-up so we get to as many questions as possible. Robert P. Borchert: Thank you, and good morning, everyone. Joining me are Parth Mehrotra, our Chief Executive Officer, and David Mountcastle, our Chief Financial Officer. The financial results reported today are preliminary and are not final until our Form 10-K for the year ended 12/31/2025 is filed with the Securities and Exchange Commission. Following our prepared comments, we will open the line for questions. Now I would like to hand the call over to our CEO, Parth Mehrotra. Parth Mehrotra: Thank you, Robert, and good morning, everyone. Privia Health Group, Inc. delivered a very strong 2025. Our 2025 performance and very strong value-based performance clearly demonstrate our ability to perform in all types of market and healthcare regulatory environments. We are proud to deliver on our mission to achieve the quadruple aim that our outcomes lower costs, improve patient experience, and happier and more engaged providers. New provider signings and implementations remain strong across all markets, which provides great visibility through 2026. At year-end 2025, we had 5,380 implemented providers, caring for over 5,800,000 patients. We continue to demonstrate very high gross provider retention of 98% and patient NPS of 87 across our footprint. Added 591 providers, a 12.3% increase year-over-year. We ended the year with 1,540,000 value-based attributed lives, up 22.7%. Privia’s diversified value-based platform serves over 1,500,000 patients through more than 130 commercial and government programs. We remain highly focused on generating positive contribution margin in our value-based book. This was driven by new provider growth across our markets, as we continue to execute extremely well and drive growth across our markets. The combination of implemented provider growth helped increase practice collections 16.9% in 2025. We continue to show strong operating leverage on cost of platform and G&A expenses. Adjusted EBITDA for the year increased 38.8% to $125.5 million with EBITDA margin as a percentage of care margin expanding 480 basis points to reach 27.2%. On December 5, we completed the acquisition of Evolent Health’s ACO business. This added over 120,000 value-based attributed lives across existing and new states. We also entered Arizona in April with our anchor partner, IMS. IMS was implemented on the Privia platform at the end of Q3, and we are seeing strong sales momentum in the state. Privia Health Group, Inc.’s national footprint now includes a presence in 24 states and the District of Columbia, including the Evolent Health ACO business. We have proven that we can build scale and manage risk without depending on any one particular contract, while we continue to implement clinical and operational enhancements in our medical groups. Lives attributed to the CMS Medicare programs were up 52%. Commercial attributed lives increased more than 16% from last year to reach 910,000. Medicare Advantage and Medicaid attribution increased 15% and 23%, respectively, from a year ago. Our performance over the past few years is a testament of our approach to value-based care and the strength of our actuarial underwriting, clinical operations, and physician-led governance structure. Our 2025 performance and momentum positions our business extremely well as we converted 130% of EBITDA to free cash flow. We expect to drive EBITDA growth of approximately 20% at the midpoint of our 2026 guidance and convert 80% of EBITDA to free cash flow, assuming no new business development. This positions Privia Health Group, Inc. to end 2026 with approximately $600,000,000 in cash in a very difficult healthcare services environment. We deployed $180,000,000 for these transactions, and our cash balance ended the year at $480,000,000. This was only $11,000,000 below a year ago, due to the tremendous cash flow generation of our business in 2025. Our 2025 results and 2026 guidance further demonstrate our ability to continue to compound EBITDA and free cash flow. Now I will ask David to review our financial results and 2026 guidance in more detail. David Mountcastle: Thank you, Parth. Privia Health Group, Inc.’s strong operational performance continued through the fourth quarter. Implemented providers grew 130 sequentially from Q3 to reach 5,380 at December 31, an increase of 12.3% year-over-year. Implemented provider growth along with solid value-based performance in ambulatory utilization trends led to practice collections increasing 9.6% from Q4 a year ago to reach $868.7 million. Adjusted EBITDA increased 26.4% over the fourth quarter last year to reach $31.5 million, representing 27% of care margin, which is reconciled to GAAP net income in the appendix. All metrics were substantially higher than our initial guidance that we provided at the beginning of 2025, with practice collections and platform contribution coming in at the high end. For the year, we exceeded the high end of our updated 2025 guidance provided in November for all key operating and financial metrics, reflecting our strong execution amidst a very challenging environment, as we continue to generate significant operating leverage. Practice collections increased 16.9% to reach $3.47 billion. Care margin was up 14.4%. And adjusted EBITDA grew an exceptionally strong 38.8% to reach $125.5 million. Our business continues to generate very strong financial leverage as conversion from EBITDA to free cash flow was 130% in 2025. This is a 390 basis point margin improvement year-over-year as we continue to generate significant operating leverage. We ended the year with $479.7 million in cash with no debt. Given our outstanding cash generation with minimum capital expenditures, we expect to end 2026 with approximately $600,000,000 in cash assuming no capital deployment for new business development. This positions us with significant financial flexibility to take advantage of opportunities as they present themselves in the current market. Using the midpoints of our new 2026 guidance, implemented providers are expected to increase 10.6% year-over-year. Attributed lives are expected to be approximately 1,580,000. We expect practice collections to grow 6.6% and care margin 13% at their respective midpoints. We are guiding to adjusted EBITDA growth of 19.5% at the $150,000,000 midpoint and expect 80% of full-year 2026 adjusted EBITDA to convert to free cash flow as we become a full cash taxpayer this year. While our guidance for 2026 assumes no acquisitions, we will remain disciplined and strategic in our capital deployment. We expect to continue to actively seek business development deals both in new and existing markets to continue to grow the business and compound our EBITDA and free cash flow. Privia Health Group, Inc.’s business momentum, powered by the consistent execution by our provider partners and our employees across economic, healthcare, and regulatory cycles over the past nine years validates the strength of our business model. I would like to take this opportunity to thank each one of them for their continued hard work. Operator, we are now ready to take questions. Operator: We will now open for questions. Your first question comes from the line of Joshua Richard Raskin of Nephron Research. Please go ahead. Joshua Richard Raskin: Hi. Thanks, and good morning. Can you speak to tech investments including AI and maybe advancements that you are making on your model for physicians? I am interested in any new capabilities that you have implemented, maybe efficiencies you are seeing on both the administrative side and the revenue cycle side. And then lastly, anything athena has rolled out that you think is making an impact on your implemented provider base? Parth Mehrotra: Yeah, thanks for the question, Josh. So I think it is very timely, and I would like to just step back maybe. When we think about AI-related investments, there are three components that are important to understand in our business model. We are very uniquely positioned with the ACO entity, with our medical group structure, with the single-TIN medical groups, and then with the full tech and services platform where we are deeply embedded in the workflow. I think of a lot of data access and ownership across every single patient, five plus million, every single specialty, every single practice, across the whole care continuum. So the medical groups have access to every single patient encounter, the clinical records. Our MSO has access to every single claim that goes through the RCM engine. It is a very data-rich environment, and we are really excited to enable us to benefit from all of this innovation that is going to happen now and into the next two to three years. You know, that will lead us to enhance all potential applications of AI. So with that being true, the second key point is what buckets of investments we can make between the corporate side and the physician practice side. On the corporate side, one is every single corporate function at Privia. We are implementing Gemini in every single thing that we do in a HIPAA-compliant manner. We are working with our existing technology partners. So you mentioned athenahealth. There is also Salesforce. There is Workday. And then there are new innovators that are innovating across the spectrum that we are continuously piloting. So that is on the corporate side. And then on the physician practice side, I think there are three buckets: the entire fee-for-service workflow, the entire value-based workflow, and then the patient engagement workflow where we are looking at different applications of AI with both existing vendors that we work with, like athena, but then also new companies. So we invested in Navina last year as we talked about. Balance between how much we can implement sooner versus a little bit delayed as these models are becoming better and faster, helping us with clinical decision support with suspect medical conditions, with better documentation of patients, scribing as an example. And the last bucket is actual care delivery. There is a shortage of PCPs, shortage of nurse practitioners, and APPs in a capacity-constrained manner. So how our doctors interact with patients, with our service lines, with after hours, interaction with the patients, scheduling patients, chart prep, medication adherence, risk assessment, obviously, stratify the population, work with the high-acuity patients, and just all of that to how the doctors interact with the patients. The productivity enhancement we can get across our whole organization is massive. So I think if you look at slide 11 on our investor presentation this morning, you know, we have gotten the business to, if you look at the midpoint of our guidance for 2026, at 29% EBITDA margin as a percentage of care margin. That is very close to what we thought at IPO as our long-term range, 30% to 35%. I think with all that we see from what we can do with AI, I think we can get to the high end of the range or even exceed it over the next many years. There is no reason why a company like ours with this much opportunity should not be able to do that. So I think that is going to lead to really good results for margins and then ultimately shareholder returns. Jailendra P. Singh: Thank you, and good morning, and congrats on a strong quarter. I was wondering if you can provide some color on practice collection trends for both Q4 results and 2026 guidance. Practice collections declined slightly, like 40 basis points, from Q3 to Q4. I also notice in your slide that the care center locations declined slightly from Q3 to Q4. Not sure if that is the primary driver. Mean Q4 results and 2026 guidance are both pretty solid. But that is the one metric where there is some variability versus what you have typically seen and 2026 guidance. Have practice collections historically grown in ‘26 at the rate you are guiding, and how should we think about that? Parth Mehrotra: Yeah. Thanks for the question, Jailendra. So in Q3, as you recall, we recognized there is a lot of prior period true-up on our value-based book from ‘24. That obviously led to the great outperformance on EBITDA. But we talked about this last quarter where Q3, we had some prior period adjustments, so the quarter-over-quarter comps get a little bit tougher. And then annually, there are two or three variables. So one is, if you look at page 10 of our press release where we break out revenue by source, you will see the capitated revenue line went up by close to $100,000,000. And that was a result of increase in lives. And then also on the Evolent ACO business, important to highlight, we are not recognizing any premium revenue in practice collections on our value-based book other than this capitated line. So that makes the comps tougher. I think the right way to look and compare is at the care margin line. That is what we are focused on, on what Privia can get from a shared savings perspective. At the midpoint, care margin is growing low double digits, which is very consistent with how we looked at the business. Just some year-over-year nuances. And then on the care centers, I think it is just rounding. To be precise, it is 1,300 plus care centers. I do not think you are going to see—we are not assuming—the guidance does not assume that that will repeat itself. We are pretty prudent with our guidance. Overall, it is pretty strong trends. The provider growth speaks for itself. The implemented providers is really strong. We had one of our best sales years, best implementation years. You can see the year-over-year growth. You can see the guidance for this year for ‘26. So that is the key metric there. Operator: Your next question comes from the line of Lisa Gill of JPMorgan. Please go ahead. Lisa Gill: Good morning, and thanks for taking my question. I have a question around utilization trends. Obviously, it has been a really strong utilization environment the last few years. What are your thoughts around ACA and Medicaid enrollment and any potential impact that it could have? Parth Mehrotra: Yes. Thanks for the question, Lisa. So look, I think as we have said previously, we really have to bifurcate the utilization into ambulatory versus the inpatient. Physician community-based physician practice, primary care, and OB, the community-based care utilization versus the inpatient that you see more in the post-acute or acute facilities. Post-COVID, as the trends normalized, I think we have consistently said, and that holds true, that the ambulatory utilization continues to stay elevated, and we expect it to remain elevated. And that is actually a good thing. That is the lowest cost setting. You want patients to interact with their primary care providers. I do think, like you pointed out, with what is happening with the ACA population, with Medicaid, with all the changes, either enforced by the government or otherwise, payers reacting to it, you are going to see a lot of churn. We expect that to happen. I think our diversified model across commercial, MA, MSSP, exchange positions us really well. We do not have a big Medicaid population, do not have a big exchange population. Whatever we have tends to get normalized. People tend to see their primary care provider. Children tend to see their pediatrician. Even if they lose coverage or move on, we see a lot of uninsured or self-insured folks show up. So we do not see any trends abating for us. Overall, I do think for the acute and post-acute care, there are going to be nuances as all of this normalizes over the next couple of years. I think that bodes well for our business. Operator: Your next question comes from the line of Jeffrey Robert Garro of Stephens. Please go ahead. Jeffrey Robert Garro: Yeah, good morning, and thanks for taking the question. I want to ask about EBITDA to free cash flow conversion. Conversion guidance was 90% a couple of years ago and 80% last year and now here in 2026. You also materially outperformed on that metric ultimately in 2025. And I know there are a couple moving pieces with taxes and folding in ECP. So was hoping you could help us bridge between those historical expectations, 2025 outperformance, and the FY 2026 guidance on EBITDA to free cash flow conversion? Parth Mehrotra: Yeah, absolutely. I will start, and then Dave will give some of the specifics. So look, I think you have highlighted one of the strongest elements of our business model. If you look at slide 11, this is nine years of data, including this year’s guidance. We have averaged over 100% conversion. We love free cash flow. You can quote me on it. It is the cleanest purest metric. You cannot adjust it. It is either in the bank or it is not. Everything is expensed on the P&L, and it is a very clean metric. So I think we are going to manage that as the best we can. Obviously, our guidance always assumes normalization. And then if things turn out better, we hope that benefits the shareholders. Our guidance reflects becoming a full cash taxpayer in 2026 as we run down the NOLs, and David will walk through some of the nuances. We manage a negative float in this business. We focus on collections, get money to our providers. It is a strength of our business model relative to others in the space. And I think enterprise value to free cash flow is a key metric here. So that is reflected in the 80%. And then I will let David answer any specifics on that one. David Mountcastle: Yeah. I mean, outside of that, I would just say we had a really good collection year. And we had a few timing issues at the year end that I think we were originally expecting them to come in January, and they came in at the end of the year. So did have a little bit of timing there at the end, but we are definitely confident in our 80% or more for 2026, and we will become a full cash paying taxpayer in ‘26. So that is going to put a little hit in our number for ‘26. Operator: Your next question comes from the line of Whit Mayo of Leerink Partners. Please go ahead. Whit Mayo: Hey, thanks. Good morning. You are going to have $600,000,000 of cash at the end of the year. You do not have any debt, and it is not very efficient to have this much cash sitting on the balance sheet. So just maybe any updated thoughts around capital deployment and if priorities have changed at all. Parth Mehrotra: Yeah, I appreciate the question, Whit. Look, I think, first of all, in probably the toughest healthcare MA regulatory environment, we really love our position in the space. The strength of the model, the cash flow generation, the balance sheet strength, relative to others, private or public companies. Our priority will be to continue to deploy capital to keep compounding the business. You saw us deploy $180,000,000 last year. We have doubled EBITDA ‘23 to ‘25. On a rolling basis, we are going to double it again ‘24 to ‘26. I think our answer is consistent to that question. We think our ability to use cash to acquire assets across this ecosystem and keep compounding our units, whether it is entering new states, adding implemented providers, adding lives, can acquire medical group tax IDs, ACO entities, MSO entities. Such a diversified business model, and there are a lot of companies that are challenged public and private. I think a lot of medical groups have partnered with other companies that may not be doing that well, to get them at least to have a relationship with Privia in an ACO entity and be part of the Privia family. I think our ability to be the partner of choice for a long-term perspective for a lot of the physician groups out there, given our track record, gives us the ability to be the partner of choice. And then also, we like to keep a sufficient cash balance for a rainy day. We do not like leverage on businesses that could potentially have variability in shared savings. As we all know, pandemics happen, hurricanes happen. We are supporting our medical groups. There is a rainy day fund. But then also, we have the flexibility to return capital as a last resort if our stock price deviates meaningfully from what we think is intrinsic value. We have that option too. But I think the priority is going to be continue to deploy capital and keep compounding the business the way we have been doing. Operator: Your next question comes from the line of Matthew Dale Gillmor of KeyBanc. Please go ahead. Matthew Dale Gillmor: Wanted to ask about the Evolent acquisition. Now that you have owned the asset for a few months, I was curious if you had any updated perspective about the business or the synergy within the acquisition. I was particularly curious about the cross-sell discussions with Privia’s platform into that physician base, whether that is new or existing states. Thanks. Parth Mehrotra: Yeah, appreciate the question, Matt. So we just closed this in December. I think we are really excited to have the team join us. I think the core business that they run is solid. You can compare their savings rate on that book relative to our overall savings rate. It is publicly available. Our hope is we can increase that savings rate pretty meaningfully this year into the next few years. I also think it allows us to have an offering in this care partners model where the provider groups that they focused on are really providers that are not on our technology stack that we can go out and reach out to a lot more providers that have partnered with other companies that may not be doing that well, to get them to at least have a relationship with Privia in an ACO entity, and then obviously cross-sell into our full medical group business model. And then obviously in new states as we enter over time. So I think that will materialize itself over the next few years. We are really excited to have that business be part of our offering, and I think we are going to realize as many synergies as we can. Operator: Your next question comes from the line of Sean Dodge of BMO Capital Markets. Please go ahead. Sean Dodge: Yes, thanks. Maybe just staying on the Evolent ACO acquisition. Parth, you mentioned increasing their savings rate up to the levels of the other Privia ACOs, maybe as quickly as this year. Just mechanically, how do you do that? What are the first couple of levers you can pull there to drive that? And then initially, you said it would contribute positively to EBITDA in 2026. Any quantification you can share on how much you have embedded in the guidance for ‘26 from the Evolent acquisition? Parth Mehrotra: Appreciate it, Sean. So just to be clear, I did not say it would happen this year. I think it will happen over time. We have a playbook that we run. You have all the quality metrics that you want to improve. There is some basic block and tackling: getting the patients to see their doctors, making sure we prevent the ED rates and inpatient rates, all of those things. Then all the nuances as we stratify the population, look at where you have some high-acuity patients, manage those, things like that. It is a little bit nuanced given that these providers are not on our platform. So we are focused on making sure we have the right level of engagement with the practices, right level of data that comes through the technology stack that is implemented on top of their existing infrastructure. We have known that we have been in MSSP for the last eight, nine years. These things take time. We just got the business. I think rule number one is do not do anything stupid and disrupt it. We are going to run our playbook, implement how Privia does things hopefully a little bit better, and so this will happen over time. The acquisition is accretive. You saw their savings rate. It makes money. We did not break out the EBITDA. It is all included in our guidance. We are growing another 20% this year. Part of that is from the acquisitions that we did, and there will be opportunities in some existing states where we have the medical group presence. The synergies are to be had. Our growth algorithm is going to be based on adding new providers, adding lives into value-based arrangements, same-store care center growth, and then doing deals that are accretive. So I think we are going to keep doing all of those four things and hopefully keep compounding EBITDA here. Operator: Your next question comes from the line of Andrew Mok of Barclays. Please go ahead. Andrew Mok: Hi, good morning. The corporate G&A expense dropped sharply in the quarter. Was there anything to call out driving the beat? And is this the right run rate to think about for 2026 even with the moderation in practice collections growth for next year? Thanks. David Mountcastle: No, there is not really anything to call out. We definitely had some sequential decreases in things like legal and some of our consulting. I would look at our 2026 guidance as maybe a better way to look at all of our expenses. We do expect to continue to gain leverage in the G&A space. Operator: Your next question comes from the line of Matthew Dineen Shea of Needham & Company. Please go ahead. Matthew Dineen Shea: One of the things that has impressed us is the continued provider growth in existing markets. So it is good to hear you are already seeing strong sales momentum in Arizona in particular as well as any other noteworthy markets. Do you expect your sales or growth efforts to be different in the value-based care ACO-only states versus the implemented provider states? Or is it the same playbook and resources sort of across markets? Thanks. Parth Mehrotra: Yeah, I appreciate the question, Matt. So look, our playbook in the core medical group business is the same across all our markets. Our objective is to develop really dense delivery systems with a very low-cost provider base with community-based providers at the forefront. That materializes differently in every state. We establish presence, work with a great anchor group if we can get a pretty sizable anchor partner like we did with IMS. Doctors know doctors the best. Before we show up in the state, this model pretty much does not exist. We establish ourselves, we establish the sales team, we start knocking on doors, and then showcase what we have done in other states. The payers know us. They know the playbook that we run. There is a win-win here given all the cost pressures and everything that is wrong with the healthcare ecosystem. This is where cost can really be taken out, quality can be improved. So how that materializes to your question, we got a great anchor group, great set of physicians with IMS. They are super excited to be part of Privia. They see what we have done elsewhere. It leads us to then reaching out to the networks around these patients and the independent practices that can stay autonomous and yet be part of something bigger like a Privia. Given the health system dynamics and the payer dynamics in the state, that is our playbook there. As a portfolio approach, implemented provider growth hopefully just continues to pick up. The way we sell the ACO-only versus the full stack just depends by state. There are nuances to both. We have a very ROI-driven value prop in each. But the medical group value prop obviously is a much deeper discussion. There is a separate sales team for each, but there will be cross-sell. We are kind of indifferent as long as we get them, whether we get them in one or the other. We will just continue to go full steam ahead on both. Some of the competitors that we deal with are also different in both of those. Our overall story should resonate with physician practices. They are looking for a full solution. So we just try to optimize that. Operator: Your next question comes from the line of Jack Garner Slevin of Jefferies. Please go ahead. Jack Garner Slevin: Hey, good morning. Thanks for taking the question and congrats on the really strong results. I wanted to touch on a little bit of the MA contracting environment. Acknowledging you have got less full risk in your book and have been on the front end of concessions that are being given by payers to value-based players that are driving value, I would be curious to hear your take on how that might develop for your business as you look at 2026 and then beyond 2027 with some of the payers looking to claw back margin, but also acknowledge the value that is being brought from PCP-led provider groups in the space. Thanks. Parth Mehrotra: Yeah, thanks for the question. It is pretty nuanced. Just to take a step back, I think us foresighting what might have happened in the MA environment and that shared risk—where the doctor, an entity like Privia, and the payer all have skin in the game—is the right model. I think what you are seeing is an adjustment in the industry by the payers. You have seen a little bit of round robin with how the payers have reacted. The lives are moving between those entities as they adjust benefits, as they prioritize it differently, between three or four of the big MA players out there as you have seen and noted on. Years ago, payer X; last year, payer Y; this year, payer Z. Whether by luck or by foresight or by execution, we kind of avoided some of the traps. We have continued to have a belief that you have to recognize the amount of work that the physicians have to do to manage a high-cost patient population and to deliver results. You have to get paid for it. If you do not get paid for it, I do not think anybody wins. We love to take as much risk as we can if we can manage it. If the payer gives us a contract that compensates us well to take that risk and compensates the physicians that are working extra hard to perform in these contracts, we are very forward-leaning. So I think we are just going to continue to look for opportunities with our payers, keep getting our delivery networks more dense, adding capabilities, and impacting the total cost of care, and delivering it and showing that to the payers. I think these things get normalized. I think we are going to flush through V28 over a couple of years here. The payer environment will stabilize, and so I think it positions us really well. If there is some delayed gratification in ramping up risk, we will do that because the doctors do not go anywhere. The patients do not go anywhere. It is just coming to a consensus with the payers on the right contract structure. Our revenue recognition methodology is different. We are not recognizing any premium revenue part of that book. Operator: Your next question comes from the line of David Larsen of BTIG. Please go ahead. David Larsen: Congratulations on another good quarter. Can you just reconfirm the Evolent Care Partners EBITDA and revenue? Is it $10,000,000 of EBITDA on $100,000,000 of revenue? And then how many of those doctors do you think you will be able to convert over to your core Privia athena platform where you are doing all the billing and AR for them? Thanks a lot. Parth Mehrotra: Yeah, thanks for the question, David. I do not think we disclosed any of those numbers. I think those were numbers that Evolent might have disclosed in their earnings call over the last couple of quarters, including this past week. Whatever numbers you are getting from them may be different for us. Our top line includes everything. You will see the results when CMS announces it in August. We are not going to break down EBITDA by any line of business. We have not done it for any acquisition or any line of business. But it is accretive. It is contributing meaningfully to this year’s EBITDA. That is why this was asked earlier on the call. We grew EBITDA 39% last year. We have grown another 20% this year, doubling EBITDA on a three-year rolling basis. And Evolent is part of that growth. Operator: Your next question comes from the line of A.J. Rice of UBS. Please go ahead. A.J. Rice: Thanks. If you could just update us on some of your newer markets and your expectations? In contribution, you are $235,000,000, up from $179,000,000 in the prior year. What have you embedded in your guidance this year? Are there any wins worth calling out there? How are they progressing relative to your expectations? Parth Mehrotra: Yeah, thanks, AJ. So look, I think our goal is to accrue prudently and then hopefully outperform. Our initial guidance was $105 to $110 million EBITDA, and we ended the year at $125 million, materially higher. A lot of it was related to shared savings, some prior year, some in-year, as we perform well. Our guidance has taken the same methodology. We would not expect a material jump. If we do better, we will hopefully see it in the results. If we do not, then we will stick with what we have. We have a very diversified book. You have written really well about all the trends that impact the whole company. It is a portfolio approach. We are now in 24 states, some in various pools of risk. There are some markets that are maturing. Some are still negative EBITDA. The mature markets are running well ahead of that number. Some may not be doing that well. We evaluate all our markets. If we do not think some markets are working well, we exit. We exited Delaware, as an example, a couple of years ago. So you will see us be very, very prudent with this business. I do not think you can make mistakes. If you think some deal structures or anchor partners or markets are not working well, and we have an opportunity to do it differently, you have to keep pruning the tree here to keep letting it grow really well. The overall business is in very good shape, 29% EBITDA to care margin. So that should tell you that the whole overall business is in very good shape. There are always puts and takes. Some do better one year, others in other markets. We just develop very dense physician networks here. Operator: Your next question comes from the line of Ayush on behalf of Elizabeth Hammell Anderson of Evercore ISI. Please go ahead. Ayush: Hey, good morning, guys. Thanks for taking my question. As CMS transitioned from the ACO REACH program towards the new ACO LEAD model, how are you guys evaluating whether that framework aligns with Privia’s long-term value-based strategy? And then as your value-based book continues to grow in scale, how do you think about maintaining the consistency of performance across cohorts, particularly as the provider mix evolves? Parth Mehrotra: Yeah, I appreciate the question, Ayush. Like with any new program, we will evaluate it. It goes into effect next year. I think we are still going through the details of LEAD versus REACH. What bodes well is, with the REACH sunsetting, it allows our sales team to reach out to a lot of physician practices and providers that may have participated in REACH. By the way, ‘25 to ‘26, anybody who is in REACH is going to see pretty significant decline in the shared savings just given how they changed some of the elements of that program. We are still studying LEAD. MSSP Enhanced Track versus LEAD is on a TIN basis. It just depends on the patient population, the state, the ACO, the majority of the patient pool. You can participate in one, not both. We have some REACH lives today, so we will see if they move into MSSP Enhanced or LEAD. As we work with other new partners, we will see if LEAD makes sense or not. If you have a pretty mature ACO in an MSSP Enhanced Track that you have been in for the last many years, we will just evaluate it ACO by ACO. We take a five to ten-year view, like I said earlier. There will be opportunities in particular states. It is a generic question; the answer is much nuanced. This is healthcare. It happens locally in every state. Every pool, every patient population, every payer, every contract is different. That is a core value proposition and moat around this business. It is hard to replicate. A lot of people can enter these businesses, but you have seen how hard it is to make real money and real free cash flow. Given the diversity of our book and the number of contracts and the payers we work with, and the scale we are operating at across different types of patient populations, I think that just speaks for itself. All of it is a core competence of this business that is very, very hard to replicate. You have to have real capabilities and a great team all around from a risk management perspective, underwriting perspective, delivery of care and total cost of care management with these practices and how you work with them, the data, the technology stack, and convert EBITDA and free cash flow with our shareholders. I think it just speaks for itself in how we have been able to deliver value to the payers, generate shared savings, and share that with physician practices. Operator: Your next question comes from the line of Jessica Elizabeth Tassan of Piper Sandler. Please go ahead. Jessica Elizabeth Tassan: Thanks, and congrats on the really strong year. I am interested to understand first what are the specific AI tools that you have rolled out nationally to all of your network providers? What did that rollout process look like? And then any early outcomes or savings data that you can share? Then, going forward, what kind of clinical category would you maybe target for AI-enabled improvement? For example, are care transitions an opportunity? Is end-of-life care planning an opportunity? Just curious if there are any one or two categories that you would call out. Thanks. Parth Mehrotra: Yeah, I appreciate the question, Jess. This stacks to what Josh asked right at the beginning of the call, so I am not going to repeat all of that. Hopefully, you got some of that. From a category perspective, given the five buckets I described earlier, we are looking at agentic AI as it relates to patient engagement, interaction with patients, scheduling patients, care gap closures, medication adherence, chart prep, risk assessment, clinical decision support, stratify the population, work with the high-acuity patients. Given our physicians are capacity constrained, the ability and the need to work deeply with every patient is front and center as we specifically, as payment models evolve to different versions of value-based care. Obviously, there is a whole host of applications on revenue cycle, on the fee-for-service workflows. From a company perspective, we are working with some existing companies that we work with today. As they innovate, we invested in this business called Navina, like we talked about last year. That was pretty tangible for us. There are a number of new innovators in the space that we are partnering with and piloting some of them. The technology is evolving really fast. The improvements that we see and the applications are pretty amazing already. I think this is going to be a three, five, seven-year journey. At some point, once it is more baked, we can implement in every single one of those buckets. We are super excited on this journey. I think it will be margin-accretive and productivity-enhancing, and I think you are going to see a lot more adoption. We will obviously highlight more, but those are the categories going forward for a business like ours. Operator: Your next question comes from the line of Michael Ha of Baird. Please go ahead. Michael Ha: Thank you. As you look across the broader value-based care M&A landscape, it appears to be heating up in a pretty big way only very recently. Acquisitions being made, especially in South Florida, interest ramping up in California. A lot of this coming from a couple of your large payer partners looking to really build greater market saturation. And some of these multiples we are hearing of, they are not too far off from your own, but the quality of these assets appear to be much lower. So I am curious to hear your thoughts on all of this. How does it look to you? What do you think is driving the activity? Is it simply now entering the end of V28, and the narrative is beginning to pick up again? And as you look ahead, how does all that you are seeing today impact your own M&A strategy? Parth Mehrotra: Yeah, it is a good question. Look, I am not going to comment on what others have done recently or any particular deal. You highlighted two geographies in South Florida and Southern California that almost run very, very differently from a large part of this country from a healthcare delivery and risk taking and the concentration MA population. Those are very unique geographies. The assets are unique. Some of the payers have rovers on some of the assets. As you know, we are not in the clinic MA space. We believe in shared risk. We are just not in the MA clinic business. We believe in community-based doctors staying autonomous, independent, and helping them. To the broader question, we are positioned really well. We have a very diversified model. We can look at assets across the spectrum—ACO entities, medical groups, MSO entities, service providers, whatever have you. We can hopefully be a partner of choice. So we are going to be pretty aggressive. I think finding quality assets is key. You could spend a lot of money buying a lot of things, and they do not have the same quality of earnings. They do not have free cash flow. They do not have EBITDA. We are going to be very, very disciplined. We do not like to pay big multiples, especially for assets that are lower quality. While we have a lot of balance sheet capacity with our cash balance, with any potential debt capacity—even though we do not like leverage on this business—we are primed to do larger deals. We are going to be very thoughtful. If we can get an asset that we can improve, make an impact, buy and integrate and synergize, and continue this compounding of EBITDA, we will pursue it. Operator: Your next question comes from the line of Craig Jones of Bank of America. Please go ahead. Craig Jones: Great, thanks for the question, guys. Thinking more about the long-term 20% EBITDA growth number you have out there. You have a lot of levers in your portfolio to drive this every year. Could you break down how you see the components of driving that 20% growth in a typical year among organic, inorganic, margin expansion, or whatever it may be? And then which components do you view as higher visibility versus lower visibility? Thanks. Parth Mehrotra: Yeah, I appreciate the question. You have to go back to slide 11 to look at this on a multiyear basis. Those are: you enter new states; you add implemented providers in existing and new states; you add value-based lives in platform practice; you grow same-store; and then you improve the cost structure like we have done, both on the cost of platform and then also on sales and marketing and G&A. Then on value-based contracts on which we have the potential to earn care management fees and shared savings. Every year is different. The components are different, but they all work together. Some years we have scaled the cost structure really well. Some years you do M&A. Like this past year, you look at ‘22 to ‘23, we grew pretty fast. We entered five new states. The cost structure did not scale, so adjusted EBITDA margin barely improved across those two years. Versus ‘23 to ‘25, you have seen that margin profile get better. It will ebb and flow, but the direction is hopefully upward right. Like I said earlier, with the application of AI and everything else, I think we are going to continue to get this margin profile better. If we do acquisitions, we are going to synergize them. If we enter new states, some of them lose money in the first couple of years. It just depends. Given the whole book where it stands today, you are going to see us pursue all those four components. It will be a combination of both organic and M&A. M&A is a core component of the strategy as we roll up the industry. How it evolves— which year, which component is higher or lower—I think it will vary, but we are going to keep executing on all of those. Operator: Your next question comes from the line of Daniel R. Grosslight of Citi. Please go ahead. Daniel R. Grosslight: Thanks. On taking on risk, I think that has been a recurring theme on a lot of these earnings calls. But it does seem like some of your competitors are now beginning to adopt your type of model or at least approach to risk taking, which I guess is good because imitation is the best form of flattery. But it does make me think about your provider recruitment over the next couple years, if your conversations with providers have shifted at all, and if so, how has that sales pitch gone? Parth Mehrotra: It is a good question. It builds on some of the themes on the earlier questions. Arguably speaking, the perceived barriers to entry in this business can be lower. Anybody can start an ACO if they raise capital from some VC or private equity fund. The issue is performing and building core competence on how you deliver value, and then execute and deliver shared savings day in, day out, every year, year after year, across cycles, and generate free cash. We have said consistently, I will repeat it: you have to share the appropriate level of risk with the doctor. That is the best long-term strategy. An entity like Privia and the payer and the doctor all share risk. A lot of money got raised and got spent in giving contracts or irrational economics to the payers and to the doctors without sharing the appropriate level of risk. You do artificial things, and the viability of the business can be put to risk. We have seen that. A lot of companies have not performed well. They are surviving. We think the TAM is pretty large, and hopefully our results just speak for themselves. We have a full-service offering with our medical group that a lot of the competitors do not have: every patient, every specialty, technology stack, payer contracts, and then we have a full suite of value-based capabilities to help them perform in those in a very integrated manner. We think that is a very differentiated approach. Now we have a lot of history and data to back it up—eight, nine years of performance like you see on slide 11, across any cycle. We want competitors to perform really well because that is good for the industry. There are some competitors that are doing really well. Hopefully, we are one of the survivors and consolidators. Some of them which were not that great, hopefully we can consolidate over time. I do not think the pitch is any different. We execute the way we do. Our record speaks for itself. Operator: Your next question comes from the line of Ryan M. Langston of TD Cowen. Please go ahead. Ryan M. Langston: Thanks for squeezing me in. On the prepared remarks, you talked about the IMS acquisition saying there was pretty strong sales momentum in that state. Can you just give us a sense on organic pick up from IMS? I am just trying to understand broadly what the growth trajectory looks like on some of these larger deals as you ramp up in new states. Thanks. Parth Mehrotra: Yeah, I mean, we do not break it up. You have the size of that group if you go to the website. It was a pretty meaningful group. A very large multispecialty group got themselves out of a health system and then found us. We found them, and there are a lot of synergies in the business model. Our best salespeople are our physicians. If we do well for them, they speak for us. We establish ourselves. We establish the sales team. We start knocking on doors. It starts small and builds up. I just do not think any one year makes a difference. It is a five-year strategy to build a big medical group there. We expect, hopefully, new signings and implemented providers. We are going to continue to go full steam ahead. When you get a sizable group, the snowballing starts sooner. Operator: Your next question comes from the line of Richard Collamer Close of Canaccord Genuity. Please go ahead. Richard Collamer Close: Morning. Thanks for fitting me in. Maybe just one last question on your appetite for new business development. How are you thinking about the best return on your investment as you are thinking about either expansion into new markets or investing in some of your more recently entered markets and really trying to build density, all in light of the challenging payer landscape that you have been referring to? How does that impact your philosophy on return on that invested capital? Parth Mehrotra: That is a great question. Every deal is different, and you have to evaluate it on its merit. Each market runs with its own P&L. They have business leaders that are responsible for growing those markets. We take a portfolio approach. These markets and these dense networks take time to build—five, six years at least. You are seeing us do a whole wide variety of transactions over the last few years, ones that we have disclosed being a public company. We can do in-market BD as opportunities arise, add new capabilities, add new markets, buy businesses like we did with the Evolent deal. Given our capital position and free cash flow profile, we have the luxury to do both. The whole business is performing really well. So if there is a market where we know we are going to lose money as we invest and put the sales team on the ground, and if it is a smaller anchor partner, but it is a big state with good demographics and enough independent physicians, we will take a five-year view because we understand the unit economics of this business really well. When you get a business operating close to 30% EBITDA to care margin, generating this much cash, we thought we would do that five, six years ago. We have seen across 15 states with the medical group model and now nine more states with the ACO-only model. We know what works, what does not work. We have seen a lot of issues over the years. We have worked with a lot of payers, different healthcare geographies, different payer dynamics, different health system dynamics. Very few companies are in this position where they can invest with that kind of a mindset. We are pretty fortunate, and we are going to keep pressing on all those fronts. We take all that into consideration as we take that five to ten-year view. Operator: Ladies and gentlemen, this concludes today’s call. We thank you for your participation. There are no further questions at this time. Please continue, gentlemen. You may now disconnect your lines. Parth Mehrotra: Thank you for listening to our call today. We appreciate your continued interest and look forward to speaking to you again in the near future. Thank you, operator.
