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Matthew Beesley: Okay. Good morning, everyone. Welcome to Jupiter's full year results for 2025. I'm Matt Beesley, Chief Executive at Jupiter, and I'm joined, as always, by Wayne Mepham, our Chief Financial and Operating Officer. You will have already seen results in our morning's release, and Wayne will talk you through the details shortly. But from a financial perspective, last year was a challenging one for Jupiter. We started the year with materially lower AUM. We see multiple years of outflows. Client sentiment for risk assets was limited and short-term performance was not where we wanted it to be. But we remain focused on what we could control. Careful planning and deliberate management actions many taken in years before this one allowed us to navigate these challenges and make meaningful progress against our strategic objectives. Across cost savings, capital allocation and revenue generation, we have done what we said we were going to do, and in many cases, quicker than we had initially expected. Moving into 2026, we are demonstrably in a stronger position than we were 12 months ago. Many leading indicators are now firmly pointing in the right direction, giving us increased confidence on being able to deliver on our targeted 70% cost/income ratio. Investment performance has improved across all time periods. Client demand, particularly for risk assets, has grown, and we generated positive net flows for the first time since 2017. We've also completed 2 acquisitions, the larger of which not only avoided any client overlap, but positioned us to move into a new part of the U.K. market. Importantly, we also end the year with a highly engaged and client-centric workforce. One particularly pleasing aspect of today's results is that investment performance, crucial for any active manager and often a lead indicator, has markedly improved over all time periods. Our key performance indicator is measured across 3 years, over which 68% of mutual fund assets outperformed their peer group median compared to 61% last year. Nearly half of our total AUM was in the top quartile on the same basis. On a 5-year view, 75% of our AUM outperformed with more than 60% in the top quartile. But the biggest move we saw was over 1 year, where the figure increased by 42 percentage points to 84% of AUM outperforming with nearly 70% of our AUM in the top quartile of its peer group. A number of funds have had really strong performance over this albeit shorter time period, including both dynamic bond and strategic bond, which moved from fourth quartile to first quartile. A number of funds with our Merlin multi-manager capability also moved into the first quartile and the whole range is now above median over all of 1, 3 and 5 years. Looking at this from another angle, our larger funds are also continuing to perform well. At end December, we had 15 funds with over GBP 1 billion of client assets under management. Of these, 11 outperformed across each time period, with 6 funds top quartile over all of 1, 3 and 5 years. We know clients are rightly more focused on longer-term performance, but it is nonetheless encouraging to see such a turnaround and across all time periods. Strong investment performance is not necessarily a precursor to inflows, but it is nearly always a prerequisite. Let's move on to look at flows that we have seen through 2025. It's been great to see that flows have been broad-based across regions, client channels and capabilities. And that so far, this has continued into the first quarter of 2026. From a growth perspective, it was a really strong year with meaningful upticks across both retail and institutional client channels. We generated GBP 16.9 billion of gross flows were the highest that we have ever recorded. Across all regions, gross flows increased compared to the prior year and our AUM from European clients grew by just under 40%. This is a significant achievement given our ambitions to grow internationally. From a net flow perspective, we generated GBP 1.3 billion of net inflows in 2025. This is our first calendar year of net inflows since 2017. The institutional channel was the largest contributor here with GBP 1 billion of net inflows. The real turnaround, though was from retail clients, where we generated GBP 0.3 billion of net inflows with over GBP 2 billion coming in the second half of the year. In terms of investment capabilities, clearly, systematic was a material driver of flows. And within that, Global Equity Absolute Return or GEAR, continued to demonstrate excellent performance. And as such, client demand remained high. But this was not simply a GEAR story. Rather, the majority of the systematic range saw net inflows, including the long-only world equity fund, which tripled its AUM to over GBP 1 billion. Global equities was also a positive contributor, including demand for global leaders and gold and silver. And finally, something we've not been able to report for some time, our U.K. equity capability had positive flows across both retail and institutional clients, most notably into dynamic and growth strategies. It is indeed possible that we could now be seeing a more constructive outlook for U.K. equities going forward. So a welcome return to positive flows, encouragingly diversified across capabilities, channels and regions. And this momentum has continued so far this year. As of a few days ago, we generated positive flows year-to-date across both channels to the tune of over GBP 1 billion, and we now manage over GBP 70 billion of client assets. This time last year, when I discussed growth opportunities, I said we might expect most of these 7 investment capabilities to be larger within 12 months. Well, today, 5 of the 7 have greater AUM, most notably our systematic and global equity capabilities, which are more than 60% larger than they were a year ago. Of these, 3 have seen positive inflows, too. Where there has been a decline in AUM, some of this was cyclical, such as within Asian and emerging market equities after strong flows in the prior periods and some was more performance driven as with our unconstrained fixed income strategies. However, all of these are now performing well, particularly over shorter time periods, and we've already seen outflows abate from levels at the start of 2025. We have strong performance, and we are now positioned to be both more resilient and to better embrace the growth opportunities in front of us. And there are an increasing number of opportunities out there. For a long time, arguably, the smart trade for investors has been to be long U.S. large cap and to do so in a cheaper way possible, which largely meant owning S&P tracker indices. But we could now be entering into a new environment where clients' assets shift away from the U.S. and where markets become less correlated. Against this backdrop, active stock picking becomes ever more important. And if these conditions persist, this should be positive for active managers and even more so for Jupiter, given our areas of investment expertise. Before I hand over to Wayne, I want to give a quick update on the CCLA acquisition, which completed early this month. As you will be aware, CCLA are one of the U.K.'s largest asset managers focused on serving the nonprofit sector. And they bought GBP 15 billion of client AUM with them across charities, religious organizations and local authorities. This is a new client channel for Jupiter, and there's absolutely no client overlap between the 2 firms. It is a stable business with a long-term sticky client base. They bring complementary investment expertise too, across equities, real estate and multi-asset. And as you can see, the deal results in a much more diversified product range. Much like Jupiter, CCLA have a culture of open, transparent communication with their clients. So it's no secret that their recent performance has not been where they would like it to be. Using their charities fund as a proxy here and on a longer-term view, their flagship fund outperformed for 7 straight years, but has lagged comparative benchmarks more recently. Given their style, which is more focused on quality and growth and given what has happened within markets, this is understandable and indeed, to some extent, even expected. There are not long-term concerns here. But between a period of softer performance and the corporate event of the acquisition, it's conceivable that clients could use this as a catalyst event to consider allocations. For our own budgeting purposes, we are conservatively expecting a minor level of outflows from the CISA strategies through 2026. Overall, however, the deal remains highly compelling from strategic, cultural and financial perspectives, and the market seems to recognize this, too. And the opportunities for us to leverage the strengths of both businesses as a more scaled player in this large and growing client segment are meaningful, whether that is broader investment expertise, a global footprint or a more technology-driven operating model. Wayne? Wayne Mepham: Good morning, everyone. So 2025 has been an eventful year for Jupiter with some key drivers of future financial growth. We announced the acquisition of CCLA, declared an additional distribution and identified further cost savings, all of which are important management actions that will drive value today and into the future on top of the organic growth in our underlying business. I'm going to put these into context both for our financial results in 2025, but more importantly, the expected benefits still to come. Of course, the CCLA acquisition completed only early this month. So the guidance I will give includes some estimates, and you should expect more on this in July. So let's kick off with the normal financial summary. Reductions in AUM have been one of our biggest challenges for a number of years. but the combination of those positive net flows Matt took you through and strong market performance since May has seen our AUM reach GBP 54 billion at the year-end. That's up over 19% with continued momentum into the new year. But of course, it's the average that matters for 2025 revenues, and that was down 5% to GBP 48 billion. Combined with lower fee margins, that results in around GBP 311 million of net revenues, excluding performance fees for the year. As revenues were down, our cost-income ratio is higher than I would like in the longer term at 82%. But our cost management initiatives brought benefits this year and the steps we have taken to grow revenue and manage costs will move us close to that 70% target. Performance fee revenues were strong at GBP 120 million. We committed to an additional distribution of 50% of 2025 performance fee revenues. So that leads to a distribution of GBP 60 million, which I will cover later. Overall, it means we delivered over GBP 138 million of underlying profits or GBP 62 million, excluding performance fees. That's a total underlying EPS of 19.4p. And without performance fees, that's an EPS of 8.7p, taking us to full year ordinary dividends of 4.4p per share. Let's look at this in a bit more detail, starting with AUM. Since the beginning of 2024, AUM has fallen each quarter and into April 2025. We all know about the outflows in 2024, nearly half of which came through in the final quarter. And early 2025 was also challenging with real market disruption in the lead up to tariff announcements. We reached a low of GBP 43 billion of AUM in April. But since then, we have seen steady progress each month from markets and importantly, for momentum, positive flows almost every month and over GBP 1 billion of flows in the last quarter alone. That's a strong sign for 2026. It means our AUM was up nearly 20% from the start of the year and it's up over 12% on the average for 2025. And that momentum has continued into 2026, so positive signs already for this year. As I've already touched on, net management fee revenues were down compared to 2024 at GBP 311 million. Fee margins were down on 2024 at 65 basis points, which was driven by ongoing changes to our business mix. That's both from net flows and market dynamics, pushing up AUM in relatively lower margin areas. It's a progression we saw through 2025, so we enter 2026 with a run rate margin of 64 basis points. It's also a trend that I expect to continue in the short term. So I'm budgeting for average margins to be around a further 1 basis point lower this year at around 63 basis points, but off a much higher starting AUM. Of course, that excludes the impact of CCLA, which I will guide to separately for this year. Along with performance fees, that's combined net revenue of GBP 431 million for this year. Those performance fees are a lot higher than I guided and is a clear demonstration of simply how difficult it is to predict, both in terms of AUM levels and alpha generated. But accepting years like this can happen from time to time, if I look back at the average income we've generated, that tells me that performance fees could be around GBP 20 million for 2026. I'd emphasize all the usual caveats and disclaimers and note as 2025 demonstrates, there is the potential for that to be much more. So let's move on to costs. Before I run through the details, I wanted to remind you of our approach here. We've always been very thoughtful on costs. We recognize there is both the opportunity and the necessity to focus on good cost management. Cost management to us means controlling necessary expenditure, but also allowing investment and controlling that expenditure whilst maintaining good investment with a high ROI requires careful planning, a good cost management culture and a willingness to explore new ways of working. And we've been doing just that for some time with our most recent work leading to that announcement in May of a GBP 15 million minimum targeted savings. And our approach translates well to the integration of CCLA with a further minimum savings of GBP 16 million through that same careful and considered approach. Matt and I have always delivered on our cost commitments. And as before, we see a path to get to that next milestone of a 70% cost/income ratio. So overall operating costs for this year, excluding those relating to performance fees, are down by GBP 5 million compared with 2024. But the split of comp to non-comp is a little different to what I expected even in July, and so I'll walk you through this. Firstly, our range of outcomes for total compensation costs is normally 45% to 49%. But for 2025, we have reported a 50% ratio, so just outside that range. That's a very short-term impact, and we don't expect that to repeat. In fact, our projections see that coming down by 2 percentage points in 2026. So the main reason we are above the target is the share price. It's nearly doubled over the course of the year, and that has an impact on the accounting for employee taxes on existing share awards. Of course, we seek to hedge the impact by buying shares, but that's an economic hedge and does not have -- does not remove the accounting cost. But these short term and largely accounting impacts have been more than offset by savings we have achieved in noncompensation costs. They are over GBP 11 million down on expectations at the start of the year and GBP 6 million down on our most recent guidance. That's the full year saving we targeted from noncompensation costs over a year ahead of schedule and absorbing higher variable costs linked to that rapid growth in AUM in the second half. And looking ahead to 2026 and still excluding CCLA, I expect our non-compensation costs to be around GBP 106 million. With the GBP 11 million saving already achieved, the increase reflects variable cost growth where they are linked to AUM. For my compensation guidance, where it's the same as I've said before, that's the 48% guidance from earlier this year and lower still in the future with combined -- and combined with non-comp costs gets us to the targeted savings of GBP 15 million. The investment we have made since 2024 in automation and through outsourcing has enabled us to achieve our lowest headcount since 2014 without adding to our ongoing noncomp costs. In fact, we have delivered savings there, too. So a lower compensation ratio through building scale and lower overall headcount despite having more people today in our investment management teams than we had some 10 years ago. And lower overall noncomp costs through systematic review of the smaller systems, the smaller supplier relationships that I said we would do and where we will continue to focus. With the results that we have a business that delivers greater operational efficiency today despite the well-documented cost headwinds. Turning to exceptional items. They were in line with guidance at GBP 6 million. I had said they might be higher this year, but it was dependent on the completion of the CCLA acquisition, and that did not happen until this year. So 2025 included some charge for the acquisition, but these will mainly come through in 2026 and beyond. Matt has already touched on this, but I wanted to provide an update on the CCLA financials, such as we can, having only owned the business for a matter of weeks. It's important that your model should only include 11 months of contribution. And of course, the half year is just 5 months. AUM was little changed from the announcement date at GBP 15 billion of AUM. The mix of business has changed a little and the run rate fee margin is now 43 basis points. The underlying fee rates have been stable for many years, but the mix of long-term assets to money market AUM driven by clients' needs could have an impact on the average in the future. From a cost perspective and before any synergies, my expectation is that compensation costs will be GBP 32 million and noncompensation costs will be GBP 20 million. That's 11 months' worth, so not quite half of that for this first half year. To remind you, we have a minimum targeted synergy saving of GBP 16 million to be achieved on a run rate basis by end 2027 and GBP 17 million of net cash costs to achieve the acquisition and integration. We continue to focus on the effective delivery of those financial measures, and I'll continue to update you as we progress. For your models, on synergies, I expect to deliver a good proportion of our target on a run rate basis by the end of 2026. But for the 2026 numbers, I've included GBP 4 million of reduction as savings from those headline costs I just gave you. On the acquisition and integration costs as well as the normal acquisition-related intangible asset, where we are reporting those as exceptional items. For that noncash intangible asset for now, I'll include an annual charge of GBP 5 million, and I'll confirm the number once finalized. For cash costs in exceptional items, I have GBP 14 million for 2026, and that leaves about GBP 5 million of integration costs still to come mainly in 2027. That is in line with my previous guidance of GBP 17 million net cash cost relating to the acquisition, which is, of course, after tax deductions. Later in the year, I will also set out how we intend to report on the group as a whole, so you can adjust your models. But for 2026, you should expect to get separate information on this business as we demonstrate delivery of the financial returns we announced. So finally, let's look at capital. So some capital movements after the balance sheet date this year. That's mainly the impact of the acquisition. And you can see the current expectation of our capital, but these are very draft numbers as at the completion date. Importantly, our capital position is broadly in line with where we have said, well above 2.5x cover of the higher capital requirement. That remains very strong, but also some of the acquisition integration costs have not come through yet. So I think about it net of those and still feel very comfortable we are well positioned for the future. Of course, this is after the ordinary dividend we proposed at 2.3p on top of the interim dividend of 2.1p, distributing half our underlying EPS for the year in line with our policy. And also that commitment to distribute half the performance fee revenues for just for this year. That's GBP 60 million of additional distributions, which the Board has elected to make through a combination of a special dividend and a new buyback program. So that's equally weighted between the 2, a GBP 30 million buyback or around 3% of issued shares and a 5.7p special dividend to be paid in May. As you know, we already have over 16 million shares in treasury. That's a share purchase we completed in 2025. The shares we're about to acquire and those treasury shares will be canceled. And when we are done, we will have bought back and canceled over 7% of our issued share capital since 2022. And that remaining capital continues to be put to work in liquidity positions for ongoing business needs and in seed capital, where we are supporting organic growth in our business. At the year-end, we held seed investments with a market value of GBP 73 million, all of which has been held for less than 3 years. And in 2025, we recycled funds from areas where we achieved our objective into our first active ETF and a Cayman Island domiciled version of our highly successful GEAR fund. It's early days for both of those. That Cayman fund has already attracted client funding. So we'll monitor the capital needs there very closely and put it to work elsewhere when I can. So to wrap up on the financials. Well, financial results are often a lagging indicator of performance, and that's really clear in the measures we have reported today. But there are also signs that give us indicators of future performance, too. Profits are up on 2024, driven by performance fees. But importantly, strong underlying revenue growth might be expected in the future, driven by rapid growth in the AUM at the year-end. We've delivered on our cost actions, implemented ahead of schedule and in considered way that doesn't compromise our growth potential. We have taken clear actions to deliver growth in the business, bringing in teams that are performing well as well as through the acquisition of CCLA. And finally, we have fulfilled our commitments to reward shareholders through strong distributions equivalent to 15.8p per share or well over 18% return on the share price just a year ago. Back to Matt. Matthew Beesley: This is my fourth full year results as CEO here at Jupiter. So 3 years since we first presented this strategy for the future growth of the business. I wanted to briefly look back across the real progress we have made, but also to look forward to what is coming next. We've consistently stated that increasing scale is and remains the most important of our objectives. While we continue to deliver on our cost commitments, focus must shift on to driving top line revenues and to building scale. Importantly, scale for us is not simply a question of increasing the absolute pounds of clients' assets we manage. But by better leveraging our operating model, we know that new assets for us to manage will lead to higher incremental profit margins. We are making material and visible progress here. AUM has increased by 19% over the last 12 months, supported by positive client flows, strong investment performance and good market returns. And clearly, that number increased by a further GBP 15 billion in early February with the completion of CCLA. We continue to add depth to our expertise, investment expertise this year with the acquisition of the team and assets of Origin Asset Management as well as bringing in the new investment team to manage European equities. We are not yet where we want to be in terms of scale, but there's both momentum and growth optionality, both organic and inorganic right across the group. To deliver our target cost ratio, this growth in scale must be paired with an unrelenting focus on efficiency and cost discipline. Wayne and I have continued to deliver on our commitments here. But reducing complexity is not simply about taking costs out of the business. It is evolving our structure to ensure we have an efficient operating model. The most material change in that through 2025 was unquestionably the consolidation and outsourcing of much of our middle and back-office operation functions to BNY, which will help us work more efficiently and ultimately deliver a better service to our clients. As we look forward, we remain resolutely focused on cost discipline as we find efficiencies in our core business and deliver on synergies through the CCLA deal. In prior years, we've talked much here around the rationalization of our product range. That product range now being largely complete, the focus in 2025 was on sharpening the attractiveness of our active offering. Within the underlying business, we've always looked for ways to broaden our range of expertise that we offer to our clients. And we launched 2 active ETFs last year listed in the U.K. and across Europe and also our first fund on our offshore Cayman platform. The joining of CCLA brings a whole new client channel to Jupiter, broadening our appeal now across into the nonprofit channel where we hadn't previously had any presence. Clients' needs continue to evolve, and we must evolve with them. But through the additions of new capabilities and new methods of delivery, I'd argue that Jupiter has never before appealed to as broad a range of clients. Our fourth and final objective is to deepen relationships across all of our stakeholder groups. For our clients, we continue to produce high-quality and improving investment outcomes. For our shareholders, who we appreciate who have not had the easiest of journeys in recent years, we have now delivered a meaningfully positive shareholder return and have announced total dividends of 10.1p per share and another share buyback program of up to GBP 30 million. Everything we have discussed this morning, though, has only been made possible by the hard work of our people who work tirelessly to serve our clients. We regularly conduct star surveys, and I was delighted to see that in our most recent survey, our engagement score was 88%. This is a truly great result. It is up 9 points from where we were 12 months ago and also 9 points ahead of the financial services benchmark. So it is fitting that in 2025, we were selected as one of the Sunday Times Best Places to Work. So we go into 2026, having made significant strategic progress. Many of our leading indicators are pointing in the right direction. Client sentiment has improved, and we are generating net positive flows. We built scale, both organically and inorganically, bringing new assets onto our operationally efficient platform. Investment performance is strong, and we have a broader platform of diversified and differentiated investment expertise than we've ever had before. However, we are not yet where we want to be. We know there is still a tremendous amount of work yet to be done, but we are unquestionably better placed today than we were 12 months ago to capitalize on the opportunities ahead of us. And if market trends persist, those opportunities for Jupiter could be plentiful. So with that, I will hand over to Alex to lead us to questions. I think first in the room, Alex, and then online. David McCann: Dave McCann from Deutsche Bank. Three questions from me. Matt, you mentioned in the remarks that you're expecting or possibly could see some outflows in the CCLA business this year because of the performance of the funds. I think that's a reasonable assumption given what we can see there. A question really is, was that expected, as you say, when you did the deal and therefore, was it priced in? Or is this sort of an unwelcome development that's, I guess, cropped up since? And then probably one for Wayne. You accepting the significant caveat you made around performance fee guidance, you have increased effectively the guidance from 10 to 20, all else equal. So I just wanted some color what is the sort of waterfall to get from 10 to 20? Is this just extrapolating from last year, noting that obviously, GEAR hasn't started this year as well, but we're obviously very short as a short-term period. But we'll start with those, and I'll come on to the other one in a moment. Matthew Beesley: Yes. Thanks, David. So the first question, the outflows from CCLA, was this expected. Yes, it was. Let's remember that CCLA as investment proposition has had many years of very strong investment performance, indeed, 7 successive years of outperformance prior to the 2 soft years of performance that they've currently delivered for their clients. So within context, as an active manager, this is not unexpected. They have a particular quality growth style of investing, and that style has been under significant pressure in the last 2 years, say, after a period of very strong performance. So while, of course, we want to see all our businesses grow, ideally, we recognize as active managers, there will be periods of time where some of our investment capability lags benchmarks. As a result of that, the outflows that we are suggesting might come to pass today are completely consistent with our prior expectations. Wayne Mepham: In terms of performance fees, what I've done here is look back over time and taking into account the AUM we now have in those areas that can generate performance fees, obviously, taking into account watermark as well with some of those being below. So it's an extrapolation as you put it, in terms of the outlook. I mean you quite rightly referenced here short-term performance. I mean it's difficult in January. I think if you'd ask me that question just a month ago, you'd be putting the question in quite a different way. Clearly, that strong return in January hasn't continued into February. So it's very difficult to predict this far in advance. But yes, GBP 20 million based on history, extrapolated, I think, is the right number for now. David McCann: Okay. And then the third and final question for me. Obviously, CCLA completed now, obviously, there's still some integration to do. But -- you touched on the remarks there, Matt, about the scalable platform and so forth. So would you be looking to do more of those kind of deals if you could find them? . Matthew Beesley: Yes. So look, you're absolutely right, David. In the short term, the focus is very much on the successful execution of the integration with CCLA and we obviously outlined both our targets and our time line in that regard. As of today, Wayne pointed out the very robust nature of our balance sheet. We know this is a very capital-generative business. We have a focus on improving the profitability of this business. We are very much focused on that 70% cost-income ratio. And with that improved level of profitability would naturally come likely an improved level of capital generation as well. What I hope that shareholders see is that we're going to be thoughtful and judicious about how we deploy that capital. When opportunities arise for us to deploy it inorganically as with CCLA, as with the Origin Asset Management deal, we believe we should be looking into -- looking at those opportunities given how attractive they can be both strategically and financially. But absent those opportunities, as we've shown today, we will return that capital to shareholders. So the outlook from here is to remain judicious focused and balanced in terms of how we generate -- sorry, how we allocate that capital that we expect to generate. Alex James: If no more in the room, we've got a couple online. One on flows for Matt and one on fee margins for Wayne. Matt, you referenced positive year-to-date net inflows across both channels. I wonder if we can give any more details around capabilities or regions or anything else. And Wayne, on fee margins, if you -- a question for a bit more detail around what's happened in the second half of this year and then the drivers of that guidance into 2026. Matthew Beesley: So year-to-date, the trends we are seeing so far are very much consistent with the trends we saw at the end of 2025. So still a very diversified range of investment capabilities that are attracting new client money and also a diversified range of geographies. And indeed, the comment I made in my prepared remarks is that, that positive flow that we've seen year-to-date is effect of positive growth in both our institutional as well as our retail wholesale investment trust channel as well. So very much so far a continuation of the trends we saw at the end of 2025. Wayne Mepham: Yes. So on fee margins, I mean, we always guide to in recent years a decline in the fee margin somewhere between 1 and 2 basis points on an annual basis. I mean, obviously, very difficult to predict because often and nearly always actually, it's due to business mix rather than any necessary fee pressure. Now I think what's slightly unique about last year is just the rapid change. I mean, I spoke about it in my prepared remarks, the AUM was down at GBP 43 billion in April, and we ended the year at GBP 54 billion. So that rapid increase in AUM and actually the weighting of the growth that came through, through that period was obviously beneficial to our business overall, it was tending towards lower fee margin areas of our business. So hence, why that increase. Now clearly, the impact so far is in this year has continued to follow really that trend that we saw towards the back end of last year. So hence, the 65 basis points for the year as a whole last year on average, end the year at 64 basis points. Clearly, I'm trying to look to the future and where it might go. At this stage, I'm seeing a 63 basis point average for 2026, of course, excluding CCLA. Alex James: Thank you. No more questions online. No more in the room? Matthew Beesley: Well, that leads me just to thank you all for being here today, and we look forward to updating you on our progress in the summer. Many thanks.
Operator: Good afternoon. Welcome to Array Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sarah Sheppard, Investor Relations at Array. Please go ahead. Sarah Sheppard: Thank you. I would like to welcome everyone to Array Technologies' fourth quarter and full year 2025 earnings conference call. I'm joined on this call by Kevin Hostetler, our CEO; Keith Jennings, our CFO; and Neil Manning, our President and COO. Today's call is being webcast via our Investor Relations site at ir.arraytechinc.com, where the related presentation and press release are also available. In addition, the press release and the presentation detailing our quarterly and full year results have been posted on the website. Today's discussion of financial results includes non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures can be found in the related presentation and on our website. We encourage you to visit our website at arraytechinc.com for the most current information on our company. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made on this call. We refer you to the periodic reports we file with the SEC for a discussion of risks that may affect our future results. Although, we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements to conform these statements to actual results, except as required by law. I'll now turn the call over to Kevin. Kevin Hostetler: Thank you, Sarah. Good afternoon, everyone, and thank you for joining us. I'll begin by highlighting our key achievements from 2025 before transitioning to our strategic imperatives for 2026. Neil will provide additional detail on these objectives, and Keith will conclude with an in-depth review of our financial results and introduce our 2026 financial guidance. Then we'll open the line for your questions. I'll begin on Slide 4. 2025 marked a year of pivotal growth, commercial momentum and strategic execution for Array. We closed the year with nearly $1.3 billion in revenue, achieving an exceptional 40% year-over-year increase, supported by 35% tracker volume growth. This result underscores our team's unwavering dedication and resilience as we continue to outpace broader industry growth trends. Our profitability remains strong with adjusted gross margin, adjusted EBITDA and adjusted net income per share, all landing within our guidance range and adjusted net income delivering solid double-digit growth year-over-year. After the regulatory-related uncertainty throughout 2025, commercial activity built meaningfully as we exited the year, driving strong bookings momentum across our core markets and enhancing our visibility entering 2026. Importantly, we closed 2025 with a record $2.2 billion order book, reflecting both sustained customer demand and improved commercial execution across our portfolio. This performance was enabled by the commitment and discipline of our commercial teams as demonstrated by a 2x book-to-bill for both total Array and our recently acquired APA business. As committed last quarter, APA is now incorporated into our order book, contributing approximately $100 million. We remain highly confident in APA's growth trajectory, and APA, along with our recent new product introductions, now comprise close to half of our total order book value. Turning to Slide 5. I'd like to reflect on what has been a standout year for Array. Our progress and achievements are a direct testament to the strength, resilience and commitment of our employees. Together, we didn't just meet challenges, we transformed them into opportunities to engage, evolve and innovate, positioning Array for sustained growth. I'm especially proud of the successful completion of the APA acquisition, which brought over 200 talented new team members to our organization. Our teams are seamlessly integrating, and we are already unlocking meaningful value and expanding our share of wallet with customers. At APA, continuous innovation extends beyond engineered foundations to fixed tilt racking, where the business holds a market-leading position. The team has some exciting new fixed-tilt offerings slated to come out this year, and we look forward to sharing more details in the coming quarters. Complementing the progress made on our balance of system strategy, we continue to elevate the organization by investing in both our leadership team and our product portfolio, while at the same time, optimizing our capital structure. We strengthened our leadership bench by bringing in seasoned executives with deep industry knowledge and relationships, fresh perspectives and a proven execution capability, enhancing our ability to operate with discipline while accelerating growth. In parallel, driven by deep customer engagement, we broadened and upgraded our product portfolio to more effectively address the industry's most pressing challenges and better meet the evolving needs of our customers. Finally, by refinancing higher cost debt and proactively managing our debt maturity profile, we improved our financial flexibility to support our next phase of strategic growth. I'm now on Slide 6. Our results in 2025 demonstrate that the foundation we've built is working, anchored by a talented team, a stronger product portfolio, a more resilient supply chain and meaningful expansion through APA. Now our focus shifts to how we build on that momentum, capture emerging opportunities across the industry and create lasting impact. This brings us to our 2026 strategic imperatives. This year, we're sharpening execution around 3 imperatives that operate as an integrated framework: innovate our future, elevate our international business and advance our customer-first culture. Against the backdrop of organizational and portfolio advancement, our first strategic imperative for 2026 centers around innovation. At this stage in our company's evolution, innovation remains paramount. It is the core engine driving growth and bolstering our competitive positioning. We will continue to invest both organically and inorganically in differentiated technologies and solutions that enhance customer value and reinforce our role as a trusted technology partner. This does not just mean new product development, but also continually updating and improving our internal tools and processes. To this end, we've created a robust AI road map with plans to apply transformational technology in all areas of our business. I'm excited to share updates in the coming quarters of the enhancements we're making. Innovation is how we win, not only in product performance, but in customer experience, financial strength and with the deliberate and targeted market expansion. It's the unifying catalyst that connects every element of our strategy, which is why it stands first among our 2026 strategic imperatives. As we anchor our strategy in innovation, we are equally focused on our second imperative, elevating our international business. While recent macro conditions in key markets such as Brazil and Spain have presented challenges, the broader international landscape presents compelling opportunities for growth. Key international markets are maturing and demanding more feature-rich capabilities. This also brings further opportunity to refine and adjust our global supply chain for enhanced scale and efficiency and streamline research and development around a common leading platform. Our focus remains on disciplined execution, positioning the right products in the markets where our differentiation and value proposition resonates with our customers and where they are willing to pay for it. As we position our international business for enhanced performance, our third strategic imperative further strengthens our customer-first culture across the organization. At the end of the day, our growth depends on how we effectively satisfy our customers' needs. And to do this, we need to listen to, support, and partner with them. In 2025, we saw very clearly that when we focus on our customers' outcomes, strong business performance follows. We will continue to grow our order book and pipeline by engaging and thrilling our customers with our diverse offerings, quality level of service and our differentiated value proposition that delivers measurable impact to our customers' economics. Together, our 3 strategic imperatives for 2026 form a unified strategy that drives our market-leading performance, expands our opportunities and supports durable long-term value creation. With that, I'll now turn it over to Neil to provide a deeper look at our strategic imperatives and how we will evaluate our success. Neil? Neil Manning: Thank you, Kevin. Let's turn to Slide 7. Our first strategic imperative, innovate our future is about ensuring Array stays ahead of where the solar industry is going. The demands on solar installations are rising, tougher terrain, more extreme weather, higher energy generation expectations and tighter cost structures, our innovation pipeline is designed to meet those realities head on. We start by continuing to strengthen our core tracker technology. DuraTrack is a renowned platform in the industry, and we're continuing to expand its capabilities while broadening its reach to become our standard offering globally. This year, we'll incorporate improvements like our next-generation industry-leading terrain following capabilities for OmniTrack and launch a new U.S. tracker version to further address unique market needs. These are tangible upgrades that will improve energy yield, reduce operational risk and simplify installation for our customers. Second, we're executing on our balance of system strategy. With the APA integration well underway, we're on track to launch our optimized tracker plus foundation integrated solution in the second half of 2026. This offering reduces engineering and installation complexity, simplifies customer procurement and reinforces Array as a broader solution partner. We continue to assess other balance of system market leaders as potential additions to the Array portfolio. The last component of this initiative is further commercializing software and services, areas where customers want more support, more insight and more automation. We're continuing to invest in our SmartTrack platform and beyond new deployments, we see a meaningful opportunity to retrofit SmartTrack across our extensive installed base. SmartTrack adoption is growing rapidly and with more opportunity in our order book than cumulatively deployed to date. We've proven the value of our technology and now our transition to a subscription-based model reflects our customers' desire for greater flexibility, continuous innovation and scalable deployment as we drive real project return on investment, all while generating recurring revenue for Array. Our innovation agenda powers all facets of our strategy. Executing on these investments today reinforces Array's strategic advantage for the years ahead. Turning to Slide 8. As innovation continues to drive our competitive advantage, our next imperative focuses on enhancing our presence and performance throughout global markets. One of the most important steps we're taking to elevate our international business is the introduction of our DuraTrack technology globally. This is driven by direct customer feedback. They need higher energy production, simpler installation and stronger resilience in some of the toughest terrain and weather conditions found across EMEA and Latin America. DuraTrack has delivered exactly that for years in the United States, faster installation time, consistently maximizing power density with far fewer parts in the field, no scheduled O&M and delivering among the lowest LCOE in the industry. And its patented wind-stow technology provides up to a 4% increase in energy yield compared to active snow systems in high wind environments. Bringing these capabilities to our international customers gives them a proven, feature-rich platform that protects our investment and enhances project economics. At the same time, phasing out older non-SmartTrack compatible configurations of the H250 tracker allows us to ultimately align around one global platform, consolidate our supply chain and focus our R&D and operations on the products that drive the greatest value for customers. We took a onetime inventory valuation charge in Q4 as part of this transition, and now we're moving forward with a more differentiated and scalable product platform. With this broader expansion, we plan to launch a new international offering later this year, featuring the strongest of H250's capabilities with DuraTrack's patented technologies, combining the best of the Array portfolio on a single global tracker platform. Our international expansion remains selective, prioritizing markets where our differentiated technology and value resonates. We've made focused investments to bring our technical sales approach internationally and are already seeing clear signs of traction across key regions with increasing engagement and commercial momentum in select markets throughout EMEA and Latin America. This early success reinforces our confidence in the long-term opportunity and validates our disciplined returns-focused approach to international expansion. Our growing international pipeline reinforces the strength of our partnerships, our technical performance and our relevance in global utility scale markets. Core multinational customers are pulling us to new markets and opportunities, and we stand ready to serve them. Elevating our international business isn't just about expanding into new geographies. It's about bringing the full strength of Array's technology, reliability and customer partnerships to the fastest-growing global markets that value it. By doing so, we diversify our revenue base, strengthen our competitive position and capture a critical path for continued growth. Turning to Slide 9. Advancing a customer-first culture means we are elevating how we show up for and with our customers commercially, technically and operationally. We've already made solid progress strengthening customer engagement as evidenced by our record order book and critical commercial wins in 2025. We closed the year with our highest quarterly new bookings since 2023 and a book-to-bill ratio of over 2x. This level of commercial momentum is driven by our global commercial efforts, reflects our targeted investments in the front end of our business and our deeper engagement with developers, IPPs and utilities and a growing level of trust and the reliability and performance of our products. The APA success story is only getting started. Now with the bankability of Array behind APA, they've seen a significant increase in utility scale project interest. APA's 2x book-to-bill ratio in the quarter is a result of their expanded pipeline and accelerating bookings. The strong momentum has continued into the new year. In 2025, our domestic Array business experienced greater than 20% growth in early-stage domestic project bids, providing further evidence of robust customer pipelines and a clear move towards engaging Array early on as a strategic partner. As we continue to prioritize engaging with high-quality customers, we are securing more multi-project awards while increasing our average project size, which we expect to grow at a significant double-digit rate from 2025 to 2026. Our strengthened commercial organization with high-impact industry veterans, coupled with formalized technical sales function articulating our differentiated value validated by third-party engineering studies is driving a tighter alignment between what the market needs and what our product road map is delivering. It shortens feedback loops and ensures we're solving the right problems at the right time. Advancing a customer-first culture informs how we sell, how we serve, how we innovate and ultimately, how we win. As we move through 2026, this imperative ensures that every part of our organization is aligned around delivering exceptional customer outcomes, and that alignment will continue to translate into strong commercial momentum and order book growth. With that, I'll now turn it over to Keith to provide more details on our results. Keith? Keith Jennings: Thank you, Neil. Good evening, everyone. I will begin on Slide 11. In 2025, we took deliberate steps to align our capital structure with our operating strategy. After a very busy year in the capital markets, we are pleased with the resulting leverage, liquidity, debt maturity profile and the cash cost of our debt as we continue to execute. We ended the year with over $380 million of available liquidity and net debt leverage of 2.3x trailing 12-month adjusted EBITDA. On February 18, we upsized and extended our revolving credit facility to $370 million from $166 million, bringing our pro forma total available liquidity to nearly $600 million. This upsize not only rightsized our total available liquidity, but also strengthened and expanded our bank group with 3 new banking partners to help support our strategic imperatives and global commercial operations. With this stronger capital structure, we are well positioned to continue pursuing organic and inorganic opportunities in support of driving long-term shareholder value. Moving to Slide 12 and 13 for financial highlights for the full year 2025. We delivered strong financial results, exceeding the high end of our revenue guidance. Revenue in the fourth quarter was $226 million, including $33 million of revenue from APA. For the full year 2025, revenue was $1.3 billion, representing an impressive 40% growth over 2024. Of this, APA contributed $50 million. Sequentially and year-over-year, ASPs were higher in both our legacy Array and STI segments, aligned with the forecasted effect of rising commodity prices experienced throughout 2025. Our impressive revenue growth was supported by tracker volume increasing 35%, underscoring our market share gains throughout the year. For full year 2025, adjusted gross profit increased 11% year-over-year to $347 million, representing an adjusted gross margin of 27%. When compared to the prior year, adjusted gross margins declined primarily due to the falloff of prior year 45X amortization benefit recognized in 2024 that contributed approximately 550 basis points and tariff impacts combined with ASP pressure added an incremental drag of approximately 80 basis points on the year. As expected, APA had a slight dilutive impact on overall adjusted gross margin in 2025 and delivered an adjusted EBITDA margin a few hundred basis points ahead of the core business. Reflecting the significant front-end investments we made throughout the year, adjusted SG&A was $163 million, 12.7% of revenue, an improvement from 15.4% of revenue a year ago and moving toward our near-term target of 10% of revenue. Adjusted EBITDA was $188 million with an adjusted EBITDA margin of 15%. This represents 8% earnings growth when compared to adjusted EBITDA of $174 million and adjusted EBITDA margin of 19% in 2024. As with adjusted gross margin, the adjusted EBITDA margin change was driven by the incremental prior year 45X amortization recognized in 2024. GAAP net loss attributable to common shareholders was $112 million, driven primarily by $103 million non-cash goodwill impairment charge and a onetime inventory valuation charge of $30 million, both associated with the 2022 STI acquisition. This compared to a net loss of $296 million in 2024, which included a $236 million non-cash goodwill impairment charge and a $92 million non-cash long-lived intangible asset write-down also associated with the STI acquisition. Diluted loss per share was $0.73 compared to the diluted loss per share of $1.95 in the prior year. Adjusted net income was $103 million, 13% growth above the $91 million in 2024. Adjusted diluted net income per share was $0.67, growing 12% when compared to $0.60 in the prior year. For the full year, free cash flow was $80 million, which was lower than 2024, primarily due to timing of working capital and 45X rebates. Turning to Slide 14 for our full year 2026 guidance. We entered 2026 in a position of strength, supported by greater order book visibility, a broader product portfolio to support our customers, accelerated contracting momentum, improved capital access and flexibility. We expect revenue within the range of $1.4 billion to $1.5 billion with adjusted gross margin between 26% and 27%. Excluding the impact of prior year 45X amortization falloff, margins are roughly flat at the midpoint year-over-year, reinforcing our commitment to disciplined execution and cost management in an inflationary environment. Given the impact on contract signings from the regulatory uncertainty in 2025, revenue activity is trending toward an approximate 40-60 split between the first and second half of the year. Adjusted G&A is expected to continue to gain leverage at approximately 12% of revenue. This brings our expected adjusted EBITDA to a range of $200 million to $230 million with an adjusted diluted earnings per share between $0.65 and $0.75. Free cash flow conversion as a percentage of adjusted EBITDA is anticipated to be similar to 2025. In the first quarter of 2026, we expect revenue of approximately $200 million and as a result, adjusted EBITDA to be down slightly from Q4 2025. Looking ahead, we see multiple drivers of momentum across our global markets. Hardware, software, and services are all poised to grow. We will continue to opportunistically refine our capital structure to bolster liquidity, enhance strategic flexibility and fuel disciplined investments. Backed by our record $2.2 billion order book and powerful new capabilities, we are ready to capitalize on future opportunities, deliver industry-leading market growth and sustainable value creation for our shareholders. Thank you for your time today. Now back to Kevin for closing remarks. Kevin Hostetler: Thank you, Keith. Looking ahead to 2026, our focus is clear: continue innovating, deepen our global reach and elevate the customer experience across every touch point. The foundation we are building positions us to capture the opportunities ahead and deliver durable long-term value for our customers, employees and shareholders. Thank you all for your ongoing support and confidence in Array. With that, we'll open the line for questions. Operator? Operator: [Operator Instructions] Our first question comes from Mark Strouse with JPMorgan. Mark W. Strouse: Keith, thanks for all the color on the gross margin puts and takes. Just curious, when you're looking beyond 2026 in your backlog or how you're thinking about underwriting new [ business ], can you just talk about kind of how we should think about gross margins over the medium term? And then just quickly on APA. I think you guys were saying with that deal that it was kind of immediately accretive to EBITDA, but dilutive on the gross margin line. Can you talk about the impact of APA in your 2026 guide? Does that turn accretive at some point this year? And then I have a quick follow-up. Keith Jennings: Thank you, Mark. Good questions. So first, let's talk about our outlook for gross margins across the horizon. A few things to bear in mind. As we entered 2026, our core margins remain intact. Any volatility that we've shown over 2025 and 2026 have all been driven by primarily accounting and onetime charges. And also the amortization of 45X for prior year performances played some part in that volatility. So if you look at 2026 and you remove the prior year 45X amortization, we're down roughly 50 bps, which is -- which takes us to the midpoint of our guide. When you look across the medium term and outlook, we expect our gross margins to maintain at these core levels. So we are in a fairly competitive environment price-wise. We are in an environment of rising commodity costs. We are in an environment of changing dynamics as we try to expand into certain strategic markets internationally that have lower price points. So we are confident that our gross margins across the horizon can hold. When moving to your second question on APA. APA when we closed was, yes, in 2025, slightly dilutive on the gross margin level, but accretive immediately on the EBITDA level because of their low commercial costs or I should say, very, very streamlined commercial costs. When we look at 2026, we expect APA to be in line or slightly better than our core gross margins because we've now been able to file for 45X. 45X in the APA context when you're modeling, we need to remember that it only applies to the structural fasteners, so the A-Frame that is used in utility scale only. And so I recognize that some of the models out there have 45X across the entire APA platform, it does not apply that way. When we think about overall 2026, APA is now also more accretive at the EBITDA level because they continue to be streamlined in their operating costs Mark W. Strouse: Okay. And then a quick follow-up for Kevin. The past 2 or 3 quarters, you've talked about kind of the mix of your backlog that's coming from Tier 1 customers increasing. At least directionally, if you can't give us an exact number, can you just give us an update on that? Does that continue to trend higher? Is it flatlining? Any color would be great. Kevin Hostetler: Yes, it does. So first of all, let me just begin saying we're really comfortable with the quality of our order book at this point, record order book of $2.2 billion and the real positive book-to-bill on both Array and APA both being at 2x book-to-bill. So very, very significant for us and that acceleration. A couple of tidbits I'd give you relative to the order book. For me, one of the more interesting tidbits would be, for example, in 2025, we received 4 gigawatts of orders from customers that historically were not customers of Array, meaning they were customers of our competitors, or new customers in the space. So clear market share gain from just those 4 gigawatts already. I think relative to our order book the one other comment is, on our last call there was some confusion of whether our increasing order book even in that quarter was due to a changing definition. I want to take this opportunity with everyone on the call to reiterate that we have not made any changes to our order book and how we define that order book. And I'll reiterate that every chance I get that: one, we have to have a confirmation of a named project awarded to Array; Number two, we have to have a target start date; And number three, we look for there to be an existing PPA in place prior to putting that into our order book. Now what we have talked about with some of our international orders that have been awarded to Array, so meaning we have a named project, we have a target start date, we've been notified that we've won the project. We're still holding some on the sideline until we're more confident in international markets that they will proceed as planned. And we're doing that as we've talked historically to reduce any debookings and associated volatility. As we noted in our presentation now, 95% of the order book with that new methodology is now domestic, so much higher quality. In terms of -- we've also made in my prepared remarks that over 50% of our order book is now direct to what we call those Tier 1 customers. And to be clear, when I say direct, meaning that's the one directing the purchase, even if we get a purchase order from an EPC, we're saying that over 50% of the order book is being now directed by those Tier 1s. And that could be a Tier 1 developer who is -- who has given the award to Array, but we're executing that award through their chosen EPC, but over 50% of our order book is now direct to those Tier 1s. So between the high percentage of domestic order book, the new market share takeaway, the 2x book-to-bill, the over 50% direct to what we call Tier 1, we're really pleased with the shape of the order book as we move forward here. Operator: The next question comes from Julien Dumoulin-Smith with Jefferies. Kevin Hostetler: Julien, you may be on mute. We don't hear you yet. Julien Dumoulin-Smith: Sorry, you are right. I was double muted. I apologize about that. Look, let me kick this off here. First and foremost, you talked about nice momentum on backlog. Can you give us a little bit of a sense of market share momentum with key clients? Could we potentially see some multi-gigawatt orders here? How much of that is already reflected in what you all are disclosing here? And then separately and adjacently, how do you think about the commercial strategy abroad, right? You've got this reinvigorated effort internationally. How should we expect to see this and realize this in as much as disclosures in the coming quarter? And again, I get that you've offered some caveats about some of the legacy geographies. What would you expect in terms of formal disclosures or announcements with key partners? I'll leave it there. Kevin Hostetler: Yes. So let me take the first part. So a few additional hints on our order book. So we are now engaging in more multi-project deals, not all of those obviously reflected in the order book to date, but we are now looking at kind of multipacks of deals, 3, 4 and 5 deals at a time with a lot of our core partners as we move forward. So that's working really well for us. The second thing is the average size of a project is getting larger as well. So we expect both the size and quantity of deals to go up significantly this year, and that's what we're really seeing in our order book. I'll let Neil talk about the international and what we're specifically driving there in this regard. Neil Manning: Sure. So just to jump in. So we're optimistic overall internationally, but it's also really important to note that we're being intentionally selective. And so we look at that from the prism that the U.S. is the dominant profit center for solar tracking globally. So when we look at where we diversify in international markets, we're looking from that lens. So where we have the ability to differentiate based on train capability for weather and extreme weather events, along with installation and overall performance, we're being really targeted in countries where customers are willing to pay for that capability and not just get into a bake-off on price. So as we diversify, as the Spain and Brazil markets reset themselves, we're making some really good progress in Eastern Europe and also in Latin America based on the investments that we've made in, sales resources over the last several quarters. We've had some key wins with repeat customers, so customers from our legacy home markets that have brought us into new countries, and we have awarded projects and contracts now that we're executing against. So you're going to continue to see that, Julien, over the next quarters as we continue to talk about that and see that. And our early-stage pipeline outside of Spain and Brazil is also increasing quite well as well. So I think that you'll see this continue to flow through, and we're pleased with the progress so far, and we'll continue to see that in the coming quarters. Operator: The next question comes from the line of Joseph Osha with Guggenheim Securities. Joseph Osha: One of the things that has been turning up, and I heard this a lot at in the solar is that, yes, this year looks like it's going to be okay building legacy 45 and 48 projects. But there is some uncertainty out there in terms of the ability to secure financing, in particular, tax equity financing surrounding some of the remaining uncertainty on FEOC. So I'm wondering if you can comment on that at all and whether that's materializing in your conversations with your customers. Kevin Hostetler: Yes. So look, the Treasury guidance released last week, I mean, it clarifies a major source of the uncertainty, which was really the level at which we have to focus our supply chain and certify for material assistance. And that's really a product component supply, so not every nut and bolt. And that's one helpful. But there's still some uncertainties for the industry around ownership structure the Treasury needs to address in the forthcoming year. So we don't have full clarity to say that. So what's happening for us, the second part of your question relative to FEOC is, customers are proactively hedging and focusing on predominant U.S. supply or in some cases, we're seeing customers add some language to their contracts that allow them to shift late in the game to 100% U.S. content at predetermined price points. And that's how they're hedging and giving themselves great flexibility to avoid the FEOC. The fact that our customer base is getting larger and larger and more capitalized, so some of the larger developers, IPPs and utilities that are best capitalized, we are not yet seeing issues with financing projects for those customers. At least it's not coming up to my level that we're facing that. We review that on pipeline calls every other week, and we're still not seeing that show up as an issue in our business. So we'll continue to monitor it and report if we do. But as of now, we're not having that issue with our Tier 1 customers. Operator: The next question comes from Brian Lee with Goldman Sachs. Brian Lee: Maybe just on the seasonality here. You experienced some into year-end. And then also here, given some indication that Q1 seasonality. Maybe can you speak to what's driving some of that? And then how much visibility you have on the implied pickup into 2Q in the second half? Maybe how much backlog of the $2.2 billion is expected to ship here over the next few months? And is there a book-and-bill business here implied in the guide? Or is everything covered by backlog? And then maybe I'll just squeeze in a second question around just big picture thoughts around M&A going forward as part of the capital allocation strategy. I think there's been more news of some of your peers in the tracker space diversifying into other parts of the stack. So wondering where you fit in terms of looking at those opportunities and maybe providing more holistic solutions. Kevin Hostetler: Yes. So I think let me address the seasonality. I think it's consistent with what you're seeing from our peer companies that have already reported in terms of a deceleration in Q4 and Q1. You have 2 things that drive us that are -- for those businesses that are largely North American. And the first issue is that you do have a historical seasonality, the build season for North American-focused businesses is really Q2 and Q3. That's the construction business that then gets finished in Q4. Now for the last couple of years, when our STI business was running and gunning in Brazil, in particular. If you remember, we did well over $200 million annually in Brazil. You have the countercyclicality that we benefited from. So their construction season was Q4 and Q1, obviously, on the other side of the equator. And that was very helpful in mitigating Array's historical seasonality that we had from the North America construction. So without that, that has a dampening effect and creates that seasonality in Q4 and Q1. The second and likely the larger contributing factor this year was the holdback that we saw last year leading into the OBBB. So as you recall, the industry paused waiting for that to get figured out, which means they paused contracting, they paused orders. And then once that was figured out, as you all see in our results and our peer companies', you saw an acceleration of orders but then they have to go through the engineering, planning, development, construction process. And that's why you see the shape of the year. And it's consistent between us and our peers that have already reported. You'll see an acceleration in Q2, then a further acceleration in Q3 and a further acceleration in Q4. So that's really the nature of the cyclicality. There's nothing unique to Array in that cyclicality. Yes, that's really what you're seeing and experience playing out with that delay and pause in the market that we all experienced last year. Relative to M&A, look, we're going to continue our focus on building out our balance of system strategy, and we're going to do that in a way that we think definitely benefits our customers. I guess, if I could describe kind of our approach to it is, when we think of this building out of the balance of system strategy, there's kind of 2 approaches you can take. And one would be a pure commercial integration, and I kind of liken that to say, do you want fries with that shake? And that for us is weak over time. It gets disintermediated. Maybe you want the shake today and not the fries, but you're not -- you still want it at the bundled price. And it kind of flies in the face of a lot of our customers that are EPCs with the fact that the P in EPC stands for procurement. These are organizations that understand how to buy large-scale construction projects. As such, I don't think EPCs really care if they're buying from 3 vendors or 6 vendors. That's not meaningful. Our approach on M&A is going to be a little bit different in that we're really focused around technical integration in which we can bring products in, increase the value proposition through interoperable engineering with Array that makes compelling value proposition for our customers. So we're just approaching it a little bit differently than others and ensuring that anything we're looking at in our balance of system has to have a technical interoperability opportunity. And what you're seeing that play out is APA. So the APA integration of the foundation with tracker will be a phenomenal new product for us this year. So it not only does it eliminate a number of components, but allows us to have an engineered foundation at incredibly close to a standard foundation price point. And we think that will help accelerate adoption of engineered foundations in our portfolio. So that's a great example of how we're thinking about M&A in our business. So hopefully, I'm answering your question. If not, we'll take a follow-up if we're missing something. Operator: Our next question comes from Philip Shen with ROTH Capital. Philip Shen: Great job with the bookings. You gave a good sense of the quarterly revenue cadence. Can you help us with the quarterly gross margin cadence? Should we expect lower margins on the lower revenues in Q1? And then should we expect that to ramp sequentially as we get through the year? Keith Jennings: Phil, good evening. This is Keith. Yes, I think it is safe to say that the Q1 margins will look much like Q4 because of the level of the revenues that should scale up. So we're guiding to a 26% to 27% on the full year -- that's the full year average. We think that, that is where we are currently operating. And hopefully, that answers the question. Philip Shen: Okay. And then as it relates to bookings and backlog, Kevin gave a lot of great color there. You're doing well with a lot of Tier 1 customers. I was wondering if you can talk through the bookings in Q1 and Q2. What strength are you seeing now? And do you expect the strong kind of 2 to 1 kind of book-to-bill to continue. You can't keep that forever, but how much longer can we see that continue as we get through these quarters? Keith Jennings: I don't think we want to get into forecasting bookings. We've not done that historically, Phil, but I appreciate the question. I could say that we feel good about our underlying momentum in terms of the size of our pipeline increasing, the number of opportunities we're getting, the timing of those opportunities. So we're getting brought into bigger deals earlier than we have been historically so that we're kind of getting in and getting specified and doing some of the engineering work earlier that helps us with the win rate. So all those things, I think, are positive trends. But I'm not yet going to go out on a limb and predict bookings in Q1 and Q2. Let's just say that the momentum that we've seen in the last couple of quarters so far has been continuing for us. We're hopeful that, that continues. over the next couple of quarters and through the rest of the year, frankly. Kevin Hostetler: And I should say that momentum comment is valid for not only the legacy Array, but the momentum we're getting on APA is quite significant. Operator: The next question comes from Corinne Blanchard with Deutsche Bank. It looks like Corinne has dropped out of the queue. The next question is from Maheep Mandloi with Mizuho. Maheep Mandloi: Just in terms of like the large customers you have, could you just talk about like their average sizes and how to think about this move from small to large developers? How does that benefit your order book going forward? Kevin Hostetler: Yes. Maheep, one of the things we did, as you recall, almost -- well, it's almost 2 years ago now, but back in 2024 was that we looked and kind of did the survey of what we call quality of customer. And I personally went out and interviewed some of our customers that we weren't doing as much business with that actually didn't tend to push out, didn't delay. And what we found was that there was this group of developers and certainly even a group of EPCs that were stronger than others because of their -- they were well capitalized. They had plenty of equipment, meaning that they weren't delayed for lack of transformers, those kind of things that we ran into a lot over the last switchgear, transformers. So what we did was we kind of identified that quality of customers, and we put that quality of customer into our bid strategy, meaning we wanted to win more orders with higher-quality customers that demonstrated they didn't have pushouts and delays. They had the equipment. They stayed on track. They had good PPAs in place. And that was kind of how we transformed. So when we call that Tier 1 customers, that's a lot of what makes up our definition, if you will, of Tier 1 customers, which meant we wanted to do more direct to utilities that control their own destiny, control their own interconnect. We wanted to do more with those Tier 1 developers that were the best capitalized developers out there. And that's what you're seeing in kind of when we talk about the quality of our order book continually improving, you saw a great amount of market share takeaway in orders in 2024 of that kind of targeted group and then again in '25. So our -- what we called at the time, our low share of wallet Tier 1 customers that we wanted to win more of, that's really coming through in our order book at this point. So we're pretty pleased with it. Operator: The next question comes from Colin Rusch with Oppenheimer. Colin Rusch: The opportunity to accelerate deployment times in the field, either from footings perspective or from a module attachment perspective, it seems like there's -- that's maybe the 2 areas where there may be some competitive opportunities for you guys? Kevin Hostetler: Yes. We haven't seen -- so look, the challenge with us is the amount of labor required to accelerate and pull projects in artificially. We often are talking to customers about pulling into maybe a quarter. But in terms of pulling stuff that would be 3 and 4 quarters out earlier, we don't typically see this because, again, the size of our projects and the amount of labor you'd have to reschedule and get local to that new site tends to be pretty difficult. And frankly, the largest EPCs and the ones we're focused on are pretty well booked out because those are the same group of EPCs that those top-tier developers are utilizing. So I don't see a whole lot of what I would call artificial demand acceleration or pull forward into the year at this point. I think this year is fairly well baked. There may be spots in small projects and maybe more opportunity on the APA side in the DG channel and C&I channel. Sure. There's a lot of opportunity, I think there, but not so much on the utility scale. Colin Rusch: Yes. I'll take it offline. I think my question was more about actually shortening the time frames in the field once you're deploying -- not pulling projects forward. Kevin Hostetler: Are you saying construction time frame? Colin Rusch: Exactly. Kevin Hostetler: Yes. We've got a lot of products that we've been -- yes, we've been focusing on a lot of products that do that very quickly. And we can certainly offline give you a bunch of sense of what we've been doing to reduce installation time for our customers. We feel pretty well satisfied with the work we've been doing there. Operator: The next question comes from the line of Dylan Nassano with Wolfe Research. Dylan Nassano: I appreciate the earlier color on gross margins, and I just wanted to focus in on the EBITDA level a little bit. I mean it looks like historically, you've kind of trended closer to the high teens kind of EBITDA margin and mid-teens kind of suggested here in the guide. So just any more color on kind of a possible path back to those historical levels and hitting that as a run rate if you were to kind of stay at these gross margins that you're guiding to? Keith Jennings: Dylan, this is Keith. Great question. First, I think as I said earlier, I think we're in a very competitive environment. So I think our gross margins are probably going to be in the level where we are now. To your question of how does that drop through to improve our EBITDA margins, I think it's going to come from 2 places. One, scale as we continue to grow, then we're going to get some SG&A leverage. Right now, you can see us coming down over the time horizon from 2024, I think where we were closer to 15% to last year, we were closer to 13%. This year, we are forecasting to be at 12%, and we have a near-term target to leverage up to somewhere around 10%. The other component that we have to remember is that APA is a strong acquisition for us. It improves the opportunity for us to speak to our customers about a broad array of how we work and develop and bundle things. As those commercial synergies come online in 2027 going forward, we should see more EBITDA margin expansion as that business grows. And so right now, we're still forecasting to be at the 15%, but we think that there with leverage and scale that we should get back to the high mid-teens. Operator: Corinne Blanchard has rejoined the line with Deutsche Bank for a question. Corinne Blanchard: Sorry about that. I don't know what happened. I was there. I was talking. I mean most of my questions have been taken now, but maybe 2 parts and sorry if I missed it. But the first one, can you talk about the OpEx margin maybe throughout '26 and maybe expectation for the medium term, '27 and '28? And then the second question would be like your view on the U.S. versus international mix and how we should think about it for the rest of the year? Keith Jennings: So great question, much like the earlier question. We are not slowing our commercial investments in our SG&A. We have seen the benefits of that in terms of how it has improved the customer mix, quality, the size of orders that we're winning, the engagement with customers as we integrate APA and increase our ability to converse about the relevant development of sites and what's under the panel. And so what we have been focusing on is the leverage that, that brings, right? So if you look 2 years ago at our OpEx, it was running at a rate of about 15% of revenues. We have increased our spend, but we've also grown and leveraged ourselves now where that is approaching 12% of revenues. We have a near-term target to operate this business at about 10% of revenues, and we think that's in sight with scale and leverage and growth. And so we continue to expand the front end and change our application engineering team and also how we engage with the higher-quality customers. We think there's a fair bit of EBITDA margin expansion to be had when the commercial synergies from APA starts to kick in, in 2027. Right now, what we're seeing with APA is the gross margin synergies between 45X and procurement synergies. And so we are fairly confident that we are on the right path to back to high mid-teens EBITDA margins. Kevin Hostetler: I think to answer a little bit more on the international side as well. Look, we've proven the formula works. When we invest in the front end of our business, when we add new sales resources that bring in industry knowledge, relationships, we -- and in particular, when we add that technical capability in with that sales organization, we're seeing really a lot more traction and success than we had historically. So we've taken that same approach. And what Neil and the team have been doing internationally was taking that same pattern that has worked. And over the last 12 months, we've added a handful of resources in other countries in Latin America. We've added -- and also new sales leadership of the entire region. We've added new sales leadership in Europe, again, industry experts in both cases with relationships and then building out the team. We've added technical selling resources in each region as well as additional country -- direct country managers in those regions that we think we have an opportunity to win and where customers are willing to value our differentiation and frankly, pay for it. So we're not just bidding on price. So I would say the international is probably -- the international rate of recovery is about a year behind the domestic. You're seeing the results of that domestic recovery already in 2025. I think we'll begin seeing much more of that acceleration in 2026 for our international businesses. Operator: The next question comes from Ameet Thakkar with BMO Capital. Ameet Thakkar: Just one quick one for me. If we look back at your historical kind of free cash flow to EBITDA conversion ratios in 2023 and 2024, they were, I think, kind of between 70% and 80% and obviously a lot lower in 2025, same kind of levels expected in 2026. And can you just kind of walk us through kind of like is it kind of shifting more of your manufacturing to the U.S., selling more in the U.S. and changed some of your kind of payment terms or working capital needs relative to what it was before or any other kind of drivers for that? Keith Jennings: Thank you, Ameet. Great question. If you go back to 2025 and 2024, some of the things that we were experiencing were the quick collections of 45X. As in prior year, 45X was impacting the conversion ratio. And also, as you get into 2025, what we were going through is growth. When you grow your revenues by 40%, you're also going to grow your account receivables by that much as well. We also saw an expansion of our CapEx as we built a state-of-the-art facility in Albuquerque to bring the factory of the future into our setup and capture more of the 45X in-house. So those are the 2 things. I think that if you think about our business, and we converted roughly 43% of our EBITDA to free cash flow in 2025. We are forecasting to hold the same ratio. So if we are forecasting roughly 15% EBITDA expansion, then we should be growing free cash flow by just about the same percentage. So we're fairly confident that we'll be generating -- continue to generate free cash flow to add to our flexibility and our choices of deleveraging or continuing to invest diligently. Operator: The next question comes from the line of Chris Dendrinos with RBC Capital. Christopher Dendrinos: I wanted to dive back into the international strategy here. And I mean, maybe can you expand a little bit more on the supply chain strategy there? And are you positioned to go after, I guess, a broader set of markets here? Does there ultimately need to be some incremental investment to, I guess, call it, optimize the supply chain to be cost competitive? Neil Manning: Yes, Chris, it's Neil. I'll take that one. So on the international side, there's a couple of things in play that we've done and some things that you'll see in the coming quarters and into next year. So over the last, I would say, 8 quarters, we've built out a center of excellence in Asia to consolidate supply chain and purchasing for both our U.S. and for international footprints so that we can consolidate spend between Spain and Brazil and for areas that are domestic content required partially for the U.S. So that's in place. That's up and running and performing quite nicely. The other thing that you saw with our release today is that we're also moving to consolidate our international and introduce the DuraTrack platform into both the EMEA and Latin America regions. So that's going to give us scale and additional ability to drive efficiencies on a global basis on a global platform as we move forward. So at that point, then, you're also going to see a new product introduced later this year, which brings the best capabilities of both the H250 and DuraTrack platform together, which will then again bring supply chain and build material efficiencies on a global basis. So we're really looking forward to that. Kevin Hostetler: I mean I'll -- I know Neil is being a bit modest on the amount of work that the team has done. And I'll say, when I think about a couple of countries, Australia is a great example. Our ability to domesticate a supply chain and win orders in Australia, specifically because of our quick ability to fully domesticate supply chain in Australia has led to an outsized win rate in that region. So we feel really good about that. We've been able to replicate that in multiple other countries that as we began getting into, the countries came and said we want a higher proportion of domestic content. And we've kind of have the formula down of how we engage, what the project team looks like to do that. And in every case I could think of in my head, we've been able to hit our time lines to increase domestic content in these other regions, which has then allowed us to have a higher win rate as they put these new controls or limits on awards of orders in some of these emerging markets. So I think we've got a really good formula for that at this point, and the team has been executing really well. I can think of 3 particular regions in the last 18 months that we've been able to form teams and win specifically as a result of our ability to domesticate componentry, so really good work. Operator: The next question comes from Ben Kallo with Baird. Ben Kallo: I want to go back to the market share gains. Could you talk more about where you're seeing those gains come from? You don't have to name companies specifically, but -- and why you think that you guys are gaining share? And then I know there was a reference to customers that haven't used you before. Is this something where it's a customer that's also growing volume and so they're adding another partner or same volume and you're taking actual share from them, not just increasing your share overall, if that makes sense. Kevin Hostetler: Yes. So let me just start. If you just peel up the domestic business and start there, and you look at our volume growth last year of 35%, there's nobody that says this industry grew 35% last year. And anyone who does, is confused. So when you just look at the domestic ATI volume growth, we've taken back market share. We see that. We see that in our internal win rate. And our internal forward-looking win rate, that means the wins and losses that we see internally on bids continues to be better than what we're seeing when you're looking at the rearview mirror of revenues, right? So we continue to see strong traction and momentum in a positive forward basis. Relative to that 4 gigawatts we talked about, in some cases, that was market share takeaway where they were currently doing business with others, and we've been able to go in and win a fair share of that business from a technical selling basis. And in other cases, it was companies that were migrating up into utility scale who already had familiarity with Array at DG level, for example, but have not done utility scale and are going with Array on their larger program. So there's a blend of both. But suffice to say, if you just look at our volume growth, just look at our orders growth and trajectory, you'll see that we are once again significantly rebounding in market share. Operator: Our last question comes from Vikram Bagri with Citibank. Unknown Analyst: It's [ Ted ] on for [ Vik ]. I wanted to ask about wallet share. You mentioned further the share of the wallet. Where does the integrated tracker and foundation solution get you to in terms of wallet share, either on a percentage or dollar per watt basis? And then do you have a goal in mind for where you want that wallet share to ultimately be once you factor in the organic and inorganic growth? Kevin Hostetler: We can't give you the latter answer without you figuring out what pieces of inorganic that we have most interest in to be clear. So we're going to shy away from that. I would say, look, we've talked about the APA throughout the acquisition. And what you're doing is solving for foundations. So if you think about the $1 a watt or $1.08 a watt, whatever number you want to use, and the tracker being roughly $0.10 of that, the foundations range somewhere on the low end of $0.025, but typically up to almost $0.04 a watt. So that's what we pick up with APA. And as we do that integrated offering with APA, we pick that up at really nice margins. So that's our first focus was to be able to integrate a foundation with a tracker to increase that share of wallet. We are keenly focused at other areas of that, that we think provide the best opportunity for interoperability. Again, that's our laser focus on our platform expansion, the balance of system strategy we're deploying is ensuring that those items we buy, there is true technical integration capability that will not only save our customers' money as we technically integrate but allow outsized margin opportunity for Array. That's our focus. Operator: Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's conference as well. Please disconnect your lines, and have a wonderful day.