Operator: Welcome to the LeMaitre Vascular Q4 2025 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. Dorian LeBlanc, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir. Dorian LeBlanc: Thank you. Good afternoon, and thank you for joining us on our Q4 2025 conference call. With me on today's call is our CEO, George LeMaitre; and our President, Dave Roberts. Before we begin, I'll read our safe harbor statement. Today, we'll be making some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, February 25, 2026, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we may discuss non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and will be available in the Investor Relations section of our website, www.lemaitre.com. I'll now turn the call over to George LeMaitre. George LeMaitre: Thanks, Dorian. Q4 featured 16% sales growth, a 71.7% gross margin, and 47% op income growth. Q4 sales were led by grafts, up 27%, valvulotomes up 20%, and shunts up 18%. EMEA grew 29%; APAC, 20%; and the Americas, 10%. Artegraft grew 29% worldwide in Q4 as our OUS launch continues. We now have approvals to sell Artegraft in 52 countries. International sales were $1.9 million in Q4 and $4 million in full year 2025. We expect to sell approximately $10 million of Artegraft internationally in 2026, contributing $6 million of sales growth for the year. In Q4, RFA vascular grew 19% and RFA cardiac grew 90%. As a reminder, we currently distribute RFA tissues in just 3 countries: the U.S., Canada, and the U.K. German distribution should begin in Q2, and we now expect to receive Irish approval in Q3. We also plan to file for approval in Austria, Holland, Belgium, Spain and Switzerland this year. On a related note, we will be consolidating our Chicago RFA facility into Burlington in 2026 as we seek to simplify operations and reduce costs. We ended 2025 with 160 sales reps, up 5% year-over-year, and we plan to end 2026 with 170 to 180. We also expect to go direct in Poland in Q4. We've begun hiring a Polish general manager. This project will include an office, warehouse, customer service team and several sales reps. We currently sell approximately $650,000 a year to our Polish distributor, and this will be the 32nd country where LeMaitre sells direct to hospitals. As mentioned on our November call, the 2026 U.S. price list reflects a blended 8% increase across the portfolio. On January 1, the price increase was installed and early results indicate hospital acceptance. Our U.S. customer service team tells us that this year's transition has been smoother than in years past. Our European customer service team also reports positive customer acceptance to a similar January 1 price increase. 2025 was another year of operating leverage at LeMaitre. Sales were up 14% and op income was up 30%. And our 2026 guidance indicates another nice year on the horizon, 12% sales growth and 21% adjusted op income growth. We recently hung our 5-year goals on the conference room wall. We call them the 2030 planks. Our playbook remains simpler: produce quality devices, build our vascular sales force, go direct in new countries, acquire niche products and focus on profitability, cash flow and dividends. I'll now turn the call over to Dorian. Dorian LeBlanc: Thanks, George. Q4 organic revenue growth was 15% with 9% price growth and 6% unit growth. Organic growth was broad-based both by geography and by product category. In Q4, our gross margin increased 240 basis points year-over-year to 71.7%. This increase was a result of higher ASPs and manufacturing efficiencies. Operating expenses in Q4 were $27.4 million, a 6% year-over-year increase. Our margin expansion and moderated expense growth in Q4 led to operating income increasing 47% year-over-year to $18.8 million, and operating margin of 29%. Q4 fully diluted earnings per share were $0.68, a 39% increase year-over-year. Our Q4 EPS includes a onetime loss on a mark-to-market adjustment in our investment portfolio of $0.5 million for an investment that has subsequently been sold. Overall, 2025 was a year of 14% organic revenue growth with 9% price growth and 5% unit growth. Adjusted gross margin of 70.4%, a 180 basis point improvement over 2024, adjusted operating margin of 26%, and adjusted EPS growth of 23%. Our adjusted numbers exclude the onetime benefit from the employee retention tax credit received in Q3 2025. We ended 2025 with $359 million in cash and securities. Our free cash flow, cash from operations less capital expenditures in 2025 was $74.5 million. In January 2026, we experienced a cyber incident that affected certain of our systems and data. We securely restored our critical systems and experienced minimal to no disruption in sales to our customers or in the manufacturing or release of product. We do not believe the incident has had a material impact to our financial position or results, and we believe we have adequate insurance coverage. The estimated impact is reflected in our 2026 guidance. However, our review of the incident remains ongoing, and we are subject to various risks described in our SEC filings, including in our upcoming Form 10-K. On February 19, our Board of Directors approved a new $100 million share repurchase program and a Q1 2026 dividend of $0.25 per share, an increase of 25% year-over-year. This is our 15th consecutive year increasing our dividend. Our increasing dividend underscores our continued focus on profitable growth, and that commitment is reflected in our 2026 guidance. We anticipate full year 2026 revenue of $280 million, organic sales growth of 12%, a gross margin of 72.1% and operating income of $77.8 million, up 21% adjusted from a very strong 2025. We are guiding EPS of $2.91 per share, up 22% adjusted. The manufacturing transfer of our Chicago RestoreFlow processing to Burlington and the opening of our new 34,000 square foot warehouse will drive an increase of CapEx to approximately $11 million for the year. Our guidance implies a constant euro-U.S. dollar exchange rate of $1.18 for the year and an anticipated yield on our invested cash of 4%. The LeMaitre franchise delivered in 2025 with a focus on niche markets, our direct-to-hospital sales model, our growing commercial organization and our disciplined expense and capital management. Thanks to our focused and dedicated global teams, we believe we are poised for another successful year in 2026. Finally, we would like to welcome Kyle Bauser to the call. Kyle has picked up the coverage of LeMaitre at ROTH. Thank you, Kyle, and we look forward to the continued coverage. With that, I'll turn the call over for questions. Operator: [Operator Instructions] Our first question comes from Kyle Bauser with ROTH Capital Partners. Kyle Bauser: Thank you for the welcome. It's a pleasure to be following the company. Maybe I'll just start off on guidance. Really nice finish to the year, continued operating leverage. 2026 looks to have some nice continued operating leverage in the business. Can you maybe rank the factors that will be key to achieving the operating growth kind of that's north of what the sales growth rate is, just kind of explain the leverage in the business? George LeMaitre: Sure. This is George, Kyle. How are you doing, and welcome to the call and welcome to covering the company. Yes, maybe looking backwards, it's a little bit of a look at the leverage, but we've been pretty good at keeping headcount at a fairly stable level. We've been good at growing our sales pricing, our ASPs to the customers. You've seen that again here at the beginning of 2026 in our gross margin. We're getting a little more efficient also manufacturing our products. So old-fashioned operating leverage was what we showed last year. To get to that was at 14% sales growth and 30% profit growth, and we expect more of the same next year. Kyle Bauser: Got you. I appreciate that. And George, in your prepared remarks, you talked about the 8% blended increase for this year in prices, and it sounds like this year's transition was smoother than in the past. I guess any additional color around maybe why it was more difficult in the past, and more over kind of the outlook for future price increases? Is 8% still kind of what you're looking for going forward? George LeMaitre: It's always on everyone's minds with us. So let's talk about prices a little bit. So this year, we decided to send the price list out on November 1 instead of December 1. And I feel like that gave everyone a little bit more time, the sales reps, the customer service reps, and the hospital purchasers, time to prepare for the transition in January. So we had a really nice transition, really smooth transition. But it may also be worth pulling out, everyone's like, well, is this business as usual? And I think why I'm calling it out in my script is I just want to communicate to folks, it feels like business as usual -- maybe a little smoother than normal for bureaucratic reasons, but it feels like business as usual, and the U.S., what I'll call, rack rate price list increases. Kyle, you're new to this group, but we've read them out sort of in January previously -- or sorry, the first call in February previously, so I'll do it again here. But in '22, we had a 6.1% price hike for the U.S. hospitals, 5.6% the next year, 5.8% the next year, 8.1% the next year, and finally, this year, 8.3%. So it's been getting a little bit higher, but I would call this business as usual in the U.S., and we're getting word back from our European colleagues that it's business as usual as well over there. Kyle Bauser: Okay. Appreciate it. And then just quick lastly, I think reps, 160, you expect to end the year at 170 to 180. Do you anticipate -- what does the cadence look like there? Is it kind of steady, evenly distributed across the year, more back-end weighted? Just curious. George LeMaitre: Right. Kyle, of course, you bumped into this one. So I had been giving this quarterly, and I think this is the first time we're going to try not to give this quarterly and just give it annually. It's really hard to keep track of individual sales reps and when they're going to quit and when they're going to get hired and things like that. So I think we're not going to try to give you quarterly check-ins exactly -- we may check in with it, but we won't tell you what we're trying to get to. I think you can think broadly that we're trying to tell you we're going to grow our sales force. And you already know a couple of them are going to be in Poland as well. So that includes the Polish move that we talked about in my script. But I hope that suffices, something like 170 to 180 at the end of the year. Operator: [Operator Instructions] Our next question comes from Rick Wise with Stifel. Frederick Wise: Great to see the excellent quarter. A couple of things. You highlighted in your starting remarks sort of who we are and what we do, the M&A, we acquired niche products, et cetera, et cetera. Hate to always hit the M&A question, but gosh, what a great job you're doing with cash generation, $359 million. Surely, all things equal, that number is going to be higher in 12 months, depending on how you manage the share buybacks. But how do we think about the setup for M&A in '26? How important is it to you now? What are you thinking about? George LeMaitre: Maybe I'll give you a quick intro and then Dave will handle most of it. Obviously, Dave is here. I would say, in a good way, one of the things we've been trying to prove over the last 5 years is that this company was a great operating company by itself and didn't have to rely on M&A. And I think the proof is in the pudding, we've had all these years of the organic growth rate of 17%, 13%, 14% and now who knows what happens this year. So we have had a bit of a chip on our shoulder about trying to prove to you guys that we could do it organically. But of course, we went out and raised all this money. We're really in the game for M&A. Maybe Dave can expand a little bit more on how he sees the field right now. David Roberts: Yes. Rick, thanks for the question. Obviously, the center of the fairway for us is still that open vascular area where we get 80% of our revenue. There are about 22 targets there, I think, as we've talked about. And frankly, we're in discussions with all of them, some more actively than others. But it's not that broad of a universe. So as you also know, we've started looking for acquisition targets in the cardiac surgery field, and that's 12% of our revenue. The sweet spot for us is revenues of anywhere from, I don't know, $15 million to $150 million. And I think some of the larger ones might be -- there are a few large ones in open vascular, but some of the larger ones are in cardiac surgery. Do I feel more pressure to do an acquisition? I don't know. I feel it's always the same. I always feel a lot of pressure to do a good acquisition. But in terms of the timing, I would say, it's nice to have cash, because the cash creates optionality, allows us to look larger. But as I've often said, it's more important to do a right acquisition that might not be as large than to just use all the cash. That's not what we're here to do. We'd love to find a great large acquisition, but we're looking for the right acquisition. Frederick Wise: And one more for me. Just maybe you could unpack the stellar really Artegraft performance in the quarter, and you highlighted a couple of points, but just help us understand, so 2 things, one, maybe is the TAM, is the opportunity perhaps bigger than the $8 million in Europe, for example, you talked about in the past? And I mean, you're already at $2 million quarterly run rate in the fourth quarter, I think, if I remember saying it right. But how sustainable is this? Any updated thoughts on the TAM? George LeMaitre: Okay. So Rick, we knew we're going to have to get to this, and I would say I just take the blame for that one. We put that TAM out there. I guess we didn't exactly understand what we had in our hands, and it's a lot better than what we thought. So for fun, again, this is not too scientific, but maybe we're going to call the TAM $30 million now instead of $8 million, and that's new for this phone call. So thanks for calling us out on that. You're right on that. The TAM, you can also add up right now. We're already -- forget about TAM, but the actual market that we're selling right now. Remember, we have that Omniflow ovine graft, that sheep graft, it's a piece of it. And then we also have this new thing, the Artegraft in Europe, which you now know is $4 million. And the other one is $6 million. I'll give you that on this phone call. We're looking backwards, it's always sort of okay, not going forward. So there's 10 million right there. And maybe we call the TAM $30 million right now. It's going great. I think it's ahead of expectations. The doctors are more excited about it. In some ways, the Omniflow, which is the ovine sheep product, sort of it smooths out the path for the doctors to be ready for the ovine version, which is more robust and, I would say, more healthy, less prone to post-implantation issues and things like that. So all good stuff over there. The market is ready for it, and we have a fantastic sales force of about, I think, 55 reps over there maybe right now -- 55 or 60, I should know the number. 55 reps over there, Rick. So yes, we're ready to go. We keep going direct in all these new places. It feels great. It's a great launch at the right time for that company. And you could see what happened last year. Organic growth in Europe is 17%. Is that quarter or is that year? David Roberts: Year. George LeMaitre: That's year. Okay. Yes. So 17% organic growth driven a lot by that product line. Hope I gave you what you wanted, Rick. Dave, do you want to add something about the different products maybe? David Roberts: I might add, Rick, that Artegraft in the U.S. is used primarily for dialysis access procedures. And in Europe, the algorithm for dialysis treatment is fistula first and then frankly, they go right to a catheter, which is difficult for patients due to the infection risk. They skip over the middle step that we have in the U.S., which is to implant an access graft, and that's where Artegraft has really shined. So in Europe, Omniflow, the graft that George is referring to, is used predominantly as a leg bypass graft. And we're seeing, in early days, Artegraft, the hospitals and doctors are ordering the longer ones for use in the leg. I think we'll be developing the market for AV access graft, dialysis access graft in the arm, but we believe it's there strictly because we see the success in the U.S., and the patients' benefit. So I think we're delighted by the uptake of Artegraft in Europe and outside the United States now. And I think we have a long-term growth potential there by expanding the use of it more into dialysis access. Operator: Our next question comes from Michael Petusky with Barrington Research. Michael Petusky: So George, I guess I'm curious about Europe and the strength there. And obviously, Artegraft gets some of the credit. But I'm just curious, do you feel like the way you guys approached MDR and sort of really got after when some other competitors didn't or just decided to sort of throw in the towel on some products. I mean, is that part of what's driving that too? And if that's the case, I'm just wondering how -- any anecdotes about picking up share and that sort of thing? George LeMaitre: Sure. Okay. So it's a little bit of that. We've been pretty aggressive with MDR. In fact, just to sit on that point for a second, we got our final necessary MDR approval for our PTFE LifeSpan product. We couldn't be more excited about that. I think we have 22 approvals and our regulatory gang has just done a knockdown job getting those things early for us. As to whether it's taking share because other people have fallen down on the job, other companies have not gotten their approvals. I think early on, we were getting worried that, that was the case. I don't have additional stories. You heard a lot about our shunt where we were sort of left as the only man standing for a while. I think 1 or 2 of them are coming back on the market now. But I would say, we're thrilled where we are MDR-wise. I don't have new stories about material players dropping out of the market vis-a-vis MDRs. I will tell you, every time a company gets acquired in and around our space, I think the Edwards' embolectomy catheters were acquired by BD 1.5 years ago, somehow the larger companies that they get traded into, they don't treat these as well and they leave opportunities for us. So maybe we have some opportunities around catheters because a very large competitor now owns the Edwards catheters. But of course, Edwards is large to start with. So no new great war stories there. Just maybe we go direct, where we went direct in Portugal last year, we went direct in Czechia, you're hearing us talk about Poland. We're really covering the map over there. And at some point, we're going to be one of the largest vascular distribution channels in Europe. So maybe that always plays into our health over in Europe. I don't know. Michael Petusky: Okay. Great. Let me ask one more question, my almost obligatory question on China. I know it's a tiny market for you, but I also know you're trying there. And I'm just wondering, any updates in China? George LeMaitre: Sure. And I think for the last 3 or 4 calls, Mike, and I appreciate you staying on the topic, it's been good news over there. And I got another good one for you, which is I think we were up 24% in revenue in Q4. It's happening there for us as just a regular company. We're a $2 million company over there. It's small versus our guidance this year for revenues is $280 million. So you and I are now talking about a $2 million entity inside of a $280 million. So it's small, but it's growing like you'd expect it to grow in China. We're over the tariff thing. The way we got over that was we just raised prices. That's helped us a lot over there. We're profitable over there now for the first time ever. I think Q4 was a profitable quarter. And that's saying a lot. That's having come a long way from losing $1 million a year over there on regulatory filings. The one sort of, I don't know what you say, negative over there is that we went over there to get XenoSure cardiac approved, and we got it approved after a long arduous clinical trial. And then quite honestly, it's been a big nothing burger over there. So it's not happening because of that. It's happening because of everything else. We also separately have now finalized our application for XenoSure Vascular in China. We shall see what that leads to. I don't want to make a big deal out of it here. But as an organic operating business, forget about XenoSure and all the clinical trials on that. It's going great over there. We're thrilled. We've got a new manager, he started about 1.5 years ago or so. He's doing a fantastic job. Michael Petusky: Okay. Great. I've got to ask this because I sort of almost can't believe the number. The 20% valvulotomes, I mean, I think that product came out when I was roughly in college. I may be exaggerating, but it's pretty close, I think. How do you put up a 20 plus 20 on a product that's been around 3 decades or more? George LeMaitre: Right. I mean, it's just a lot of focus, and we have the perfect channel. The whole channel was built around valvulotomes. For how long we've been at this, you're talking about that, I've been here 33 years, and we've been building brick by brick, a channel that's supposed to sell valvulotomes and then other stuff that Dave would buy. So it's a perfectly built channel for that. But you don't want to get too far over your skis on it. Yes, we had a great quarter, but units are roughly flat. We're not here in a market that's growing fast. So I don't want to oversell everything here. But yes, it keeps working for us. I don't know what the unit number was in Q4. We had a 20% organic -- no, 20% reported sales number in Q4. Dorian LeBlanc: 17% organic. George LeMaitre: 17% organic. And I can't right now break that down for your units, Mike. I will say, in general, it's a flattish unit market, and we're doing it by spreading our wings around the world and finding new opportunities. David Roberts: Mike, it's Dave. I would just add that the procedure in which a valvulotome is used is a peripheral vein bypass. And I agree with George, we don't want to get over our skis, overexcited. But a couple of years ago, there was this huge study done here in the United States, this BEST-CLI study from the NIH. And it showed this peripheral bypass was a more robust procedure. It held together longer with less complications, et cetera, than endovascular. Now the big endovascular companies, they have the marketing firepower to grow their businesses, no question. But if you're wondering why the valvulotomes are resilient and the units are staying flat and not going away in the face of a lot of endovascular competition and alternatives, I would say it's because it's a procedure that works. And so yes, good for us to have a good product offering in a procedure that works for patients long term. Michael Petusky: Okay. Great. And actually, you just brought to mind, I just want to ask before I get off, did you give the split between unit growth overall, not just for value, but overall for the company in the quarter? Dorian LeBlanc: Yes. This is Dorian. Mike, we did. It was 9% price, 5% units. George LeMaitre: That's for the year of 2025; and in the quarter, 9% and 6%. Operator: Our next question comes from Jakub Mlejnek with Oppenheimer. Jakub Mlejnek: Just to start with, what impact do you envision the CREST-2 trial in carotid revascularization to have on your carotid artery stenting business? And has that been -- or how has that been factored into the guidance? David Roberts: Jakub, it's Dave. Thanks for the question. It's funny. We just had a record quarter for our carotid shunt business. And so how do you square that with the fact that CREST-2 came out? And I'll get to the takeaways in a second. But to give you a sense of the scale, 15% of LeMaitre's worldwide sales are used on carotid procedures. Those are shunts and patches. We get a little over 50% of our revenue OUS, but 80% of our shunt units are sold OUS. And so these CREST-2 results, that's another NIH trial, I don't know how long it will take to impact our U.S. business. Our U.S. business has been impacted by TCAR, that alternative stenting procedure, for a while. So I think we're really well positioned because we're so diversified geographically. And then I'd also just -- CREST-2 is a Level 1 NIH study. But I would emphasize that if you peel back the onion, the exclusion criteria for stenting, they were able to exclude patients with long lesions, calcified lesions, tortuous arteries et cetera, et cetera, whereas the carotid endarterectomy cohort did not have lesion-based exclusions. And so it was a little bit of an apples and orange comparison. And it turns out if you just had 3 of the patients in the stenting -- of the 600 patients in the stenting cohort have incidents after their procedure, there would have been no statistical benefit to stenting. And so it was really pretty close to a jump ball. And then when you factor in the exclusions, I think we have to see where this goes long term. But in the meantime, I think we're pretty well positioned. Our carotid shunt business is kind of transitioning into an OUS business. And I think it's resilient for a long time to come. Jakub Mlejnek: Got it. Yes. I appreciate all the color on that. And then I guess back to the price versus unit growth, would you be able to break out for this last quarter, the price versus volume contributions within the various categories? George LeMaitre: Jakub, we've tried to stay away from that just for simplicity. So no, we'd prefer not to, if you don't mind. Operator: Our next question comes from Michael Sarcone with Jefferies. Michael Sarcone: I guess I just wanted to start on the gross margin side, do you think you can walk through the puts and takes as we make our way through 2026? It would be helpful to get some color there. Dorian LeBlanc: Yes. Mike, thanks. It's Dorian. And I think you saw a really nice step-up throughout 2025. We had an 80 to 90 basis point step-up each quarter. And when you adjust out the benefit of that tax credit, which on a reported basis gave us an extra 110 basis points. So we're up 180 basis points from 2024 to 2025 adjusted, and we're guiding to be up 170 basis points from 2025 to 2026. So we're seeing a nice continuation of that gross margin story. And obviously, we get the benefit from the pricing increases coming through. We've done a nice job of getting underperforming products out of the bag. We got rid of the [ ZEO ] midway through the year. So that helped with that cadence of improvement in the gross margin in the second half of the year. But we've got some good manufacturing efficiencies that have come through. And all that offsets the normal inflationary pressures in cost of sales, but also some of that mix of the OUS business growing faster than the U.S. business. And we all know that the U.S. business has higher ASPs in general. Back half of the year, we'll have a little bit of pressure from the manufacturing transfer for the RestoreFlow business and a little bit of pressure from opening the new 34,000 square foot warehouse we have here near the Burlington headquarters. But overall, it's just been a great gross margin story for us, up 180 and guiding for another up 170. Michael Sarcone: That's great. I guess a second one for me, and I apologize if it's been asked, but hopping between calls. Just any update on the M&A environment and what the pipeline looks like there? David Roberts: Yes. Mike, I answered the question a little bit earlier for Rick, but the summary is, the pipeline is in good shape. We're pretty busy these days, still hunting in open vascular surgery, where there are 22 targets, and cardiac surgery as well. But yes, the revenue sweet spot, as I mentioned, $15 million to $150 million. Yes, we're out hunting. And as soon as we have anything to report, we'll report back. Operator: Our next question comes from Brett Fishbin with KeyBanc Capital Markets. Brett Fishbin: Just wanted to start with a follow-up on the OUS Artegraft launch again. Just we saw a really significant upside to your original expectations in 2025, the year coming in at $4 million rather than $2 million. I wanted to just double-click on where you saw the outperformance. Just curious like on what countries are performing the best. And then just thinking about the $10 million guidance for 2026. Just curious on your approach to that, just thinking about the sequential progression in the past 2 quarters, like where it seems to be heading, if you view that as maybe a conservative approach to the year-over-year ramp? George LeMaitre: Okay. Great. So the first part of the question is what countries. And it does feel like it's most of a Central Europe type thing right now, and I would call out what we call DACH, Germany, Austria, Switzerland. And then also, I would say, Holland has been -- or Netherlands, if you will, has been really good. So maybe that's the strength so far. And it's just getting going in our very strong markets of Italy and Spain. We were trying to figure out should we allow them to have consignment. And we weren't going to do it and then all of a sudden, we changed, we decided to do it. So we're starting to ramp up specifically in Italy and Spain. And then in the U.K., we really haven't gotten going as strong as these other places. So I think you've gotten Central Europe really off to a fantastic start. And now you have Southern Europe, which we define as sort of France, Italy, Spain, and then Northern Europe, which is the U.K., the Nordics, to give, if you will. So I think you have a long, long way to go here, and we're not going to get involved in what inning we're in, because we always get ourselves in trouble doing that. But it feels like you've got a long way to go. As for quarterly cadence, we thought a lot about it, and we decided to skip the hoo-ha of all that and just give you yearly number. We really don't feel comfortable guiding on one product line. They're so small versus Europe Artegraft, what is it, $10 million this year versus $280 million for the whole guidance. We don't want to get too zoned in on that topic. So we're going to give you $10 million and try not to break it down for the quarters. But still a nice answer. You're going to pick up $6 million in growth from that product line in Europe alone -- sorry. And then also to isolate, it's mostly a European and South African thing, and it's not as much in other places so far. You have Canada to give, you have Australia to give, you just got the approvals, but it's really a European and South Africa thing right now. Brett Fishbin: All right. That was super helpful. And then I'll ask one other question. I think it was more of a topic on the last earnings call, but just wanted to ask about the overall health of the APAC market. You commented on China already, but it looks like a bit of a bounce back quarter here. And just curious if you're still seeing any signs of softness in certain countries or back to business as usual in '26? George LeMaitre: Okay. Well, okay. Yes, it was a fantastic quarter. I think it was 20% up organically and reported. So it was a real solid 20%. It seemed like in Q4, everything sort of came back, maybe with the exception of Japan came back a little bit, but not as much as we would have wanted it to. So I would say, I still feel a little softness in Japan, but we're going into the year with all kinds of optimism, because China is now -- in terms of the size of APAC, China is getting there. Korea also had a very specific incident around direct embolectomy catheters and so it's a long story. I'm not going to get into it. And that thing has gone -- that's over now, and we're direct everywhere in Korea now. So you should get some nice action out of Korea as well as China, and that should bring you along here this year, but felt much better in Q4. We'll see what the next 12 months brings in Asia. Operator: Our next question comes from Danny Stauder with Citizens JMP. Daniel Stauder: First one, I wanted to ask on the RestoreFlow cardiac call point. It sounded like it accelerated, I believe I heard 90%, and that's after a strong 2Q and 3Q. So I was curious what you saw in 4Q that is driving this performance? And then just more broadly, are there any recent trends in the area that are playing out thus far in 2026 that we should keep in mind here? George LeMaitre: Okay. Maybe this thing called the Ross procedure is sort of starting to dominate conversation inside of our company. And the sales manager in the U.S. is a fellow who lives in Toronto, and he's been the guy who's generally been building the Canadian business around allografts. He's now in charge of North America. He's been in charge for 1.5 years. And I would say, he's been pushing the cardiac side of allografts a lot harder in the U.S. proper, not just Canada anymore, but in all of what we call North America. We really don't have much of a presence in Mexico. So it's mostly Canada and the U.S. So I would say it's a bit of that. We did a big training course down at Mount Sinai in New York in October around the cardiac device, and that sort of brought a lot of interest to that device. So we're in a spot where we don't have a lot of cardiac sales. So when we sell some stuff, it looks like a lot. But still, it's was nothing 5 years ago, right? We had 0 in sales 5 years ago, and now it is something. So it's been a satisfying run, and I would say it's about the focus on cardiac. The vascular business itself is pretty good, too. It's a lot bigger, but it grew, what, 19% in Q4. So the vascular business is also doing well, but maybe the excitement is around cardiac. Daniel Stauder: Great. That's great color. Just one follow-up for me. Staying with RestoreFlow, just with the manufacturing transfer of RestoreFlow from Chicago to Burlington, I may have missed this, but should we see this benefit to gross margin in 2026? Is it already in that guidance? Or is this more of a 2027 event? How should we be thinking about that? David Roberts: Yes. It's probably a slight headwind to margin in 2026 as we ramp up in one location and wind down in another. We do think that we're bringing it here, as we have with other manufacturing transfers, to have it centralized, to have better control over it, whether or not it improves gross margins long term. I mean, I think that's our hope, but we'll get it transferred first and think about 2027 when it comes. But all the costs are fully baked into our 2026 guidance. Operator: Our next question comes from Jim Sidoti with Sidoti & Co. James Sidoti: A couple of modeling questions. The 2026 guidance, can you tell me what you're assuming for tax rate and share count? Dorian LeBlanc: Yes. Tax rate, I can give you, we had a Q4 '25 tax rate of 23.2%, and that was the same for the full year, 23.2% for 2025. So that's probably a pretty good number to plug in for your 2026 models. Share count, it doesn't change a whole lot, just the option activity. We'll hit publish on the 10-K in the morning, and I think you can pick up the numbers from there, or we can get them to you offline if you need them earlier. James Sidoti: Okay. It looks like it was down in the fourth quarter. I mean, is that a good number for 2026? David Roberts: If you're looking at it being down off of '23, remember -- off of Q3 rather, remember in Q3, we had this nuance where because of the excess income from the tax credit, we actually flipped from the convertible being excluded to being included. So we had to take the dilutive impact of that. So it was a little bit wonky on the onetime. So the Q4 number is the right number to look after. James Sidoti: Okay. All right. And then you talked about RestoreFlow in Ireland. Is that approved already? George LeMaitre: No, it's not, Jim. You're right to call that out. We had expected approval by the end of Q2 at the last call, and we're now calling for approval in Q3. The filing was a little bit delayed. It will go in, in March, and it was supposed to -- we thought it was going to go in earlier. James Sidoti: Okay. All right. And then you've also talked about the headwind to consolidate Chicago into Burlington. Is that significant? Or is that $1 million, less than $1 million, more than $1 million? Can you give us some sense on that? Dorian LeBlanc: I think we'll say, it's fully baked into the guidance, and you can see we've got a pretty consistent gross margin guide here, 72.1% for the quarter, 72.1% for the year. So obviously not having a material impact. James Sidoti: Okay. All right. And then the last one, can you give me the operating cash flow in the quarter? David Roberts: Cash from operations was $23.1 million. CapEx was $1.8 million. Free cash flow of $21.3 million. Operator: Thank you. Ladies and gentlemen, that concludes today's conference. I would like to thank you for your participation, and you may now disconnect. Have a great day.
Operator: It is now my pleasure to turn the conference over to Mr. David Hoffman, Delcath Systems, Inc. General Counsel. Thank you. You may begin. Please note this conference is being recorded. Greetings, and welcome to Delcath Systems, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Thank you, and welcome to Delcath Systems, Inc. fourth quarter and year-end 2025 earnings call. David Hoffman: With me on the call are Gerard Michel, Chief Executive Officer; Sandra Pennell, Chief Financial Officer; Kevin Muir, General Manager, Interventional Oncology; Vojislav Vukovic, Chief Medical Officer; and Martha Rook, Chief Operating Officer. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results may differ in a material manner from those expressed or implied in forward-looking statements due to various risks and uncertainties. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurance that such expectations will prove to have been correct. For a discussion of such risks and uncertainties which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, those contained in quarterly reports on Form 10-Q, as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements included in this call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent events or circumstances. Our press release with our 2025 results is available on our website under the Investor section and includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website. 2025 was a pivotal year delivering over 40% volume growth. Gerard, please proceed. Gerard Michel: Today, we operate 28 active treatment centers and the highly anticipated CHOPIN results demonstrating clear clinical benefit when Hepzato PHP is sequenced with checkpoint inhibitors is slated for publication. Entering our third year of launch with strong momentum, we are confident that continued site activations and commercial expansion, and the CHOPIN results will drive meaningful revenue acceleration and create substantial shareholder value. 2025 was a pivotal year in which we achieved over 40% volume growth and achieved record annual revenue of $85,200,000. We currently have—excuse me for that little bit of a glitch on the screen here. We have organized our commercial strategy around three priorities: expanding site capacity, changing prescribing patterns, and building referral networks. We track our progress against these priorities through three internal KPIs: number of site activations, rate of new patient starts per site per month, and the average number of treatments per patient. Capacity is a function of the number of active sites and the volume of patients our sites can treat. As expected in the launch phase of any product, the first two KPIs have shown significant variability where small changes in patient numbers can have a large impact, especially when treating an ultra-orphan patient population. Despite this variability, we are very encouraged by the trends we are seeing. Treatment number per patient has remained consistent at approximately four cycles per patient. We use these KPIs internally to model our projections and set guidance. The first strategic priority, expanding site capacity. We had a strong surge in activations early this year, bringing three new sites online. Specifically MD Anderson, UT Southwestern, and Mayo Clinic, Scottsdale. We now have 28 REMS-certified treatment sites. Leading cancer centers continue to engage and we are targeting 40 active treatment centers by 2026. The pace of activations will likely be variable, given the planned timing of the Salesforce expansion, as well as the anticipated increase in interest and support following the pending publication of CHOPIN results. We expect more activations to occur in the second half of 2026 compared to the first half. The expansion of the U.S. commercial team divides the country into nine regions. In addition to the expanded commercial team, we have revamped our medical affairs team with both new leadership and a new team of MSLs. We are off to a strong start in 2026, having treated new patients per site per month at a rate of approximately 0.75 for the first two months of 2026, similar to the pace we saw in 2025. For context, for the full year in 2025, the average rate was 0.5 new patients per site per month, with significant seasonality. We anticipate some seasonal loss of capacity in the late summer. Seasonality is partially driven by the small number of REMS-certified team members at a treating site. For instance, when key personnel take vacation, sites cannot easily add new patients while also servicing our existing accounts. While we are working to minimize the seasonality by increasing bench strength—sites cannot easily add new patients. Total site capacity is a function of open sites and the total number of patients a center can treat, which can vary by month. Our 2026 projections regarding total site capacity, which can vary by month, assume a similar summer seasonality pattern that we experienced last year. Our second strategic priority is changing prescribing patterns by expanding the set of patients our treating oncologists consider appropriate for PHP. With PHP clearly addressing a significant unmet need in liver metastases from uveal melanoma, recent 2025 publications and real-world evidence have reinforced the value of early and effective liver-directed therapy. Several of our strongest advocates highlighted that initiating PHP treatment earlier in the disease course can meaningfully improve outcomes by reducing tumor burden, and that combining Hepzato with systemic therapies can further enhance effectiveness. We expect increasing impact from the CHOPIN phase 2 data. As a reminder, this investigator-initiated trial showed that sequencing PHP with ipilimumab and nivolumab delivered statistically significant and clinically meaningful improvements in one-year progression-free survival, overall survival, and objective response rates versus PHP alone, all within a very short 10-week treatment window. The ability to quickly initiate this combination therapy addresses concerns about delaying systemic therapy, and the combination itself addresses concerns regarding treating patients with extrahepatic disease. Leading centers such as UCLA and Massachusetts General Hospital are already adopting CHOPIN-inspired protocols, including flexible sequencing and combination use with agents like bevacizumab in eligible patients. These data are helping both to establish Hepzato as a preferred first-line liver-directed option and to expand the patient populations our treating oncologists are comfortable referring for PHP treatment. Our third strategic priority, developing referral patterns, is critical to ensure eligible patients are identified and efficiently referred to one of our treating centers. The majority of patients with uveal melanoma are initially diagnosed with disease and managed at community or non-PHP institutions, making early referral a critical lever for both patient capture and better outcomes. To address this systematically, we are currently leveraging a variety of data sources to identify oncologists who have a patient who has very recently been diagnosed with metastatic disease before treatment decisions are locked in. Our oncology managers then engage those physicians to provide education on treatment options and the locations of our treating centers. We believe this upstream approach is already producing results and will be a meaningful driver of new patients per site going forward. The development of referral networks to our treating centers will also support this third strategic priority and strengthen these referral networks across the country as a top priority to support the 2026 guidance Sandra will share shortly. Collectively, these three priorities and the underlying KPIs again, the expansion of both the commercial and medical field forces and the active referral development, will deliver continued long-term growth. I will now turn to an update in our clinical development programs. Our ongoing metastatic colorectal cancer trial continues activation of new trial sites. While opening and training sites for medical device clinical trials is more complex than a clinical trial with conventional drugs, we are on track to activate nearly all of the currently targeted 26 trial sites by mid-2026 and to present interim data results in late 2027. Our second program in metastatic breast cancer has one active clinical trial site, and additional sites are opening soon. Compared to physicians who treat metastatic colorectal cancer patients, breast cancer doctors have much less experience with liver-directed therapies. This lower level of awareness requires extensive communication and education on the potential benefits of PHP for patients with metastatic breast cancer. We have had numerous well-attended advisory boards. There are clear areas of unmet need in the subset of these patients with liver metastases. We will provide guidance related to the readouts from the metastatic breast cancer trial later this year, once progress of operational activities allows for more precise forecasting. We are now targeting 15 trial sites and expect to activate them by late 2026. Based on the results of the CHOPIN trial and the resulting interest in the medical community, we are evaluating combination PHP immune checkpoint inhibitor trials across various tumor types. It will take another three to six months to finalize the build plans for future combination trials and other indications. I look forward to sharing future updates on this topic. I will now ask Sandra to review our financial results. Sandra Pennell: Thank you, Gerard. Revenue from our sales of Hepzato was $19,000,000, and ChemoSAT was $1,700,000 for the quarter, compared to $13,700,000 for Hepzato and $1,400,000 for ChemoSAT during the same period in 2025. Full year 2025 revenue was $78,800,000 from Hepzato and $6,400,000 from ChemoSAT, compared to $32,300,000 for Hepzato and $4,900,000 for ChemoSAT in 2024. We recognize gross margins of 85% in the fourth quarter and 86% for the full year. Research and development expenses for the quarter were $9,400,000 compared to $2,900,000 for the same period in the prior year. Full year 2025 SG&A was $43,000,000 compared to $29,600,000 in 2024. SG&A expenses versus last year have increased primarily due to continued commercial expansion and an overall increase in general business functions. While full R&D expenses in 2025 were $29,200,000 compared to $13,900,000 in 2024. The growth in R&D spending was primarily driven by ongoing investments in our clinical team and the initiation of the phase 2 clinical trial evaluating Hepzato in combination with standard of care for mCRC and mBC. We do expect our R&D expenses to increase in 2026 by nearly 90%, primarily due to CRC. With regards to SG&A, we also expect our SG&A expenses to increase in 2026 by nearly 50%, primarily due to the sales and marketing initiatives and the commercial expansion. Our fourth quarter 2025 net loss was $1,900,000 compared to a $3,400,000 net loss in the fourth quarter of the previous year, while full year 2025 net income was $2,700,000 compared to a loss of $26,400,000 in 2024. Adjusted EBITDA for the full year was $25,100,000 compared to an adjusted EBITDA loss of $2,500,000 for 2024. Non-GAAP positive adjusted EBITDA for the fourth quarter was $2,400,000 compared to positive adjusted EBITDA of $4,600,000 for the same period last year. We ended the year with approximately $91,000,000 in cash and investments and quarterly positive operating cash flow of $8,300,000 and full year operating cash flow of $22,500,000. As of today, we have no outstanding debt obligation and no outstanding warrants. Six hundred and twenty-eight thousand five hundred and seventy-two common shares were repurchased for $6,000,000 through December 31, 2025 under the approved $25,000,000 share buyback program. Turning to 2026 guidance, we are guiding to total revenue of at least $100,000,000 for the year, which represents greater than a 20% increase in Hepzato Kit procedure volume and greater than 10% growth in ChemoSAT. The revenue guidance reflects the 340B pricing change, and based on our current and projected customer mix, we do expect the 340B pricing impact to result in an average selling price of around $175,000 per kit for Hepzato, approximately a 10% discount off our published list price. Forecast for 2026 gross margins are between 84% and 87%. Given the concentrated nature of our customer base, this dynamic will continue to introduce some variability in realized pricing as we add new sites and as centers’ 340B eligibility kind of fluctuates quarter to quarter. This does conclude our prepared remarks, and I will ask the operator now to open the phone lines for Q&A. Thank you. Operator: We will now conduct our question and answer session. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. 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. Our first question comes from the line of Marie Yoko Thibault with BTIG. Please proceed with your question. Marie Yoko Thibault: Hi, good morning, Gerard and Sandra. Thanks for taking the questions. I wanted to ask my first one here on some of the assumptions around your guidance. You gave us a lot of details on pricing and volume expectations, but I just wanted to clarify, you mentioned seasonality. Is that your third quarter that you are talking about when you talk about summer seasonality? And because we had the NDRG come in last year, maybe you could remind us on the magnitude of that seasonality just because things were a little bit noisy with that pricing change. And, Sandra, on the price you said $175,000, I think, for this year. That is a little higher than where you kind of exited the year. I would love to hear a little bit about the trends behind that. Gerard Michel: We do expect seasonality in the third quarter. Not all of the seasonality last year was due to pricing. A great deal of it was. And although we are trying to increase staffing at the certified teams at the hospitals, it is a tall order to get physicians and perhaps patients taking time off. From Q2 to Q3, from a volume perspective, because it was noisy last time with the pricing, we expect only modest growth, perhaps even flat, given the seasonality we saw last year. We have small numbers to work with, but that is what we are assuming. And as Sandra mentioned, due to 340B across all our customers, it is looking like it is closer now to getting closer to 10%, so a bit in our favor. Sandra, you can comment on the magnitude of the pricing question. Sandra Pennell: Sure. Thanks. I will deal with the seasonality at a high level. We do expect seasonality in the third quarter, so you may see a bit of a maybe flat to modest growth from Q2 to Q3, similar to what we saw in 2025, and then with that growth starting back up from Q3 to Q4. So from a pricing perspective, yes, we did have a slight price increase. Our list price went from $187,500 last year to $189,100, again limited by inflation. And then we are seeing a more favorable mix. I think we have said, Marie, in previous calls, that we thought we were going to have more of a 20% discount, but seeing that some of our higher-end users tend to not be 340B eligible at the moment, we had some favorability there and really were tracking closer to a 12% net effective reduction on price. It swung closer to 10% in the fourth quarter. We came up with the 10% based on the mix of hospitals that we think will come on board. Again, we will continue to update everyone if that changes significantly outside of $175,000. Marie Yoko Thibault: Alright. Very clear. Thank you for that detail. And then when we look at your websites from time to time, you mentioned the REMS certification process. You also mentioned some clinical trial centers. I wonder if you could just remind me of the difference between your Hepzato Kit REMS site, your Hepzato Kit site, and then how we should be thinking about the differentiation between the sites that are, you know, commercial and those that are purely clinical as we keep track of some of these metrics. Thanks. Gerard Michel: Yeah. I am glad you asked that. It is our intention for the Hepzato Kit REMS site to be compliant, and for it to be compliant for the FDA, we cannot put hospitals on that are accepting referrals but have yet to do their first patient. We want patients to know where to find treating centers, so that is why we put together the hepzatokit.com website with a physician finder on that as well. I did say in the past that we believe REMS-certified centers, even if they have yet to do their first, needed to be put on that first FDA website. Upon further digging, it is a bit of a gray area. But on further digging, we have reached the determination that it is probably best not to put on clinical trial centers unless they are going to be commercial centers. So, actually, I am glad you asked the question because this is a change. So if investors and analysts want to know how many treating centers there are, you just go to hepszatokitrems.com. Everybody there is either actively treating UM patients or is REMS certified and will soon treat a UM patient. We do have some clinical trial overlap, but we will only put those on there that are going to be commercial centers. Short answer is look at hepszatokitrems.com for the number of treating centers. If you are a patient, go to hepzatokit.com because that is all the centers that are accepting referrals. Marie Yoko Thibault: Alright. Very helpful. Thank you. Operator: Our next question comes from the line of John Lawrence Newman with Canaccord Genuity. Please proceed with your question. John Lawrence Newman: Hi, team. Good morning, and thanks for taking my question. I just had two here. On the CHOPIN study, really impressive data last year. How you plan to use that study in the United States and when we might start to see an effect? And then, Gerard, just curious on the timing on the publication there, anything you could tell us? And then also just from an operations perspective on the business, you have got two really interesting and important clinical studies running in colorectal and breast cancer. Just curious if you are more focused on those studies and making sure that they enroll quickly, or if you are kind of balancing that with keeping the business cash flow positive this year? Thanks. Gerard Michel: Okay. Thanks for the questions. In terms of timing of CHOPIN, as I think everyone on the call knows, this is an investigator-initiated trial. We are told that it is imminent. I think probably within the next month or so it will be published, but I cannot absolutely promise that. In terms of how we will use it, it is going to be used in a multifaceted way. The sales reps will certainly make the treating physicians aware that it exists and give them access to the publication, as well as make our medical science liaisons and our senior medics at the company available to answer detailed questions about how doctors might interpret the data and based on these data both in respect of highlighting Hepzato was probably the liver-directed therapy to use for most patients, showing its combination therapy with ipi/nivo can be safely utilized. And thirdly, I do believe a number of KOLs believe that the guidelines should be updated, and perhaps even downgrading the role of clinical trials in the guidelines. So that is another critical way we are going to try to utilize the data. In terms of prioritizing clinical development versus cash flow positive, we have a very healthy balance sheet of over $90,000,000. I do not think there is any need for us to focus on positive cash flow from quarter to quarter. We may go cash flow negative on some quarters, but we think that is the right thing to do for the long-term value of the business. We are not going to chase a perceived optical gain that would simply hinder the long-term value of the company. John Lawrence Newman: K. Great. Thanks very much. Operator: Thank you. Our next question comes from the line of Chase Richard Knickerbocker with Craig-Hallum. Please proceed with your question. Chase Richard Knickerbocker: Good morning. Thanks for taking the questions. Just a quick one to start. As far as commercially, can you give us a sense for the average treatments per patient and kind of an update there? And with that in mind, to that average number of treatments, is it kind of been every six to eight weeks, or are we seeing a little bit longer in the real world? Even more so, how long it is taking a single patient to get to the next treatment? And then on your guide, can you kind of walk us through what it assumes as far as new patient starts? Because if you use that number that you gave around 0.75, you could theoretically get to a number that can be above $100,000,000. Right? So should we think about it conceptually as a floor? And then have an updated thought as far as cadence of new center adds this year. I realize it can be pretty variable, but just as we think about our models and kind of the pipeline that you have right now I am sorry if I missed it again. And then, Sandra, maybe just last one. Any sort of guidepost that you would be willing to give us just around either kind of R&D spend or kind of EBITDA—same kind of question. But any sort of help as you kind of think about how you are modeling patient enrollment in your ongoing studies? Gerard Michel: Average still is for treatments per patient around four. That has changed very little. How long it takes them is more of a decay curve—what is the probability of getting to the next treatment. Any single patient might just get one or up to six. Some are going past six. In terms of the interval between treatments, it is probably stretching out closer to eight than to six. Every site is different. The actual interval is probably seven-point-some-odd at this moment, which is what we saw last year. And with growing sites, that means growing revenue. I do not think it is going to go past eight. I do not think it is going to drop down to six. It is going to be in that realm. We are assuming, as we said before, that the first two quarters of the year are stronger than the third quarter, and then the fourth quarter rebounds, which is what we saw last year. We think it is prudent to think that as we gain more sites—and we keep the average new patient per site per month consistent with what we saw last year. In other words, the average site does not get incrementally more productive as we add new sites, which is what generally happens. The newer sites take a while to reach their stride on average. I do not think the average productivity will decline. It will keep steady as we add sites. There are two things that will increase the pace in the back half of the year. That is the addition of more reps—we are going from six to nine regions—as well as we reinvigorated our medical affairs group. We have an expanded team in the field right now. So increased field presence. And then the second thing will be the publication of CHOPIN results. We believe that will take a bit of time to really make its mark, and I think that will be in the back half of the year. As a function of all of that, we expect more centers being activated in the back half of the year than the front half of the year. Sandra Pennell: Yeah. So we are expecting R&D to increase by nearly 90% in 2026 over 2025, primarily due to CRC. Now, again, this is dependent on making sure we get those sites open and enrolled. With regards to SG&A, again, we are expecting nearly a 50% increase overall this year, primarily due to the sales and marketing initiatives and the commercial expansion. Q1 alone will probably go up nearly 30% to 40% over Q4, and then more of a healthy growth, maybe 15% each quarter thereafter. Q4, probably flat or modest increase each quarter thereafter. Hopefully, that will give you a little bit more information for your modeling from an expense side. Chase Richard Knickerbocker: Yes. Thank you, Sandra. Thanks, guys. Operator: Thank you. Our next question comes from the line of Sudan Naveen Loganathan with Stephens. Please proceed with your question. Sudan Naveen Loganathan: Hi, thanks, Gerard and Sandra. My first question is around the third quarter. You mentioned kind of having a potential seasonality. But, you know, you guys have a lot of other potential catalysts coming through such as the CHOPIN publication and also the focus on the new regions that you kind of split up the Salesforce. So, you know, is there any catalyst or anything else to kind of rally around for the third quarter that could maybe help mitigate some of this seasonality? Also, maybe even some more site starts coming online that quarter that could potentially help? Is there anything you can kind of give details on? Gerard Michel: Yeah. I think the one aspect of the seasonality that will always be with us to some extent is physician schedules. At our high-producing sites, they are flat out. They book room time ahead of time, and they fill it with patients. When one or two of those members take time off, they lose capacity, and they generally just treat existing patients. They do not bring on new patients. So for us to kind of counter that effect, we would have to efficiently refer patients to other centers that seem to have capacity, and that is tough to do. We just think it is prudent despite the fact that we are trying to increase bench strength at these various centers to take that into account and assume it is going to happen again. Are there upsides? Could CHOPIN increase the number of site activations because of CHOPIN? Yeah. That is an upside as well. So, yeah, we are hopeful for upside. I think for now we are just being not overly conservative but reasonably conservative in our guidance. Sudan Naveen Loganathan: Again, I have to ask it, though, but I appreciate it. Thank you. Alright. Operator: Thank you. Our next question comes from the line of Charles Wallace with H.C. Wainwright. Please proceed with your question. Charles Wallace: Hi. This is Charles on for R.K. Thank you for taking my question. You mentioned that the procedure growth and also the site activation may be weighted in the back half. But as you add more patients from these sites, do you expect that the discount will expand from the current 10%? As potentially more 340B patients get added to this mix? And are you still targeting 23.1 treating centers? And then one more question on gross margin. You reached 86% in 2025. Expect to maintain this level in 2026? Gerard Michel: Yeah. So I think the discount for the 340B is very difficult for us to be precise as to what we think the discount will be. What matters then after that number is the mix—the effective average value per kit that we are getting, the discount off of AMP for ASP. We have modeled 10% for the year, which is a little bit better than we were running close to 12%. It swung closer to 10% in the fourth quarter. Looking forward, we are doing the best we can. We came up with the 10% based on the mix of hospitals that we think will come on board. Sometimes we do not know until we are ready to ship a product to a hospital. Sometimes it is even after the fact that we find out whether or not they want to claim 340B pricing. Some of them roll on and off the DSH eligibility. That is disproportionate share hospital. And some of them actually choose not to use it because they want to use a different legal entity. So it is highly complex. I think for now, just stick with the 10%. That is what we are modeling. Sandra Pennell: Yes. We are guiding right now from 84% to 87% in 2026. So I think it is obviously dependent on each quarter’s sales as well as any pricing impacts over this next year, but even potentially hitting close to 90% in 2027 and beyond. Operator: Perfect. Thank you. Our next question comes from the line of William Maughan with Clear Street. Please proceed with your question. William Maughan: Hey, good morning and thanks. So with the pricing reset around mid-’25, are you pleased with the amount of volume increase that you feel you have gotten from that expansion into 340B hospitals? And then you have spoken before about one of Hepzato’s major competitors for patients being competitive trials. So can you just comment on anything you have seen from those competitive trials in terms of increasing or finishing enrollment that might leave more patients available to you? Thank you. Gerard Michel: I think it is impossible for us to state whether or not we are getting increased volume due to 340B pricing. Just as a reminder, it is not that there was an access issue to these hospitals. It was a matter of, you know, how much margin, frankly, would they make for each kit. And, not surprisingly, we will never know. My jokingly say, unless we have a kind of a parallel universe experiment. We just will not know. We simply count the number of patients being recruited by the ongoing trials that we can see listed on clinicaltrials.gov. Thankfully, the IDEA trial, which was a big one, finished enrolling late last year. Around the second quarter of last year, there was a large expansion of Replimune access trials—sites—as well as Thomas Jefferson on a number of single-center trials at their center, which definitely took some patients out of the mix. So I think we have a steady headwind. It is definitely a bit less than what was ongoing last year. Operator: Thank you. Our next question comes from the line of Yale Jen with Laidlaw. Please proceed with your question. Yale Jen: Good morning, and thanks for taking the questions. Just two up here. One of those is the referral development. I appreciate you highlight some of the major efforts in terms of going forward. Would that be more of an emphasis given that will potentially create much more flow of patients from much larger sources? Gerard Michel: You know, thanks for the question. It has to be because, as we get deeper into the TAM, we are now going to be looking for patients that are, you know, less, let us call it, educated, who are seeking out our sites. To do that, we have to get patients whose doctor—who is likely a doctor who treats cutaneous melanoma—just quickly says, “Hey, ipi/nivo for HLA-A2 negative, or tebentafusp for HLA-A2 positive.” Cutaneous melanoma docs do not refer a lot of patients for liver-directed therapy. It is not first on their mind, important in their normal mixed practice. We need to get in front of those docs who have patients who are not online looking for the latest and greatest, and to get in front of those docs early, introduce them to a physician at one of our treating centers, educate them on the product so they can offer that option to their patient. So, yeah, it is a critical activity for us to continue to deliver growth. Yale Jen: Okay. Great. That is very helpful. One other question is that given some of the sites treating patients for quite a while, maybe already been a couple quarters up to now. Do you feel most of those sites are heavily rich, steady state at fewer patients? Or would you be able to deepen the number of patients to be treated over there, or do you feel that, for all those sites, you are pretty much at a steady state at fewer patients? Gerard Michel: Yeah. There are certain centers—we have a set of centers. I think MGH would be a good example—that for them to do a lot more patients, they are going to have to book more room time and get another team. That would be the dial that has to be turned to increase their capacity. We would love it if they did that. We are ready and willing to help them on the training of the new team members. There are other centers where we have a low share. Think of a narrow set of patients, like no extrahepatic disease, which is not a limiter. It should not be per our label. Another reason being that the physician is just a believer that cancer is a systemic disease. “I will only treat this patient if they only have hepatic disease.” Clinical trials being one of them. It is usually a mix of reasons. So the first one of those is we will try to impact by changing guidelines, if at all possible, to deemphasize clinical trials. And the second one, we will try to put the data in front of the docs saying, “Look. You can treat these patients with extrahepatic disease with systemic and our product at the same time.” That is an educational component. So, in some of the higher-volume centers where we have a low share—our high-volume centers—modestly changing training patterns at our lower-share hospitals where there is a high volume, the CHOPIN data, perhaps some changes in the guidelines, all should help us there. Yale Jen: Maybe the last question here, just squeeze in. I know it is often difficult to predict, but do you feel the NCCN guideline could happen maybe later this year or maybe early next year? Or that is too elusive to predict? Gerard Michel: The first driver is the expanded MSL force and the expanded Salesforce. In terms of NCCN, they have all been known to have off-cycle meetings. I think this one, the schedule is November. They have all been known to have off-cycle meetings. That is a physician-initiated activity more than a company-initiated activity. All we can do is discuss the available data with the KOLs, share our perspective that perhaps there are some areas of the guidelines that should be modified based on the latest data, and they really need to drive it. We can send notes in—pharma companies requesting or providing information into the guideline committees. But at the end of the day, it is up to them to drive it. We are hopeful that they will foster the conversation amongst them, but, again, this is more of a physician-initiated activity than a company-initiated activity. Our mission at the company is simple: to improve survival and quality of life for patients with liver metastases by delivering the most effective liver-directed therapy available. None of this progress would be possible without the dedication and hard work of our entire team and the support of our investors who are in many ways part of the team. And I want to thank every one of them. We look forward to sharing our continued momentum with you throughout 2026. Have a great day. Operator: This concludes our question and answer session. I would like to turn the floor back over to Gerard Michel for closing comments. Gerard Michel: Thank you all for joining us today and for your continued support and thoughtful questions. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
Operator: Good afternoon, everyone. My name is Leila, and I will be your conference operator today. At this time, I would like to welcome you to the Salesforce Fourth Quarter and Full Year Fiscal 2026 Conference Call. This conference is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Mike Spencer, Executive Vice President of Finance and Investor Relations. Sir, you may begin. Michael Spencer: Good afternoon, and thanks for joining us today on our fiscal 2026 fourth quarter results conference call. We are trying out a new format today and as such, have shortened our prepared remarks to ensure we have time for your questions. Our press release, SEC filings and a replay of today's call can be found on our website. Joining me on the call today are Marc Benioff, Chair and CEO; and Rob Washington, Chief Operating and Finance Officer. We also have Miguel Milano, President and Chief Revenue Officer; and Patrick Stokes, President and Chief Marketing Officer, joining us for the Q&A portion of the call. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties and assumptions, which could change. Should any of these risks materialize or should our assumptions prove to be incorrect, actual company results or outcomes could differ materially from these forward-looking statements. A description of these risks, uncertainties and assumptions and other factors that could affect our financial results or outcomes is included in our SEC filings, including our most recent report on Forms 10-K, 10-Q and other SEC filings. Except as required by law, we do not undertake any responsibility to update these forward-looking statements. As a reminder, our commentary today will include non-GAAP measures. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings materials and our press release. And with that, let me hand the call to Marc. Marc Benioff: All right. Thanks so much, Mike. We're so thrilled to be here with everybody. And I'll tell you what, we're here in this beautiful San Francisco on the 60th floor of Salesforce Tower, and it is a gorgeous day, 70 degrees, the AI capital of the world, and we're coming here to you live, really excited about everything that's going on. So let's start with the highlights from one of the absolute best years in our history and one of the best performances in software ever and guiding one of the best performances in software ever, we have delivered phenomenal performance across revenue, across margin expansion, across cash flow and cRPO and RPO. I mean the numbers are really incredible. For the full year, we delivered $41.5 billion in revenue, up 10% year-over-year, 9% constant currency. We had $11.2 billion in revenue for the fourth quarter, up 12% year-over-year, 10% constant currency. CRPO rose to $35.1 billion, up 16% year-over-year and 13% in constant currency. And we passed an incredible milestone with $72 billion in total RPO, which is up 14% year-over-year. Now that is $72 billion in total RPO, up 14% year-over-year in case you missed that point. I did read a tweet that RPO does not matter, but evidently, we have it if it does matter. So total RPO, $72 billion. Last year, we laid out a path towards double-digit revenue growth by the second half of fiscal year '27, and we're hitting our marks. And based on our strong Q4 performance and the fast start with Informatica, we're updating our fiscal year '30 revenue target to $63 billion. Now that means we've only spent 2 years of the 40s, kind of hard to believe. I have never seen performance like this. But this obviously is not a rational market. We all know this. So we're using our remarkable cash flows to take advantage. This is not our first SaaS Pocalypse. We have been through many SaaS Pocalypses. I remember the horrible SaaS Pocalypse of 2020 when not only the software industry was dying, but we were all dying, but we made it through that. And now everyone is back, doing great. So we're so grateful to make it through that, and we're going to make it through this one as well. And it's just a great marketing opportunity and a great buying opportunity, and that's why we are doing this incredible repurchase authorization of $50 billion. In fiscal year '26, we returned more than $14 billion or 99% of our free cash flow to shareholders. Thank you, Robin, for that. And today, we're increasing our share repurchase authorization to $50 billion because these are some low prices. So Robin will share more about that in a moment. The biggest brands in the world are choosing Salesforce to lead their Agentic transformation, companies like Amazon, Ford, AT&T, Moderna, GM, Pfizer, so many, and these are big deals in Q4, wins over $1 million were up 26% year-over-year. That's just so we know in Q4, wins over $1 million were up 26% year-over-year. Congratulations, Miguel. Wins over $10 million were up 33% year-over-year. For example, the U.S. Army run by Army Secretary, Dan Driscoll, do an amazing job, has awarded us a 10-year indefinite delivery, indefinite quantity contract with a ceiling of $5.6 billion. Thank you, Dan. This level of financial performance is a clear signal, a clear signal that companies across every industry and region are investing in Salesforce to become Agentic enterprises, just like we've been talking about now for 2 years at Dreamforce that the Agentic Enterprise is our real idea, and we're going to talk about Agentforce, and I think it just became an $800 million business. We're going to talk about that. You've heard me talk about it at Dreamforce and on these calls, our vision of humans and agents working together for years, companies bought apps. We all use apps. I've got apps right here on my phone. I've got apps on my computer. But now I'm using apps and agents. I use them at home. I use them in my company. We talking about that. That is a reality. We have 83,000 employees here at Salesforce Humans. And we have lots of agents running around as well. Miguel qualified 50,000 leads this week with agents. So we have apps and agents. We have humans and agents working together. We've been talking about that at Dreamforce as well. And this is just an incredible opportunity for Salesforce. Our market is bigger than ever because not only selling apps, we're selling apps and agents. So bringing humans, agents, apps and data together, not just to make people better at their jobs, but to redefine how work gets done. This is just an incredible exciting moment in software. So we're seeing incredible demand for Agentforce. In its first 15 months, we closed 29,000 deals, up 50% quarter-over-quarter. Customers in production have increased as well, nearly 50% in Q4. It can do more, have more power, more capability than ever. If you haven't seen the new Agentforce, you haven't seen Agentforce, the level of determinism, the voice capabilities, Agentforce Studio, Agentforce Builder. We are spending a huge amount of time on Agentforce. I just saw the new Agentforce demos from our team. It was incredible. We even have Agentforce running in Slack. We have Agentforce Builder running in Slack. We have amazing things happening. And our Agentforce and Data 360 ARR, including Informatica, now exceeds $2.9 billion. I heard ARR, doesn't matter anymore. But in case it does, we have $2.9 billion, up 200% year-over-year. More than 75% of our top 100 wins in Q4 included both Agentforce and Data 360. In a bit, we're going to hear from 3 amazing customers. Wyndham, one of my very favorite customers in the world, the world's largest hotel chain. Shark and Ninja. I just got one of their great new products. I'm sure you know about. They've got the best SLUSHi machine, but one of the most innovative consumer product companies in the world and SaaStr, an incredible community of B2B software founders, executives, investors and I think you all know that I love [indiscernible]. But I've never been more excited about our business here at Salesforce. No one else is delivering this level of capability at this scale to this many customers. And we are taking the power of the Agentic enterprise of these apps and Salesforce, and we're giving them the security, reliability, availability, scalability that you need to make them successful in business like ours, but in all businesses, in small and medium businesses and general-sized businesses and very large enterprises in the government and in ISVs as well. So this is a category that just did not really exist a year ago. I will just say that look at IT service management. We just launched Salesforce IT service in October, Salesforce ITSM. And in just a few months, Miguel has won over 180 customers, amazing Miguel. But I especially love 5 customers who got to leave the purgatory of ServiceNow, like Sunrun, Cornerstone, CoolSystems, and there's others, too, that we're not allowed to mention, but I might mention them anyway. Who are leaving in ServiceNow, now for the new Salesforce IT service product, which is about apps and agents, helping you manage all your ITSM. But don't just think it's just that. We built an amazing new life sciences product this year. Agentforce for life sciences. And since we launched so many of the global pharma companies, and I've met with so many of the CEOs myself, they're leaving Veeva, purgatory Veeva, including AstraZeneca, Novartis, Takeda and of course, Albert at Pfizer. They're all saying that they are going to Salesforce Life Sciences, which is a product that has apps and agents. And this is amazing. They are the most regulated businesses in the world, and they are choosing Salesforce. And over the years, I've met with untold numbers of customers, call it thousands, call it more than that. They used to tell me maybe, okay, I want to roll my own AI. I'm going to build my own model. I'm going to build my own agent. I said, tell me about that. Let me know how that goes. Show me exactly what you're doing. Or you can just turn it on in the Salesforce product you already have. You have Sales Cloud, turn on the agents. You have Service Cloud, turn on the agents. You have Marketing Cloud, turn on the agents. You have Slack, turn on SlackBot. And that idea that every app now has the capability to have agents. So customers tell me that they want to basically kind of get to that next level. And the way to do that is by including this context, the ability for the AI, the data to know you. No better example of that than SlackBot, immediately as you turn it on, you're a Slack customer, it looks at all your Slack. It looks at your DMs. It looks through Salesforce. It looks through Google. It looks even that Microsoft Teams as hard as that is for some agents to go and do, but we've told them how to do it. And then it says, I understand your business, and I can give you help, advice, support. And in fact, a recent survey of 100 CIOs found that the number of companies planning to use a platform like this, this idea of apps and agents has now doubled just in the last 18 months because of this, they realize this is more than just turning on Moltbot on your Mac mini, okay, which, by the way, I have a Mac and a setup is great. OpenClaw, I love it. But for companies who want to have the reliability, availability, security, okay, the sharing models, the key parts of that to really make sure that the business is safe and secure while you're running all these skilled agents. Well, let's just know that, that is what Salesforce is doing. And that's why Salesforce has become one of these incredible companies because our platform provides these amazing 4 layers that you see right here that everyone needs to convert raw intelligence into real work. Everything they need to become an Agentic enterprise. Just look at this, look at what we've built. Look at what we have built. And thank you to our team. They have done a phenomenal job. Srini can't be here because he's in India. He was at the India AI Summit this week. He could not make it back here in time. Look at what our engineering team has built, and thank you to them. Look at where it starts. First of all, yes, we can use all those large language models. We love them all. We love all of our children equally. And down below here, whether it's Anthropic or OpenAI or Mistral or Llama, all of them. And there's more coming. They're amazing. World models are coming. They're amazing. They're all down below here, and we're using them. And then, of course, we bring them into Data 360, and that lets you harmonize your data, integrate your data and federate. That means connecting the other data sources throughout your company and grab it. Other data repositories, you might be using Snowflake or Databricks, you might be using BigQuery or anything, even IBM mainframes and you can bring it into Data 360, activate your data and then it comes up into your apps. So if you're using the service app, and you want to have an experience like help.salesforce.com for your company. Now the service app has that Agentic capability, the data is coming up. And it comes up to the next level to Agentforce and you can build your agents, train your agents, put the guardrails in your agents, give them voice, they can talk now, they're talking. And then all of a sudden, you can even manage and orchestrate and collaborate from Slack. So this is our architecture. And all of this is unified, integrated. And that idea that we can deliver this unified platform to our customers to help them deliver humans and agents working together. So you can see right here, Agentforce has the tooling to build, to manage, to orchestrate the agents to make them talk, to give them determinism, to give them the capabilities that they want. And then we have the engagement layer to deliver Agentic enterprises where work happens in Slack across our apps. So if you haven't seen SlackBot. I talked to a lot of customers like, I don't see SlackBot. Why we used it? I have the free edition. I'm like, well, maybe you should pay and get the enterprise edition because boom. That's when all the SlackBot turns on and you can go through your whole company, run your company. I had one of our customers over last night, Aneel Bhusri Workday. I'm like, have you seen SlackBot? Aneel is like, no, I haven't seen it yet. I'm like, you're the biggest Slack customer we have. I'm like I just sit there and say, look at this. And I'm like, said a SlackBot. I'm having drinks with Aneel. And I just am trying to like give him a demo of SlackBot, what should I say to him? What is the strategy between Salesforce and Workday and then boom, boom, boom. It just went through the whole