Operator: Hello, and welcome to the agilon health Fourth Quarter 2025 Earnings Conference Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Evan Smith, to begin. Please go ahead when you're ready. Evan Smith: Thank you, operator. Good afternoon, and welcome to the call. With me are Executive Chairman, Ron Williams; and our CFO, Jeff Schwaneke. Following our prepared remarks, we will conduct a Q&A session. Before we begin, I would like to remind you that our remarks and responses to questions may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. Additionally, certain financial measures we will discuss in this call are non-GAAP financial measures. We believe that providing these measures helps investors gain a better and more complete understanding of our financial results, and it's consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is available in the earnings press release and the Form 8-K filed with the SEC. And with that, let me turn the call over to Ron. Ronald Williams: Thank you, Evan, and thank you all for joining us today. 2025 was a year for building the foundation of sustainable performance through intense focus on operational discipline. While we are navigating a comprehensive transformation, our mission remains unchanged, empowering physicians to lead the transformation of health care through our total care model. The fundamental resilience and effectiveness of our partnership model demonstrates a durable long-term growth runway through trusted relationships with community-based physicians. These individuals are leaders in their communities and have an average 10-year-plus relationship with their patients, creating deep community ties that are difficult to replicate. While we are not satisfied with our financial performance in 2025, we made tangible progress in the areas that matter most for a durable turnaround, which Jeff will provide more detail on in a moment. Our tangible progress includes the advancement of our clinical pathways and quality programs, our disciplined approach to payer relations and our continued focus on data-driven performance. All are driving greater clarity and sustainability across agilon's scalable operating model to support long-term value-based care success for our total care model. Our preparation for the future includes applying our continued discipline and focus across these critical areas as we navigate the potential of a lower-than-expected rate increase in 2027 following CMS's advanced rate. We believe the advanced rate notice does not sufficiently reflect the ongoing population-wide increase in cost and utilization due to growing chronic disease burden and aging of the Medicare population. In addition, our further review of the risk model revision and normalization outlined in the advance notice, we believe the potential impact will be generally in line with the national average. However, we believe that our clinically focused program remains a critical part of the long-term answer. Continued advancement of our burden of illness and clinical pathway initiatives with our partners will help to mitigate the impact of the risk model changes as they did for V28. In addition, given the focus of our model is the assessment of conditions at the point of care with diagnosis tied to documentation from a visit we believe we have minimal exposure to unlinked or audio-only coding. We believe our ability to differentiate on the management of medical cost and quality outcomes should continue to position us well with health plans and physicians with the expectation that the rate and cost spread will ultimately normalize over time. Throughout the year, we advanced several key transformation priorities, which are embedded in our expectation for material improvement in year-over-year medical margin and adjusted EBITDA. At the midpoint, we expect revenue of $5.5 billion, medical margin of $325 million and adjusted EBITDA at breakeven. Our 2026 outlook reflects the expected positive impacts from the team's execution on payer contracting, clinical and quality programs, cost initiatives as well as premium increases. We also anticipate benefiting from payer benefit design changes, including increases to deductibles and maximum out-of-pocket expenses as well as reductions in supplemental benefits. While this is expected to benefit cost trend, we are assuming that net cost trends will remain elevated in 2026 at approximately 7%. Let me now reinforce key areas we believe are supporting a stronger foundation for execution in 2026 and forward. First, we entered 2026 with an enhanced financial data pipeline and strengthened actuarial and analytical capabilities, improving financial discipline, clinical visibility and overall predictability. We are increasingly able to identify variants earlier and intervene faster. As we have previously stated, we now have greater visibility into detailed revenue and claims information with the ability to calculate member level risk scores, utilizing our enhanced data pipeline, a key difference versus prior years. In addition, we believe the pipeline, AI-assisted advances for high-risk member identification and diagnosis through our burden of illness program as well as execution on clinical pathways will deliver results over and above the final year of the V28 impact. Second, through a disciplined approach to better underwriting the risk we take by contracting, agilon intentionally prioritize economic sustainability over membership growth. This approach included a willingness to pause growth, walk away from unprofitable payer contracts and restructuring arrangements with certain payers in specific markets temporarily migrating to a care coordination fee model as opposed to full risk. As a result, we expect to benefit from incremental percentage of premium and enhanced quality incentives for the value we deliver. A reduction in Part D exposure to less than 15% of our membership as well as shorter average contract term lifts, which we expect will help us better navigate changing market dynamics, including exposure to at-most policy, utilization or payer behaviors. In addition, our disciplined and rigorous recontracting process led us to exit certain payer contracts in specific markets. These contracts did not meet our minimum threshold of profitability. We expect membership will be reduced to approximately 430,000 members in 2026, including approximately 25,000 members in no downside care coordination fee arrangements with upside performance-based fees. We believe care coordination fee arrangements provide a long-term risk-adjusted growth opportunity to potentially move these members when appropriate to a full risk arrangement. Third, we advanced clinical pathways, which are evidence-based data-enabled care models designed to help our partners proactively identify, diagnose and manage the care journey for patients with high-impact chronic conditions. We believe these pathways, including heart failure, dementia and COPD can materially affect utilization, quality and total cost of care. We concluded the year with active heart failure programs adopted in over 90% of our network. Congestive heart failure or CHF is the most mature and scaled pathway, serving as a blueprint for other conditions, including early identification, expanded support for guideline-directed medical therapy and appropriate end-of-life care guided by patient preference and goals. Palliative care is also a core extension of our total care model. It's designed to proactively support patients with advanced illness, often those with late-stage heart failure, COPD, cancer or significant multi-morbidity. While only representing a small subset of our population, we have increased the number of patients engaged with this program. Clinically, it improves quality of life and care coordination. Financially, it helps us reduce avoidable late-stage utilization, particularly inpatient admissions and emergency care. Most importantly, the patients and their families have a better experience and clearer goal of care discussions and more coordinated support. Fourth are our quality initiatives. Our quality programs continue to mature with stronger measuring discipline and improved care gap closures. Quality isn't just a scorecard for us, it's a lever for patient outcomes, member experience, cost and revenue. The strategy recognizes that primary care performance directly drives the majority of Star measures, making agilon's physician-centric model structurally advantaged and an area of increasing focus by payers. Our value-based care model enables exceptional quality performance by providing the necessary tools and support to help our network deliver the highest quality care. To drive additional performance in 2025, we strengthened our data access and analytic capabilities to further enhance our ability to identify care gaps. We also expanded our capabilities for providers to close care gaps in areas such as diabetic eye exams. Our network consistently delivers quality performance for measures we can influence and control ahead of benchmarks at 4.2 stars on a composite basis across the platform, maximizing quality bonus revenue while reinforcing physician alignment. In 2026, we believe we have the opportunity to more than double the incentive contribution. As we indicated last quarter, 2024 results were very strong in ACO REACH and an improvement over 2023 results. ACO REACH continues to demonstrate the value creation agilon can deliver and is shaping the way we are transforming our MA business. CMS recently announced the lead program long-term enhanced ACO design, intended to launch after the REACH model concludes at the end of 2026. LEAD is designed as a 10-year voluntary model with a longer planning horizon, benchmarking enhancements and an emphasis on better serving high needs patients. We see LEAD as a positive signal. It reinforces CMS commitment to value-based care with a longer-term structure that can support sustained investment and consistent operating execution. Lastly, we executed on initiatives to reduce operating costs and controls. We believe we made meaningful progress on forecasting, performance reporting and market level accountability in 2025. These are critical to improving decision speed and execution. We executed on $35 million in operating cost reductions above what we communicated at the end of the third quarter. This will enable greater operating leverage from the platform and support our business objectives. In summary, we are executing with urgency, while cost trends are expected to remain elevated, we believe our transformation actions will support improved operating performance. We plan to build on the progress made last year with a continued emphasis on disciplined execution, collaboration and measurable positive impact for patients. We expect 2026 to mark a strong improvement in medical margin and adjusted EBITDA supported by renegotiating with health insurers to better reflect the reality of today's environment, care costs and plan initiated decisions. A heightened focus on investments in quality performance as health plans continue to increase the incentives available for top quartile performance. Continued progress to improve patient outcomes and reduce total cost of care through proactive chronic disease management and ongoing development and expansion of clinical pathways, strengthening provider engagement and reducing variability in performance across markets and practices, optimizing our cost structure. Lastly, we will continue to advance initiatives, which we expect to support continued performance improvement in 2027. With that, I'll turn it over to Jeff to walk through the financial results. Jeffrey Schwaneke: Thank you, Ron, and good afternoon. As Ron stated, 2025 was a transformational year. We took significant actions focused on improving the profitability of the business, including a disciplined approach to contracting, improvements in our burden of illness program, enhancing our clinical and quality programs, meaningful cost reductions and continuing to advance strategic initiatives related to our data visibility, clinical and cost management programs. Through the execution and implementation of these initiatives, we expect to drive significant improvement in profitability in 2026 while continuing to invest in our platform and partners. As we discussed last quarter, this is supported by several underlying market and payer-related tailwinds, including the 2026 final rate notice by CMS, payer bids, which were focused on margin and our actions we took in 2025 centered on execution and profitability. For today's discussion, I will cover 3 key areas. First, I will walk through our fourth quarter and full year results and a bridge to our jumping off point for 2026. Second, I will walk through our 2026 guidance, including key assumptions, driving improved profitability. And finally, I will discuss the strength of our capital position and a more disciplined near-term growth outlook. Moving to our financial performance for the fourth quarter and full year 2025. Starting with membership. Medicare Advantage membership at the end of the quarter and fiscal year-end 2025 was 511,000 members. Our ACO REACH membership for the quarter and fiscal year-end 2025 was 114,000 members. As a reminder, membership continues to be affected by our decision to take a measured approach to growth, inclusive of previously announced market exits in a smaller 2025 class. Total revenue for the fourth quarter was $1.57 billion and $5.93 billion for full year 2025, respectively. Revenue in both reflect the impact of lower-than-expected risk adjustment revenue and previously disclosed market and payer contract exits. With respect to medical costs, we continue to see favorable development from the first half of 2025 with the respective cost trend now sitting in the mid-5% range. However, for the third quarter of 2025, we experienced elevated costs, primarily attributed to inpatient stays, including a few large discrete multimillion-dollar claims totaling $6.5 million. Based on this, we increased our medical cost trend for the third quarter of 2025 to 7.2%, up from the low 6% range we previously recorded. Given the elevated cost trend we experienced in the third quarter, along with minimal paid claims visibility at close of the fourth quarter, we took a prudent approach and recorded fourth quarter medical cost trends at 7.4%. This brings our full year 2025 cost trend to approximately 6.5%, which we believe provides a solid foundation heading into 2026. Medical margin for the fourth quarter was negative $74 million and negative $57 million for the full year. Both the fourth quarter and full year results are reflective of the elevated cost trend assumptions just discussed as well as the previously discussed risk adjustment impact. In addition, the full year results include negative $60 million from exited markets and negative $53 million from prior year development. Adjusted EBITDA was negative $142 million and negative $296 million for the fourth quarter and full year, respectively. The fourth quarter reflects the items I already highlighted, partially offset by lower geography entry costs and the benefit from continued operating cost discipline. ACO REACH was in line with our expectations. Adjusted EBITDA for the fourth quarter was negative $6 million and for the full year of 2025 was $41 million. As Ron mentioned previously, ACO REACH performance further supports our confidence in our approach, the total care model and value we bring to our partners and members. On the balance sheet, we ended the quarter with $285 million in cash and marketable securities and $91 million of off-balance sheet cash held by our ACO entities. Year-end cash was ahead of our expectations by approximately $66 million, including $34 million in permanent improvement and $32 million related to expense timing. Last, in tandem with our transformation initiatives, after the quarter, we extended our credit facility and term loan. Details were filed in an 8-K. Next, let me discuss our outlook for 2026. As I previously mentioned, we are optimistic about our ability to deliver significant growth and profitability in 2026, driven by our actions in 2025. We have provided our first quarter and full year 2026 guidance metrics in the press release and earnings presentation posted on our website for you today. We have also provided bridges in the earnings presentation that walk from our jumping off point to the full year 2026 guidance. For the full year 2026, we expect year-end membership on the agilon platform will be in a range of 525,000 to 540,000 members. This includes estimated Medicare Advantage membership of 430,000 and ACO model membership of approximately 103,000 at the midpoint. The estimated Medicare Advantage membership reflects the market exits we announced in 2025, a small amount of growth as well as the impact of our disciplined contracting. As we highlighted on our third quarter earnings call, our contracting efforts were focused on achieving positive adjusted EBITDA across all markets, which embeds our assumptions of medical cost trends, payer-specific bids, quality performance and market-specific cost structure for 2026. As a result of this disciplined profitability-focused approach, we exited several payer-specific contracts for 2026, which reduced overall Medicare Advantage membership by 50,000 members. Additionally, Medicare Advantage membership includes approximately 25,000 members in a care coordination fee structure with additional incentives tied to quality and cost performance. For the full year, we expect revenues in the range of approximately $5.41 billion to $5.58 billion. As highlighted in the slides we provided today, most of the year-over-year improvement is expected to be driven from known factors, including increased percentage of premium from our contracting efforts and payer bids, which were on average at or above the CMS benchmark rate. Combined, these are expected to create over $625 million in incremental value in medical margin in 2026. As mentioned earlier, in addition to exiting structurally unprofitable arrangements, we also reduced exposure to Medicare Part D costs to below 15% of our membership. We prioritize care coordination fee structures with performance-based incentives, more than doubling the quality incentive opportunity from 2025 for the value we deliver to our members and payers. With respect to our burden of illness program, we are confident that the enhanced data pipeline, which now includes over 85% of our members, AI advances for high-risk member identification and diagnosis in our BOI program and execution on clinical pathways are expected to deliver results over and above the final year of V28 implementation. We expect a net 40 basis point improvement year-over-year at the midpoint. As a reminder, over the last 2 years, we have more than offset the impact of the V28 implementation. Our enhanced data pipeline has shown a 99% plus correlation rate and is expected to improve the accuracy and forecasting of our risk-based revenue. With respect to cost trend, we are assuming a gross cost trend of 7.5% for 2026 as trends remain elevated and net 7% when considering the 50 basis points estimated benefit from payer bids. As we have stated previously, 2026 payer bids across our markets, on average, demonstrated payers bidding for improved profitability with benefit design changes, including increases in premiums, deductibles and maximum out-of-pocket expenses and a reduction in supplemental benefits. It's important to note that this 7.5% cost trend for 2026 comes on top of the higher cost baseline that we are now assuming for 2025, which we believe is an appropriate stance in this continued elevated cost environment. We expect medical margin to be in the range of $300 million to $350 million in 2026. This reflects the positive impact from our disciplined contracting efforts, a slight benefit from our BOI program and a more conservative cost trend assumption heading into 2026 due to the continuation of elevated medical expenses. We anticipate G&A expense of approximately $234 million, which is slightly lower than the full year 2025 and geo entry expenses of approximately $15 million. G&A expense for 2026 includes the benefit from the organizational realignment initiatives we implemented in the second half of 2025, which reduced operating expenses by $35 million, exceeding what we previously communicated. This was partially offset by employee merit and medical cost inflation and the reestablishment of incentive compensation expense, assuming a full target payout. We continue to focus on additional initiatives to optimize our cost structure and drive additional operating leverage heading into 2027. Last, adjusted EBITDA for the full year is expected to be in the range of negative $15 million to positive $15 million or breakeven at the midpoint. This includes the contribution from our ACO REACH programs, which is expected to be in the range of $20 million to $25 million. As a reminder, our ACO REACH outlook reflects announced changes to the ACO REACH program for the 2026 performance year, primarily related to a rebasing of the risk adjustment cap from 2022 to 2019. While we are confident these factors will drive improved performance, we are continuing to actively manage the business to further enhance execution across all initiatives, laying the foundation to drive improved performance beyond 2026. Finally, I will discuss our capital position, which will enable our teams to continue executing on our transformation and deliver our anticipated material year-over-year performance improvement. We expect to end 2026 with at least $125 million of cash on hand, including our ACO REACH entities. This is driven by our better-than-expected year-end cash position, combined with our current 2026 outlook. Additionally, we have extended our credit facility with our existing lenders by 2 years and currently plan to pursue a reverse stock split as indicated in our proxy filing. We believe the extension reflects the strength of our operating performance outlook and continued lender confidence in our business. Finally, I would like to address the advanced rate notice released by CMS. To reiterate, we are disappointed and believe the proposal does not adequately address the high cost and utilization trends experienced over the last several years. As Ron mentioned, after further analysis of the details provided with the advanced notice, we believe our BOI and clinical pathway initiatives will help mitigate the impact of the risk model revision and normalization factor outlined in the advanced notice. In addition, our initial analysis of the sources of diagnosis indicates we should experience minimal impact as the strength of our model is our primary care partners' physical interaction with their patients. This would set our expected baseline closer to the published effective growth rate. We will continue to analyze and monitor this release and remain hopeful that a more comprehensive and appropriate approach will be taken when final rates are released in April. In summary, we recognize that we are operating in a dynamic macro environment, including industry headwinds and regulatory changes. We have executed on a significant business transformation plan, combined with our physician-centric model and scale, we believe, positions agilon health to deliver sustainable value for patients, partners and shareholders. With that, operator, let's move to the Q&A portion of the call. Operator: [Operator Instructions] Our first question comes from Jack Slevin with Jefferies. Jack Slevin: I just want to kick off on some of the trend discussion because I think I caught all of it, Jeff, but I want to make sure we've got sort of the right understanding in terms of what's baked in for 2025. So I guess I just want to clarify, it sounds like 3Q has stepped up. You sort of roughly match that or maybe step it up slightly. Just a little color or clarification there. And then if there's anything you've seen in some of that true-up in the third quarter on what might be driving that acceleration in cost trend, I would be interested just to hear if there's any color on that at this point. Jeffrey Schwaneke: Yes. Sure, Jack. Thanks for the question. Yes, you're right. So what we saw in the third quarter, in the prepared remarks, we commented on really higher inpatient stays. So we had a lot more inpatient volume. Specifically, we had several cases that were over $1 million. And if you aggregate those, it's roughly $6.5 million of cases that were over $1 million in the third quarter. And so sitting at this point, we took the cost trend in Q3 from the low 6s to 7.2%. And listen, we recognize that we have limited claims visibility, paid claims visibility for the fourth quarter. But we felt it prudent given that Q3 is kind of coming in so high that we moved Q4 up to 7.4%. And so what that did is it took the full year from the low to mid-5s to 6.5%. So right now, we have 2025 at 6.5% cost trend. Jack Slevin: Okay. That's really helpful. I appreciate that color. And then maybe just to follow up on some of the '27 commentary, sort of acknowledging you all have a lot of wood to chop in '26, and I think that seems to be clear in sort of the guidance that's laid out. But maybe just on '27 on the rate notice and then on the ACO front as well. I guess I'm on record saying I think value-based care players can get to roughly 5% on rev trend. It sounds like you guys maybe have a slightly different bridge there, but are landing in a similar zone. Considering that sort of environment, 7.5% cost trend that seems possibly conservative for '26, but maybe unclear where that goes. How do you think about what actions you might need to take in '27 on MA, whether it's further contract adjustments? Maybe just -- I'll leave it open ended there, but interested to get sort of what that landscape might look like. And if I can squeeze in a loose second piece on the ACO front, I heard the LEAD commentary. Would love to hear just sort of how you're approaching what to do in '27 on that front with the end of REACH. Jeffrey Schwaneke: Yes. Yes, I'll handle the '27 commentary that you talked about, and then I'll send it to Ron for the ACO part. But really, Jack, it's the same actions we've been taking, right? So it's contracting, it's our burden of illness program. We'll see how the final rate notice shakes out. But it's the same levers that we've been, I would say, executing on this year. We will do more of that as we think about '27. I would say the 2 open components are what happens with payer bids. And so obviously, we get a preview of what those bids look like before we enter into our contracting discussions. So that will be an important piece. And then overall, what the cost trends do. But I think from our perspective, we believe that we can continue to improve margins beyond 2026 through all of these levers that we've talked about today, and that's what we're focused on. So -- and then -- and Ron, on the ACO. Ronald Williams: Yes. Look, Jack, I think the ACO new model is encouraging in the sense that it's a 10-year model, which provides for a longer period of time, gives you a basis to plan and perhaps to make investments to support the development of the model. Now we have encouraged from a policy point of view, further clarity, much greater even stretching out of the implementation of the program. I think that at this point, there's not a lot that we know, but the main thing that we know is that it represents a continuing opportunity. And I think that the work that we've done so far in the current model will position us very well in terms of however the program unfolds. And so we're looking forward to being actively involved. As a matter of fact, I'll be in Washington next week. Dr. Oz is going to be in a meeting on that, and we'll continue to advocate physicians to make that program effective for patients, for physicians and for us. Operator: And the next question comes from Jailendra Singh with Truist. Jailendra Singh: I want to follow up on the incremental inpatient admit costs you just were talking about for Q3. Were those claims tied to some specific payers and geographies? Just trying to understand if your Q3 reserving of 7.4% versus 7.2% in Q3 kind of assumes -- Q4 reserving of 7.4% versus 7.2% in Q3, assumes those inpatient stays continue at a similar level or get worse? Just trying to understand if cushion built in Q4 is enough. Jeffrey Schwaneke: Yes. Thanks, Jailendra. I guess a couple of things. Number one, they weren't concentrated in specific markets is what I would say. And we did see utilization step up, not across the board, but in several of our markets, specifically in inpatient stays. And I would say September appears to be the highest of the quarter. And so it was more focused on the end of the quarter is where we saw that. And I understand your point, you're saying, could these just be random acute events that don't reoccur. That's certainly possible. But again, with limited claims visibility as we closed out the year, we just felt it was prudent to provide a solid foundation from which to jump off into 2026. And so we went ahead and moved that cost trend up to 7.4%. So again, limited claims visibility for us, but we felt it necessary to provide a good stepping off point. Jailendra Singh: Got it. And then my quick follow-up on your OpEx cost initiatives, which is now $35 million benefit in 2026. Do you guys see any additional opportunities in terms of streamlining cost? And what areas that could come from? Jeffrey Schwaneke: Yes. I think it's all the areas that generated the $35 million. Certainly, we're not done looking, okay? Let's put it that way. And so I think there are further opportunities for cost reduction. Some of that's going to require automation and AI and technology. So I think they'll be harder to achieve, but it doesn't mean it's not there. And so that's what we're focused on as we think about executing on 2026 and heading into 2027. Operator: And the next question comes from Michael Ha with Baird. Hua Ha: Wondering, is there any update you've received on the '25 fee-for-service trend within ACO REACH? Is it still 8.5%? And then also just on trends more broadly across both REACH and MA. There's been some conversation about the MA rate notice, I'm saying that back half trends are actually less steep. So if CMS were to include more back half '25 claims experience, it might actually drive the effective growth rate slightly lower than the advanced notice, but it sounds like your own back half trends have actually stepped higher versus the front half, which would obviously go against that thinking. So I'm curious to hear your thoughts on the ongoing conversation. Jeffrey Schwaneke: Yes. Yes, for sure. Thanks, Michael. I think the first half we commented on is in the mid-5s for us. So in the MA population, we certainly did see an acceleration of cost trends, at least for Q3. We'll have to see how Q4 plays out. But at least for Q3, we certainly saw that. The fee-for-service cost trend, the latest on that is 8.1%. So it came down a little bit. But what I would say is in the ACO program, it was also concentrated in the back half, and we have a lot more current data there from the government is what I would say. And so those cost trends were tilted toward the back half as well, but they've come down from 8.5% to 8.1%. Hua Ha: And one more on the rate notice. I'm curious, after you've reviewed it yourself, I'm just wondering if you -- there's anything you view as most notable with potential for CMS to improve. Again, there's conversation about another area about the treatment of skin subs and the risk model recalibration. By that, I mean, they adjusted the effective growth rate to exclude it, but it doesn't look like they did that for -- potentially for the coefficients aligned with those skin subs. So now we have this strange situation potentially where it's distorting the risk model recalibration and driving this rate headwind. I'm curious if that's an area you've been looking at thinking about and just broader thoughts on areas of improvement into the final rate notice. Jeffrey Schwaneke: Yes. Certainly, all of those items that you have mentioned, in addition to what is the final kind of cost trend, all of those items are top of mind for us. I guess what I would say is, again, just broadly, ultimately, we're looking for rates that account for the cost trends that we've seen over the last several years. However that shakes out. That's ultimately what we're trying to achieve. I guess we'll have to see how all of these things that you mentioned play out. Hopefully, some of those get delayed or lengthened or spread over time to balance, I would say, the cost trend dynamics that we're dealing with. But ultimately, we'll have to see how that shakes out. Operator: [Operator Instructions] And our next question goes to Ryan Langston with TD Cowen. Ryan Langston: A few of the larger public plans have highlighted expected margin recovery in group MA specifically. I think the last disclosure of your mix was around 17% or 18% kind of midway through last year. I guess where does that percentage sit now and in 2026? And I guess, how is that potential recovery reflected in the guidance? Jeffrey Schwaneke: Yes. Thanks, Ryan. It's a little early to figure out kind of where the membership is going to play out is what I would say. But I don't think that we're going to have too different of a mix heading into 2026. But obviously, we really don't get final membership until towards the end of the first quarter. And so we'll kind of give an update at that point in time. But right now, there's nothing that says our mix is going to be substantially different from that. Operator: And the next question goes to Matthew with Needham & Co. Matthew Shea: I wanted to hit on quality. Nice to see the medical margin opportunities there. I think in 2025, you've been targeting $25 million of opportunity tied to quality. How did you do on achieving that? And then for 2026, as we think about that opportunity doubling, could you maybe just give us a sense of what those increased incentives look like and pathway to achievement? Is that just greater stars improvement or any discrete strategies you're laying out to achieve that quality opportunity? Jeffrey Schwaneke: Yes. So a couple of things. The quality, obviously, the measures aren't done yet. There's runout that has to happen. But I think we're in the ballpark or getting close to what we thought we would achieve for 2025. That's the first thing. The second piece, which you mentioned is there's an opportunity for us to -- there's doubling of the potential for us to earn. And what I would say is broadly across our network in 2024, we were roughly at 4.2 stars. We made progress and improved that in 2025. Now the verdict is not all the way out because we have the runout that has to happen, but we're pretty confident that we will do better in 2025. And as we think about 2026, the opportunity is there. What we have included in our guide is similar performance to 2025. And so we haven't banked on that in the guide, but we're obviously shooting for a higher level of performance. And we have programs that are centered, as you can imagine, around driving that performance. Operator: And the next question comes from Stephen Baxter with Wells Fargo. Stephen Baxter: Just want to make sure that I'm fully tracking the comments on the advanced notice that you gave and why you think that your view of it is more in line with the effective growth rate. I think you're saying that you have, I guess, little to no exposure to unlinked chart review, which makes perfect sense given the model that you operate. But in terms of the other risk model changes, including the normalization impact, that 330 basis points item in the CMS announcement, are you saying that you just don't have exposure to that? Or you're saying that other things like coding trend and clinical efforts offset that? I'm just trying to get to what an apples-to-apples comparison is for you guys. Jeffrey Schwaneke: Yes, yes. Good clarification. I would say, yes, we are exposed to that. And generally, we've run the math, and we're very close to what is outlined in the rate notice. What we are saying is that we've shown the ability over the last several years to offset the implementation of V28. And recall, V28 was roughly 3% to 3.5% per year. And so we feel pretty confident that we can do that again in 2027. And so that's what -- that was the comment that was made is we have a way to offset that. And so generally, we're viewing it as the effective growth rate is really the number. Ronald Williams: Yes. I would just add that what's been driving has really been the implementation of our clinical pathways and particularly with our congestive heart failure, we ended the year with about 90% of the platform well implemented in that program. So we think we're crossing over with a pretty good run rate, and we think there's still a lot more prevalence in the communities for us to help patients get diagnosed and get on the right kind of therapy to help better manage that condition. And we also will be implementing additional clinical pathways, which we talked about that we think will be important contributors over time. And I think that one of the things I would say also is that we recognize that we need to focus on 2027 in terms of taking a step up in order to address this. So we're not saying that what we're doing, we think is perfectly adequate. We think it's a really, really solid foundation, and we're going to be doing more to make certain as best we can that we can get to where we need to. Stephen Baxter: Got it. And then my actual more tangible question, just on the medical margin bridge that you guys gave us in the slides. The $127 million for the payer contract, there any rough sense you can give on how much of that is percent of premium changes versus having less Part D risk. I'd love to just get a better sense of what inning you feel like you're in on this percentage of premium effort and whether you kind of characterize the success you're having as being relatively broad-based or maybe having more success with a subset of payers and maybe there's more opportunity in front of you? Jeffrey Schwaneke: Yes. I would say the majority of that is either percent of premium or relief from the payers stars -- specific payer stars issues that they've had. And that is contracted and done. So that's -- those are -- that's locked in value is what I would say as we think about the 2026 P&L. Operator: And the next question comes from George Hill with Deutsche Bank. Wenji Li: This is Liz on for George. I just have one question on the special need plans. Could you help frame the current exposure to the special need plans versus the traditional MA membership and whether the mix shift towards a special need plan means a structurally higher margin opportunity over time? Jeffrey Schwaneke: Yes. I don't -- yes, if I just look at our special needs plans, it's roughly 7% roughly for us, right around 7%. And I don't think we have enough information right now with our membership to determine if there's been a big mix shift, but more to come on that one. Operator: And the next question comes from Justin Lake with Wolfe Research. Justin Lake: A couple of follow-ups for you guys on the stuff you've already talked about. First, on the membership exits, right, and some of the recontracting you've done there. I -- is it fair to think that you've kind of walked away from the contracts and the plans that you think are not good partners? And the kind of go-forward improvement here will be execution and hopefully, rates that reflect cost trends? Or do you still feel like there's more to come on that side? And also, were there any partners that stood out there? Is it concentrated in 1 or 2 plans that you walked away from? Or are you seeing that more broad-based? Jeffrey Schwaneke: Yes, Justin, I guess what I would say is it's probably payer and market specific. So it's not specific to any one payer. I think as you know, economics are different across payers and markets. And so I wouldn't single any payer out to say they were specifically an issue. And so it's broad-based. And ultimately, as we think about it going forward, I think these are members that we can ultimately get to a contract sometime in the future. But obviously, we're in challenging macroeconomic times. And we just couldn't get to a deal this year. So it doesn't mean we can't get to a deal ever. It just means the economics and the risk wasn't right for us at this point in time. And that's the same lens that we'll have as we renew contracts for 2027. Ronald Williams: Yes. I think the point I would make, Justin, is that we've been pretty clear about the value that we create. And that if we're not going to be paid for it, then we will not be delivering that value. And we'll see what happens next year as they realize that what we were telling them was really an important contributor to their success. So we're hopeful, but we're also firm about it has to be the right agreement for us and for our physician partners. Justin Lake: Perfect. And then just last follow-up on the -- on trend. I think this question has been out there for a while, but CMS went on their call and said, we think trend is 5.5%. ACO REACH have been pushing 8% to 9% in the last couple of years. Have you been able to -- you sit in a unique position kind of playing in a significant way in both. Have you been able to sit down and kind of bridge that gap in terms of -- I know skin substitutes is a big part of it. But beyond that, do you think there's 300 basis points of difference between ACO REACH and Medicare Advantage? Or do you think there are a couple of pieces that the industry can kind of bring down the DC and sit down with CMS and say, here's what you're missing. Jeffrey Schwaneke: Yes. I guess what I'd say, Justin, is I think the industry and we are aligned that there seems to be a disconnect between the ultimate rate at the bottom line that's getting paid and the cost trends that everybody, including fee-for-service has seen over the last several years. So there's no -- I think there's no answer here that bridges that gap is what I would say. And I think that's why everybody is advocating for kind of a revisit of what the initial rate notice is. Operator: The next question goes to Craig Jones with Bank of America. Craig Jones: I want to follow up on the chart review comment you made. So do you say you're in line and be in line with the 1.5% or do you think it will be like closer to 0%? And then as you think about how that spread among your payer partners, is it a pretty tight cluster or some potentially going to have like a 5% impact and some will have a 0% impact? Jeffrey Schwaneke: Yes. I think what we're saying is the removal of selected diagnosis is minimal for us just given our model because we're highly aligned with the primary care physician. And really, we're seeing those members in the office. And so for us, there's not a lot of unlinked conditions given how our model is designed and our proximity to the primary care physician. So I'd say that's just broad across everywhere. The Part C risk model changes, that obviously would be different by market. Operator: And our last question goes to Daniel Grosslight with Citi. Luismario Higuera: This is Luis on for Daniel. I just have a quick cleanup question. I know you're intentionally slowing down market growth this year, but guidance still includes $15 million of new geography entry expenses. Can you remind us where exactly that is allocated to? Jeffrey Schwaneke: Yes. That's really capital commitments from prior growth. There's some of that, that drags into the following years, what I would say. And there was a little bit of growth this year. And obviously, there's some other groups that we're talking to, but not really getting into that right now. Operator: And that does conclude the Q&A portion of today's call. So I will hand back over to you, Ron Williams, for any final comments. Ronald Williams: Yes. Thank you. I would like to close by really expressing a deep appreciation and a huge thank you to our physician partners whose commitment to quality care to their patients is really fundamental to our long-term success. I also want to thank all of the employees of agilon who have really been focused on this transformation that we've gone through this year, positioning us for the kind of success that we've outlined in our guidance. So -- and thank you for joining the call. We appreciate your questions and the opportunity to engage with you. Have a good day. Operator: Thank you, everyone. This concludes today's call. Thank you for joining. You may now disconnect.
Operator: Good afternoon. Thank you for attending today's Teladoc Health Q4 2025 Earnings Conference Call. My name is Tamia, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Michael Minchak, Head of Investor Relations. Please proceed. Michael Minchak: Thank you, and good afternoon. Today, after the market closed, we issued a press release announcing our fourth quarter 2025 financial results. This press release and the accompanying slide presentation are available in the Investor Relations section of the teladochealth.com website. On the call to discuss the results will be Chuck Divita, Chief Executive Officer. During this call, we will also discuss our outlook, and our prepared remarks will be followed by a question-and-answer session. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating our performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. I would now like to turn the call over to Chuck. Charles Divita: Thanks, Mike. Our financial performance reflects a solid finish to 2025 as well as progress we've made across our strategic priorities. Fourth quarter results were generally in line with our previously discussed expectations, including consolidated revenue and adjusted EBITDA both modestly above the midpoint of our guidance ranges. Consolidated revenue was $642 million, slightly higher than the prior year period, and adjusted EBITDA was $84 million, representing a 13% margin for the quarter. Net loss per share was $0.14, which included amortization of intangible assets of $0.52 per share pretax and stock-based compensation of $0.09 per share pretax. For the full year, consolidated revenue of $2.53 billion was 1.5% lower than the prior year, and adjusted EBITDA was $281 million, representing an 11.1% margin. Net loss per share of $1.14 included the following pretax amounts, amortization of intangible assets of $1.99 per share, stock-based compensation expense of $0.46 per share, a noncash goodwill impairment charge of $0.41 per share and restructuring costs of $0.11 per share. These items were partially offset by discrete tax benefits totaling $0.20 per share. Full year free cash flow was $167 million, and we ended 2025 with $781 million in cash and cash equivalents on the balance sheet after retiring $550 million in convertible debt at maturity in June. Net debt to trailing fourth quarter adjusted EBITDA was under 0.8x at year-end. Turning to segment results. Fourth quarter Integrated Care revenue of $409 million grew 4.7% over the prior year's quarter and came in near the upper end of our guidance range, benefiting from both performance-based revenue and U.S. virtual care visit volume related to a strong flu season. The acquisitions of Catapult Health and TeleCare contributed approximately 260 basis points to year-over-year growth and international delivered double-digit constant currency revenue growth. Chronic Care program enrollment was $1.19 million at quarter end, increasing 2% sequentially versus the third quarter. U.S. integrated care membership finished the quarter at 101.8 million members. Fourth quarter Integrated Care adjusted EBITDA was $65 million, up 23% over the prior year period and representing a 16% margin for the quarter. For the full year, Integrated Care segment revenue increased 3.3% to $1.58 billion, with acquisitions contributing approximately 210 basis points to segment revenue growth. U.S. Virtual care visit revenue grew double digits year-over-year, more than offset by a lower subscription revenue due to the shift towards visit-based arrangements we've spoken about previously. International revenue grew mid-teens on a constant currency basis for the full year. Adjusted EBITDA increased 2.7% over 2024 to $239 million, representing a 15.1% margin, about 10 basis points lower than 2024. Excluding the impact of M&A, adjusted EBITDA margin would have been up approximately 20 basis points year-over-year. Shifting to better health. Fourth quarter revenue was $233 million, 6.7% lower than fourth quarter of 2024. Average paying users for the quarter declined 6% year-over-year to 375,000 with a low double-digit increase in non-U.S. users, partially offsetting a low double-digit decline in U.S. users. Segment results also included approximately $7 million in insurance-based revenue, in line with our expectation. In the fourth quarter, BetterHelp adjusted EBITDA increased to $18 million, up from $4 million in the third quarter. The adjusted EBITDA margin was 7.9% compared to 1.6% in the third quarter and was driven primarily by seasonal pullback in ad spend due in part to higher ad prices during the holiday season. For the full year, BetterHelp revenue was $950 million, a decline of 9% from the prior year. This included insurance revenue of $13 million, in line with our expectation of $12 million to $14 million. Adjusted EBITDA of $42 million represented a margin of 4.4% compared to 7.5% in the prior year period. This year-over-year decline was driven by lower overall revenue and investments to scale the insurance offering, partially offset by a 7% reduction in advertising and marketing spend compared to the prior year. With that overview of our results, I would like to shift the focus to 2026, our priorities and where we see opportunities going forward. First, a critical area of focus for us is advancing our position in the U.S. markets served within our Integrated Care segment. While we have a well-established leadership position, we see opportunities to broaden our impact on patient care and client value and in turn, business growth and performance. We're going after this opportunity through product and capability innovation and the strength of our care model across virtual care, chronic condition management and mental health. For example, we recently launched our enhanced 24/7 care offering, the next generation of our flagship virtual care service. By leaning into the shift from subscriptions to visit-driven value, this new offering creates broader engagement points by expanding the range of conditions we can address, supporting our care providers with real-time access to specialists and placing more information at the point of care to address care gaps and other needs. We're also advancing innovations in our chronic care programs to support and improve the health of people living with chronic conditions. The human toll and the cost of chronic illness are major issues facing the health care system, and we intend to deepen our role in this area. In 2026, we're leveraging our extensive data in new AI-enabled stratification capabilities together with additional targeted clinical interventions to address the needs of rising and high-risk members, including coordination with primary and specialty care when appropriate and manage care more holistically. These AI models align and efficiently activate care teams for personalized action. In addition, we are rolling out new connected devices, in-home testing and other features to support our comprehensive approach, and we intend to build on these advancements in our product development pipeline going forward. And as part of our care model, we can also extend our various services for new and impactful use cases to support our clients. For example, as part of a broader implementation, a large Blue Plan is utilizing Catapult Health's virtual checkup program to engage Medicare Advantage members to ensure they complete their annual wellness visit. An example of how we can further leverage the potential of our virtual care assets and capabilities, meet people where they are and connect them with the care and support they need. As a virtual native, clinically focused organization, technology is central to delivering integrated patient care at scale and the investments over the past year further support our innovation agenda. These include enhancements to our Prism care delivery platform to surface actionable and personalized information across our care teams and efficiently deploy AI tools to support their important work. And seeing the significant opportunities to leverage AI, more extensively in our business, we made important investments over the last year in our new Pulse data and AI platform. Pulse brings together and unifies our extensive data, provides context, applies intelligence and most importantly, connects AI-driven insights to activation and orchestration in support of patient care. All of these and other innovations are aimed squarely at driving engagement, clinical outcomes and client value in direct support of our growth opportunities in Integrated Care. In 2026, we also remain highly focused on leveraging our scaled position in virtual mental health services and have several initiatives underway to advance our position. This includes the launch of Wellbound, our new employee assistance program offering that combines strengths across Integrated Care and BetterHelp as well as rapidly scaling BetterHelp's insurance coverage offering. We are making considerable progress, and we are now live in 20 states plus Washington, D.C. and have more than 4,500 credentialed and enrolled providers at this point. Additional network arrangements have also been secured bringing covered lives to more than 120 million. Early trends are encouraging, including strong growth in insurance sessions, which now exceed 1,200 sessions on average per day, an annualized revenue run rate of over $40 million, which further informs our approach to 2026 for both the consumer cash pay and emerging insurance market and reflected in the guidance that I'll cover later. We will continue a methodical expansion throughout the year, further scaling provider capacity and payer network coverage while prioritizing and ensuring strong user experience. And with BetterHelp's broad reach and brand recognition, there are millions of potential users that start the registration process at BetterHelp each year. In addition to improving conversion by expanding payment options with insurance, we also remain focused on growing our acquisition funnel through greater awareness. As an example, we are excited that BetterHelp has been named the exclusive online therapy provider for AARP, which advocates for 125 million Americans, 50-plus and older with an expected launch over the next 60 days. In addition, BetterHelp has partnered with Walmart to join their Better Care Services initiative, which launched earlier in the year. BetterHelp's international expansion also continues to be an important growth driver. Non-U.S. revenue represented nearly 24% of total segment revenue in 2025, with continued growth in our English-speaking offering and further boosted by localized launches in France, Germany, the Netherlands, Spain and Austria. With solid performance in these localized markets, we expect to expand the model into additional countries in 2026. We are actively executing the turnaround of BetterHelp through these initiatives, and look forward to demonstrating the underlying potential of the business as we progress through 2026. Our third priority is driving value creation in Integrated Care through our international offerings, which combine a global reach with a strong understanding of the unique characteristics of each individual market. This includes deepening and expanding long-standing partnerships with existing clients, growth with public health systems and expansion of hybrid care models that bring virtual services into physical care settings to meet local needs, including emergency services, primary care and specialty care across several countries, including Canada, France and Australia. Finally, our fourth strategic priority is operational excellence. Over the past year, we've sharpened our strategic focus, driven cost and productivity initiatives and accelerated innovation. We also achieved ISO 9001 certification for key U.S. integrated care processes, reflecting the level of operating rigor across the company. In 2026, we had one of the most successful implementation seasons in our history from a volume and performance standpoint, another important validation of the team's relentless and ongoing focus on execution. I also want to take this opportunity to further comment on the role of technology and artificial intelligence advancements in shaping the future of care at Teladoc Health. Firmly grounded in clinical care and patient safety, we are excited about the opportunity to responsibly apply AI to improve outcomes, simplify the experience for members and clinicians and reduce friction across the health care journey. Care is at the heart of our innovation agenda with our technology experts working alongside health care professionals to develop, evaluate and align with evidence-based standards and support high-quality care experiences. Our responsible AI framework ensures that innovations undergo rigorous review to preserve safety, accuracy and trust. With an extensive, diverse and well-established client base of over 12,000 organizations, our partners and patients look to us to deliver quality experiences that perform and endure. We've been building the infrastructure, expertise and partnerships for decades, and our models improve with every touch point, creating smarter systems at scale. As I mentioned earlier, Teladoc Health Pulse, our data and AI intelligence platform, serves as the backbone of our AI initiatives by unifying unique multidimensional data from patients, care providers and partners. It provides context for the data and the ability to apply AI to this contextualized data to support a wide range of value-accretive activations across the patient experience, clinical and care team support and the operations of our business. In addition to the gains we've already made, we intend to further scale the benefits of Pulse through 2026, including in our product innovations and initiatives to drive greater efficiency and performance of our business. With that as a backdrop, let me provide a few examples of how AI enhances many of the moments that define high-quality care for us. In our chronic condition and cardiometabolic programs, AI transforms connected device signals, member reported data and other data sources into dynamic health insights. These insights help us personalize outreach, identify changes in health earlier and support healthier decisions related to sleep, nutrition, activity and stress. This improves engagement and overall health and helps prevent members from progressing to higher risk. In clinical settings, AI helps connect members to the right provider, supports clinicians with ambient generated documentation and informs next best actions for our members. These tools enhance consistency, reduce administrative burden and free clinicians to focus on questions and matters that require judgment and human connection. They do not replace clinical teams, they extend their reach and effectiveness. Pulse enables us to empower care teams with a more complete picture of a person's health and sharper insights that help them understand and predict patient needs, guide targeted interactions and connect the right care at the right time. It is helping us move faster and smarter, transforming the way we work and our ability to drive better health outcomes. And in our hospital and health systems offerings, our AI-enabled Clarity solution uses computer vision and audio analysis to identify patients' safety risk and signs of behavior escalation. This helps care teams intervene earlier, protect staff and patients and expand capacity. These capabilities have become increasingly important as health systems balance safety needs with ongoing workforce constraints. In mental health, including BetterHelp, AI is improving intake and matching while also reducing therapists' administrative workload, for example, by automating clinical documentation and enabling clinicians to spend more time on patient care and improving overall efficiency. At the same time, therapy remains grounded in a human relationship where AI assists, it is applied transparently, responsibly and with a clear governance framework that prioritizes quality, privacy and trust. We believe this is the path to stronger engagement, sustained ROI for our clients and a better whole person experience for the people we serve. This approach positions Teladoc Health to continue leading the evolution of virtual care and to help our clients bring forward the next generation of AI-enabled health care in a safe, integrated, compliant and clinically grounded way. Stepping back, the macro challenges across the health care industry remains significant, and our clients are focused on affordability and rising medical costs, the prevalence of chronic disease, unmet mental health needs and other needs. And as a strong partner and leader in virtual care, we believe we're well positioned to drive outcomes, leverage advancements in technology and deepen our impact, and the work we are doing across our strategic priorities further enhances that position. We entered 2026 on a stronger foundation and renewed underlying momentum driven by new innovations in Integrated Care products and capabilities, strong progress towards scaling BetterHelp Insurance, growth in international markets and continued focus on execution and business fundamentals. Moving now to 2026 guidance. We expect full year consolidated revenue to be in the range of $2.47 billion to $2.59 billion, approximately leveled with 2025 at the midpoint. Consolidated adjusted EBITDA is expected to be in the range of $266 million to $308 million, representing 2% year-over-year growth at the midpoint. Full year free cash flow is expected to be between $130 million to $170 million and reflect working capital build related to BetterHelp's significant growth in insurance in 2026 as well as lower net interest income on cash and cash equivalents due to the paydown of the 2025 convertible and lower assumed interest rates on cash balances generally. We project full year stock-based compensation expense to be below $60 million in 2026, representing a year-over-year decline of at least $20 million versus 2025 and down more than 70% versus 2023 levels demonstrating significant progress over time and an important area of focus for us. For the first quarter, we expect consolidated revenue in the range of $598 million to $620 million, and adjusted EBITDA in the range of $50 million to $62 million. For the Integrated Care segment, we expect full year 2026 revenue to grow in the range of 0.4% to 3.9% over 2025. The midpoint includes approximately 60 basis points of tailwind from our recent acquisitions. As we've spoken about previously, segment revenues continue to be impacted by the migration of U.S. virtual care subscriptions towards visit oriented models which are more reflective of the U.S. health care fee-for-service construct. However, with visit revenue now comprising more than half of U.S. Virtual Care revenue, we expect the impact of this shift on our top line to moderate going forward relative to prior years and as we move towards the later stages of this transition. And over the long term, we expect to see visit revenue growth outpaced the decline in subscription revenue with Virtual Care being a net positive contributor to growth. We are guiding to a full year adjusted EBITDA margin of 15.1% to 16.1% for Integrated Care, which represents an increase of approximately 45 basis points over 2025 at the midpoint. This increase reflects the net impact of gross margin changes resulting from subscription to visit-based revenue and mix-related impacts more than offset by lower operating expenses due to ongoing cost savings and efficiency related initiatives. Our guidance also currently reflects an expected $5 million to $7 million headwind from tariffs in 2026, up from a $3 million headwind in 2025, an area we will continue to monitor for further developments. We expect U.S. integrated care members to end the year in the range of 97 million to 100 million members, modestly down versus 2025 levels due to reductions in the enrollment at certain health plan clients related to government programs, including the impact of expiration of the enhanced subsidies on Affordable Care Act business. We are guiding to first quarter Integrated Care revenue down 1.2% to up 2.0% versus the prior year period. This includes 155 basis points of growth from the Catapult and Telecare acquisitions at the midpoint. Adjusted EBITDA margin is expected to be in the range of 12.5% to 14%, up approximately 30 basis points at the midpoint. Factors impacting the first quarter year-over-year comp reflected the prior year's quarter including recognition of favorable performance on risk-based deals in Chronic Care, the year-over-year headwind from the previously discussed client contract loss in the second quarter of 2025, and lower expected infectious disease visit volume in the first quarter of 2026 compared to the prior year's quarter due to a timing variation in the flu season. From a cadence standpoint, we'd expect the first half versus second half revenue split in 2026 to be slightly more weighted to the second half relative to 2025, given these factors, although generally consistent with the average split over the past 5 years for Integrated Care. Moving to the BetterHelp segment. we are guiding 2026 revenue down 7% to down 0.5% versus 2025, reflecting a moderating rate of decline versus both 2025 and 2024 at the midpoint of our guidance. With the traction we expect in our insurance offering, we are focused on scaling it through the year and in turn, moderating the level of advertising and marketing expenditure we expect in 2026. Our guidance also reflects continued growth in non-U.S. markets as well as factors such as the macro backdrop, demand levels, customer acquisition costs and churn rates. With respect to insurance, we expect to generate revenue of $75 million to $90 million in 2026, with a steady sequential ramp and exiting the year at an annualized revenue run rate of more than $100 million. As I mentioned earlier, insurance sessions continue to grow at a strong pace, and we expect session growth to continue as we progress through the year driven by several factors, including strong underlying demand for mental health services, together with BetterHelp's planned rollout of new states, increasing payer coverage, adding credentialed providers and growing the insurance user base in existing states. We also launched insurance-covered psychiatry services in February as well as new enhancements such as new scheduling features and instant therapist matching. We expect continued headwinds in U.S. direct-to-consumer cash pay driven both by a challenging consumer backdrop and our intentional decision to further rationalize the level of ad spend given our progress in insurance, an opportunity to refocus investments on scaling this rollout. This outlook contemplates direct-to-consumer revenue in total being down 14% to down 9% year-over-year, inclusive of potential cannibalization from our U.S. insurance rollout. We expect to see double-digit growth in non-U.S. markets with contribution from both the legacy English-speaking offering as well as newer localized market launches. For the first quarter, we are guiding to BetterHelp segment revenue down 11.25% to down 7% year-over-year. This outlook contemplates insurance revenue of $10 million to $13 million in the first quarter, up from $7 million in the fourth quarter of 2025 as well as the timing and impact of advertising and marketing spend actions. We are targeting sequential quarterly revenue improvement for the BetterHelp segment, beginning with the second quarter and continuing through the balance of 2026. We are guiding to an adjusted EBITDA margin of 3% to 4.6% for the full year and 0.75% to 2.75% in the first quarter. Key factors impacting margin include revenue mix, reduced advertising and marketing spend, which we expect to be down by a mid- to high-single-digit percent versus 2025 and investments to enable the successful scaling of the insurance offering. Similar to prior years, we expect to deliver the highest adjusted EBITDA margin in the fourth quarter. As we ramp and mature our insurance position over time, we expect to see improvements in lifetime value, customer acquisition costs and operating leverage as we stabilize and grow the revenue base and offset changes in gross margin from this revenue mix. One final note with respect to guidance, the ranges we have provided at this time for free cash flow and net loss per share do not assume any specific changes in our current debt structure as our remaining convertible notes don't mature until June 2027. However, as we previously discussed, we continue to evaluate various options with respect to our long-term financing needs. Subject to market conditions and absent any other significant developments, our current expectation is that we will address the 2027 convertible notes in 2 phases. The first would be to pay off a substantial portion through a combination of existing balance sheet cash and new traditional term loan debt and do so potentially before year-end. And then second, we would retire the remaining balance at maturity with existing cash at that time. After addressing the 2027 converts, we expect our resulting gross debt position on a go-forward basis to be significantly below the current level and appropriately aligned with our financial profile and needs. We will provide further updates as necessary. In closing, as we move into 2026, we have clear priorities and the foundation to support our growth and performance initiatives. We are focused on execution and acceleration as we progress through the year and strengthening the underlying drivers of long-term performance and business value. With that, let us open it up for questions. Operator? Operator: [Operator Instructions] The first question comes from David Roman with Goldman Sachs. David Roman: I wanted just to maybe see if you could help us wrap a lot of the moving parts together here. I think it's now been 1.5 years of you in the seat as CEO. As you reflect on the guidance here for 2026, it does include another year of relatively challenging organic revenue growth and year-over-year trends in adjusted EBITDA. So where do you think we are in sort of the journey of stabilizing the business? And what is it going to take to get back to more consistent year-over-year revenue growth? And is there a path even growing this business at, call it, a low to mid-single-digit rate? Charles Divita: Yes. Thanks for the question. I think first on integrated care, which I think is primarily what you're asking about, as I mentioned in my prepared remarks, and you know we've talked about previously, this headwind from subscriptions to visits has continued to be a factor. We've had strong underlying growth in visit revenues, but not enough to offset that headwind that's come in subscription revenue. We do see that -- now that we have over 50% of the Virtual Care revenues coming from visits, we do see that moderating and ultimately visit growth being a driver of growth. And that's been a factor out there that we've spoken about. In Chronic Care, we continue to see opportunities in terms of both the bundled products we have there and the level of recruitables. But more importantly, what we've been building over the last year in terms of the clinical foundations, I mentioned the data and AI capabilities and our ability to really drive stronger ROI across populations for our clients. And in turn, that's going to drive growth for us. So we entered 2025 with a very similar product portfolio that we had in 2024. And now with these enhancements and the foundations that we've been building, we think there's a bigger opportunity for us to go after. So yes, I do believe there's growth potential in the business. I do acknowledge the headwind that we've had from the subscription, the visit mix changes. That's been well talked about outside. And the underlying growth in visits, I think, will be a factor for us going forward. In BetterHelp, it's really about the insurance scaling. We were excited to enter the market mid last year. We've been scaling it pretty materially over that time period. And as I mentioned also in my prepared remarks and in the guidance, we're going to see some significant growth in 2026 from that. So I think getting BetterHelp turned around and really leaning into the market opportunity in integrated care, particularly in the U.S. coupled with the growth we're seeing internationally, I think, is how I would answer that. Operator: the next question comes from Richard Close with Canaccord. Richard Close: Yes. Maybe just a follow-up to that, Chuck, in terms of Chronic Care enrollment. Just curious in terms of how cross-sell is going. If you can just talk about the trends there through the most recent selling season, and the new products that you're talking about, are they gaining traction? Or just the level of demand interest currently in the new offerings? Charles Divita: Yes. Well, first of all, our ability to manage across conditions is a selling factor and our ability to do that without multiple integrations in one offering. And that's -- we've had some really good success with that in terms of bundling products and crossing populations. We're seeing continued good interest in our weight programs and our bundled products. So all of that. I think going forward, in addition to the things that I mentioned in my earlier response, it's really about going after the population health more strongly and more broadly. And we are uniquely positioned with the clinical model that we have and that we've been building pretty materially over the last year to be able to go after those populations, provide a range of services, really identify where things are falling through the cracks and develop the right levels of clinical interventions for high-risk and rising risk populations. Those are the things that drive the medical costs and there are also things that drive the human costs. So our operating model and our value proposition and, in turn, our product portfolio is going to lean into that. And that's really where we're going to see the longer-term growth of this company. Clearly, we're out there competing on a day-to-day basis with the product portfolio we have and the competitive environment we have. But ultimately, our ability to lean into this clinical model that we've built is what's going to drive stronger growth going forward. Operator: The following comes from Daniel Grosslight with Citi. Daniel Grosslight: We have one just about the ramp in BetterHelp EBITDA this year. The guide implies a bit of a steeper ramp than prior years. The first quarter EBITDA in BetterHelp is around 11% of full year, in the past, it's been closer due to high teens. Can you just walk us through the cadence of BetterHelp adjusted EBITDA margin improvement this year? What's driving that steeper ramp and kind of the levers that get you to the bottom and top of that full year guidance range? Charles Divita: Yes. There's some moving parts in BetterHelp. Obviously, the level of advertising spend, the most material mover there. And we also have some investments we're making, obviously to scale insurance, really the fundamental drivers of the EBITDA margin. Of course, as you've seen in the past, we do expect the fourth quarter EBITDA margin to be the strongest as we pull back ad spend with respect to the holiday season. But Mike, I don't know if you want to comment further on the ramp. Michael Minchak: Yes. I would just say, obviously, with the investments that we're making to scale the insurance, that's obviously one of the factors that's impacting the first half of the year. So that's, I think, one of -- another factor. Daniel Grosslight: And the levers that get you to the bottom and top end of the range? Operator: The next question comes from Sarah James with Cantor Fitzgerald. Charles Divita: [indiscernible] question if we're still live on the line here. Sarah James: Okay. I don't know if you heard that last question, but I thought it was great. The levers that get you to the high end versus the low end of your 2026 guidance? Charles Divita: I apologize. Can you repeat the question? It broke up a little bit on our end. I apologize if you could restate that. Sarah James: Yes, no problem. Can you walk us through the primary assumptions that differentiate the high end versus the low end of your 2026 guidance range? Charles Divita: Are you talking about -- at a segment level? Sarah James: I would love if you could do the whole company touching on those segments. Charles Divita: Okay. Yes. So I think, first of all, I'll make some comments and then Mike can weigh in. We see the guidance ranges in BetterHelp being wider because of the changes we're making there, both in terms of the variability in the consumer market as well as the ramp in insurance. So that's really a driver of the variability you see on the low and the high in Integrated Care, it's a little bit tighter. But obviously, as our business moves more and more to visit-based arrangements, there's some variability there as well as the ramp of Chronic Care enrollment, those kinds of factors and what we see with respect to some seasonality in our visits. So that's the predominant variation around the range. But Mike, anything else you want to add to that? Michael Minchak: No, I think that covers all. Operator: The next question comes from Jailendra Singh with Truist. Jailendra Singh: Maybe it is a little early to talk about it, but with the 2026 selling season effectively closed, what is the early feedback from 2027 RSP discussions? Are health plans still in the state of its strategic uncertainty? Or is there a clear strength towards unbundling Virtual Care and Chronic Care from broader insurance package? Trying to understand if that health plan headwind you have been talking about might start to ease it a little bit more in the next few quarters or few years? Charles Divita: Yes. I appreciate the question. I would say the -- it's mixed in the sense that the macro environment that we've spoken about and has been facing, and I know you're well aware of in facing the health plans, those things just continue to sort themselves out. And clearly, with the -- what happens with the expiration of the enhanced subsidy is ultimately in their books of business, some of the things that are going on at a federal level. Those things are out there. I would say when I say it's mix, we're having much stronger renewed conversations with health plans, and I would characterize more strategic conversations with health plan specifically about how our suite of services and a vision on what we're building can really uniquely help them in the things that are challenging them the most. And we -- I mentioned in my prepared remarks, what we've done with Catapult as an example, for a large blue plan in terms of their Medicare Advantage population, we need those populations to get their annual wellness visits. It's important to their health, and it's also important to the economics of the health plan. So I think there's a stronger and a renewed interest to really dig in and evaluate how our unique solutions can help them. Another example with our enhanced 24/7 care offering. That's -- it's not your normal 24/7 care. There's a number of features there that are beneficial to all of our clients, but certainly beneficial to health plans in terms of the ability to avoid unnecessary specialist referrals, the ability to navigate patients to the next best action to close care gaps, to address a broader range of services. So those are really resonating in those conversations, and I think they're going to give us a lot of opportunities to lean in with our unique set of solutions. Operator: The following question comes from Jessica Tassan with Piper Sandler. Jessica Tassan: Just given some of the early experience with the insurance paid BetterHelp members, could you just describe kind of how those numbers are behaving? How long are they remaining on the cash pay BetterHelp? When are they converting to insurance paid? And then just as they move into insurance, what is their utilization and retention look like? Charles Divita: Yes. Well, I'll make some directional comments. Obviously, it's still a bit early, right, to draw any definitive conclusions on that. But everything we're seeing that we're looking to accomplish, we're seeing it in the trends in terms of conversion, usage, number of sessions, the interest level in using their insurance. All of those things are consistent with our expectations. And obviously, in our more mature markets, which is still very, very early, but in our more mature markets, we're really seeing that play out pretty consistently. And as I mentioned earlier, the growth in sessions has been pretty significant since we started this, and it's not just in terms of acquired users with insurance, but it's the utilization of services of those acquired users. So all of those things are directionally supportive of what we're looking to accomplish. Obviously, we want to see it play out longer, but we like what we're seeing so far, and that's why we've really been focused on scaling insurance and really yielding the benefits of the funnel and the platform that we have. Operator: The next question comes from Sean Dodge with BMO Capital. Sean Dodge: Yes. Maybe just staying on BetterHelp. Chuck, you mentioned the success you've had recently driving growth by scaling it internationally. I know international pricing is a little different than here in the U.S., but so our customer acquisition cost. So I guess just anything you can share on the margin profile of BetterHelp in the U.S. versus BetterHelp international. Is the mix shift that's happening there, is that responsible for some of this BetterHelp margin pressure you're guiding to? Or is that -- is kind of the mix impact you're talking about on BetterHelp margins. Is that more from the insurance side? Charles Divita: Yes. It's not only the insurance side, but there is a different profile internationally, although we get to the bottom line margins that we're looking to accomplish there. So there's a little bit of that. And now as you know, and I mentioned, international has been growing nicely, and it's now over 24% of the revenues of BetterHelp in the consumer. And with these localized models as well as our English-speaking offerings, seeing nice growth there. If you think about in a lot of those international markets, there's an access issue. And I think with our consumer experience and the ability to resonate locally, there's a lot of interest. Mental health is not just a U.S. issue. So I think that's going on as well as, obviously, the growth in insurance. It does have a different margin profile, but we do believe over time is going to have a different economic construct when you think about customer acquisition costs, lifetime value, efficiency of our ad spend. And I think that's predominantly what you're seeing in the margin profile. Operator: The following comes from Elizabeth Anderson with Evercore. You may proceed. Ayush Vyas: This is Ayush on for Elizabeth. You noted previously that competition from insurance enabled providers has sort of pressured the U.S. cash pay business. As you expand your own insurance footprint, are you guys seeing that competitive dynamic begin to kind of moderate in those markets? And then in the states where insurance has been like the longest, are you seeing any meaningful differences in engagement patterns compared to cash pay users? Charles Divita: Yes. Yes. I appreciate the questions. The -- there's a number of things going on in Virtual Mental Health. First of all, I would say pre-pandemic, I would say there was not as much probably appreciation of recognition of the challenge that we're out there. And I think post-pandemic, unfortunately, we've seen the payers and everyone really understand and focus on mental health and take a number of actions to expand access there. And also Virtual Care post-pandemic is one of the areas of virtual care that's sustained high levels because, obviously, you don't necessarily need to be in person for those kinds of sessions to occur. So all that's been going on. The underlying unmet need is still there. The demand is there. And so I think that's a factor in our growth and the session growth that we're seeing, and you see that with other parties as well. So I think even though we were a bit later joining the insurance market, we do believe there's going to be strong underlying demand, of course, with BetterHelp's position and funnel and experience we should be able to see that going there. In terms of the behaviors, as I mentioned earlier, it's a little bit hard to draw definitive conclusions. But we are seeing good data in terms of when we show insurance, people selecting to use insurance, the number of sessions that we're seeing. So I think the patterns are, at this point, consistent with what we expected. And I think that underlying demand for mental health services is going to continue to bode well for our insurance uptake. Operator: The next question comes from George Hill with Deutsche Bank. George Hill: I'll say one quick one and one kind of more developed one. The first one is, does the AARP relationship have any significant economic drag to it just because I know AARP tends to extract pretty significant like price concessions to work with them to have that relationship. And then on the topic of moderating the BetterHelp marketing spend. My understanding is the correlation of the revenue to that business with the marketing spend has historically been pretty high. So I guess like how do we think about the risk of pulling back on the marketing spend in BetterHelp and the idea that, that leads to accelerating revenue erosion? Charles Divita: Yes. I appreciate the question. In terms of AARP, I will get into details on it, but what we're doing with AARP, we have reflected in the guidance that we have out there and we're excited about it. The ability to be the exclusive mental health care to an organization like AARP and bringing that really 2 leading brands between AARP and BetterHelp to address mental health and really we see it as an opportunity to grow the awareness and adoption within that population and obviously, new opportunities in terms of the funnel. The cash pay component of that, people will be able to avail themselves to a discount in the first month of the cash pay and also insurance seems there won't be a discount there. But standard benefits and cost sharing will apply there, but people will be able to access their insurance as we scale that. And we're also able to, in addition to offering this normal services we have, we're going to have virtual mental health webinars, workshops led by our licensed clinicians, with topics that really resonate with that population. And they also get 3 months free of better sleep to help them with sleep and relaxation and stress. So we're excited about AARP. We haven't necessarily -- we're not quite sure what the ultimate demand generation is going to be there. But we've built it into our guidance, what we're expecting with respect to AARP, including our arrangement with them. What was your second question, again? George Hill: I'm sorry, Chuck. It was just on the -- yes, ad spend, the risk of ad spend, yes. Charles Divita: Yes, I appreciate that. Sorry. there is a high correlation between advertising spend and the direct-to-consumer pay model, and we'll continue to see that correlation we believe we have an opportunity to make that ad spend more efficient. First of all, we have international growth opportunities that are out there and they have a bit of a different expenditure pattern on what it takes to secure that membership. And we also see that there's a number of initiatives to sort of improve the conversion of members. So get more efficiency out of the ad spend, we've broadened our channels, how we -- what levers we pull. So there will be a significant correlation to your point, it is going to be down versus 2025 and 2025 was down versus 2024. But we feel like we've got the right mix of focusing the resources on scaling insurance while also making sure we're activating the top of the funnel. Operator: The next question comes from Brian Tanquilut with Jefferies. Brian Tanquilut: Sorry to pound the table more on BetterHelp. But just as I think about the push into the insurance side of the business, how are you thinking about the KPIs to manage to? And what second looks like when we think of percent of sessions, reimbursed, payer plan coverage breadth, the reimbursement rates to now selection performance, things like that. Just how do we think about those KPIs as we try to think through our models? Charles Divita: Yes. I'll make some comments and then Mike can jump in. So clearly, it's -- we're looking at things like conversion, right, user acquisition. We're looking at the number of sessions that a user -- that a person needs. And we expect that since the -- one of the barriers you will, with respect is cost. And with kind of removing that barrier or moderating that barrier, it's going to be more about therapy decisions as opposed to economic decisions. So we expect to see that. We do expect to not have to maybe spend as much money to reacquire users when people need therapy. So the customer acquisition component of it. We do expect to see some, obviously, gross margin differences in that book of business going forward, but also lower cost to acquire those members and be able to achieve the margins we are. We're also looking at therapist capacity. How many sessions -- how many therapists are on the platform, how many sessions they're able to pursue. I mean, that's one of the benefits of BetterHelp and with this massive therapist network. And we're able to, with the demand we have, fill up their calendars. And as you know, these virtual therapists, they've got to secure patients for their own business model. So our ability to kind of bring that demand and match it up with the therapist is going to be key. And then obviously, there will be some operating expenses as we administer insurance. And to your point, contracted rates with payers for the services we have, and we think we're bringing a lot of value to the table and we should be able to secure the rates we need. So it's those kinds of KPIs. It's not unique in the sense that we have a pretty considerable B2B business in Virtual Care in our Integrated Care business. So we have a good understanding of what those levers look like. Operator: The following is from Allen Lutz with Bank of America. Allen Lutz: Chuck, I want to ask another question on the BetterHelp assumptions for 2026. You had $13 million of revenue in 2025 from insurance. How should we think about the visibility into that $75 million to $90 million? Is that just based on you're in a specific region of the country and that equates to that $13 million. And then the size of the addressable market that you're moving into over the course of 2026 correlates pretty directly to that $75 million to $90 million? Or are there other variables we should think about there? Charles Divita: Yes. In terms of 2025, recall that the acquisition of Uplift brought a certain level of revenues and book of business with them. We were able to acquire a solid base of payer contracts, some capabilities and, of course, some talent. And then as a result of the integration, be able to start launching markets with BetterHelp, starting obviously with Virginia. So the revenues in 2025, we're largely uplift insurance revenues. And so what we're seeing now is a significant ramping of BetterHelp's revenues. And that's why in my prepared remarks, I wanted to share that we're up over 1,200 sessions on average per day, and again, starting from 0 with BetterHelp, not too long ago. And that's been a nice growth week over week over week, and even on that basis at an annualized run rate of over $40 million. So as we roll out new markets, as we have more sessions, more users on the platform for longer, we're seeing that play out in the data, and that's what gives us confidence in the ramp, not only based on state rollout, but also based on utilization and access and awareness. And of course, we're always continuing to add payer contracts as well. And that's really what you're going to see the sequential ramp through the year and why we shared on the last point in the prepared remarks about the exit rate as being around $100 million run rate. Operator: The following comes from Stan Berenshteyn with Wells Fargo. Stanislav Berenshteyn: I guess I'll volunteer myself to ask an Integrated Care question here. So you ended the year with about 102 million members. You're guiding 2026, I think at the midpoint, down 3 million, give or take. Can you comment on the drivers here? How should we think about the timing? It seems at least some of this decrease is going to happen after Q1? And should we expect that dynamic to impact chronic care enrollment at all? Charles Divita: Yes. I think on the latter part, no, we don't expect that. We still have a massive membership base to cross-sell into with Chronic Care. I think what you're -- what we're seeing and what we tried to anticipate in our guidance on that particular number was really the dynamics in the marketplace. We've got strong retention, and so none of that is really related to client loss. It's really the enrollment we are expecting. And the reality of it is, with respect to the Affordable Care Act subsides going away, the health plans to quite yet know what the ending enrollment is, even though we're in 2026 already. We believe there was a lot of people that signed up that we're expecting or assuming that the subsidies might continue and they might disenroll. So we're just trying to factor in what we're thinking there, obviously, the Medicaid situation and ultimately, though, it's less important about the raw enrollment membership council, though that's -- it's a factor. But as we move more towards visit-oriented economics, it's really about visits and utilization. And what we see in some of these membership declines we've assumed that the level of utilization in some of those areas aren't as penetrated as others. So we're not necessarily seeing that as a significant headwind at the end of the day from a revenue generation standpoint, but we did want to share our thinking on the raw number. Operator: The next question comes from Ryan MacDonald with Needham & Co. Ryan MacDonald: I wanted to ask about incremental opportunities for BetterHelp, especially since as you continue to scale the insurance initiative here. Obviously, CMS had announced the access program that's going to be launching later this year, actually covers multiple areas that I think Teladoc could take advantage of in terms of not only mental health but also in diabetes care. Just curious how you view this opportunity given the recently announced reimbursement rates and if it's an attractive opportunity you view for the business to invest towards in 2026. Charles Divita: Yes. I would say, first of all, on BetterHelp. I think we are predominantly focused right now on mostly commercial business. And we've got a number of levers there. I mentioned earlier that we've launched psychiatry in there. So there's a number of levers we have on the BetterHelp side. With respect to ad to access program, it's something that we're continuing to evaluate, certainly aligns with the value prop of our program. And it also -- we frankly like seeing more attention to chronic illness and in particular, even some underserved populations and rural populations. So we're continuing to evaluate it. There's some implications of those programs in terms of the reimbursement levels and other things. So again, it's something that we're going to continue to evaluate. But longer term, I do think it's really good that the country is focusing more on Chronic Care. And frankly, I think our programs play pretty well into that. Operator: The next question comes from Jeff Garro with Stephens. Jeffrey Garro: I'll ask another one on Integrated Care business development. I was hoping you give some comments breaking down demand between the health plan versus employer channels, particularly given some of the challenges for the health plans and the exchange and MA markets and how that all will impact your go-to-market strategy into the next selling season? Charles Divita: Yes. Thank you. So we ended 2025 on a solid footing. We had really good demand and results in the employer channels. And we had good interest in the health plan channels, notwithstanding the challenges I've talked about. So we had some nice wins and some expansions as well as some headwinds and all that. I think for purposes, as we enter 2026, a lot of the dynamics are still in play, a lot of need and interest in the employer markets. But I think even more in the health plan channel, as I mentioned earlier, having more strategic conversations about how we can move the needle on their medical costs. And it varies in terms of the population, it varies in terms of lines of business, in terms of what the drivers are to their economics. But because of our position and the suite of services we have and frankly, the investments and the innovations we've done over the last year, we're in a much stronger position to lean into those strategies. They -- there are some health plans that have brick-and-mortar primary care strategies. We think we can complement those. There are others that are heavily focused in particular lines of business. And so we're really just leaning into where our opportunities are to serve those health plans, move the needle on the populations that they're responsible for and ultimately drive cost outcomes and ROI for them. So I think we're in a good position, notwithstanding some of those macro headwinds that are still out there. Operator: The following comes from Scott Schoenhaus with KeyBanc. This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.
Unknown Executive: Welcome to the Westgold Resources First Half '26 Financial Results Presentation. Our presenter today is Westgold Managing Director and CEO, Wayne Bramwell. Go ahead, Wayne. Wayne Bramwell: Thank you, Steve, and welcome to everyone on the call. Thank you for taking the time to dial in today. With me today, I have our Chief Financial Officer, Tommy Heng. We are assuming you've all seen our report. I'm going to hand over to Tommy to run today's call, and I'll jump in at the end to talk to what's ahead before opening up the call for questions. So, Tommy, over to you. Su Heng: Thanks, Wayne. It's fair to say that this was a record half. But before I go through the numbers, I think it's important to reflect on the journey that has brought us to this point. Our outcomes this half aren't accidental. They stem from years of disciplined effort. We worked through the tough times, stayed focused and made deliberate long-term decisions about how and where to invest in this business. We committed early to becoming unhedged, strengthening Westgold's infrastructure, investing in drilling and development and upgrading our equipment base. And that strategy has been validated by increasingly consistent operational performance across the group. And whilst we have substantial room to improve, what we're seeing now is the direct result of executing that strategy, progressive improvements in operational consistency, production growth and a relentless internal focus on managing and reducing cost pressures. Importantly, all of this work has been delivered at a time when the gold price environment is becoming increasingly favorable. As an unhedged producer, we've been fully exposed to those strong prices, giving us the ability to convert this operational momentum directly into financial returns to shareholders. Thanks to this increasing production and the realized gold prices, our revenues effectively doubled compared to this time last year, allowing us to deliver $550 million in underlying treasury build, a remarkable step up from the $100 million recorded in the prior corresponding period. This momentum has strengthened our balance sheet substantially, driving our closing treasury balance to $654 million compared to $152 million in H1 FY '25. Our operating performance translated directly into earnings with underlying EBITDA rising to $612 million, up from $224 million and the underlying net profit before tax increasing to $447 million, a significant uplift from $89 million a year earlier. This accumulated in underlying net profit after tax of $314 million, more than 5x the previous corresponding periods $57 million. Overall, H1 FY '26 marks an exceptional financial performance and demonstrates the capability of the business to generate sustained value. Slide 5. Not surprisingly, our record financial results coincide with record production results. Production from Westgold's mined ore amounted to 170,000 kilo ounces of gold for the half at an all-in sustaining cost of $2,871 per ounce. This production is a core business, which generated $517 million in net cash flow. From core business to side hustle, Westgold commenced production from ore purchased from New Murchison in September 2025. Over the half, we produced 25,000 of gold at an all-in sustaining cost of $5,644 per ounce. These are comparatively low-margin ounces as we purchased this gold at a discount to the average spot price, yet this strategy has generated an additional $15 million of net cash flow for the period. The key point about the OPA that is not captured in these numbers is that the OPA ore does not displace our own ore. In fact, the opposite is true. The blending of soft oxide material from the OPA with Westgold mine hard underground ore actually allows us to process increased volumes of our own ore, effectively increasing the throughput of our Meekatharra mill and dropping unit processing costs. So combined, Westgold's group production for the half was 195,000 kilo ounces of gold at an all-in sustaining cost of $3,225 per ounce, allowing us to generate $532 million of net cash flows from operations. Slide 6. This slide breaks down our P&L and the record underlying profit we were able to deliver this half. $1.2 billion in revenue drove a gross profit of $436 million. Fair value appreciation in some of our liquid investments were offset by admin costs and the negative impact of fair value movements in our royalty agreements, resulting in an underlying net profit before tax of $447 million. Unsurprisingly, when you're making profits, you pay taxes. Westgold's income tax expense was $133 million for the half. This accumulates in an underlying profit of $314 million. To reconcile to statutory profit, we need to account for one-off items, the most impactful of which is the accounting loss on the sale of the Mt Henry-Selene project. Though the sale hadn't completed by the end of this period, the accounting standard dictates the assets are moved to assets held for sale, resulting in a preliminary loss of $178 million. This one-off accounting loss on sale is 100% noncash, but it's important to note that the sale generated immediate real cash inflows of $15 million and approximately $65 million in Alicanto shares and up to $30 million in deferred considerations payable in cash or shares upon the achievement of agreed project milestone. This demonstrates our ability to generate value from noncore assets that would have otherwise remained unrealized within our portfolio. The loss results in a positive adjustment to the income tax expense to the tune of $53 million, resulting in a strong statutory profit of $191 million. This compares very favorably to the statutory loss of $28 million for the prior corresponding period. Slide 7. Key slide for me, $550 million in underlying treasury build for the half before paying $129 million for growth and exploration, $76 million in stamp duty for the Karora transaction, $50 million in debt repayment to end the period debt-free, $29 million for dividends and share buybacks, $2 million in New Murchison capital raise and receiving $26 million of cash inflows from the sale of the Lakewood mill and the deposit from Alicanto for the Mt Henry-Selene sale. We ended the period with $521 million of cash and an impressive $654 million in treasury closing balance. After paying for growth and one-off payments, our treasury still grew by $290 million in the half. Slide 8. This slide shows our treasury growth over the longer period. Since the acquisition of Karora, cash is king, and we're happy to see our strategy is increasing cash flows and further strengthening our balance sheet. This balance sheet strength gives us flexibility and optionality as we build momentum post our merger with a steadfast focus on delivering our guidance and 3-year outlook. Slide 9. To that end, we maintain our production and cost guidance for FY '26. We maintain a conservative estimate for third-party ore purchases going forward as we don't control mining for this ore source. We expect to produce around $365 million for the period being the guidance midpoint at an all-in sustaining cost between $2,600 and $2,900, excluding the OPA. Slide 10. Let me quickly recap our 3-year outlook. We're on a clear path to grow production from 326,000 ounces in FY '25 to 470,000 ounces by FY '28 with the all-in sustaining cost stepping down towards circa $2,500 per ounce. This is a high confidence executable plan built on organic growth from our existing operations, not blue-sky assumptions. The strategy is simple: mine and process higher-grade ore and optimize the mills. By investing sensibly in our mines and processing hubs, we're steadily upgrading the grade profile and matching capacity with better quality feed, lifting ore sources and margin. And importantly, we're delivering against this plan. Beta Hunt infrastructure upgrades have lifted development rates, setting up a sustainable ramp-up towards 2 million tonnes per annum. Great Fingall filed its first reef stope, a key milestone in the Cue Hub's high-grade transition. Starlight continues to deliver strong high-grade stopes, improving feed quality through Fortnum. This is real progress and exactly the trajectory our 3-year outlook sets up. Slide 11. Now while the 3-year outlook gives us a solid high confidence baseline, it's important to remember that it does not capture all of the upsides we're actively advancing. I won't run through everything on this slide but let me call out a few of the material opportunities already in motion. Bluebird South Junction. Our plan assumes 1.2 million tonnes per annum by FY '28, while we're aiming to hit 1 million to 1.2 million tonnes by early FY '27. Higginsville mill expansion, feasibility work is looking beyond 2.6 million tonnes with options assessed up to 4 million tonnes per annum. Operational improvements. We've made significant gains that aren't baked into the base case and have the potential to drive further cost and productivity benefits. Each of these represent meaningful tangible upside to our 3-year outlook baseline. And collectively, they highlight just how much flexibility and growth optionality sits within the Westgold portfolio. Before I hand over to Wayne to wrap up, I would like to touch on shareholder returns. Westgold continues to deliver on its commitment to shareholder returns. We declared a $0.03 per share final dividend for FY '25. And while we did not declare an interim dividend for H1 FY '26, during the half, we upgraded our dividend policy for FY '26 to demonstrate our growing confidence in the business and commitment to delivering against that policy. In addition, we launched a 5% on-market share buyback program, a clear signal of our belief in the value of our shares and our disciplined approach to capital management. These initiatives are underpinned by strong cash generation and a robust balance sheet, positioning us to continue rewarding shareholders while investing in growth. We paid $28 million for the FY '25 dividend during the half and commenced on the market share buyback. With that, I'll hand over to Wayne. Wayne Bramwell: Thank you, Tommy. What a gorgeous set of numbers. We made some tremendous progress on our portfolio simplification goals during the half, bringing forward value from noncore and nonproducing assets. After the end of the period, we completed the sale of the Mt Henry-Selene Project to Alicanto Minerals for a total consideration of $110 million, comprising $80 million of immediate value from $15 million in cash and $65 million in Alicanto script and up to $30 million in deferred consideration based on specific performance criteria. This transaction was consistent with our strategy to unlock value from assets that would otherwise remain unrealized within our greater portfolio. We are also making good progress on the planned divestment of Peak Hill and Chalice, which like Mt Henry-Selene, are assets that sit outside of our 3-year plan. We are demerging our noncore Reedy's and Comet assets in the Murchison into a new soon-to-be listed company called Valiant Gold. Like the assets on the previous slide, Reedy's and Comet are assets that for Westgold have value but are under scale and don't feature in our longer-term plans. What makes this different is that their proximity to each other and to our processing hubs lend themselves to become a great value generator under a smaller focused management team where these assets are their top priority. The prospectus for Valiant was released last week, describing the $65 million to $75 million IPO with a $20 million priority offer for eligible Westgold shareholders. Following the raise, Westgold will retain a 44% to 48% cornerstone equity position in Valiant. As part of the transaction, we are entering into an OPA with Valiant, providing them with a fast-track pathway to cash flow. I think of this as an analog to the deal we've recently done with New Murchison Gold. If you would like more information on the Valiant IPO, I encourage you to obtain a copy of the prospectus from the Valiant Gold website. Okay. Final slide for me. This is a great set of results, and I'm incredibly proud of what the team has delivered. Our strategy is working and the early outcomes are clear. But we're not in celebration mode here. There is still plenty of work ahead of us. Our focus remains exactly where it needs to be on safety, on delivering our full year guidance and on executing the 3-year outlook, which sets the minimum bar for what this business can and should achieve as we continue to live performance. With that, let's move straight to questions. Unknown Executive: Your first question comes from Adam Baker. What is the reasoning behind not paying a dividend for H1 FY '26, noting minimum dividend policy of $0.02 per year and a maximum of 30% of free cash flow. To you, Tommy. Thank you. Su Heng: Thank you, Adam, for the questions. Our reason for reasoning is we would like to pay a fully franked dividend, such as the timing of when our tax returns are launched, the franking credits will only materialize circa in the second half. So hence, that's why we want to pay a fully franked dividend and stay tuned. Unknown Executive: Next question comes from Hugo. Should we still expect Fletcher reserve and resource updates in the coming months? Wayne Bramwell: Thanks, Hugo. Certainly, we're continuing to drill Fletcher, so I would expect a resource uplift this year and a small reserve conversion. We're basically doing both. We're doing infill and extensional and that will feed into resource and reserve updates. Unknown Executive: Next question also from Hugo. Can you provide some color on the timing of integrating recent ore purchase agreements and the impacts to FY '26 production and cost guidance? Wayne Bramwell: Thanks again, Hugo. Certainly, the NMG ore purchase agreement was factored into our FY '26 guidance. Going forward, '27, '28, none of the other ore purchase agreements that we have in place, for instance, with Valiant have been factored in. Unknown Executive: Next question comes from Kevin. How far above nameplate could you run Higginsville mill given the blending of soft Forrestania resource? Wayne Bramwell: Thanks, Kevin. Even with us feeding our own sort of softer oxide from Lake Cowen late last year, I mean, on face value, that Higginsville mill has a 1.6 million tonne per annum throughput. There were days where there was a high blend of soft in it doing 1.7, 1.75. So we'd expect to see similar numbers with Forrestania. Unknown Executive: Stay with us while we go through some other questions. Next question comes from Ganesh. When does the mill expansion at Higginsville proceed? What is the grams per tonne from Beta Hunt and Great Fingall you are targeting? Wayne Bramwell: Thanks for that, Ganesh. Expansion of Higginsville, the proposal to do that is with the Board now. Your second question is? Okay. The number that we use in our mine plan for Beta Hunt is circa 2.4 grams. It often does better than that, but we forecast and schedule Beta Hunt conservatively. The same is true with Great Fingall. We at steady run rate. Great Fingall, we schedule at 4 grams, but our expectation is in that ore body with high components of gravity gold, we'd see numbers much higher than 4. Unknown Executive: Next question comes from Paul. Wayne and team, you moved a few deposits from exploration into development, including Larkin and A Zone. How quickly could you bring these into development? Wayne Bramwell: Good question. We are actually mining in the A Zone. So currently, West Beta Hunt, we mined A Zone and Western Flanks. And we do actually have stopes in Larkin. So really, what we see as the opportunities in terms of scale at Beta Hunt, Western Flanks, A Zone, Fletcher, Murchison, Larkin, these are all things which were either drilling or actually mining from. So yes, Beta Hunt, much bigger system than we would expect. Unknown Executive: Another question from Paul. With the ore purchases, why have you not upgraded guidance? Wayne Bramwell: I think I answered that one. We basically -- the existing FY '26 guidance has already got the NMG ore purchases baked in. But until Valiant actually starts to deliver, we'll be conservative. We won't build any of that in until Valiant starts to produce. Unknown Executive: We have no further questions at this time. I think I'll give it to you, Wayne, to close off. Wayne Bramwell: Look, thanks, everyone, for patching in today. And I think the main issue Tommy explained well was that in terms of why no half year dividend, really, it's the fact that we're in the process of building our franking credits. From an investor's perspective, and I'm one as well, I much prefer fully franked dividends than unfranked, and that's really the focus going out to the full year.