thing, showed them every deal. He couldn't believe everything that was happening between these -- our two companies. He had to get updated because he's the new CEO of Workday. And it was amazing. That was my real experience. Together, all of this is the complete operating system for the Agentic enterprise. Yes, I'm using it myself, and we're using it. We're customer 0. And that's crucial because, look, we already know now. Our customers aren't going to deploy just one agent. There's going to be many agents, many capabilities, the ability to automate many different types of work, and they're going to deploy hundreds or thousands. Many are going to be from us. Others are going to be from other amazing companies, like the one that I just mentioned, Workday, I love them. But these agents can't work in isolation. Like ET, each one of them needs to go home. Okay? So that home is Salesforce, and they are calling us through the MCP server or maybe even just through one of our core platforms. And the more agents that our company deploys, us or anyone else, the more essential our platform becomes. This is my personal testimonial. I'm giving you my personal testimonial of how I run Salesforce. You can come here. I will show you how I run a business with apps and agents together. And it's why nearly 90% of Forbes top 50 AI companies, Forbes top 50 AI companies use Salesforce and Slack. And if there is a SaaS pocalypse, I think it might be being eaten by the SaaS and SaaSquatch because there are a lot of companies using a lot of SaaS because SaaS just got a lot better with agents as a Service. Now I won't tell you exactly tell you what that says. But let's just say they're SaaS and there's also Agents as a Service. Now I want to tell you how we're measuring the value our platform delivers to customers. Today, we are one of the largest consumers of tokens in the world to date, now over 19 trillion tokens. So we continue to show you that because we want you to see that we're actually doing what we say. I know that there's been some enterprise software companies who say they're doing agents or they're doing AI, but then they're not showing up in the token rankings from the language model companies. So we're here's 19 trillion, okay. But we really want to take this to another level. And another level is a token on its own doesn't know your customers, your pipeline, your org chart, but Salesforce does. And the value isn't in the token. The value is in what our platform does with it, the work. That's why today, we're introducing an additional metric, the Agentic Work unit created by our very own Patrick Stokes sitting here at the table, the AWU not to be confused with our customer, AWS. And AWU represents one unit of AI work, Agentic work unit. We're rolling this out to see how you like it actually here in earnings. It's a record updated workflow triggered, decision made, MCP called. And to date, AI agents on the Salesforce platform delivered 2.4 billion Agentic work units. That is where AI isn't just thinking or calling things, it's getting work done, work done, transactions. And in Q4 alone, we delivered about 771 million of them. We're still trying to exactly figure out exactly what these numbers mean for us. But what it means for me is that we are doing what we say. That is we are explaining that humans and agents are working together. We are showing you a business at scale, running them. We are showing them how we are making our business better. Our service is so much better this year because we're using our new Service Cloud with our omnichannel supervisor deployed with Agentforce. Our sales, Miguel just hit record sales numbers. You can see them. We've never sold or had so much ACV in our history in the fourth quarter because not only does he has 15,000 account executives, but he has all these agents who are out there doing this amazing work. So that is so exciting. This is raw intelligence converted into real work. It's driving efficiency and growth. Okay. Now let me tell you about one of the biggest drivers of these work units, SlackBot. A lot of you use Slack. I use Slack every day. It's the employee -- ultimate employee agent. And many of you know that X, the social media platform hosts about 500 million messages a day, right? Elon Musk do an amazing job on X, incredible what he has done. But did you know that Slack hosts about 1 billion messages a day? So while X, amazing X, I use it myself. I just tweeted something, 500 million messages a day. Well, Slack is hosting 1 billion messages a day. And remember, every one of them is about getting work done. That's why we bought it. Remember, Slack's ticker symbol was work. SlackBot can access all of those messages as well as your files, your calendar, your Salesforce, your Google, your Microsoft Teams here this, here that. SlackBot goes around, pulls it all together. And then it knows your business. So then it's able to orchestrate with other agents and has an incredible partner marketplace, really the #1 AI ecosystem in the world and has more than 350 AI apps and agents already. There is no other AI ecosystem like it. One of those partners is in Great Anthropic, we love Anthropic, we love Dario, Daniela, I tweeted about what they did yesterday, incredible demo. Just yesterday, Dario demonstrated how he is doing something amazing with Salesforce in the enterprise. Every single one of their demos, whether it was for HR, engineering, investment banking, started and ending in Slack, pretty awesome. And so it's about agents and apps, humans and agents, it's all working together. You can see it in his demos. You can see it in our demos. By the way, Anthropic runs its whole global operation on Salesforce and Slack, I think actually every AI company does. Yes, I think they do. So maybe you saw they're hiring a Salesforce admin, Dario. Let us know if you need new names. But I think it's just a point we're making that Salesforce is doing great with these AI companies. We're so thrilled of our relationship with Dario. And I think we just put another $100 million into the new round. We're up about $330 million in Anthropic invested. It's almost about 1% of Anthropic. And believe me, I wish we had invested a lot more, John. I don't know why we didn't do more. Okay. With that, it's time we're going to hear from some of our most inspiring customers becoming Agentic Enterprises. We have the great Mark. Mark, I see you. Mark is there from SharkNinja. Mark Adam Barrocas: Marc, congratulations to you and your team. What a quarter? Marc Benioff: Mark, I'm so thrilled to talk to you, and I love all your products, and thank you for the Christmas presence. I have them, and I'm using them. Mark Adam Barrocas: Appreciate it. I'm really happy that so much of our holiday selling season was really driven by the launch of Salesforce that, as you know, happened at the end of September and would love to talk to you about it. Marc Benioff: Well, Mark, you know that we've been working together now, just me and you as well as with our whole sales team to make we can automate all of SharkNinja. We want to automate your sales, service, marketing, your commerce, everything you're doing. I'm so excited about your future. We have our best team working with you. Give us your view of what's happened and the value we've been able to deliver. What's your biggest surprise? What in the Slushi machine, what came out? Mark Adam Barrocas: Look, Marc, I mean, we launched 25 products a year, and we're really innovating at speed. And we need customer service solutions that move just as fast I mean most companies treat service as a cost center. For us, Marc, it's really about lifetime value of the consumer. I mean we view service as a growth engine for the business. And it's not just about servicing problems, it's about building lifetime value. We set up with you and your team, a guided shopping agent in 8 weeks right before the holiday season. I was nervous about it as I went to my team and I said, we're putting this in place in October. There's generally kind of a cutoff in our business where after October 1, you don't really do anything. And we launched this in 8 weeks, and it brought tremendous value to the consumer. I mean, it helped them with researching and buying and troubleshooting really all in one seamless conversation. So it was a great success for us this holiday season. Marc Benioff: Well, Mark, I think that working with you has been extremely interesting because you're very much a B2C company. And there's so many exciting things that you're doing. When you look at what Salesforce has done and deployed, especially in regards to AI agents and apps, where has it really impacted you the most? Mark Adam Barrocas: Well, look, let me start with this stat for you. I mean, just since we launched Salesforce in Q4, I mean, agents have participated in 0.25 million consumer engagements during that period of time. So just in a really, really short period of time, 0.25 million engagements. We put so many products out into the market and sometimes that many products creates complexity for the consumer. And so whether they're calling about a service issue or a troubleshooting issue or where is my order issue, it's allowed our customer service agents to focus on really the really challenging issues, and it's freed up an enormous amount of time for them. It's a win for the consumer because the consumer is getting their questions answered quickly, they're not waiting. And it's a win for us because it's driving down cost. And it's, in the end, just having a better service experience. Marc Benioff: Well, Mark, I just want to thank you so much. We're so grateful to you as a customer of Salesforce. It has been an absolute pleasure getting to know you, working with you. And I think that we have such a great future together, and thank you for the Christmas presence. I'm using them. I have made some amazing Mango sorbet actually this week, and it was awesome. Mark Adam Barrocas: Sounds great. Thanks, Marc. Marc Benioff: Bye, Mark. Great to see you. Well, I've been so thrilled to work with Mark, but I have to also introduce you to another really good friend of mine, Geoff at Wyndham, and you probably heard from Geoff this week. He had a phenomenal quarter, doing great, the #1 hotel in the world. Geoff, we are so thrilled. Geoff, congratulations on everything that's going on with Wyndham. We're thrilled. Give us your vision of what's going on in the world and with Wyndham. And we'd love to hear how you're using Salesforce as well. Geoffrey Ballotti: We have, Marc, I mean, when you think about just how far we've come in the last year, today, we have over 5,000 deployments of Agentforce across our over 8,300 hotels. It is a huge, huge part of our Agentic platform, and we are really just getting started. We're starting to roll out to Canada and Internationally. But with Salesforce tools like MuleSoft and Data 360, we have built a single source of truth, unifying all of our guests' reservation information and data, all of their loyalty information and all of their CRM data so that all of our agents now are operating with the same trusted and real-time guest and hotel information, which they weren't before. We're calling it Wyndham Guest 360. It is a key enabler for our Agent Foundry. And it is delighting in better guest experiences, improving those experiences and building on increased loyalty engagement. But most importantly, Marc, you've talked a lot about labor, which is agentic. It is taking millions of dollars of labor costs from our small business owners in the front office out of their operation, and it is driving millions of dollars of increased revenue for these franchisees. Marc Benioff: Well, I just have to say this one thing, which is I have been hugely surprised at how fast you have gone, Geoff. We work with all the major hotel companies, and I love them all. And I stay in them all. They're fantastic. I'm actually going to stay at a Wyndham Hotel tonight. I'm flying East. But I have to ask you this question, Geoff, because I don't understand how are you going so fast? What are you doing? Is this because you're leading from the top? I mean you seem to like -- I just talked from Mark at SharkNinja. He really is owning this. Why are you guys going so fast? Why are you doing so well? I mean it's just incredible. You're loading out these apps and agents, your team is crushing it. What is going on? Geoffrey Ballotti: We're in the hospitality business, and we always say it's all about humans, yes. But it is humans, as you've always said, with agents who are driving that customer success together. Think about our customers. Before our integration with you all, our agents had to spend time gathering basic guest information on who Marc Benioff was before he checked in tonight. And that was not easily at their fingertips or even worse asking Marc for his information that we should have had. And our agents now have encyclopedic knowledge, think about it of all of your guest history, all of your booking behavior, all of your loyalty status because we tied it all together, giving us an ability to answer any question imaginable that any guest like you might have before you check in tonight, before your stay in moments, not minutes, and we're booking you into your preferred room based on our knowledge, our guest sales force knowledge of your past day history. We are successfully working now. I hope to upsell you a suite upgrade if we haven't already an early check-in. It sounds like you're getting in late, a late checkout tomorrow if you'd like one. I don't know if you're bringing -- if you have pets, but if you were -- those agents would be selling you a pet fee or [indiscernible]. Marc Benioff: Don't tell dogs about that. They're going to jump in. Geoffrey Ballotti: But look, this is all being done autonomously, which small business owners and operators would not have had time to do before. We have been working so hard. It is generating so much money. We're seeing faster average speeds of answer, 0 hold times. I've heard you talk a lot about why no customer should wait. And that's why we're doing it. We're receiving and we're removing more importantly, millions and millions of dollars, as I said, in the front office, but we're generating millions of dollars of increased ancillary revenues to these small business owners. It's not costing anything. And we're also seeing, which is really, really important, a 200 basis point increase in direct bookings from AI voice agents -- and AI voice agent conversion versus having to get those bookings through expensive third-party online travel agencies. That is increasing guest satisfaction. Our guest satisfaction scores are up 400 basis points. They've never been higher. And this customer experience that we've created is more efficient. Again, humans with agents, driving customer success. We're agent first, and we're very proud of it. Marc Benioff: Well, I just want to thank you so much, Geoff, thank you, and thanks to your team because I'll tell you, it takes a great leader like you, but it also takes a great team, and you've got both. And you've made something really incredible happen. Great job and congratulations. Geoffrey Ballotti: We're proud to be with you, our Chief Commercial Officer, was on stage with you at Dreamforce. Marc Benioff: You did a great job. Did a great job. Geoffrey Ballotti: We'll be back this year. Marc Benioff: See you. I hope you come to Dreamforce this year. Bye, Geoff. All right. Well, you -- I want to now introduce you to an incredible person who I've known for 20 years, and it's very inspiring entrepreneurs, really become a huge influencer in the world, who's getting his hands dirty to a great company called SaaStr, building agents, learning how they work, deploying them, really being on the bleeding edge, the cutting edge of this technology. And thanks for being here, Jason. I'm so thrilled to have you. Jason Lemkin: Super exciting. Yes, congrats on the quarter, by the way. Marc Benioff: Jason, I just want to ask you one question. What is it that's making this happen? What is inspiring you to kind of transform yourself and transform SaaStr to this incredible opportunity? Jason Lemkin: Well, look, maybe two things. If you're -- we're builders. We've been -- I mean, you were -- I think you were like on RadioShack computers or something back in the day, right? We've been building since are there? Marc Benioff: Right down the street here, Rolodex game. Jason Lemkin: So we've been building at heart, right? And this is the most exciting time to build ever, ever for us as executives, entrepreneurs. Honestly, if you're not excited to be building an Agentic, you should quit. You should go off and go to pasture, do your next thing. So we backed into agents because I got tired after our own big event of rebuilding the team. And we went all in and we said, I want to try to rebuild the whole team with agents about almost 10 months ago. Agentforce was a key part of that. And we wanted to push it early. Can you really do all of this, all these go-to-market motions with agents, and the numbers are pretty good. Marc Benioff: Well, you've been a pioneer. You it's a funny thing because in our own independent world, here we are, we're out here building Agentforce, SlackBot, you know that. We also acquired Momentum and we acquired Qualified and so forth. We're so excited about these companies. And then all of a sudden, well, you kind of were building our vision of the future totally independently. Jason Lemkin: Yes. Marc Benioff: And so we felt very validated in a way. It was kind of crazy. But then we looked at you and said, "Wow, this is a true visionary." And you really have always had a lot of clarity, not just in SaaS before that, you know that. Jason Lemkin: Yes. Marc Benioff: And now here you are, you know as Agent as a Service as well. You have your vision there now as well. So I guess, once a visionary, always a visionary. But give us your vision then. Where are we going? Because you've heard about the SaaS pocalypse, and you know that this isn't our first SaaS pocalypse. We've had a few of them. But now where are we going over the next couple of years? Jason Lemkin: Well, I think -- and I think this is good for Salesforce, but I think we're underestimating how powerful these agents are. I think -- look, for most people, AI is confusing, the media is confusing, what the hell is going on. Let me simplify this. I was just looking at our numbers on Agentforce this morning. So far -- and again, we're a small organization. We went from 15 humans to 2.5 and 20 agents, okay? That's a lot of change. But on Agentforce alone, as a tiny organization, we closed $2.7 million. That's not the Army contract you got, but that's a lot for us, $2.7 million with an agent, and we have $3.5 million more in the pipeline. Those are agents, and it works. And so that is exciting. That is exciting that these agents can go out and sell for you. And the first thing I did. Marc Benioff: It is kind of crazy and amazing, isn't it? Jason Lemkin: It's crazy. It just wasn't -- not only was this not really possible a year ago, and this is -- a year -- the problem with all of us, we were using ChatGPT in the early days, it was all hallucinations. It was hard to believe this stuff would work even 18 months ago, wasn't it? It was hard to believe. But everything got okay last summer. And then at the end of the year, it got great. And there's reasons that Salesforce had got great. But to be nerdy, even at Anthropic, your customer, when they rolled out these 4. models up to 4, 5, for B2B stuff like we do, it wasn't a little bit better. It was like jaw-droppingly better. The hallucinations will be worse than a human makes and the productivity is high. So it's just we've never seen these gains. And the idea that now our Salesforce instance can run autonomously versus doing manual data entry, I mean this was always a dream. Marc Benioff: I want to tell everyone exactly why I wanted to do here because number one is, yes, we love, by the way, Mark at SharkNinja was awesome, right? And then we had Geoff at Wyndham. And these are very big companies, like good-sized companies. And not the biggest companies in the world, but incredible companies. But you're a small company. You're in some ways, a solopreneur, right? You're an entrepreneur, you're -- and I think that it is going to go across the whole market that is small businesses are benefiting, medium. We call small businesses 0 to 200 employees, maybe that's where you are. Then we have 200 to 2,000 medium, then we have the 2,000 to 5,000 in general business, then we have the 5,000, the Monsters, then we have the government. We have software companies. Every segment is impacted by this. Don't you think every company is impacted? Jason Lemkin: I think everyone is going to look at their business and say, -- what can I fully automate with an agent? Everyone's -- you're going to unleash a torrent of creativity, right? The key thing that I've learned for folks is just start with one use case. For us, it was what you -- the idea you came up with like last summer, reactivate the leads the sales team never talked to. That was our first use case. Find something or with Window. Marc Benioff: That is a huge thing, right? Because like there's 20 million, 30 million. We don't even know, maybe 100 million people we didn't call back in the last 26 years. But Miguel called back 50,000 people with agents last week that we would not have gotten to. Even though he's got all these reps, he still doesn't have the ability to call everybody back. It's amazing. Jason Lemkin: We did 3,000 with Agentforce. And for one -- I was just looking at a couple of examples. We closed a $250,000 customer this week, but the first one with Agentforce was Freshworks. You know Freshworks. They do support and a bunch of other stuff. But they've changed. Girish isn't the CEO anymore. The marketing teams turned over, we don't know anybody. The agent found the right person and closed the deal. That's sort of magical. That wouldn't have really been possible without agents' AI. Marc Benioff: Is that exciting. Jason Lemkin: Yes, it's just like... Marc Benioff: That's exciting, right. Jason Lemkin: It is exciting. And the fact that every company can start with something here. They can reactivate something or even with Wyndham responding after hours. And actually, my old Head of Customer Success is now Head of SMB at PayPal. They use Agentforce. And he just told me -- text to me this morning or DM this morning, they have a broken merchant flow where folks would sign up to use PayPal and then they would abandon it like an abandoned cart. They put Agentforce on it and the conversion rates are much higher, but they couldn't get any people to do this, right? So all of us have some process where there's no one to do it. Marc Benioff: That is why I think it's so exciting because you have humans and agents working together. You're working with your agents. It's the apps and the agents working together. But it's kind of fun because I think that for the last 26 years, you and I, we've been in this kind of SaaS industry, and it's all been all about apps. And that's now -- and the apps aren't gone away. But as PayPal is still using those apps, they have -- by the way, PayPal is a huge customer in sales, B2B and also service, call center, contact center. But now just as you articulated so beautifully, more productivity, more capability, the ability -- the lost card idea, that's what we're finding this ability. So now we're selling not just in the SaaS apps world, we're also selling agents. And yes, these 2 are going to be 2 markets. And who knows, maybe one will be bigger than the other. Maybe they'll both be the same size. We don't exactly know. I mean we just gave guidance that we're going to do $46.2 billion this year on revenue. So I can't tell you when the -- and Agentforce is like about an $800 million business now. So I can't tell you exactly when Agentforce will be a $46 billion or $30 billion. But it has the potential to go just like -- but I'm still planning. Jason Lemkin: What's 46 x 3 help me you guys. That's something I think Agentforce... Marc Benioff: [ 46 x 3 is 120 plus 18 is 138 ]. Jason Lemkin: I think Agentforce and I'm not being [indiscernible]. I think it will be $120 billion. want to the table because I think the value is about 3x the software. This is why I think the SaaS apocalypse or SaaSquatch pocalypse or whatever, I think there's some truth to this because agents are changing the world. And if you're not -- if you don't have Agentforce, if you're one of the leaders and you don't -- you're not there, I think it's fair to be concerned, right? But the value -- I wrote this post about how much more valuable Salesforce is up with our agents. It's not a little more value. It's like 10x more valuable. Marc Benioff: I don't think you are using Salesforce really 6 months ago. Jason Lemkin: Not really. Our team had shrunk and the value was we were using it as a data store... Marc Benioff: Fired with some reps... Jason Lemkin: Never fired, they left. Yes. Yes. Marc Benioff: They left. Jason Lemkin: They left. Yes. Yes. Marc Benioff: But now you have like a team of agents and humans and your company is bigger and more successful than ever. Jason Lemkin: We're using Salesforce all... Marc Benioff: Amazing this year, right? Jason Lemkin: Yes. Yes. Marc Benioff: Okay. Jason Lemkin: Or even -- and actually, what's interesting is not only are these agents using more Salesforce, I just figured this out today. The most dated part of our software stack is a company called Marketo. You'll remember from the old days for marketing automation. Marc Benioff: Absolutely. Jason Lemkin: Back in the day, very innovative, right? Jaw dropped in the day. We're sort of a prisoner. We're stuck on it. These agents. Marc Benioff: I got some things to show you there. Jason Lemkin: Yes. But the agents, our Salesforce agents have taken all of that data and put it into Salesforce. So now Salesforce is accumulating all the value from all these other stores and becoming the hub. So that's why whatever the math is -- I'm going to bet on the 150. I'm not going to -- it might take 8 years, but I think it's -- I think the Agentic side is worth 3x to 4x the software side. Marc Benioff: A plus. Great job. Thank you being here. Really appreciate you joining the earnings call. Jason Lemkin: It's great. Thanks, everybody. Marc Benioff: All right. There we go. We just had 3 great customers. We gave some numbers. And now I'm turning it over to you, Rob, and take it over. Robin Washington: Thanks, Marc. What an amazing trilogy of 3 great questions. Marc Benioff: Congratulations for such a great quarter. Robin Washington: Absolutely. On a great year. We're going to turn to the numbers and tell everybody about it. So good afternoon. We closed an exceptionally strong fiscal year. We have rebuilt our platform to convert the raw intelligence of LLMs into real work that drives revenue, as we just heard about, reduces costs and scales reliably without limits. This is powering the transition to the agentic enterprise for our customers and ourselves. So to share a few data points, as expected, as Marc said, we had a great quarter or a great year. We finished the fiscal year '26 with second half net new AOV growth ahead of second half AOV growth. Agentforce and Data 360 ARR, inclusive of Informatica Cloud ARR reached $2.9 billion. That's up over 200% year-over-year. This includes Informatica Cloud ARR of $1.1 billion and Agentforce ARR of approximately $800 million, which is up 169% year-over-year. New bookings for Agentforce One Edition and Agentforce for Apps or as we call it A4 X, our most premium SKUs, nearly tripled quarter-over-quarter. Our consumption flywheel is spinning faster than ever. In the quarter, more than 60% of Agentforce and Data 360 bookings came from existing customers expanding their commitments. Looking at our largest deals, every single one of our top 10 wins included Agentforce, data, sales, service, platform and analytics. Our newest addition to our portfolio, Informatica, landed in 6 of those top 10 wins, proving it is a critical component of us building the data foundation for the Agentic enterprise. So let's dive a bit further into these incredible results. Subscription and support revenue grew slightly above 10% year-over-year in nominal and constant currency. Total revenue was $41.5 billion, up 10% year-over-year in nominal and 9% in constant currency, driven by Agentforce, Data 360, Slack, Agentforce sales and service performance. Informatica's Q4 results also outperformed our expectations. This strong performance was partially offset by continued weakness in marketing and commerce, weaker-than-expected Tableau performance and the on-prem revenue timing in Tableau and MuleSoft we shared last quarter. Q4 revenue attrition ended the year at approximately 8%, in line with recent trends. Our current remaining performance obligation, or CRPO, ended Q4 at $35.1 billion, which was up approximately 16% year-over-year in nominal and 13% in constant currency, driven by strong net new AOV, especially in Agentforce, Data 360, Slack and Sales. This does include a 4-point contribution from Informatica. Our top priority remains accelerating growth. Based on our FY '26 net new AOV performance, we are more confident in our path to reaccelerate organic revenue in second half FY '27 as outlined at Investor Day. Given our strong net new AOV performance and the incorporation of Informatica, we are updating our FY '30 framework as follows. We are now targeting FY '30 revenue of $63 billion, which represents an 11% CAGR from FY '26 to FY '30. We remain on track to Rule of 50 by FY '30, and we are pleased that with our continued focus on operational excellence, we delivered 60 basis points of expansion in FY '26. As we think about FY '27 and fueling our framework, we are making targeted investments, including advancing our Hyperforce third-party infrastructure for trust and security, ramping our AE capacity and scaling FTEs to drive adoption. These investments are partially funded by efficiency we've unlocked becoming the lean Agentic enterprise as our own customer zero. Before we turn to guidance, a quick update on capital allocation. I'm proud to say that we have achieved all elements of our Investor Day commitments, including capital allocation. Also, our Board has approved a 5.8% increase in our quarterly dividend to $0.44 per share. Additionally, and as you've heard, given the current stock price dislocation, the most prudent investment we can make is in Salesforce. We are updating our share repurchase authorization to $50 billion. So let's talk about FY '27. We are initiating fiscal year '27 revenue guidance of $45.8 billion to $46.2 billion, growth of approximately 10% to 11% in nominal and constant currency. We expect subscription and support growth guidance of slightly under 12% year-over-year or approximately 11% year-over-year in constant currency. This is fueled by continued momentum in Agentforce and Data 360, partially offset by weakness in Marketing, Commerce and Tableau. Our non-GAAP operating margin guidance is 34.3%, an expansion of 20 basis points. As I mentioned, this is the year where we are making further investments to fuel long-term growth and ensure customer success with Agentforce. We expect GAAP operating margin of 20.9%, an expansion of 80 basis points. Turning to Q1 guidance. We expect revenue of $11.03 billion to $11.08 billion, growth of approximately 12% to 13% in nominal and 10% to 11% in constant currency. CRPO growth for Q1 is expected to be approximately 14% year-over-year in nominal and approximately 13% year-over-year in constant currency. Clearly, we are executing against our FY '30 framework, accelerating growth and investing with discipline, including investing in Salesforce via share repurchases. Before we wrap up, to better reflect our Agentic Enterprise strategy, we are reevaluating our revenue by cloud disclosures in FY '27. So stay tuned for an update on this disclosure prior to our Q1 earnings release. Finally, a big thank you to all of our employees for their dedication and hard work delivering a very successful FY '26 and onward to an incredible FY '27. Mike, I'll turn it over to you. Michael Spencer: Thanks, Robin. And with that, Leila, we're going to go to the first question, please. Operator: [Operator Instructions] And your first question will come from Keith Weiss with Morgan Stanley. Keith Weiss: Excellent. Congratulations on a really nice end to FY '26, particularly when it comes to the Agentforce numbers. The Agentforce numbers are definitely eye-popping getting to a big scale and still growing at really, really high rates. But on the other side of that, CRPO perhaps was a little bit disappointing. On an organic basis, you grew that at 9%, just in line with your guidance. And typically, we expect a little bit of a beat, 100, 150 basis points of a beat. And I think that's stoking some concerns with investors, can Salesforce do both? Can we grow a big Agentforce business and sustain the growth and momentum in the broader Salesforce portfolio? Can we bring it along the entirety of the business? So can you talk to that aspect? Can Agentforce catalyze the broader Salesforce product portfolio? Can it bring along everything? And what gives you confidence in that acceleration in the back half of the year? Marc Benioff: All right. Well, I think that, that is absolutely a great question. And I think the reason why it's such a great question is because Salesforce is, just as you said, it's a comprehensive business. We're closing new business, new ideas. We have been building new technology, and we also carry with us that we are a subscription business. So we're carrying with us our legacy as well, and we're renewing and moving that legacy business forward. That's also one of the exciting parts of Salesforce because that also gives us the predictability to understand what's going to happen in the future fiscal years. So yes, we are innovating, we're creating the future, we're adding to the future, we're also renewing our customers and I have to tell you, we're just very proud actually of the numbers. I mean this fiscal year is far better than I expected it at the beginning of the year in the fourth quarter, actually, even the third and fourth quarter, Miguel's numbers were far exceeded my expectations and to your point, Agentforce also and also Data 360 are exceeding our expectations. And yes, could we sell more? Could we renew more? Can we do more? Can we do this? Can we do all these various things? We absolutely can, but we are very grateful for what we've been able to achieve so far. Robin, do you want to add to that? Robin Washington: Yes, I agree with that. I think we're monetizing AI, Keith, through many different fashions. We've got multiple ways to monetize. We're seeing great growth, as I mentioned, in our premium SKUs. We're seeing acceleration. I think just listening to the 3 customer interviews, it talks about the great value that they're getting from core. It's also important to point out, we didn't talk about it a lot, but our seats, we're still seeing them grow year-on-year and quarter-on-quarter. So what we see is now with Agentforce with the system that you laid out, the system of agency, et cetera, we're just seeing incremental value to our software. And some of it's going to be consumption-based, but we're going to have a hybrid model. Seats will continue to be a key component of our growth going forward. And what we hope to see is just what you heard from the 3 customers today, incremental value coming as a result of our agentic technology and capabilities. Operator: Your next question will come from Brent Thill with Jefferies. Brent Thill: Marc, the $50 billion buyback, I guess many are asking given the falloff in big multiples, why not lean a little harder in acquiring technology in M&A versus buying the stock back? Marc Benioff: Well, I really appreciate that. I think, Brent, the way to look at this is -- I'll just tell you how I look at it, which is that there's many uses of cash. Number one is dividend. We just increased the dividend by 5%. That's one use of cash, very important. And then we also look at buyback, traditional buybacks, okay? And so we're doing that. We've done that very aggressively over the last few years, as you know. And acquisitions, we will continue to do acquisitions, but using our new formula that we put into place, and we've done now quite a few acquisitions using that new formula, and it's been great. I wish I had used it actually through the entire history of Salesforce. I think we have a much better understanding of how to do acquisitions that are accretive to the business, but not dilutive to investors. And then debt. So I think there is a role here that we're just very underleveraged on our balance sheet. And I think, look, you're a great banker. You've been a great banker for decades now. I think if you look at our balance sheet, now we're going to do more than $16 billion in cash flow this year. We're not using debt effectively. And I think at these prices in the market, the ability actually to kind of come to terms that we had some acquisitions in the past like Slack and Tableau that diluted our investors, I think now is the opportunity to take some of that stock back out of the market. And these are great prices, I'm sure you would agree with that, and we want to use our capital correctly, and I think debt is a great way to do that. And I think our stock is at a great price, and I want Robin to buy as much of it as you possibly can. Robin Washington: Yes. And I'd maybe add to that, Brent. It doesn't preclude us from doing all the things you mentioned to grow, as Marc just said, with our free cash flow, with our cash balance, with our access to market. We're going to do -- we bought 10 companies, and we also returned over 99% of our free cash flow to our shareholders via buybacks and dividends. So as we think about optimizing our balance sheet, to Marc's point, we're positioning ourselves to grow organically, inorganically and also return value to our shareholders. Marc Benioff: I think that when you look at such a huge cash flow number, although we just finished a $15 billion year coming into what will be probably at least a $16.5 billion cash flow year, then we should be really just thinking about how do we use cash correctly? What is the right way to use cash? And yes, I think that there are many ways to use cash, but focusing on those 4 things, the dividend, the buyback, the acquisition and debt, all 4 are critical. And if you have other ideas or you have other thoughts, we're very open. We -- I'd love to have the conversation, of course. Operator: Our next question will come from Kirk Materne with Evercore. S. Kirk Materne: Marc, you alluded to it in your comments. The presentation yesterday by Anthropic, I thought was an interesting example of sort of a better together strategy with you and one of the model partners. But there is continued concern that those providers might become more competitive with you over time. I was wondering if you could just give us an idea of how you see the lines of demarcation in terms of partnering as well as potentially competing down the line? Where you think you guys have a right to win, where they might have a right to win? I think just a little bit more color on that would be helpful in terms of people's view of where we might be going in terms of the partnerships with those companies. Marc Benioff: Well, no, I'd be delighted to do that. And maybe we can even put up our slide again of our kind of stack diagram because it makes it really clear what our vision of the world is, which is at one very critical part of this, these new models, whether it's OpenAI, whether it's Anthropic, whether it's Gemini, whether it's Llama, whether it's, you pick, DeepSeek, Mistral, there are so many. You can go off as well to look at that there's thousands of them. We make some of them ourselves. These models are new parts of our infrastructure that we really did not have in place a few years ago. We had some of our own models. You remember when we did Einstein, and I would talk about on the earnings call that I was using Einstein to understand what was happening in my business, that was all based on Salesforce models that we had. So we've always had models at the bottom of our infrastructure. But now we really are able to say, look at this, we've done 19 trillion tokens with these models. So these models here, that's who we have today. They will change over time. They're a critical part of our infrastructure. I think the strategic question that you're asking is this: Not only does it look like that in this slide that we just saw, but could those models themselves become platforms? So could OpenAI then also be a platform, could Anthropic be a platform, can Gemini be a platform, can DeepSeek be a platform, can Mistral be a platform, can Llama be its own platform, so that in the way that we have Windows and Mac or HTML or different things as platforms where applications all of a sudden appear, well, all of a sudden, an application come in within one of those platforms and then use some of those services? Absolutely. Those could be new platforms. There will also be other new platforms. I have a platform right here as well, iOS. There are many platforms. And our job, as a software company, is to help our customers to create success and to take that and help them connect with their customers in a whole new way. So we'll deliver our products, our capabilities, our value proposition with our customer relationships, of course, we have over 150,000, I think, customers on our core, 1 million on Slack. We have 15,000 sales reps who are out there. Their job is to work with customers to help architect their future success with these ideas. And our primary vision though today, because this -- in the current reality, this is about humans and agents working together. And these customers, like you saw today with Wyndham, with SharkNinja, even SaaStr, even Salesforce. Our job is to take what's available today and make it successful. And that isn't where those platforms are today, as you know. And in your business, you work for an amazing company, Keith works for an amazing company. And these large banks, where we are providing a lot of automation for the sales professionals, the service professionals, there is a lot to do to not only automate those call centers, those contact centers, the sales forces, the employees with Slack, but then to also then unleash the agents in a way that is compliant, that is secure, that is available, that is scalable, that is reliable, that is able to operate hand-in-hand. So if you go to help.salesforce.com today and you want to get help from Salesforce, you know that you're going to be able to automatically connect to our contact center as well. That's incredible. We couldn't do that just a couple of years ago, as you know. So that's the current way we're deploying. Well, there could there be other ways that we deploy? It's definitely possible. The future could have many different forms, but we can see right now what we're going to sell this year to our customers. We have a lot to sell and a lot to do. Operator: Your next question will come from Gabriela Borges with Goldman Sachs. Gabriela Borges: I wanted to ask the team about the $2.4 billion disclosure on AWUs. Tell us a little bit about how you translate the tokens and the agentic work units to monetization? I know you've been working on AELAs. How do you think about the evolution over time in the pricing model? Jason from SaaStr was talking about the agentic value of the stack being 3x to 4x more than software value of the stack. So tell us a little bit more about how the ELAs are going? And Robin, for you specifically, how does it impact gross margin? Marc Benioff: I think Patrick should really lead this AWU discussion because it's kind of his brainchild, and he was very unhappy that I keep bringing out this token number because I'm very impressed that we have 19 trillion tokens, but because I think that really shows that we're really using these products to deploy these agents. I mean everybody now knows Agentforce is hugely successful and all the new capabilities of Agentforce, the determinism, the voice, the programmability, Agentforce Studio, Agentforce Builder and now Slackbot as well. But I think that then there's another level, this idea of agentic work units. So why don't you tell us your vision? Patrick Stokes: Yes, sure. So as we started looking at how our customers were using Agentforce and we started looking at how we're consuming tokens from the model providers, right, all those models that sit at the bottom of our layer from OpenAI and from Anthropic, what they're doing is they're providing intelligence into our system, and we're able to measure that intelligence through the lens of a token, and that's how most of these model companies are charging. It's the amount of tokens that your platform, in our case, is consuming. But when we started looking at that across our customers, we can start to see, okay, our top 10 customers are consuming this many tokens. We know how many tokens Salesforce is consuming internally. But it begs the question, well, is it -- are they