Operator: Good day, and welcome to the CBIZ Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Sikora, Vice President of Investor Relations and Corporate Finance. Please go ahead. Christopher Sikora: Good afternoon, and thank you for joining us on today's call to discuss CBIZ fourth quarter and full-Year 2025 results. During this quarter, we posted an earnings presentation that tracks to our prepared remarks. The presentation is available on our Investor Relations website. Before we start, I'll remind all participants that you will be hearing forward-looking statements during this call. These statements reflect the expectations and beliefs of our management team at the time of the call, but are subject to risks that could cause actual results to differ materially from these statements. You can find additional information on these factors in the company's filings with the SEC. Participants should be mindful that subsequent events may run in this information to be out of date. We will also discuss certain non-GAAP financial measures on today's call. As noted on Slide 3, a reconciliation between GAAP and non-GAAP financial measures can be found in the supplemental schedules of the presentation. Joining us for today's call are Jerry Grisko, President and Chief Executive Officer;Brad Lakhia, Chief Financial Officer; and Peter Scavuzzo, Chief Strategy Officer and Technology Leader. I will now turn the call over to Jerry, who will begin on Slide 4. Jerry Grisko: Thanks, Chris. Good afternoon, everyone, and thank you for joining us. I want to start today by highlighting how CBIZ positioned to win in the middle market. We have nearly doubled in size, enhanced our service offerings and advanced our investments in people, technology, and automation. The middle market professional service industry has historically grown above GDP with a large and growing total addressable market of diverse clients that rely on trusted advisers to help them navigate complex operating environments and grow their business. The industry benefits from secular growth drivers tied to greater complexity for business leaders a shortage of accounting talent leading to increased outsourcing of accounting services, constant changes to accounting and tax standards as well as the ongoing importance of adapting and modernizing processes with advances in AI and automation. We are now among just a handful of firms that have the scale and capabilities to meet middle market clients growing demand for greater industry expertise, leading technology and a broader range of services delivered by trusted advisers. Our strategic focus in 2026 and beyond is ensuring that we organize and invest in our capabilities to maximize the value of our scale and competitive position. We expect these investments to further strengthen our value proposition to clients, differentiate CBIZ in the market and accelerate our growth. Moving to Slide 5. It is important to recognize that many accomplishments the CBIZ team delivered in 2025. We made significant progress by completing the vast majority of the Marcum integration priorities. We brought our teams together physically, enhanced their ability to work together through common systems and processes and strengthened our go-to-market capabilities. These steps were necessary to unlock the opportunities associated with the acquisition and position CBIZ for sustainable long-term growth. I want to thank our entire team for their hard work and support and their commitment to our clients, team members and CBIZ during this important year of transformation. In 2025, we delivered approximately 2% organic revenue growth with solid year-over-year improvement in bottom line profitability. We continue to generate healthy cash flow from operations to support our business and to invest in attractive opportunities. While our revenue growth is impacted in part by soft market conditions that affected the entire industry, there was also a portion related to productivity losses, often experienced in the first year following the combination of 2 organizations of similar size. We believe these headwinds will abate in 2026 as we have seen improving middle market sentiment, and we're in the process of completing our first busy season as a combined company on common platforms. Now moving to Slide 6, operationally, we've built upon market's investments in transformation and innovation, including AI and data-focused priorities, and we've improved how we deploy our combined offshore teams. Having our teams work on common systems and apply the standardized processes and workflows that were established in 2025 allows us to increase utilization and enhance client experience by matching our best people to the clients most in need of their expertise. From a people and leadership standpoint, we've completed most of our internal reorganization priorities. Over the past year, we strengthened our leadership bench by placing our best leaders into roles that directly drive growth, accelerate the formation of our industry groups and advance the adoption of AI and Innovation. Thanks to our team's hard work, key retention metrics around clients and managing directors are in line with expectations and synergies are double our initial expectations. While there remains technology and real estate-related immigration work ahead of us, along with opportunities for further cost synergies, the integration is largely behind us, and we are now focused on how we leverage our scale to accelerate growth. With that, I'll turn to our 4 strategic priorities guiding our efforts on Slide 7. We are focused on 4 strategic priorities to drive growth and increase our value to our clients, attracting and retaining top talent, elevating our national brand, utilizing industry specialization, and delivering value through our enhanced breadth and depth of service offerings. Together, these priorities will strengthen our ability to win the new business, retain and expand client relationships and enhance and realized pricing. Our first growth priority is to attract and retain top talent. For 2025, we were pleased to fund substantial amounts of incentive compensation to recognize the contributions of our team in this critical year of transition. And in 2026, we plan to return to full incentive program funding tied to delivering on our top line growth objectives. We will also increase our producer count within our Benefits and Insurance group by approximately 15% this year, and we are investing in sales development resources to capture new opportunities. We now have the ability to attract a unique level of talent to CBIZ. Recent examples include bringing on the head of AI incubation and ahead of data from Big 4 firms. And we have a pipeline of senior professionals who want to join the unique platform that we have now built. Our history tells us that we have a strong track record of high returns on our investments in talent. We're confident that the continued investments in talent will allow us to command better pricing, expand existing relationships and win new logos. We have scaled our brand and marketing approach and our second growth priority is to continue to raise our brand visibility and to ramp up targeted marketing initiatives. While CBIZ has a strong reputation with existing clients, we need to always be top of mind for new clients and event-driven project-based work. We see a large opportunity to explain the power of our new platform and the ways in which we can help current and potential clients. In 2025, our team generated more than 50,000 net new leads across key markets using targeted TV, digital, and out-of-home advertising, leading to improved win rates. In 2026, our focus will be on translating increased visibility into engagement for our services, supporting new client opportunities and reinforcing our position with companies pursue transformational events. Our branded marketing investments are a key component to both our go-to-market and our talent recruitment strategies. Our third growth priority is deepening and growing our industry specialization. Clients want advisers who bring deep industry-specific insights and our expanded scale positioned us to do just that. We've organized into 12 industry verticals, which allows us to lead with insights, anticipate client needs and deliver coordinated tailwind solutions supporting stronger retention and more consistent growth. The strategy and model has already proven successful. Construction executive recently named CBIZ as the #1 firm on its 2025 list of the top 50 construction accounting firms, reflecting the strength of our position in that industry. We are leveraging national resources while maintaining our local delivery advantage, and we're encouraged by the early progress we're seeing. All 12 industry verticals now have dedicated leadership that does align national and regional support to drive improved collaboration, cross-serving and industry-focused client engagement. Finally, we are delivering a more coordinated client experience across our services. With our highly recurring essential revenue base, and strong client retention, our most immediate growth opportunity is expanding relationships with our existing clients. We are seeing notably increased collaboration across service lines, early success from cross-serving initiatives and growing interest in bundled solutions. This strengthens our new business efforts, allowing prospects to see the full breadth of our capabilities. In 2026, our efforts are centered at increasing the number of clients using multiple services. We've built the foundation for this work, and we are expecting the efforts to become a more meaningful contributor to organic growth over time. Taken together, we believe strong execution against these 4 priorities positions us to drive attractive levels of growth. At the same time, we remain focused on delivering their growth with strong earnings quality. Now turning to Slide 8. An important value driver is our investment in automation, including artificial intelligence. In time, AI will meaningfully change how professional services firms operate. They will increasingly automate routine manual tasks and reshape workflows across our service offerings. We want to be clear about what AI does and does not change. The core role of the trusted adviser applying judgment, advocating for outcomes and leveraging the experience, collaboration in ethics remains indispensable. Trust is uniquely human. Our clients trust us as their advisers and look to us to harness these tools on their behalf, and that's exactly what CBIZ is doing. We are positioning CBIZ to lead and view AI as an extension of the automation initiatives we've leveraged for many years to generate a high return on investment. Critically, we are implementing AI as an enterprise-wide capability rather than a series of isolated pilots. This means standardizing workflows, strengthening data discipline and establishing governance, so outputs are reliable, repeatable and audit ready. Today, we have over 60 dedicated professionals focused on our technology and our AI strategy, and we are collaborating with top-tier cloud and AI providers to accelerate our transformation. We are embedding AI tools in our daily workflows, enabling all of our employees with structured training and scaling proven capabilities already in production. A good example is tax. We currently use tax automation software to streamline 1040 return preparation. In parallel, we are layering in AI capabilities to process more complex data like K-1 footnotes. Over time, we expect these enhanced capabilities will support margin expansion in our tax business, not by charging less, but by delivering more value with greater efficiency. AI also has the potential to create new revenue opportunities, particularly within our higher growth, higher-margin advisory practice. As the regulatory and operating environment grows more complex, clients need more help interpreting data in making strategic decisions, exactly the kind of judgment intensive work where clients seek out trusted advisers, especially one who can leverage AI. We believe our competitive scale and strategy positions us well to benefit as AI reshapes our industry. Our middle market clients typically do not have the scale, capital or internal expertise to build and govern AI infrastructure themselves. We do. Our size and breadth allows us to invest in and deploy advanced tools across our platform, while pairing them with trusted adviser relationships that clients depend on. Because the majority of our revenue is fixed fee or commission based, we expect a great deal of productivity gains to flow to margins without pressuring our top line. Lastly, coming to the current demand and pricing, we are not seeing AI put pressure on either one. To the contrary, our pipeline remains healthy, retention is strong and clients continue to lean into their advisory relationships. The use of efficiency tools is not without precedent. Over the past decade, our industry has significantly expanded the use of lower-cost offshore labor with full transparency to our clients, reducing the cost to deliver work with accounting firms generating meaningful margin expansion from these activities. We see AI following a similar pattern, delivery costs improved, but the value to the client remains and even grows and pricing reflects that value. Firms that are prioritizing AI adoption are being rewarded with deeper client relationships and expanded wallet share. We believe we are well positioned on that side of the equation. In summary, our foundational platform work and scale automation initiatives are expected to support more efficient growth, margin expansion and an increasingly favorable revenue mix. We believe that AI deployed with discipline and governance will be a meaningful driver of long-term value creation. Slide 9 details how offshore continues to be a meaningful opportunity for CBIZ. We are accelerating our use of global resources to improve utilization, expand capacity and support margin expansion. Ultimately, we believe offshoring provides a better experience for our U.S.-based team, enabling a higher level of service and responsiveness to our clients. Today, we operate offshore delivery centers in the Philippines and in India with more than 500 professionals supporting our tax and attest services. We expect to increase offshore hours from approximately 6% in 2025 to 10% in 2026. Over the next several years, we plan to expand this to more than 20%. We believe achieving these levels which are consistent with comparable firms, will drive significant growth and margin opportunities over time. Now to wrap up my opening remarks, I want to comment on the current business climate and our outlook. While 2025 turned out to be a more cautious operating environment for our clients, our proprietary Pulse survey and ongoing discussion with clients points to a more encouraging backdrop heading into this year. What we're hearing from clients is greater comfort with the business environment. While clients still recognize the economic and political environment remains highly dynamic, the incremental comfort indicates an increased opportunity for project-based work. We saw this picked up in the second half of last year. As a reminder, more than 70% of our revenue is recurring and resilient across cycles. The remaining portion is more project-based and our assumptions regarding the level of activity largely drive the rate of our 2% to 5% organic revenue growth outlook. Finally, as Brad will discuss in more detail we are pleased with the strong free cash flow generation we expect in the coming year and view stock repurchases as highly attractive, given our long track record of growing free cash flow. Now I would like to turn the call over to Brad for our financial review. Brad Lakhia: Thanks, Jerry, and good afternoon, everyone. My comments begin on Slide 11. Consolidated financial results for the fourth quarter and full year demonstrate the strength and resiliency in the CBIZ model. We delivered strong profitability and free cash flow despite tempered top line growth. Fourth quarter revenue was $543 million, up 18% versus the prior year driven by the acquisition. You will recall our remarks on the third quarter call. Two things had to happen for us to meet our fourth quarter expectations. First, market conditions had to be consistent with the third quarter and we're pleased that assumption held true. The second assumption required we drive above-average utilization by working with our clients to get an early start on the busy season. This assumption did not come through, as utilization remained at normal historical levels due to client preference to pursue this work in 2026. Fortunately, the work was pushed into 2026, and we are well positioned to convert on this activity during the first half of the year. For the full year, revenue grew 52% versus the prior year as reported, and we estimated we grew approximately 2% organically. As we shared during 2025, this was below our initial expectations due to less favorable market conditions in the first half as well as lower demand in our SEC capital markets practice. The CBIZ model generates strong recurring essential revenue, and our client retention remains high. As we move past a transformative year, we are excited to execute on our top line growth initiatives in 2026 and beyond. Operating expense declined as a percentage of revenue, reflecting lower incentive compensation tied to our top line performance and the acceleration of synergies that contributed approximately $35 million of savings in 2025. Together, these 2 items helped drive 250 basis points of year-over-year gross margin expansion. Roughly 80% of our operating expense is personnel related with incentive compensation as the primary variable component. Incentive compensation programs have historically represented approximately 16% to 17% of our total compensation and benefits. While incentive expense was lower in 2025, we ensured our high-performing teams are recognized and rewarded for their 2025 accomplishments, and we remain committed to investing in the best people in our industry. For the fourth quarter, adjusted EBITDA was a loss of $29 million. And for the full year, adjusted EBITDA was $447 million. Full-year adjusted EBITDA margin increased approximately 530 basis points versus last year with lower incentive compensation expense driving approximately 270 basis points of that improvement. Excluding the impact from incentive compensation and acquisition timing, we believe our margin expansion is consistent with and even exceeds historical performance, representing the benefits of greater scale and higher-than-expected synergies. Fourth quarter adjusted diluted earnings per share was a loss of $0.70, bringing our full year adjusted EPS to $3.61. This is in line with our original 2025 guidance and is a strong testament to the team's ability to deliver improved profitability and achieve the year 1 accretion we committed to when we announced the Marcum transaction. We repurchased approximately 2.4 million shares totaling $160 million in 2025 under our right of first refusal and through the open market. In addition, our Board of Directors recently approved the continuation of our share repurchase program, authorizing the repurchase of up to 5 million shares. Full year free cash flow increased $65 million to $176 million and conversion from adjusted EBITDA was approximately 40%. Conversion was tempered in 2025 due to elevated integration-related spend that will begin to abate in 2026. Our business model drives meaningful cash generation under nearly all business climates. This affords us flexibility to support high-return capital allocation priorities that drive top line growth, improve client experience and margin expansion. Moving into our segment review. Financial Services fourth quarter revenue was $439 million, up 23% year-over-year, benefiting from an additional month of the acquisition compared to last year. Full year 2025 revenue was $2.3 billion, an increase of approximately 70% driven by the acquisition. Adjusting for known items, we estimate we delivered low single-digit growth in our core accounting and tax service lines, which offset headwinds in our SEC related business. In addition, our advisory business grew in the second half, capturing improved market conditions relative to the first half. Financial Services adjusted EBITDA was up $264 million, ending the year at $449 million. Adjusted EBITDA margin expanded 600 basis points, driven by the impact of synergies, lower incentive compensation expense and additional scale benefits. In terms of pricing, we were pleased to deliver mid-single-digit rate increases for the year. We are competing favorably and realizing rate increases that exceed overall inflation and capture the value we bring to our clients. Our long-term target for Financial Services is solid mid-single-digit annual organic revenue growth and we expect continued adjusted EBITDA margin expansion driven by top line growth and operating efficiencies. Turning to our Benefits & Insurance results on Slide 14. Overall, it was another solid year for B&I with year-over-year revenue growth and strong profitability. 2025 revenue was $410 million and represents 2% growth year-over-year primarily driven by growth in our Employee Benefits Group and the payroll and human capital management group. This was partially offset by softness in the property and casualty market as well as producer attrition. For the year, adjusted EBITDA was up $3 million, representing 4% growth and 20 basis points of margin expansion. Growth drivers for B&I in 2026 include enhancing client and key producer retention while driving new business. We are also tying a larger level of producer incentive compensation to cross-serving targets. We are capturing opportunities for outsourced services and seeing increased interest in our solutions to mitigate rising health care costs and navigate workforce dynamics. Slide 15 provides a look at our quarterly seasonality for revenue, adjusted EBITDA and free cash flow. Seasonality is driven by the accounting in tax busy season and the related timing of billing and collections which impacts working capital. We ended with net debt of approximately $1.45 billion, resulting in a net leverage ratio of 3.3x and we had over $400 million of available liquidity under our revolver as of December 31. Turning to our 2026 outlook on Slide 16 and you could also reference Slides 21 through 23 in the appendix for additional detail. At a high level, we expect to deliver year-over-year growth in revenue, profitability and free cash flow. Revenue is expected to be between $2.8 billion to $2.9 billion, representing 2% to 5% year-over-year growth. The difference between the high end and the low end of the range is largely driven by macroeconomic assumptions, which could impact project-based work. In terms of seasonality and consistent with historical patterns, revenue is expected to be weighted at approximately 55% in the first half and 45% in the second half. Adjusted EBITDA is expected to be in the range of $450 million to $460 million. The funding of incentive pools will correlate with our top line performance. At 2% growth, we would expect a little to no headwind compared to 2025; and at 5% growth, we would expect incentive compensation to be refilled at target levels and would therefore realize the full $65 million headwind. Investing in talent remains a top priority and it's critical to our long-term success. We're balancing that investment with a disciplined approach to profitability, supported by efficiency initiatives and synergies that will partially offset higher compensation. We expect $70 million to $80 million in integration costs in 2026. Compared to 2025, business-related integration costs will decrease, but will be partially offset by higher facility optimization costs. The first half and the second half split for adjusted EBITDA is expected to be approximately 70% and 30%, respectively. Adjusted EPS is expected to be in the range of $3.75 to $3.85 per share and this contemplates a tax rate of approximately 28.5% and a weighted average fully diluted share count of approximately 62 million shares. Free cash flow is expected to be in the range of $270 million to $290 million, representing approximately 60% conversion at the midpoint of our adjusted EBITDA outlook. This is largely driven by lower acquisition-related items and the benefit of approximately $50 million of purchase price adjustment we collected this January. We are factoring in only modest contributions from working capital efficiency and lower interest payments. Capital expenditures will be higher in 2025 by approximately $20 million to $25 million tied to facility optimization plans. And in 2027 and beyond, we expect capital expenditures will normalize to approximately $20 million to $30 million annually. M&A earnout payments are expected to be approximately $30 million in 2026. Beyond 2026, we believe we have opportunities to further enhance free cash flow conversion. And these levers include: driving profitable revenue growth, enhancing working capital management with a focus on DSOs, lowering interest payments and maintaining an asset-light low CapEx model. On Slide 17, we outline our capital allocation priorities as we continue to generate strong free cash flow. Our first priority remains funding organic growth and maintenance capital. Second, we remain committed to delevering, targeting net leverage ratio of 2x to 2.5x. At our current valuation, which implies a high-teens 2026 net free cash flow yield, we believe share repurchases are highly accretive and represent a compelling use of capital. Similar to 2025, we intend to be active and disciplined in executing repurchases balanced with steady debt reduction. The strength and scale of our business model, combined with our consistent free cash flow, gives us confidence that we can simultaneously invest in growth, return capital through share repurchases and achieve our leverage targets. Thank you for joining us today, and I'll turn the call back to Jerry. Jerry Grisko: Thanks, Brad. Our top priority in 2026 is reigniting our growth engine and leveraging our scale. We have clear strategic growth priorities and efficiency enablers that we are confident will drive value creation for shareholders in 2026 and beyond. We believe we have the building blocks to deliver on our long-term growth algorithm. Our diverse client base positions us to cross-serve and drive larger share of wallet. We are finding that our ability to provide specialized industry expertise is enabling us to deepen core client relationships and differentiate ourselves from our competitors. Looking forward, we are focused on compounding value through multiple growth engines. We see tremendous opportunity to not only retain business and expand within our existing clients, but also to land clients who seek multiservice capabilities we can now offer. Work completed in 2025 has built the foundation for us to realize operating margin expansion as we increasingly deploy technology and leverage our offshore teams. And last but certainly not least, we remain committed to high return capital allocation priorities that are supported by strong and consistent cash flow you have come to expect from CBIZ. Thanks again to our CBIZ team for your hard work and thank you to our shareholders for your continued support. We look forward to your further engagement with you throughout the coming months. And with that, operator, please let's open the call for Q&A. Operator: [Operator Instructions] The first question today comes from Faiza Alwy with Deutsche Bank. Faiza Alwy: I wanted to ask about, Jerry, your comments around your revenue growth that you said was impacted by soft market conditions and also related to some productivity losses. And I'm curious if you can talk a bit more about that, particularly around the soft market conditions and the improving middle market sentiment that you mentioned, maybe if you have any views around why sentiment was softer last year and what's improving and your confidence around that? Jerry Grisko: Yes, Faiza, Happy to take the question. As we've talked for years, our client -- that middle market client is a highly resilient client, but what they need in order to invest forward is certainty and stability in the playing field or a business climate. And we saw anything but that certainly in the first half of the year and our market, our competitors, everybody kind of experienced the same thing. So that's really what I was referencing when I referred to kind of soft market conditions. What we did see kind of encouragingly is that as the year progressed, things did settle in a little bit, and our clients did begin to get more comfortable with investing and we benefited from that. We saw more activity in our advisory work, and we're expecting that work to kind of get you through into 2026 for sure. You asked a second part of that question that I can't recall. Faiza Alwy: I guess just around the confidence and the improving sentiment around the customer. Jerry Grisko: Yes, Faiza, we do a middle market pulse survey. What we're seeing in that survey is that our clients are more comfortable, more confident today than they were at this period -- at this time last year. And we're seeing that not only in our -- in the survey works, but we're also seeing it in the kind of green shoots that we're seeing on the project side of the business. So everything appears to be holding true. And we're expecting that, again, more of the activity that we saw kind of start to emerge in the second half of the year will continue through the first part of and into 2026. Faiza Alwy: Okay. And then I wanted to ask about your comments around the role of the trusted adviser and -- as you know, there's a lot of concern in the market around AI and all of that, and you certainly addressed a lot of it in your prepared comments. And I'm curious, as you think about that -- the role of the trusted adviser, are there portions of your business that are maybe a little bit more formulaic where some of your customers could just with big ease as it relates to new technology advancements? Like are there certain parts of your business where there's potential room for disruption or just would love to hear your perspective on that. Jerry Grisko: Yes. Again, Faiza, and I'll turn it to Peter Scavuzzo because he's obviously leading this with us, and he's here alongside us today, but let me start with the answer to that. Our client -- the answer is we see AI over time, definitely augmenting the work that we do for our clients. And there are certainly pieces of the work that we do that will be more automated and therefore, more efficient as a result of the tools that are available in the market. But it's very hard to separate that work from the remainder of the work that we do for them. And our clients, that middle market client oftentimes turns to that trusted adviser more than just for a tax return, more than just for an audit, more than just for payroll or benefit to insurance or the other services we provide but really for deep knowledge of their business, familiarity with them, deep knowledge of their industries and kind of a holistic approach to helping guide them through what is increasingly a complex business environment and some of their most important and impactful events in their lives, whether it be expansion of a plant or making an acquisition, it's very difficult for that client to separate one isolated piece of work that may have been performed more efficiently from the holistic body of work that we do. That's the special relationship that we have, the trusted relationship that we have with that middle market client. Peter, I don't know if you have anything to add. Peter Scavuzzo: Yes. A couple of items I'd add is they're coming to firms like CBIZ not because they need less advisory. They need more. Our role is providing human judgment is going to be more critical than ever. The reliance on trust becomes more critical than ever. AI is adding more complexity to the businesses. And the middle market organization is going to depend on CBIZ to help them demystify these complexities and help them navigate through this. Operator: Next question comes from Chris Moore with CJS Securities. Christopher Moore: So maybe we can start with pricing. So at Q3, we had talked about roughly 4% for the year versus 6% or 7% in '23 and '24. You talked about mid-single digits. So that mid-single digits for '25, that's roughly 4%. Is that what we're saying? Jerry Grisko: Yes. Chris, we didn't specify 4%, 5%. But I will tell you, squarely in the mid-single-digit range for 2026. Brad Lakhia: Chris, Brad here. The -- for 2025, listen, we did what we said is we were navigating through the second quarter. We did see some -- listen, it was not a period of uncertainty. And what we saw with some of our clients coming to us, again, as trusted partners, long-standing trusted partners asking us for some assistance as they navigated through -- the broader world navigated through some uncertainty. But even with that, as we closed out 2025, Chris, we still delivered very consistent mid-single-digit price realization for the full year. So we're pleased with how we exited the year. And as we turn now well into 2026, and we see line of sight into this busy season and beyond. We see that holding up very nicely. Christopher Moore: Got it. So, so far in '26 -- I mean, so there is an argument to be made that pricing in '26 could be a little bit better than you got in '25. Brad Lakhia: Yes. We're not -- listen, the guidance we have, the 2% to 5% guidance does not assume any significant year-over-year improvement in the pricing environment. So consistent normal pricing environment year-over-year mid-single digits, as Jerry said. Christopher Moore: I'll jump maybe to incentive comp. Brad went through this, but I didn't quite get it. So the -- in '25, I think we talked about roughly 9% of revenue, then we would kind of normalize, but that would depend on where we were in the 2% to 5% growth. So if we got to 5% growth, then we would get back kind of fully baked in closer to a 12% level if we get between the 2% and 5%, it will get somewhere between the 9% and 12%. Is that the way to look at it? Brad Lakhia: Yes, that's the way to look at it. What I mentioned in my remarks earlier, Chris, was if we saw a 2% growth to the low end of our guidance range, we would expect and we wouldn't really be seeing any incremental funding of those pools year-over-year. As we move and migrate to the top end of that guidance range 5%, we would be funding those pools more at historical targeted levels, and that would kind of result in a headwind of somewhere in the neighborhood of $60 million to $70 million year-over-year. And that's largely what our EBITDA or adjusted EBITDA guidance reflects. Christopher Moore: Got it. That's helpful. And in terms of the going -- the delta between the 2% and 5% revenue growth. So that is mostly project revenue is the difference between whether or not we're at 2% or 5%. Is that right? Jerry Grisko: I would say broad market conditions, macro market conditions, right, that really drive more project-related work. Christopher Moore: Can we talk maybe about -- I know SEC Capital Markets is one area that was softer in '25. Can we talk about kind of some of the project areas in '25 that were softer and what your thoughts are at this point in time in '26? Jerry Grisko: Yes. By the way, I appreciate the way you're framing it because the capital markets work that we experienced in '25 is really also market related, right? So we talk about market conditions. It's really all the project work we do and those -- that work that we're -- that is more susceptible to market conditions. So I put the capital markets work in that category. But to get to your specific question, we saw work within, for example, more discretionary work. So we do a lot of work around valuation. We do risk and advisory work. We have worked within that category that is IPO-related that was soft during that period of time. So there's a wide range of the -- what would normally be higher growth, higher margin, very attractive advisory services that we provide that in those environments, where our clients are doing less of that work and the markets are less receptive to that work. That revenue slows a little bit for us. But when the markets improve, it's a significant catalyst to our growth in our margin. Christopher Moore: And do you have any thoughts in terms of '26, whether that markets are shifting in that direction? Jerry Grisko: Yes. Just I would say I would say, more optimistic and more favorable at this time than they were in the first half of 2025. So we're encouraged by the environment that we're entering into '26. Operator: The next question today comes from Andrew Nicholas with William Blair. Andrew Nicholas: I wanted to follow up on that last point and sorry to keep pointing in on it. But in terms of like the bottom and upper end of your guide, it sounds like the project-based work is a decent bit better than first half '25. Is that continuation giving you to the midpoint? And I guess maybe another way to ask the question, you talked about '25 growth between core accounting and advisory. Is there any way to kind of qualitatively speak to the different kind of chunks of your business, core accounting, advisory, B&IS and what your expectations are that are embedded in guidance for '26? Brad Lakhia: Yes, Andrew, there's a couple of parts there. Let me try to take the first part first, which is the -- how we're thinking about the midpoint of the guidance. I just kind of restate what Jerry said, which is really largely -- the range itself reflects kind of a view around macro conditions and how those macro conditions could shape the nonrecurring more advisory parts of our business. And so if you're looking for me to provide you like what is more prescriptively the midpoint of that range. I wouldn't want to do that. But what I would say is, though, to the extent that those market conditions continue to remain supportive as they were in the back half of 2025 and as we see them today, the midpoint of the guidance becomes something we feel is more realistic, more achievable. So I'll pause there and get your reactions to that because then I want to come back to the second part of your question. Andrew Nicholas: Yes, that's helpful. And then, yes, I guess, the second part of my question was just how to think about core accounting versus advisory versus B&IS if there's a way to kind of disaggregate the growth rates there. I think core accounting is obviously less susceptible to the macro than the rest of it. Jerry Grisko: Yes. So the pieces that you identified, core accounting impacts and benefits in insurance, let me remind everyone that our revenues are largely recurring in essential and so those tend to be more predictable and grow at kind of steadier rates. The other pieces of the business are a little less predictable, but when the markets are favorable obviously, they grow faster, and the margins are enhanced. Last year, what we saw is really just as a result of the market -- the way the market just unfolded is slower growth in our advisory practices in the first half of the year, but it picked up in the second half of the year. So net-net, the business was in line with what we experienced on both the accounting and tax side and the Benefits & Insurance side. It just played out a little different as a year ago. Andrew Nicholas: And then just a kind of related question. So this year, revenue guide 2% to 5% the long-term target is still mid-single digits. Can you help us kind of bridge to that target? Is the opportunity in '27, '28, '29 going forward? All centered around the cross-sell opportunity. And it sounds like you're incentivizing B&IS a little bit differently to help augment that. Or is there anything else that we should be thinking about as we bridge that to the medium-term target? Jerry Grisko: Yes. So Andrew, we really look at our growth opportunities with 3 levers, right? Pricing, and we talk a lot about pricing, and we're really pleased with the mid-single digits that we experienced in 2025. And again, what we're -- what we expect to see in 2026. Where the real opportunity comes as the next 2 levers, which are expanding the client relationship, so breadth of services that we can provide to them and new logos. And we think we have an opportunity on both of those fronts, primarily driven by the industry initiatives that we now have in place. If we think about those industries we are unmatched in the market among our competitors among -- with the breadth of services that we can provide. What we're doing within each of those industry groups is identifying the profile of the client, their unique needs in bringing really unique bundled services to that client. That will expand the share of wallet that we have with that client and also allowed us to go out and track and we're seeing evidence of this already being able to track very high-profile clients within that industry as a result of that service offering that no one else can have. So we think over time, '27, '28, as these things start to take hold, the real growth opportunity is going to be an expansion of wallet and in our ability to win new logos over time. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and thank you for standing by. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, please press star 11 on your telephone. To withdraw your question, please press star 11 again. You would then hear an automated message advising your hand is raised. We ask that you limit yourself to one question and one follow-up. Good morning, and welcome to Papa John's International, Inc.'s fourth quarter and full year 2025 earnings conference call. Earlier this morning, we issued our earnings release, which can be found on our Investor Relations website at ir.papajohns.com under the news and events tab. I would now like to hand the call over to Heather Hollander. You may begin. Heather Hollander: Chief financial officer and president, North America. Comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings. In addition, please refer to our earnings release and our Investor Relations website for the required reconciliation of non-GAAP financial measures discussed on today's call. Lastly, we ask that you please limit your questions to one question and one follow-up. And now I will turn the call over to Todd. Todd Penegor: We have substantially improved our brand health, customer experience, restaurant fleet, and cost structure. To our brand health, technology platform, innovation pipeline, together with key leadership appointments and organizational changes, as well as our value and quality perception with our customers, we achieved growth, and higher utilization amongst our loyalty members, or our most valuable customers, increasing loyalty orders redeeming Papa Do from 24% last year to 48% at the 2025. Our international business, we have delivered five consecutive quarters of positive sales comps. We have made progress against our technology roadmap with the goal of establishing Papa John's International, Inc. as a best-in-class technology leader in QSR. We established a plan to deliver at least $60,000,000 of system-wide supply chain cost savings to our company and franchise restaurants without compromising the customer experience. We identified at least $25,000,000 of non-customer-facing corporate cost savings to be realized through 2027. And we ended the year meeting or exceeding our updated guidance targets, while investing $21,000,000 in supplemental marketing year over year to support our value proposition. These actions begin to take hold. And near-term performance is mixed as our transformation initiatives continue to gain traction. Still, our progress is just beginning. As we work to build on this momentum, I am even more confident that Papa John's International, Inc. is well positioned for meaningful medium- and long-term growth and value creation than I was at this time last year. For example, from a consumer lens, in the fourth quarter, we saw strength in our loyalty customers and existing customers in North America. However, new customer acquisition was lower than last year. From a product perspective, core pizza remains resilient, with the total number of pizzas sold actually increasing 1%. On the other hand, single pie orders declined during the quarter, and total pizza sales declined low single digits as our order mix shifted towards smaller, non-specialty pizzas. From a geographic perspective, we delivered strong 6% comparable sales growth internationally, driven by strength across key markets in the Middle East, Asia Pacific, and Europe. Performance highlights include 7% comp sales growth in the UK, as the market benefited from our transformation work. As for fulfillment channels, in North America, we were pleased that our carryout business returned to low single-digit order growth supported by the 50% carryout offer in November. There was also notable strength in Uber Eats performance. This upside was offset by year-over-year order declines in total delivery. As we look to 2026, we are positioning the business to win in a category that has staying power and growth opportunities. Pizza is a go-to for families and friends. In everyday moments, special occasions, and gatherings, I am confident Papa John's International, Inc. will capture this global market opportunity. And that deep-rooted consumer affection ensures pizza remains one of the most durable food categories. By being the best pizza makers in the industry, we will win new customers, and leverage our rebuilt innovation pipeline. Our two largest opportunities to gain share are expand our total addressable market, elevate our pizza order mix to more premium pizzas, and drive add-ons. Let me share more on each. Starting with our value proposition. In the fourth quarter, promotions such as our 50% carryout deal, $9.99 create your own pizza, and our popular Papa Pairings were effective, improving our value perception scores, which increased mid-single digits compared with last year, even as QSR peers introduced aggressive new promotional offers. We will continue to pulse compelling promotions to meet the customer where they are. We are also significantly evolving our promotional intensity to really think about how we meet the consumer where they are. We will continue to pulse compelling promotions to meet the customer where they are. We are also significantly evolving our promotional intensity using our premium ingredients and featuring our signature sauce. We will continue to pulse compelling promotions to meet the customer where they are. We are also significantly evolving our promotional intensity using our premium ingredients and featuring our signature sauce. Second, a steady dose of innovation is critical for new customer acquisition, and our innovation engine is firing on all cylinders. At the January, we launched our pan pizza platform. Following extensive culinary research and development, our teams have crafted an elevated, differentiated pan pizza experience with a crispy garlic Parmesan crust, a six-cheese artisan blend, and a fluffy soft interior. Pan pizza fills an important menu gap for us, and it raises the bar on a nostalgic type of pizza that we know our customers love. While early, pan pizza mix is performing above expectations. And we plan to build momentum off the pan pizza launch, driving trial and awareness of this outstanding product. We are also excited to expand pan pizza into several priority international markets in the coming months. Our innovation pipeline expands our aperture beyond traditional QSR pizza. It is designed to drive incremental sales and attract a broader customer base, serving up new crispy coated chicken tenders alongside new dipping sauces at accessible price points. For example, part of our product innovation work in 2026 is centered around crafting compelling side items at accessible price points. To provide a handheld option as an accessible price point, we are pleased with the early results. As we elevate our offerings outside of core pizza and drive benefits to total ticket, sales, and four-wall margins, we are testing oven-toasted sandwiches in North America and will soon begin testing in certain international markets. These chef-crafted sandwiches are made on bakery-fresh ciabatta bread, brushed with our signature garlic sauce, and packed with innovative flavors and high-quality meats. In the UK, we are pleased with the early results of this new growth platform, with our new sandwiches increasing sales of non-pizza items in test markets. We plan to build upon these learnings for chicken innovation in the US. Our innovation is supremely customer-centric and insights-driven. We recently piloted a protein crust pizza featuring an industry-first protein-infused dough that aligns with the customer's desire for protein-rich options. When paired with our premium toppings, this pizza delivers up to 55 grams of protein per serving with 23 grams in the crust alone. Customer feedback during the test was highly positive, but we are still in the early development phase. The protein crust pizza is an example of how we are rebuilding our innovation pipeline, soon joining our menu lineup. The protein crust pizza is an example of how we are rebuilding our innovation pipeline. The protein crust pizza is an example of how we are rebuilding our innovation pipeline. We expect the benefits of a comprehensive value proposition to begin to take hold. And look forward to providing updates in the coming months. We are also building partnerships with notable brands and strategic collaborations to introduce Papa John's International, Inc. to new customers. With the competitive dynamics in the QSR marketplace, we are equally focused on sharpening our marketing message. At Papa John's International, Inc., innovation extends beyond the menu, along with consumer-led, data-driven product innovation to win new customers and improve order mix on the path to sustainable, profitable top-line growth. The foundational work we have done to recalibrate our ovens to adjust bake temperatures and optimize bake times has made our expanded innovation pipeline possible and has improved product quality and consistency. We are putting innovation behind these partnerships, and we are excited about what is ahead. While it is too early to share the details about these partnerships, we know pizzas are a game played nationally, but won locally. With a new single-serving pizza to drive incremental orders from existing customers and aligning with the trends that matter most to our customers, we are supporting our product launches with an all-new creative platform developed in partnership with our new agency of record. I am thrilled to share that we have reestablished co-ops across 50 markets in the United States, which includes the majority of our priority markets. These co-ops enable franchisees across regions to pool resources for more effective localized targeting and brand support, with collaborative local campaigns. Now nearly half of our North American system-wide sales are supported by an advertising co-op. For example, as we prepared for our pan pizza launch, we launched a comprehensive campaign built around online video, social and owned channels, TV, influencer and media activation, and widespread press outreach. Our messaging around pan is performing well, especially among younger consumers with strong purchase intent, with pan front and center because we know great pizza deserves a star. We will continue to anchor on our six simple ingredients promise. These new campaigns will also connect with customers by leaning into culture-forward omnichannel storytelling. Investing in technology and our tech stack is essential to being at the forefront of digital leadership in QSR and elevating the customer experience. Early in the fourth quarter, we launched our new omnichannel apps across both iOS and Android devices. This enhancement consolidates our apps onto a single modern code base, makes digital innovation faster and more efficient, and increases our agility in adapting to customer needs. The new app experience is delivering strong early results, outperforming our legacy platforms in reliability and conversion, with response times nearly 40% faster and a 70 basis points improvement in conversion. Over the next two years, we will migrate from our legacy system to a modernized POS, combined with AI-powered labor, inventory and restaurant management systems. We have partnered with leading food service technology provider PAR Technology. To reduce complexity and improve workflow in our US restaurants, we have partnered with PAR Technology to migrate to PAR POS, consolidating inventory management, make line operations, and AI-powered labor, inventory and restaurant management systems onto one platform and enable real-time insights. PAR POS provides us with powerful data and insights to inform our decisions and better serve our customers. The new system will utilize existing hardware, minimizing implementation expense and accelerating deployment. Additionally, we continue to expand our partnership with Google Cloud. In the second quarter, we plan to launch an advanced voice and group ordering feature to transform digital ordering through its AI-powered food ordering agent, and frictionless reordering for Papa Rewards members. Together, these enhanced tools will simplify the ordering experience, reduce cart abandonment, and shorten the path from app open to checkout. We will continue to leverage our strong partnership with Google Cloud to deliver additional enhancements to make the customer experience even more seamless. Differentiating our customer experience across every demand channel remains a top priority. Our loyalty program, Papa Rewards, is one of our most valuable assets, connecting us with nearly 41,000,000 fans and engagement across all customer cohorts, leveraging personalization and exclusive offers to drive urgency, exclusivity, and incremental visits. In 2025, our loyalty members placed two and a half times more orders than non-rewards members, indicating both the strength of our loyalty program and the opportunity associated with capturing new members. We are also engaging customers more frequently and helping to build advocacy among younger, value-orientated consumers. And given the importance of the carryout channel, we are also providing franchise incentives to support remodels and elevate the in-store experience. Finally, we continue to partner with and evolve our franchisee base. Our Papa Rewards loyalty program continues to increase order frequency, engagement across all customer cohorts, and we are already seeing green shoots. I am pleased to report that we continue to gain momentum with our efforts to optimize our North American supply chain and reduce overall costs to serve. As we have progressed with the work, we have identified additional productivity opportunities and now expect to achieve at least $60,000,000 of North American system-wide cost savings, with $20,000,000 to $25,000,000 realized by 2026. These cost savings will equate to at least 160 basis points of four-wall EBITDA improvement by 2028. Next, we completed a strategic review of our restaurant fleet for both company and franchise restaurants and identified targeted opportunities to strengthen it through selective closures. In November, we refranchised 85 restaurants, and we are currently in negotiations to refranchise 29 additional restaurants in the Southeast to another strong growth-orientated operator and expect to finalize that transaction in the second quarter. Partnering with well-capitalized strategic growing franchisees enhances local execution, improves operational efficiency, and unlocks future growth. In addition to accelerating refranchising, we are accelerating our refranchising program and expect to reduce company-owned restaurants to mid-single-digit percent of the North American system. Turning now to our cost structure. We have conducted a comprehensive review of non-customer-facing costs as well as our corporate and field resources to create incremental flexibility across the company, further strengthen execution, and support profitable long-term growth for the Papa John's International, Inc. system. Together with the just-reviewed actions to optimize our restaurant portfolio, we expect this program to deliver at least $25,000,000 in cost savings outside of marketing through 2027. I will briefly walk through the key drivers of these savings in a moment, and Ravi will share the expected financial impacts from these initiatives in a few moments. Starting with our organizational structure, we are taking action to better align corporate and field resources with our transformation priorities, including business areas that we believe have the greatest potential to drive sustainable growth, expand our addressable market, simplify operations, and optimize spans and layers in our organization. In parallel, we also evaluated non-customer-facing costs and are executing against identified opportunities to reduce indirect spend. A portion of these savings will be reinvested to ignite even more customer enthusiasm and to remain agile and, as needed, to invest on behalf of the system in innovation, marketing to supplement national advertising, return co-ops to full strength, and support compelling price points across the system; technology such as our new POS and advancements in personalization and loyalty to drive customer engagement; priority markets and franchise development incentives that deliver strong returns for both franchisees and franchisor; and supply chain to improve cost leverage and four-wall EBITDA across the system. We have established clear success criteria and are closely tracking returns on these investments, and we are already seeing green shoots. In summary, as we accelerate our transformation through focused investment in product and priority markets, we are making visible progress executing our strategy and are confident in our direction and in our ability to deliver sustainable, profitable long-term growth and capitalize on opportunities. And with that, I would like to turn it over to Ravi. Ravi Thanawala: Thank you, Todd, and good morning, everyone. I will begin by sharing an update on our progress to improve restaurant profitability and optimize our restaurant portfolio, collaborating with our franchisees, and reviewing the North America restaurant fleet. I will then provide an overview of our fourth quarter financial results, and conclude with our outlook for fiscal 2026. First, I am honored to step into the role of president in North America in addition to my CFO responsibilities. I have spent the last three months in our restaurants, and I am struck by the engagement of our team members and franchisees and look forward to continuing to work with them to accelerate our transformation. To drive profitable growth across the Papa John's International, Inc. system, I am highly focused on improving four-wall EBITDA for both company-owned and franchise restaurants. Given the high flow-through inherent in our business model, transaction growth supported by an elevated customer experience, and TAM-expanding product innovation such as the pan pizza, sandwiches, and sides that Todd referenced, will serve as a critical driver for four-wall margin over the medium and long term. Lower cost and greater efficiency are additional pillars of the four-wall EBITDA improvement. In addition to reducing our overall cost to serve, the supply chain optimization that Todd referenced will drive cost efficiency in our restaurants and improve customer service. We are developing new tools that allow us to better predict sales demand and give our restaurants better visibility to align staffing needs with peak and off-peak periods. We are leveraging new AI capabilities, including our Google Cloud partnership, to simultaneously drive customer experience across the category. Optimizing our restaurant portfolio and strategically closing underperforming restaurants are among the most impactful actions we can take to improve restaurant profitability and fleet health. We have completed a strategic review of our restaurant fleet and identified targeted opportunities to strengthen it through select closures. The vast majority of our global restaurants have performed well over the years and delivered strong returns for both corporate and franchise owners. However, we have identified approximately 300 underperforming restaurants across North America that are not meeting brand expectations or lack a clear path to sustainable financial improvement, as well as locations where we can effectively transfer sales to a nearby restaurant. These locations are primarily franchise-owned and are mostly operating at negative four-wall EBITDA. We expect to close the majority of these restaurants by the end of 2027, with approximately 200 closures occurring in 2026. We believe these closures will further strengthen the system. This is the same strategy we successfully deployed during my tenure managing our international business. We delivered significant upside, improving AUVs in the UK by 17% after implementing our transformation plan. Similarly, select strategic closures will allow our North American franchisees to redirect resources towards operational excellence and improve franchisee health by allowing franchisees to reallocate resources in their remaining restaurants and open units in priority markets. While domestic four-wall EBITDA has been pressured over the last two years by food costs, labor inflation, and fixed cost leverage, we expect to generate at least 200 basis points of improvement in four-wall EBITDA over the medium term driven by supply chain savings, operational efficiency, and market optimization. In addition to healthier corporate and franchise restaurant portfolios, we expect the increased restaurant-level profitability will accelerate unit growth. We expect the increased restaurant-level profitability will accelerate unit growth. We expect the increased restaurant-level profitability will accelerate unit growth. As an incremental lever to assist our franchisees in growing profitably, we are also investing in long-term restaurant development incentives, with an emphasis on accelerating growth in our highest priority markets. I am also highly focused on reducing menu complexity to improve restaurant operations. Based on productivity studies and feedback from both franchisees and customers, we have made the decision to eliminate Papadias and Papa Bites from our North America menu in the second quarter. We expect that this menu revision will exert approximately 150 basis points of near-term pressure on 2026 North America comparable sales, but ultimately benefit the brand as we improve operations and grow sales of products outside of core pizza as the benefit of our reinvigorated innovation pipeline builds. Turning now to our financial results. Please note that all comparisons and growth rates referenced today are compared to the prior-year period unless otherwise noted. In 2025, we met or exceeded our updated financial targets for system-wide sales, comparable sales growth, and adjusted EBITDA as we pivoted during the second half of the year to amplify our value proposition in response to a weaker consumer backdrop and intense competitive promotional activity while prudently managing our expenses. We also opened 279 new restaurants and ended 2025 with 96 restaurant openings in North America and 183 in international markets. For the fourth quarter, global system-wide restaurant sales were $1,230,000,000, down 1% in constant currency, reflecting a system-wide sales decline of just under 1%, as higher international comparable sales and 1% global net restaurant growth were more than offset by lower comparable sales in North America. As Todd described, we are taking actions to further increase our agility across our restaurants. In 2025, our US market share slightly softened. As we move throughout 2026 and build momentum behind our transformation, we expect to recapture share. North America comparable sales decreased 5% in the fourth quarter driven by a 5.5% decrease in transaction comps. Carryout grew 1% but was more than offset by declines in total delivery. The international team delivered another exceptional quarter with comparable sales improving 6%. We saw continued momentum across our key markets driven by new menu offerings, aggregator expansion, and improved brand and marketing performance. Total consolidated revenue for the fourth quarter was $498,000,000, down 6%, as lower revenue at our domestic company-owned restaurants, North America commissary, and all other business units was partially offset by higher international revenues. North America commissary revenues decreased $7,000,000 primarily due to lower pricing, slightly offset by higher volumes. Domestic company-owned revenues decreased $24,000,000 primarily due to refranchising of 85 corporate restaurants. All other business unit revenues decreased $7,000,000 driven by lower advertising fund revenue as a function of lower sales. Partially offsetting these declines was a $4,000,000 increase in international revenue driven by improved performance across our priority regions. Fourth quarter consolidated adjusted EBITDA decreased to $51,000,000 as we sharpened our value proposition during the quarter in addition to lower comparable sales in the prior year, and approximately $2,000,000 of higher management incentive compensation. Fourth quarter consolidated adjusted EBITDA performance was impacted by marketing investments and subsidies of approximately $8,000,000. These declines were partially offset by lower cost of sales related to the refranchising transaction and commodity deflation. In 2025, consolidated adjusted EBITDA was $201,000,000, including $21,000,000 of incremental marketing investments, building on approximately $4,000,000 of incremental marketing investment in 2024. In the fourth quarter, domestic company-owned restaurant delivered four-wall EBITDA of $19,200,000 and a four-wall margin of 12.7%. Domestic company-owned restaurant segment adjusted EBITDA margin, which includes G&A expenses, was 6.3%, improving by approximately 10 basis points as a flow-through from higher average ticket offset lower transaction volumes and labor inflation. North America commissary segment adjusted EBITDA margins were 7.7%, an increase of 150 basis points primarily reflecting higher volumes. Food costs and restaurant labor were each approximately 32% of domestic company-owned revenues during the quarter. Turning to our balance sheet. At the end of the quarter, our total available liquidity was $515,000,000 and our covenant leverage ratio was 3.2 times. We continue to maintain a strong balance sheet that provides ample flexibility to invest behind our transformation initiatives. Turning now to cash flows. Net cash provided by operating activities in 2025 was $126,000,000. Free cash flow was $61,000,000, an increase of $27,000,000, primarily reflecting favorable changes in working capital and timing of cash payments for the national marketing fund and cash taxes. Capital expenditures decreased approximately $8,000,000. Now turning to our 2026 outlook. Our financial guidance is provided on an adjusted basis, excluding restructuring charges. As we improve our cost structure to support our transformation, we expect to incur restructuring charges of approximately $16,000,000 to $23,000,000 associated with our transformation work. We expect these will be primarily cash charges to be recognized in 2026 and 2027. We have reduced our corporate workforce by approximately 7% and expect to close approximately 200 North America restaurants in 2026 and 100 in 2027, representing approximately 21% of annualized global system-wide sales, respectively. These impacts are reflected in our financial guidance. For 2026, we expect global system-wide sales to range between flat and low single-digits decline. For North America, we expect comparable sales to be down 2% to 4%. Our guidance reflects both the benefit of innovation pipeline and considerations around the current cautious consumer environment we expect to persist throughout 2026. These factors are expected to influence our comparable sales trends through the year. Quarter to date, comparable sales are down mid-single digits, and we expect to end the first quarter in that range, followed by improved trends in the second half of the year. Internationally, as we build on our transformation momentum, we expect comparable sales to increase between 2%–4%, supported by the benefits of our product innovation, marketing co-ops, and new aggregator marketing strategy. As Todd shared, we are negotiating the refranchising of 29 additional restaurants in the Southeast and expect to close the transaction in the second quarter. This transaction is expected to reduce 2026 consolidated revenues by approximately $9,000,000, including the impact of eliminations, and benefit adjusted EBITDA by approximately $1,000,000. We also plan to refranchise additional restaurants in 2026, but those transactions are in the earlier stages and are not factored into our guidance at this time. We will provide updates on financial impacts on future earnings calls on those transactions’ progress. For 2026, we expect consolidated adjusted EBITDA to be between $202,000,000–$210,000,000. Recall that 2025 and 2026 are our investment years as we support our transformation initiatives, and we do not expect this $22,000,000 investment to continue after 2026. In 2026, we expect to invest approximately $22,000,000 in supplemental marketing and franchisee subsidies as we lean into a promotional strategy in this year's innovation calendar, and we continue to stand up local co-ops. As Todd described earlier, our 2026 consolidated adjusted EBITDA outlook includes $13,000,000 of cost savings outside of marketing on our way to achieving $25,000,000 of total cost savings by 2027. As our transformation advances, we will continue to be prudent with cost management to support our menu strategy and enhance franchisee profitability. For non-operating expense items, we expect net interest expense between $35,000,000 and $40,000,000, adjusted D&A between $70,000,000 and $75,000,000, and capital expenditures between $70,000,000 and $80,000,000. As we move to a more asset-light model after 2026, we expect capital expenditures to step down to approximately $60,000,000 to $70,000,000 per year, on average. We expect our 2026 GAAP effective tax rate to be in the range of 30% to 34%. For Q1, our tax rate is expected to be between 34%–38%, reflective of an anticipated shortfall of the vesting of restricted shares resulting in additional tax expense when compared with the prior-year period. Turning to restaurant development. We expect to open between 40 and 50 gross new restaurants in North America in 2026. In the near term, we are focused on elevating four-wall economics and capitalizing on significant market share opportunities over the medium term. Internationally, we expect to open 180 to 220 gross new restaurants in 2026. We anticipate international closures will represent 5% to 6% of our international system as we continue to pursue strategic closures with the intent of accelerating new restaurant development and our consumer experience, and closures returning to 1.5% to 2% per year after 2027, with new restaurant growth comparable to 2025 levels. Overall, we are pursuing an asset-light model that generates higher free cash flow. We believe that our accelerated refranchising program combined with our efforts to grow transactions, improve restaurant-level profitability, and reduce corporate G&A will generate higher free cash flow. While transformations are not linear, we are managing the current environment while taking deliberate strategic actions to deliver long-term value creation for all of our stakeholders. Now we would like to open up the call for any questions you may have. Operator? We will now open for questions. Operator: Ladies and gentlemen, as a reminder, to ask a question, please press star 11. Please limit yourself to one question and one follow-up. Our first question comes from the line of Brian Bittner with Oppenheimer. Your line is open. Brian Bittner: One of your competitors suggested the QSR pizza industry as a whole is pretty stable, in fact, growing. And your same-store sales guidance for 2026 is a 2% to 4% decline. And the question is just what is holding you back from holding or taking share in 2026 in your view? I realize you see a cautious consumer out there, but it seems like your guidance does assume a market share decline in 2026 and just would like your commentary on that. And then I just have a quick follow-up. Todd Penegor: Yeah, Brian. Thanks for the question. You know, as we think about 2026, our opportunity is really about bringing our innovation calendar to life. As you think about where some of the opportunities have been for us over the last year or so, you know, and it was really around recruiting new customers to our brand. And we do believe that innovation is going to play a big role with that. Actually doing a nice job continuing to protect and drive frequency with our existing customer, and you saw that in the prepared remarks with the work that we have been doing in Papa Rewards and the targeted CRM offers. We are seeing good repeat rates early in the game. You know, the sandwich come with a fun property tie-in. So those are things that we know we have to drive on innovation to recruit new customers. We also know we have got to bring news, continue to drive our core pizza business. You know, the good news is we sold 4% more pizzas in 2025 on a full-year basis than we did the year before. Even though we saw some of the mixed trade downs from large and specialty into medium, which provides a little bit of pressure on our business, we know we have an opportunity to drive add-on with affordable sides. So we have got that news coming through this year. But we do think as we go through this year, you know, bringing to life pan pizza, we are already seeing a nice mix in that product. We know we have an opportunity to recruit new customers into our brand, and it is a great product once they try it. It is doing really well in test. So I would expect to see that come to life during the course of this year. And the single-serve pizza opportunity is an opportunity for us to start to expand our total addressable market because we do not play in that category yet. And that will really compete better at the local level, and we have been working hard over the course of the last eighteen months since I have been here to get the co-ops back up. And as you heard in the prepared remarks, we now have 50 co-ops representing half the system sales in the US up and running. So all of those are the nice tailwinds in our business that we are going to see during the course of this year. Why do we have the guidance that we have with all of that news? Well, we have got a couple of things that we know we need to evolve and change. We talked about we are going to do the things that are right for the long term of the business. And we know we have got to compete even stronger in the 3P channel. And that is not just national offers, that is working local, and the co-ops will help us really position to do that even stronger at the local level. So we think we will continue to see some of the mixed trade downs, and we are going to be focused on doing that. But you know, we think it is a prudent approach to the business. We are managing our cost structure appropriately. We continue to invest to bring the news to life. And we do really think that kind of prudent approach to our business will set ourselves up for long-term success. Anything else, Ravi? Ravi Thanawala: And just, Brian, as we think about dimensionalizing the 2025 comp, 180 basis points of our comp pressure came from our sides business. Fifty basis points were from channel mix, the balance was really a mix shift within the pizzas that sell from larger sizes to medium sizes and a little bit of a mix out of specialty and to create your own. So there are a couple of dynamics there, but as Todd mentioned, we are really focused on wearing in our innovation strategy and competing well. Todd Penegor: Thanks, Brian. Follow-up. Yeah. I think, you know, on competing on value, we really think about how do we meet the consumer where they are at. And, you know, we did that in partnership with our franchise system in the fourth quarter. Our 50% carryout offer met them where they are at, and, you know, that is a great offer and a great overall service experience because we do really well on the carryout side. You know, having $9.99 create your own did meet the consumer where they are at, but we have to compete on both ends of the barbell, and that is why bringing this innovation is so important. And you can see that as we come out with a compelling price point on pan, at $11.99, it is still a trade-up from our $9.99 create your own offering. So that does help margin in check and dollars. But what we really need to do is continue to recruit new customers because if we can get them into our rewards program, we see higher frequency, and there is a lot of value that can be created with Papa Do redemptions. We have seen a nice uptick in the Papa Do redemptions, and our frequency, as we said on the call, is two and a half times more with a loyalty member than a non-loyalty member. You know, the work we are doing on innovation to have affordable sides certainly helps us on value. And we said earlier, we are going to have to make sure that we have got the appropriate offers in 3P to compete even better to make sure we have got not just our fair share of the pizza category, but our fair share of QSR in the 3P channel. It is going to have to be a balance. We are just going to have to continue to drive folks over into our program. So as you think about more personalized one-to-one communication to drive value, drive behavior with those customers, we will continue to lean in on that. A great way to compete for the size and scale of the business that we are against the bigger competitors that are out there. Operator: Please stand by for our next question. Our next question comes from the line of Sara Harkavy Senatore with Bank of America. Your line is open. Isaiah Austin: Hi. Thanks for the question. I am Isaiah Austin on for Sara. Just briefly, how do you guys think about competing on value? I know it is kind of derivative of the previous question, but how do you think of competing on value when you think of going against a larger scale competitor? And then I just have a quick follow-up. And do you mind letting me know how you guys see growth? Is that coming more from aggregator platforms, or if there is an opportunity to drive growth primarily through the one key platform? Ravi Thanawala: Yeah, and just like as a reminder in our prepared remarks, we talked to an opportunity for capturing 200 basis points of margin upside on a four-wall basis in the system, with 160 basis points coming from supply chain and the balance coming from labor and market calendar. So even in this value-centric world, we are pulling levers to continue to maintain and drive our four walls. And just more broadly, from a four-wall standpoint, in December 2024, we provided a and figured that our domestic company-owned restaurant four-wall margins were $150,000. And as we look at the numbers for year end 2025, we are at $135,000. So just from a broader system standpoint, we went slightly backwards, but we have a clear plan that we just laid out to reaccelerate there. And then by having this balance of value messaging that I referenced and wearing in our innovation program, we think there is an opportunity to drive growth from a carryout standpoint in our 1P business, and we see that as a core focus. We continue to attack, really bringing new customers, and that is not just in our traditional channels to carryout and 1P, but also helps a lot in 3P as we bring all this news to life. And just like as a reminder in our prepared remarks, we talked to an opportunity for capturing 200 basis points of margin upside on a four-wall basis in the system, with 160 basis points coming from supply chain and the balance coming from labor and market. And just more broadly, from a four-wall standpoint, in December 2024, we provided a and figured that our domestic company-owned is at a $1,250,000 AUV, roughly at a 10% EBITDA margin. And our top 75% of our fleet AUVs are roughly $1,400,000 at a 12% EBITDA margin. So when we look at the top 50% of our fleet right now in the US, we see opportunities to continue to accelerate four-wall margins and drive increased check and traffic in that channel. Todd Penegor: We have been first movers on the aggregators, and we continue to grow and expand that business in both. As we have talked about, we see a lot of runway still left on the different platforms. So we are going to continue to lean in both, but I think we have to be agile both at first party and third party. And we truly believe our strong innovation calendar will help us really bring new customers, and that is not just in our traditional channels to carryout and 1P, but also helps a lot in 3P as we bring all this news to life. Ravi Thanawala: As, you know, look. There are lots of different offers that consumers are seeing in this value-centric world. But I think we have to be agile both at first party and third party. James has got lots of experience on managing the third-party experience and third-party business, and we will continue to shift and adjust as needed. Operator: Our next question comes from the line of Todd Brooks with Benchmark. Your line is open. Todd Brooks: Hey, good morning. Thanks for the question. Ravi, you just gave us some hints on kind of the overall system performance. But can you maybe take the metrics that you gave us for unit-level EBITDA for company and apply that to the overall base, how much that 500 restaurants system that they are operate a rough—company and apply that to the overall base, how much that—different perspectives in terms of managing ticket versus transaction as well that could impact individual franchisees' performance. But what we are all rallied around—is recapturing 200 basis points of margin rate upside. And as I think about 2026 relative to 2025, we expect four-wall profitability to slightly increase year on year on a dollar basis. Ravi Thanawala: Yeah. I cannot give specifics on the declines from a system standpoint, but what I would say is it is a probably a reasonable starting point to work from. I think more broadly, across our system, there are different perspectives in terms of managing ticket versus transaction as well that could impact individual franchisees’ performance. But what we are all rallied around is recapturing 200 basis points of margin rate upside. And as I think about 2026 relative to 2025, we expect four-wall profitability to slightly increase year on year on a dollar basis. And the last thing I will add, I think we really have the opportunity to lean in on our CRM and figured that our domestic company-owned, and our top 75% of our fleet AUVs are roughly $1,400,000 at a 12% EBITDA margin. So just from a broader system standpoint, we have a clear plan that we just laid out to reaccelerate there. And then by having this balance of value messaging and wearing in our innovation calendar, we continue to accelerate four-wall margins. Todd Penegor: Yeah, Todd. And I would add, you know, that is why we really took a thoughtful approach to the closures and really conducted a full strategic review, as we said in the prepared remarks, to make sure that we really strengthen the system and help on the four-wall profitability and help on our overall AUVs. Take a look at restaurants that maybe the trade areas have moved away or there was going to be significant investment to get them up to grade, both from how we are operating them as well as how they are perceived because they may look a little more older and tired. Todd Brooks: Okay. Great. So I am trying to dimensionalize the 300 that you have identified for closure. How much healthier does that make the rest of the system from an economic standpoint? Todd Penegor: To really strengthen the system and help on the four-wall profitability and help on our overall AUV and our more challenged EBITDA restaurants. You know, that opportunity is an opportunity to really take care of our lowest AUV and our more challenged EBITDA restaurants. Ravi Thanawala: So the AUVs increase about 3% on an average basis from the restaurant closures, and I would say the recapture rates vary by individual trade zones. But our recapture rates are very healthy in the business. So we took a pretty surgical approach of looking at quality of operations, quality in the trade zone, quality of the assets itself, and made a pretty clear determination in terms of restaurant by restaurant, which are the ones that we felt should close. And, you know, we have had great partnership with the franchisees to make sure we are thinking about each market holistically, that we are setting ourselves up for a stronger system. Todd Penegor: Yeah. Appreciate the work Ravi has been doing with each franchisee on the joint capital planning front to really look at what is going to be the best opportunity to not only be there for our consumer, but set our system up and our franchise up in those markets for ultimate success. Whether that is a relocation, whether that is a closure, whether that is a reimage, whether that is a new build, we are working hard to really make sure that we partner with our franchise community to set them up for long-term success. Operator: Thank you. Our last question will come from the line of James Jon Sanderson with Northcoast Research. James Jon Sanderson: Hey. Thanks for the question. I wanted to get a little bit more feedback on the delivery channel. Any feedback on how the third party performed relative to first party? And what do you think the biggest unlock or opportunity ahead is to really drive increased check and traffic in that channel? Ravi Thanawala: Thanks, Todd. In the quarter, third-party delivery grew low single digits on a dollar basis. The decline came from the first party side. We think that there is still meaningful work that we can get after to improve consumer satisfaction scores on the delivery side. There is no one thing we are doing there. There are a number of things we continue to work on. We are leveraging our Google Cloud partnership to continue to evolve that digital experience journey. We are looking at different strategies to make sure that we are improving taste of food, which is a key measure of consumer satisfaction. Which is a key measure of consumer satisfaction. Which is a key measure of consumer satisfaction. On the delivery of product. And third is we are going to continue to leverage CRM to make sure we are getting our most loyal consumers into that delivery channel. Todd Penegor: Well, I would like to thank everybody for joining the call this morning. I know it is a busy morning with a lot of other folks announcing. So I appreciate your continued interest in Papa John's International, Inc. Thanks, Jim. I appreciate your continued interest in Papa John's International, Inc. James Jon Sanderson: Alright. Thank you very much. Operator: Ladies and gentlemen, there are no more questions in the queue. I would now like to turn the call back over to Todd for closing remarks. Todd Penegor: Most importantly, I want to thank our team members and franchisees for their dedication to serving our customers as we accelerate our transformation in 2026 to set ourselves up for mid- and long-term success. We are confident we have the right plan in place to create meaningful value across our organization for our team members, franchisees, and shareholders. Have a great day. I look forward to some of the follow-up calls this morning. Thanks, everybody. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good evening, ladies and gentlemen. Welcome to Nu Holdings conference call to discuss the results for the fourth quarter of 2025. A slide presentation is accompanying today's webcast, which is available in Nu's Investor Relations website, www.investors.nu in English and www.investidores.nu in Portuguese. This conference is being recorded, and the replay can also be accessed on the company's IR website. This call is also available in Portuguese. [Operator Instructions] [Foreign Language] [Operator Instructions] I would now like to turn the call over to Mr. Guilherme Souto, Investor Relations Officer at Nu Holdings. Mr. Souto, you may proceed. Guilherme Souto: Thank you, operator, and thank you, everyone, for joining our earnings call today. With me on today's call are David Velez, our Founder, Chief Executive Officer and Chairman; and Guilherme Lago, our Chief Financial Officer. Start with this quarter's result, we're introducing a new managerial reporting framework, including managerial indicators and our managerial P&L. All financial metrics discussed and presented today reflect this framework. Lago will provide additional details during his presentation. These managerial measures are important to how we manage the business but are not financial measures as defined under IFRS and may not be comparable to other companies. A full reconciliation to the most directly comparable IFRS figures is available in our managerial P&L reconciliation report and in the appendix to this presentation. Unless otherwise noted, all growth rates discussed today are presented on a year-over-year FX neutral basis. Today's discussion may include forward-looking statements, which are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those expressed or implied. Please refer to the forward-looking statements disclosure included in this earnings presentation for additional information. With that, I will now turn the call over to David. Please go ahead, David. David Velez-Osomo: Hello, everyone, and thank you for joining us today. 2025 was a fantastic year for Nubank, and Q4 '25 truly showed the strength of our business model. During the year, effectively, most of our key indicators from customer love to scale, engagement and profitability moved in the right direction, while we continue to invest significantly on long-term growth. We closed the year with 131 million customers adding 17 million net new customers and maintaining an activity rate of 83%. Scale and engagement remained the foundation of our model. ARPAC reached $15 per active customer, up approximately 9% quarter-over-quarter and 27% year-over-year, driven by deeper monetization across our platform. As a result of strong customer growth and higher ARPAC, revenues in Q4 '25 reached $4.9 billion, up 45% year-over-year. Gross profit in the same period reached nearly $2 billion, up 38% year-over-year. At the same time, we maintained discipline with an efficiency ratio of 20% under the new methodology even as we continued investing in our core markets and new technologies. Net income reached $895 million, translating into a record 33% return on equity while maintaining strong capital buffers and scaling our credit portfolio responsibly. These results reflect the priorities we set and the discipline of execution throughout the year. One way to see this execution is to look at what we put in customers' heads. Across our markets, we launched more than 100 new products and features. More important than the number was the intent. Each launch aimed to deepen engagement to expand access and strengthen unit economics. Individually, these initiatives are incremental. At scale, they compound. In payments, we evolved Pix with AI-enabled features, launched instant payments in Colombia and expanded Mexico's cash in and cash out network to more than 30,000 physical points. In credit, we expanded responsibly, launching new payroll loan modalities in Brazil, the subscription-based credit card in Colombia and rolling out programs like Fresh Start to help engage customers regain access to credit. We also introduced the under 18 credit card, beginning to build financial relationships earlier in customers' lives. On the affluent segment, Ultravioleta continued to strengthen our value proposition. For SMEs, we scaled credit products and launched tools like Charging Assistant to help small businesses manage cash flow. Behind this execution was a clear set of priorities, cutting our allocation of capital and talent throughout the year. As you may recall, our top priority is to build the largest and most loved retail banking franchise in Latin America. In 2025, we made measurable progress across all 3 markets. In Brazil, we became the largest private financial institution by number of customers, reaching 113 million with an activity rate of 86%. Scale and engagement continue to reinforce each other. In Mexico, we reached 14 million customers, advanced our banking license process, and roughly half of our customers received their first credit card through Nu, reinforcing our role in expanding access to credit. In Colombia, we surpassed 4 million customers, and the subscription-based credit card significantly increased approval rates while maintaining healthy unit economics. In our digital ecosystem, we reached over 12 million unique active customers across initiatives such as NuCel, NuPay and NuTravel. Adoption remains early relative to our base, but growth and satisfaction indicators are compelling. On AI and global expansion, our foundation model, nuFormer, is now in production for credit decisioning in Brazil and in testing across additional use cases. AI is already improving underwriting, conversion and service quality with Pix with AI surpassing 10 million monthly active users. In January, we also received conditional approval from the OCC for a U.S. national bank charter. Overall, we delivered on our 2025 priorities while strengthening the foundation for what comes next. Let me now turn to how we're thinking about 2026. As we enter 2026, we see this as an inflection year. The year we begin transitioning from a Latin American leader to a global digital banking platform. Our priorities are organized around 3 pillars. First, winning in our core markets. Brazil and Mexico will continue to absorb the majority of our capital and management attention. In Brazil, we will deepen leadership in the mass market, expansion of wallets and ARPAC, strengthening small businesses and grow our high-income presence through Ultravioleta. In Mexico, finalizing our banking license process is critical as it unlocks the next phase of credit growth and customer depth. In Colombia, we will continue scaling credit and bringing a number of new products. Across all 3 markets, our focus remains on experience, principality and monetization. Second, strengthen foundations for international expansion. During 2026, we will lay the operational groundwork for our U.S. opportunity, building on the conditional bank charter approval. Latin America remains our primary growth engine. Third, AI as a superpower. We will expand nuFormer to lending in Brazil and credit cards in Mexico, and continue putting AI directly into customers' hands, moving closer to our long-term vision of an AI-powered personal banker in every customer's pockets. With that context, I'll hand it over to Lago to walk through the quarter's financial results. Guilherme Marques do Lago: Thank you, David, and good evening, everyone. Now before moving into this quarter's financials, I will briefly explain an evolution in our disclosures. As Nubank has become a multiproduct, multisegment and multicountry platform, we are introducing a managerial P&L to provide a clear view of value creation and internal performance. This evolution does not change economic reality. It only clarifies it. The managerial P&L is derived entirely from our IFRS results and represent our structural reorganization of IFRS line items designed to enhance comparability and better reflect economic contribution. The framework preserves net income, cash flow, equity and regulatory capital and is fully reconciled to IFRS. The key benefit is clear visibility into how margins, operating leverage and value creation evolve as the Nubank platform scales across multiple products, segments and geographies. And to support this new disclosure, we are publishing a detailed managerial P&L reconciliation report on our Investor Relations website, including the full bridge to IFRS and the complete methodology used. We have also updated historical data back to the first quarter of 2021 under this new framework. With that context, I will now walk you through the quarter's performance already used in the managerial P&L. We ended the quarter with a total portfolio of $32.7 billion, up 40% year-over-year, driven primarily by credit cards and unsecured lending. Credit cards increased 12.2% quarter-over-quarter. This was the strongest quarterly growth since the end of 2023. This reflects continued limit expansion in Brazil supported by our foundational credit models, along with typical fourth quarter seasonality. Now unsecured lending balance surpassed $8 billion with record-high originations of $4 billion in the fourth quarter. Secured lending grew 3.8% quarter-over-quarter. Recent changes to FGTS regulations have reduced new originations by more than half, though the impact on outstanding portfolio remains limited given the longer duration nature of the secured loans. We remain very comfortable with the portfolio's growth trajectory and risk profile underpinned by very disciplined credit underwriting and the evolving nature of our credit models. I will now turn to deposits where we continue to build a scalable and resilient funding base. We ended the quarter with total deposits of $41.9 billion, up 29% year-over-year, with growth across all 3 countries. In Brazil, growth reflected typical fourth quarter seasonality, including the 13th salary. In Mexico, following pricing and product adjustments in the third quarter, deposits resumed growth in the fourth quarter. On funding costs, we saw improvements across all geos. The cost of deposits declined to 87% of the interbank rate on a consolidated basis by the end of the fourth quarter, reflecting mixed dynamics, disciplined pricing and seasonality. Now deposits remain a very strategic lever for us. Strengthening balance sheet resilience, supporting earnings and reinforcing customer engagement while we continue to manage pricing with discipline to preserve attractive economics. Turning to NII, CLA, and risk-adjusted margins. Net interest income increased 13% quarter-over-quarter, driven by portfolio growth and improved funding costs, especially in Mexico. Credit loss allowance increased primarily as a function of growth. As we expanded credit card limits and balances, provisions rose mechanically due to front-loaded origination accounting while underlying credit quality remained stable. We also recorded a one-off item related to Mexico. As background, Prosofipo is a sector-wide deposit insurance fund to which all Sofipos are required to contribute to. As the largest Sofipo in the country, Nu was required to make an extraordinary contribution of approximately $25 million, which is reflected in interest expenses this quarter. This is a onetime nonrecurring regulatory levy, not a reflection of the credit quality or the financial health of our operations in Mexico. Risk-adjusted NIM closed at 10.5%, and would have been broadly stable quarter-over-quarter excluding the Prosofipo contribution. Moving to asset quality. As our portfolio has diversified across products, segments and geos, we are now presenting consolidated NPL metrics. We believe this provides a more holistic view of credit quality across the Nubank platform. Now given Brazil's relative size, trends remained largely driven by the Brazilian portfolio, where credit performance continues to track our expectations, supported by disciplined underwriting. As you see in the slide, early-stage delinquencies measured by 15 to 90 NPLs improved for the fourth consecutive quarter, declining 20 basis points to 4.1%, partially reflecting the seasonality of the quarter in Brazil. As a result of prior improvements in early delinquencies, 90+ NPLs declined 10 basis points, pointing to 6.6% in the quarter. Coverage ratios remained strong, both on total balances basis and on 90+ NPLs, providing continued comfort across loss absorption. We typically see a seasonal uptick in the 15- to 90-day NPLs in the first quarter of the year. This pattern is expected for this coming quarter, aligned with historical trends. Overall, we see no signs of deteriorations and remain comfortable with our credit quality indicators. Turning to gross profit. Gross profit reached a nearly $2 billion in the quarter, up 38% year-over-year. In terms of composition, float contribution increased, reflecting strong deposit inflows in Brazil and improved funding economics in Mexico following the pricing adjustments implemented in the prior quarters. Fees also performed well, driven by very strong purchase volumes supporting the largest quarterly increase in our credit card market shares in Brazil in over 10 quarters. The credit component reflected higher front-loaded credit loss allowances consistent with the strong portfolio growth in the quarter. Now looking ahead, we will remain credit first. Credit represents the largest profit pool in financial services and is a key driver of engagement and relationship depth across our platform. At the same time, fees and float provide diversification and support a more resilient gross profit profile as we continue to scale across products, segments and geos. Going to the efficiency ratio now. As part of our disclosure evolution, we updated the methodology for calculating this metric to better align with industry practice and enhance comparability. Details of this new methodology are included in the appendix to this presentation, and we are also presenting the ratio under the prior methodology for reference. Under the new methodology, the efficiency ratio declined to 19.9%, falling below 20% for the first time in our history. This reflects operating leverage with net revenues growing faster than operating expenses even after typical fourth quarter seasonality in marketing and transactional costs. In the fourth quarter, we also recognized approximately $22 million of transition expenses provisions related to our return-to-office decision, which becomes effective only in mid-2026. These cost provisions are temporary and not indicative of the ongoing run rate. Now looking ahead, as David outlined before, 2026 is in fact, an investment year. We are laying the operational foundations for global expansion and accelerating the adoption of AI and other new technologies across the platform. These are deliberate investments in long-term capacity building Nubank, and they will likely put upward pressure on the efficiency ratio in the near term. We are comfortable with this trade-off. The structural drivers of operating leverage, revenue growth, scale and disciplined cost management remain unchanged, and we expect efficiency to continue improving over the medium term as these investments that we are making today begin to generate returns. To close the P&L review, net income. In the fourth quarter, net income increased 50% year-over-year to $895 million, delivering a record-high ROE of 33%, while we continue investing in growth and maintaining quite robust capital buffers. This includes certain nonrecurring items in the quarter, a positive impact of approximately $58 million of net income related to the remeasurement of deferred tax assets following the CSLL rate increase in Brazil and a negative impact of approximately $29 million related to return-to-office provisions and the Prosofipo levy in Mexico. Now together, these results demonstrates the scalability of our operating model, growing earnings while sustaining high returns. Now turning to capital and liquidity. At the holdings level, total capital stands at $8.9 billion. Of that, $3.6 billion covers regulatory requirements across our 3 geographies. $2.2 billion represents excess capital in our operating entities. And $3 billion sit at the Nu Holdings level as unrestricted cash and equivalents available to fund both continued growth in our core markets as well as our global ambitions. Now on the liquidity side, available funding of $38.8 billion represents approximately twice our net credit portfolio of $19 billion, which represents our gross credit portfolio net of credit card accounts payable, which provides very significant headroom to continue scaling credit responsibly while also seizing the opportunities coming from further balance sheet optimization. Our capital liquidity positions reinforce our ability to invest in growth from a position of strength, and that is exactly what we intend to do. Taken together, our capital and liquidity positions are not simply a reflection of our past performance. They are, in fact, the foundation of what comes next, and we enter 2026 with the financial strength and to win our core markets, the firepower to accelerate globally and the discipline to do both things responsibly. Now I'd like to thank you, and we are very happy to take your questions. Operator: [Operator Instructions] I would now like to turn the call over to Mr. Guilherme Souto, Investor Relations Officer. Guilherme Souto: Thank you, operator. Could you please open the line for Mr. Eduardo Rosman from BTG Pactual? Eduardo Rosman: I have a question for David Velez regarding AI. David, do you see a risk that Nu could be disrupted by AI? Or do you see Nu as a potential winner in this transformation? It would be great if you could elaborate a little bit since I think the stock and then the sector in the U.S. has been suffering lately because of that. David Velez-Osomo: Sure. And the answer is both. It is both a challenge and has potential for disruption as well as significant opportunity. Net-net, we think it's more opportunity than challenge for us. But we have to take it pretty seriously, and we are taking it very seriously. A couple of ways to think about it. I think there is one specific trend or one common denominator across every technology transformation, and this goes all the way to even the internet era, which is any business model that relies on simply moving bytes from point A to point B, where you're effectively a broker, tends to be heard the quickest because one of the things that technology does is remove a lot of that friction in those processes. So I think to some of the commentary that has been around in the market about financial services is, I think, businesses in financial services that are simply moving money from one point to another point will have the higher risk of potential disruption. You need to be able to add more value than that. And I think from that angle, we think -- we have always believed that credit, specifically, credit revenue is actually the most sustainable type of revenue in financial services because of the capital intensity, the regulatory nature of it, the balance sheet aspect and the proprietariness of the data where AI plays a role and ultimately allows you to make a better decision on that. So I think from one angle, there is potential for challenging around the business model, but I think we're very well positioned given the way we are set up and the strength around credit. That we have. I think a couple of our opportunity is really on the revenue side. And as a reminder, our package $15 a day and our incumbent competitors are something like $40, so we have a significant opportunity to increase ARPAC, is around new cross-sell and new products that we will -- can be delivering to the very significant consumer base that we have. And I think everything around cross-sell, everything about using the data that we already have to offer new products and services, it's a big opportunity and nice and enabler. And here, we've discussed a few times over the past year the significant lift that we're seeing when we're using our own foundation model on credit but also cross-sell and a number of other revenue-related opportunities. And then you have the cost side, and I think the cost side is a little bit more clear. I think every single company really might benefit from that, where every function that you do, especially as a bank from customer service to compliance to regulatory to AML, will be significantly enhanced or is being significantly enhanced through AI. So net-net, I do think that there are potential disruptive vectors in some of the business models. But I think when you compare -- when you think about the fact that 95% of the world's financial services profits are still concentrated in incumbent banks that still have significantly larger cost structures, means that we're very well positioned to take advantage of AI as a technology enabler for revenue and cost and ultimately be one of the winners in this technology shift. Guilherme Souto: Operator, could you please open the line for Mr. Jorge Kuri from Morgan Stanley? Jorge Kuri: Congrats on the numbers. I wanted to ask a question about your loan growth for the quarter. And I guess it's a two-part question. First, can you help us dimension the impact that your clip increases are having on your credit card growth? To what extent -- I know there is evidence in the seasonality, but if we think at the year-on-year growth, how much do you think came from those clip increases? How much of that acceleration in credit cards, do you think, is still going to roll over into 2026? And then the second part is on FGTS. Is there a way to quantify what was the headwind on your loan book based on FGTS? In other words, excluding FGTS, what would have been the portfolio sequential growth? Guilherme Marques do Lago: Thanks for the questions. Let me try to slice them in those 2 parts. So your first question was on the clip. Look, this was a year in which we have deployed this new technologies and approach to credit underwriting very successfully so far in allowing our customers to increase kind of their credit limits, especially in Brazil so far. And the best way for me to kind of illustrate the magnitude of this increase is, Jorge, maybe, refer you to Explanatory Note #32 of our financial statements in which we are then starting to provide, what I call, the unused credit limits. And you can see that unused credit limits went from about $18 billion to $29 billion, so an increase of about $11 billion, which accounts for about 60% increase in unused credit limits. It's a big one. And I think it wouldn't be possible for us to do so if we hadn't been leveraging kind of the entirety of the predictive AI credit underwriting tools that have been kind of developed by us over the past now 18 to 24 months. Have we seen all of those benefits translated into net income? The answer is no, not yet. So usually, I think at least I see kind of credit limits increases playing out in 3 steps. First, you have to offer the additional credit limits. Then the credit limit translates into purchase volume. And then you have to see whether the purchase volume will then translate into IBB. We are starting to see the first step, Jorge, which is, in the fourth quarter of 2025, our market share in purchase volume in Brazil has gone up by about 50 basis points. It was the biggest market share gain that we've seen in Nubank over the past 10 to 11 quarters. There's 2 more to come, and then we still have to see kind of all of those purchase volumes reflecting into IBB. Even though 2025 was, I think, a big sign of the magnitude of this ability to increase clip, I don't think it will stop there. You will continue to see this kind of unfolding in new models and new improvements throughout 2027 -- 2026, 2027 and onwards. And I would also say that the advent of the predictive AI technology will not stop at clip Brazil, right? It will be and is being exported to clip Mexico, clip Colombia, and then we're going to go acquisition Brazil, acquisition Mexico and what -- you're going to go to fraud. It's going to go to deposits, pricing and designs. So it's -- there's a plethora of options that we're going to be leveraging on. So that's my attempt to address your first question, Jorge. The second question was on FGTS. So the new regulations of FGTS came into effect on November 1, 2025. And we have seen our originations of FGTS loans dropping by about 50% to 60% in the period in which the new regulation has become effective. It was more than offset by the growth in public consignado, in public payroll loans, but it has certainly been a headwind to the origination of this very kind of interesting asset class. Jorge Kuri: And is there a way to quantify that? Thinking about it on a quarter-to-quarter basis, what would have been the total balance of credit expansion excluding that? So instead of the 11% FX-neutral quarter-on-quarter, what would have been the number without FGTS? Guilherme Marques do Lago: Yes, it would have been about 13% to 14%. Jorge Kuri: Okay. So quite significant. That was super clear. Congrats again. Guilherme Marques do Lago: Thanks, Jorge. Guilherme Souto: Operator, could you please open the line for Mr. Pedro Leduc from Itau BBA? Pedro Leduc: A little more as you look into 2026 and I'm going to use some of the prepared remarks there, especially in terms of efficiency trajectory. You mentioned that there might be some pressures. I want to see if you can maybe go into detail about it. And of course, it's a ratio. And also as I'm trying to think about revenues, of course, you're ending on a very high pace of loan book, NII. But as I look forward, can you help us understand a bit on the drivers when we see funding costs go up -- go down, sorry, if we can see that continuing a little bit on the portfolio. Just help us think a bit about these drivers now that you are already 35% ROE. Guilherme Marques do Lago: Leduc, thanks for the question. Look, I will refer to Slide 16 of our earnings deck, which is -- brings the efficiency ratio evolution. And we have seen, kind of over the past quarters and years, the continuation of the operating leverage potential of the organization. We wanted to highlight very clearly that we may see kind of upward pressure on efficiency ratio in the coming quarters, i.e., in the short term, like the next 4 to 6 quarters. As a result of very deliberate investments, I would bucket them in 3 categories. Number one is we have recently announced a return-to-office policy, right, and which starting on July 1, 2026, employees will start going back up to the office 2 times per week. That means that we're going to have to kind of prepare the offices, increase the leased area to welcome our employees as they prepare to come back to the office. We believe that this will bring enormous benefits to the company, including about kind of ingenuity, kind of innovation, coordination, but it does come with an increase in OpEx in the short term, and we wanted to clarify this. I would say that the return to the office will likely bring kind of our efficiency ratio, all else constant, up by about 80 to 100 basis points. The second bucket, I would say, Leduc, is the -- all of the investments that we are making in AI and new technologies. So that brings new talent that we have to hire, eventually new investments in R&D and research in GPUs that will have kind of a short-term cost, which we believe will be way, way, way more offset by the medium-term gains that we're going to have, but we will not shy away to make investments in talent, R&D and GPU to maximize the impacts of our efforts in AI. And I would say that kind of we have return to the office. You have AI. And the third one is the globalization. So there is a lot of investments that we are making in laying down the foundation for us to go beyond Brazil, Mexico and Colombia. And no, a substantial amount of those expenses are not capitalized and are incurred in 2026, first, to collect revenues and margins in the following years. So that's the direction. I wouldn't be able to provide you, Leduc, at this point in time more kind of a precision on the effect of all of the 3, but we think that they would put some kind of upward pressure in the coming quarters. Guilherme Souto: Operator, could you please open the line for Mr. Yuri Fernandes from JPMorgan? Yuri Fernandes: Congrats on the year. Most metrics, they look very good. But there is one line here that I think investors are a little bit more puzzled this quarter. That is the tax rate, right? And I know there is a managerial adjustments, and we see some incumbents in Brazil also having similar adjustments. So I think it's easy to understand and explain. But regarding this quarter, and maybe Lago can help me here, I would like to understand what drove the lower accounting tax, if this was the DTA? And you have lower DTAs, but just checking if this was DTA, some kind of tax-exempt bond, IOC. And maybe some kind of color going ahead, what should we expect for the tax rate for Nubank? Guilherme Marques do Lago: Sure. So Yuri, look, I think the lower effective tax rate in the fourth quarter can be explained by, I would say, largely 2 things: 1 completely nonrecurring and 1 recurring. What's the nonrecurring one? So about beginning of December 2025, the federal government approved an increase in the corporate income tax applicable to fintechs, including those like Nubank that essentially kind of increased progressively the corporate income tax from about 40% to 45% starting in 2026 and then going all the way in the next 2 years. Even though that, in the medium term, is a headwind for our effective tax rate, in the quarter in which this kind of legislation is passed, we have to remeasure our deferred tax assets. So our DTAs remeasure up, and that increase in the DTA, which was about $58 million, Yuri, is recognized in the fourth quarter of 2025, decreasing the effective tax rate in the quarter. So that's the portion that I attribute as a nonrecurring one-off event. The recurring ones is that kind of as we increase the amount of investments that we have been making in technology across the firm in Brazil but also in the other countries, we end up also benefiting from kind of a technology investment tax breaks that some of the governments provide. And that may increase a little bit the OpEx, but they are more than offset by lower effective tax rate. Those are the 2 aspects that have kind of impacted ETR this quarter. Yuri Fernandes: So very clear, Lago. And you also had the nonrecurring on the Prosofipo, like the deposit as you mentioned, so not the same magnitude but also negative versus this tailwind you had in the quarter. Guilherme Marques do Lago: No, Yuri. No, that's precisely clear. I think we have basically 3 one-offs in the quarter, right, what I would say. One is the $58 million DTA reassessment that we just discussed. The other 1 was the about $25 million one-off expense of the Prosofipo. And the third one was the $22 million provision expense for the return-to-office program, right? So those are the 3 moving parts that we have: DTA positive, return to the office negative and Prosofipo negative. Guilherme Souto: Operator, could you please open the line for Mr. Mario Pierry from Bank of America? Mario Pierry: I wanted to focus a little bit more on the provision expenses, right, because we did see your cost of risk go up this quarter. And last quarter, if I recall, you were talking about your ability to extend credit to existing clients because you're employing AI and then you're seeing a lower cost of risk in this reverse this quarter. So I wanted to understand a little bit better what happened with provisions in the quarter. Also, if you can talk a little bit -- you showed your NPL relatively stable. But this is a consolidated NPL, correct? And before, you were showing us Brazil NPL only. It seems like your NPL on a consolidated basis is lower than the previous number. Just trying to understand why the NPLs, as you're expanding into Mexico especially, are you seeing lower NPLs in Mexico than you had in Brazil? Guilherme Marques do Lago: Mario, thanks so much for the questions. Let me try to address each of them in order. So the first one is we did have an increase in CLA item this quarter. And I would be very clear. This was entirely attributed to growth, not to any type of asset quality deterioration experienced in the quarter. So we didn't see -- we saw asset quality performing very much in line with our expectations, including the seasonality trends. And now we are on like February 25, and we continue to see kind of our asset quality metrics. They're trailing our expectations very well in all asset classes in Brazil, in Mexico and in Colombia. So we watch this kind of quite closely, but as of now, we have not seen any signs of degradation in our asset quality. What we have seen to justify the increase in CLA is not only the increase in the credit book in itself, which you can see kind of in Slide 11 that grew by about 11% quarter-over-quarter, but also, Mario, in the increase in credit limits, unused credit limits, which do not show up as credit portfolio per se but are exposures for which we do need to build CLA. So again, CLA growth, entirely driven by growth in exposure, not degradation of assets. The one thing that I would highlight, at least, Mario, that I like to see going on a recurring basis when I look at those numbers is like NPL formation was fairly stable, 3.6 to 3.5, Stage 3 formation fairly stable. And one metric that I personally look as a ballpark, Mario, is the CLA divided by average credit portfolio. So it used to be like 3.9 fourth quarter '24, then 4.3, then 3.9. Then in the third quarter of 2025, we went down a little bit from 3.9 to 3.3, and now it's back to 3.9. So I think the third quarter, as we updated them, all those with higher recovered ratios, it may have come kind of slightly below. Now it's going back to 3.9. I'm sure you're going to ask the question what's next. I think what's next is something around or below the average between 3.3 and 3.9 on the coming quarters, of course, something that we don't control, but that would be more or less our expectations with the mix that we have today. So that's your first question. I think your second question was on the NPLs. Would you provide kind of now consolidated NPL trends, simply because as we grow the book internationally with Mexico, Colombia and hopefully, other countries in the next years, we start to see those metrics kind of better representing the economic reality of the company rather than looking at Brazil only. However, if we were to post the Brazil-only NPL charts, they would equally show kind of a fairly benign trend of asset qualities, moving very much in the direction of seasonality that we expect to see in the fourth quarter. And then your question about, look, how can you actually aggregate Mexico and Colombia and get to lower NPLs, it is justified mostly by the write-off policies that we have in those countries than on the risk of those countries. So for example, in Mexico and Colombia, we can have shorter write-off policies than we have in Brazil, and that kind of affects the overall NPL calculations. But in general, Mario, no concerns at this point in time with asset quality. It is super point -- super important to highlight, and I know that you've been following this for many years, so I speak more for -- to the other participants of the call. Fourth quarter of every year, we usually observe a benign movement in NPLs because of seasonality, but equally, we do expect to see kind of an uptick in NPLs in the first quarter of 2026, also following natural seasonality, right? Guilherme Souto: Operator, could you please open the line for Mr. Gustavo Schroden from Citi? Gustavo Schroden: My question is regarding credit products and also client mix. We could see a relevant increase in loan book for credit cards and personal loans, but I'd like to explore more the secured loans. Lago explained about -- Lago, you explained about the FGTS change recently, indeed, has impacted the evolution of this portfolio. But I'd like to understand the appetite for payroll loans, I mean, public and private payroll loans, how the bank sees these products, we should expect some, let's say, replacement of FGTS by this private payroll loans mainly. So any view on that would be great. And also about the client mix, should we -- could you explain us how the bank is evolving in this, let's say -- exploring the affluent market, I mean, mid- to high-income customers, especially after this increase in credit limits? That would be great. Guilherme Marques do Lago: Thanks for the question. Let me try to address the first one on the breakdown of originations of our secured loans, and then David may address the second one on our performance in both the, what we call, super core and high-income segments. So I would basically divide our, what we call, secure loan portfolio in 3, right? So we will have the FGTS. We have the public payroll loans, and we have the private payroll loans. So FGTS is the one that has recently received kind of a negative impact of the new regulations starting on November 1, 2025. It has dropped kind of our originations by about 50%, and we continue to have a very good dialogue with the government to try to influence the agenda for 2026 and 2027. We have become market leaders in FGTS. It was a very -- it is and it used to be a very good product, and we believe it will continue to play an important role in the formation of our secured lending book. Even though if regulations don't change, will probably play a smaller role than it could have played before. But that's bucket number one. Bucket number two, public consignado or public payroll, which I put here, including both SIAPE and INSS, we are very bullish on this. We think it is still a market that has kind of a lot of opportunity to increase efficiency in the intermediation and in the distributions. We can offer products at materially lower cost than most of the other market participants. And it's now finally entering into time in which we will see interest rates drop in Brazil. And with that, we hope that kind of portability will pick up, and we like to believe that we're going to be one of the biggest beneficiaries of that -- of the trend. So I think it is one that we think regulation is there. Portability is there. Interest rate cycle is there. So we are bullish that this will kind of have an even faster growth in 2026. The third bucket is private consignado. So this is a product with which we are very, very optimistic and bullish on a structural form by which I mean it is a way for fintechs such as Nubank to have access to information and to customers who used to be primarily served by incumbent banks, which own the payroll service of large corporates in Brazil. So it's a massive opportunity for us. And it's one that we will lean in as soon as we see the mature improvements in credit risk that this product offers. We are still not seeing that. I think part of that is kind of a counterparty risk of the corporates. Part of that is the collateral is not yet operating at its full potential. We, however, think it's a matter of when, not a matter of if. Gustavo, you've also been following this quite closely for some time. You may recall that when public consignado was introduced a few years ago, it took kind of a year, 1.5 years for everything to -- all of the collaterals to be working well. And we are just waiting for this to happen for us to lean in more heavily. Now let me pause here, see if you have any follow-ups and then pass the floor to David for him to comment on the affluent part of your question. Gustavo Schroden: All clear, Lago. Guilherme Marques do Lago: Perfect. David Velez-Osomo: I think I'll say on the secured lending side is it is -- continues to be a very significant opportunity for us. I think growing within that existing profit pool has been probably more complicated than we expected given the significant operational complexities that the product has. There is a fair amount of features that need to be built into the product, specifically around portability. Most of the growth of those products are portability and when customers are doing that portability, you need a lot of different integrations. There's also a fair amount of fees. All of that friction is going away. I think the tailwind, if there's one consistent tailwind in Brazilian financial services, is that all those -- all that friction and cost that historically have improved -- or had made it harder to move towards the best product, it's going away. So we're seeing accelerating market share gain, and we are ready to -- we're building a lot of those features, and we're getting significant share on the secured line. So while I wish the traction to date had been significantly higher, I think every single month, we're seeing an acceleration of market share and the tailwinds are helping. On the high-income side, we continue to see a very good growth. Again, this is a competitive environment. It's a competitive segment. A lot of banks, incumbent banks and others are going upmarket. We define upmarket for us as customers are making above BRL 12,000 per month. So this is not 1% of Brazilians. This is probably closer to 10% of Brazilians. And within this consumer base, we already have 2 out of 5. About 40% of those Brazilians in that bracket are customers of Nubank today. They're just not really using us as their primary card. We are the third card. We have small share of wallet. A lot of the times was because we gave them a low credit limit initially. And if we had opportunities to improve credit limits on mass market and we're seeing that with AI models, we have even more opportunities to improve credit limits on high income because the customer type that we didn't really understand. So we have to fix credit limits, which we're doing. We have to improve the value proposition of the product, specifically on credit card, which we are. Over the past couple of quarters, we launched new improvements, different cash back rates. We announced a lot of integration with our NuTravel platform. So it's a really good product where we guaranteed the price of any ticket or hotel that you book in our app. We're seeing customers getting significant value out of that. So it's very well integrated with the travel value proposition. We announced our frequent flyer lounge in Guarulhos in Sao Paulo. That is getting a lot of acceptance. So there's a long path of opportunities that we have to improve the product on the credit card side. And we see that translating into increasing market share. This segment for us grew something like 40% year-over-year and is gaining share across our portfolio. So we're seeing good traction. A lot of these investments are paid off. The second part of the value proposition is investments, which you might know that, obviously, we've discussed it a few times. It's taken a while for us to build a very, very compelling investment value proposition in our app. We're getting very close. We are close to really product parity. We have now all the products that this segment needs in our app. We have fixed income products, equity products, crypto products. We have all the type of visualizations that this customer is asking. So we're getting very close to have a very good investment platform that it's critical to win this high-income segment. So overall, these are -- these 2 specific opportunities that you mentioned, they are not 1-, 2-quarter opportunities where you're significantly gone. These are long journeys of a lot of product improvements, but we feel very good about the progress we've made and the opportunity we have ahead. Guilherme Marques do Lago: And Gustavo, just one additional point. We mentioned about the mass market, which, in our definition, our customers will earn up to BRL 5,000 per month. And then you asked about what is called high income, which are customers who earn more than BRL 12,000 per month, which was the answer that the David had provided. But in the middle, which is what we call super core, i.e., customers who earn from BRL 5,000 to BRL 12,000 per month, it is the segment in which we are growing the fastest, right? So as David mentioned that in the high income, we've been growing at about 40% per year. In what we call super core, we are growing at about 100% in 2025. So I would kind of invite you and others to kind of segment this at least in 3 parts. And I think there's a massive opportunity for us to go into the super core there as well. Guilherme Souto: Operator, could please open the line for Neha Agarwala for HSBC? Neha Agarwala: Keep it short. Just wanted to follow up on the private payroll segment. We do understand your concerns regarding operational complexities at this point, but we do see a lot of other lenders being more aggressive in this market. And the market has doubled during 2025. Do you see the risk of some of your customers who might have personal loan with you going -- or have a credit card with you going to other banks and taking private payroll loans and ultimately, their leverage increases and that could impact the asset quality for those customers for you on the unsecured side? Guilherme Marques do Lago: Yes, very good question. And yes, we are very mindful of those 2 risks, which I call kind of the cannibalization, i.e., customers borrowing from another bank and kind of us losing the primary banking relationship. That's one. The second one is structural subordination, right? So customers borrowing and providing the collateral and ourselves becoming structurally subordinated to someone else. The same can be made when we lean in into this product. Even though we have been very mindful of this, we have not yet seen any evidence that any of those 2 risks that you've laid out are materializing within our customer base. In fact, most of the customers who have been applying for private payroll loans have been customers with higher credit risk, at least that has been our experience, and most likely customers who would not be entitled to have access to an unsecured personal loans or even sometimes to unsecured credit cards. But it -- but we are tracking this very, very closely. In terms of the growth of the market that you've also pointed out now, I would highlight that there are a few things to adjust in this growth. One is there's just a natural shift from asset classes that were considered private consignado without the collaterals that were instituted by the government and are just now migrating to the new private consignado. Those are usually loans that have been carried by kind of the more traditional incumbent banks, and they account for a fairly substantial portion of what is seen as the growth of this new asset class, i.e., is just migration from the old to the new. The second one, we now see kind of players playing in this space with very 2 kind of different approaches. The incumbent banks who have relationships with the corporates when it comes to payroll loans, they are more focused on the lower risk customers, and the digital players are more focused on the higher-risk customers. But when we step back, we are seeing kind of this market operating with first losses of low double digits, which is not yet conducive to the quality of the collateral that this product can have. Once we see kind of a credit improving as the product will deliver, we will not shy away to leaning very heavily and the term cannibalization is just not a term that we use. We will be there offering the best product for our customers irrespective if they will actually use the proceeds to prepay or repay higher yield assets. We are not moving ahead with this as strongly as others not because of the risk of cannibalization but more because of conservatism with credit risk. Neha Agarwala: Understood, Lago. And in terms of cannibalization, yes, your NIMs might go down, but risk-adjusted NIMs might not be impacted as much even if you replace the credit from unsecured to secured with some of your customers, right? Guilherme Marques do Lago: That's correct. The other component of that, Neha, is that you may see, at some point in time, the amount of capital that you have to allocate to private consignado possibly being lower than the ones for unsecured. So not only risk-adjusted NIMs may be preserved or even increased in an absolute amount, but the return on equity may be as appealing, if not more appealing because you have to post lower capital to that. Yet to be defined. Neha Agarwala: I just wanted to understand why not offer the private payroll. And I understand that there are complexities, and you can price for those complexities and collateral not working smoothly. Why not offer it to some of the customers whom you deem to be riskier and you don't want to give them an unsecured loan at this point? Why not start off with the secured private payroll loan with them and price it accordingly? Guilherme Marques do Lago: Yes, we most certainly could. I think what we are saying is that the benefits of the collateral for the higher-risk customers have not proven to be material enough to justify a substantially different credit underwriting or pricing policy to date. But again, just to be super clear, I think it is a matter of when, not a matter of if. This is a good product. This is a good structure. This will benefit kind of consumers, by and large. We just don't think that is yet ready to be kind of the product in which we will lean in that heavily at this point. Guilherme Souto: Operator, could you open the line for Mr. Tito Labarta from Goldman Sachs, please? Daer Labarta: I guess my question is following up a bit more on expenses. First, you talked about 2026 being an investment year and thinking more about the global expansion. Just help us think a little bit about what investments are needed there because, I mean, you got the initial license pre-approval, I guess, in the U.S. But is there more investments that you need to make in the U.S. already in 2026? Just help us think about what are these investments that you need to lay this global foundation. And then also just specifically in the quarter, because if I look at the accounting P&L, which, I guess, is more comparable to the estimates that are out there, there was a big jump in expenses, and I know there was the one-off from the return to office but marketing expenses jumped quite a bit. G&A expenses jumped a bit. If you can just give some more color, what specifically drove those increases in operating expenses in the quarter would also be helpful. David Velez-Osomo: Thanks, Tito. Quickly on U.S., we will continue to invest. I mean, kind of we are investing more, mostly on team building and product. It's de minimis. It's not a significant source of investing for launch in the U.S. We did announce a number of bigger marketing partnerships over the past couple of months. And those really are related to both our core markets as well as U.S. and potentially future markets around the world. So there is an increased a bit on marketing. There are team increases that we're having for the U.S. launch. But I wouldn't say they're going to -- they expect to be significant in 2026. Guilherme Marques do Lago: And then, Tito, on your questions about the breakdown of our OpEx in the fourth quarter of 2025, I think the marketing one is a traditional seasonal one. It usually spikes a little bit in the fourth quarter of the year. The other one was incorporated in the tax breaks related to technology investments. So many of the increases in Lei do Bem that are recognized as OpEx, but they actually drive quite a bunch of off-tax efficiency. But nothing extraordinary or nonrecurring other than those 3 moving parts that we've mentioned. Daer Labarta: Okay. No, super helpful. And maybe just one quick follow-up for David. Any just initial thoughts on what the expansion plan in the U.S. will be, like just a high-level footprint on what you're targeting segments, go to market there? Any color or thoughts that you can provide would be super helpful. David Velez-Osomo: Sure. On a very high level -- and we're not really ready yet to disclose specifically what the strategy there is going to be, but at a very, very high level, this is the largest market in the world. And while, at a very high level, it seems like a very saturated or competitive market in certain segments, when you dig in into subsegments in certain niches that, by the way, happen to be the size of Brazil, we actually find opportunity to solve a number of consumer problems that are similar to what we've done in the past. So we're going to have a very targeted strategy. We're going to be very disciplined on investing. There are a lot of focuses on certain potential geographies or subsegments that we are interested about. You're not going to see us kind of shooting in all directions here because it's a bit of a long journey, and we fully acknowledge that this is a very competitive and sophisticated market in certain areas. But we do think that it's -- there are opportunities for us to create a meaningful business in certain subareas of the United States. Guilherme Souto: So thank you, everyone. We now have approached 60 minutes of the call, so we are now concluding today's call. On behalf of Nu Holdings, our Investor Relations team, I want to thank you very much for your time and participation on Nu earnings call today. Over the coming days, we will be following up with questions received tonight but we are not able to answer. And please do not hesitate to reach out to our team if you have any further questions. Thank you, and have a good night. Operator: The Nu Holdings conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
Gemma Garkut: Okay. Welcome, everyone, and thank you for joining IR's Half Year FY '26 Results Webinar. My name is Gemma Garkut, Head of Communications here at IR, and I'll be hosting today's session. This morning, IR released its half year results and associated presentation for FY '26, which have been lodged with the ASX. These are available on the ASX platform and our Investor Center on our website and should be read in conjunction with this webinar. Joining me on the call today are Ian Lowe, CEO and Managing Director; and Christian Shaw, CFO, who will present today on IR's business performance for the half. We will then open the session for a short Q&A. A few housekeeping items before we begin. Today's session is being recorded and will be made available on our Investor center following the call. [Operator Instructions] If we do not get to your question during the live session, you are welcome to contact our Investor Relations team via the details provided on our website and in today's ASX announcement. A reminder that today's discussion may include forward-looking statements. Please refer to disclosures by the ASX, including the materials lodged earlier today. With that, I'll now hand over to Ian to take you through the highlights for the half. Ian Lowe: Thank you, Gemma. Welcome to the webinar, everybody. We're really going to cover 3 core themes in the course of today's presentation. I'll just quickly run through these to begin with at a headline level. So, first of all, our half 1 financial performance. So, the headlines here being revenue was slightly down due to a softer renewals book. Our earnings performance impacted by expected credit losses. This is consistent with disclosures made in November of last calendar year, and we've also seen cash improvement. The second theme around continued product-led growth execution. We've launched a number of new products in the first half. We've seen some early-stage sales and adoption progress. And I'm going to expand a little today on some new product releases that we've confirmed for 2026. And the third theme is around new business growth. And so, this is where I'm going to give some color on some modest improvement we've seen in new client revenues and also improvement in revenues derived from existing clients, which we refer to as expansion revenues. Just quickly on product-led growth highlights before we get into the financials. So as many of you will be aware, product-led growth is the central growth strategy for the business. And so, we wanted to give a high-level view of our progress against this important, this important part of the overarching strategy. So, in the first half, we launched our first AI-powered product called Iris. This is a natural language interface that allows our clients to undertake deep discovery in the very granular data that we harvest for them. And Iris will evolve over time and become a foundational component in the product-led growth strategy. So, the launch of this first iteration of Iris was really important for us. In the first half, we also launched Elevate. So, this is the same Prognosis technology that we've offered as an on-prem solution for a long period of time but provided as a service. And so, this is particularly attractive to new clients that haven't invested in the Infrastructure to maintain and run Prognosis where they can essentially outsource that process to us and consume Prognosis-as-a-service, and that is the Elevate product. We also launched this in the first half. Some time ago, we launched High Value Payments. Now we've fully implemented this product for a top 10 U.S. bank, which is a really significant milestone for us. And we're engaging with other major global banks on the sale of that same product. I'll give some more detail on that through the presentation. Our innovation initiative called IR Labs. We're looking forward to launching a new AI-powered stand-alone product in calendar year '26. I'll give some more detail on that in this presentation. And indeed, as we approach that launch, we would expect to share more information in relation to it. As mentioned earlier, we've also seen some modest early-stage improvement in the growth metrics that we've laid out to monitor our progress against product-led growth. This was underwritten by a cohort of new clients that we secured in the half, in particular, across verticals, including Government, Health and Defence. So, I'll expand on this as we go, but I'll just hand over to Christian in relation to the financial update. Christian Shaw: Thanks, Ian. My name is Christian Shaw. I've been the CFO with IR for 2 years now. It's my pleasure to provide a financial update on first half FY '26. Firstly, by way of introduction, I'd like to confirm that thanks to a strong sales close in December 2025, the company's results were at the upper end of the guidance range that was provided to the market via the ASX on the 14th of November 2025. And there's a slide included in the appendix of today's presentation to this effect. The focus of my presentation today relates to first half FY '26 results versus the Prior Comparable Period or PCP. I'll now take you through the key financial metrics for the first half of FY '26. However, shareholders are encouraged to read the Appendix 4D and the interim financial report lodged this morning on the ASX in conjunction with this results presentation. In summary, core operating performance for the period was broadly consistent with PCP. However, the incurrence of material expected credit losses ultimately resulted in an operating loss and a net loss after tax. A relative earnings shortfall is more obvious given the existence of large nonoperating gains in the PCP. Statutory revenue for the first half of FY '26 was $28.3 million, which was slightly down 2% to PCP. Renewals performance and contribution to total revenue was slightly down versus PCP, reflecting a softer book of business in the period. Expansion or cross-sell and upsell revenue outperformed, albeit against a low base. Encouragingly, new client revenue grew with multiple strong wins achieved late in the reporting period and despite shorter-than-usual contract lengths. Operating expenses, inclusive of expected credit losses exceeded PCP and without which were slightly lower. Product and technology expenses increased in line with strategy, while Sales & Marketing expenses reduced, and G&A held steady. The earnings before interest, tax, depreciation and amortization or EBITDA loss was a loss of $3.1 million and a net after-tax loss of $1.5 million, both of which were down against PCP, which reported profit results of $4.6 million for both measures. First half FY '26 cash increased to $43.6 million and net assets remained strong at $95.7 million. The company has no debt. I'll commence a deeper dive now for the period with Pro forma revenue, which is an underlying measure that alters statutory revenue by apportioning the License Fee revenue from term-based contracts as the largest component evenly over time based on contract life. This alternate view of revenue provides the ability to look through cyclical swings in the renewals book and to more readily observe underlying performance across reporting periods. It's particularly relevant to the company because as you can see from the slide, the very strong majority of our business is represented by term-based contracted revenues. For first half FY '26, Pro forma revenue was down 6% to $34.4 million versus PCP, with term-based contracts revenue down 4% and services revenue down 2% to PCP. The company's product-led growth strategy is targeting a sustainable growth in Pro forma revenue, and this will happen when increased new client and expansion of existing clients' business exceeds client churn. This next slide shows Pro forma revenue by territory and product. The Americas being our largest market at 70% of Pro forma revenue was down 6% to PCP. Pro forma revenue in the Americas was negatively impacted relative to PCP by the prior sale of the testing business, although much more importantly, by the closing of new client sales late in the period and by the broader business theme where new business sales, whilst growing, are not yet a complete mitigant to churn. APAC was down 7% in a quieter period and Europe, our smallest market, was down 6%. Turning to a product view. Our largest product, Collaborate's Pro forma revenue was down 9% to PCP, with 5% of that impact coming from less services revenue, including less testing revenue after the testing business sale. Collaborate's churn, although relatively stable, continues to impede growth acceleration in Pro forma revenue despite the recent strength seen in sales to new clients and expansion in existing clients. Infrastructure, representing 28% of Pro forma revenue, similarly to Collaborate, decreased by 9% to PCP, driven by churn, whereas Transact, our third product and 22% of Pro forma revenue was up 6% and driven by expansion business. And further information is available in the appendix to this presentation on Pro forma revenue. Turning now to Statutory revenue. First half Statutory revenue was $28.3 million and slightly down by 2% to PCP. The highlight for the half was an increase in License Fee revenue of 4% that was underpinned by a combination of new client contracts and expansion uplift business to existing clients across all territories and products despite a softer renewals book that was less than that of the prior half year period. Another minor point to note is the anomalous nature of the services revenue, which contained less testing revenue in the reporting half than the PCP due to the sale of the testing business. As a reminder, because of the accounting standards on revenue recognition, the company's Statutory revenue trends with our primary sales measure, Total Contract Value, or TCV, and in turn, the renewal book of business due to the current dependency in our business composition. One of the ambitions of our product-led growth strategy is to build and sell value in IR software over time through consumption, which will drive variable SaaS style revenues that demonstrate reduced fluctuation over the lifetime of client contracts. The next slide highlights first half FY '26 EBITDA, a common non-IFRS profit measure. For the first half of FY '26, the company's EBITDA was a loss of $3.1 million, which contrasts to the prior comparable period profit of $4.6 million and a brief analysis will follow. Statutory revenue, which has been discussed, was slightly down, driven by modestly reduced renewals and increased new client and expansion sales. Expected credit losses for the half year was $4.8 million, being an increase of $4.8 million. And for clarity, this is recorded in the consolidated statement of comprehensive income in the line item, General & Administrative expenses. The charge was principally associated with a single client and reflected an increase in credit risk, which was signaled by the client, a product reseller and was not related to software performance. Operating expenses. Excluding expected credit losses for the first half, operating expenses were down 4% versus PCP to $26.5 million, reflecting an ongoing disciplined approach to cost management despite the company pursuing a growth agenda. During the half, product and technology expenses increased 14%. Sales & Marketing expenses decreased 9% and General & Administrative expenses, excluding expected credit losses, were flat. No R&D was capitalized during the reporting period. Shareholders are advised that the company is expecting expenses to increase in the second half of FY '26 as a result of accelerated investment in the company's product-led growth strategy. And further information is available on operating expenses in the appendix to this results presentation. Other gains and losses for the first half were a modest $100,000 loss comprising a grant from the U.S. government of $1 million relating to Employee Retention Tax Credit program and currency exchange losses of $1.1 million. This contrasts sharply to the PCP gain of $3.3 million relating to the sale of a testing business and currency exchange gains. Moving now to IR's cash, which for the half year increased by $3 million or 8% to 30 June 2025, leading to a closing balance of $43.6 million at the end of the half. Our operating cash flow increased strongly for the reporting period to $5.5 million against a PCP of $0.5 million. Client receipts were $3 million higher to PCP due to timing. And in combination, payments to suppliers and employees and payments for income taxes were down $2 million due to timing and some nonrecurring payments in the prior comparable period. And further information is available in the appendix on the company's operating cash flow and its link to EBITDA. Investing activities contributed a net $1.8 million cash inflow, which was moderately increased to PCP, where increased interest receipts largely offset the prior comparable period proceeds from a sale of the testing business. Net financing outflows of $4 million was a reduction of $600,000 against PCP and included a $3.5 million payment for the FY '25 final dividend and $400,000 in reduced lease payments. Exchange rates had a minor negative impact on closing cash. Lastly, IR's balance sheet, which remains strong. At 31st of December 2025, net assets were $95.7 million, down 5% to PCP and comprised total assets of $115.3 million, which includes the combination of cash and Trade & other receivables totaling $107.2 million and total liabilities of $19.7 million. There is no debt. Net tangible assets per share closed first half at $0.53, down 7% to PCP. And I'll now hand back to Ian for product-led growth update. Ian Lowe: Thanks, Christian. I'm just going to take a few minutes here to share with everybody some of the progress that we're making on our product-led growth strategy and in particular, the new products that we have earmarked for build and release over the coming months. So I think most people are probably aware that product-led growth is really a central focus of execution. And really, this slide lays out the context around that. So our historical revenue performance has really been reflective of an overreliance on contract renewals and the value of those renewals fluctuates each year. Our underinvestment in building new products has compounded our reliance on the renewals book. And ultimately, it's limited our new business growth. And so a substantial and ongoing investment to build new products is essential for the company to return to sustainable growth, and this is product-led growth. So, with this strategy, our focus is to increase our innovation investment to build the new products that align to our clients' current and future needs and then commercialize those new products. In particular, we're focused on securing new clients and the revenue that they bring and also cross-sell and upsell to our existing clients, which we call expansion revenue. And realizing these benefits over time as we build momentum is really what should lead to the secure product-led, or securing the product-led growth that we're targeting, which in turn establishes sustainable growth over the medium term. So, with this in mind, we've previously shared three growth metrics which are really a way for us to start to share with you our progress against our product-led growth strategy. And so let me go through each of these very quickly. The first is new client revenue or, if you like, client that is derived from new clients that we've signed. So pleasingly, we've seen modest progress against this metric in the first half versus PCP. The second flavor is expansion revenue. And so as previously described, this is about cross-sell and upsell driven principally by these same new products, to the client base that we already have today. In percentage terms, we saw a strong uplift in real dollar terms, it was a modest uplift because it's off a low base. But nonetheless, we saw some progress in the second metric expansion revenue. And obviously, as we continue to release new products, and I'll expand on that momentarily, we anticipate that this should strengthen our sales pipeline over time. And then the third growth metric, Subscription fees. This is flat or down 3% against the prior corresponding period. And again, this is a growth metric that really will be largely reflective of our ability to secure clients with products that are linked to a variable pricing model. So Prognosis Elevate, for example, where clients will pay a portion of their License Fee based on consumption and new products that we plan to release in calendar year '26, and I'll cover this in more detail shortly, which should strengthen both our proposition with Elevate, but also we anticipate or we're targeting an improvement in the Subscription fee revenue. So these three metrics really will continue to give us a very good sense of our progress as we execute against our product-led growth agenda. In terms of new products, in the first half, there are a couple of particularly noteworthy product launches, which I've mentioned previously. Elevate, this is Prognosis-as-a-service. This simply allows clients to consume the existing Prognosis product in a cloud-based context as opposed to on-prem. It doesn't replace on-prem. It's really just an option that clients can take if they choose to consume Prognosis-as-a-service. This is particularly relevant for new clients. And the reason for that is where clients have already invested in the infrastructure to run Prognosis on-prem, they may want to continue to commit to that infrastructure, in which case, we're seeing that Prognosis-as-a-service, Elevate is particularly relevant for new client discussions. And we will release new products under the subscription model that I've mentioned previously. And in turn, we believe that will strengthen the Elevate proposition. In the first half, we also launched Iris, and this is in its first iteration, a natural language AI capability specifically built to the needs of observability. We've started to roll this out across the client base with our collaborate product. The feedback has been overwhelmingly positive. And we're now in the process of completing the development that would allow us to roll this out to clients on both Transact and Infrastructure. And we believe the development for that will be complete towards the end of the FY '26 period. Iris really is a key pillar in our medium-term product-led growth strategy. Iris will become increasingly central to the way that we look to monetize value moving forward, and it will become increasingly focused on consumption-based revenues. High Value Payments is a product that we launched back in FY '25, and we sold that to a foundation client in the form of a top 10 U.S. bank. I'm pleased to say that, that complicated but very important deployment for that first foundational client is complete. And in parallel with that deployment, we've been talking to a number of other global banks and Tier 1 banks in different domestic markets, and we have progress against a number of those. Moving forward, there's a number of new products that we plan for release in calendar year '26. So firstly, we've talked previously about our innovation division, IR Labs. And we're on track to deliver a new stand-alone AI-powered product in calendar year '26. This will be a minimum viable product release. And we're going to share a lot more detail about what this technology does, the value it creates and our plans for commercialization. We'll share a lot more about that as we get closer to the release date. I've also previously mentioned Iris to be launched for both Transact and Infrastructure clients, and that will happen in calendar year '26. We believe we're on track for a first release towards the end of the financial year '26, the current financial year. And we have plans to extend the Iris capability in a couple of important ways. The first is to transition from a Natural Language Query Interface to also being Agentic. And really, what this means for clients is that Iris will start to communicate with them proactively, not just reactively with important insights and discovery, and it will always be on. So this gets our clients to the point where they're essentially able to subscribe to an Agentic AI capability that is purpose-built for observability data that will feed them all of the insights they need to know to stay on the front foot and maintain the performance of their critical systems. And then secondly, later in calendar year '26, we have a data layering capability that we're planning to release. And this will allow our clients to bring data other than the data that is harvested through Prognosis to correlate to the Prognosis data to deliver richer insights again. And so that contextual correlation will allow clients again to reach new insights that previously aren't possible without this data layering. So we're enormously excited about that road map. Just very quickly, and again, we touched on this at the AGM. There are three core themes in our innovation agenda. So when we think about building new products, we really benchmark those ideas against these three core themes. The first is that we are transitioning to being an AI-first platform. That is absolutely essential, but it's also going to create enormous incremental value that shifts our value proposition in a meaningful way for all of our current and future clients. The second theme is interoperability. Historically, Prognosis has been an isolated part of the technology ecosystem for our clients, and we're setting about changing that. Prognosis will become integrated into client workflows and processes. Clients will be able to leverage the data within Prognosis in new ways. Prognosis will also start to ingest data from other sources, and we talked about how we want to layer data to the benefit of the Iris value proposition. And we also want to start to expose data from within Prognosis to new users, so extending outside of the IT organization within the client into other external and internal stakeholders. The third theme is remediation. And this is really what happens after an issue, a performance issue has been identified, which is what Prognosis does so well today. We want to go on the journey with the client to accelerate their remediation process. And that will extend into predictive capabilities that look to avoid the need for remediation in the first place as well as starting to automate elements of the remediation process by interacting with the underlying technology that is actually creating the performance degradation. So, these three themes are really central to the way we think about new products and on that basis, important that we share that. So, in summary, some observations. The first half of FY '26, our performance really does reflect this historical underinvestment in new products and a softer renewals book. So, in response to that, our product-led growth strategy will see us invest substantial amounts on an ongoing basis to build and commercialize new products, and that process is well underway, as you've seen from today's update. We are starting to see new product momentum emerge. So, this is the production line that we've built and refined to deliver these new products. And we're also seeing some very modest early improvement in the growth metrics that will gauge our progress towards sustainable growth. I think it's important to understand that this transition to a product-led sustainable growth future will take a little bit of time. Our softer FY '26 renewals book on the impacting the top line, our investment in product-led growth, building new products in terms of our expenses, those 2 things come together to impact our profit performance over the short to medium term. Importantly, the business has a strong cash position to fund our product-led growth strategy. And so we continue to focus on the execution of that strategy. Thanks very much. That concludes the presentation, and I'll hand it back over to Gemma. Gemma Garkut: Thank you, Ian. Thank you, Christian. We'll now open it up to Q&A, and we have a couple of questions. The first question is directed to Christian. The credit loss is large relative to revenue, which is very disappointing. What processes have you put in place to ensure this can't happen again? Christian Shaw: Thanks, Gemma. Look, this particular client that led to this outcome was an anomalous or an unusual client contract for us. And unsurprisingly, the management and Board of this company have been all over the nature of that. And we've put in place incremental guardrails to ensure that the structure of the nature of the contract and that counterparty won't be repeated in the company's near future or hopefully at all in the future. And that risk is contained and is contained to that particular client. And there is no such risk in quantum or in nature on our books. Gemma Garkut: Okay. Thank you. Moving on to the next question. Ian, this one will be for you. There is a lot of talk about Generative AI replacing SaaS software businesses. What are your barriers to stop this happening? And what do you have that Gen AI can't replicate? Ian Lowe: It's a good question. And with the benefit of more time, I'd very happily pull all of this apart. Look, I think the first thing is that AI will present some disruption over time in a couple of areas. At the moment, the value proposition of observability is really threefold. The ability to collect all of the telemetry that speaks to the performance of the technology that we monitor. Our ability to normalize that, centralize that, tidy that data up and present it in a way that drives reporting, analytics, notifications, alerts, things of this nature. And then the third is the ability to operationalize that data. So this is about workflow automation. It's about remediation. It's about decision-making on business performance, not just the technology in isolation. And so our opportunity is, first of all, to leverage AI, so to participate in the AI dynamic by leveraging AI and in particular, increasingly Agentic capabilities to take our clients on that journey where we are operationalizing the data in new and meaningful ways. And we think about that beyond just the client organization. We also think about that in terms of the clients' stakeholders, internal and external. So, this is a very conspicuous part of our product strategy and something we think and talk about and are building towards with new products as we speak. I think that AI will be increasingly disruptive in its ability to capture telemetry, although in an on-prem environment, that presents challenges that AI today can't really address elegantly. I think AI's ability to assemble and analyze the data is probably where it will make inroads fastest. But the operationalization of that data and using AI to do that in new and meaningful ways for our clients is really a big opportunity. And it's not a space where we see a lot of capabilities in the market today. And so we're determined to get into that space quickly. Gemma Garkut: Next question. Are you looking at M&A opportunities? And if you are, what would these look like for you? Ian Lowe: Well, look, I'm happy to take that question. So, we're not determined to undertake a transaction. We absolutely would look at a rightsized opportunity that accelerates the strategy, the product-led growth strategy. Anything that is tangential to that strategy is probably going to be less interesting. So, we remain interested in opportunities that are rightsized and can accelerate the existing product-led growth strategy. Gemma Garkut: Two more questions. Can you give a little bit more color to IR Labs and what will be launched at the end of the financial year? Ian Lowe: Probably not. And the reason for that is that, look, we're operating somewhat in stealth mode here for very good reasons. What we have said, just to reiterate, is that in calendar year '26, we will launch a minimum viable product that will be available in the market, and we'll have supporting Sales & Marketing activity around that. In the lead up to that launch, that first release, we will share a lot more in terms of what that product is, the value it creates and our plans to commercialize that product, both at that point in time and ongoing, we'll share a lot more of that as we get closer to that launch date. Gemma Garkut: And final question. You've mentioned there is a lot to do next half and into FY '27. What gives you the confidence, Ian, that IR will be able to execute on these goals? Ian Lowe: Look, that's a good question. There's a couple of things that combine to respond to that question. This business has an extraordinary base of clients to which we have direct access to inform decisions around new products and understand the journey that they are on and make sure that we're aligning our future product sets and new products with those journeys. So, with that, there is a level of trust around the IR brand and the market generally that I think is quite extraordinary and a great credit to what the company has achieved historically. And that's a big part of how we succeed moving forward. We have extraordinary talent in the business. I'm reminded of this every day. And I think critically, we've got a balance sheet that funds our product-led growth strategy. So these things all combine, I think, to put us in a position where there's a lot of work to do. It's not going to happen quickly, but we do believe that over that medium term, we're in a good position to execute our strategy. Gemma Garkut: Final question. IR is still generating cash and has a very strong balance sheet with $43.6 million in cash. Notwithstanding the increased expenses for product-led growth, there would still seem to be headroom to investigate a share buyback to improve EPS, especially knowing that profit will be subdued in the short to medium term. Wouldn't this be a good use of capital while the share price is so low? Ian Lowe: I'm happy to take this one. So, look, it will come as no surprise that we've looked at this, and we've looked at it both closely and repeatedly. I think on balance, certainly, my view is that we don't know exactly what's going to lie ahead as we pursue our product-led growth. And on that basis, we think that at this point in time, at least, preserving our capital to execute a strategy that will deliver the sustainable growth we're all seeking. We think that's the priority. We, of course, reserve the opportunity or the right to continue to review this, and we may make or take a different position if circumstances warrant taking a different position. But right now, we think that, that's in the best interest of shareholders. Gemma Garkut: Thanks, Ian. That is the final question that has been sent through. So, we will conclude the webinar there. Please do reach out to our Investor Relations team directly if you have any further questions following this webinar. But Ian, before we conclude, I'll just hand over to you for any closing comments. Ian Lowe: Thanks, Gemma. Look, I really just want to thank everybody for their interest and support. Hopefully, we've explained or laid out for you the journey that the business is on, and we're looking forward to sharing our full-year results in a few months' time. Gemma Garkut: Okay. Thank you very much. Thanks, everybody.
Ryan Chellingworth: Thank you, everyone, for standing by. Welcome to the Retail Food Group First Half 2026 Results Presentation. [Operator Instructions] I will now hand over the conference to Peter George, Executive Chairman of Retail Food Group. Peter George: Good morning and thank you for joining the Retail Food Group first half presentation. My name is Peter George, and I'm the Executive Chairman of RFG. I'm joined today by Ryan Chellingworth, who is the Group's Chief Financial Officer. Ryan was appointed CFO on the 1st of January this year, having previously served as Deputy CFO. He is a chartered accountant with over 25 years experience domestically and in the U.K., including as Group Treasurer at EML Payments. Ryan brings a strong blend of financial fundamentals and commercial acumen, and I'm confident he'll make a significant contribution to RFG's next phase. Today, we'll be providing an update on the first half business performance, financial results for the period, the outlook for the balance of the financial year and recent trading, and then we will open up to questions. RFG remains Australia's largest multi-brand retail food franchise manager. We own and manage 10 brands with a global footprint of over 1,200 trading outlets across 29 countries, including over 690 outlets in Australia. We also manufacture and distribute high-quality pies from our Sunshine Coast bakery and roast and distribute coffee from our Sydney Roastery, and we hold the exclusive license to establish Firehouse Subs in Australia. As we move forward, our focus is on building our core brands by concentrating our resources and investment under the strategic framework that will be detailed today. Turning to Slide 5 and the key messages from today's presentation. First half was a period of mixed conditions. Consumer sentiment remains subdued, particularly across shopping center exposed categories and our earnings declined as previously guided. However, the results also provided insight into the opportunities moving forward as we focus on transformation and enhancing the network. Across our core brands network sales rose 0.8%. Same-store sales were up 0.2% and average weekly sales grew by 0.9%. These metrics demonstrate improving network quality and underlying brand resilience even as the total number of stores declined through the exit of low-performing and noncore outlets. Further progress has been made on the company store strategy reset with 70% of the 50 targeted transitions or exits now either agreed or complete. The refinancing announced on the 3rd of February provides balance sheet certainty and scope to further execute our strategic priorities. Today, we are also outlining a transformation program built around 3 pillars: cost rationalization, operational enhancement and structural alignment. This program is designed to right size the organization, consolidate our Southeast Queensland offices to our Robina headquarters, remove process inefficiencies, improve supply chain and field team effectiveness and ensure brand-aligned leadership. These actions will deliver material cost savings, will improve franchise partner support and position the business for sustainable earnings growth. Our growth opportunities remain central to the longer-term earnings story and will continue to be pursued with disciplined investment. First Firehouse Subs restaurant is planned for launch in the fourth quarter of this financial year. Our Turkiye international hub is now operational, and we continue to focus on sustainable network expansion for Beefy's Pies. Turning to Slide 6. At the headline level, domestic network sales were $254.6 million, down 1% on the prior corresponding period with domestic same-store sales growth of 0.2%. Growth in Crust and Beefy's offset softer conditions across the shopping center exposed categories. Domestic outlets ended the period at 693, which was down 29 from the number at June 2025 as we exited low-performing sites and progressed the company store strategy reset. These actions have resulted in improved network quality, and we are seeing the benefits through improved average weekly sales across the remaining stores. Underlying revenue declined 1% as higher Beefy's revenue was more than offset by cycling the $2.7 million in nonrecurring insurance proceeds and $0.6 million in deferred franchise-related income recognized in the prior corresponding period. Underlying EBITDA declined 43% to $9.2 million within the $9 million to $10 million guidance range provided to the market a couple of weeks ago. The decline reflected several factors, lower gross margin on slower-than-expected ramp-up of the newer Beefy's stores, compressed coffee margins where the group chose to maintain wholesale pricing to support franchise partners through the difficult trading conditions, absorbing higher green coffee bean costs and finally, delays in the commissioning of the new international supply hub in Turkiye. Looking at the network results in more detail. Core Brands, as we said, delivered network sales growth of 0.8% and same-store sales growth of 0.2%, driven by continued strength in Beefy's and Crust as customer count improved and competitor discounting in the pizza category eased. Improving network quality was evidenced by core brand average weekly sales rising 0.9%. During the period, we opened 22 new outlets across our core brands, offset by the closure of low-performing stores and the exit of sites as part of the company's store strategy reset. Within the coffee, cake, bakery segment, Gloria Jean's and Donut King traded in line with the challenging conditions flagged at the AGM in November. The Glorange refresh and premium product innovation continue to provide positive support, which I will cover shortly. In QSR, Crust delivered same-store sales growth of 2.2%, building on the momentum that we saw in the fourth quarter of last financial year when network sales returned to growth. Beefy's continued to perform well with same-store sales growth of 4.6%. RFG's immediate priority is improving core brand network sales and operational efficiency, which will maximize value for both our franchise partners and our shareholders. This involves 3 areas of focus: first, operational improvements to enhance our service delivery to franchise partners; second, procurement and supply chain initiatives to improve buying and reduce input costs; and third, a back-to-basics marketing strategy, targeting core customers and driving foot traffic. The goals of these focus areas is to increase network sales across core brands and improve store level profitability for franchise partners. As we've previously highlighted, RFG does well when its franchise partners do well. Early proof points of this strategy are encouraging with core brand same-store sales growth of 0.2%, average weekly sales up 0.9% and the current year cost reduction run rate of $1.2 million to $1.8 million already achieved. We will also have seen further Glorange store refresh success, which I'll discuss on the next slide. As previously disclosed, following the conclusion of the potential divestment review process, the Board has decided to retain Brumby's Bakery as a core CCB brand. While the process attracted considerable interest from multiple parties, we were not convinced that the options available would be in the best interest of shareholders, franchisees or team members at this time. Brumby's remains profitable and is an important contributor to the group's performance. We are currently developing strategies to support and grow the Brumby's network, and we will share these in due course. Our key medium-term growth opportunities, Firehouse Subs, international and Beefy's will continue to be supported by disciplined investment, and I will address each of these later in this presentation. The transformation program sets out the practical actions that will allow us to execute against our strategic priorities structured under 3 pillars. The first is cost rationalization. We are rightsizing the business to align with expected revenue growth. This includes consolidation of our Southeast Queensland offices to our single headquarters in Robina and reducing management layers to improve speed of decision-making. The second is operational enhancement. We are identifying and addressing process inefficiencies, improving supply chain and field team effectiveness and simplifying internal processes. The end goal is faster, better support for our franchise partners. The third pillar is structural alignment. We are improving our core business units with brand-aligned leadership, better operational alignment across brands and more effective use of centralized support functions. These pillars have clear measurable outcomes that will deliver $1.2 million to $1.8 million in cost savings during FY '26 that we have previously disclosed, targeting to increase to $5.7 million to $7 million of annualized cost savings during FY '27. They will support our focus on increasing core brands store numbers over time, and they underpin our goal to improve RFG profitability. Crucially, these initiatives are designed to be mutually beneficial for RFG and our franchise partners. The Gloria Jean's refresh. The Gloria Jean's Glorange format continues to demonstrate encouraging performance. Sales of the refurbished Glorange outlets in Goulburn and Robina are up 31% and 25% on the prior corresponding period. Our new store at GJ Shepparton is trading at 24% above the Gloria Jean's network average, excluding the drive-thru sites. Five further Glorange refreshes are planned for the second half, which will provide additional data points to validate the format at scale. Beyond the physical store format, we're also refreshing the broader Gloria Jean's market approach and improving the in-store customer experience. The combination of a modernized store environment, improved product offering and targeted marketing is designed to reenergize this brand for its next chapter. Brand innovation continues to drive customer engagement and network sales growth across our portfolio. Donut King's premium Christmas program lifted campaign performance 15% versus the prior corresponding period with the premium donut category advancing 14% following the Pistachio and Biscoff campaigns. This continues the strong Donut King premium range trend we highlighted at the AGM. Crust rolled out 5 new summer flavors generating over $1 million in additional product sales. This follows the success of the meat deluxe collection, which delivered $1.3 million in incremental sales in FY '25. Crust continues to benefit from its position as a QSR sector leader, topping the Fonto December quarter customer satisfaction scores across pizza brands. Gloria Jean's launched a collaboration with Pistachio Papi in September 2025, building on earlier global brand collaborations and extending the brand's relevance into new beverage occasions. Beefy's Pies. Since our acquisition of 9 Beefy's Pies stores in December 2023, we've delivered 7 new outlets and consistent network sales growth. In the first half of this year, the brand delivered 19% network sales growth and 4.6% same-store sales growth. Average weekly sales across the network were $28,000, while the 7 newer stores averaged $15,000, which is 70% of the non-highway network average and was below our expectations. The newer store performance is, therefore, what we are focusing on near-term for this brand, operational and marketing improvements to lift new store ramp-up and ensure sustainable growth as we expand beyond the Sunshine Coast. Recent innovation includes the Aussie Roast Lamb Pie with over 15,000 units sold since November. This type of product-led innovation is important in driving trial and repeat purchases in new markets. International represents another important medium-term growth opportunity. Our Turkiye hub is now operational, improving service levels and purchasing compliance by positioning supply closer to our master franchise partners and unlocking road freight options across the region. This is a meaningful structural improvement that will support margin and growth for our international franchise network. We appointed a Head of International in September last year, and we are reviewing incentive structures for international franchise partners to encourage store growth in key regions. International trading outlets stood at 528 at the end of the period, effectively flat on the prior 6 months. Firehouse Subs. Further progress has been made towards RFG's Australian launch of Firehouse Subs. During the half, we advanced the selection of key suppliers, progressed stores design finalization and develop marketing launch plans with agency support. Under the terms of our 20-year development agreement with Restaurant Brands International, we have a target to open 15 company-operated restaurants in the first 3 years and have a right to commence sub-franchising from year 4 with a target of 165 stores over 10 years. We continue to target the first Firehouse Subs restaurant opening in the fourth quarter of this financial year in Southeast Queensland. Turning to the company store reset. As announced in August, alongside our FY '25 results, 50 of our 65 company-operated stores were identified for sale or exit with the remaining 15 to be retained. The retained portfolio is concentrated in Beefy's Pies, which we will continue to operate as company stores to drive brand expansion, along with Gloria Jean's and one Donut King outlet. At the end of February 2026, 70% of the 50 targeted outlets have now been transitioned, agreed for sale, exited or closed. In the first half, the stores identified for sale or exit recorded a post-AASB 16 loss of $1.2 million and a cash outflow of $2.1 million, inclusive of lease costs. This strategic reset remains central to improving RFG's cash flow profile and network quality. As transitions take effect in the second half, we expect the associated cash outflows to reduce, contributing to an improvement in group cash flow. I'll now hand over to Ryan to walk through the financial results in more detail. Ryan Chellingworth: Thank you, Peter, and good morning, everyone. Turning to Slide 17, which outlines the P&L for first half 2026. Underlying revenue declined 1% on the prior corresponding period. Higher company store revenue from Beefy's and the full period contribution from CIBO Espresso helped offset the cycling of 2 one-off items in the prior period, $2.7 million in insurance recovery proceeds and $0.6 million in deferred franchise income. Gross margins were pressured by higher coffee bean costs, which the group chose to absorb rather than pass on to franchise partners given the challenging trading conditions. A wholesale coffee price increase will take effect from March 2026, which combined with better buying of green coffee beans is expected to support gross margin improvements in the second half. Underlying EBITDA and NPAT declined as a result of the above, together with a reduction in lease impairment benefits relative to the prior period, which we have previously flagged. Whilst company store costs increased from the new Beefy's stores and the CIBO full period impact, we did see a reduction in corporate overhead costs due to a reduction in bad debt expense, insurance costs, recruitment fees and occupancy costs. On Slide 18, we reconcile underlying to statutory EBITDA with detailed reconciliations including in the appendix on Slides 27 and 28. Key reconciliation items include company store lease provisions, company store trading results for outlets identified for sale or exit, marketing fund timing differences and growth horizon investment costs relating to Firehouse Subs and international hub establishment. Statutory NPAT for the period was $2 million, a reduction from $7.3 million in the PCP for the reasons outlined on Slide 17. Moving to Slide 19. The CCB division accounts for 72% of RFG's domestic network sales, contributing a greater share of EBITDA due to the vertical integration of coffee and pies. CCB same-store sales were resilient, down 0.4% though declining customer count and noncore outlet closures drove network sales 2.4% lower in difficult trading conditions, particularly in shopping centers. Positively, average weekly sales rose 1.7% and average transaction value increased 4%, indicating improved network health among continuing stores. Underlying segment EBITDA declined 47% to $7.5 million, reflecting compressed coffee margins, the cycling of one-off revenue adjustments across insurance proceeds and deferred franchise income and a lower contribution from lease impairment releases relative to the prior corresponding period. Turning to QSR on Slide 20, which accounts for 28% of domestic network sales. Key trading metrics across QSR improved over the period. Network sales were up 2.8% and same-store sales grew 1.6% with customer count, average weekly sales and average transaction value all rising. We opened 4 new Crust outlets during the half and the easing of aggressive competitor discounting that had previously impacted the pizza category supported growth for the brand. Crust had deliberately chosen not to participate in a price war to protect franchise partner profitability and was able to capitalize through a continued focus on value for the customer. Underlying segment EBITDA declined due to the cycling of lease and bad debt provision releases in the prior corresponding period. Moving to Slide 21 and our operating cash flow. Our operating cash flow declined by $9.9 million versus the prior corresponding period. This reflects several factors. First, the cycling of the one-off benefits in the PCP, including insurance proceeds and debt recoveries. Second, lower gross profit from the decision to maintain wholesale coffee pricing to support franchise partners and a lower contribution from Beefy's. Third, noncore cash outflows, including those relating to the setup of the international hub and Firehouse Subs preparatory costs. And fourth, company store cash outflows, which are expected to reduce in second half 2026 as transitions and exits take effect. We expect a meaningful improvement in operating cash flow in second half 2026, driven by the wholesale coffee price increase from March, cost-out benefits and the progressive reduction in company store outflows following the store exit and transitions in the first half 2026. On Slide 22, we include the balance sheet. We ended first half 2026 with $16.7 million of cash, which includes $11.3 million of restricted cash relating to marketing funds, bank guarantees and Firehouse Subs commitments. Working capital increased modestly due to seasonal timing and inventory positioning through the holiday period. Lease-related assets and liabilities reduced as company store exits progressed. At first half 2026, we had drawn borrowings of $32.5 million under our previous debt facility. Post period end, we completed the refinancing of a new $41.2 million facility with WH Soul Pattinson maturing 31st of August 2027. This facility provides for an additional $7.5 million drawdown to support our strategic priorities. Moving to Slide 23. The debt refinancing delivers balance sheet certainty and supports the company's strategic priorities. Our capital allocation framework is now focused on 5 areas: first, core brand operational efficiency and targeted marketing to drive network sales; second, the cost-out program across the 3 pillars Peter outlined, which directly supports cash flow improvement; third, maintaining appropriate liquidity to execute our strategic priorities; fourth, the initial Firehouse subs rollout funded within the new facility; and fifth, leveraging the Turkiye hub to support growth in our international franchise network. With that, I will hand back to Peter to discuss our FY '26 outlook. Peter George: Thank you, Ryan. For FY '26, we continue to guide underlying EBITDA of $20 million to $24 million. This guidance implies a meaningful improvement in the second half relative to the first half, which is underpinned by several drivers that we have discussed today. Macro conditions remain challenging, and our market will stay tightly -- marketing will stay tightly focused on core customers and value-driven propositions. In the first 8 weeks of calendar 2026, core brand network sales were down 5.5% versus the prior corresponding period, primarily reflecting customer count impacts within the CCB division from outlet closures. Over the same period, core brand same-store sales declined 0.2%, demonstrating continued brand resilience in a challenging environment. Looking at the key drivers for the second half. Gross margin is expected to improve as the wholesale coffee price increase takes effect from March, combined with better green bean purchasing and improved international coffee trading. Cost-out initiatives are underway and expected to deliver $1.2 million to $1.8 million of savings in the second half with the full year FY '27 benefit expected to reach $5 million to $7 million. International growth will be supported by the go-live of the Turkiye hub and incentive programs for master franchise partners. Company store cash outflows are expected to reduce as transition benefits take effect. Beefy's will focus on brand expansion outside the Sunshine Coast and on lifting the performance of the 7 newer stores for operational and marketing improvements. And Firehouse Subs remains on track for a fourth quarter '26 opening with the refinancing providing the funding runway for the initial rollout. Before opening to questions, I'd like to take this opportunity to thank our franchise partners and team members for their commitment through what has been a challenging period. Our franchise network is the heart of this business and the actions we are taking are designed first and foremost to improve their outcomes. I'd also like to thank our shareholders for their continued support as we execute the transformation and growth agenda. While near-term earnings have been impacted by a number of factors, the strategic foundations we are building, notably a leaner cost base, stronger core brands and a compelling growth horizon in Firehouse Subs and international position RFG well for sustainable value creation. We'll now move to questions. As a reminder, if you wish to ask a question please enter it into the webinar chat. Ryan Chellingworth: Moving to the questions. So we've had some come through prior to the webinar, and there's some that have come through since the webinar started. First question: What is being done to modernize and bring back the Bakery division? Why has it not competed with other bakeries taking market share? Peter George: Well, I think it's -- since COVID, it's been fairly stable. It hasn't competed with some of the other bakery chains for reasons probably related to the allocation of capital to other areas of priority. But it is -- as we said earlier, we've decided to retain the asset, and we will come to the market with details of its strategic future in the near-term. Ryan Chellingworth: The second question that's come through from the chat, it's come through from Ling Zhang. Could you please let us know the result of the revised corporate store strategy, especially the results for cash flow in the first half 2026? I'm happy to take that one. So as we noted in the presentation, we have 70% of the 50 company stores, we have either transitioned to franchise partners. We have agreed sales in place or we've exited or closed. From a cash flow perspective, we saw cash outflows of $2.1 million in the first half 2026, which we expect to improve through the second half as those store transitions take effect. The next questions come from Ken Wagner. How many Firehouse stores do you expect to have at the end of FY '27? Peter George: We have a contractual commitment for 15 stores in 3 years. The 3 years is probably running about 6 months behind schedule for a number of reasons, access to appropriate sites. We took a while to get the supply chain for the ingredients put in place. So by the end of 2027, I would expect we'd have somewhere around half of the 15 stores in place. Ryan Chellingworth: Second question from Ken. Assuming Glorange works, how quickly can you roll it out to the rest of the Gloria Jean's stores? Peter George: Well, we're confident that it will work. We need to give it a fairly rigorous trial period, though, because we do in this industry, often see a honeymoon effect of a refurb of the store, then it comes back to its original sales performance. In order to encourage franchisees to invest the money in refurbishing, we have to have fairly compelling proof. So once that compelling proof is available, which I think it will be in the near future, the rest of the network will be refurbished in accordance with the requirements of the franchisee and the landlord, but it will take probably 2 to 3 years for the whole network to be transformed. Ryan Chellingworth: Next question from Ken. How material is the international business in terms of EBITDA? Peter George: Yes. Right now, it's not immaterial. It contributes $2.5 million of the total, so it's about 10%. There is significant upside potential though out of the new supply chain initiatives that were put in place recently, we were missing a lot of revenue because they weren't buying coffee office because of the inefficiency of providing that out of Australia and Dubai. So we think its potential in the long-term is to be much more significant, probably somewhere around the 20% of earnings level. Ryan Chellingworth: Okay. Next question comes from Larry Gandler. With regards to the debt facility, does RFG expect the facility to be fully drawn by the end of financial year 2026? Peter George: Yes. Ryan Chellingworth: Second question from Larry. What have early demand indications or what early demand indications can you discuss about Firehouse Subs? Has the company -- is the company building consumer anticipation? Peter George: The answer to that is, yes. We've done extensive taste testing and that's universally come back very positive. The proposition is that these are much higher quality products than the main competitor offers. The price differential is not great. There are a few added extras such as availability of fries, which our main competitor doesn't offer. And further down the track, the angle of the Firehouse foundation will come into play. Ryan Chellingworth: Okay. We'll just pause there for one moment while we wait for any more questions to come through. On the basis that we don't have any further questions coming through, that concludes today's presentation. Thank you, everyone, for joining in, and have a good day.
Gemma Garkut: Okay. Welcome, everyone, and thank you for joining IR's Half Year FY '26 Results Webinar. My name is Gemma Garkut, Head of Communications here at IR, and I'll be hosting today's session. This morning, IR released its half year results and associated presentation for FY '26, which have been lodged with the ASX. These are available on the ASX platform and our Investor Center on our website and should be read in conjunction with this webinar. Joining me on the call today are Ian Lowe, CEO and Managing Director; and Christian Shaw, CFO, who will present today on IR's business performance for the half. We will then open the session for a short Q&A. A few housekeeping items before we begin. Today's session is being recorded and will be made available on our Investor center following the call. [Operator Instructions] If we do not get to your question during the live session, you are welcome to contact our Investor Relations team via the details provided on our website and in today's ASX announcement. A reminder that today's discussion may include forward-looking statements. Please refer to disclosures by the ASX, including the materials lodged earlier today. With that, I'll now hand over to Ian to take you through the highlights for the half. Ian Lowe: Thank you, Gemma. Welcome to the webinar, everybody. We're really going to cover 3 core themes in the course of today's presentation. I'll just quickly run through these to begin with at a headline level. So, first of all, our half 1 financial performance. So, the headlines here being revenue was slightly down due to a softer renewals book. Our earnings performance impacted by expected credit losses. This is consistent with disclosures made in November of last calendar year, and we've also seen cash improvement. The second theme around continued product-led growth execution. We've launched a number of new products in the first half. We've seen some early-stage sales and adoption progress. And I'm going to expand a little today on some new product releases that we've confirmed for 2026. And the third theme is around new business growth. And so, this is where I'm going to give some color on some modest improvement we've seen in new client revenues and also improvement in revenues derived from existing clients, which we refer to as expansion revenues. Just quickly on product-led growth highlights before we get into the financials. So as many of you will be aware, product-led growth is the central growth strategy for the business. And so, we wanted to give a high-level view of our progress against this important, this important part of the overarching strategy. So, in the first half, we launched our first AI-powered product called Iris. This is a natural language interface that allows our clients to undertake deep discovery in the very granular data that we harvest for them. And Iris will evolve over time and become a foundational component in the product-led growth strategy. So, the launch of this first iteration of Iris was really important for us. In the first half, we also launched Elevate. So, this is the same Prognosis technology that we've offered as an on-prem solution for a long period of time but provided as a service. And so, this is particularly attractive to new clients that haven't invested in the Infrastructure to maintain and run Prognosis where they can essentially outsource that process to us and consume Prognosis-as-a-service, and that is the Elevate product. We also launched this in the first half. Some time ago, we launched High Value Payments. Now we've fully implemented this product for a top 10 U.S. bank, which is a really significant milestone for us. And we're engaging with other major global banks on the sale of that same product. I'll give some more detail on that through the presentation. Our innovation initiative called IR Labs. We're looking forward to launching a new AI-powered stand-alone product in calendar year '26. I'll give some more detail on that in this presentation. And indeed, as we approach that launch, we would expect to share more information in relation to it. As mentioned earlier, we've also seen some modest early-stage improvement in the growth metrics that we've laid out to monitor our progress against product-led growth. This was underwritten by a cohort of new clients that we secured in the half, in particular, across verticals, including Government, Health and Defence. So, I'll expand on this as we go, but I'll just hand over to Christian in relation to the financial update. Christian Shaw: Thanks, Ian. My name is Christian Shaw. I've been the CFO with IR for 2 years now. It's my pleasure to provide a financial update on first half FY '26. Firstly, by way of introduction, I'd like to confirm that thanks to a strong sales close in December 2025, the company's results were at the upper end of the guidance range that was provided to the market via the ASX on the 14th of November 2025. And there's a slide included in the appendix of today's presentation to this effect. The focus of my presentation today relates to first half FY '26 results versus the Prior Comparable Period or PCP. I'll now take you through the key financial metrics for the first half of FY '26. However, shareholders are encouraged to read the Appendix 4D and the interim financial report lodged this morning on the ASX in conjunction with this results presentation. In summary, core operating performance for the period was broadly consistent with PCP. However, the incurrence of material expected credit losses ultimately resulted in an operating loss and a net loss after tax. A relative earnings shortfall is more obvious given the existence of large nonoperating gains in the PCP. Statutory revenue for the first half of FY '26 was $28.3 million, which was slightly down 2% to PCP. Renewals performance and contribution to total revenue was slightly down versus PCP, reflecting a softer book of business in the period. Expansion or cross-sell and upsell revenue outperformed, albeit against a low base. Encouragingly, new client revenue grew with multiple strong wins achieved late in the reporting period and despite shorter-than-usual contract lengths. Operating expenses, inclusive of expected credit losses exceeded PCP and without which were slightly lower. Product and technology expenses increased in line with strategy, while Sales & Marketing expenses reduced, and G&A held steady. The earnings before interest, tax, depreciation and amortization or EBITDA loss was a loss of $3.1 million and a net after-tax loss of $1.5 million, both of which were down against PCP, which reported profit results of $4.6 million for both measures. First half FY '26 cash increased to $43.6 million and net assets remained strong at $95.7 million. The company has no debt. I'll commence a deeper dive now for the period with Pro forma revenue, which is an underlying measure that alters statutory revenue by apportioning the License Fee revenue from term-based contracts as the largest component evenly over time based on contract life. This alternate view of revenue provides the ability to look through cyclical swings in the renewals book and to more readily observe underlying performance across reporting periods. It's particularly relevant to the company because as you can see from the slide, the very strong majority of our business is represented by term-based contracted revenues. For first half FY '26, Pro forma revenue was down 6% to $34.4 million versus PCP, with term-based contracts revenue down 4% and services revenue down 2% to PCP. The company's product-led growth strategy is targeting a sustainable growth in Pro forma revenue, and this will happen when increased new client and expansion of existing clients' business exceeds client churn. This next slide shows Pro forma revenue by territory and product. The Americas being our largest market at 70% of Pro forma revenue was down 6% to PCP. Pro forma revenue in the Americas was negatively impacted relative to PCP by the prior sale of the testing business, although much more importantly, by the closing of new client sales late in the period and by the broader business theme where new business sales, whilst growing, are not yet a complete mitigant to churn. APAC was down 7% in a quieter period and Europe, our smallest market, was down 6%. Turning to a product view. Our largest product, Collaborate's Pro forma revenue was down 9% to PCP, with 5% of that impact coming from less services revenue, including less testing revenue after the testing business sale. Collaborate's churn, although relatively stable, continues to impede growth acceleration in Pro forma revenue despite the recent strength seen in sales to new clients and expansion in existing clients. Infrastructure, representing 28% of Pro forma revenue, similarly to Collaborate, decreased by 9% to PCP, driven by churn, whereas Transact, our third product and 22% of Pro forma revenue was up 6% and driven by expansion business. And further information is available in the appendix to this presentation on Pro forma revenue. Turning now to Statutory revenue. First half Statutory revenue was $28.3 million and slightly down by 2% to PCP. The highlight for the half was an increase in License Fee revenue of 4% that was underpinned by a combination of new client contracts and expansion uplift business to existing clients across all territories and products despite a softer renewals book that was less than that of the prior half year period. Another minor point to note is the anomalous nature of the services revenue, which contained less testing revenue in the reporting half than the PCP due to the sale of the testing business. As a reminder, because of the accounting standards on revenue recognition, the company's Statutory revenue trends with our primary sales measure, Total Contract Value, or TCV, and in turn, the renewal book of business due to the current dependency in our business composition. One of the ambitions of our product-led growth strategy is to build and sell value in IR software over time through consumption, which will drive variable SaaS style revenues that demonstrate reduced fluctuation over the lifetime of client contracts. The next slide highlights first half FY '26 EBITDA, a common non-IFRS profit measure. For the first half of FY '26, the company's EBITDA was a loss of $3.1 million, which contrasts to the prior comparable period profit of $4.6 million and a brief analysis will follow. Statutory revenue, which has been discussed, was slightly down, driven by modestly reduced renewals and increased new client and expansion sales. Expected credit losses for the half year was $4.8 million, being an increase of $4.8 million. And for clarity, this is recorded in the consolidated statement of comprehensive income in the line item, General & Administrative expenses. The charge was principally associated with a single client and reflected an increase in credit risk, which was signaled by the client, a product reseller and was not related to software performance. Operating expenses. Excluding expected credit losses for the first half, operating expenses were down 4% versus PCP to $26.5 million, reflecting an ongoing disciplined approach to cost management despite the company pursuing a growth agenda. During the half, product and technology expenses increased 14%. Sales & Marketing expenses decreased 9% and General & Administrative expenses, excluding expected credit losses, were flat. No R&D was capitalized during the reporting period. Shareholders are advised that the company is expecting expenses to increase in the second half of FY '26 as a result of accelerated investment in the company's product-led growth strategy. And further information is available on operating expenses in the appendix to this results presentation. Other gains and losses for the first half were a modest $100,000 loss comprising a grant from the U.S. government of $1 million relating to Employee Retention Tax Credit program and currency exchange losses of $1.1 million. This contrasts sharply to the PCP gain of $3.3 million relating to the sale of a testing business and currency exchange gains. Moving now to IR's cash, which for the half year increased by $3 million or 8% to 30 June 2025, leading to a closing balance of $43.6 million at the end of the half. Our operating cash flow increased strongly for the reporting period to $5.5 million against a PCP of $0.5 million. Client receipts were $3 million higher to PCP due to timing. And in combination, payments to suppliers and employees and payments for income taxes were down $2 million due to timing and some nonrecurring payments in the prior comparable period. And further information is available in the appendix on the company's operating cash flow and its link to EBITDA. Investing activities contributed a net $1.8 million cash inflow, which was moderately increased to PCP, where increased interest receipts largely offset the prior comparable period proceeds from a sale of the testing business. Net financing outflows of $4 million was a reduction of $600,000 against PCP and included a $3.5 million payment for the FY '25 final dividend and $400,000 in reduced lease payments. Exchange rates had a minor negative impact on closing cash. Lastly, IR's balance sheet, which remains strong. At 31st of December 2025, net assets were $95.7 million, down 5% to PCP and comprised total assets of $115.3 million, which includes the combination of cash and Trade & other receivables totaling $107.2 million and total liabilities of $19.7 million. There is no debt. Net tangible assets per share closed first half at $0.53, down 7% to PCP. And I'll now hand back to Ian for product-led growth update. Ian Lowe: Thanks, Christian. I'm just going to take a few minutes here to share with everybody some of the progress that we're making on our product-led growth strategy and in particular, the new products that we have earmarked for build and release over the coming months. So I think most people are probably aware that product-led growth is really a central focus of execution. And really, this slide lays out the context around that. So our historical revenue performance has really been reflective of an overreliance on contract renewals and the value of those renewals fluctuates each year. Our underinvestment in building new products has compounded our reliance on the renewals book. And ultimately, it's limited our new business growth. And so a substantial and ongoing investment to build new products is essential for the company to return to sustainable growth, and this is product-led growth. So, with this strategy, our focus is to increase our innovation investment to build the new products that align to our clients' current and future needs and then commercialize those new products. In particular, we're focused on securing new clients and the revenue that they bring and also cross-sell and upsell to our existing clients, which we call expansion revenue. And realizing these benefits over time as we build momentum is really what should lead to the secure product-led, or securing the product-led growth that we're targeting, which in turn establishes sustainable growth over the medium term. So, with this in mind, we've previously shared three growth metrics which are really a way for us to start to share with you our progress against our product-led growth strategy. And so let me go through each of these very quickly. The first is new client revenue or, if you like, client that is derived from new clients that we've signed. So pleasingly, we've seen modest progress against this metric in the first half versus PCP. The second flavor is expansion revenue. And so as previously described, this is about cross-sell and upsell driven principally by these same new products, to the client base that we already have today. In percentage terms, we saw a strong uplift in real dollar terms, it was a modest uplift because it's off a low base. But nonetheless, we saw some progress in the second metric expansion revenue. And obviously, as we continue to release new products, and I'll expand on that momentarily, we anticipate that this should strengthen our sales pipeline over time. And then the third growth metric, Subscription fees. This is flat or down 3% against the prior corresponding period. And again, this is a growth metric that really will be largely reflective of our ability to secure clients with products that are linked to a variable pricing model. So Prognosis Elevate, for example, where clients will pay a portion of their License Fee based on consumption and new products that we plan to release in calendar year '26, and I'll cover this in more detail shortly, which should strengthen both our proposition with Elevate, but also we anticipate or we're targeting an improvement in the Subscription fee revenue. So these three metrics really will continue to give us a very good sense of our progress as we execute against our product-led growth agenda. In terms of new products, in the first half, there are a couple of particularly noteworthy product launches, which I've mentioned previously. Elevate, this is Prognosis-as-a-service. This simply allows clients to consume the existing Prognosis product in a cloud-based context as opposed to on-prem. It doesn't replace on-prem. It's really just an option that clients can take if they choose to consume Prognosis-as-a-service. This is particularly relevant for new clients. And the reason for that is where clients have already invested in the infrastructure to run Prognosis on-prem, they may want to continue to commit to that infrastructure, in which case, we're seeing that Prognosis-as-a-service, Elevate is particularly relevant for new client discussions. And we will release new products under the subscription model that I've mentioned previously. And in turn, we believe that will strengthen the Elevate proposition. In the first half, we also launched Iris, and this is in its first iteration, a natural language AI capability specifically built to the needs of observability. We've started to roll this out across the client base with our collaborate product. The feedback has been overwhelmingly positive. And we're now in the process of completing the development that would allow us to roll this out to clients on both Transact and Infrastructure. And we believe the development for that will be complete towards the end of the FY '26 period. Iris really is a key pillar in our medium-term product-led growth strategy. Iris will become increasingly central to the way that we look to monetize value moving forward, and it will become increasingly focused on consumption-based revenues. High Value Payments is a product that we launched back in FY '25, and we sold that to a foundation client in the form of a top 10 U.S. bank. I'm pleased to say that, that complicated but very important deployment for that first foundational client is complete. And in parallel with that deployment, we've been talking to a number of other global banks and Tier 1 banks in different domestic markets, and we have progress against a number of those. Moving forward, there's a number of new products that we plan for release in calendar year '26. So firstly, we've talked previously about our innovation division, IR Labs. And we're on track to deliver a new stand-alone AI-powered product in calendar year '26. This will be a minimum viable product release. And we're going to share a lot more detail about what this technology does, the value it creates and our plans for commercialization. We'll share a lot more about that as we get closer to the release date. I've also previously mentioned Iris to be launched for both Transact and Infrastructure clients, and that will happen in calendar year '26. We believe we're on track for a first release towards the end of the financial year '26, the current financial year. And we have plans to extend the Iris capability in a couple of important ways. The first is to transition from a Natural Language Query Interface to also being Agentic. And really, what this means for clients is that Iris will start to communicate with them proactively, not just reactively with important insights and discovery, and it will always be on. So this gets our clients to the point where they're essentially able to subscribe to an Agentic AI capability that is purpose-built for observability data that will feed them all of the insights they need to know to stay on the front foot and maintain the performance of their critical systems. And then secondly, later in calendar year '26, we have a data layering capability that we're planning to release. And this will allow our clients to bring data other than the data that is harvested through Prognosis to correlate to the Prognosis data to deliver richer insights again. And so that contextual correlation will allow clients again to reach new insights that previously aren't possible without this data layering. So we're enormously excited about that road map. Just very quickly, and again, we touched on this at the AGM. There are three core themes in our innovation agenda. So when we think about building new products, we really benchmark those ideas against these three core themes. The first is that we are transitioning to being an AI-first platform. That is absolutely essential, but it's also going to create enormous incremental value that shifts our value proposition in a meaningful way for all of our current and future clients. The second theme is interoperability. Historically, Prognosis has been an isolated part of the technology ecosystem for our clients, and we're setting about changing that. Prognosis will become integrated into client workflows and processes. Clients will be able to leverage the data within Prognosis in new ways. Prognosis will also start to ingest data from other sources, and we talked about how we want to layer data to the benefit of the Iris value proposition. And we also want to start to expose data from within Prognosis to new users, so extending outside of the IT organization within the client into other external and internal stakeholders. The third theme is remediation. And this is really what happens after an issue, a performance issue has been identified, which is what Prognosis does so well today. We want to go on the journey with the client to accelerate their remediation process. And that will extend into predictive capabilities that look to avoid the need for remediation in the first place as well as starting to automate elements of the remediation process by interacting with the underlying technology that is actually creating the performance degradation. So, these three themes are really central to the way we think about new products and on that basis, important that we share that. So, in summary, some observations. The first half of FY '26, our performance really does reflect this historical underinvestment in new products and a softer renewals book. So, in response to that, our product-led growth strategy will see us invest substantial amounts on an ongoing basis to build and commercialize new products, and that process is well underway, as you've seen from today's update. We are starting to see new product momentum emerge. So, this is the production line that we've built and refined to deliver these new products. And we're also seeing some very modest early improvement in the growth metrics that will gauge our progress towards sustainable growth. I think it's important to understand that this transition to a product-led sustainable growth future will take a little bit of time. Our softer FY '26 renewals book on the impacting the top line, our investment in product-led growth, building new products in terms of our expenses, those 2 things come together to impact our profit performance over the short to medium term. Importantly, the business has a strong cash position to fund our product-led growth strategy. And so we continue to focus on the execution of that strategy. Thanks very much. That concludes the presentation, and I'll hand it back over to Gemma. Gemma Garkut: Thank you, Ian. Thank you, Christian. We'll now open it up to Q&A, and we have a couple of questions. The first question is directed to Christian. The credit loss is large relative to revenue, which is very disappointing. What processes have you put in place to ensure this can't happen again? Christian Shaw: Thanks, Gemma. Look, this particular client that led to this outcome was an anomalous or an unusual client contract for us. And unsurprisingly, the management and Board of this company have been all over the nature of that. And we've put in place incremental guardrails to ensure that the structure of the nature of the contract and that counterparty won't be repeated in the company's near future or hopefully at all in the future. And that risk is contained and is contained to that particular client. And there is no such risk in quantum or in nature on our books. Gemma Garkut: Okay. Thank you. Moving on to the next question. Ian, this one will be for you. There is a lot of talk about Generative AI replacing SaaS software businesses. What are your barriers to stop this happening? And what do you have that Gen AI can't replicate? Ian Lowe: It's a good question. And with the benefit of more time, I'd very happily pull all of this apart. Look, I think the first thing is that AI will present some disruption over time in a couple of areas. At the moment, the value proposition of observability is really threefold. The ability to collect all of the telemetry that speaks to the performance of the technology that we monitor. Our ability to normalize that, centralize that, tidy that data up and present it in a way that drives reporting, analytics, notifications, alerts, things of this nature. And then the third is the ability to operationalize that data. So this is about workflow automation. It's about remediation. It's about decision-making on business performance, not just the technology in isolation. And so our opportunity is, first of all, to leverage AI, so to participate in the AI dynamic by leveraging AI and in particular, increasingly Agentic capabilities to take our clients on that journey where we are operationalizing the data in new and meaningful ways. And we think about that beyond just the client organization. We also think about that in terms of the clients' stakeholders, internal and external. So, this is a very conspicuous part of our product strategy and something we think and talk about and are building towards with new products as we speak. I think that AI will be increasingly disruptive in its ability to capture telemetry, although in an on-prem environment, that presents challenges that AI today can't really address elegantly. I think AI's ability to assemble and analyze the data is probably where it will make inroads fastest. But the operationalization of that data and using AI to do that in new and meaningful ways for our clients is really a big opportunity. And it's not a space where we see a lot of capabilities in the market today. And so we're determined to get into that space quickly. Gemma Garkut: Next question. Are you looking at M&A opportunities? And if you are, what would these look like for you? Ian Lowe: Well, look, I'm happy to take that question. So, we're not determined to undertake a transaction. We absolutely would look at a rightsized opportunity that accelerates the strategy, the product-led growth strategy. Anything that is tangential to that strategy is probably going to be less interesting. So, we remain interested in opportunities that are rightsized and can accelerate the existing product-led growth strategy. Gemma Garkut: Two more questions. Can you give a little bit more color to IR Labs and what will be launched at the end of the financial year? Ian Lowe: Probably not. And the reason for that is that, look, we're operating somewhat in stealth mode here for very good reasons. What we have said, just to reiterate, is that in calendar year '26, we will launch a minimum viable product that will be available in the market, and we'll have supporting Sales & Marketing activity around that. In the lead up to that launch, that first release, we will share a lot more in terms of what that product is, the value it creates and our plans to commercialize that product, both at that point in time and ongoing, we'll share a lot more of that as we get closer to that launch date. Gemma Garkut: And final question. You've mentioned there is a lot to do next half and into FY '27. What gives you the confidence, Ian, that IR will be able to execute on these goals? Ian Lowe: Look, that's a good question. There's a couple of things that combine to respond to that question. This business has an extraordinary base of clients to which we have direct access to inform decisions around new products and understand the journey that they are on and make sure that we're aligning our future product sets and new products with those journeys. So, with that, there is a level of trust around the IR brand and the market generally that I think is quite extraordinary and a great credit to what the company has achieved historically. And that's a big part of how we succeed moving forward. We have extraordinary talent in the business. I'm reminded of this every day. And I think critically, we've got a balance sheet that funds our product-led growth strategy. So these things all combine, I think, to put us in a position where there's a lot of work to do. It's not going to happen quickly, but we do believe that over that medium term, we're in a good position to execute our strategy. Gemma Garkut: Final question. IR is still generating cash and has a very strong balance sheet with $43.6 million in cash. Notwithstanding the increased expenses for product-led growth, there would still seem to be headroom to investigate a share buyback to improve EPS, especially knowing that profit will be subdued in the short to medium term. Wouldn't this be a good use of capital while the share price is so low? Ian Lowe: I'm happy to take this one. So, look, it will come as no surprise that we've looked at this, and we've looked at it both closely and repeatedly. I think on balance, certainly, my view is that we don't know exactly what's going to lie ahead as we pursue our product-led growth. And on that basis, we think that at this point in time, at least, preserving our capital to execute a strategy that will deliver the sustainable growth we're all seeking. We think that's the priority. We, of course, reserve the opportunity or the right to continue to review this, and we may make or take a different position if circumstances warrant taking a different position. But right now, we think that, that's in the best interest of shareholders. Gemma Garkut: Thanks, Ian. That is the final question that has been sent through. So, we will conclude the webinar there. Please do reach out to our Investor Relations team directly if you have any further questions following this webinar. But Ian, before we conclude, I'll just hand over to you for any closing comments. Ian Lowe: Thanks, Gemma. Look, I really just want to thank everybody for their interest and support. Hopefully, we've explained or laid out for you the journey that the business is on, and we're looking forward to sharing our full-year results in a few months' time. Gemma Garkut: Okay. Thank you very much. Thanks, everybody.