doing anything? Are they working? Are they providing any value? Or is it just input and output of intelligence, right? So you can ask it a question, it can write you a poem, but that's not really all that valuable in the enterprise world. What's valuable is creating a document for you or updating a record or helping us; right here at this table, we all used Slackbot to prepare our notes here, our customer stories, we're all preparing that with Slackbot. And so what we did is we said, what if we could count those individual work units? And then what if we could look at those work units relative to the tokens? And we said, "Oh, there's a relationship between the 2." We can start to see a ratio of tokens being consumed and work coming out. And that ratio starts to become really interesting because now we can look at our customers and say, "Hey, Customer A, you have a really nice ratio. You're getting a lot of work done on the platform for the amount of tokens that you're consuming. And hey, Mr. Customer B, your relationship is actually not so good. You're consuming a ton of tokens and not getting a lot of work done, what can we do to help you?" So it becomes a really kind of interesting way. The tokens are kind of a leading indicator, but the work unit, we think is a much more valuable indicator in terms of where the value is actually coming from for our customers and for our own transformation into an agentic enterprise. But maybe on the monetization, I can toss to you. Robin Washington: Yes. I mean this is something that we continue to look. I think you were asking specifically, Gabriela, about what does it do to gross margins? And as we think about margins in the short run, we think we're pretty neutral. Patrick talked about this differentiation between tokens and AWUs. Well, tokens, those prices, we're working with our various partners. Those are going to start to go down over time and commoditize. But also importantly, when you think about our products, engineering and product is working on ways to continue to fine-tune our products with things like Agentforce Scripts, which is going to make it easier for us to produce the work, but reduce the overall cost. So those are things. And then again, we're optimizing. We're using Customer Zero. Marc talks about the fact that we're reallocating resources. We're also looking at other things to overall continue to drive our efficiency down. So short term, we don't see gross margins getting worse, fairly neutral. Long time, we're doing everything in conjunction with our FY '27 framework and our overall operating margin improvement to continue to get efficiencies in gross margin and operating margin. Marc Benioff: Miguel, do you want to take on the question about AELAs and kind of what we're seeing in the market and how customers are consuming this technology? Miguel Milano: Yes. I've been working very hard for the last quarter to have this minute because I really want to tell you the story. Q3 was stellar. You heard the numbers at the time. We made a very clear commitment, Robin and I in partnership at the Investor Day. We shared 3 key messages to you all. Number one is we were seeing the very likely possibility of revenue reacceleration in 12 to 18 months. That was 4 months ago. Today, we are saying that the revenue reacceleration, organic revenue acceleration of subscription and support is going to happen in H2. And we are very -- we have committed to that, and we are certain now because we've seen the net new AOV growth outpacing the AOV growth in H2 last year. We're sitting now in Q1. We're looking at Q1 and Q2. And I can tell you with absolute confidence that the net new AOV growth is going to significantly outpace the AOV growth. So now 4 quarters of net new AOV pulling up the AOV growth is going to finally translate in H2 into a revenue reacceleration. That was number one. Number two was the fiscal year '30 a long-term durable growth plan. We are recommitted to that to the point that we've increased the target from 60 to 63, if you do the math, it's not all because of Informatica, it's because we are more and more certain that we are going to hit the numbers. And then the third thing, which is substantially important, and it goes to the monetization and to the AELA question is, we have found the formula to monetize AI. There are 3 ways, distinct ways and the main ones that we are using to monetize AI. Number one is our large installed base of 100 millions of seats, we are upgrading to our premium SKUs that contain already embedded AI and unlimited access to agentic for employee use cases, number one. We've seen, as Robin referred to earlier, that, that SKU business has triple Agentforce First Edition and Agentforce for Sales and Service has tripled quarter-on-quarter. Last quarter, it doubled. So it's pretty monster. The second way to monetize is this is very peculiar because now our apps are Agentforce Sales, Agentforce Service, all of them are agentic. So now the ROI that companies generate by implementing our apps has increased. So now we have access to new seats that before companies couldn't afford to roll out Salesforce or any of our apps. And the third way is for customer-facing agentic use cases, agents, which sell fuel, the credits, Flex Credits. And companies, if you look at the bookings of Agentforce in Q4, 50% were credits, Flex Credits, fuel; and 50% were higher SKUs. If you look at the top 12 deals, which, by the way, record, Robin and Marc, we've never done more than 10 deals above $10 million in any given quarter. This was our best Q4 ever, our best quarter ever. We did 12 deals above $10 million, one of them above $50 million, 3 of them above $20 million. When we look at those and if you look at the 3 ways to monetize, 6 out of the top 10 deals basically were upgrades of the existing SKUs. Seven out of the top 10 deals, we added seats. And 5 out of the top 10 deals included credits for agentic use cases, customer-facing use cases. Three of them included everything. But the beautiful thing is in every story that we heard today -- that was very incredible, these 3 customer stories, I have a bunch of stories that I wanted to tell you, but we're running out of time here. In every one of these stories, we are monetizing AI through these 3 different angles. And we are seeing it in the bookings, we are seeing it in the pipeline. I'm very confident about Q1. I mean something happened in Q4 that was monster. I mean, Marc said a target to me and to my team. I need to see bookings starting with a number, and we delivered above the number. That was incredible. I'm looking at the pipeline, double-digit growth in pipeline. I'm looking at my capacity. We've hired over time. We started last year, 12 months ago, with 0% growth in ramped AEs. This is -- these are AEs that are ready to sell. It takes our AEs a year-or-so to sell, to be prepared. We are starting this fiscal year with 15% to 17% more growth in ramped AEs. That's dynamite. We have double-digit growth in pipeline. I'm very confident about the net new AOV growth significantly outpacing AOV growth. And AELAs have been a big part of this. This is the #1 product that we sell now. We sold 120-plus AELAs in Q4. I thought we were going to do between 50 and 100. We did 120. In the top 10 deals, we sold 8 AELAs in the top 10 deals. These are customers that go all-in and commit and commit long term to our -- to the future, and they are outsized deals. Marc Benioff: Very good. Thank you so much, Miguel. Robin Washington: Thank you. Operator: Your last question will come from Raimo Lenschow with Barclays. Raimo Lenschow: I'll make it a quick one. If your cross-sell or the token upsell is working so well, you said 60% of the booking came from that one, it's kind of almost getting the message out to more customers quicker. You now have 29,000 customers. How do you think about that evolution from kind of getting new customers and getting those guys up and productive this year? How do you think about the role there and what are the roadblocks? Miguel Milano: Yes, Raimo, good to see you again. Listen, we did 29,000 Agentforce transactions. We have approximately 22,000, 23,000 customers. But you said it very well: Our role, the role of my team, the role of my executive, the role of all the AEs is to be in front of customers to explain these stories and the value that we can drive. I mean today -- yesterday or today, I don't know when, there was a world tour in Australia, we had 12,000 customers... Marc Benioff: It's actually tomorrow, but it's today. Robin Washington: Australia time. Miguel Milano: I don't know, whatever. 12,000 customers showed up. It's happened. It's already happened, by the way. And I think we just need to -- the key message that we are conveying to our customers is we are -- SaaS is more important than ever. In the world of LLMs, this is -- I mean, we are so happy that this raw intelligence exists. But to convert raw intelligence into reliable, accurate, scalable enterprise work, you need a software infrastructure like the one that Marc described with our 4 layers, the system of context, the system of work. This is our big differentiator. Nobody has 40% market share in sales and service. I'm sorry, in the customer domain, we are the systems of work. We have the system of agency, very sophisticated. Some companies are building it, whatever, but we have the best because we are proven in 4,000 production customers, 23,000 total customers. Nobody has that at the scale and the complexity because our agents are connected to the data, connected, able to trigger actions. And then we have the system of engagement, which is Slack. I mean the demo of Anthropic was incredible. It started in Slack. Then what did they do? They took it out to another UI, which is awful, by the way. But it's -- I mean it wasn't really as nice as Slack, but they did all the work, incredible work. Again, we are so lucky that these companies exist. And then they copy-pasted. They did that, right? They copy-pasted it and they put it back in Slack. Okay, today, you can do that with Slackbot. You don't have to get out and in. We have a great partnership with Anthropic. But anyway, Raimo, we are very excited. Marc Benioff: Patrick, I think you should come in here and talk about this. Patrick Stokes: Yes. I mean everybody right now, everybody through the past few years has been so enamored with the model, of course, it's this brand-new thing, this intelligence layer that we never had, but also the data. But what's really happening around us is the apps are changing. The UI is changing, as Miguel is alluding to. And that's really what we're seeing because these old apps of these point-and-click buttons, those were designed for human beings to interact with. But what happens when you have human beings and agents in the same place, right? Suddenly, a lot of those interactions, those UI paradigms kind of get thrown away. You don't need all of this complex UI anymore. And that's what makes Slack so powerful. And I think that's what Anthropic knows. I think that's what we saw in their demos yesterday, right? You kind of like process the work. But ultimately, it's coming -- that work is getting done because some person or some agent is asking for it and then you need to give it back to that person or that agent. And where do you do that? You do that in Slack. And that's what makes Slackbot so unbelievably powerful is you never have to leave. And of course, it's powered by Claude. We love our partners of Anthropic, but it knows all of the context of your business, not just the context of your systems of records, as we think about it, but all of the conversations happening inside of Slack and has access to all of that and the knowledge that it gains from that is truly unmatched. It might be our most important piece of data that we have. And so when you put all that together into this brand-new user interface, that's really where we see this big transformation in SaaS happening. It's that the apps are going to -- they're going to change and they're going to just turn into this environment where humans and agents are really working together. Robin Washington: And I think to add to that, if you think about customer success, right, we're really doubling down, as we said, on FTEs. And I think they're the folks that are on the ground with our selling teams, our solution selling teams to ultimately make this vision a reality. And I think that's the key component to converting it from AELAs to ultimately consuming. That's what we want to continue to see happening is that consumption wheel continuing to fly. Marc Benioff: Well said. Michael Spencer: Well, great. Thank you, Raimo. And we want to thank everyone for joining us today and look forward to seeing you soon. Marc Benioff: Bye, everybody. Thanks so much.
Operator: Greetings, and welcome to Shake Shack Inc. Fourth Quarter 2025 Earnings Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Alison Sternberg. Thank you. You may begin. Alison Sternberg: Thank you, operator, and good morning, everyone. Joining me for Shake Shack Inc.'s conference call is our CEO, Rob Lynch, and our Vice President of FP&A, Carrie Britton. During today's call, we will discuss non-GAAP financial measures and the financial details section of our shareholder letter, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Some of today's statements may be forward-looking, including those discussed in our Annual Report on Form 10-Ks, filed on 02/21/2025, and our other SEC filings. Any forward-looking statements represent our views only as of today. We assume no obligation to update any forward-looking statements if our views change. Reconciliations to comparable GAAP measures are available in our earnings release. By now, you should have access to our fourth quarter 2025 shareholder letter, which can be found at investor.shakeshack.com in the Quarterly Results section or as an exhibit to our 8-Ks for the quarter. I will now turn the call over to Rob. Rob Lynch: Thank you, Alison, and good morning, everyone. Before I begin discussing our 2025 results and our 2026 plans, firstly, I am thankful for the team that we have in place. We have so many talented people on our team, some who have been here from the beginning. I'm also grateful and excited for the executive team that we have built. We've also added some remarkable new members to the team who bring a lot of external experience and best practice to bear on the foundation that we are building to support our lofty future aspirations. My gratitude starts with all of the amazing people in our restaurants who welcome our guests every day, with warm hospitality and amazing cooking that makes Shake Shack Inc. so special. Another reason I am so excited and thankful to be here is because at Shake Shack Inc., we truly believe that we have the best food in the industry. And we endeavor to give access to that food to an ever-growing number of communities throughout the world. In order to do that, we will need to continue to use the best ingredients in our freshly prepared food and conveniently deliver it with value to our guests in every community that we serve. Our company started as a hot dog stand in a park, a park that had fallen into disrepair and needed its community to bring it back to life. So what did our founders do? They raised money for that park by selling premium hot dogs made in one of the world's most acclaimed fine dining restaurants, to everyone who was willing to stand in line to order. They served everyone with the same principles of enlightened hospitality that they were known for delivering in their fine dining restaurants. We aspire to bring that founder story to life every day and through each new Shack that we build. We want to provide the entire world access to the quality of food and hospitality that historically has only been found in higher-priced fine dining establishments. In doing so, we will prove that the world's best food does not have to be exclusive. But in order to accomplish that goal, we have to continue to use the highest-quality ingredients, turn those ingredients into our culinary-forward recipes, prepare our sandwiches, shakes, and sides fresh when ordered, and then deliver our food in a convenient and timely manner, all at a great value. Certainly not a small task. But we are well on our way to proving that food that is prepared fast with approachable price points does not have to mean that you are settling for anything less than the best in the world. I believe this endeavor is something to truly be proud of. It is why I am here. 2025 was a year of strong execution and disciplined growth. 2025 was a year of strong execution and disciplined growth. 2025 was a year of strong execution and disciplined growth. Now on to our 2025 results. We are laser-focused on becoming a best-in-class restaurant operations company. What does that mean to us? It means that we will support our team members so that they can accurately and expediently serve our guests the highest quality, best-tasting food in the industry at a great value, with enlightened hospitality. I cannot emphasize enough the hard work of our restaurant teams and the effectiveness of our strategic initiatives and disciplined execution of a focused set of strategic priorities. These outcomes reflect the hard work of our teams and made important strides in improving our unit economics and guest value proposition, despite a macroeconomic environment that remained uncertain for much of the year. At the same time, we enhanced unit economics through margin expansion, laying the foundation for greater quality and cost discipline within our supply chain, and meaningful reductions in build costs, driving improvements in operational excellence, and, more importantly, delivering compelling culinary innovation and value. Our teams have made so much progress in 2025, and I cannot wait to celebrate all of their upcoming achievements in 2026. For the year, we grew total revenue by more than 15%, increased our presence domestically and internationally by opening 85 Shacks system-wide, and delivered same-Shack sales growth of 2.3% in our company-operated business, all while we expanded our restaurant-level profit margin by 120 basis points to 22.6%, and drove 20% year-over-year growth in adjusted EBITDA, reaching approximately $210 million. Our success this past year reflects an investment in operational excellence and consistency at launch, and, of course, hospitality. As stated earlier, operational excellence remains foundational to our strategy. Positioning the business for more durable and profitable growth, we strengthened the fundamentals of the business while continuing to elevate the team member and guest experience. In 2025, we completed the first full year under our new labor model. It is not about cutting labor. It is about the optimized deployment of our talent so that we can maximize the effectiveness of it. We want to make sure that our team members are well prepared to take care of our guests during our busiest times, and that they are able to do that in a well-orchestrated, results-oriented manner. We have implemented a performance scorecard across our company-operated Shacks, providing visibility and accountability by measuring key metrics across people, performance, and profits. We have seen attainment to the labor guide improve from approximately 50% of Shacks meeting targets in mid-2024 to consistently above 90% in 2025. It reduces stress, and less reactionary to their ever-evolving scheduling needs. It is like any other thing that we do in life. When you align on a plan, you are able to better deal with the unexpected challenges that inevitably come your way. In turn, that results from unforeseen circumstances and ultimately improves performance. This is not about driving out costs. Cost reduction is an outcome, not the overarching goal. Our priority is to help our managers become more strategic, to measure results, and continue to optimize in a disciplined and consistent manner. We are highly focused on execution through optimizing deployment, improving throughput, and ensuring our teams can deliver great service. We are seeing meaningful success from these efforts, evidenced by reduced wait times across all dayparts and higher team member retention. Specifically, our wait times improved from seven minutes in 2023 to under six minutes in 2025, and team member tenure has increased nearly 40% since 2023. Those results would not be achievable if we were simply cutting labor and increasing stress on our teams. Like many in the industry, we faced a challenging commodity environment in 2025, with beef inflation reaching the mid-teens in the second half of the year. As we navigated these pressures, we approached it with a long-term mindset, not by reducing portion sizes or negatively impacting quality, but by building a significantly improved network. To mitigate rising costs and protect margins, supply chain optimization was a critical focus, and we accelerated supply chain initiatives focused on diversification and logistics. We conducted the most comprehensive RFPs in our history across key categories and onboarded additional suppliers to foster competition, augment quality, reduce business risk, and improve purchasing leverage. These structural improvements enhanced our resilience, reduced the time and distance required to transport goods as our footprint expands, and helped mitigate inflationary pressure without taking outsized price increases. Importantly, the groundwork we laid in 2025 positions us to achieve additional cost savings and further expansion in 2026 and beyond. Our progress in operational excellence has unlocked a new level of confidence and capability within our culinary organization, allowing us to introduce more elevated menu items and to be highly responsive to evolving consumer preferences and trends. In 2025, we formalized and strengthened our culinary development process by implementing a disciplined stage-gate framework to ensure every item meets three critical criteria: it must deliver our gold standard of culinary innovation and quality, resonate with our guests, and be operationally friendly in our Shacks and our supply chain. This enhanced approach delivered tangible results in 2025, giving us greater visibility and time to optimize our go-to-market planning and training, which leads to operational excellence and consistency at launch. We launched one of our most successful LTO shakes, the Dubai Chocolate Shake, which drove meaningful traffic to our Shacks and generated exceptionally strong guest satisfaction scores. We also leaned into side innovation, introducing items like fried pickles and onion rings, both of which performed strongly. In fact, onion rings resonated so much with our guests that we added them to our core menu, a testament to our ability to test, learn, and scale effectively. But our improvements are not limited to our LTOs. We also improved the quality of our core items as we made meaningful investments in improving the quality of our core sandwiches, fries, and beverages. These wins are not short term in nature. They represent the foundation that we are building for the future. We also expanded our Crackable Shake program. We are extremely excited with the sales of this premium crackable shake platform and will continue to drive innovation there. Lastly, we introduced our Good Fit menu, featuring a new way to enjoy Shake Shack Inc. and start the New Year on a healthy note for differing dietary preferences, including high-protein serving sizes. We have always made these items. We simply packaged them up and merchandised them as a timely, relevant, additional sales layer for our business. A great example of our ability to drive sales growth without significant operational or supply chain disruption. In January, we reintroduced our Korean-inspired menu, building on its previous success while elevating it with the addition of Sauce Chicken Bites, which added another exciting limited-time option to delight our fans. Innovation like Sauce Chicken Bites will help us build new chicken occasions. We believe we have a lot of opportunity to increase our chicken sales. In late January, we launched our “We Really Cook” campaign. This campaign spotlights our recipes and the quality ingredients that go into preparing the cook-to-order food we deliver each and every day. We want to reinforce the fact that we freshly prepare fine dining quality recipes in our Shacks every day, and deliver them with enlightened hospitality. This marketing platform is an investment in creating awareness amongst current and prospective guests about what really makes Shake Shack Inc. special. Over time, this awareness will continue to build our value proposition and make us even more competitive across the restaurant industry. Importantly, this platform allows us to deliver targeted value through compelling price points within our digital channels, while maintaining pricing integrity across the broader menu. Our 1-3-5 in-app promotion platform has proven to be a powerful guest acquisition and engagement tool, driving app downloads up approximately 50% since launch. The combination of elevated innovation and channel-driven value resulted in strong traffic trends, improved brand engagement, and a more balanced positioning between premium quality and everyday accessibility. The new guests that we are bringing into our app are also the foundation for the launch of our loyalty platform later this year. On the development front, 2025 was a milestone year for Shake Shack Inc., as we expanded our global footprint and are generating stronger returns. In 2025, we made significant progress in optimizing our build model. By improving build costs, through disciplined design simplification, value engineering, and procurement strategies, we reduced the average net build cost for new Shacks to under $2 million in 2025, a reduction of approximately 20% compared to the prior year, while materially improving the economics of how we build and scale the brand, maintaining AUVs, and expanding margins, and creating more efficient, profitable growth as we scale. We opened 45 new company-operated Shacks during the year. We successfully entered new domestic markets like Buffalo and Oklahoma City. The viability of these markets for our brand may have been questioned in the past, but we are proving that Shake Shack Inc. has the potential to enter every market in the United States. Looking ahead, our pipeline for 2026 is even more robust, with plans to open 55 to 60 new company-operated Shacks, primarily in markets outside of our historical footprint of the Northeast and in major tourist cities. Our licensed business also delivered strong momentum, with 40 new licensed openings in 2025. We saw particularly strong performance in our new Shacks in markets that we have entered in the past two years such as Canada and Israel. We are also proud of our strong comp performance in the Middle East, Japan, the United Kingdom, and in U.S. airports. We announced several strategic growth partnerships, including expansion into Hawaii, a new partnership with Penn Entertainment to bring Shake Shack Inc. to casino destinations, and a new agreement to enter Panama. Most recently, in January, we partnered with the Australian Open to launch two pop-up Shacks at the tennis tournament. Together, these two licensed sites did approximately $1.6 million in sales in just three weeks over the course of the tournament. Attendees there were willing to stand in a very long line to get a ShackBurger and fries, despite having never been there before, indicating strong demand for our brand in this market. These partnerships expand our global reach, reinforce Shake Shack Inc. as a premium internationally recognized brand, and give us extreme confidence in our ongoing global growth potential. As we close out 2025, we are proud of the progress that we have made, from delivering strong financial performance and improving unit economics to accelerating development, strengthening our operations, and continuing to innovate in our culinary offerings. The year was truly transformative, laying a foundation that positioned Shake Shack Inc. for sustainable, profitable growth. We are entering 2026 with confidence, guided by a clear strategy centered on profitable revenue growth, margin expansion, and strategic investments in our brand and infrastructure. We hope to achieve this by focusing on six key priorities: building a culture of leaders, optimizing restaurant and supply chain operations, building and operating our Shacks with best-in-class returns, driving comp sales through culinary, marketing, and digital innovation, accelerating our licensed business, and investing in long-term strategic capabilities. By staying disciplined in these areas, we are confident that we will continue to drive strong operating results, enhanced guest experiences, and sustainable growth as Shake Shack Inc. scales both domestically and internationally. The investments we are making in the business in 2025 and into 2026 will position us to start leveraging the capital spend and our P&L in 2027 and beyond. As a result, we expect that by 2027, we will be growing G&A at a lower rate than sales. We plan to disclose our G&A long-range plan that will deliver this leverage in 2026 after our new CFO joins the team. Our start to the year grew 4.3% year over year. I will now hand the call over to Carrie Britton, who has been an invaluable leader and partner through our CFO transition, to discuss our quarterly results and guidance. Carrie Britton: Thank you, Rob, and good morning, everyone. Building on the strong foundation Rob outlined, 2025 was a highly successful year for Shake Shack Inc. Through our continued focus on operational excellence, the effectiveness of our marketing and culinary initiatives, enhanced guest experience, and supply chain optimization, we delivered 150.4% revenue growth to $1,450,000,000, positive same-Shack sales of 2.3%, 120 basis points of restaurant-level margin expansion, and 19.5% adjusted EBITDA growth, all while facing significant commodity inflation and a challenging macro environment. We have added nearly $80,000,000 to adjusted EBITDA to approximately $210,000,000 in the last two years. These results demonstrate solid momentum and the effectiveness of our initiatives. We are very pleased with our fourth quarter results, supported by the opening of 15 new company-operated and 17 new licensed Shacks, and 23.4% year-over-year growth in system-wide sales. Fourth quarter total revenue was $400,500,000, up 21.9% year over year, which reflects strong execution across both our company-operated and licensed businesses. Our licensing revenue reached $15,200,000 in the fourth quarter, with licensing sales of $232,700,000, up 26.4% year over year. In our company-operated business, we grew Shack sales 21.7% year over year to $385,300,000. We generated $77,000 in average weekly sales. We delivered 2.1% same-Shack sales growth with 0.5% positive traffic and 1.6% price/mix. Same-Shack sales grew sequentially each month of the quarter, and we delivered positive same-Shack sales and positive traffic for the quarter. However, the last six weeks of the quarter did not meet our expectations due to inclement weather in some of our most heavily penetrated markets like the Northeast. In-check menu prices rose about 2%, while blended pricing across all channels increased approximately 4%. This compares to approximately 6% last year, with less dependence on price increases. We are off to a strong start in 2026. January same-Shack sales increased 4.3% year over year, despite weather-related headwinds that represented an approximate 400 basis point impact during the month. We saw strong year-over-year sales growth across our owned channels, led by our app channel and the success of our 1-3-5 promotion. January AWS was $68,000, down 7% year over year. The decline versus prior year was primarily attributable to the 53rd week in 2025. As a result, January 2026 did not include the benefit of the high-volume holiday period between Christmas and New Year's Eve that was captured in January 2025. Excluding this timing impact, we have shifted our same-Shack sales comparison by one week to better align operating weeks and holiday placement between periods. Additionally, to ensure a more comparable year-over-year analysis, this results in an approximate 250 basis point year-over-year headwind to total revenue in the first quarter, primarily driven by holiday timing. In the fourth quarter, food and paper costs were $110,600,000, or 28.7% of Shack sales. Blended food and paper inflation was up low-single digits, with beef costs up low-teens and paper and packaging costs flat year over year. Through proactive procurement and cost mitigation initiatives, our teams meaningfully offset industry-wide commodity pressures. Labor and related expenses totaled $97,900,000, or 25.4% of Shack sales, representing a 150 basis point improvement year over year, driven by more efficient scheduling and deployment through our labor management strategies. Other operating expenses were $59,900,000, or 15.5% of Shack sales, up 70 basis points versus last year, driven by higher delivery sales mix and repairs and maintenance expense as we continue to invest in our company assets. Occupancy and related expenses were $29,400,000, or 7.6% of Shack sales, flat year over year. G&A was $50,500,000, or 12.6% of total revenue. For the full year, G&A was $176,200,000, approximately 12.2% of total revenue, reflecting incremental investments in marketing and continued investments in our people to support growth and strategic initiatives. Excluding $1,700,000 in one-time adjustments, G&A totaled $174,500,000, approximately 12.1% of total revenue. Looking ahead, we plan to continue investing in marketing and digital capabilities to drive traffic and guest frequency, with marketing spend expected to remain in the 2% to 3% range of total revenue, above historical averages of 2% or less. Unlike last year, our marketing plan for 2026 is more evenly distributed across the quarters rather than back-end weighted. Additionally, we expect our total G&A expense to remain relatively steady each quarter of 2026. This will result in a higher year-over-year G&A step-up in the first half, tapering in the back half of the year. As Rob mentioned earlier, we expect to capture additional leverage in G&A following these incremental investments as the business continues to scale. Equity-based compensation was $5,300,000, up 21.8% year over year, with $4,800,000 in G&A. Preopening costs were $5,200,000, up 1.7% year over year, reflecting 15 new Shack openings and investments to support a strong opening schedule for the first quarter and throughout 2026. Notably, the lifetime preopening expense for the class of 2025 declined approximately 14% compared to the class of 2024. We grew adjusted EBITDA by over 20% year over year as we advance a robust 2026 development pipeline. Adjusted pro forma net income was $16,600,000, or $0.37 per fully exchanged and diluted share. Net income attributable to Shake Shack Inc. was $11,800,000, or $0.28 per diluted share. Depreciation was $26,400,000. Our GAAP tax rate was 39.6%, and our adjusted pro forma tax rate, excluding the tax impact of equity-based compensation, was 26.1%. Our balance sheet is strong, and we ended the year with $360,100,000 in cash and cash equivalents and generated $56,500,000 in free cash flow. We currently have approximately 34 Shacks under construction. Now on to our guidance for the first quarter and full year 2026. As a reminder, our guidance incorporates the year-over-year impact of the 53rd week in 2025 on this year's guidance. For the first quarter, we expect total revenue of $366,000,000 to $370,000,000, with same-Shack sales up 3% to 5%, licensing revenue of $12,800,000 to $13,200,000, restaurant-level profit margin of 21.5% to 22%, and approximately four licensed openings. In late February, we rolled off price we took on our delivery channels last year, an approximate 1% impact. We plan to exit the quarter with approximately 3.5% overall price. Our inflation outlook reflects our expectation for low single-digit inflation, with commodity pressure from beef up mid-teens, partially offset by supply chain savings initiatives. We expect labor inflation to be in the low single-digit range. For the full year, we are reiterating our guidance that we provided at the ICR conference in early January: total revenue growth in the low teens, system-wide unit growth in the low teens, restaurant-level profit margin expansion of at least 50 basis points per year, and adjusted EBITDA growth in the low- to high-teens range. We are planning for low single-digit year-over-year inflation in food and paper costs after accounting for our supply chain strategies. Excluding these savings initiatives, food and paper cost inflation would be up mid- to high-single digits, with pressure led by uncertainty in beef pricing that represents approximately 30% of our blended food and paper basket. Our outlook assumes no major changes to the macro or geopolitical environment. Thank you for your time. And with that, I will turn it back to Rob. Rob Lynch: Building off of a strong 2025, we are excited about the opportunities ahead and look forward to making progress against our strategic priorities in 2026. Above all, I am so grateful to our dedicated teams for bringing their hearts, minds, and focus to their endeavors every single day. Thank you all for your time today. And with that, operator, please open up the call for questions. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press the star key followed by the number one on your telephone keypad. 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. Our first question is from Brian Michael Vaccaro with Raymond James. Please proceed. Brian Michael Vaccaro: Hi, thanks, and good morning. I appreciate all those details. I was just gonna ask you about kitchen equipment. I believe you rolled the new fryers in in the last several months. And could you just give us an update on where you are in terms of testing as well? And are there any new ovens and grills and the shake machines planned rollouts of any of that equipment in 2026 we should be mindful of? Rob Lynch: Yeah. Thanks for the question, Brian. We have actually implemented our fry hot holding equipment into all of our Shacks at this point. And I can tell you I have been out visiting Shacks really all quarter, and our fries have never been better. I will give you a data point. Fries cold or less than optimal fries used to represent over 30% of our guest complaints, and after implementing the new equipment, it may now represent less than 10% of our complaints. So, huge transformation in terms of improving the quality of our product through equipment innovation. We, as you know, we have our equipment innovation center that we have built here in Atlanta. We have been bringing all of our operators through that innovation center and our licensed partners through that innovation center for the last three or four months. And some of that innovation is already starting to show up, particularly in some of our licensed partner Shacks internationally where they can build faster. They have not quite as big of a pipe, so they can build faster. So, yeah, there is a lot of progress laying out the format of our kitchens, not just new equipment, but the way we are designing and architecture side of our kitchen. From the innovation both on the equipment side and the design and architecture side of our kitchen, so we are really hopeful that we will have an optimized kitchen standard that will last for years to come really starting in 2027. We have to get through our pipeline. We have the longest pipeline of permitted restaurants in the company's history. So once we start getting through that pipeline, we will move to that model, which we anticipate being really transformational for us. Brian Michael Vaccaro: Alright. Well, that is great to hear. And just to follow up on new unit development, if I could. Could you elaborate on the sales volumes you touched on in your prepared remarks, and are you able to elaborate on the sales volumes that you are seeing in the Class of 2025? And you talked about really optimizing those build costs. What kind of build cost inflation do you expect for the class of 2026? Rob Lynch: Thanks very much. We are incredibly excited about the opportunity to continue that momentum and their hard work. I just cannot give our team enough credit. I mean, given the construction and materials industry and tariffs and everything else, like, the costs have not gone down. And our team, through their ingenuity, was able to take 20% of our build costs out. So, yeah, we have rate reduction. Now I will tell you the average build cost is a function of the mix of the restaurants that we build in any given year. And as we continue to increase the mix of drive-thrus, the average build cost will not see the same type of incremental decreases in cost simply because the drive-thrus cost more to build, and they are going to be a bigger part. But the reason why we are so excited about that is we are starting to see our drive-thrus in 2025 outperform our core designs from a revenue standpoint. So we are seeing great returns there. So we are going to continue to build those. It is going to help us scale even faster. So as we build that pipeline, we will be more adept at being able to break down the type of Shack based on the cost and not just report out on the average build cost as the mix evolves. So we will be, you know, there is a little bit of noise in kind of the aggregate. That is our intention as we move forward. Here probably in 2027. Operator: Our next question is from Rahul Krotthapalli with JPMorgan. Please proceed. Rahul Krotthapalli: Good morning, guys. Thanks for taking the question. Rob, I want to touch on the evolution of the loyalty program and how best you can communicate the value of the brand through this program as we move towards the year. Then the follow-up is on the New York City and the Northeast markets that continue to be a headwind today. Are there any in 2026 that could potentially turn this into a tailwind? Thank you. Rob Lynch: Wow. Great questions, Rahul. I will go with the first one on loyalty. So one of the biggest bright spots in our business right now is our decision to launch a targeted, strategic value platform in our app. As I called out in my comments, our app downloads are up 50% as a result of that program. And we are seeing huge amounts of traffic growth each of these last three months. It gives us a huge amount of confidence for our loyalty program that we intend on launching by the end of this year. And the confidence in that loyalty program grows every day as we continue to see the engagement with our app that does not yet feature some of the added components and value that we will offer in the loyalty platform. So we are extremely excited about launching that and the ability for that to impact our business. Now I will tell you, our intention in launching loyalty is to launch it in an enlightened hospitality-driven way. So we are not going to rush in. We are going to launch it this year, but we are going to continue to optimize it as we scale it. We are going to continue to make sure that it is Shake Shack Inc.-specific and delivers the same premium enlightened hospitality experience that we try to deliver in our restaurants. So revenue, you know, sales or margin, as I have mentioned before, we have seen significant incremental sales and profit impact from that program. With minimal impact, it has an outsized impact on our ability to drive profitable growth. In regards to your second question surrounding the Northeast, there is no question that we have been impacted by weather in 2025. And, obviously, there have been two big weather situations, one in January and one essentially just wrapping up right now, where we have had some closed restaurants. And we do everything we can not to close our restaurants, but we have got to make sure we put our team members' safety first. So, yes, we mitigated some really significant weather impact. The numbers that we reported out in Q4 and then in P1 in January, we are extremely proud of, because those numbers reflect the impact we are seeing right now. As we move forward with our development, the majority of our development in 2026 is outside of the Northeast. I want to make it clear. That is not because we do not see growth opportunity in the Northeast, and that is not because we do not still love our New York roots. We are absolutely committed, and we will continue to diversify our footprint. And that is going to diversify our footprint and mitigate some of our disproportionate exposure to particularly the Northeastern and Mid-Atlantic weather situations that we are dealing with right now. We are also extremely excited about the impact that is going to have. There is just so much white space for us to go into a lot of these other markets. And, frankly, the results we are seeing in some of these other markets that we may have thought and others may have thought we could not be as successful in are really surprising us with how strong the demand is. And we are starting to remodel a lot of our Shacks in New York City, but we are going to build out markets across the United States. Thank you. Operator: Our next question is from Sharon Zackfia with William Blair. Please proceed. Sharon Zackfia: Hi. Thanks for taking the question. I think I looked back in my model, your labor is the lowest as a percent of sales since I think 2013 or 2016, so a long time. I guess I am curious, Rob, how low can you drive labor? And as we look at the future restaurant-level margin expansion, particularly for this year, is labor a key component of that, or is it really coming more from supply chain and cost of sales? And then on that six-minute wait time, is there any way to dimensionalize that between walk-in and drive-thru? And is that a happy place for you, six minutes, or are you trying to further improve that? Thanks. Rob Lynch: Great question. So what I will tell you is we feel really good about where our labor is. And moving forward, the primary drivers of our improvement on the labor line will primarily be the benefit there that has been a decrease in a lot of overtime. As our operations have improved, and our leadership across our operating footprint has continued to focus on all the KPIs that we put on the scorecard every day and holding people accountable but supporting them, and our tech has improved to help us manage labor in a much more sophisticated way, we now have a lot less overtime. And we have more people in the Shacks at lunch and at dinner and less people in the shoulder hours because we are more capable. We can run those hours, and that is really been the significant driver. We can open faster and better. We can close faster and better, so we do not need as many people during those lower volume hours. And lastly, we are really doubling down on hospitality. I hope it came through in the comments, but we have added a couple KPIs onto the scorecard that are specific to hospitality around whether guests were greeted, whether guests received a table touch. So some of the things that, you know, from an ops metric standpoint in the past, we are going to keep focusing on those, but we are adding hospitality metrics to make sure that we are delivering the best hospitality in the industry. And that is going to further drive sales. I want to make it clear. We always want to get better. We are laser-focused on being best-in-class operators, which means labor management is a big part of that. But we have now really built the model that I think is going to be consistent with where we want to be moving forward. On the overtime point, you know, that really is a key leading indicator. When you see a lot of overtime in your cost structure, it is not just a function of scheduling. It is a function of team member retention issues, because you have people calling off or getting terminated, all that stuff. We now have a lot less overtime. On the six-minute wait time, we are absolutely working to further improve that. We have gotten better across every component of our business. We are definitely not satisfied with just under six minutes. We continue to strive to get more efficient. And some of that is going to come through process improvement, but a lot of that is going to come through, as I talked about on Brian’s question, kitchen design. We have a significant improvement standardized that we will be rolling out at the end of this year heading into 2027 in our standard kitchen design, as well as we will be launching our optimized long-term kitchen design. We would roll it out tomorrow, but we have permits in place for a lot of Shacks. Do not get me wrong. Those are going to be great Shacks. And there are optimizations that we can make. But really towards the tail end of this year heading into 2027, we are really excited about both the speed impact and just overall team member satisfaction, other operating KPIs, including accuracy, and deliver the food in a much more efficient way. There has been a bigger positive impact on wait times through the drive-thru as we have optimized a lot of our drive-thru, back-of-house design and just the way we operate drive-thrus. Operator: Our next question is from Jeffrey Andrew Bernstein with Barclays. Please proceed. Anisha Dat: Hi. This is Anisha Dat on for Jeff Bernstein. Wanted to ask a question on promotions. Given the stronger January comp, can you break down what portion was driven by promotional activity, including value initiatives, versus baseline demand, and whether those customers are incremental visits or primarily trade up/trade down within existing guests? Thanks. Rob Lynch: Yeah. So we do not necessarily disclose to that level of detail, but what I will tell you is that we are focused on driving all channels of revenue, whether it is in-Shack, in-app, or delivery. Our in-Shack business has been really healthy. We have seen a lot of traffic and check benefit in our Shacks. I think it is a testament to the focus on hospitality that we are delivering in Shack. We have done a lot of work. Our tech team has done a lot of work on our kiosk to make sure that we are delivering a great kiosk experience. We sell the same Coca-Cola as everyone else. So we still make money on the things that we discount inside of our app, but we are very strategic. The incentives that we offer are part of our base business, and those things are the most comparable from a price point standpoint to our peer group. And those things are incentives on our highest margin products, particularly beverages and fries. So, you know, we consider our app the most incremental channel. Yeah, I mean, what I would tell you is these guests are incremental traffic that we are deriving benefit from. But right now, the app is definitely the highest driver of incremental traffic. Operator: Our next question is from Peter Saleh with BTIG. Please proceed. Peter Saleh: Great, thanks, and congrats on a strong start to the year. Rob, I want to go back to the 1-3-5 menu that you guys rolled out again. I think you mentioned a powerful menu bringing in new guests. Can you talk a little bit about the profile of this guest that you are seeing with this 1-3-5? And are you able to retain this guest once the promo ends? And then on the marketing push for 2026, can you just talk a little bit about how it may be different than 2025? Are you targeting any different channels? Or I know that cadence is going to be a little bit more evenly distributed, but any other details you can provide would be helpful. Rob Lynch: They look a lot like our normal guests, and our normal guests are taking advantage of the 1-3-5 program as well. So it is not significantly changing the profile relative to, like, household income and those types of things. It really is something that I think just affords everyone the opportunity to come in and improve the value that they are perceiving from our brand. We want to continue to launch premium, high-end, differentiating culinary LTOs. We are continuing to work on improving our core menu. We want to make sure that we are continuing to improve our value. We have invested in our fries this year. We have invested in our beverages this year. We have invested in our sandwiches this year. We want to make sure that we are competitive. In this environment, what I will tell you is that we spend a lot less discounting than the fast food industry. We are not out there giving away our food, trying to bring in customers from profiles that we may not be able to retain as things evolve. We are out there being strategic and targeted, and the only way you get 1-3-5 is in our app. And the acquisition cost of getting an app user used to be significantly higher than it is today with this promotion. So if you think about the holistic value creation, lifetime value of an app user, the decreased cost of acquisition in addition to the incrementality of the revenue at a slightly lower margin than our core items, but not significantly lower, all in all, it is a home run for us. And so we are going to continue to drive that program. We see this as a continued driver of incremental traffic in our model. This is not something that we see as a temporary model. And it is only going to accelerate and expand once we launch an even more premium loyalty experience that offers these types of value-driving programs. On marketing, we launched our Today’s Special and “We Really Cook” campaign here in Q1. We are going to continue to leverage that platform to launch our LTOs moving forward. And a lot of that is top-funnel media. I think in the past, what Shake Shack Inc. has done is we have invested a lot in the bottom of the funnel, a lot in conversion. Right? So a lot of paid search, email, and other campaigns offering BOGOs and other types of discounts to get that conversion. There is a big opportunity to create awareness of what makes Shake Shack Inc. so special. We have an opportunity to expand our aperture top of funnel. So we are striking a bit more of a balance between top-funnel and lower-funnel marketing. And the top funnel is going to just increase the population size. And then if we are still as adept at conversion as we have been with 1-3-5 and our other programs, then a lot more of that top funnel should flow through to the bottom line. So that is really how we are thinking about marketing moving forward. It is not necessarily a demographic push or a household income push or anything like that. We truly believe that our brand can meet the needs of every stratification of guests in the industry from the teens with the least amount of discretionary income all the way up to the high household income. We want to make sure that we are offering solutions for all of them. Operator: Our next question is from Sarah with Bank of America. Please proceed. Sarah: Thank you so much. I wanted to sort of understand what clearly looks like incrementality of total transactions. And I wanted to know if that was from the sort of app and the in-app traffic as a traffic driver. Last quarter, you said that in-app traffic was up like 500 basis points. So am I right in thinking that as it stands now, app traffic had been at the time maybe 5%? And I wanted to know if that was from the sort of app and the in-app traffic as a traffic driver? And I wanted to sort of understand what clearly looks like negative mix in the fourth quarter—maybe about 2%—and I wanted to know if that was from the app, because it sounded like more transactions. And I think total traffic was up maybe 400 basis points. So, you know, there is a lot in there, but just sort of quantifying the lift or the contribution and how I should think about perhaps mix in the future? Thanks. Rob Lynch: Great question, Sarah. So one of the biggest drivers of the mix impact, particularly in P12, was our decision to price our Big Shack at $10. So, you know, there was intentionality around cannibalizing some of our higher-priced double burger buyers, trading guests from single ShackBurgers up to the Big Shack at $10, and from doubles to the Big Shack at $10. The double price points range anywhere from $10 up to $14 depending on whether you are buying an Avocarth Bacon Burger or just a plain Double ShackBurger. And what we found—and, you know, it is not rocket science, and we learned this lesson for the last time—is that we sold Big Shack to a lot of doubles. So the negative mix impact that we saw in P12 was less about any type of app traffic shift and much more about our LTO volume. Moving forward, we will take that trade-off all day long. And as we move forward and plan our LTOs, we are making sure that we have a very clear understanding of where the volume is going to be sourced from, whether it is coming from guests that were purchasing either singles or doubles, so that we can mitigate any type of mix impact moving forward from that. Like I said, it is not as significant as you might think given the $1 drinks and $3 fries in the app. And that is because when they come in, everybody is buying a sandwich. Sometimes you have multiple party size. So the checks are not as negative mix as you might think. And the incremental traffic that we are seeing from that program is tenfold any of the mix benefits. Operator: Our next question is from Andrew Barish with Jefferies. Please proceed. Andrew Barish: Hey, guys. Just wondering on an example or two maybe on the supply chain saves for this year. I mean, the implied benefits are quite significant and impressive. Just maybe an example for us. And then is it first-half weighted, or do those saves kind of more evenly show up as we move through the year? Rob Lynch: I mean, on the supply chain, there is definitely significant savings yet to be to unfold. I mean, I think we talked about it in Q4 as we were just scratching the surface. Well, I would say we are kind of into the surface right now and really excited about the work that the team has done. And, you know, when we talk about supply chain, I think I have reinforced it a couple times. It is not just about cost. Our ingredients are not always the same as the rest of the industry. Like, we buy different ingredients. We are 100% Angus, no antibiotic, no hormone beef. We put 20% brisket into our grind. We have got to be always thinking about the brisket supply. So by going out and qualifying and diversifying our supplier base, not only has it improved our cost structure, it has also secured our supply. So, you know, moving forward, we should benefit from that really significantly here in 2026. But there is still a lot of work to do on our distribution and some of the logistics of our business. So we are going to continue to derive some pretty substantive benefit moving forward. And I will just close by saying, if we had normalized beef costs last year, we would have expanded restaurant margins astronomically. We grew restaurant-level margin 120 basis points last year with unprecedented beef costs and beef inflation. When we do see a return to normalized beef pricing, the work that this team has done in operations and supply chain is going to flow through at a dramatically improved rate. I just cannot reinforce enough how amazing the work this team has done, particularly in the restaurant operations and the supply chain. As we look, I know that beef markets right now are very unpredictable, and there are some unknowns. Lots of things going into what we think the beef is going to look like over the next year. But this team is very competent and hardworking. Operator: Our next question is from Samantha on for Christine Cho with Goldman Sachs. Please proceed. Samantha: Hi, this is Samantha on for Christine Cho. Thanks for taking my question. You highlighted a development pipeline tilted away from the Northeast with same-Shack sales growth in the Southwest and Midwest outpacing New York City and the Northeast during the quarter. How does the margin and cash-on-cash return profile of these growth regions compare to the legacy coastal core? And how should that regional mix shift influence system-wide margins over the next three to five years? Rob Lynch: Well, that is a great question. It is an interesting question. What I would tell you is the revenues that we forecast for some of these markets are less than the revenues than when we open up a Shack in New York City. They are just going to be smaller populations, and there are smaller tourists. So, tourists compression. And we are doing everything we can to mitigate that compression by opening drive-thrus, which tend to have higher revenues. So the balance in geography should be, to a certain extent, mitigated by the format. In terms of the flow-through in the margins, I have got to tell you, there are not a lot of franchise systems who are opening restaurants in New York City and Los Angeles because there are a lot of challenging business dynamics there. We do really well there. That is where we grew up, so we know how to operate in those markets. But the reason why people develop in places like Oklahoma City and Florida and Tennessee is because the real estate is less, and the labor costs are less. So, you know, if we can hold on to our AUVs through an improvement in the mix of our formats and have lower real estate cost and lower labor cost, supply chain optimization, and the diversification that we get from our footprint, we should see continued margin expansion. We continue to believe that we can expand margins through continued operating excellence year in and year out. We have guided to 50 basis points a year. We have not pulled that despite a lot of our peers coming in with margin dilution last year, and looking forward, we are not being concerned about margins from a margin standpoint. Operator: Our final question is from Nick Sinton with Mizuho Securities. Please proceed. Nick Sinton: Thank you. The January comp of over 4%, obviously, I think you guys said that includes a 400 basis point headwind. Did we lose the call, or did we just lose Nick? Rob Lynch: Yeah. I lost to Nick, but yes, it does include the 400 basis points of headwind. Operator: We just lost Nick. And we will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. Nick Sinton: You are welcome. You are welcome. Sharon Zackfia: Thank you. Andrew Barish: Thank you.
Operator: Good day, everyone, and thank you for standing by. Welcome to the Encore Capital Group's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bruce Thomas, Vice President of Global Investor Relations for Encore. Bruce, please go ahead. Bruce Thomas: Thank you, operator. Good afternoon, and welcome to Encore Capital Group's Fourth Quarter 2025 Earnings Call. Joining me on the call today are Ashish Masih, our President and Chief Executive Officer; Tomas Hernanz, Executive Vice President and Chief Financial Officer; Ryan Bell, President of Midland Credit Management; and John Young, President of Cabot Credit Management. Ashish and Tomas will make prepared remarks today, and then we'll be happy to take your questions. Unless otherwise noted, comparisons on this conference call will be made between the fourth quarter of 2025 and the fourth quarter of 2024 or between the full year 2025 and the full year 2024. In addition, today's discussion will include forward-looking statements that are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from our expectations. Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. We undertake no obligation to update any forward-looking statements. During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our investor presentation, which is available on the Investors section of our website. As a reminder, following the conclusion of this conference call, a replay, along with our prepared remarks will also be available on the Investors section of our website. With that, let me turn the call over to Ashish Masih, our President and Chief Executive Officer. Ashish Masih: Thanks, Bruce, and good afternoon, everyone. Thank you for joining us. On today's call, I will start with a high-level recap of 2025. Then I'll review our strategy and market position as well as our view on how we create value for our shareholders. This will be followed by a few key measures that are important indicators of the state of our business and a 2025 recap of our MCM and Cabot businesses. Then Tomas will review our financial results, after which I'll touch on our financial objectives and priorities and provide guidance on several key metrics for 2026. At the conclusion of today's call, we will also post to our website our annual report, which includes our 10-K and my letter to shareholders. We will begin with a look back over the past year. With the momentum of our largest business, MCM leading the way in the U.S., Encore delivered very strong results in 2025. For the full year, we grew portfolio purchases by 4% to a record $1.4 billion and increased collections by 20% to a record $2.6 billion. Average receivable portfolios increased 12% to $4.1 billion and estimated remaining collections, or ERC, rose 14% to a record $9.7 billion. These results clearly demonstrate Encore's leadership in the consumer debt purchasing industry and reflect the strengthening of our operating model through exceptional execution and investments in innovation. I'll provide more detail on both MCM's results and Cabot's performance later in the presentation. Our leverage improved to 2.4x at the end of the year compared to 2.6x a year ago. Importantly, we continue to improve and delever our balance sheet, even with continued significant portfolio purchases as well as the resumption of our share repurchase program early in the year. We repurchased approximately 9% of our outstanding shares in 2025 for approximately $90 million, reflecting our confidence in Encore's future performance. Our record collections performance in 2025 led to $257 million of net income for the year or earnings per share of $10.91. Before I continue, I believe it's helpful to remind investors of the critical role we play in the consumer credit ecosystem by assisting in the resolution of unpaid debts. These unpaid debts are an expected outcome of the lending business model. Our mission is to create pathways to economic freedom for the consumers we serve by helping them resolve their past due debts. We achieve this by engaging consumers in honest, empathetic and respectful conversations. We pursue our business objectives through our 3-pillar strategy of participating in the largest and most valuable markets, developing and sustaining a competitive advantage in these markets and maintaining a strong balance sheet. We employ a strategy across our 2 main businesses, Midland Credit Management, or MCM in the U.S. and Cabot Credit Management in select European markets. We believe value is created in the consumer debt buying industry through optimal execution of 3 critical drivers: buying, collecting and funding. When these drivers are executed well within attractive markets, leveraging the resources we possess and our strong balance sheet, we believe they enable high consistent returns and profitability. I'll take a moment to describe each of these 3 critical drivers of our value engine, which form the virtuous cycle of buying well, collecting efficiently and funding competitively. The cycle begins with a commitment to purchase portfolios of charged-off receivables at attractive returns, which is the buy well component of our value engine. Over the many years of our industry leadership, we have built a trusted reputation with the sellers of portfolios, the largest credit card issuers, which provides us access to bid on the opportunities we seek. Our disciplined portfolio purchasing is underpinned by superior data and analytics capabilities, which when applied to a very large data sets stemming from our scale and history, optimize portfolio valuation through account level underwriting. As a result, we win more portfolios at strong returns, enabled by our superior collections as reflected in our industry-leading portfolio yield and collections yield. The cycle continues with our commitment to collect efficiently, maximizing net collections to realize strong yields. Our operational excellence, advanced analytics and our consumer-centric approach produce industry-leading yields while still exhibiting a solid cash efficiency margin. Because of our large scale, we have a broader reach within the portfolios we buy than our competitors, as we often see consumers we have come to know in previously purchased portfolios. As a result, our very effective, personalized engagement with consumers leads to payments with predictable, consistent cash flow. This cash flow helps to complete the cycle as it contributes to our commitment to fund competitively based on low-cost funding and a strong balance sheet. Importantly, our balance sheet strength enables access to capital at competitive costs through the credit cycle. In summary, Encore's value engine is the critical enabler of our competitive advantage that allows us to execute our proven 3-pillar strategy to drive shareholder value. I would now like to highlight Encore's performance for the year in terms of several key metrics, starting with portfolio purchasing. Encore's global portfolio purchases for 2025 were a record $1.4 billion, an increase of 4% compared to 2024. Keep in mind that the comparison to the prior year purchase level is impacted by the outsized $200 million of portfolio purchasing by Cabot in the fourth quarter of 2024. As a result of the attractive market conditions and higher returns available in the United States, 83% of our portfolio purchasing dollars were spent in the U.S. in 2025. Global collections in 2025 were up 20% to a record $2.6 billion. This exceptional collections performance is the result of strong execution and continued significant portfolio purchasing as well as the deployment of new technologies, enhanced digital capabilities and continued operational innovation, especially in the U.S. Our global collections performance in 2025 compared to our ERC at the end of 2024 was 109%. We believe that our ability to generate significant cash provides us with an important competitive advantage, which is also a key component of our 3-pillar strategy. Similar to the collections dynamic I mentioned earlier, strong execution, higher portfolio purchases at strong returns over the past few years as well as operational improvements have also led to meaningful growth in cash generation. Our cash generation in 2025 was up 22% compared to the prior year, and we expect it to continue to grow. Let's now take a look at our 2 largest markets, beginning with the U.S. The U.S. Federal Reserve reports that revolving credit in the U.S. remains near record levels. At the same time, since bottoming out in late 2021, the credit card charge-off rate in the U.S. increased to its highest level in more than 10 years in 2024 and still remains at an elevated level. The combination of strong lending and elevated charge-off rates continues to drive robust portfolio supply in the U.S. Let me illustrate this impact by highlighting the annualized amount of net dollar charge-offs, which can be estimated by multiplying revolving credit outstandings by the net charge-off rate. Using Q3 2025 data, the most recent quarter reported by the Federal Reserve, annualized net charge-off volume was more than $54 billion. Similarly, U.S. consumer credit card delinquencies, which are a leading indicator of future charge-offs, also remain near multiyear highs. With the revolving consumer credit at an elevated level and the charge-off rate above 4%, purchasing conditions in the U.S. market remain favorable. We are observing continued strong U.S. market supply and favorable pricing as well. Fourth quarter delinquency data supports our expectation that the portfolio purchasing environment in the U.S. is expected to remain robust for the foreseeable future. With portfolio supply in the U.S. market growing to its highest level ever in 2025, we purchased significantly more portfolio than we ever have in the U.S. MCM leaned into this opportunity by finishing the year with a record $1.17 billion of portfolio purchases, up 18% compared to the previous record high in 2024. That's an increase of $175 million on a year-over-year basis. In addition to solid portfolio purchases in 2025, our MCM business continues to excel operationally. MCM collections increased in 2025 to a record $1.95 billion, which was an increase of 24% compared to 2024. Our collections momentum continued throughout 2025 with Q4 collections of $503 million, the highest collections quarter ever for our U.S. business. The collections overperformance in the U.S. was driven by the deployment of new technologies, enhanced digital capabilities and continued operational innovation, which enabled us to reach more consumers, leading to more payments as well as a large and growing payer book. These initiatives had a greater impact on the early stages of the portfolio's life cycle, leading to overperformance of our recent vintages. We expect that our collections forecast will gradually adjust to reflect the positive impact of these initiatives. Our outstanding results not only reflect the improvements we've made in our collections operation and the overall effectiveness of our collection platforms, but also the strength of the U.S. consumer. Despite some of the negative news and macro uncertainty in the U.S., our consumers' payment behavior remains stable. This is in line with what many of the bank and credit card issuers are saying in the recent earnings calls. We, of course, continue to monitor for any signs of change. Turning to our business in Europe. Cabot delivered a solid year of performance in 2025. Cabot collections in 2025 were $641 million, up 9% compared to 2024. We continue to be focused on Cabot's operational excellence and cost management, including leveraging relevant best practices from our MCM business. This is particularly relevant in the U.K., where banks are increasingly selling fresh portfolios and forward flows. Our operational focus and initiatives have enabled Cabot to continue to deliver stable collections performance. Cabot's portfolio purchases in 2025 were $234 million, which is in line with the historical trend, but lower than 2024 due to the exceptional Q4 2024 purchases of $200 million that included large attractive spot market portfolio purchases. We continue to be selective with Cabot's deployments as the U.K. market remains impacted by subdued consumer lending and low delinquencies in addition to continued robust competition. I'd now like to hand the call over to Thomas for a more detailed look at our financial results. Tomas Hernanz: Thank you, Ashish. Moving to the financial results slide. For the year 2025, we delivered strong growth in collections and portfolio revenue of 20% and 12%, respectively. The strong collections performance was supported by the high levels of U.S. portfolio purchases in recent quarters, our focus on execution, operational improvements and a stable consumer behavior. Collection yield for the year was 63.6%, an improvement of 3.9 percentage points compared to the prior year. Portfolio revenue in 2025 increased by 12% to $1.46 billion, supported by 12% growth in average receivable portfolios and a portfolio yield of 35.7% As a reminder, changes in recoveries is the sum of 2 numbers. First, recoveries above or below forecast is the amount we collected above or below our ERC expectations for the quarter and is also known as cashovers or cash unders. Second, changes in expected future recoveries is the net present value of changes in the ERC forecast beyond the current quarter. Changes in recoveries were $209 million for the year. Of that total, the vast majority, $198 million, were recoveries above forecast. Changes in expected future recoveries were $11 million. For the fourth quarter, changes in recoveries were $68 million. Of that total, $57 million were recoveries above forecast. Changes in expected future recoveries in the fourth quarter were $11 million. Both of our businesses, MCM in the U.S. and Cabot in Europe were net positive contributors to changes in recoveries for the fourth quarter and the full year. Put differently, during 2025, we collected $198 million more than we forecasted in our ERC, which is incremental cash flow. The collections overperformance in the U.S. was driven by the deployment of new technologies, enhanced digital capabilities and continued operational innovation, which enabled us to reach more consumers, leading to more payments as well as a large and growing payer book. These initiatives had a greater impact on the early stages of our portfolio life cycle, leading to overperformance of our recent vintages. We expect that our collections forecast will gradually adjust to reflect the positive impact of these initiatives. As this takes place in the next few quarters, we expect any future cashovers to migrate eventually into portfolio revenues. Debt purchasing revenue in 2025 increased by 37% to $1.66 billion, and the resulting net purchasing yield was 40.8%. Approximately 5.1% was the impact of changes in recoveries. Other revenue in 2025 were $104 million, bringing total revenue to $1.77 billion, reflecting growth of 34%. Operating expenses in 2025 decreased by 1% to $1.14 billion as reported. However, operating expenses for the year, adjusted for onetime items, were up 11% compared to 20% growth in collections, reflecting significant operating leverage in the business. Cash efficiency margin for the year improved by 3.2 percentage points to 57.8% compared to 54.6% in 2024. We expect cash efficiency margin for the year to exceed 58% in 2026. Interest expense and other income for the year increased by 15% to $291 million, reflecting higher debt balances. Our tax provision of $79 million in 2025 implies a corporate tax rate of approximately 24%, which is in line with our previous guidance. Finally, net income in 2025 was $257 million, resulting in earnings per share for the year of $10.91. We believe our balance sheet provides us with very competitive funding costs when compared to our peers. Our funding structure also provides us financial flexibility and diversified funding sources to compete effectively in this favorable supply environment. Leverage closed for the year at 2.4x, a 0.2x improvement versus last year and lower than a quarter ago. In October, we issued $500 million of senior secured high-yield notes due 2031 at an attractive coupon of 6.625%. Also in October, we settled $100 million of 2025 convertible notes entirely in cash. In November, we repaid EUR 100 million of the principal outstanding under our 2028 floating rate notes. The combination of these transactions improve our balance sheet, leave us with no material maturities until 2028. and provides strong liquidity to continue to grow our business well into the future. With that, I would like to turn it back to Ashish. Ashish Masih: Thanks, Tomas. Now I would like to remind everyone of our key financial objectives and priorities. Maintaining a strong and flexible balance sheet, including a strong BB debt rating as well as operating within our target leverage range of 2 to 3x remain critical objectives. With regard to our capital allocation priorities, buying portfolios, particularly in today's attractive U.S. market, offers the best opportunity to create long-term shareholder value by deploying capital at attractive returns. This is indeed what we are doing as highlighted by our track record of purchasing receivable portfolios at strong returns. Next on our capital allocation priority list are share repurchases. As I mentioned earlier, we repurchased approximately 9% of our outstanding shares in 2025 for approximately $90 million, reflecting our confidence in Encore's future performance. And finally, we remain committed to delivering strong return on invested capital throughout the credit cycle. Our ROIC improved to 13.7% in 2025, up from 7.5% in the prior year and at the highest level in the last 4 years. As a result of our strong performance in 2025, the business momentum we are carrying into the new year and a positive outlook for 2026, we are providing the following guidance on key metrics: We anticipate global portfolio purchases in 2026 to be within a range from $1.4 billion to $1.5 billion. We expect global collections in 2026 to increase by 5% to $2.7 billion. In addition, after a strong year in 2025 in which productivity enhancements and strong execution across the business contributed to a new level of earnings power. We expect our EPS in 2026 to increase by 10% to $12 per share. We expect the combination of interest expense and other income to be approximately $300 million for the year, and we expect our effective tax rate for the year to be in the mid-20s on a percentage basis. In closing, as I look ahead at this year and beyond, I'm truly excited about how Encore is performing and our future prospects. Let me state 3 reasons why I feel this way. First, we're buying record amounts of portfolio at strong returns. Through our MCM business in the U.S., we are the largest debt buyer in the largest and most valuable consumer credit market in the world. The U.S. market continues to be very favorable, driven by growth in consumer lending and charge-off rates that are at the highest level in 10 years. Given our superior collections capabilities, we are able to purchase record amounts in the U.S. at strong returns. Second, our collections operations are performing very effectively. At the same time, our teams are continuing to enhance our collections capabilities through innovation in areas such as omnichannel and digital collections. And our collections effectiveness is also enabling us to reduce leverage while growing portfolio purchasing. The third and final reason is our funding. We have adequate liquidity to continue to grow the business as a strong flexible balance sheet provides us the capacity to capitalize on any opportunities that come up in the market. Now we'd be happy to answer any questions that you may have. Operator, please open up the lines for questions. Operator: [Operator Instructions] Your first question comes from the line of David Scharf with Citizens Capital Markets. David Scharf: Obviously, this attractive part of the cycle is translating into the very strong results. So focusing less on the quarter and more on 2026 guidance. Just drilling into the EPS guidance a little bit, a couple of questions. And just setting aside the actual number of $12 per share, I think maybe what's most noteworthy for investors is just the fact that you provided earnings guidance. Can you provide maybe a little bit of what the thought process was behind kind of why you felt now after so many years was the right time to give guidance and why it was a particular single number and not a range because I think all of it certainly is going to be viewed positively. Ashish Masih: David, thanks for your question. This is Ashish. So as you -- just a bit of context, you correctly point out this part of the cycle is helping drive strong purchasing and collections. But I would like to just underscore and highlight that it's not just the market that's strong, which is the case, favorable U.S. market, but we are really buying well and executing well and not the case with everyone I would imagine. So we feel really good about how collections are performing. And in terms of your direct question on the guidance, this is indeed a different path we are taking because what we're finding is our expectations for the future and earnings power of the business was not truly getting reflected in some of the estimates that are out there. So we wanted to make sure investors and analyst community can take that cue from us. And your question around point estimate versus the range is a good one. We kind of thought that through, and we feel comfortable with this $12 number at this point. Of course, we'll monitor performance throughout the year, how that goes. But we just felt compelled to kind of make sure everybody was understanding kind of what our prospects are, and so we put it out there. David Scharf: Got it. Understood. Certainly speaks to more earnings visibility. Maybe diving into the actual guidance itself a little more. As we think about 10% EPS growth. Are you able to, I guess, provide how much of that is coming from kind of the future share buybacks, just the lower share count, if we should be factoring in buybacks this year as well as whether or not a lot of the upfront legal expenses are going to level off into 2026? Ashish Masih: So we kind of develop our guidance based on a range of factors and we'll continue to monitor it through the year. So clearly, you can estimate what happened last year in terms of the share repurchases impact. So that's a reasonable one to take, I guess. But we are not providing an estimate on repurchases amount for the coming year. Now in terms of legal expenses, they will rise, I would say, as we are buying a lot of accounts. But at some point, they do level off. Also, as you noticed, percent of legal collections is at an all-time low for MCM, around 34%, 35%. So we are collecting more and more in early part of the cycle, stage of a portfolio or a vintage, and that's going to call center and digital collections and increasingly to digital collections. So we feel really good about it, but we are buying a lot of portfolio in the U.S. So there will be some legal increase, I would imagine. At some point, it tapers off. So we took into account a whole range of things, as you can imagine, to provide that $12 number. Tomas Hernanz: Yes. One more thing is I wouldn't focus so much on the specific lines of the OpEx line. But just keep in mind what I said in the call where we do expect cash efficiency margin to be better than 58%, right? So which is very much what we printed in '25. So regardless of where we end up in legal, we think that margins are going to increase year-on-year. Operator: Your next question comes from the line of Robert Dodd with Raymond James. Robert Dodd: Congrats on the quarter and with David on thanks for the earnings guidance as well. On the -- in answering David, you just said that you would not be giving guidance for how much to expect on the buyback front. But when I look at the rest of the guidance components, right, I mean, collections growing, I mean, obviously, purchases growing, but you generate such a large amount of cash and efficiency is improving. All of that would tend to point to your leverage is going to continue heading lower. And in my opinion, at least. And you're already below the midpoint. So I mean, while you maybe not giving guidance per se, would it be reasonable to -- for an investor to think that maybe buybacks would accelerate in '26 versus what we saw in '25? Ashish Masih: Robert, thanks for your question. You're right on the leverage. So as we are -- we have grown purchasing, but we are collecting really well. Our leverage will continue to trend downwards. And kind of how that impacts repurchases. So what we have said, our priorities are very clear. And in terms of we said where as you approach midpoint, we will resume share purchases -- repurchases, which happened last year. But there are other factors we've said like balance sheet and liquidity -- strength of balance sheet, liquidity, continued performance, kind of outlook on the markets and so forth. So those factors are there as well. But we did accelerate, to your point, our repurchase rate towards the end of 2025 compared to early part of 2025. So that's kind of we are well positioned to continue supporting repurchases, as I indicated, but we haven't given an exact number. Robert Dodd: Got it. Got it. Appreciate that. I mean one other thing I did know, I mean, in the past, when you've given capital allocation priorities, M&A is a bit on the list, usually at the bottom of the list, to be fair. It's well below portfolio purchases. This time, it's not on the list at all. I mean, is that an indication that just the market for portfolio purchases is so good that you cannot see M&A representing a good candidate for capital allocation over the next 12 months? I mean is that just -- it just doesn't -- it seems very, very unlikely to you? Or any color there? Ashish Masih: Yes. So 2 things there, Robert. So one is we changed that hierarchy in Q3 2024 results, in November 2024. So at that time, I stated and I kind of still hold to kind of what we are seeing is a very consistent set of portfolio buying opportunities, particularly in U.S. So we feel very comfortable. And M&A, of course, it's always there as a possibility. We see all the opportunities. We look at it. The bar for us is high. We've been very disciplined. It does not mean that if a very attractive opportunity came by, particularly if there's a back book with it or whatever it might be, that we would not take it more seriously, we would. But based on the opportunity that we see, combined with the purchasing environment in the U.S., we felt portfolio buying is clearly the #1 priority and M&A had moved, of course, a little bit lower. So that's what change we made about 15, 16 months ago, and we are still holding true to that right now. Robert Dodd: Got it. Got it. I appreciate. My memory may be failing me. One more, if I can. On the efficiency, and I mean, obviously, your collections performance has improved markedly. And at the early parts of the curves and as you say, you haven't -- that hasn't fully flowed into the curves themselves right now, and you need more proof case. But at the same time, your collections efficiency seems, if anything, to be accelerating, right? I mean -- so I mean, how far -- for lack of a better term, how far behind the curves or how far behind are the curves versus the pace at which your operational efficiency and execution continues to improve? I mean another way to put it, like how many quarters do you think it will take for all of those improvements to actually be reflected in the curve might be the simpler way of asking it. Ashish Masih: Yes. So I kind of got the 2-ish parts of your questions. So on that one, it will take a few quarters. So as we get actual results -- and again, these are the early stages of the 2024 and '25 vintages, which are very large, by the way. So that's why the dollar impact is huge. '24 was $1 billion of purchasing. '22 is close to $1.2 billion. So these are large vintages. It takes -- it will take a few quarters as the actual data comes through. Now what you will see then is the cash over revenue, which is recoveries above