Ryan Chellingworth: Thank you, everyone, for standing by. Welcome to the Retail Food Group First Half 2026 Results Presentation. [Operator Instructions] I will now hand over the conference to Peter George, Executive Chairman of Retail Food Group. Peter George: Good morning and thank you for joining the Retail Food Group first half presentation. My name is Peter George, and I'm the Executive Chairman of RFG. I'm joined today by Ryan Chellingworth, who is the Group's Chief Financial Officer. Ryan was appointed CFO on the 1st of January this year, having previously served as Deputy CFO. He is a chartered accountant with over 25 years experience domestically and in the U.K., including as Group Treasurer at EML Payments. Ryan brings a strong blend of financial fundamentals and commercial acumen, and I'm confident he'll make a significant contribution to RFG's next phase. Today, we'll be providing an update on the first half business performance, financial results for the period, the outlook for the balance of the financial year and recent trading, and then we will open up to questions. RFG remains Australia's largest multi-brand retail food franchise manager. We own and manage 10 brands with a global footprint of over 1,200 trading outlets across 29 countries, including over 690 outlets in Australia. We also manufacture and distribute high-quality pies from our Sunshine Coast bakery and roast and distribute coffee from our Sydney Roastery, and we hold the exclusive license to establish Firehouse Subs in Australia. As we move forward, our focus is on building our core brands by concentrating our resources and investment under the strategic framework that will be detailed today. Turning to Slide 5 and the key messages from today's presentation. First half was a period of mixed conditions. Consumer sentiment remains subdued, particularly across shopping center exposed categories and our earnings declined as previously guided. However, the results also provided insight into the opportunities moving forward as we focus on transformation and enhancing the network. Across our core brands network sales rose 0.8%. Same-store sales were up 0.2% and average weekly sales grew by 0.9%. These metrics demonstrate improving network quality and underlying brand resilience even as the total number of stores declined through the exit of low-performing and noncore outlets. Further progress has been made on the company store strategy reset with 70% of the 50 targeted transitions or exits now either agreed or complete. The refinancing announced on the 3rd of February provides balance sheet certainty and scope to further execute our strategic priorities. Today, we are also outlining a transformation program built around 3 pillars: cost rationalization, operational enhancement and structural alignment. This program is designed to right size the organization, consolidate our Southeast Queensland offices to our Robina headquarters, remove process inefficiencies, improve supply chain and field team effectiveness and ensure brand-aligned leadership. These actions will deliver material cost savings, will improve franchise partner support and position the business for sustainable earnings growth. Our growth opportunities remain central to the longer-term earnings story and will continue to be pursued with disciplined investment. First Firehouse Subs restaurant is planned for launch in the fourth quarter of this financial year. Our Turkiye international hub is now operational, and we continue to focus on sustainable network expansion for Beefy's Pies. Turning to Slide 6. At the headline level, domestic network sales were $254.6 million, down 1% on the prior corresponding period with domestic same-store sales growth of 0.2%. Growth in Crust and Beefy's offset softer conditions across the shopping center exposed categories. Domestic outlets ended the period at 693, which was down 29 from the number at June 2025 as we exited low-performing sites and progressed the company store strategy reset. These actions have resulted in improved network quality, and we are seeing the benefits through improved average weekly sales across the remaining stores. Underlying revenue declined 1% as higher Beefy's revenue was more than offset by cycling the $2.7 million in nonrecurring insurance proceeds and $0.6 million in deferred franchise-related income recognized in the prior corresponding period. Underlying EBITDA declined 43% to $9.2 million within the $9 million to $10 million guidance range provided to the market a couple of weeks ago. The decline reflected several factors, lower gross margin on slower-than-expected ramp-up of the newer Beefy's stores, compressed coffee margins where the group chose to maintain wholesale pricing to support franchise partners through the difficult trading conditions, absorbing higher green coffee bean costs and finally, delays in the commissioning of the new international supply hub in Turkiye. Looking at the network results in more detail. Core Brands, as we said, delivered network sales growth of 0.8% and same-store sales growth of 0.2%, driven by continued strength in Beefy's and Crust as customer count improved and competitor discounting in the pizza category eased. Improving network quality was evidenced by core brand average weekly sales rising 0.9%. During the period, we opened 22 new outlets across our core brands, offset by the closure of low-performing stores and the exit of sites as part of the company's store strategy reset. Within the coffee, cake, bakery segment, Gloria Jean's and Donut King traded in line with the challenging conditions flagged at the AGM in November. The Glorange refresh and premium product innovation continue to provide positive support, which I will cover shortly. In QSR, Crust delivered same-store sales growth of 2.2%, building on the momentum that we saw in the fourth quarter of last financial year when network sales returned to growth. Beefy's continued to perform well with same-store sales growth of 4.6%. RFG's immediate priority is improving core brand network sales and operational efficiency, which will maximize value for both our franchise partners and our shareholders. This involves 3 areas of focus: first, operational improvements to enhance our service delivery to franchise partners; second, procurement and supply chain initiatives to improve buying and reduce input costs; and third, a back-to-basics marketing strategy, targeting core customers and driving foot traffic. The goals of these focus areas is to increase network sales across core brands and improve store level profitability for franchise partners. As we've previously highlighted, RFG does well when its franchise partners do well. Early proof points of this strategy are encouraging with core brand same-store sales growth of 0.2%, average weekly sales up 0.9% and the current year cost reduction run rate of $1.2 million to $1.8 million already achieved. We will also have seen further Glorange store refresh success, which I'll discuss on the next slide. As previously disclosed, following the conclusion of the potential divestment review process, the Board has decided to retain Brumby's Bakery as a core CCB brand. While the process attracted considerable interest from multiple parties, we were not convinced that the options available would be in the best interest of shareholders, franchisees or team members at this time. Brumby's remains profitable and is an important contributor to the group's performance. We are currently developing strategies to support and grow the Brumby's network, and we will share these in due course. Our key medium-term growth opportunities, Firehouse Subs, international and Beefy's will continue to be supported by disciplined investment, and I will address each of these later in this presentation. The transformation program sets out the practical actions that will allow us to execute against our strategic priorities structured under 3 pillars. The first is cost rationalization. We are rightsizing the business to align with expected revenue growth. This includes consolidation of our Southeast Queensland offices to our single headquarters in Robina and reducing management layers to improve speed of decision-making. The second is operational enhancement. We are identifying and addressing process inefficiencies, improving supply chain and field team effectiveness and simplifying internal processes. The end goal is faster, better support for our franchise partners. The third pillar is structural alignment. We are improving our core business units with brand-aligned leadership, better operational alignment across brands and more effective use of centralized support functions. These pillars have clear measurable outcomes that will deliver $1.2 million to $1.8 million in cost savings during FY '26 that we have previously disclosed, targeting to increase to $5.7 million to $7 million of annualized cost savings during FY '27. They will support our focus on increasing core brands store numbers over time, and they underpin our goal to improve RFG profitability. Crucially, these initiatives are designed to be mutually beneficial for RFG and our franchise partners. The Gloria Jean's refresh. The Gloria Jean's Glorange format continues to demonstrate encouraging performance. Sales of the refurbished Glorange outlets in Goulburn and Robina are up 31% and 25% on the prior corresponding period. Our new store at GJ Shepparton is trading at 24% above the Gloria Jean's network average, excluding the drive-thru sites. Five further Glorange refreshes are planned for the second half, which will provide additional data points to validate the format at scale. Beyond the physical store format, we're also refreshing the broader Gloria Jean's market approach and improving the in-store customer experience. The combination of a modernized store environment, improved product offering and targeted marketing is designed to reenergize this brand for its next chapter. Brand innovation continues to drive customer engagement and network sales growth across our portfolio. Donut King's premium Christmas program lifted campaign performance 15% versus the prior corresponding period with the premium donut category advancing 14% following the Pistachio and Biscoff campaigns. This continues the strong Donut King premium range trend we highlighted at the AGM. Crust rolled out 5 new summer flavors generating over $1 million in additional product sales. This follows the success of the meat deluxe collection, which delivered $1.3 million in incremental sales in FY '25. Crust continues to benefit from its position as a QSR sector leader, topping the Fonto December quarter customer satisfaction scores across pizza brands. Gloria Jean's launched a collaboration with Pistachio Papi in September 2025, building on earlier global brand collaborations and extending the brand's relevance into new beverage occasions. Beefy's Pies. Since our acquisition of 9 Beefy's Pies stores in December 2023, we've delivered 7 new outlets and consistent network sales growth. In the first half of this year, the brand delivered 19% network sales growth and 4.6% same-store sales growth. Average weekly sales across the network were $28,000, while the 7 newer stores averaged $15,000, which is 70% of the non-highway network average and was below our expectations. The newer store performance is, therefore, what we are focusing on near-term for this brand, operational and marketing improvements to lift new store ramp-up and ensure sustainable growth as we expand beyond the Sunshine Coast. Recent innovation includes the Aussie Roast Lamb Pie with over 15,000 units sold since November. This type of product-led innovation is important in driving trial and repeat purchases in new markets. International represents another important medium-term growth opportunity. Our Turkiye hub is now operational, improving service levels and purchasing compliance by positioning supply closer to our master franchise partners and unlocking road freight options across the region. This is a meaningful structural improvement that will support margin and growth for our international franchise network. We appointed a Head of International in September last year, and we are reviewing incentive structures for international franchise partners to encourage store growth in key regions. International trading outlets stood at 528 at the end of the period, effectively flat on the prior 6 months. Firehouse Subs. Further progress has been made towards RFG's Australian launch of Firehouse Subs. During the half, we advanced the selection of key suppliers, progressed stores design finalization and develop marketing launch plans with agency support. Under the terms of our 20-year development agreement with Restaurant Brands International, we have a target to open 15 company-operated restaurants in the first 3 years and have a right to commence sub-franchising from year 4 with a target of 165 stores over 10 years. We continue to target the first Firehouse Subs restaurant opening in the fourth quarter of this financial year in Southeast Queensland. Turning to the company store reset. As announced in August, alongside our FY '25 results, 50 of our 65 company-operated stores were identified for sale or exit with the remaining 15 to be retained. The retained portfolio is concentrated in Beefy's Pies, which we will continue to operate as company stores to drive brand expansion, along with Gloria Jean's and one Donut King outlet. At the end of February 2026, 70% of the 50 targeted outlets have now been transitioned, agreed for sale, exited or closed. In the first half, the stores identified for sale or exit recorded a post-AASB 16 loss of $1.2 million and a cash outflow of $2.1 million, inclusive of lease costs. This strategic reset remains central to improving RFG's cash flow profile and network quality. As transitions take effect in the second half, we expect the associated cash outflows to reduce, contributing to an improvement in group cash flow. I'll now hand over to Ryan to walk through the financial results in more detail. Ryan Chellingworth: Thank you, Peter, and good morning, everyone. Turning to Slide 17, which outlines the P&L for first half 2026. Underlying revenue declined 1% on the prior corresponding period. Higher company store revenue from Beefy's and the full period contribution from CIBO Espresso helped offset the cycling of 2 one-off items in the prior period, $2.7 million in insurance recovery proceeds and $0.6 million in deferred franchise income. Gross margins were pressured by higher coffee bean costs, which the group chose to absorb rather than pass on to franchise partners given the challenging trading conditions. A wholesale coffee price increase will take effect from March 2026, which combined with better buying of green coffee beans is expected to support gross margin improvements in the second half. Underlying EBITDA and NPAT declined as a result of the above, together with a reduction in lease impairment benefits relative to the prior period, which we have previously flagged. Whilst company store costs increased from the new Beefy's stores and the CIBO full period impact, we did see a reduction in corporate overhead costs due to a reduction in bad debt expense, insurance costs, recruitment fees and occupancy costs. On Slide 18, we reconcile underlying to statutory EBITDA with detailed reconciliations including in the appendix on Slides 27 and 28. Key reconciliation items include company store lease provisions, company store trading results for outlets identified for sale or exit, marketing fund timing differences and growth horizon investment costs relating to Firehouse Subs and international hub establishment. Statutory NPAT for the period was $2 million, a reduction from $7.3 million in the PCP for the reasons outlined on Slide 17. Moving to Slide 19. The CCB division accounts for 72% of RFG's domestic network sales, contributing a greater share of EBITDA due to the vertical integration of coffee and pies. CCB same-store sales were resilient, down 0.4% though declining customer count and noncore outlet closures drove network sales 2.4% lower in difficult trading conditions, particularly in shopping centers. Positively, average weekly sales rose 1.7% and average transaction value increased 4%, indicating improved network health among continuing stores. Underlying segment EBITDA declined 47% to $7.5 million, reflecting compressed coffee margins, the cycling of one-off revenue adjustments across insurance proceeds and deferred franchise income and a lower contribution from lease impairment releases relative to the prior corresponding period. Turning to QSR on Slide 20, which accounts for 28% of domestic network sales. Key trading metrics across QSR improved over the period. Network sales were up 2.8% and same-store sales grew 1.6% with customer count, average weekly sales and average transaction value all rising. We opened 4 new Crust outlets during the half and the easing of aggressive competitor discounting that had previously impacted the pizza category supported growth for the brand. Crust had deliberately chosen not to participate in a price war to protect franchise partner profitability and was able to capitalize through a continued focus on value for the customer. Underlying segment EBITDA declined due to the cycling of lease and bad debt provision releases in the prior corresponding period. Moving to Slide 21 and our operating cash flow. Our operating cash flow declined by $9.9 million versus the prior corresponding period. This reflects several factors. First, the cycling of the one-off benefits in the PCP, including insurance proceeds and debt recoveries. Second, lower gross profit from the decision to maintain wholesale coffee pricing to support franchise partners and a lower contribution from Beefy's. Third, noncore cash outflows, including those relating to the setup of the international hub and Firehouse Subs preparatory costs. And fourth, company store cash outflows, which are expected to reduce in second half 2026 as transitions and exits take effect. We expect a meaningful improvement in operating cash flow in second half 2026, driven by the wholesale coffee price increase from March, cost-out benefits and the progressive reduction in company store outflows following the store exit and transitions in the first half 2026. On Slide 22, we include the balance sheet. We ended first half 2026 with $16.7 million of cash, which includes $11.3 million of restricted cash relating to marketing funds, bank guarantees and Firehouse Subs commitments. Working capital increased modestly due to seasonal timing and inventory positioning through the holiday period. Lease-related assets and liabilities reduced as company store exits progressed. At first half 2026, we had drawn borrowings of $32.5 million under our previous debt facility. Post period end, we completed the refinancing of a new $41.2 million facility with WH Soul Pattinson maturing 31st of August 2027. This facility provides for an additional $7.5 million drawdown to support our strategic priorities. Moving to Slide 23. The debt refinancing delivers balance sheet certainty and supports the company's strategic priorities. Our capital allocation framework is now focused on 5 areas: first, core brand operational efficiency and targeted marketing to drive network sales; second, the cost-out program across the 3 pillars Peter outlined, which directly supports cash flow improvement; third, maintaining appropriate liquidity to execute our strategic priorities; fourth, the initial Firehouse subs rollout funded within the new facility; and fifth, leveraging the Turkiye hub to support growth in our international franchise network. With that, I will hand back to Peter to discuss our FY '26 outlook. Peter George: Thank you, Ryan. For FY '26, we continue to guide underlying EBITDA of $20 million to $24 million. This guidance implies a meaningful improvement in the second half relative to the first half, which is underpinned by several drivers that we have discussed today. Macro conditions remain challenging, and our market will stay tightly -- marketing will stay tightly focused on core customers and value-driven propositions. In the first 8 weeks of calendar 2026, core brand network sales were down 5.5% versus the prior corresponding period, primarily reflecting customer count impacts within the CCB division from outlet closures. Over the same period, core brand same-store sales declined 0.2%, demonstrating continued brand resilience in a challenging environment. Looking at the key drivers for the second half. Gross margin is expected to improve as the wholesale coffee price increase takes effect from March, combined with better green bean purchasing and improved international coffee trading. Cost-out initiatives are underway and expected to deliver $1.2 million to $1.8 million of savings in the second half with the full year FY '27 benefit expected to reach $5 million to $7 million. International growth will be supported by the go-live of the Turkiye hub and incentive programs for master franchise partners. Company store cash outflows are expected to reduce as transition benefits take effect. Beefy's will focus on brand expansion outside the Sunshine Coast and on lifting the performance of the 7 newer stores for operational and marketing improvements. And Firehouse Subs remains on track for a fourth quarter '26 opening with the refinancing providing the funding runway for the initial rollout. Before opening to questions, I'd like to take this opportunity to thank our franchise partners and team members for their commitment through what has been a challenging period. Our franchise network is the heart of this business and the actions we are taking are designed first and foremost to improve their outcomes. I'd also like to thank our shareholders for their continued support as we execute the transformation and growth agenda. While near-term earnings have been impacted by a number of factors, the strategic foundations we are building, notably a leaner cost base, stronger core brands and a compelling growth horizon in Firehouse Subs and international position RFG well for sustainable value creation. We'll now move to questions. As a reminder, if you wish to ask a question please enter it into the webinar chat. Ryan Chellingworth: Moving to the questions. So we've had some come through prior to the webinar, and there's some that have come through since the webinar started. First question: What is being done to modernize and bring back the Bakery division? Why has it not competed with other bakeries taking market share? Peter George: Well, I think it's -- since COVID, it's been fairly stable. It hasn't competed with some of the other bakery chains for reasons probably related to the allocation of capital to other areas of priority. But it is -- as we said earlier, we've decided to retain the asset, and we will come to the market with details of its strategic future in the near-term. Ryan Chellingworth: The second question that's come through from the chat, it's come through from Ling Zhang. Could you please let us know the result of the revised corporate store strategy, especially the results for cash flow in the first half 2026? I'm happy to take that one. So as we noted in the presentation, we have 70% of the 50 company stores, we have either transitioned to franchise partners. We have agreed sales in place or we've exited or closed. From a cash flow perspective, we saw cash outflows of $2.1 million in the first half 2026, which we expect to improve through the second half as those store transitions take effect. The next questions come from Ken Wagner. How many Firehouse stores do you expect to have at the end of FY '27? Peter George: We have a contractual commitment for 15 stores in 3 years. The 3 years is probably running about 6 months behind schedule for a number of reasons, access to appropriate sites. We took a while to get the supply chain for the ingredients put in place. So by the end of 2027, I would expect we'd have somewhere around half of the 15 stores in place. Ryan Chellingworth: Second question from Ken. Assuming Glorange works, how quickly can you roll it out to the rest of the Gloria Jean's stores? Peter George: Well, we're confident that it will work. We need to give it a fairly rigorous trial period, though, because we do in this industry, often see a honeymoon effect of a refurb of the store, then it comes back to its original sales performance. In order to encourage franchisees to invest the money in refurbishing, we have to have fairly compelling proof. So once that compelling proof is available, which I think it will be in the near future, the rest of the network will be refurbished in accordance with the requirements of the franchisee and the landlord, but it will take probably 2 to 3 years for the whole network to be transformed. Ryan Chellingworth: Next question from Ken. How material is the international business in terms of EBITDA? Peter George: Yes. Right now, it's not immaterial. It contributes $2.5 million of the total, so it's about 10%. There is significant upside potential though out of the new supply chain initiatives that were put in place recently, we were missing a lot of revenue because they weren't buying coffee office because of the inefficiency of providing that out of Australia and Dubai. So we think its potential in the long-term is to be much more significant, probably somewhere around the 20% of earnings level. Ryan Chellingworth: Okay. Next question comes from Larry Gandler. With regards to the debt facility, does RFG expect the facility to be fully drawn by the end of financial year 2026? Peter George: Yes. Ryan Chellingworth: Second question from Larry. What have early demand indications or what early demand indications can you discuss about Firehouse Subs? Has the company -- is the company building consumer anticipation? Peter George: The answer to that is, yes. We've done extensive taste testing and that's universally come back very positive. The proposition is that these are much higher quality products than the main competitor offers. The price differential is not great. There are a few added extras such as availability of fries, which our main competitor doesn't offer. And further down the track, the angle of the Firehouse foundation will come into play. Ryan Chellingworth: Okay. We'll just pause there for one moment while we wait for any more questions to come through. On the basis that we don't have any further questions coming through, that concludes today's presentation. Thank you, everyone, for joining in, and have a good day.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Fourth Quarter 2025 Earnings Call. [Operator Instructions] This conference call is being recorded today, Wednesday, February 25, 2026. Before we begin, note that the matters the company management will be discussing today that are not statements of historical facts or forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the company's expectations, strategies, prospects, backlog or targets. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected. Important factors that could cause actual results to differ materially from the company's expectations are disclosed under Risk Factors in the company's Form K and other SEC filings. Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any forward-looking statements. In addition to the press release issued today, the company also filed with the SEC earnings release form on Form 8-K and its Form 10-K in the year ended December 31, 2025. Speaking today will be Joe Hanna, Chief Executive Officer; Phil Hawkins, Chief Operating Officer; and Keith Pratt, Chief Financial Officer. I will now turn the call over to Mr. Hanna. Go ahead, sir. Joseph Hanna: Thank you, Stephanie, and good afternoon, everyone. We appreciate you joining us for McGrath RentCorp's Fourth Quarter and Full Year 2025 Earnings Call. This is a particularly meaningful call for me personally. It will be my final earnings call as CEO of McGrath. As many of you saw in our February 5 press release, I will retire as CEO effective April 3, but remain a Director on the McGrath Board. I want to start by expressing my deep gratitude to our customers, our team members, our Board and our shareholders. It's been an honor to lead this organization. I'm very proud of our company culture, our reputation with customers and the growth we have realized over the past 9 years. Our Board invested considerable time developing a thoughtful CEO succession plan and is confident that Phil Hawkins is the best leader to succeed me, given his industry stature and experience at McGrath since 2004, most recently as Chief Operating Officer. Phil is a seasoned industry professional who embodies the core values of our company, and his experience will enable him to continue the execution of the company's strategy and maintain its positive growth trajectory. I've had the pleasure of working with Phil for over 20 years, and I could not be happier to have Phil succeed me as CEO. For today's call, I will cover our fourth quarter and full year 2025 results. Phil will then provide comments on our business outlook and plans for 2026. Keith will share the financial details including our financial outlook for 2026. And then we'll open the call for questions. I should also highlight that our Board of Directors today announced our company's quarterly cash dividend for the quarter ending March 31, 2026. This will be McGrath's 35th consecutive annual dividend increase. Now for the fourth quarter 2025 total company revenues rose 5%, driven by rental operations revenue growth across all 3 of our rental businesses. Adjusted EBITDA increased 14% from a year ago. I am pleased with this performance, which was driven by strong results at Mobile Modular and TRS-RenTelco. Across the company, our rental businesses performed well in a mixed demand environment. At Mobile Modular, activity was steady, portable storage showed continued stabilization and TRS maintained the healthy momentum we saw throughout the year. Looking first at our Mobile Modular business. Rental revenues increased 2%. Our Mobile Modular Plus offerings and our geographic expansion efforts gave us opportunities to grow in a slow nonresidential construction market. We continue to benefit from the shift in demand towards mega projects, which helped to offset lower demand across other nonresidential construction categories. Sales of new modular units were down in the fourth quarter and for the full year as a challenging nonresidential construction market presented fewer opportunities. In contrast, our Enviroplex business had a very strong fourth quarter and full year with healthy education demand, growing revenues with high gross margins. Turning to Portable Storage. We continue to realize gradual top line improvement, while broader commercial construction remain soft. We benefited from seasonal retail business and geographic expansion progress. In the quarter, rental revenues increased 3% year-over-year. Finally, TRS-RenTelco, rental revenue grew by an impressive 13% in the fourth quarter. This business completed a notable year of recovery ending with sustained utilization in the low to mid-60s and healthy demand across both general purpose and communications segments. As I reflect on 2025, our company had a strong fourth quarter, which played an important role in delivering a solid full year result in a mixed environment. Over the course of 2025, weakness in nonresidential construction created headwinds for the company but our strategic initiatives made a positive contribution and helped offset those pressures as well as the performance at TRS and Enviroplex, which bolstered our overall results. I want to thank each of our team members for your accomplishments and steadfast commitment to delivering the highest quality service to our customers. Our culture at McGrath is a driving force behind our growth, and it shines through in every customer interaction. Phil, over to you to comment on our business outlook and our 2026 plans. Philip Hawkins: Thank you, Joe, and good afternoon, everyone. I appreciate the opportunity to join the call today and to share more perspective on the business. I'd like to start by saying McGrath has been my home for more than 20 years, and I've had the opportunity to work across nearly every part of the organization. I worked closely with both Joe and Keith with a shared focus on disciplined execution and building long-term shareholder value. Joe is behind an impressive legacy of leadership and service commitment that he is thoroughly ingrained throughout our company. It is a great honor to succeed Joe as CEO and to continue leading our capable team. As CEO, I look forward to building upon that foundation, continuing to strengthen our market positions and leading McGrath to capture long-term opportunities that lie ahead of us while delivering value for our shareholders. Now let's look at the year ahead. The key drivers of our performance in 2026 will be continued progress from our modular growth initiatives and building on the market recovery at TRS. I'll discuss those further after I outlined the overall demand environment for our businesses. In the modulars business, uncertain market conditions persist, nonresidential construction indicators such as the Architectural Billings Index, or ABI, remains soft. While we do not expect meaningful improvement in the environment this year, we have proven our ability to grow in these conditions. At Mobile Modular, we started 2026 with lower utilization but with some solid momentum driven by the ongoing success of our services and geographic expansion initiatives. In our commercial business, mega projects, such as large industrial projects, data centers and government work remain active. Our fleet size and modification capabilities provide a competitive advantage in these opportunities and these strengths are helping our pipeline and bookings. In education, we expect a stable market this year. Overall, our education markets and modernization backlogs are healthy. The modular business remains our largest long-term growth opportunity. Turning to portable storage. We remain hopeful that the market demand has stabilized. While industry utilization remains low, our order activity has shown some positive momentum and we are starting 2026 with a slightly higher rental revenue run rate than at the beginning of 2025. At the same time, profitability remains a key challenge in this highly competitive market. We are laser-focused on improving sales effectiveness to get more units out on rent while protecting margin. We will continue to invest in growing our presence in existing markets, expanding into new locations aligned with demand and pursuing tuck-in acquisitions that support our growth. TRS is entering 2026 with good momentum. We see continued strength in aerospace and defense, data centers and semiconductor segments. Our 2026 performance will be accomplished through a strong leadership team with deep technical expertise and the ability to deploy capital effectively. In summary, across McGrath, we are entering 2026 in a healthy position. We are confident our strategy is sound, and we have the right team to execute. With that, I will turn the call over to Keith, who will take you through the financial details of the quarter and our outlook for 2026. Keith E. Pratt: Thank you, Phil, and good afternoon, everyone. Before I give the financial details and outlook for 2026, I want to recognize Joe for his leadership and many years of service to McGrath. Joe has played a critical role in shaping the company's strategy, driving results and positioning the business for long-term success. I also want to congratulate Phil on his well-deserved appointment to CEO. Phil and I have worked closely together. He brings deep strategic, operational and financial knowledge of the business, and I'm confident he will provide strong leadership as we continue to execute our strategy. So now on to the financial highlights. As Joe mentioned, we delivered strong results in the fourth quarter, driven by increased revenue across each of our businesses and the strong adjusted EBITDA performance at Mobile Modular and TRS-RenTelco. Looking at the overall corporate results for the fourth quarter. Total revenues increased 5% to $257 million with rental operations increasing 6% and sales revenues increasing 5% during the quarter. Adjusted EBITDA increased 14% to $105 million. Reviewing Mobile Modular's operating performance as compared to the fourth quarter of 2024, Mobile Modular had a good quarter, with adjusted EBITDA increasing 13% and to $68.7 million. Total revenues increased 2% to $175.8 million. The business saw a 2% higher rental revenue and 10% higher rental-related services revenues, primarily due to higher site-related services projects, which were partially offset by 1% lower sales revenues. Total gross profit grew 9% for the quarter, driven by a higher mix of used equipment sales, which have higher margins than new sales. Rental-related services also delivered growth and at higher margins than a year ago. Average fleet utilization was 71.3% compared to 76% a year earlier. Consistent with the challenging demand environment experienced throughout the year, fourth quarter returns of rental units were higher than new shipments. Fourth quarter monthly revenue per unit on rent increased 6% year-over-year to $874. For new shipments over the last 12 months, the average monthly revenue per unit decreased 3% to $1,169. We continue to make progress with our modular services offerings. Mobile Modular Plus revenues increased to $10.5 million from $8.4 million a year earlier, and site-related services increased to $10 million, up from $6.9 million. Overall, Mobile Modular had a good quarter as we continue to make progress with our modular solutions growth strategy. Turning to the review of Portable Storage. Adjusted EBITDA for portable storage was $9.6 million, a decrease of 3% compared to the prior year partly driven by lower margin on our delivery and pickup services and reflecting a very competitive market. Rental revenues for the quarter increased 3% to $17.3 million benefiting from some incremental seasonal retail business, while commercial construction activity remains soft. Average utilization for the quarter was 61.2%, which was comparable to a year ago. Quarterly utilization was relatively steady throughout the year and provided an indication that demand conditions are showing signs of stabilization. Turning now to the review of TRS-RenTelco. Adjusted EBITDA was $23.1 million, an increase of 21% compared to last year. TRS had another strong quarter with total revenues up 19% to $40.6 million, driven by higher rental and sales revenues. Rental revenues increased 13% to $28.7 million as the industry continued to experience improved demand conditions. Demand was robust throughout the quarter with a modest seasonal slowdown at year-end. Average utilization for the quarter was 64.5%, up from 59.1% a year ago and rental margins improved to 44% from 40% a year ago. Sales revenues were notably strong in the quarter, increasing 42% to $10.3 million and with gross margins at 64% compared to 58% a year ago. The remainder of my comments will be on a total company basis. Fourth quarter selling and administrative expenses increased $2.7 million to $54.4 million. Interest expense was $6.5 million, a decrease of $2.4 million as the result of the lower average interest rates and lower average debt levels during the quarter. The fourth quarter provision for income taxes was based on an effective tax rate of 26.4%, compared to 25% a year earlier. Turning to our full year cash flows -- cash flow highlights. Net cash provided by operating activities was $256 million compared to $374 million in the prior year. The decrease was primarily attributed to the absence of the nonrecurring $180 million merger termination payment received from WillScot in 2024, net of $63 million McGrath merger costs. Rental equipment purchases were $143 million compared to $191 million in the prior year. In addition, to investments in new fleet, healthy cash generation allowed us to pay $48 million in shareholder dividends. At quarter end, we had net borrowings of $515 million, and the ratio of funded debt to the last 12 months actual adjusted EBITDA was 1.42:1. Finally, our 2026 financial outlook. For the full year, we currently expect total revenue between $945 million and $995 million. Adjusted EBITDA between $360 million and $378 million, gross rental equipment capital expenditures between $180 million and $200 million. Our current outlook for each of our businesses is as follows: We continue to see solid opportunities at Mobile Modular, where we have multiple growth initiatives in progress and we expect this business to grow adjusted EBITDA in 2026. Given current utilization levels, we have equipment available to meet demand in most established markets. We expect to spend approximately $5 million to $8 million higher operating expenses in 2026, preparing available fleet to meet customer orders. Last year, we increased the size of our sales team to broaden our geographic coverage. And as we enter 2026, we see good momentum in several new regional markets where we will invest capital in new rental equipment to support demand. At Portable Storage, we see some signs of more stable demand in a very competitive environment. Until utilization improves, we expect it will be challenging to grow adjusted EBITDA and 2026 performance is expected to be comparable to 2025. At TRS, market conditions improved last year, and we expect to see more growth in 2026. As a result, TRS should contribute higher adjusted EBITDA again this year. Given recent high utilization levels and our growth outlook for the business, we expect to increase capital investment in TRS in 2026. Our Enviroplex business, which sells new modular classroom units had a very strong 2025 with strong revenue growth and higher gross margins than a year earlier. For 2026, we expect revenues, margins and adjusted EBITDA to be in a more normalized level and closer to 2024 levels. Our 2026 outlook also includes the following expectations for the company: Rental equipment depreciation expense of $85 million to $89 million; direct cost of rental operations of $122 million to $126 million; SG&A expense of $225 million to $229 million; and interest expense of approximately $26 million to $29 million. In summary, we remain committed to building long-term shareholder value through sound, strategic focus disciplined capital application and consistent execution. I will now turn the call over to Joe. Joseph Hanna: Thank you, Keith. Before we open the call for questions, this company has been a major part of my life for 22 years, and I'm incredibly proud of what we've built together. I'm excited about where McGrath is headed. We have the right strategy, the right teams and the right leadership. I would like to specifically call out the executive team and thank them for their support during my tenure. To our team members, thank you for your dedication. To our customers, thank you for your trust. To our shareholders, thank you for your investment in our company. Stephanie, you may now open the lines for questions. Operator: [Operator Instructions] We'll take our first question from Scott Schneeberger with Oppenheimer. Daniel Hultberg: It's Daniel on for Scott. First off, congrats to Joe and Phil and best of luck going forward to both of you. Jumping into the questions. Historically, you guys have guided the initial guide pretty conservatively out of the gate. How do you see the drivers this year that could potentially take you above that guidance range? Keith E. Pratt: Daniel, it's Keith. Let me make a couple of comments. I think the first thing is it's always hard to develop the financial outlook. And I always, at this time of the year, reflected a couple of things. First of all, the calendar. It's still very early in the year. And if you look at our business, typically, the second half of the year is the biggest contributor to our financial performance. So we really have to be humble at the start and say there's a lot we don't know, especially about the second half. I think right now, in particular, the macro presents some challenges. We've talked at length about the nonres construction market, some of the challenges there. We're not assuming a change in those conditions this year. And obviously, I outlined looking across our businesses, there's a little bit of a different outlook in the context for each business. If you look at what things can present upside in our year, it's really looking at each of the businesses and each of the initiatives we have underway and saying we do more, we made greater progress than is reflected in the initial guide, that's not an easy thing to do. Our team did a phenomenal job last year, particularly right through the fourth quarter. But that gives you some context. We have a lot to work with. It's early in the year. We are clear on strategy, and we have a team that knows how to execute but it's still not an easy environment. One other thing I will say, when you look at the revenue range being quite wide, what would push you to the upper end, it's really the sales activity in our Mobile Modular business. That's an area where if you look at the details of last year, we actually took a step back we didn't sell as much on the new equipment side, even though our used equipment sales were up a bit. But if we look at that part of the business, we have a good team. We have a lot of good opportunities we see in the market. We think it's a great long-term opportunity. But it's very hard to predict exactly where that can land. So we're assuming some growth there. If we do well, it could be pushing us more towards the upper end. On the other hand, if it's a difficult year, it could push us lower within our range from a revenue point of view. Daniel Hultberg: Got it. That's a helpful overview. Switching gears to your initiatives in Mobile Modular. We saw a real nice acceleration in the growth there for both Mobile Modular Plus and Site Related Services, I mean, despite being in a pretty tough environment now, could you speak to the accelerated momentum you've seen for those offerings? Philip Hawkins: Thanks. This is Phil. We're happy with the progress we're making in capturing additional profitability on every project with these service offerings. Our product and service offerings come with the building, that's Mobile Modular Plus and our construction services outside the building. Site Related Services continue to grow at double-digit rates. We have several customers, many customers that see value in having one provider provide those activities while our units are on the job site and before units get there. Daniel Hultberg: Got it. And switching to TRS. Rental revenue growth really accelerated nicely in the quarter. Could you please elaborate on what drove that acceleration? And what type of visibility do you have to sustain this momentum into '26? Joseph Hanna: Sure. We were very happy with how TRS performed. We are -- we actually -- you know there's 2 different components to the rental business there. One is our general purpose fleet and the other is our communications fleet. The general purpose fleet saw growth in aerospace and defense and semiconductor business, which is just a recovery of more projects that we're seeing in that customer base. And then over on the communications fleet, we're seeing a nice demand from data centers. And if you think about a data center, all the different connections the testing that has to be done, it's very intensive and requires considerable amounts of test equipment to get those facilities up and running. And so we're the company that people go to when they need that equipment and it worked out very nicely for us during the year and especially in Q4. Keith E. Pratt: Yes. One thing I'd add is in that business, we typically see some slowdown in activity as we get to the period from Thanksgiving to year-end. And this year, business remains strong with really very little drop-off in activity through December 31. There was a little bit of a dip right at the end but I would characterize that as a very healthy, very consistent fourth quarter and finish to the year. And a good example of where things really broke in our favor in that business for the final quarter of the year. Operator: We'll take our next question from Manav Patnaik with Barclays. John Ronan Kennedy: This is Ronan and Kennedy on for Manav. Congratulations to both Joe and Phil. The CEO transition, it sounds like it was thoughtful, should be smooth to seamless. Phil, you spoke of strategic continuity and continued disciplined execution. Are there any areas, whether it's portfolio management or mix, M&A appetite, capital returns where your approach may differ even if subtly for Joe's once you step into the CEO role? Philip Hawkins: Thanks, Ronan. I think Joe, Keith and I have worked closely together along with other members of our leadership team to craft our current strategy and refresh that over the last several years. And those strategic initiatives are in progress. We're happy with the products we're making, and I don't expect any near-term changes. John Ronan Kennedy: Got it. And beyond the performance of TRS and Enviroplex, total company basis [ 425, ] which specific strategic initiatives were most impactful in offsetting the nonresi headwinds and which do you anticipate will be most impactful for '26? Philip Hawkins: I would say geographic expansion, the additional salespeople, we added into the market in 2025 that we talked about on prior calls, momentum we have in those markets coming into 2026 or one of the biggest drivers in offsetting the impact that we're seeing to some of the more challenged areas of the commercial market. John Ronan Kennedy: Appreciate it. And then with the Mobile Modular starting 26% lower utilization, but guiding to the adjusted EBITDA growth, even with higher operating expenses and CapEx repair fleet. Can you walk us through the bridge on that? And what the key drivers are there, whether it's pricing, utilization, the Mobile Modular, Site Related Mix or and from take standpoint cost absorption? And then what's the incremental margin on the Mobile Modular Plus and Site Services versus base rental? Keith E. Pratt: Yes. A lot to unpack there. What I would say, Ronan, is, and Phil alluded to we've got several initiatives in play that we feel good about. So as always, there's a range of possible outcomes here. We'll be working to try and make the most of each of those initiative areas. I think the geographic expansion is important to call out. We stacked up over 25%. We feel good about the traction we're getting in the market. We'll put new capital to work because a lot of that geographic coverage is in areas where the -- we do not either have equipment in the market or we don't have the right kind of equipment available in our fleet. In terms of margin impact, I wouldn't see margin impact being dramatically different within the individual revenue streams, so areas like Mobile Modular Plus, areas like Site Related Services, I would look at what we've done historically and said, margins are probably going to stay pretty consistent. Probably the biggest wildcard is the sales piece of the business. You saw in the fourth quarter -- even though sales were down a bit for Mobile Modular, we actually increased our gross profit contribution from sales, and that was the impact of a higher mix of used sales. So when we turn that and look into '26, again, there's a range of possibilities here. We put our best estimates on the table but we look a lot around sensitivities. So that area a little bit hard to tell but I think we have a realistic midpoint in our range that reflects some continued progress with sales at Mobile Modular, probably not as heavy weighting towards the used sales more on the new, and that can be slightly detrimental from a margin point of view. So let us know if you like more color? I know you touched on a lot of individual topics there. John Ronan Kennedy: No, that's great. And then ask on the monthly revenue per unit, I think you rose 6% year-over-year, while new shipment revenue per unit fell 3%. Could you talk about the drivers there, whether it's mix drive pricing, customer-driven and potential implications for the portfolio and future economics as the portfolio churns. Keith E. Pratt: Sure. I'd probably start with the 6% increase in the revenue per unit on rent. So that's really looking at all of our assets that are held by customers and are at work, so to speak. That is really the key metric. And you see that 6% lift is very good in this environment. We're very pleased with that. The offset was fewer units being on rent, and that netted out to about 2% rental growth for the quarter. In terms of new activations, based on an LTM look at new shipments, the number there was down by 3%. So it was down from $1,203 to $1,169. I think there's a few things going on there. First, we are within those numbers. We are making progress with MM Plus. If we look at the base rent, that is actually lower and that's for a couple of reasons. The primary reason is mix related when we look at the types of units, the regions they're in, the contracts they're on, mix plays a big factor there in making the base rent lower but in addition, we're also seeing parts of the market for modulars are very competitive. Others are more stable but there's definitely a lot of competition in the marketplace. So that's how I would sort of summarize what we're seeing. I think when we look at the economic opportunity, there's still a significant gap between the revenue we're getting for units in our fleet today and where we're executing new shipments. That combination of discipline on base unit pricing, good progress with services. There's still an opportunity over time to raise that fleet rate by as much as 33%. Operator: We'll take our next question from Daniel Moore with CJS Securities. Dan Moore: Joe, congratulations going out on a strong note, so to speak. And Phil, congratulations to you. I look forward to working more closely going forward. CapEx or purchases of new rental equipment, you touched on several times, tick higher in Q4 as well as our guide for 26. Is that primarily kind of expanding into new geographies? And just talk about the confidence that you have to turn on the CapEx to get a little bit more required more rental equipment in this environment? Philip Hawkins: Dan, this is Phil. The primary driver of that higher CapEx on the modular side of the business is definitely geographic expansion, where we're growing our fleet in a newer market. There are some product areas of our portfolio in mature markets where we'd also be adding and then TRS, the health of the TRS business is another place where the CapEx will be likely higher than it was a year ago. Keith E. Pratt: Yes. And Dan, always good to look at history when you look at that number, it really takes us back to a level similar to what we spent in 2024. It's still lower than what we spent in 2023. And one other comment I will make is that the portion of additional spend, it also includes maintenance CapEx on some of our modular units, where we're doing a long-term refurb on the unit and we're not really adding any units to the fleet. And so think of a number, order of magnitude around $20 million in that CapEx guide, that is really extending the life of units we already own as opposed to adding units. Dan Moore: Got it. That's helpful. Any color, Keith, kind of the cadence of growth in margins embedded in the 26 guide, starting with Q1, how do we see kind of revenue and EBITDA growth? And how do you see it progressing over the course of the year? Keith E. Pratt: Yes. The way I would look at it is we're not assuming business conditions get any better anytime soon. So I would look at the first quarter as maybe be more comparable to how we started last year, second quarter, probably more of the same. And then second half of the year, by then, I think we're likely to be seeing more impact from deploying some of that new capital, particularly in some of the new modular markets. That's sort of how we characterize it at a very high level. Dan Moore: Very good. See if I have one more. I guess just from a capital allocation perspective, obviously picked up the dividend. Balance sheet's in great shape. Maybe talk about the M&A pipeline for '26 and kind of strategic priorities from a capital allocation perspective this year? Philip Hawkins: We continue to have an active M&A pipeline. We're consistently looking for opportunities, particularly in those geographic areas that we would like to enter. And the timing on those is always uncertain based on finding the right assets, right business in the right geography at the right valuation. It continues to be part of our financial allocation model and place that we spend a lot of time. Operator: We'll move now to Steven Ramsey with Thompson Research Group. Steven Ramsey: I extend my congratulations as well. When thinking about the geographic expansion, can you give a little bit more flavor on how the ingredients for how you go to market if it's Modular and Storage, how you're thinking about going to densely populated areas versus mega project-oriented areas? And then maybe lastly, in the areas with success how much is Modular Plus and SRS a factor or attaching to those wins? Philip Hawkins: All right. The way I would think about geographic expansions. We are looking for metro areas and based on metros that states that are strong opportunities for both -- for our entire Modular Solutions platform, which would include modulars, portable storage and all the service offerings that you referenced in that. So when we enter a new market, our goal is to provide all those offerings. And then it always helps if there's some large mega projects in those markets that provide a nice anchor, but we believe that -- and we've demonstrated through entering the Pacific Northwest after Design Space, Midwest after Vesta that we can enter these markets, come in with quality people and processes and add CapEx and take share. We'll participate in growth that exists in that market. Maybe to add to your question on Mobile Modular Plus, I think you think about that being a small portion of the revenue on unit, it really becomes more impactful as you get more units on rent in that market, and you're seeing that flywheel build over time. So I wouldn't say that's a material needle mover early in the process. Steven Ramsey: Okay. That's helpful. And then maybe to continue on SRS and modulars showing such great growth makes up $74 million or 16% of Modular segment rental revenue, do you expect the strong double-digit growth of those product lines to continue in 2026? Philip Hawkins: I think we have -- we believe there's a nice long-term opportunity there. On the -- as penetrations increase on the Mobile Modular Plus side, we add more service to that offering. We think there's room to continue turning that flywheel and give lift. -- the site-related services side, that could be lumpier, right? Those are larger revenue items tied to specific projects, and those can -- a little bit like sales tend to be a little lumpier in the process. We believe we've got a runway to continue to grow those. I'd be careful about the trajectory that we make in there and how long that high growth that we see can continue. Keith E. Pratt: Yes. Steven, one thing I'd point out is we've been doing this for a few years. So as we, if you will, anniversary some of the success of earlier MM Plus contracts, sometimes we'll have returning units, which actually bring the number down because they come back and they had MM Plus on the contract. And so simply replacing that with another contract that is MM Plus is necessary to hold the line. So Again, we've made a lot of progress. We think there's more opportunity. We've broadened the offering. Those are all good long-term drivers. But keep in mind, as we start rotating here, some of our earlier success has to be replaced. Steven Ramsey: Okay. That's helpful perspective. And then last one for me, serving data centers with TRS. Can you talk about how much you can do to grow intentionally that product set? Or how much of it is following customers? And then with data centers being supportive of TRS growth can you put the data center vertical into some kind of context of size within total TRS revenue. Philip Hawkins: Yes, I don't think we want to try to give a specific size of that related to TRS but I would characterize that word as following existing customers that are doing fiber connections or other communications type of testing and electrical testing into that data center space. So this is the work that we do every day across many different project types. There just happens to be a lot more of it in these data center projects. Operator: We'll take our next question from Marc Riddick of Sidoti. Marc Riddick: So first of all, I want to start, Joe, thank you so much. It's been a pleasure working with you over all these years and certainly wish you the best on your retirement. You've worked with us at Sidoti for many years, and it's certainly been a pleasure to do so with you and certainly looking forward to having a very positive retirement well. I know you're not completely going to do here but it's good for you and, it's been a pleasure. So full congratulations there. Joseph Hanna: Thank you, Marc. Marc Riddick: And Phil, we're certainly looking forward to working closer with you over time and certainly wish you're the best going forward. And really, really do appreciate all the color that you guys have already given on the call. One of the things I did sort of want to touch a little bit on the expansion. You touched on the organic pursuits on the expansion side and the geographic footprint side. Maybe you can touch a little bit on the potential of acquisitions. I guess there hasn't -- the pace of acquisition activity hasn't been what it was prior to everything at WillScot and the like. And maybe you could talk a little bit about what you're seeing out there valuations, appetite. Anything color-wise that you can give there would be appreciated. Philip Hawkins: Maybe I'll start with reminded everyone that we did 2 small deals related to our geographic expansion efforts last year, one in portable storage and one on the modular side of the business. So those are examples of the type of opportunities and transactions that represent our pipeline and that we look for. I think a couple of things to think about are we don't determine the timing of those, the owners do. And so a lot of our pipeline are people that we keep in close contact with when they're ready to sell or their first call, but they may not be ready at a particular time that we're having conversations with them. And for ones that are ready, there's a process to go through diligence, evaluating fleets and making sure it's the right fit for us, and then the valuation starts have to align. So I think we are rigorous in that process. We don't feel compelled to do deals. We look for ones that make sense for us, again, based on the market the valuation and the timing of the opportunity. And so those are the 2 we found this year. We continue to be hopeful that there's more. It's not something that we bake into our earnings guidance or our plan. Marc Riddick: Okay. Great. And then the one thing I sort of -- as a quick follow-up. As far as the timing of investments and timing of CapEx, is there anything we should be thinking about there as far as whether there's -- whether that would be concentrated to any particular part of the year? Or do you anticipate that sort of being sort of a consistent level as you go through 2026? Keith E. Pratt: Yes, Marc, it's a good question. I would say, generally, it's likely to be front loaded. So the first couple of quarters, the spend is likely to be heavier because as you heard us describe in some of the earlier Q&A, one of our opportunities with the geographic expansion is building the revenue base particularly in the second half. So capital will generally be flowing earlier in the year. And then you're going to see that if all goes according to plan, showing up in the revenue streams, particularly in the second half. Operator: Ladies and gentlemen, that appears to be the last question. Let me now turn the call back over to Mr. Hanna for any closing remarks. Joseph Hanna: Thank you, Stephanie. Now Phil, how about if you finish the closing remarks. Philip Hawkins: It would be my pleasure. On behalf of Joe and Keith and the entire team here at McGrath, I'd like to thank everyone for joining us on the call today and for your continuing interest in our company. We look forward to speaking with you again in late April to review our first quarter results. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Zevia PBC Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jean Fontana, Investor Relations. Thank you. You may begin. Jean Fontana: Thank you, and welcome to Zevia's Fourth Quarter and Full Year 2025 Earnings Conference Call. On today's call are Amy Taylor, President and Chief Executive Officer; and Girish Satya, Chief Financial Officer and Principal Accounting Officer. By now, everyone should have access to the company's fourth quarter 2025 earnings press release, and investor presentation made available this afternoon. This information is available on the Investor Relations section of Zevia's website at investors.zevia.com. Before we begin, please note that all financial information presented on today's call is unaudited. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release, presentation slides that accompany today's comments and reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors.zevia.com. And now I'd like to turn the call over to Amy Taylor. Amy Taylor: Thank you, Jean. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2025 earnings conference call. We are proud of the transformation progress we delivered in 2025. Through a series of high-impact initiatives spanning product innovation, marketing, distribution and supply chain, we not only significantly improved our financial performance, but also strengthened Zevia's competitive positioning within the better-for-you soda category. But before I speak to strategy, I'll briefly highlight our performance. For 2025, we delivered net sales growth of 4% and improved adjusted EBITDA threefold to negative $4.7 million. For the fourth quarter, net sales decreased 4% to $37.9 million as we lapped the pipeline fill to Walmart from last November and December. Net sales for the quarter were impacted by a shift of our Costco rotation into January. Importantly, this program was a national one with premium in-store positioning reaching beyond our regional footprint and driving trial and awareness in underdeveloped and fast-growing markets. Adjusted EBITDA for the fourth quarter reached breakeven and was ahead of our expectations. So turning to the 3 strategic pillars that enabled this progress. I'll start with amplified marketing. Our improved performance for the year was supported by powerful marketing that clearly differentiated Zevia as the antidote to the artificial, and as a product with no fake ingredients and no fake claims. Key campaigns showcase Zevia's use of creative culturally relevant content and high-profile brand fans to boost brand awareness, reinforce our positioning and appeal to consumers that are just trying to do a little bit better with healthier choices. For our second growth pillar, product innovation, 2025 was a breakthrough year. We introduced on-trend fruity flavors such as Strawberry Lemon Burst and retailer exclusive Orange Creamsicle, both of which strongly resonated with consumers. We also began to elevate taste for select classic flavors, the impact of which will carry into 2026 in parallel with our package design evolution. Our marketing and product initiatives helped to propel distribution, our third growth pillar, the historical peak levels in 2025. including a nationwide presence in Walmart as we are an anchor brand within that retailer's modern soda set and at Albertsons, where we increased our shelf space and gained eye-level placement with a vertical brand block within their next-gen beverage set. Through these initiatives, we've strengthened our foundation for growth with brand, product innovation and distribution working together to capitalize on favorable category and consumer trends that create strong tailwinds. Now in 2026, we are building on this momentum with a focus on expanding reach and driving trial to expand the user base and ultimately to accelerate growth. So first, let's walk through our marketing initiatives. Stevia is resonating with the consumer more than ever as we continue to show up as the antidote to the artificial. We kicked off this year with a playful campaign inviting consumers to join a ZTOX, so a detox from artificial soda with one simple swap, choose zero artificial better-for-you soda instead. This month-long campaign featured influencer partnerships, an immersive activation at world-renowned DJ Diplo's Run Club, sampling at Life Time Fitness' Miami Marathon and a bold out-of-home takeover across Atlanta. Early reads of editorial and social outcomes revealed that the campaign punched above its weight. The next brand campaign in March will continue to reinforce Zevia's unique position in personality in a digital campaign also activated at retail. And during our next call, I'm excited to update you on summer brand campaigns bolstered by new and familiar high-reach brand ambassadors, our most significant investment in reach and cultural relevance to date. More to come on this, as this and other initiatives will run in parallel with our spring and summer rollout of our dynamic new package design and will be supported by retail-driven trial driving programs focused on expanding the user base. So next, let's talk about the portfolio and 2026 product innovation. While trust and affordability remain core differentiators for Zevia, we are winning where it matters most in the category, which is taste, unlocking a broader consumer base and strengthening long-term brand relevance. We know that new products are outperforming legacy items in velocity, creating a halo effect that boosts legacy items as well. With that distinction, combined with brand and accessible price points, we are in a strong position to expand our consumer base and continue to drive strong repeat rates. Orange Creamsickle was a huge hit as the #1 six-pack at Sprouts immediately following its initial launch and is now being rolled out as a hero flavor of 2026. Fruit Punch and Peaches and Cream, which also saw successes in variety packs and as a limited time offer, respectively, are now rolling out nationally. And finally, after proving to be a hit and the top Zevia SKU at Walmart, the new fruity variety pack can be found across retail starting in spring resets. We are bullish on this robust innovation pipeline overall and specifically as a complement to the legacy soda portfolio, enabling Zevia to super serve old-school soda fans and engage new modern soda consumers with a light and fruity palette. This strong portfolio with improved packaging and taste across the board should be a key driver of both new users and increased consumption this year. Now building on the successes in our product innovation and in marketing, let's move on to our third growth pillar, distribution. We continue to make meaningful progress through our key distribution channels and step-by-step in new channels. In club, we are focused on building consumer acquisition through trial and thus volume. Earlier successes this year include a new Costco front-of-store national rotation that represents a meaningful opportunity to drive trial with new consumers in underdeveloped and fast-growing markets. In the mass channel, we're growing our Canadian Walmart business to just over half of those stores, and our largest single retail opportunity in the U.S. is to win distribution at Walmart's top competitor. In grocery, we're leveraging the success story of Albertsons, where expanded space and eye-level placement through a vertical brand lock have yielded growth and in recent months, share gains. We believe this performance plus the new packaging, new items and improved taste will yield more retailers to follow Walmart and Albertsons lead, though several spring sets are still forthcoming. And in e-commerce, we continue to see accelerated growth in our business overall and through subscriptions, plus the introduction of our smaller count option across flavors in this channel will continue to drive sales. In the medium term, we see meaningful opportunity to drive new distribution across all club operators, value and dollar channels and in mass. And long term, as is true for the whole category, convenience and food service remain a big opportunity both for trial and for continued growth. As the only zero sugar clean label offering at an accessible price point, we are uniquely positioned to stand apart from a crowded competitive set in better-for-you soda in each of these key channels. One quick note before handing it over to Girish, we are pleased to announce the appointment of Andy Rubin as Chair of the Zevia Board. Andy has made valuable contributions over the past 5 years, most recently as our Lead Independent Director. I look forward to further leveraging his strong background, including being the founder of Trove Recommerce, a practiced ECG consultant and a 10-year Walmart veteran, where he served as VP of Corporate Strategy and as Chief Sustainability Officer. Paddy Spence will remain on the Board, and we are grateful for his ongoing support. And then finally, we're pleased to welcome Suzanne Ginestro as a Director, as previously announced. She's a seasoned marketing executive with over 25 years of experience in brand building and consumer growth. Her background and track record of success will further strengthen our Board capabilities. In closing, I'm energized by what our team has accomplished and even more so for the future as our strategic initiatives bear fruit and accelerate momentum. While we still have a lot of work to do, we are focused on the long term, and we believe we are well positioned to capitalize on the strong better-for-you beverage tailwinds well into the future. With that, I'll turn it over to Girish. Girish Satya: Thank you, Amy. Good afternoon, everyone, and thanks for joining our call today. 