forecast will migrate over time to portfolio revenue. So that's one element of your question. I think the other one is the efficiency or the cash efficiency margin on the operating leverage, that's continuing to kind of improve as well, and we continue to innovate and improve our operations. If you look at our headcount that we disclosed, the total headcount, I mean, it's been flat for 3 years, and our collections are up from '23, '24, '25, our headcount was flat, and our collections have gone up almost 40% in that time. So you can see the operating leverage is truly kicking in combination with improvement in our collections as well, not just pure fixed variable issue. Are there any other questions in the queue? Operator: Yes, excuse me. The line for Mike Grondahl is now open with Northland. Mike Grondahl: Congratulations on a very strong finish to the year. Ashish, I got on a little late, so I apologize if this has been asked, but I think it's important, too. I can't remember the last time, and this is probably going back 5, 10 years that ECPG has guided earnings for a forward year. But here, you guys are guiding to $12 for next year, roughly a $3 per quarter run rate. What is sort of giving you the confidence to do that? What's sort of driving this change, if you will? Ashish Masih: Mike, thanks for your question. So we've been buying really well for many years and collecting really well in a very consistent manner as we expected our collections to grow. We've also kind of stabilized Cabot. So there was a couple of years where we were kind of restructuring Cabot operations in terms of operations performance as well as its cost structure. And after we made some of the corrections at the end of '24, last full year has been very stable performance that Cabot team has delivered. And on top of that, MCM team continues to deliver innovation, operational excellence and growing collections. So all of that is playing into our confidence, and we see very good purchasing outlook for 2026 as well in the U.S. And we'll, of course, be disciplined at Cabot, and we are buying our kind of fair share there at the right returns. So overall, the environment feels -- we feel very confident, combined with kind of how we are executing in the market to provide the guidance. Now of course, as I said earlier, part of that motivation was also that the investment community, the estimates were not truly reflecting our prospects. So we felt compelled to kind of provide it at this stage so that everybody can get a sense of what our future prospects are as we feel them at this moment. Mike Grondahl: Cool. And then maybe 2 more questions. Clearly, we're in early '26. This purchase environment has been good for you guys for the last, I'll say, 3 or 4 years. I described it as you're kind of filling up your bucket. Are there -- as we roll from '25 to '26, would you say the environment is steady, the same? Is there really any changes you're observing in the U.S. purchase environment? Ashish Masih: Yes. It's -- I would say you characterized it correctly. It's very steady. So overall volume of supply that we see and our team can kind of seize all the deals is very stable in terms of total dollars available for sale. Now that's also dependent on the environment itself. So outstandings are at a record level. The charge-off rate is near 10-year high. So the combined impact of that is, as I said in my prepared remarks, if you take Q3 data from Federal Reserve, it's about $54 billion in annualized charge-offs. It's a very big number. So overall supply is stable. The second element is pricing is also very stable. We see a rational environment there. So both of them are very similar to 2025. And therefore, we guided to a number we expect it to exceed 2025 purchasing of $1.4 billion, and we provided a range there. Of course, we are very focused on returns. We're not going to buy for the sake of buying, but we feel it can grow based on the 2025 number. Mike Grondahl: Got it. And next, a question about technology. Would you say technology is helping Encore more on the expense side by lowering costs? Or is it helping more on the revenue side because lower cost to collect, you can pursue more accounts that were kind of previously uneconomic. Ashish Masih: I would say it's helping more on the collection side, which is the revenue side. So our yields, our portfolio yields that we now disclose, and you can compare those calculations to anyone in the industry in Europe and here in U.S. are the highest. So we are collecting more. And our cash efficiency margin is solid. It is not the lowest. So we are really spending a bit more, and a lot of that is on technology to collect even more. So the net collections is the highest. And as I said, our omnichannel and digital collections are rising. All of that innovation is driving more and more collections. And yes, we are spending some more, but the netback is very attractive. And therefore, we are able to bid and win the portfolios we want in the market. Mike Grondahl: Got it. And then last question. I know you're investing in the business buying back shares second and then maybe M&A. But it seems like from a cash flow and a deleveraging basis, '26 is going to be even better than '25. Are we naive to think that buyback almost has to be higher in '26 than '25, annualizing 3Q, 4Q, the back half of '25, a lot of cash flow. How do you want people to think about that? Ashish Masih: I would kind of reiterate what I said, and I think on one of the questions as well. Leverage will trend down from what we can see based on how we are collecting and even though we are growing purchasing. So leverage will continue to trend down. And we have a very clear framework. So we did accelerate repurchases later in the year in '25, of course. So we stand by our kind of framework, which was 15 months ago, we said that we will resume buybacks at midpoint of leverage and potentially accelerate as we get to the lower end. So that's the framework that I think would be most appropriate for you to think about. Clearly, leverage will improve, and we'll watch it every quarter how it's going to go, and that would impact. Other factors are important, too, opportunities may be there for more portfolio buying or some potentially M&A or who knows what could come, although the bar is very high, as we said. So we have to look at kind of what's happening today, but also the outlook and then factor in and decide kind of on those repurchase levels, if you would. Operator: Your next question comes from the line of Max Fritscher with Truist. Maxwell Fritscher: I'm on for Mark Hughes. Did you see any tailwinds to collections in 4Q from the lower interest rates? And then how would you expect that to affect 2026 collections in your guidance if rates were to go a little bit lower and help ease that marginal pressure on consumers? Ashish Masih: Max, we cannot isolate kind of small changes in interest rates to collections. I mean, overall, I would say and reiterate what I said in my prepared remarks, in terms of the U.S. environment, the collections consumer is very stable. We are seeing good payer rates, how people are holding on to the plans. It's been very stable. So overall, fairly stable consumer outlook on payment behavior. And just remember, our consumers who we deal with are already in some kind of financial distress, and we know how to work with them. So small changes in interest rate or other factors may or may not impact them, and we have a lot of flexibility. We don't charge kind of interest or fees and things of that nature. So we are able to change the payment plans and adapt. So we have not seen any kind of noticeable impact on payment behavior in late 2025, as you asked. And from what I can sitting here tell, we don't expect that any of the interest rate changes to impact in '26. Now if any other things happen, we'll be monitoring them, of course. Maxwell Fritscher: Understood. And then what is your assumption on the change in recoveries that you expect in 2026? Ashish Masih: So changes in recoveries is calculated every quarter based on our forecast, kind of there's 2 components, right? Cashovers or recoveries above forecast. And then the second component is the NPV of the forecast change. So in 2025, vast majority was cashovers. And again, those were heavily coming in U.S. from the 2024 and 2025 vintages, which, by the way, as I said, were driven off because of our improvements in digital and kind of other operational improvements impacting the early part of the curve. Now those vintages are starting to age, and we expect over time, these cashovers to migrate into portfolio revenue over time, and it will take a few quarters, as we said. Operator: You have another question from the line of David Scharf with Citizens Capital Markets. David Scharf: Ashish, it's been quite a while since we really asked about competition in the U.S., but there's clearly been a much more benign regulatory environment at the federal level under the current administration. It's led to a lot of actions taken by consumer finance companies getting bank licenses and other such things. Has it -- has -- the perception that there is a less onerous CFPB or other framework, has that impacted how sellers are thinking about potentially engaging with new competitors? Or is it still a very kind of small circle of buyers that are approved and likely to continue to be that way? Ashish Masih: So there were a couple of different things in your question, David. So in terms of the regulatory environment, the rules are all well set for the industry. They took years of rulemaking and then 4 years ago, they went into effect. So all of those rules, everyone has to comply with them. They are good rules for the consumer, good for the industry. Those are there. Whatever state-level regulations are there are still there. So I just want to make sure I address your question broadly. So none of that regulatory kind of perhaps whatever you mentioned on CFPB, all of that is pretty stable. I don't think that's impacted number of new buyers coming into the picture because they can get financing or other things that are possible perhaps. So we're not seeing any new competitors. There's a bunch of -- a few midsized and a lot of small ones that have always been there, so nothing new. Some of them buy a significant amount and then go away as they see the performance. So that phenomenon is pretty stable on that front. So on the buying side, that's the change. On the selling side, yes, I would say, as I think we indicated a few quarters ago, off and on, there's a bit of chatter, banks trying to figure out whether they should sell or not, some who don't sell or test water. So nothing material to report on that front right now. But that chatter has been there for the last year or so, if you would. Operator: Your next question comes from the line of Mike Grondahl with Northland Capital Markets. Mike Grondahl: Two more. One, just curious, any benefit in 1Q '26 that you're seeing from higher tax refunds? Ashish Masih: It's still early. Yes, it's still early to see. We monitor tax refunds on a weekly basis, the data that comes out. There is kind of news out there in terms of how the tax bill was structured. So some of the benefits that consumers would have gotten, people would have gotten last year, they're going to get in refunds. Now it also depends on which income strata it's going to go to and how it trickles down or trickles sideways, whatever might happen. So we are going to observe, but that's kind of out in the news and how it will impact, it's way too soon in the quarter. Operator? Operator: I'm showing no further questions at this time. And I'd now like to turn it back to Mr. Masih for closing statements. Ashish Masih: Thanks for taking the time to join us today, and we look forward to providing our first quarter 2026 results in May. Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
Operator: Welcome to the Vistance Networks, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. Good day, and thank you for standing by. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. To ask a question during the session, you will need to press star 11 on your telephone. There will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jenny Thompson, Vice President, Investor Relations. Please go ahead. Jenny Thompson: Good morning, and thank you for joining us today to discuss Vistance Networks, Inc. 2025 Full Year and Fourth Quarter Results. I am Jenny Thompson, Vice President of Investor Relations for Vistance Networks, Inc. And with me on today’s call are Charles L. Treadway, President and CEO, and Kyle D. Lorentzen, Executive Vice President and CFO. You can find the slides that accompany this report on our Investor Relations website. Before I turn the call over to Charles, I have a few housekeeping items to review. Today, we will discuss certain adjusted or non-GAAP financial measures which are described in more detail in this morning’s earnings materials. Reconciliations of our non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. Please note that some of our comments today will contain forward-looking statements based on the current view of our business, and actual future results may differ materially. All quarterly growth rates described during today’s presentation are on a year-over-year basis unless otherwise noted. I will now turn the call over to our President and CEO, Charles L. Treadway. Charles L. Treadway: Thank you, Jenny. Good morning, everyone. I will begin on Slide 3. On January 9, we announced the closing of the CCS transaction to Amphenol. We are excited about this transaction as it allows us to manage our leverage situation and create significant value for shareholders. As a result of the transaction, we repaid all of our existing debt and redeemed the preferred equity after placing a modest amount of new leverage on Vistance Networks, Inc. Our global team of innovators and employees are trusted advisers who listen to customers first and then deliver value, pushing past what is possible. Vistance Networks, Inc. will shape the future of communications technology. We deliver solutions that bring reliability and performance always in motion. Vistance Networks, Inc. will be the parent company of Aurora Networks, formerly known as the Access Network Solutions business, and Ruckus Networks. The company was renamed Vistance Networks, Inc. on 01/14/2026 as the CommScope name and brand conveyed with the CCS sale. We would then distribute the excess cash to our shareholders as a special distribution. Aurora Networks provides broadband network products. Aurora Networks’ comprehensive end-to-end product portfolio supports global service providers with innovative solutions. Ruckus Networks develops purpose-driven networking solutions enabling positive business outcomes in the world’s most demanding environments. An industry leader in innovation, the Ruckus Networks portfolio includes award-winning Wi-Fi, switching, and cloud-managed platforms. Now I would like to give you an update on the fourth quarter and full year earnings on Slide 4. I am pleased to announce that in the fourth quarter, Vistance Networks, Inc. delivered core net sales of $1.93 billion. We ended the year with cash of $923 million, an increase of 31% from the prior quarter. For clarification, Vistance Networks, Inc. delivered core net sales of $515 million, a year-over-year increase of 24%, and core adjusted EBITDA of $99 million, a year-over-year increase of 55%. Core adjusted EBITDA ended the year at $379 million, an increase of $242 million, or 176%, compared to the prior year. In addition to strong revenue and adjusted EBITDA in the fourth quarter, positive results were generated by strong performance by our Aurora Networks segment. On an annual basis, Vistance Networks, Inc. results include our two remaining businesses, Aurora and Ruckus. We beat our full year adjusted EBITDA guidance of $300 million to $375 million for core Vistance Networks, Inc. As we move into 2026, we are well positioned to continue to benefit from the upgrade cycles in both businesses. Based on our current visibility, we are projecting 2026 core business adjusted EBITDA in the $350 million to $400 million range. Charles L. Treadway: I would now like to give you an update on each of our businesses. Starting with Aurora Networks, shipments in Q4 were strong. Our FDX amplifier deployment with Comcast continues to go well, and this is reflected in our results, and they have been qualified by another major operator as they ramp up their upgrade plans. The full year net sales ended at $1.23 billion, which increased $397 million, or 47%, compared to the prior year. These increases were primarily driven by the continued deployment of our new DOCSIS 4.0 amplifiers. We continue to make headway with our suite of next-generation ESD DOCSIS 4.0 amplifier and node products. We had another record quarter of DOCSIS 4.0 amplifier shipments in the fourth quarter. We expect to begin shipping to them in 2026. Although we expect our legacy business to decline over time as customers continue to delay DOCSIS 4.0 upgrades, we expect legacy license sales to normalize in 2026, which could result in a decline in EBITDA. During the fourth quarter, we received approval for our node within a single device. This new node allows our customers to choose between either the 1.8 gigahertz ESD or FDX technology, expected to ship in 2026. This new product is now available and paves the way to DOCSIS 4.0. In the quarter, we also continued development on our next-generation products and the rollout of our BCAP solution with multiple large European service providers. The solutions deployed also include a mix of Aurora Networks nodes and remote devices, as well as those from other vendors, demonstrating the flexibility of our standards-based solution across multiple operator environments. The network upgrades include Aurora Networks’ cloud-native vCAP evo, providing significant enhancements to the operator service offerings, including advancing our relationship with Altice Labs. We also won a significant new order in Asia with remote OLT and a new PON chassis order in Europe. As stated before, we believe Aurora Networks is well positioned with decades of knowledge of our customers’ ecosystems and a broad array of new products for service providers to take advantage of the latest DOCSIS 4.0 upgrade cycle as well as evolving their legacy DOCSIS 3.1 networks. Charles L. Treadway: Turning to Ruckus Networks, core Ruckus Networks full year revenue ended at $687 million, up $166 million, or 32%, compared to 2024. Revenue was up 16% in the fourth quarter compared to the prior year. Core Ruckus adjusted EBITDA of $20 million was down $5 million, or 22%, versus 2024. The decline in adjusted EBITDA was driven by our continued investment in sales and higher incentive compensation. One of the key drivers of our above-market growth was the approximately $30 million year-over-year investment in sales initiatives. Core Ruckus Networks adjusted EBITDA for the year was $128 million, which was up $86 million, or 210%, versus the prior year. We are pleased with our revenue growth year over year, and the adjusted EBITDA we delivered, which allows us to invest in our strategic initiatives to fuel growth in 2026. In addition to our investment in sales, products, and technologies, we are pleased with our progress in our RuckusOne subscription business where we grew deferred revenue by 93%. We gained market traction with our Wi-Fi 7 solutions. As we continue to execute new commercial strategies within select verticals, we expect to continue to gain market share, as demonstrated by securing multiple deals in the fourth quarter, with major U.S. professional sports stadiums, and executed our vertical market strategy. We continued our focus on providing purpose-driven networking solutions for our customers and support model, including projects for upgrading aging Wi-Fi 5 and switching infrastructure for a luxury boutique hotel group in Europe. Subsequent to year end, we were also awarded a deal for a hospital in the Middle East where we will implement a complete Wi-Fi 7 switching network refresh. Ruckus Networks unveiled the new Ruckus MDU suite featuring innovative AI and Wi-Fi 7 wall-plate solutions for high-density residential environments. This new suite of solutions meets stakeholder demands through its ability to combine enterprise-level Wi-Fi analytics with cloud simplicity and automation. This enables more devices per unit, lower latency, higher reliability, and a reduction in manual troubleshooting. These outcomes will drive improved resident satisfaction. Ruckus Networks will provide its purpose-driven network solutions to the TGR Haas F1 Team. In January 2026, with our versatile and high-performing offering and pipeline of innovations, we began delivering cutting-edge connectivity across its factories in Kannapolis, North Carolina, Banbury, UK, and Maranello, Italy, allowing the team to deploy an advanced engineering solution and optimize operating cost with the ability to manage all locations remotely. Ruckus will be trusted to power critical race-day network operations to meet the demands of the pinnacle motorsport. We made progress across all of our initiatives in 2025, resulting in market share gains. Ruckus is well positioned for growth in 2026 driven by continued demand for our Wi-Fi 7 product offering and our strategic go-to-market investments. We expect to continue to grow market share and deliver low-teen EBITDA growth in 2026. Before handing the call over to Kyle, I would like to address the DDR4 memory chip supply issue that is impacting most companies in our industry. As we navigate this situation, we are actively working on several countermeasures, including product reengineering, alternative chip supply, and price increases. Both of our businesses use these chips. As you are aware, supply of DDR4 memory has tightened, and we are experiencing availability and pricing impacts. Vistance Networks, Inc. already has significant seasonality and variability in our quarterly results. As we have said in the past, due to the seasonality and project nature of our business, annual performance is the best measure. And with that, I would like to turn things over to Kyle to talk more about our full year and fourth quarter results. Thank you, Kyle, and good morning, everyone. I will start with an overview of our full year 2025 results on Slide 5. Kyle D. Lorentzen: For the full year, Vistance Networks, Inc. reported net sales of $1.93 billion, an increase of 40% from the prior year, primarily driven by the FDX amplifier deployments at Comcast and growth in Ruckus driven by Wi-Fi 7 products and subscription services. Adjusted EBITDA from continuing operations was $292 million, which increased by 1,095%. Adjusted EPS was $0.77 per share versus $0.10 per share. For core Vistance Networks, Inc., which excludes the CCS business, we reported net sales of $5.7 billion, which increased 35% from prior year, with adjusted EBITDA of $1.3 billion for the full year 2025, which increased 90% from prior year. We believe this is a better representation of our performance and future results as it excludes certain stranded costs and one-time write-offs that are included in the U.S. GAAP discontinued operations presentation. Vistance Networks, Inc. core adjusted EBITDA for the full year 2025 was $379 million, up 176% versus prior year. As Charles mentioned earlier, 2025 was a very strong year for us in all businesses with core revenue and adjusted EBITDA growth of 40% and 176%, respectively. As it relates to Vistance Networks, Inc., both Aurora and Ruckus rebounded well from weak 2024 results. Aurora revenue grew 47% over 2024 as Aurora benefited from the start of FDX amplifier shipments as well as a strong year in legacy product licenses as delays continued in DOCSIS 4.0 upgrades. The stronger revenue resulted in Aurora adjusted EBITDA growth of $146 million, or 138%. We would expect a continued decline in legacy business in 2026 and beyond as DOCSIS 4.0 picks up momentum. In core Ruckus, we saw year-over-year revenue growth of 32% driven primarily by improving market conditions. The stronger revenue resulted in year-over-year adjusted EBITDA improvement of $86 million, or 210%. Adjusted EBITDA in core Ruckus was helped by a roughly $10 million favorable net impact of one-time E&O benefits partially offset by higher incentive compensation. Turning now to our fourth quarter results on Slide 6. For Vistance Networks, Inc. continuing operations, net sales ended at $515 million, up $100 million, or 24% year over year. Fourth quarter ended stronger than we had expected. The increase in revenue drove continuing operations adjusted EBITDA for the fourth quarter to $99 million, up 55% versus prior year. Adjusted EPS for the fourth quarter was $0.17 per share versus $0.14 in 2024. Vistance Networks, Inc. backlog ended the quarter at $65 million, up $37 million, or 136%, and up 10% sequentially versus the end of the third quarter 2025, which was expected due to strong fourth quarter shipments. Order rates were up 38% sequentially in the fourth quarter. Vistance Networks, Inc. core adjusted EBITDA ended the quarter at $632 million, down $15 million, or 2%, versus the end of 2025 as a result of higher Aurora Networks revenue. Turning now to our fourth quarter segment highlights on Slide 7. Full year segment highlights are on Slide 8. Please refer to Charts 7 and 8 to view both the Ruckus Networks and core Ruckus Networks results. Starting with our Aurora Networks segment, fourth quarter net sales of $347 million increased 33% from the prior year. Aurora Networks adjusted EBITDA of $79 million was up $42 million, or 112%, from the prior year, driven by higher amplifier revenue and year-end license purchases, and we realized higher legacy product sales as customer inventory levels stabilized and DOCSIS 4.0 products increased. Aurora Networks is a project-driven business with timing of projects driving some volatility in quarterly results. We experienced a strong rebound in revenue and adjusted EBITDA in 2025, as our investments made over the last three years on product development positioned us for the pending upgrade cycle. In addition to new products, Aurora realized strong legacy product sales in 2025. The business remains well positioned to take advantage of upgrade cycles while offsetting declines in the legacy business. As we have discussed in the past, both revenue and EBITDA are expected to decline sequentially, although Aurora adjusted EBITDA is expected to be up year over year in 2026, both from a revenue and EBITDA perspective. The expected decline in legacy products, and the impact of stranded costs, would result in Aurora adjusted EBITDA being down in 2026 versus 2025, partially offset by improving DOCSIS 4.0 revenue. Core Ruckus net sales of $167 million increased by 16% versus 2024, and adjusted EBITDA in 2025 was impacted by our investment in sales and higher incentive compensation due to stronger-than-expected 2025 results. Core Ruckus backlog at the end of 2025 was 19% higher than 2024 ending backlog. We expect the stronger market conditions to remain in 2026. We continue to drive our vertical market strategies and new product initiatives and are well positioned to grow faster than the market as we move into 2026. First quarter revenue and adjusted EBITDA are expected to be in line with fourth quarter. Finally, early in the first quarter, the activity of the segment was reported as discontinued operations while the assets and liabilities of the segment were reported as held for sale. Net sales of the segment were $1.0 billion in the fourth quarter and increased 38% from the prior year. Turning to Slide 9 for an update on cash flow. During the quarter, we generated cash from operations of $281 million and free cash flow of $255 million. As we stated during our third quarter earnings call, we completed the divestiture of the CCS segment to Amphenol. We expected cash to be up $250 million from where we started the year, and it ended up $260 million. Turning to Slide 10 for an update on our liquidity and capital structure. During the fourth quarter, our cash and liquidity remained strong. We ended the quarter with $923 million in total available cash and liquidity of $1.54 billion. During the quarter, our cash balance increased by $218 million. In the quarter, we purchased no debt or equity on the open market. With our current excess cash and the addition of new modest leverage on Vistance Networks, Inc., we plan to distribute the excess cash to our shareholders as a special distribution. We expect the special distribution to be at least $10 per share and to be paid no later than April. We expect the distribution to be a return of basis for tax purposes. Post-distribution, we expect to maintain ample liquidity and significant financial flexibility. As of 01/31/2026, post-CCS transaction, the company, including CCS, ended the quarter with a net leverage ratio of 4.8 times. I will conclude my prepared remarks with commentary around our expectations for 2026. We will continue to focus on running the businesses and delivering results. On the performance side, we experienced strong growth in 2025 in both segments. As Charles mentioned earlier, we are projecting adjusted EBITDA in the $350 million to $400 million range in 2026. In our Vistance Networks, Inc. adjusted EBITDA guidepost, we have included approximately $30 million of stranded costs associated with the CCS transaction in 2026. During 2026, a large majority of this stranded cost will be eliminated and drive our initiatives, and we expect the stranded costs to be minimal when we move into 2027. Within our guidepost, we expect low-teen adjusted EBITDA growth in Ruckus as we continue to invest in sales and go-to-market initiatives. Adjusted EBITDA growth in Ruckus will be partially offset by adjusted EBITDA pullback in Aurora as legacy business normalizes after an unusually strong 2025. If you recall, we started out the year with a net leverage ratio of 7.8 times. Following the ODBN DAS transaction closing, we used those proceeds to pay down a portion of our debt. In January, we then announced the sale of the CCS segment in August 2025. During the year, all three segments successfully grew on both the top and bottom line. Vistance Networks, Inc., including CCS revenue, grew from $4.2 billion to $5.7 billion, an increase of 35%, and EBITDA grew from $700 million to $1.3 billion, an increase of 90%. We ended the year with a net leverage ratio, including CCS, of 4.8 times. It was a great year. And, again, I want to thank our employees, customers, and shareholders for their support in 2025. I am excited for 2026 as Vistance Networks, Inc. is positioned for another strong year. And with that, we will now open the line for questions. Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. Our first question comes from Samik Chatterjee with JPMorgan. Your line is open. Samik Chatterjee: Maybe if I can start on the memory sort of challenges that you firstly referenced in your prepared remarks. I just wanted to understand how confident you are about getting capacity as you work through 2026 at this point. Are you able to secure some of the capacity that you need? And how much of an EBITDA impact are you embedding from that in your 2026 guide? And then I have a follow-up. Thank you. Kyle D. Lorentzen: Okay. Yes. Thanks, Samik, for the question. As discussed in our prepared remarks, like most companies, we are dealing with tight supply, but we are working very closely with our suppliers and customers on availability. We have orders that have been on the books with suppliers for more than a couple of years. In addition to availability, we are dealing with the memory chip price increases, and we are passing on most of the price to our customer base, but there is a little bit of lag in our ability to pass it on. I believe we are in a relatively good position on supply at this point. We have also looked at redesign options in both businesses. We have successfully passed most of this cost onto our customers as a result of the memory chip price increases. Samik Chatterjee: And any impact on EBITDA that you are factoring in? Or is it— Kyle D. Lorentzen: We factored in about a $20 million impact as a result of the memory chip price increases. Samik Chatterjee: Got it. Got it. Okay. And for my follow-up, I think you mentioned $2.6 billion of cash on hand. You would add some modest leverage before doing the special distribution. How should I think about minimum cash that you want on the balance sheet to run the business in the current revenue profile? And given that you have the proceeds now, is there anything that prevents you from accelerating the announcement of the special distribution before April? Kyle D. Lorentzen: Yes. So from a cash perspective, think about it as a couple hundred million dollars of cash. That is probably conservative. I think we want to maintain the financial flexibility, maybe a little bit more cash on the balance sheet. So think about it as a couple hundred million, and then a little bit more cash on the balance sheet. On the distribution, we talked about what we are saying about the distribution in our prepared remarks. We expect the distribution to be at least $10 and the return of basis. So that is generally what we outlined regarding the distribution. Operator: Thank you. Our next question comes from Tim Savageaux with Northland Capital Markets. Your line is open. Timothy Paul Savageaux: Hi. Good morning. Question on the Aurora business. I am trying to get a sense of the outlook for the year. I know you talked about EBITDA declining. I imagine mix is a big part of that. On the top line, would you expect to be able to grow maybe a little bit on the top line given wins that you are talking about, especially in the U.S., and see that weakness reflected in margin decline and mix? Would you expect revenues to be down for the year in Aurora for 2026? Thanks. Kyle D. Lorentzen: Yes. Hi, Tim. I think we expect the revenue to be up. What is dragging the EBITDA down a little bit in the Aurora business is, as you mentioned, mix. We had very strong legacy business revenue last year, which comes at a little bit higher margin than our DOCSIS 4.0. And then the other piece that is impacting the EBITDA, as we mentioned in the prepared remarks, is the stranded cost. So in 2026, we will have some stranded cost. Then as we go through the year, those stranded costs will be removed. By the time we get to 2027, the CCS stranded cost impact will be minimal. But that will be a drag for us from an EBITDA perspective in 2026. Charles L. Treadway: Just to give you a little color on the market overall, we are seeing a resurgence in the DOCSIS upgrade activity that started coming back. Comcast is moving forward with FDX at better-than-expected levels. In general, we are seeing this uptick across the board, and especially where we have a strong position in amplifiers. That should be positive for us. Timothy Paul Savageaux: That was where my second question was heading. I guess you described a key DOCSIS 4.0 win beginning to ship in Q1 2026. Any way you can provide any color on the size of that opportunity or how meaningful that could be for the business in terms of that second Tier 1 MSO win in driving the amplifier shipments in particular to continued record levels? Kyle D. Lorentzen: We are not going to give the precise number, but it is a meaningful dollar amount. It is tens of millions of dollars of opportunity that comes with that win. Operator: Our next question comes from Amit Daryanani with Evercore. Your line is open. Amit Daryanani: Thanks a lot. Good morning, everyone. Maybe the first question on my side, it looks like at a high level, EBITDA dollars will be flat year over year in 2026 versus 2025. But it sounds like Aurora margins are going to dip down, Ruckus should go up. Wondering if you look at a more steady-state scenario, what do you think the optimal or the target margins should be for Aurora and Ruckus? Is there a specific revenue run rate you need to get there, or would you get that through some of the internal cost reduction initiatives? Kyle D. Lorentzen: Yes. I think the way to think about our guide really has to do with some of the things we talked about in the prepared remarks. We have our stranded costs, as we talked about, Aurora mix change. We also talked, and we have been talking about the last couple of quarters, some E&O reversals in 2025 that will not repeat. I think on the EBITDA side, as we look at both the businesses, what you see in Q4—those are the types of gross margins that we would expect moving forward. As we grow our revenue, which we expect to do in both businesses, we should see some EBITDA percent improvement just based on fixed-cost leverage to drive EBITDA percentage improvement. Amit Daryanani: I was really more wondering if there is a longer-term target from a margin basis on either of the segments that you can talk about? And then maybe just separately on Ruckus specifically, there seems to be a really good Wi-Fi 7 adoption cycle that seems to be inflecting higher. Just touch on what is the revenue growth you expect out of Ruckus in calendar 2026, and the competitive narrative you are seeing there against Cisco and HPE, Juniper, and everyone else in that space as well? Thank you. Kyle D. Lorentzen: Yes. So I think on the Ruckus side of the business, we expect growth faster than the market. We think the market is going to grow plus or minus 10%. Particularly the access point market is growing a little bit faster than the switch market. As we mentioned on the call, we believe there is strong market growth, but also with the sales investments we are making in the Ruckus business, we would expect to be able to grow faster than the market. We think we can grow revenue next year in the mid-teens level. Relative to margin profile, on EBITDA margins, think about Aurora at 20% adjusted EBITDA margins. If we are able to leverage some of our fixed costs, we think the Ruckus business we can manage into the low-20s on an EBITDA margin basis. Operator: Hi, guys. It is Brenden on for George. Wanted to get a sense of the customer concentration that is left in the overall Aurora Networks business. Is there anything that you can share about that? Just trying to get a sense for gross margins since you are investing in the business, and we are seeing that impact some of the adjusted EBITDA margins. Thanks. Kyle D. Lorentzen: Yes. So on the second part of your question, the E&O benefit was about a $25 million impact favorably on our gross margins. On an EBITDA basis, that was partially offset by higher incentive compensation that we paid just because we had a strong year. Net-net, the EBITDA impact that we got between the E&O and the higher incentive comp is about a $10 million favorable impact. On customer concentration, for Vistance Networks, Inc., our top three customers represent about 40% to 45% of the business. The businesses are very different. Aurora has high customer concentration. Ruckus does not. Presentation-wise, incentive compensation sits below the gross margin line in the P&L. Operator: Thank you. I am showing no further questions at this time. I would now like to turn it back to Charles L. Treadway for closing remarks. Charles L. Treadway: Thank you for your time today, and we appreciate your interest in our company. We would like you to have a great rest of your week. Thank you. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon. Welcome to Chime's Fourth Quarter Fiscal 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded, and a replay of this call will be available on our Investor Relations website for a reasonable period of time after the call. I'd like to turn the call over to David Pearce, Vice President of Investor Relations and Capital Markets. Thank you. You may begin. David Pearce: Good afternoon, everyone, and thank you for joining us for Chime's Fourth Quarter 2025 Earnings Conference Call. Joining me today are Chris Britt, our Co-Founder and CEO; and Matt Newcomb, our CFO. Mark Troughton, our President, will participate in the Q&A. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release in our earnings presentation posted on our IR website at investors.chime.com. We will also make forward-looking statements on this call, including statements about our business, future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause our actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our Form 10-Q filed on November 10, 2025. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements, except as required by law. With that, I'll hand it over to Chris. Christopher Britt: Thanks, David, and thank you all for joining us. I'm proud to report another strong quarter. In Q4, we again delivered results that exceeded our guidance, closing out a momentous year. But before I get into the details, I want to reflect on 2025 and preview plans for a year of acceleration in 2026. Despite headlines of a pressured consumer, we continue to see stability, consistent with what we reported last quarter. Member spending remained healthy in Q4 and with steady growth across, both discretionary and nondiscretionary categories among our tenured cohorts and across all income levels. We're seeing higher average deposit balances and consistent use of our liquidity products with lower losses, including all-time low loss rates on MyPay, and importantly, no signs of increasing job loss within our member base. Our business is rooted in primary account relationships and every day, largely nondiscretionary spend. So we're built for resilience. In times of uncertainty, our value proposition becomes even more compelling. Fee-free access to liquidity, payroll on-demand, high-yield savings, credit building, tools that help members build financial stability. In 2025, we delivered 31% revenue growth with strong operating leverage, including a 12-point year-over-year improvement in adjusted EBITDA margin to 10% in fourth quarter. In Q4, we also added approximately 500,000 net new active members, bringing our total to 9.5 million. In 2025, our biggest unlock was ChimeCore, our homegrown transaction processor and ledger. We're now 100% on our own tech stack after completing a multiyear migration in Q4. ChimeCore strengthens our cost advantage with a cost to serve of roughly 1/3 of large banks and 1/5 of regional banks. ChimeCore also reduces transaction processing costs by an estimated 60% supporting our long-term gross margin target of 90%. But the bigger impact for us is velocity, owing our own tech stack enables us to innovate faster and deliver the lowest cost products to our members. That unique advantage powered our 2025 product launches extending our lead over traditional banks and fintechs as the most rewarding place for mainstream America to bank. For example, Chime Card, our new secured cash-back credit card and first product built entirely on ChimeCore. Direct depositors earn 1.5% cash back on everyday spend, a 3% savings rate, which is 7x the national average, fee-free overdrafts, early access to pay, free credit building that increases average scores up to 70 points and access to a free ATM network that's larger than the 3 biggest banks combined, all at no cost. No other company offers this breadth of services for everyday consumers, and we deliver it with an over 70% transaction margin. Chime Card is already resonating at the top of the funnel and driving strong engagement. Over half of members in our new cohorts are adopting it, and those members are using it for over 70% of their Chime spend. This has resulted in credit spend as a percent of overall purchase volume increasing to 21% in December, up from 16% in September. As a reminder, spend on Chime Card earns us nearly 2x the take rate of our debit card serving as a multiyear tailwind to revenue growth. MyPay, our on-demand payroll product had a standout year. We scaled MyPay to over $400 million in revenue run rate in Q4, while generating transaction margin of nearly 60%, only 1 year after launch. We began 2025 with MyPay loss rates of 1.7%. And in Q4, we reached our steady-state loss rate target of 1%, significantly faster than planned. With losses stabilized and a new variable pricing model in place, we can now scale both access and profitability. We're focused on making MyPay available to more members with higher limits and on driving growth in transaction profit dollars while maintaining MyPay as the low-cost product in the market. We also launched Chime Workplace, our employer financial wellness offering, bringing Chime into the enterprise channel with MyPay at Work. We saw early traction in 2025, onboarding our first customers and channel partners, and we entered 2026 with strong momentum and a growing pipeline. More broadly, our progress across liquidity products showcases our structural repayment advantage that comes from deep primary account relationships and enables low cost, low credit risk liquidity offerings. Across SpotMe, MyPay and Instant Loans, we exited the year at over $40 billion in annualized origination volume. In 2025, we also cemented our position as the primary bank account of choice for mainstream America. In terms of brand consideration, Chime is now #1 for online banking, among Americans earning up to $100,000 a year based on third-party survey data. In 2026, NerdWallet named Chime the Best Checking Account and Best Online Banking Experience. And last year, TIME's National Consumer survey recognized us as the #1 brand in banking. Our marketing isn't just driving awareness, but also primary account intent. Recently, J.D. Power named Chime the leader in U.S. checking account openings, ahead of all other financial institutions. They estimate that 13% of all new checking accounts opened in the U.S. were at Chime, nearly 50% more than the #2 brand on the list, Chase, and above a long tail of other U.S. banking and fintech brands. Our momentum in 2025, combined with the launch of ChimeCore, sets the foundation for accelerating product velocity in 2026. This year, we're focused on 3 priorities to advance our growth agenda. First, we're going to extend our lead as the best financial partner for everyday consumers. In the coming weeks, we'll launch a new premium membership tier with an even more rewarding value proposition for our most engaged and higher-earning members, including those making more than $100,000 a year. It will deliver higher savings rates, exclusive perks and even better rewards, all fee-free while maintaining our advantaged unit economics. We're also expanding our product suite to meet the needs of our fastest-growing segment. Members earning $75,000 a year and more by introducing new value propositions to address more complex needs, deepen engagement and drive long-term growth and profitability. For example, we'll launch joint accounts as well as teen accounts and custodial accounts, so members can more easily manage shared family finances. This summer, we'll be expanding into investing, automated and self-directed, and we will support Trump Accounts. These offerings provide members with new and accessible ways to build wealth. With tax season underway, we're increasing awareness of Trump Accounts among millions of eligible everyday Americans, broadening access and participation at scale. That translated into strong early traction with tens of thousands of members initiating enrollment through tax filing with Chime in the first week alone. Our second priority is accelerating momentum in our enterprise channel. Chime is transforming the direct-to-employer earned wage access industry by delivering a full suite of financial tools and pay on demand for free for employers and employees. We've seen a strong response from the market, including a growing roster of employer partners and channel partnerships like Workday and UKG. Our offering is resonating with employees. Among early cohorts, adoption is high, and these members are transacting more and retaining better than new cohorts in our direct-to-consumer channel. In 2026, our focus is scale. Expanding to more employers and building enterprise into an evergreen customer acquisition channel. We're off to a strong start, and we recently announced several new employer partners and expect additional announcements in the very near future. And finally, we'll continue to deeply embed AI across Chime and into the member experience. A lot has been written about the financial literacy gap in our country, and it's real. More than half of U.S. adults lack basic financial knowledge. And even when people are educated, they often lack the tools, the support and consistency needed to take action and turn good intentions into lasting financial progress. And that's why we're excited to expand our consumer AI offering. Chime's relationship with our members is fundamentally different than most fintechs. The majority of our members rely on Chime as their primary account, and our average member engages with us 5 times per day. We sit at the center of our members' financial lives, and that depth of engagement allows us to not just provide insights but to take intelligent real-time action with and on behalf of our members. In Q2, we'll launch the next generation of our consumer AI offering, Jade. With the vision of delivering an always-on financial copilot embedded in-app, providing personalized guidance that helps members take action automatically and make smarter financial decisions. We're currently testing Jade with employees, which gives us valuable feedback ahead of launch. With Jade, we'll move from reactive tools to more proactive financial management, helping members spend smarter, save more, pay bills on time, borrow responsibly and build long-term wealth, transforming the way mainstream consumers manage their finances. Beyond Jade, AI is already transforming how we operate. Over the past 3 years, we've reduced our cost to serve by nearly 30% and increased our ARPAM by 23%, all while improving customer satisfaction levels. AI has driven step-change efficiency across customer support, reduced fraud rates by 30% since 2023 and meaningfully increased internal productivity. We boosted developer throughput cut code review times and more than doubled marketing creative output while reducing production costs. In disputes, automation has reduced time to decision by 30% while maintaining over 99% accuracy, delivering faster, high-quality resolutions for our members. This is the leverage of a technology-first financial services company embracing AI at scale, grounded in relentless member obsession. We innovate faster, deliver better experiences and operate at a fraction of the cost of legacy players. This allows us to deliver more value to our members and these advantages compound as we grow. Last year, we generated nearly $2.2 billion in revenue with approximately 1,500 employees. As we shared on our last call, we expect to continue to scale without needing to add headcount. I'll now turn it over to Matt to cover Q4 and our 2026 outlook. Matthew Newcomb: Thanks, Chris. Q4 capped off a landmark year for Chime, our shareholders and our financial position. We went public, strengthened our balance sheet and continued to drive strong financial results. In 2025, we delivered 31% revenue growth and significant operating leverage, growing our adjusted EBITDA margin by 12 percentage points year-over-year in Q4, each ahead of our guidance. And we expect to maintain this momentum in 2026 with a clear line of sight to strong growth and further operating leverage, including GAAP profitability for the balance of the year, an important milestone that we expect to achieve ahead of previous internal expectations. But first, let's discuss Q4. Our third consecutive quarter of strong results as a public company when we again exceeded our prior guidance on both top and bottom lines. We grew revenue by 25% year-over-year and transaction profit by 31% year-over-year in Q4, compounding growth even as we fully lapped 2024's launch of MyPay. We've done this by continuing to execute across multiple dimensions of growth: active members, average revenue per active member or ARPAM, and transaction margin. In Q4, we added approximately 500,000 net new active members quarter-over-quarter and 1.5 million year-over-year. Of course, our actives aren't just any actives. They're deeply engaged, a result of our relentless focus on serving our members in a primary account capacity. Our average active member transacts with us 55 times per month that is very different from other fintechs with single-point solutions whose comparable metric is often in single digits. We have a fundamentally different customer relationship. Primary accounts drive consistent and resilient top of wallet spend, provide us an underwriting advantage through our privileged repayment position and give us a unique opportunity to cross-sell and deepen engagement even further over time. This results in consistent, durable and long-lasting member cohorts. Our oldest cohorts are now nearly a decade old and are generating more transaction profit now than they did pre-COVID, and that's net of churn. And our cohort performance is getting even better. Building on our success in H1 with our early engagement initiatives, which made it easier to get started with Chime. In Q4, we improved the quality of our new cohorts in several other areas. First, in Q4, we saw a record high number of new members convert to direct deposit. Second, we continue to grow engagement. Our new cohorts are attaching to more products faster, including with many of the products we launched and scaled in 2025, like our new Chime Card, MyPay, Outbound Instant Transfer and Instant Loans. Members using 6 or more products each month now make up 15% of our actives, up from 5% 2 years ago. Finally, fueled by these increasing levels of product attach, we've also grown monetization. This is particularly true in our newest cohorts, we are seeing members do more of their spend on Chime Card, compared to prior cohorts that transacted more on debit. Chime Card earns us approximately 175 basis points on purchase volume, compared to under 100 basis points on debit. Taken together, we've strengthened the quality of our new member cohorts while continuing to acquire at attractive CAC, yielding 5 to 6 quarter transaction profit payback periods, and LTV to CACs of over 8x. In Q4, overall ARPAM increased 5% year-over-year and 21% over 2 years to $257, driven by the strength in both payments and platform-related revenue. Our tenured cohorts have reached ARPAM of nearly $400. In terms of transaction volumes, we continue to see very steady spend trends consistent with a resilient consumer. Combined purchase an OIT volumes grew 16% in Q4, fueling payments and OIT revenue growth of 21% year-over-year, an acceleration from Q3, driven by higher take rates on Chime Card and OIT. Platform-related revenue increased 47% year-over-year or 37% year-over-year, excluding OIT. One additional contributor to ARPAM growth is Instant Loans, our up to $1,000 installment loan product with terms of 3 to 12 months. Instant Loans complement our short-term liquidity product offerings to meet our members' larger, more episodic liquidity needs. We originated approximately $400 million of Instant Loans in 2025. And as of Q4, 10% of active members had an open loan. We expect Instant Loans to scale further in 2026 and like we demonstrated with SpotMe and MyPay, unit economics improve significantly as the portfolio matures. We've seen as much as 50% lower loss rates for repeat borrowers compared to first-time borrowers. In Q4, we increased transaction margin to 72%, up from 69% in Q3, a result of delivering on 2 critical strategic priorities that we committed to as part of our IPO last summer, completing our ChimeCore migration and reducing MyPay loss rate to 1%. In addition to the velocity and innovation benefits that ChimeCore unlocks, the final stage of our migration also drove a 200 basis point increase in our gross margin, helping us close in on our long-term target of 90%. This improvement alongside our faster-than-expected progress to our 1% steady-state loss rate target on MyPay, helped us grow annualized transaction profit to $1.7 billion in Q4, up 31% year-over-year. Finally, alongside our strong growth, we continued to drive operating leverage with $57 million of adjusted EBITDA in Q4. In Q4, non-GAAP OpEx as a percent of revenue fell 9 percentage points year-over-year. Our adjusted EBITDA margin growth accelerated further with 12 percentage points improvement year-over-year in Q4, the largest margin improvement of any quarter in 2025. In our first call as a public company, we committed to delivering an uptick in profitability in the back half of 2025, and that's exactly what we did. The 57% incremental adjusted EBITDA margin we delivered in Q4 exceeded our initial guide as well as the higher bar we set for ourselves on our last call. So meaningful progress last year, but we're even more excited about the opportunity ahead. We believe we're extremely well positioned entering 2026 with a number of tailwinds that will support both continued strong top line growth, even faster transaction profit growth and further bottom line margin expansion this year. First, we're the market leader in account openings and the #1 brand in banking. In 2026, we expect to continue delivering steady and predictable growth in our core business, powered by a growing member base and their resilience everyday nondiscretionary spend. Second, we have several strong top line tailwinds exiting 2025, including Chime Card, driving higher take rates, a new variable MyPay pricing model, unlocking further scale and higher monetization. In our Instant Loans products ramping across our member base with strengthening unit economics. Third, our new products and go-to-market priorities that Chris outlined, including new premium membership tiers, investment accounts, joint accounts and Chime Enterprise will set the stage for continued growth in 2026 and in years to come. And finally, we'll do all of this without needing to grow our headcount, thanks to efficiencies from ChimeCore, and our ongoing AI initiatives. Turning to our guide. In Q1, we expect revenue between $627 million and $637 million, resulting in year-over-year revenue growth between 21% and 23%. We expect adjusted EBITDA between $90 million and $95 million and adjusted EBITDA margin of 14% to 15%. For full year '26, we expect revenue between $2.63 billion and $2.67 billion, resulting in year-over-year revenue growth between 20% and 22%, and adjusted EBITDA between $380 million and $400 million. An adjusted EBITDA margin between 14% and 15%. This represents 8 to 9 points of margin expansion year-over-year and an incremental adjusted EBITDA margin of over 55%. And as mentioned previously, we expect to be GAAP profitable for the balance of the year. There are a few things to keep in mind about our Q1 and full year outlook. First, we have a seasonal business, specifically, Q1 is tax refund season, but we like to call the most wonderful time of the year. Each Q1, with the increased activity resulting from members receiving their tax refunds, we see seasonally higher purchase volume, ARPAM, transaction margin and net new active member additions. And in each Q2, we see a normalization of these seasonal trends. with significantly fewer net new active member additions than in other quarters and lower sequential purchase volume, payments revenue and transaction margin. This Q1, we also expect to benefit from larger-than-usual tax refunds resulting from the One Big Beautiful Bill Act, which would magnify the seasonality. It's still early. We haven't yet hit the peak of tax season, and the timing of this year's refunds are a bit later than in the years prior. That said, so far, refunds are tracking higher, in line with our expectations. More broadly, for the full year, we will continue making progress across our growth framework, active members, ARPAM and transaction margin. As the market share leader in new account openings, we expect to maintain strong momentum and net new active member additions this year. For the full year, our goal is to add approximately 1.4 million net new actives at attractive ROI, building on the increasingly strong cohort quality we saw in Q4. We will also continue to drive ARPAM growth as we scale Chime Card, MyPay and Instant Loans, helping us grow LTVs and reinforce our strong cohort quality. And finally, we expect transaction margins remain consistent with Q4 '25 level as we realize the ongoing benefits of lower transaction processing costs from our ChimeCore migration. From an OpEx perspective, as Chris noted, we're excited about our road map this year and plan to invest in sales and marketing behind our new product launches, particularly in Q2 when we plan to launch our new premium membership tier. With that, I will open it up to Q&A. Operator: [Operator Instructions] Our first question comes from Tien-Tsin Huang from JPMorgan. Tien-Tsin Huang: Great results for you guys. I want to ask a couple of member questions, if that's okay. Just curious, and thanks for the outlook and all the details that you gave. I know there's been a lot of talk in the past about widening the product funnel. I'm just curious if you're getting the member behavior reaction that you're looking for from those actions and how you might do that differently in '26 versus '25 in terms of member growth focus? And I heard, Chris, you talked about the premium tiering and the new strategy there. I think that's great. I'm curious, are you solving for new member growth there or higher engagement retention, that kind of thing as you're thinking about the outlook in '26 and beyond? Christopher Britt: Thanks, Tien-Tsin. Yes, maybe just as a setup and a reminder for folks on the call. A little over a year ago, we kicked off a series of initiatives to try to make the top of the funnel, even wider, if you will. So we did things like made it easier to fund the Chime Account, to get access to certain features like credit building and our Outbound Instant Transfer feature, right out of the gate. And I mean, I think there's no question that this has been a positive development for our top of the funnel numbers and you can see it in the results. In the prepared remarks, we talked about the J.D. Power survey that showed Chime is opening up more checking accounts than any player in the industry, 50% higher than the #2 player, Chase. And so going forward, we intend to continue to be the market leader in terms of new checking account openings. We're going to do that. I think with -- we're excited about the new product innovations that we'll be rolling out in some of these new channels that I'm sure we'll talk about more on the call to ignite our growth. And we're going to do that while continuing to manage towards increasing levels of profitability. We're also seeing that these new cohorts that we're bringing in are delivering high-quality members into the fold and maybe Matt can talk to what we're seeing on that front. Matthew Newcomb: Thanks Chris. Yes, I agree. We feel really good about the overall pace of headline net new actives. But I think what's most exciting and really what's even more important for the business is the quality of our new active cohorts. That's continuing to get stronger and stronger. We mentioned, we've been setting record highs in terms of the number of new members, converted to direct deposit or early engagement initiatives have been a contributor to that. We continue to drive very meaningful lift on engagement, and we're also driving higher monetization. That's particularly true among our newest cohorts that are adopting Chime Card at a very strong rate. So we're feeling very good. And I think the proof is in the pudding. You're seeing that in our cohort metrics. Our transaction profit payback periods are strengthening. They're now at 5 to 6 quarters that supports a long-term LTV to CAC over 8x. And then at the enterprise level, the strong cohort performance is translating into very strong growth in profitability, which, again, we're balancing goals there alongside our -- so again, we feel good, not just at the quantum, but also importantly, the quality of our active member growth to enter the year. Christopher Britt: And maybe just a follow-up on the other questions you asked, Tien-Tsin, I don't think we would do much in the way of anything different. We really like this opportunity to have more active members in the mix and have them have a relationship with Chime because we know that the point in which in someone's life that they make a conversion to direct deposit is different. It might be the results of a life change or a new job. And so the more people that we can have relationships with so that we're in the mix at that moment of time, we think that's a great place to be. And as it relates to the question about the new product sort of membership tiering, that's really just based on our analysis of our member base and the fact that we can see we're growing among our higher income level members. We're growing that at a nice clip. We want to make sure that we have products and services that really deliver great value to them. So that's what you should expect to see in new tiers, members who give us more of their direct deposit are going to get even more rewarding experience using Chime as their primary bank account. So yes, I guess it's intended to open up that segment of the market even further and make sure that we are -- give ourselves the best chance of retaining those higher income numbers as well. Tien-Tsin Huang: Like Chris, anything to call out on the competitive landscape, thinking about what you're seeing from your peers? And is that impacting member behavior at all? And I'm especially curious as we go into tax season, if you're seeing any change in customer acquisition strategy from the group? Christopher Britt: Well, I think like Matt said, tax season is always a great 1 for us. We have a tax prep service. We're seeing huge engagement with that. We're continuing to see lots of -- even though it's early, we're seeing lots of tax refunds into the accounts. We're seeing people signing up for Trump Accounts and kicking off that process within the tax filing process, which is really exciting. And I just think a great development for our country, particularly the kind of everyday consumers that we serve. Yes. Of course, we're always looking across the competitive landscape. Most of the primary checking account relationships in America reside at the big banks, and we continue to outperform relative to those players. And of course, we're always keeping an eye on other fintechs that are trying to get into the area of the business that I think we've been able to prove some success in. So we're monitoring, but we feel really good about the position that we enjoy right now. Operator: We'll move next to James Faucette with Morgan Stanley. James Faucette: I appreciate all the color here. I wanted to ask you just on kind of the activity levels and continuing to add users at a pretty good clip. But wondering how we should think about that in context of your efforts to really ungate more products to more of your customers? What you're learning from that process? How we should expect refinement during '26? And I guess, really what we're kind of looking at is -- is there a possibility that we could even see some acceleration from a pretty consistent rate of member growth? Christopher Britt: Right. Thanks for the question, James. Like we said, we feel really good about the efforts and the impact of opening up the top of the funnel, and Matt sort of shared some of the highlights. Our payback periods on our customer acquisition are as good as they've been in a really long time and getting better. So we feel like these early engagement initiatives are absolutely playing out well for us. We don't anticipate any major changes to them. We're constantly trying to figure out ways to make it even easier to fund an account and to get engaged, to get access to services that are appealing to you, we're going to continue to innovate and test services that allow our members to gain access to trial, temporarily getting access to higher-level tiers if you're not quite qualified for it yet. So -- we think there's going to be lots of ways to give people a taste of all the benefits of Chime, so that when they have that moment -- that life moment when it's time to convert a primary banking account relationship that we're hopefully on that consideration set for them. And at the same time, we're seeing huge success building a brand and not just awareness of the brand, but the building a brand that is trusted and stands for really a new way to manage your money. It's authentically helpful and easy and in most cases, free. James Faucette: Yes, makes a lot of sense. And then I wanted to touch quickly on credit. Credit mix seems to be improving nicely, especially following the Chime Card relaunch. Any color there? In particular, how has customer response been to rewards on the secured card? Are you seeing incremental spend per user or other things? And I'm just wondering if and how this may tie into some of the plans you have to be attractive even to consumers that are making above $100,000 a year? Matthew Newcomb: Thanks, James, for the question, this is Matt. Yes, we're really thrilled about the early progress on Chime Card. Again, that's our new secured rewards credit card. And we do think this is going to be a multiyear growth tailwind for us. I think you know this card earns up nearly 2x the take rate versus debit. So it's a really exciting opportunity for us to continue to improve our unit economics. If you just take a look at credit mix as a percentage of purchase volume, you saw that increase from 16% when we launched the card in September to 21% in December. So a 30% increase just in the past few months. And in particular, we're really seeing very strong adoption among our newest cohorts. Our newest cohorts over half of them, half of our new members are spending with the Chime Card. Those that do adopt it are using it for over 70% of their Chime spend. And on your question, these members are spending more than members who've not adopted Chime Card. So net-net, we're seeing really strong credit mix for these new cohorts. The credit mix of new cohort specifically is close to 50%. And on a go-forward basis, we're -- we think there's a lot of opportunity to continue to drive this higher, including through this year's product road map and specifically our new premium membership tier, where we're going to offer even better rewards and exclusive perks while maintaining pretty similar take rates overall. Operator: We'll move next to Andrew Jeffrey with William Blair. Andrew Jeffrey: Great to see things play out as anticipated in the business. I thought I might drill down a little bit into Instant Loans because it feels like that product is moving a little bit more front and center for Chime? And -- it's an area where we've spent a lot of time and are very bullish, just broadly speaking, short-term consumer liquidity products, which are so much better than alternatives in the market, of course, Instant Loans and MyPay included. Could you just sort of frame up for us how the credit performance is in that particular product, what the growth opportunity is? And -- maybe just your perspective on how this suite of liquidity products really enhances consumer value as I think there's some confusion or some pushback in the market about fairness and implied APRs and all the kind of stuff that folks don't like about payday loans and credit revolving credit. So kind of a far-reaching question, but I'd just love to get some perspective on your products, in particular, in our overall view. Mark Troughton: Yes, sure. This is Mark. Just to frame Instant Loan. Instant Loan is an installment loan product that, as Matt indicated earlier that our members use for their larger, more episodic needs. So unlike MyPay or SpotMe, which tends to be intrapay period liquidity, this is longer duration. It's anything from 3 months up to a year, we're testing right now. And right now, we're looking at limits anywhere between $300 and $1,000. So it's really for -- it's really used for sort of larger longer-term liquidity requirements amongst our members. And this is something we've been testing and you guys have heard us talking about this. We've been testing this for some time now and really refining the risk models and making sure we have this really solid. We're very excited about the performance in '25. We did $200 million of originations, and we reached a 10% product attach rate by the end of Q4. And like all our lending products, Instant Loan is only available to our direct deposit members, who have been with us for a period of time. So this is a product, where we're actually able to use the privileged data we have in terms of their behavior and our privileged position at the top of the repayment stack to sort of to manage the risk here and therefore, actually offer rates that are unmatched for these members in the market. So as you -- like any lending product here, what tends to happen is as you start off and certainly with your first-time loans, you tend to have higher losses. But what we're seeing -- what we've really seen here, as Matt has indicated, is as much as a 50% reduction in our repeat loans. And we actually expect the loan performance on Instant Loan to mirror the trajectory that we've seen with SpotMe and MyPay over the years, so it's now at the point where it really is ready to scale. You started to see some of that in Q4, and you will see that throughout '26. And it really has become a sort of growth platform for us that we think is going to be a much more meaningful contributor to transaction profit over time. Having said that, these are riskier loans, they're longer duration, higher limits. So you're not going to see the sort of attach rates that you would see with something like MyPay. But if you were to look at the APRs on a product like this, this is well within the sort of lending 36% APR cap. So this is not a -- to compare this to a payday loan or even some of the sort of more creative products out there would be a huge injustice to this product. In fact, it's such a great product. This is actually our highest NPS product that we have today in our portfolio. And we're really, really excited about its prospects for '26. Andrew Jeffrey: Yes. It sounds that way. And just to be clear, Matt, will Instant Loans be transaction profit margin accretive in '26 or comparable to the rest of the company, I guess, the way to ask the question? Matthew Newcomb: Yes. We do expect this to be a contributor to transaction profit dollars, particularly as we exit the year. Andrew Jeffrey: But perhaps lower margin with the opportunity for going forward. Matthew Newcomb: Yes. Look, I think from a marketing perspective, it will look different than other parts of our liquidity products, but this is also, as Mark mentioned, something that will continue to improve over time as our portfolio matures, as the portfolio shifts to more repeat borrowers for longer duration. Again, very -- kind of a very similar playbook that we saw with SpotMe and MyPay, where unit economics just get better and better over time. Operator: We'll take our next question from Will Nance with Goldman Sachs. William Nance: I was hoping to zero in on some of the commentary around the new variable pricing model for MyPay? Obviously, really great traction in getting the margin profile to where it is and losses down to 1%. With the new variable pricing model, could you talk about your expectations for how that will impact both the ARPU and the transaction margin starting in the first quarter? And then -- maybe you can elaborate a little bit on some of the commentary around expanding access. How should we think about that in the context of, obviously, higher revenue from higher pricing, is there room to maybe tweak up the losses to expand access? Would you expect a lot of that to flow to the bottom line and ultimately to the margin? Just how you think about some of those moving pieces? Christopher Britt: Thanks, Will. Yes, just to tee this up a bit, I think we're really excited about the tailwind that we have with MyPay from a revenue perspective going into '26 here. We think it's one of many tailwinds that we have. We talked about Chime Card adoption, talked about Instant Loans, but we are excited about some of these changes, both on the revenue side, but also in terms of opening up the availability to more folks. So maybe I'll pass it over to Mark since he oversees that part of the business. Mark Troughton: Thanks, Chris. Will, yes, as we indicated in the prepared remarks, MyPay really was a breakout for us in '25, $400 million in revenue, transaction profit margin by the end of Q4, almost 60%. And that's really in the first year of this as a lending product, which we were very excited about. I think, as you know, we started MyPay off with a fixed fee pricing model. So it was free if you received your advance within -- after 24 hours, and it was a $2 fixed fee if you did it immediately. What we realized pretty quickly was that we were trying to scale the product trying to give access to bigger limits to more people faster, that fixed fee actually became a hindrance to our ability to be able to do that. And so we shifted it to a variable pricing model that really will allow us to leverage this much more a growth platform and sort of scale MyPay over time. We did that in a series of actions really that started in Q4 last year and culminated in the middle of January this year. So you would already have seen some of the increase in MyPay yield already in Q4 over Q3. There is more to come in Q1 and beyond. Having said that, it's still very early days. We -- with respect to the latest pricing changes, we haven't even had our first full calendar month yet. So I think it's fair to say that -- this is meeting our expectations, and we're excited by the impact of this. But we're not going to be giving specific guidance on the MyPay impact individually for 2026, but it is built into our overall revenue and EBITDA guidance for the year. And I think what you're going to see with us to come back to the second part of your question, we do see opportunities going forward for us instead of necessarily maintaining that 1% loss rate for us to really optimize MyPay more effectively from a net experience and a transaction profit perspective. So this is going to be a strong growth platform for us going forward. And we're going to continue to do that while maintaining the lowest cost product in the market. William Nance: That's great. Appreciate that color. And then just on the user growth, obviously, pretty strong this quarter, and I hear the commentary on your expectations for the full year. I'm just wondering if you could talk a little bit about the trajectory of Chime Enterprise over time with some of the partners, and it sounds like more to announce in the near future. How are you thinking about when Chime Enterprise could be a more meaningful contributor to the user growth? And is that something we could see as we progress through the year? Mark Troughton: Sure. I'll continue with that one. In terms of an enterprise, we continue to be really excited and there's the reason that it's 1 of our priorities for 2026 as Chris outlined upfront. We're seeing the value prop is resonating really well with employers. It's a broader suite rather than just wage access, totally free from very expensive offerings out there. And we find that any employer that we speak to really has a solid installed base of prime members, which gives us a strong differentiator. And so I think you started seeing that manifesting itself in this steady drumbeat of employers that we've been announcing, and we just announced another few partners here earlier this week. Look, it is a new go-to-market motion for us, and it does take longer than ramping up our consumer channel. But we have a solid pipeline. We expect to be making some more announcements here in the near future. We're not giving specific guidance related to adds from enterprise. But again, those are included in our overall guidance. One piece of data I can share is that we -- at our employer partners, we are not only seeing strong adoption, but what we're actually seeing is higher monetization and greater retention on our enterprise members than we're actually seeing in our direct-to-consumer channel. So this is something we continue to be excited about. Operator: We'll move next to Jeff Cantwell with Seaport Research. Jeffrey Cantwell: I wanted to ask one on your LTV, the CAC. I want to ask if you can drill into that customer acquisition cost side of the equation. Can you maybe talk about what the trend is right now? Because you added 500,000 active members this quarter just really strong. So I'm curious whether you made any changes in terms of how you acquire customers? And then related to that, can you maybe unpack or help us understand what's driving that LTV to CAC, you're highlighting in the deck? Is that more of the impact when we spending the new products and the penetration is driving LTV higher? Or how should we be thinking about LTV versus CAC? Christopher Britt: Yes. Thanks for the question, Jeff. So what I would say first on the new customer acquisition side is very consistent trends that we've seen in the past. Over 50% of new actives continue to come to Chime via organic and member-driven channels like referrals that continues to be a star of our show. We've actually made some gains on the CAC side year-over-year. CAC for the full year in 2025 is actually down about 10% relative to the prior year. A lot of the early engagement initiatives that Chris mentioned earlier about making it easier to get started with Chime were big contributors to that. So doing really good, I think, about the overall trajectory on CAC. I think probably even more so, are we feeling good about the LTV gains that we're seeing. And that I think is probably the primary driver here of the strong print on overall LTV to CAC of north of 8x. A few of the contributors to that have been the overall step-up in transaction margin resulting from our ChimeCore migration. That's driven a step-up an additional benefit has certainly been on MyPay loss rate improvement. You've seen that build into our transaction margin as well. And then third, again, particularly among our new cohorts. Chime Card is really resonated. Again, where new cohorts are seeing close to 50% credit mix. And of course, credit earns nearly 2x the take rate compared to debit. So -- yes, I guess, in summary, we're mentioning strong progress on both sides, both CAC and LTV. Jeffrey Cantwell: Appreciate it. I want to ask you about ARPAM. As you're thinking about 2026, do you mind just telling us what is the right growth assumptions you have for ARPAM. It seems like you have, I'm hearing you, it has good product momentum right now across Instant Loans and MyPay and others. And so maybe just talk about that and what you see as some more immediate drivers impacting ARPAM over the course of 2026? Mark Troughton: Yes. I think, Jeff, a lot of the similar drivers that I mentioned will flow through to 2026 as well from an ARPAM perspective. So Chime Card, I think, is probably the a great one to start with, again, for 2x the take rate. This new MyPay pricing and monetization model that we have will also be a contributor to ARPAM growth we expect this year, and Instant Loan as well is a third contributor to ARPAM growth this year. So multiple exciting tailwinds of products that we've already launched and are really scaling. And then beyond that, we're also very excited about the new product road map that Chris mentioned, again, across new membership tiers, investing products, joint accounts and other. Operator: We'll move next to Adam Frisch with Evercore ISI. Adam Frisch: Really nice update here and execution. I want to hit operating leverage for a sec. Obviously, a lot of the algorithm depends on growth on the top line, but are the cost levers still the same heading into the next few years? And if you could talk about maybe the top few biggest levers is core at the top of the list? Or has a lot of that been realized? Where is that leverage going to come from? And then on MyPay, losses reached 100 basis points. Is there still room to improve further? Or is this the level that you want as the right balance between growth and loss? Christopher Britt: Yes. Thanks for the question, Adam. So I think the high level answer here is, yes, we do continue to expect a continued trajectory of strong operating leverage. You've seen that across every part of our base, and you should expect to continue to see that across every part of our OpEx base this year. As you mentioned in the remarks, now that we have ChimeCore behind us, and of course, a result of our ongoing AI initiatives. We can just do more. We can move faster. We can innovate more quickly and be more nimble. And that's allowing us to get more done without needing to grow our headcount. So we are excited about continued operating leverage, again, across the business. I'll pass it to Mark to talk a little bit about MyPay loss rate. Mark Troughton: Yes. Adam, I think your hypothesis is exactly right. We will continue -- everything else being equal, we will continue to see improvements in those loss rates if we were just lending to the same people because we've got to get more and more efficient, and we're still seeing meaningful improvements in our loss rates in our understanding. And we're also just benefiting from older -- more tenured members who have more loans. So there would be a natural decrease in loss rates for MyPay over time. I think what you're going to see us do, though, is reinvest some of those in growth of MyPay to continue to expand attach and adoption rates, limits and optimize overall transaction profit from MyPay. So my guess is you'll see something probably a little bit higher than that in the future, but it will be far more than compensated for by an increase in revenue. Adam Frisch: Sorry, Mark, did you say a little bit higher than 100 going forward, but more revenue to show for it? Mark Troughton: I think it's going to be in a range. It's going to be in a range, a little bit below that to a little bit above it. I'm not giving a specific guidance with respect to where it would be. I think what we're really trying to do is to give you a sense of the -- conceptually how we're thinking about using MyPay to drive greater transaction profit going forward rather than just meeting that 1% loss rate threshold. Adam Frisch: Got it. So maybe it flexes up a little bit when you have a big marketing campaign in a quarter, but it goes lower than that when you digest the growth and that's just the way the business is going to run. That makes sense. Operator: We'll take our next question from Sanjay Sakhrani with KBW. Sanjay Sakhrani: I just want to follow up on some of the questions that were asked for. Maybe just one on the strong uptake on the new products and initiatives, including the fact that you have stronger tax refunds this year. I'm just curious, as we think about what's embedded in the assumptions that you guys have, how much of that have you sort of factored in? Christopher Britt: Yes. Thanks for the question, Sanjay. So we are, as I mentioned, expecting an outsized tax season this year as a result, again, of the One Big Beautiful Bill Act. It's -- we haven't yet seen the peak of tax season. It is the timing of refunds are a little bit later this year than we've seen in years past. But again, we do expect the magnitude to be higher. And so far, we are seeing that they are higher. If you take a look at the average tax refund as of the end of last week, it was up double digits compared to the average tax refund at the same time last year. So we have more to go, more data to see here in the next few weeks. But so far, that's what we're seeing. And what we're seeing so far is embedded into our guidance. Operator: We'll move next to Darrin Peller with Wolfe Research. Darrin Peller: Some of my questions were asked, but I want to hone in a little bit more on the products, the product velocity you guys have been putting out. Obviously, it was very strong with MyPay this year. When we think about the new products that will contribute in your view, the most in '26 incrementally above and beyond the pricing and the MyPay dynamic beyond that, what are you most excited about in the year ahead? And I guess, related to that also on the Chime Enterprise or workplace, it sounds like it's going really well in terms of users, partners to add and employers to add. But is that incorporated in the 1.4 million of new users? I would hope that would actually be somewhat additive versus last year where I think you did about 1.5 million. So just how should we think about that, too? Christopher Britt: Thanks for the question. Look, when we look out over the course of next year or this year, I should say, and what product initiatives we're most excited about having impact in terms of the revenue for the business. I think clearly, the continued adoption of Chime Card is going to be a major tailwind for the business. We're seeing it at the top of the funnel. We're also seeing more and more of our existing installed active debit card using member base take this card as well. And then I think when we launch this next new premium tier, we believe that it's also going to continue to drive even more adoption of this core secured credit card and drive even more spend through that product category, which is going to be really helpful to the business. I would say those are -- those 2 initiatives are probably the 2 most likely to have an impact for 2026. I don't know what you'd add to that. Mark Troughton: No, I think that's correct. In terms of the enterprise, I think as we indicated earlier, those we're not going to give specific guidance related to enterprise ads. Those are included in our overall guidance. But this is a new business. So we're obviously going to be conservative in terms of what we're putting forward with respect to enterprise. Operator: At this time, we've reached our allotted time for questions. I'll now turn the call back over to Chris for any additional or closing remarks. Christopher Britt: Great. Thank you all for joining me today and thanks to the Chime team for incredible execution. We look forward to spending more time with you all soon. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.