2025 marked a year of transformation for Zevia. The strategic initiatives we deployed across the business enabled us to return to growth and vastly improve our financial profile. Beyond the strengthening of our financial position, we've also elevated our competitive positioning, which sets the foundation to drive future growth and profitability. Turning to our results. Net sales in the fourth quarter decreased 4% to $37.9 million. The decrease versus the prior year was primarily due to lapping of the expanded distribution at Walmart in Q4 2024 as well as a reduction in promotional activity versus the prior year. Also, as Amy noted, our fourth quarter was impacted by the trade-up of our existing regional Costco rotation to a new national rotation program launched in January. This new program entails front of store placement, raising visibility for the brand as our new 30k variety pack becomes available nationwide. Gross margin was 47.7%, a 150 basis points decline from 49.2% in the fourth quarter of last year, reflecting channel mix associated with the return to the club channel and higher tariff costs, which was offset by lower promotional activity. Selling and marketing expenses were $11 million or 29.1% of net sales in the fourth quarter of 2025 compared to $16.5 million or 41.7% of net sales in the fourth quarter of 2024. Breaking it down, selling expense was $7.4 million or 19.5% of net sales in the fourth quarter of 2025 compared to $10 million or 25.3% of net sales in the fourth quarter of 2024. The improvement was largely a result of lower warehousing and freight transfer costs as we continue to benefit from our productivity initiatives. Marketing expense was $3.6 million or 9.6% of net sales in the fourth quarter of 2025 compared to $6.5 million or 16.5% of net sales in the fourth quarter of 2024. The decrease was primarily due to the timing of marketing spend as we lapped a significant investment in our holiday campaign last year. We continue to balance brand and performance marketing with the objective of driving more awareness for Zevia. General and administrative expenses were $7.3 million or 19.3% of net sales in the fourth quarter of 2025 compared to $6.8 million or 17.3% of net sales in the fourth quarter of 2024. The increase was primarily driven by higher accrued variable compensation expense. As a result of the aforementioned factors, net loss significantly improved to $1.3 million from $6.8 million from the prior year. Adjusted EBITDA was approximately $50,000 compared to an adjusted EBITDA loss of $3.9 million in the prior year period. Turning to our balance sheet. We ended the quarter with approximately $25.4 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million. Moving to our full year results. For the full year 2025, Zevia achieved net sales of $161.3 million, an increase of 4%. The increase was primarily driven by higher volumes associated with the distribution expansion at Walmart. We expanded gross margins to 48% versus 46.4% in 2024 due to better product costing and more effective inventory management. Net loss more than halved to $11.1 million as compared to a net loss of $23.8 million in 2024 and adjusted EBITDA loss vastly improved to $4.7 million for the year compared to an adjusted EBITDA loss of $15.2 million for the full year of 2024. Now turning to our outlook. In 2026, we plan to build on our momentum, leveraging our growth initiatives to broaden our consumer base through amplified marketing, sharpened product innovation and expanded distribution presence. We are supporting these initiatives with strategic investments enabled by our improved cost structure and healthy balance sheet. For the full year 2026, we estimate net sales in the range of $169 million to $173 million or 6% growth at the midpoint of the range versus 2025. Net sales expectations reflect the planned discontinuation of our tea line, which we expect to impact growth by 1 to 1.5 points. Looking at cadence, I would note that the quarterly net sales volumes are expected to shift from previous years with higher volumes anticipated in the first and third quarters. There are several factors impacting this cadence, which are as follows: the Costco national program launched in the first quarter, which benefits net sales growth while having a dilutive impact on gross margin. The second quarter is expected to be impacted by the planned discontinuation of our tea offering, the lapping of sell-ins to Walgreens and Albertsons in the second quarter of last year as well as a shift in marketing and promotional dollars spent from Q2 to Q3. This shift is to better align with our new packaging rollout. We expect to realize the impact of planned price increases beginning in Q2. Turning to profitability. We are expecting a full year adjusted EBITDA range from a loss of $1 million to positive $0.5 million, which incorporates an incremental $5 million in tariff-related aluminum costs beginning in Q2 as well as continued reinvestment in our business. Our guidance also assumes gross margins in the high 40% range starting in Q2, barring further increases in aluminum costs. We also expect to start realizing the last tranche of $5 million in savings from our productivity initiative towards the end of Q2. For the first quarter of 2026, we expect net sales of between $40 million to $42 million. This guidance reflects volume gains associated with our national Costco program that began in January. While the Costco program yields lower gross margins, we believe an investment in the club channel will support growth in trial and drive awareness. We expect an adjusted EBITDA loss of between $1.6 million and $1.9 million, reflecting a mid-40s gross margin range. In closing, the progress we've made has positioned us to move confidently into the next phase of our strategic plan. With mid-single-digit household penetration and strong tailwinds in the broader better-for-you soda space, we believe we have ample runway for growth and improved profitability over the long term. I will now turn it over to the operator to begin Q&A. Operator? Operator: [Operator Instructions] Our first question comes from Sarang Vora with Telsey Advisory Group. Sarang Vora: I wanted to start with the Costco rotation program. It's great to see that you guys are nationally up from regionally before. So how does the program work? Can you help us understand, is it nationally, but it is still rotational or you guys -- Zevia will be at Costco all through the year? Any color on the Costco program would be helpful. Amy Taylor: Sure. No problem. Yes, we're excited about the fact that we are able to kick off nationally at Costco through what is a rotation that took place at the beginning of the year, stronger visibility for the brand and almost most importantly, penetration into regions where we haven't had Costco distribution before. So what we expect going forward is in a couple of regions, if you think Texas and some across the South, the Southwest, there's a number of regions where they've never carry Zevia before. We saw very strong velocities, and we expect to continue in those regions, whether through additional regional rotations or hopefully as a new permanent item, which is the case in a few other regions. And then the other opportunity is to reengage with Costco based on the success of the program to look at incremental national rotations in the future. So there's a couple of different ways forward, Song. We could gain new regions permanently or we could gain incremental rotations either regionally or nationally based on what appears to be very strong performance out of the gates in the January program. Sarang Vora: Okay. That's great. And then second question I had was about the tariffs. Can you talk a little bit about exposure to tariff? I know you called it out about $5 million, but how are you mitigating that in some ways? It seems like there's a price increase coming up or trying to offset that. There's also some COGS initiatives you have. So walk us through how are you mitigating that tariff exposure and how long it should last in the P&L? I know we started lapping it this year, so that would be helpful. Girish Satya: Sure. So what we'll see in the P&L, of course, is increased exposure to increased aluminum costs, which is reflected in our guide. There's 2 things that we are doing to mitigate it. One, of course, as you mentioned, is the price increase, which we have taken and we will begin to see or have communicated rather, and we'll begin to see the impact of it in Q2. Secondly, we have the incremental $5 million, which is the last tranche of the savings from the productivity initiative, which again will also start hitting the P&L in Q2 as well. And so those 2 items, price and incremental costs are the main factors that we are leveraging to mitigate the increased aluminum exposure. Operator: Our next question comes from Jim Salera with Stephens. James Salera: To start off, maybe just a quick housekeeping on food. Is the $1 million or so that you guys came up short of the 4Q top line guide that you provided in 3Q, is that just by virtue of the Costco timing shift? Or is there anything else in there that we should be aware of? Girish Satya: It's primarily due to the Costco timing shift where we had planned -- we had planned regional rotations in Q4. We moved those into a broader national rotation in Q1. So the volume shifted from Q4 to Q1. James Salera: Got it. And then on the -- as we think about better visibility, obviously, more locations in Costco and some other retailers, when is all of the new packaging going to be in market? And do you guys have any marketing programs kind of around having the kind of fully implemented new packaging to help drive some visibility and maybe call attention to that? Amy Taylor: Absolutely. Thanks, Jim. So first of all, the packaging is starting to show up on shelf now, and it looks amazing. It really pops. It looks delicious. It screens the specific reasons to believe in Zevia. And I think that is tremendous support for our positioning in the market, especially given the advantage that we offer versus our competition, especially against which we are shelves now on a regular basis, given the way that the category has developed. So it looks great on shelf where you'll see it flow through because we are doing what we call a rolling launch is largely into Q2. And I mentioned in prepared remarks that we have a heavily digital campaign, some of which will be showing up at retail in March kind of at a brand level. But more specifically in parallel to the packaging rollout, our improved taste will be rolling out at the same time across legacy -- some of our classic flavors. And we have a spring/summer marketing campaign, which I'm going to speak about a little bit more on the next call, which will engage some pretty familiar faces and high-impact reach personalities that love Zevia. And it's just a great opportunity to drive reach, awareness, trial and then given the fantastic new taste and the rate of innovation that we've been driving lately also repeat. So we are bullish on the summer. That will start really hitting the shelves and hitting the market late Q2 and support the business through the back half of the year and going forward. James Salera: Great. And if I can just sneak one in real quick. I think you guys finished with marketing spend for 2025 at like $20 million, maybe a little shy of that. Can you just give us a sense for what overall marketing spending looks like in 2026 as we think about kind of the balance between flowing through some of the cost savings versus reinvesting in visibility for the brand? Girish Satya: Yes. Thanks, Jim. We will continue to increase investment in marketing. And as a percentage of revenue, it will range between, let's call it, 12% and 13% of revenue in 2026. So a slight increase over 2025 as a percentage of revenue. Operator: Our next question comes from Eric Des Lauriers with Craig-Hallum. Eric Des Lauriers: First one for me, another follow-up on Costco. So wondering how many of these regions are new? And are any of these regions -- are you also underpenetrated in other channels in these regions? Or is it sort of just club or just Costco where you've been relatively underpenetrated here? Amy Taylor: Sure, Eric. So about a little bit of each. So the regions that have never carried Zevia before, are about 35%, 40% of the regions that we showed have been in this national program. So that's net new, and that's exciting to us from a trial driving perspective, especially when you think about the fact that it's a variety pack and everybody can kind of find their favorite flavor, that trial driving mechanism often supports growth across channels and brings people into the franchise for the first time. A lot of incrementality in the club business. And then to answer the second part of your question, yes, a region like Texas, where we see accelerated velocities in the national program is exciting to think about how our business could grow across channels. If you think about Texas and go East, we have lower market penetration on the East Coast than we do, let's say, in the Midwest and across the West Coast. So these step changes really help us to expand reach and help to be a catalyst for other channels as well and other specific geographies. So excited about the Southeast, Texas and the East Coast in general as benefiting from this national program. Eric Des Lauriers: That's great to hear. And do any of the flavors in that variety pack contain either any of your new flavors or the new improved formulation? Amy Taylor: New flavors as of now, yes, new as of 2025 and new taste profile for the classic flavors, not yet. And so think about the pack design, the increase in marketing spend sort of seasonally and the improved taste profile, all ramping up during peak beverage season, so late spring. Eric Des Lauriers: That's great to hear. And then just last one for me. Just wondering if you could expand a bit on the DSD market, Pacific Northwest, and I believe it was Arizona, just how the trends there continue. Amy Taylor: Sure. So we are learning that time in market with a DSD operator yields some stronger results, meaning we are really starting to crack through distribution of display in grocery from our DSD partners. And so we see grocery in our DSD markets outperforming rest of market. And very new news, we're starting to see some of our singles programs perform better than they have in the past because of what we're able to execute, again, in grocery with our DSD partners help. And so we're leveraging some of those insights when we think about how do we drive trial and specifically how do we drive singles success through the spring and summer with the marketing and packaging rollout that you and I were just discussing. Convenience is more of a long-term opportunity. I believe that, that's true for the category in general as we think about the fit of the shopper in the convenience environment to the category and its promise. It will just take a little more time. But our DSD partners are able to help us to test and learn in some regional pilots, and we continue to do that with a few success stories that help us to learn what exactly sets the brand up for success at these early stages in the channel. Operator: Our next question comes from Andrew Strelzik with BMO Capital Markets. Andrew Strelzik: My first one, I think I caught this right. You made a comment about Albertsons and some of the successes there and kind of insinuated that other retailers may follow suit. Can you just maybe elaborate a little on what you were talking about there? And is the implication that there are some potential sales opportunities out there that aren't at this point included in your guidance because you don't have full visibility to them? Amy Taylor: Let me start with your second question, then I'll go backwards into the grocery channel dynamics and specifically Albertsons. Our guide does consider in some part that we have yet to receive final spring set communication from several retailers. And this is not atypical, right? February, the resets are March, April or May, depending on the retailer. So there could be some improvements in set. And of course, we guide just thoughtfully thinking about what we know and what we don't know, AKA, just visibility into the channel. The comment on Albertsons is really a significant learning for us around assortment, planograms and innovation. And the reason I say that is in Albertsons in the spring of last year, we increased our space by 30% by way of expansion of the category and by way of exciting new flavors. Albertsons took the majority of our flavors and most importantly, built out a brand block for Zevia, which was vertical, taking our brand to eye level. And with that, we saw accelerating growth over the last 6 months close to -- over the last 6 months, we grew faster than the category, AKA grew share in our performance over the last 6 months. And that continues to accelerate in the last couple of 4-week reads where we were close to doubling the growth of the rest of the category. And I say that just to go back to when the product is properly placed on shelf, when it features all of our innovation and when we have the right assortment, we have a very strong case study to then take to other retailers and continue to expand on it. Now these big national grocery chains move slowly, but our expectation is that over time, we're able to move more national and regional grocers in the direction that Walmart and Albertsons are going, which is now 6-plus months after the resets really bearing fruit. Andrew Strelzik: Got it. Okay. That was very clear. And then you gave some good color on some of the puts and takes through the year on the sales growth side. And so I was wondering about gross margins through the year, what you can share on that or how we should think about gross margins for the year, it sounds like maybe 1Q is the low point with Costco and then the pricing coming through in 2Q, but any color on that would be helpful. Girish Satya: Sure, Andrew. So as you noted, in Q1, we'll see a bit of a downtick from Q4 in terms of gross margin, particularly related to this national rotational program at Costco. Beginning in Q2, you'll begin to see the impact not only of the price increase, but some of the incremental mitigation factors around mitigating aluminum tariffs. And so we expect to see both of those things again, starting in Q2. So we expect in Q2 and thereafter, margins to return back to the upper 40s range. Operator: Our next question comes from Eric Serotta with Morgan Stanley. Eric Serotta: So a quick one for Girish in terms of the price increase. Can you give us some idea of the magnitude we're talking here, low single digits, mid-single digits? Okay. That's great. And then what are you assuming in terms of elasticity impact? It seems a little different than in the past when everyone is taking pricing at the same time. Some of the CSD players have moved already, moved late last year. So just wondering your thoughts on elasticity and then a question for Amy. Girish Satya: Yes. As a reminder, we did not take price last year. And so we are taking price this year beginning in Q2. Elasticity, I think, generally speaking, we've evaluated at around 1.1 or so, which is what we've seen historically, and that's kind of what's baked into our guidance. Amy Taylor: Yes. And I think one of the most important things on the price increase and on the elasticity question is that we have been a fast follower on price, which I think is appropriate for our brand and its size. We do have room on price over the next few years as we continue to build brand. And we have been, I think, most importantly, successful in projecting the impact of price increases, AKA, our elasticity assumptions have been correct. So we feel pretty confident in our ability to implement price increase as planned and largely predict its impact on the business. That, in this case, to be a very positive one. Eric Serotta: Great. And then, Amy, we're probably, what, 15 months or so into Walmart implementing the modern soda set, I guess, it was late 2024, if I remember correctly. How are you seeing that set evolve in the -- how have you seen it evolve in the interim? How are you expecting or seeing it evolve this year heading into and coming out of the spring resets? Is the overall space for modern soda increasing? And how is your space within that set trending? Amy Taylor: Sure. So just to start with, I think it was pretty cool to see the world's largest retailer be a first mover and calling the set modern soda, which I think is very strong positioning and others follow food or slowly are doing so, and they are pleased with the performance of the set, not only in its literal performance from a velocity and incrementality perspective, but also in the shopper that it attracts. It's a very attractive shopper. It's a younger shopper. It's generally a higher income shopper. Now speaking to Zevia specific, we remain an anchor brand in that set. And I say that because we are the multipack player in the set. We are the take home, the stock-up brand, and we are at a more accessible price point significantly to the rest of the set. So we play a unique role. We brought some innovation to the table in July of last year, and we're seeing strong growth from those SKUs, and we're pleased with the mix. And we've grown as much from optimizing assortment, so right packs, right flavors as we have from space. Our space has, despite tremendous pressure from competition, we've held our space, and we've made that space more productive in the form of a variety pack and bringing innovation to Walmart a little bit early. So we're bullish on Walmart even as we lap the pipeline fill, and we continue to grow there, and we've seen strong market share implications within the customer itself given our expansion through last year and our accelerating velocities. Operator: We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Amy for closing comments. Amy Taylor: Thanks. Just briefly, I would just say that in 2025, we returned to growth. We cut adjusted EBITDA losses in half. We improved our gross margins even in the midst of a challenging macro, and we gained distribution. So we are proud of the foundation that we've set. But almost more importantly, we have in our pipeline powerful packaging changes, an accelerating pace of strong innovation and improved taste across much of our portfolio. And all of this is supported by a sharper brand, which is really resonating with the consumer. So our position as a clean label, clear liquid zero sugar affordable option that also tastes great and increasingly tastes the best among better-for-you sodas is more relevant than ever. The fundamental changes and increased investments that we're making in the business set us up for the long term. So thanks for joining us today, and we look forward to speaking to you again next quarter. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Sverre Flatby: Good morning, everyone. I am here with my colleague and CFO, Einar Bonnevie, and we thank you all for joining today. Let me start clearly. The fourth quarter 2025 was a record quarter, and 2025 was a record year. So, we have interesting topics for you to go through today, and these are the main highlights. We're going through the fourth quarter highlights, the full year '25 and of course, AI, which is important. We'll go through that deeply. [Audio Gap] Status when it comes to M&A. And as you see, we will have a presentation for about 25, 30 minutes, and we will have a Q&A session at the end of the session. So please, if you have any questions, type them in as we go, and then we will attend to them at the end of the presentation. So, let's start and talk about the fourth quarter 2025. Reported revenue, NOK 135 million. That is 17% growth compared to the fourth quarter 2024. We are quite happy with that and also happy with the fact that the reported EBITDA in that quarter is NOK 31 million and the reported EBITDA margin is 23%. And even there are some one-offs as usual, this is the reported margin without any adjustments. And then the full year, it didn't just end on the high note with the fourth quarter. The full year 2025 is also a structural step-up for Omda. NOK 496 million in sales and revenue for 2025, which exceed our guiding for '25. That is 16% growth compared to 2024. And that also means that the operational baseline, the operating baseline into 2026 is very, very strong based on what has happened in 2025. So, the profitability and performance in '25, NOK 117 million, which is good, and that also implies 24% reported EBITDA margin for 2025. So next topic will be AI. And of course, when you look at AI in the market today, there's a lot of discussions, a lot of noise and predictions, and we have to respect AI as an important topic for all businesses, including our own. What we have to do is to explain properly what we are doing and how it is affecting us. The good thing for Omda is that we operate, as you see here in the picture, in a regulated, certified specialized health care and emergency environment. And what is going on in there? It is mission-critical. It has to do with life-critical treatments and reliability and compliance is, of course, much more important for customers than speed to change things in these environments. And also, if you think about the switching cost of a situation like this, it's not only about software and code. So the stability and the mechanisms in this specialized market will stay the same, although AI will have an impact, which I will get back to in a few minutes. So, if you look at this, a user using a software in the process working in these environments, the value is not necessarily only in the code. The value is, of course, in regulatory trust in specialized workflows and expertise that we deliver and, of course, in cooperation with the customers and their demands and needs. So, if you look at it that way, AI for Omda gives us a stable situation from the customer side, but it is rather an acceleration tool for us when it comes to be more efficient, a productivity accelerator really. So that is what I'm going to explain to you. It's more like what are we actually using AI for in Omda. And these 2 pictures will give you an idea. I think many analysts have already seen what's going on. And I think it's clear that a company like Omda can use development tools with AI agents to completely change the development processes and make them much, much more efficient. So, we are using, like in this picture, a senior developer, the new era gives the possibility to get added code, testing, documentation and much more efficient workflow processes using the agents rather than a lot of other colleagues helping out creating code, for instance. And this was in '24, it was experimental. In '25, we already started projects to make sure that we could do something both in our business units, but also centrally for Omda to create toolboxes for our business units to accelerate this in 2026. So, it's no longer experimental. It's our operating model going forward. So, this is going to accelerate in 2026. And then you will ask yourself, what is the impact on our business? And if you look at this graph, and let me explain it simply to the left, the percentage is self-explanatory. But then again, you see the topping here, the 3 dimensions. One thing is what we have delivered, our guidance for this year, which my colleague will go through in a minute, and then the ambitions and the long-term targets. So, what does this mean really? If you look at the gray curve here, CapEx, which is the same as investments in our own software. We think that investments in our own software will continue with the absolute value level that we have today. But that also means that the CapEx and investment in software compared to our revenue will decline over time as we show you in this curve. And if you look at the green curve, obviously, when you reduce CapEx like that, it will give more cash from operations. So that means the cash EBITDA margin or so-called EBITDAC will, of course, then increase. And this is really the important thing for Omda. So, AI in our company is not a hype. It's actually a tool set that helps us create a much more profitable business. So that means we have delivered a very strong fourth quarter '25 and also a strong year '25. So now it's time to dive deeper into that. And Einar, if you're still awake, the floor is yours. Einar Bonnevie: Thank you, Sverre. Thank you. Good morning, everyone. Let's have a deep dive into the financials. And let's start with the quarterly comparison, the fourth quarter '25 versus the fourth quarter '24. And we see it's -- yes, it is a record quarter. And there's one -- you can say, one-off or anomaly here. It's the sales of hardware and usually large hardware order in the fourth quarter made us beat the expectations. But if you adjust for that, I think we are very much within the guidance of -- in the upper range of what we guided more than a year ago for the year. And when we look at earnings, a very marked improvement in earnings. When you look at the EBITDA or cash EBITDA, you see a very strong margin improvement in the fourth quarter. And also, if you look at the whole year, the same thing here, we see a very strong year, ending -- very much ending on a high note. And the earnings was not only a quarter or 2, we actually met or beat the expectations each quarter in 2025. And ending, as Sverre said, on a record high EBITDA and cash EBITDA. I think it's also worth noting that even though we had a very large hardware order in the fourth quarter and that for the year, actually, hardware sales doubled compared to 2024. Our gross margin was still improving. COGS is coming down and the gross margin is still improving. So, taking note of that. And that also points to where we will be in 2026 and going forward. The margin improvement should continue. In a nutshell, NOK 117 million in EBITDA. We had a CapEx of NOK 47 million, so slightly less than 10%. That was our guidance and cash EBITDA, EBITDAC. We have received some questions from various investors, why do you focus on EBITDA? Why don't you only focus on cash EBITDA? And some say EBITDA is better is more general. The thing is we need both for, say, bond purposes and current tests, et cetera, measured on EBITDA, and it's more common, so you can compare it to other companies. Cash EBITDA, on the other hand, that is what we use internally. So, let me be very, very clear. Business unit leaders, they relate to cash EBITDA and not EBITDA, all right? And that is mainly because CapEx, that is a capital allocation decision. And that is one of the few decisions that are still centrally managed. So, capital allocation is centrally managed. You can get the approvement for a capital allocation for a CapEx project or not don't go to the highest bidder, so to speak. So that is why we have them, and we need them both, and I hope this explains it. As you know, we focused a lot on recurring revenue. And in the past, we have discussed recurring software revenue, but it's not only the software that is recurring. And a few analysts also have taken notice of this that they've said your professional services, they seem to be very, very stable. And yes, indeed, they are. So, in the past, we referred to professional services as semi-recurring, but we split those and started -- as from the third quarter 2025, we started splitting the professional services in the recurring part and nonrecurring part. And what we define is that customers of ours that were also customers 1 year ago, they are defined as recurring professional services or recurring professional services customers. So, we view those as recurring, and applying that logic, you get a very different perspective on what is recurring and the stability of our business. So, we see that the recurring software business takes us up to approximately 80%. And then we can add another 15% or so on recurring professional services. That brings the real recurring or the true recurring income or recurring revenue in number up to almost 95%. So, it's an extremely predictable business and an extreme stability there to the benefit of shareholders, but also, of course, to bondholders. This really gives you a stability that you don't see very many other places. And combine this with very limited churn on the software. We have guided in the past less than 2% per annum. We can restate that guidance. Churn is limited. And speaking of churn and speaking of predictability, with the earnings in 2025, and you see the cash earnings, the EBITDA and the EBITDAC, cash earnings are coming up. Revenue is growing. Cash is stabilizing. We are moving into what we call a very low leverage territory. Here, okay, let me explain the bars, 3 bars, the blue on the left, that is the last 4 quarters EBITDA. That's how they are measured. EBITDA is measured in the bondholder agreement for incurrence test purposes. Then we have the orange bar, that is the run rate. So, if the current quarter is a template for the other quarters as a run rate, and then we have on the green bars, that is the forward-looking the next 4 quarters because what is ahead of us, it is not the past. It's the future, and we have a 2026 guidance. So, the green bars, they are based on the guidance for 2026, okay? Then the blue line, the upper blue line is the incurrence test. So, we have to be below that in order to do a tap issue on the current bond. And then we have the purple line that is at 2.5, and that is what typically is referred to as low leverage, low gearing. And you see that if you look at the first quarter -- fourth quarter '25, first quarter '26, where we currently are, you see and especially if you look at the leverage compared that to, and relate that to the next 4 quarters earnings, you see that we are indeed moving into a very low leverage territory. So, low leverage, combined with high predictability on income and earnings, that is where we currently are. And this also makes -- if you, again, taking a capital allocation perspective, what shall we -- how to spend our money most wisely. Debt repayment is probably not one of them, but maybe we can improve the debt terms. And that is exactly what we are now considering. Very strong performance on the top line, on the bottom line and low leverage that points to possibilities for refinancing of the current debt. I think, as most of you have observed, and some of them are also comment to us, saying that of the approximately NOK 70 million in cash EBITDA, a large chunk of that -- of those cash earnings from operations, they go to payout interest. And paying interest, that's the largest cash items in our P&L. And of course, that costs as all other costs, we like to reduce the cost and increase the earnings. Looking at the current bond that was issued in December '23. It's callable in December '26 and at NOK 104.3. And until then, it's a so-called make-whole clause. But the bond has been trading well, and we see that the spread has been narrowing. And the last I saw was actually a spread starting with the #3. So, we are around 400 basis points -- so 400 basis points, 4 percentage points, 4%. And the current bond is dominated in NOK. So, it's 3-month NIBOR plus 4%, translates into approximately 8%. That is where the bond is currently trading. And we have higher ambitions. And currently, the bond is trading in NOK. We will have to evaluate other jurisdictions also. So, when the bond was issued, and Omda went public, we were a very Norwegian company. As you have seen on the distribution of earnings, you can see that in the report, where are our customers, where are our employees. You see from an operational perspective we are more Swedish than Norwegian. That was on finance, and what we think there's room for improvement there. Let's move on to the guidance. We know where we are, where are we heading. Okay. We will repeat our guidance for 2026. So, we will end with revenues of NOK 500 million to NOK 525 million, ending at NOK 494 million. And even if you knock off the hardware for 2025, it shouldn't be Mission Impossible. And this is just the organic part. So, this is without any new acquisitions. This is just the organic part. We forecast a margin between 28% and 32% on the EBITDA. And as Sverre just pointed out, we will compress the CapEx. So, the cash EBITDA, the EBITDAC margin should be somewhat higher than the EBITDA. So, CapEx should be less than 10%. We forecast -- we guide on 9% for 2026, and that should absolutely be possible. Not guidance, but targets. What we just saw, they were guidance. This is where we think we're going to end up. These are what we see now are our targets. They haven't changed much since what we presented in the third quarter presentation but let me be even more specific and even more clear. We restate organic growth, 5% to 10%. That includes CPI adjustments and the like. We restate that we aim for target inorganic growth or growth through acquisitions, 10% to 20% on top of that. And EBITDA in excess of 30% CapEx going forward over the next 5-year period, we see it shrinking from where we have been in the past around 10% of sales or revenue to 5% of revenue. We see COGS. As I said, in spite of the unusual large hardware order in the fourth quarter, gross margin was still improving. COGS are still coming down from around 7%, 7.5% in '24 to 6.5% in 2025. And it should be -- there's more to come. It's not an overnight sensation, but we have gradually -- if you look 5 years back, 10 years back, you see we have constantly been improving. That improvement will continue. And we see that we can bring it down to at least 2% to 5%. Salary and personnel, we have constantly bringing it down. We have been trimming the number of FTEs compared to total revenue, to 55% at the end of the fourth quarter. In percent of total revenue, down from 70 to 65 to 60% to 55%, 54%, 55% ending -- exiting 2025, and we see we should bring it down to below 50%. Other costs currently at around 13% of sales. The original target was to bring it down to 15%. We are already there and actually beyond. We see now that the next target is to bring it down to 10%. Partly still trimming your nails and also as part of that, they will remain constant, and the top line will grow. And then last but not least, on the bond loan, it's currently NOK 500 million. If we just maintain that level, I'm not saying that we will, but just take that as a starting point, we should be able, with the improvement that we have displayed already and what is to come, to bring an end to an interest rate closer to 5% than 10%. Now I'm not saying 5%, I'm saying closer to 5% than 10%. Some analysts, have said maybe you should reach 7%, well, 7% is closer to 5% than 10%. But we are ambitious, and we are ambitious based on the strong underlying performance. Okay. And with those assumptions and targets, we will end up with revenues something like this. And you can do your own calculation, do your own math. Here, I have used those expectations to see where we end up on revenues on the organic side and on the acquired side. And you can use it in your own spreadsheets, for calculations. You can apply the speed and how fast you think we'll reach the margin improvement, and you will end up with robust margins, and you can do your own math on what you think the valuation of a company like Omda should be. Okay. Let me round off by addressing the M&A. We have a huge pipeline. We do most of the sourcing ourselves. We have a lot of targets on the radar screen. We have an active dialogue with someone between 5 and 10 companies. So, we are absolutely active in the space. In short, and some may say, well, you haven't announced anything. That is true. But as the old statistics professor once told me, absence of evidence is not evidence of absence. So don't think for a single minute that the fact that we haven't announced anything is not because we haven't been active. And sometimes, the only thing you end up with is a successful DD. But we maintain the goal of 10% to 20% inorganic growth. We will consider. Should we do bolt-ons or should we do large, more transformative deals? Sometimes the bolt-on may be less money for more value. So that is always a consideration. In the current market, we've seen there has been turbulence in the market on valuation, everything from us stocks or compounders or software companies and the AI turmoil, but that also gives opportunities for us as an acquirer. And then speaking of acquisitions, this, again, is a matter of capital allocation, and we need to spend money wisely. And we also need to reconsider this, I mean, how is it undervalued compared to other things we can buy in the market? So, share buyback is also something we need to keep considering. And last but not least, since we are moving into positive cash flow, good cash territory, smaller deals may be financed with cash from operations without having to issue any new capital in any form. That was a snapshot, and let's move into the Q&A. Einar Bonnevie: And there are a few questions here, and most of them seem to be to myself. And there's one question from John here, and it's related to the last topic, M&A. And the question is, with the incurrence test being met, and you have been expecting that for a while, given your goals, what's the next outlook on getting the M&A engine humming in the next quarters? Okay. As I just said, and you can add some comments to this, Sverre. But as I just said, it has been humming. So, it hasn't been turned off. And again, we haven't announced anything, but that doesn't mean that we haven't done anything on the subject. So, it is indeed humming. Would you like to add anything, Sverre? Sverre Flatby: Yes. I think what is important is actually that the value creation behind M&A has to do with the sequence of things. So, when we have dialogues going on for many years with many targets, we're also very good at looking at when to put things together. So, there is a very, very high activity, much more than you think, when we look at this. And I think what's going on now is that we will stick to the guidance of 10% to 20%, and they will come out, as Einar mentioned, probably of a handful of smaller acquisitions rather than a big one. So, all in all, we are very happy to tell you about the M&A processes going on because these are what will make us reach our goals in the next 5 years as well. Einar Bonnevie: Okay. Thank you. Another question here from John, and that's about the bond agreement. And the question is, remind us of your buyback opening in the bond agreement. Yes. The current bond agreement gives us the opportunity to buy back shares. And we haven't done anything for the last year or so. But the bond agreement gives us an opportunity to continue to buy back bonds. What it doesn't allow currently is to delete the buyback shares. We can buy back and continue to buy back. We still have room to buy back more shares, but we cannot delete them under the current bond agreement. But that was a trade-off we made when we borrowed money the last time, but that is something we will look into because that is one way of making the implicit dividend more effective. So, we can continue to buy back shares, but we can't delete them. Okay. There's one question pending. [Operator Instructions] And this is from Balas, and it's related to net working capital. And the question is, can you please elaborate on net working capital dynamics? It looks like this year; net working capital was a drag on cash generation. And I can understand the question and the reason behind it. Okay. We have a very active net working capital view. And as you saw in the 2024 fourth quarter, we had a minus 31%. Our official target is that we should be below minus 10%. We ended 2 years ago in '24 at minus 31%. That was a record. In 2025, we end at minus 26%, which is still very good, but not as good as last year. There are always some dynamics there. As you know, we like to invoice annually upfront as much as we possibly can and then pay our bills as late as we can to use the capital effectively. But in 2025, we issued invoices and sometimes the invoices, are paid just before New Year's Eve and other times, they are paid just after. And in '25, some of them were delayed to be paid in early January. So that is what you see. There are a few bumps there, but nothing to lose sleep about. There are now 6 new questions. So let me continue. And this is one for you, Sverre. It relates to artificial intelligence. And it goes like this. Can you explain in more detail, Omda's product moat against AI in the long run? So, contract, security relationships. So, I mean, how does AI protect us? Sverre Flatby: Yes. I think, first of all, what protects us is really what I was into when it comes to what is the priority on the customer side here, which is the regulated business they have and the reliability and compliance is critical and the life-saving activity is critical, and these are run through extremely complex workflows. So, the ability to change things is, of course, there, but the business case to change things is one thing. It's really not that relevant. It's not only the code. It's a very, very complex completeness there. And then secondly, of course, the ability to replace things is one thing. But the timeline, it takes years in these areas, not because you change the code, but because you have to refactor a lot of other things and you have to handle procurements, rollout projects, et cetera, that takes years in the complex environments. So, it's really not the AI itself that protects that part of us, but we are protected in that sense that the collaboration long-term, as you ask for here as well, the contracts, what we do now with our customers is to actually have the dialogue, how are we going to deliver add-on components that includes AI functionality. But that is not easy because you also have to certify components like that. So maybe we would use 1 or 2 years to certify, but still the customer will use maybe some years even to implement because of the criticality. So, this is why it takes time. But on the good side, although it takes time to implement on the customer side, the speed of the value creation on the inside of Omda is really what is the good thing at the moment because that is no longer, as I mentioned, experimenting with tools. These are agents that actually already now are actually giving us the ability to increase the cash from operations. Einar Bonnevie: Okay. Thank you, Sverre. There's another question about AI. So, I suggest we continue that. That's also from Matt. Thank you, Matt, for submitting your questions. Which division or business area, business unit is most at risk from AI competition? And you mentioned specifically emergency or ProSang or blood management. What will you say? Sverre Flatby: Yes, that's a good question. But it's none of those 2, that's for sure. I would say it's quite the opposite. Those are quite protected given how these systems are handled. So, it's difficult to change the engine when you have a flight over the Atlantic. So that is not the places to see. However, the specific questions, my theory would be that the analytics part of our business would probably be more competitive from outside because the usage of large data and the functionality around this is probably the area that will have more competition because they are not so tied into actual clinical and emergency critical processes. So that would be my take. However, I see already that we are using AI and working with AI components inside our analytics software and the customers would like to acquire more from us -- so it's -- please remember, we have contracts there as well and customers that want to add on. So, it's not only a competition in the market with tenders. We have existing customers that want more. Einar Bonnevie: Thanks, Sverre. There's 6 more questions pending. Thank you for submitting them. And there's another one that relates to AI also from Matt. Let's take that one before we move on to other topics. What is your average contract length? And do you have enough time to integrate AI innovations before the next round of tenders. How does this work Sverre? Sverre Flatby: Yes, that's a good question. It's important to understand that when you choose a strategy like we have done and when you focus only on these very sticky software types that could be there since you mentioned in your questions, ProSang, which has more than a 50-year history with the same customers being the same -- being customers, of course. When it stays that long, that is really what's the fact here that it won't be -- it won't change because of the fact that it's tied to the workflow processes in these areas. Einar Bonnevie: Okay. There are some more questions on the financial side and also from Matt. And the question is, do you see already an impact on private valuations and M&A targets following the current software sell-off? That is a very good and relevant question. I think I tried to sum it up on the very last slide, the M&A short slide and say bolt-ons versus larger transformative deals, we see that bolt-ons are typically -- what you are referring to, the smaller private valuations. Yes, I think it's probably now an opportunity to pay less money for more value. And also, as I said, the current market provides more opportunities than challenges from an M&A perspective if you are the buyer. Because after the -- what I say, the hype in maybe 2020, 2021, '22 and expectations were going sky high. I think a lot of the private owners, they have summed up and much more realistic expectations now than maybe at least 2 or 3 years ago. And another one on acquisitions and capital allocation also from Matt. And at current share price of NOK 38, so that's approximately 2x sales or 7x, 8x EBITDA, isn't share buyback the best capital allocation? Yes. And that is also something on the very last slide that we try to sum up. Yes, share buybacks, et cetera, is to be evaluated. It's all about capital allocation. Should we increase working capital? No. Should we invest more in R&D? No. We will use AI to be more efficient. Shall we buy companies? Yes. But again, maybe the bolt-ons rather than the larger deals, again, the best return on your investment. And as you point out, yes, if you compare Omda, I mean, from an outside in view, not speaking as a CFO, but maybe more like a financial analyst from outside in view, Omda is very attractive compared to a lot of companies that we can buy. So that has to be a part of the equation. But I think it's probably not an either/or, maybe it's -- you can have that calculated too. There are still 4 questions. And this is from Mark, and I think it goes to you Sverre, it's about M&A and start-ups with AI. And he says, in terms of M&A, do you see interesting start-ups with AI agent tech that you could add to the portfolio? Please expand on venture capital funding dynamics in the Nordics in the space. Sverre Flatby: Yes, I think the most important answer to that is that our strategy when it comes to M&A is related to customer code competence. That means we acquire companies that has a proven track record within the customer space. Of course, we look at additional AI companies that has interesting technology, but this is not our strategy. And also, because, as I mentioned, it takes many years to implement on the customer side, the type of customers we have. So, what we have -- one example of how we approach this would be the last acquisition of one of the last 3 that was Dermicus, which is an AI-based app that handles wounds or cancer -- skin cancer, for instance. And these type of components that are in production that we can integrate and add and have synergies for our own business, that will be the preferred acquisition of AI companies from our side. So, I don't think the speed of -- even if the new technology comes out, the speed on the customer side will still be the same. So, for us, we will still continue to buy customer code competence in that order. Einar Bonnevie: Okay. Let's continue on the M&A topic, and this is one from John. And he writes, with your aim for small bolt-ons for M&A, do you foresee any material impact to your expected 2026 margin guidance in that year or future years? And how far can bolt-on take you versus your targets over the years? I think I can address those. Those are 2 questions combined in one. And first, on the margin side, I guess the background for the question may be that in the past, we've done some larger deals. When we IPO-ed, we were at NOK 200 million in sales. And a couple of years later, we reached NOK 400 million. So, we doubled in size. And a lot of those we acquired were turned around or turn better candidates, they diluted our margin. Now if you look at the current guidance and we say on the current business, we grow 5% to 10% organically, and we will improve the margins. We will take down the COGS. We will take down salary and personnel. We will take down CapEx. We will take down other costs. That's on the current business. Now if you add to that bolt-ons or small acquisitions, and we said our guidance and target is 10% to 20%, that would mean that we would add NOK 50 million to NOK 100 million in sales roughly for million and you have 0 margin on that in the year it turn around -- turn better candidate and you have 0 in EBITDA. Still the dilution wouldn't be very noticeable. And it would dilute maybe the margin in percentage points with a couple of percentage points, but it wouldn't dilute the absolute number, all right? So, we expect that there may be some margin dilution on the total, but not if you look at the underlying business and that on top. And it shouldn't be dramatic. So, we're not speaking of from 30% down to 10% or something like that, but knock off a few percentage points. That should be your expectation. And how far can bolt-on takes us? Okay. Again, it comes down to what is the definition of a bolt-on. But say it's -- say we're acquiring a business, there are a lot of businesses between NOK 10 million and NOK 20 million in sales. So, 3 of those would amount to approximately NOK 50 million, 10%. So that would -- 3 bolt-ons would take us into the lower part of our guided range. So absolutely doable. There are still 3 questions. We still have 15 minutes. So, if there are any more questions, keep typing in. One question here from Draven, and that goes to you Sverre. And it goes like this. Are there any success stories from this year that you are particularly proud of that demonstrate to you the strength of the business? Sverre Flatby: Yes. I think the results speak for itself. And I think actually, the most important thing is the combination of the decentralization that we have and the ability that each business unit leader have had to work much closer to the customers. So the result of that has been a much more predictable business, and there are many smaller and bigger success stories inside those business units. But I think seen from my side, the successful transition to a decentralized organization is definitely what has changed everything and has created a new operating baseline for Omda, which is going to be very strong from '26 and onwards. Einar Bonnevie: So what are you saying Sverre is 3 things. Capital allocation is important, decentralization is important. And then in a decentralized organization, have the right people on board of the bus. So, if you control those 3, things are going pretty well. Sverre Flatby: Yes. Einar Bonnevie: Okay. Let's continue to do that. There's another question from John here, and that is directly relates to a potential bond refinancing. And the question is, have you had talk with investors in the Swedish market or banks to take advantage of the difference in STIBOR versus NIBOR. And the general answer is, yes, we have Norwegian investors, we have Swedish investors. We have American, Anglo American, French. So, we have investors, and we absolutely -- and we love to have a dialogue with our investors. And yes, we, of course, also have dialogue with our Swedish investors. And again, yes, and we have dialogue with several investment banks, and we bounce ideas. And the effect then on STIBOR versus NIBOR, the STIBOR is around 2% and the NIBOR is around 4%. So of course, if we were refinancing just as an example, I'm not saying -- this is not a guidance. This is not a target, just as an example, if we were to refinance in Swedish krona on STIBOR 2% plus where the bond is currently trading 4%, that would yield 6%. So just as an example, for those of you who are watching this call and are not that into NIBOR, STIBOR and the whole interest rate universe. There's one more question, and this one goes to you, Sverre. So, you have the -- and that is also from David. Across Europe, many health care organizations are cutting staff and budgets. How does Omda work with customers to support them to maintain standards with less staff? Has this been an opportunity for cross-selling or -- how is that? How can we support our customers? Sverre Flatby: Yes, that is a very good question. And it's a quite interesting thing, combined with the previous question about the average length of a contract because it's really not a contract we're talking about. Contracts are tools that we have to have, the way the stickiness is coming from the fact that customers are using our software. And since the situation is like that, of course, we have the dialogue with the customer on how we could help and combine offerings from our own business. So, we are doing that inside our business areas with different business units working together and come up with the broader offerings to our customers. So that will help to be much more efficient. So that is one way. But also, between different business areas, since we have a strategic dialogue with large customers and key customers, we have the ability to look at a strategic approach years ahead as well and talk about what's going on. And explicitly, you're quite right in defining the fact that the economy is very, very complex and it's hard times for health care. That is a good thing for Omda because we can help them. The cost of our recurring software is quite small compared to everything else in these businesses. So yes, we are working with the customers to make sure that they can also get much more benefit of our current software and new software. Einar Bonnevie: Okay. There we are. There is actually one more question that came in while you were addressing this one, Sverre, and this is -- also goes to you. And the question is about the pricing models. And the question is, please comment on your pricing model on seat versus usage based. This is typically from -- I take it from a SaaS perspective of thinking like how does the pricing model actually work in Omda? Sverre Flatby: Yes. First of all, there are differences between different business units. However, in general, if you look at the complex widely used national, regional, highly specialized solutions, which is the backbone of our business. This is coming from contracts many years ago and where the idea is that we pay for the usage of the software normally as a site license or a predefined pricing model might add extra for an extra department or things like that, but it's much more a conservative model from the beginning here. So, it's not like a SaaS thing as such where you can -- as you do with your Netflix account that you add it or you cancel it. So, this is much more from the beginning, a more stable income that is not related to users directly. However, we have some areas where we have volume-based, but I would say more than 80% of our recurring revenue is based on these stable long-term and many times over decades contracts. Einar Bonnevie: Okay. Thank you, Sverre. There seems to be no more questions. Happy we have addressed them all. Thank you all for watching. Thank you all for submitting questions. We very much treasure the opportunity to have a dialogue with all our investors. We hope you have enjoyed this presentation and the numbers. Tune in again on the 21st of May, that is when we are going to present the numbers for the first quarter of 2026. And before that, we will also release the annual report that will be released in April. But until we speak again, our minds and souls meets, do you some napkin calculations using the numbers we have guided on. Enjoy your day. Take care and stay safe.
Operator: Ladies and gentlemen, welcome to the Erste Group Full Year 2025 Results Conference Call. I'm Sergen, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Sommerauer, Head of Group Investor Relations. Please go ahead, sir. Thomas Sommerauer: Thank you, Sergen, and also a very warm welcome to everybody who is listening in to our full year conference call 2025. We follow our usual procedure. That means that Peter Bosek, our Chief Executive Officer; Stefan Dorfler, our Chief Financial Officer; and Alexandra Habeler-Drabek, Chief Risk Officer of Erste Group, will lead you through a brief presentation, highlighting the main achievements, especially the financial achievements of 2025 and in particular, also of the fourth quarter of 2025. And before handing over to Peter, my usual reminder on the disclaimer of forward-looking statements, of which there will be quite a few as usual. And with this, I hand over to Peter for the presentation. Thank you. Peter Bosek: Good morning, ladies and gentlemen. Welcome again to our full year 2025 results and at the same time, fourth quarter 2025 conference call. I'm on Page 4 now. 2025 was an exceptionally successful year for Erste Group. A lot of good things happen to the bank and a lot of good things happen to shareholders of Erste Group. But allow me to briefly dive back to a year ago, the discussion back then and to a certain extent still today were all about share buybacks and dividends and somewhat subdued business outlook for 2025 on the back of rate cuts in the Euro zone and a mixed macro-outlook for Europe. What a difference the year makes. We at Erste found a better way to solve the excess capital challenge. We invested in growth, in Polish growth. And with this, we have substantially expanded our growth footprint in the fastest-growing region of Europe. In the meantime, the acquisition of a 49% controlling stake in what soon will become Erste Bank Polska has closed on time and from the first quarter of 2026 will be fully consolidated in our accounts. But this is just half of the story. The other half is about our strong performance in 2025. Quarter-by-quarter, growth momentum improved. This enabled us to repeatedly upgrade our financial outlook and, in the end, even outperformed our upgraded guidance. We are particularly pleased with revenue momentum, not only in terms of quantity, but more importantly, in terms of quality because quality brings it with sustainability. Translated into numbers, this means we posted record revenues in 2025, driven by our core income lines, net interest income and net fee income, and we closed the year in style with another set of quarterly records for these items. We are also on track in terms of costs. We were running somewhat above our 5% target in the first 3 quarters, but thanks to the cooling of cost inflation and adjusted for the booking of some integration costs for our Polish acquisition in the final quarter of the year, we managed to deliver on our guidance. Risk costs were only marginally higher in 2025 than in the previous year, but fully in line with our upgraded guidance with CEE shining again in terms of asset quality. Clearly, other result was special in 2025 as well as in the fourth quarter, flattering our reported net profit despite hefty banking taxes included in this line item. To be concrete, other result in 2025 benefited from net positive one-offs in the amount of about EUR 270 million pretax and some EUR 250 million post-tax. Stefan will give you the details later. Accordingly, underlying net profit would have been more in the order of EUR 3.3 billion rather than reported EUR 3.5 billion. Other way, no bad figures and comfortably historical records. And clearly very helpful in delivering capital gen beyond anybody's expectation, including our own. With a CET1 of 19.3% at year-end 2025, we are well positioned for first-time consolidation of Erste Bank Polska and arguably beyond. I therefore think it's not over to say that we got most of the decisions right last year and at the same time, set a clear ambition for 2026. It's our firm intention to stay focused and do the same in 2026. Ladies and gentlemen, throughout this presentation, we will make reference to our expectations for the business of Erste Group, including Erste Bank Polska in order to give you the best possible idea of our new Erste will look like. We will also detail already on the extraordinary items that come with first-time consolidation to almost all of which tax and minority fits fully. And in order to allow for a better like-for-like comparison, we will provide an outlook for Erste excluding Erste Bank Polska profit guidance for 2026 that we already repeatedly communicated, we hereby confirm that's a return on tangible equity of about 19% and a year-on-year increase in earnings per share more than 20%, taking our adjusted 2025 net profit of EUR 3.3 billion as a starting base and adjusting expected 2026 net profit for extraordinary items. This should translate into a net profit of somewhat above EUR 4 billion on a clean basis in 2026 as opposed to somewhat below EUR 4 billion on a reported basis. With this, let's now move to Page 5 of our key P&L performance benchmarks. Obviously, this very much reflects what I just talked about with a stable margin backdrop contributed quarterly NII record would have been difficult to achieve. And without improving cost dynamics, it would not have been possible to report a cost-income ratio of below 48%. We delivered on both fronts. Strong margins were not only supported by good balance in loan growth and healthy competitive environment, but importantly, by strong deposit pricing power, particularly in Austria and improving deposit mix overall. Risk costs at 21 basis points were in line with our improved full year guidance, as already mentioned. Trends very pretty much unchanged in this respect with continued low risk cost in the CEE region, while Austria saw most of the allocations in the final quarter of the year at a slightly lower level than a year ago. If one adds banking level reported under other operating result as shown in the lower left-hand chart with those reported under taxes, then the banking reached a new all-time high of almost EUR 440 million in 2025. Irrespective of this earnings per share adjusted for the AT1 dividend climbed to a record level of EUR 8.24 per share. And finally, return on tangible equity increased to 16.6% from 16.3% a year ago, quite a good achievement, bearing in mind the strong capital build through the year. When we look at the development of balance sheet on Page 6, we see a picture that is evidence of the strength of the business model. The business model is geared to our superior organic growth in customer business, a perfect case in point is the performance in 2025. Both on the asset and liability side, balance sheet growth can be explained by the expansion in customer business. Customer loans grew by almost EUR 14 billion or 6.4% in 2025, while customer deposits were up by more than EUR 11 billion or 4.7%. And in context of both, we can without exaggeration talk about high-quality growth. Loan growth was driven by the retail business in CEE on the back of a solid demand for housing finance, while deposit growth was also better than average in the retail and SME business. Austria, and in particular, the savings banks made a solid contribution to loan growth, while deposit growth was solid in both Austrian retail and SME segments. With volume momentum being good across the franchise in 2025, we see no reason why 2026 should turn out any worse in 2025. Consequently, we target organic loan growth of higher than 5% in 2026. That is for the business of Erste excluding Erste Bank Polska. Including Erste Bank Polska, we also expect an underlying growth rate in a similar ballpark. So, by the end of 2026, loan stock for the combined entity should be higher than EUR 285 billion. The key highlight when looking at our balance sheet metrics on Slide 7 are our regulatory capital ratios. Having said this, the other parameters are also excellent. We can again report an ideal loan-to-deposit ratio of 91.7. The growth of customer loans and customer deposits show good momentum. And finally, asset quality also reported an improvement with the NPL ratio improving both quarter-on-quarter as well as year-on-year. Generally, the asset quality situation remained very good across the CEE region and importantly stable in our Austrian. As usual, Alexandra will provide further detail on credit risk later. Liquidity and leverage ratios were as usual. But now to our capital ratios. Year-on-year, we recorded a massive rise in CET1 ratio of more than 400 basis points to 19.3%. Stefan will lead us later. But what is important to me as a CEO is that this puts us in a perfect position for first-time consolidation of Erste Bank Polska. A year ago, when we promised to the regulator that despite the 460 basis point CET1 ratio drawdown resulting from the Polish acquisition, we will always maintain a CET1 ratio of higher than 13.5%, and we aim to reach our new target CET1 ratio of 14.25% during the course of 2026, well above 13.5% and 14.5% Tier 1 ratio will certainly be the first consolidated Erste Bank Polska in the first quarter of 2026. Let's now briefly take the macroeconomic environment and particularly the outlook for 2026 on Slide 9. Our economies predict better economic growth for 6 out of our 8 core markets than we saw in 2025. And in the 2 markets for which they project consolidation, this is expected to happen at very healthy levels of between 2.5% to 3%. I'm specifically talking about the Czech Republic and Croatia. The new country in our portfolio, Poland will provide further growth in with real GDP growth estimated at 4% for 2026. Good news are also coming out of Austria, where the past 3 years, economic growth was almost nonexistent. For 2026, a modest recovery is predicted. In this forecast, we have not modeled any material tailwind from Germany fiscal expansion as this seems to take longer than initially hoped for. All in all, this is a very good starting point for the banking business and with further ground for profitable loan growth. The other macro forecasts are equally encouraging. Inflation is forecasted to retreat in most of our markets, while labor markets are expected to stay strong. When it comes to external fiscal balance, the picture is mixed as in many other places around the world. I'm tempted to say Austria, Czech Republic, Poland and Hungary usually enjoy neutral or positive current account balances while the Czech Republic is preventing a poster child of fiscal prudence. As far as the interest rate outlook is concerned, we assume only minor cuts in countries like Poland, Hungary, Romania and Serbia, while rates in the Eurozone are expected to stay flat. This as well will support profitable banking business in 2026. Talking about profitable banking business, let me share with you a couple of performance highlights of the business in 2025. To cut the long story short, retail business was a clear growth driver in the past year. I'm on Page 10 now. Retail loans were up by 8.1% to EUR 115.4 billion. Growth was reasonably balanced between housing and consumer loans and the quality of the retail book remained very good. Retail deposits also showed good growth dynamics with retail deposits climbing by almost EUR 5 billion to EUR 173 billion in the final quarter of 2025. Retail current account deposits grew the fastest quarter-on-quarter. Year-on-year, current account and saving deposits were up by 7% to 8% each, while term deposits declined by almost 6%. We also saw continued growth in off-balance sheet customer funds, security savings plans that enable customers to build long-term rates in an easy to manage digital format approached the EUR 2 million mark at the end of the year and generated gross sales in excess of EUR 1.5 billion in 2025. George, our digital platform for retail clients continued on its growth path. The number of onboarded users reached 11.4 million by the end of the year and the digital sales ratio in the retail business inched up 67%. Going forward, our ambition is unchanged to develop George into a fully-fledged financial adviser in order to give even larger parts of our client operation access to high-quality financial advice. In the corporate segment, I'm on Page 11 already loans were up 5% year-on-year and 0.8% quarter-on-quarter. The slight growth slowdown in the final quarter of the year was to weaker demand in large corporate business after a strong performance earlier in the year, while the SME and commercial real estate business lines continue to exhibit solid growth. In terms of products, demand for investment loans continued to be more pronounced in the fourth quarter, while year-on-year, there was a good balance between investment and working capital. On the liability side, corporate deposits enjoyed good growth. And here as well, current account deposits grew faster than term deposits year-on-year. The market business also delivered strong performance in 2025 with our ECM and DCM teams successfully executing 360 transactions with an issuance volume of EUR 211 billion. In Asset Management business, after passing the historic EUR 100 billion milestone in the third quarter, dynamic growth continued. Assets under management reached EUR 104 billion at the end of 2025. This bodes well for the future fee growth. On the digital front, the corporate business also progressed well. Client migration to George business has been completed in Austria, Romania and is progressing well in the Czech Republic. With this, by the end of 2025, some 76,000 corporate clients across our region are using George business. And with this, I hand over to Stefan for the presentation of the quarterly operating trends in the reporting segments. Stefan Dörfler: Thanks very much, Peter, and good morning also from my side. Please follow me to Page 13, and let me start by saying that for 2025, I'm particularly pleased with our loan growth performance. We achieved an acceleration in loan growth to 6.4%, up from 4.9% a year ago at the same time when we needed to speed up our capital build. To accomplish these 2 competing goals concurrently is testament to the strength of this organization. As far as loan volumes by country are concerned, the Czech Republic was the standout performer, producing consistent double-digit growth throughout the year. As highlighted already in previous quarters, Czech growth was well balanced between retail and corporate business, but within retail, mortgages led the way. Of the more than EUR 5 billion worth of net loans we added there, mortgages contributed roughly 50%. Growth in Hungary was equally driven by a massive increase in housing loans, admittedly from low levels, but still due to the introduction of a government-subsidized mortgage scheme as of September 2025. Having said this, demand for consumer loans was also quite robust, while corporate lending momentum trailed. Growth in Slovakia and Romania was more or less in line with the group average and in the former driven almost exclusively by strong momentum in the mortgage business, while in the latter, growth was mostly registered in consumer loans. In Austria, as Peter already mentioned, we saw mixed trends. At the savings banks, growth momentum improved noticeably towards end of the year. Interestingly, growth was better in the corporate than the retail business and within retail, clearly attributable to housing loans. In Erste Bank Austria, however, growth was generally subdued. On an aggregated level, in the corporate business, we saw a good growth balance between investment loans and working capital facilities, while in the retail business, housing loans in absolute terms made a better growth contributions -- better growth contributions, especially in the final quarter of the year. Thanks to this growth momentum in 2025 and the constructive macro-outlook, we target organic growth in 2026 of more than 5%, both for Erste with and without Erste Bank Polska, resulting in a net loan stock of higher than EUR 285 billion for the enlarged group by year-end 2026. On the liability side, the favorable mix towards cheaper deposits continued in the fourth quarter of 2025, as you can see on Page 14. This we observed in our core retail SME and savings bank's deposit base, which rose 5.5% over the past 12 months to EUR 209 billion, but also in our corporate business line. In both, overnight deposits increased, while term deposits declined year-on-year. Consequently, the cost of deposits fell again in the fourth quarter of 2025 with corresponding positive read across to net interest income. In terms of total deposit volumes, we are up 4.7% and 2.1% year-on-year and quarter-on-quarter, respectively. As far as geographic segment highlights are concerned, we saw strong retail inflows in both Austria retail and SME segments in the final quarter of 2025, while the quarter-on-quarter decline in the Czech segment was attributable to volatility in noncore deposits. In conclusion, we benefited from strong volume momentum, and that's true for both assets and liabilities, not just in the fourth quarter, but throughout the year 2025. Let me now move to net interest income on Page 15. As those of you who follow us for some time will remember well, ever since the end of the rate hike cycle in September 2023, we talked about NII plateauing even when rates were cut in half between mid-2024 and mid-2025. Now is the time to officially start talking about the next leg up because we are right in the middle of it. Most of the moving parts that are relevant for NII performance point in the right direction. Macro is somewhat supportive. Volume momentum is strong. Deposit mix is improving. Pricing power of Erste Group is intact. And last but certainly not least, we have an interest rate environment that bar any dramatic changes is at least not unsupportive of bank profitability. Consequently, we produced the second consecutive record quarterly NII print with NII first time topping EUR 2 billion. That's a year-on-year increase of 4.6% or a plus of 2.7% quarter-on-quarter. If we look at the annual performance, we started this year, let's say, the year 2025, of course, with a flat outlook and closed it with an increase of 3.5%, resulting in NII of almost EUR 7.8 billion. A key development in this context was the stabilization of NII in Austria as the year went on, followed by a trend reversal towards the positive in the final quarter of the year, essentially driven by a better deposit mix and continued deposit repricing. One could say that we have turned the NII tide in Austria. This is not insignificant as the Austrian retail and SME segment will still contribute more than 1/4 to NII even going forward. And it bodes well for the outlook for 2026 to which I will come in a minute. We also saw continued good performance in the Czech Republic and Slovakia, where a combination of deposit repricing, upwards fixations of mortgage loans and, of course, good volume dynamics all helped. The other segment principally benefited from higher allocations of income earned on local access capital, mainly from money market and government bond investments. And a final comment on NII 2025 and also at this point in time, our sensitivity to rate cuts has declined further to about EUR 170 million for a 100-basis point instant downward rate shock with the full impact expected at the minority-owned savings bank. So actually, no big deal for you as our shareholders. Now for the outlook for 2026. We target net interest income north of EUR 11 billion for this year. This incorporates an organic growth assumption of about 5% for the -- excluding Erste Bank Polska, strong contribution from Erste Bank Polska. The nonrecurrence of interest earned on the purchase price of Erste Bank Polska, around about EUR 7 billion, as you know, and the amortization of about EUR 170 million gross, that's about only EUR 60 million net of positive fair value adjustments recognized on debt securities and derivatives on first-time consolidation. Let's now turn to another success story of 2025 and frankly speaking, the past couple of years, and that's fee income on Page 16. At EUR 850 million, we posted another record in the final quarter of the year, up 9.1% year-on-year and 6.5% quarter-on-quarter. The drivers are in the meantime well known. Securities business, which includes asset management, continued to perform exceptionally well amid a helpful market environment and customers' increased propensity to invest in capital markets. Payment fees also made a good contribution when adjusting for the shift of loan account fees from payments to lending fees as of the first quarter of 2025. And insurance brokerage fees benefited from the usual end of year performance bonus payments. If we look at fees from the annual perspective, the story is very similar to what I've just said about the quarter. Net fee income reached nearly EUR 3.2 billion, again, a new record. This means that fees grew by 8.6% in 2025, comfortably above the target we set for the year. As for the growth drivers, we again talk about securities business, payment services and insurance brokerage. Honestly, it's hard to highlight individual country segments in the context of fee performance because as you see from the chart of the slide, Page 16, all of them made great contributions in 2025. Therefore, the main task for us is now to maintain the momentum going into 2026 as the bar is clearly moving even higher. But with an organic growth target of higher than 5%, you see that this is also clearly our goal. The inclusion of Erste Bank Polska should result in a combined fee income of about EUR 4 billion in 2026, whereas where we have to look at the final print that will also depend on the allocation of local FX income from Poland, either to the fee or the trading line. Over to operating expenses now. I'm on Page 17 already. Let me start with a quick summary on 2025. We were clearly running above our 2025 cost inflation guidance of about 25%. You all remember our discussions in the quarterly calls until the third quarter as we invested in efficiency projects, but in the end, still managed to come in right on target when adjusting for booking Polish integration costs in the amount of EUR 38 million to be fully transparent. This was only possible because of a significant year-on-year slowdown in cost growth in the fourth quarter, mainly driven by a stabilization in personnel costs and a moderation in depreciation and amortization charges as well as office expenses. Quarter-on-quarter, we saw the usual seasonality, so no surprises there. For 2026, it is our target to build on the solid performance of the fourth quarter and limit organic growth inflation to 3% as we should now benefit from efficiency gains and the downward inflationary trend in our countries, even Austrian inflation numbers came down recently. But 2026 is not only about better efficiency in Erste's pre-Poland business, but all about consolidating Erste Bank Polska. And in this respect, there will be 2 absolutely very relevant topics. First, and we have been talking about this in the past already, we can be more specific today, integration costs. Secondly, is intangibles amortization. While the former will mainly impact 2026, the latter will stay with us for the next decade. Our refined estimate of remaining integration costs now stands at EUR 180 million. The net impact will be dependent on the final split between Genna and Warsaw, but a good portion can be assumed to be booked locally based on the recent announcements of our colleagues from Erste Bank Polska in relation of rebranding costs. The amortization of intangibles, essentially, it's about customer relationships, will be based on the value of customer stock for 100% of Erste Bank Polska of EUR 2.1 billion and consequently have an outsized impact on the cost line of EUR 210 million annually. As opposed to this gross amount, the bottom-line impact at about EUR 70 million will be significantly lower as tax and minority shields fully apply. This is a noncash charge and irrelevant to regulatory capital as already fully deducted. Taking all of these items into account, we target operating expenses of about EUR 7 billion in 2026 for the enlarged Erste Group. Next up is operating results, and I'm already on Page 18. At almost EUR 11.7 billion, we posted record operating income in 2025 and at almost EUR 3.1 billion, we also posted record operating income for the quarter. The reasons we have discussed already in detail. We saw high-quality revenue growth driven by our core income lines, net interest income and net fee income. Or put differently, we enjoyed strong core business momentum. And with cost performance being in line with expectations, we saw records for both annual and quarterly operating results. As cost growth was a touch higher than revenue growth in 2025, the cost/income ratio was slightly weaker in 2025. However, much better than anticipated at the beginning of the year. When it comes to the outlook for 2026, and we just look at the Erste business, excluding Erste Bank Polska, then based on what we already said about macro, interest rates and business momentum, there's only one conclusion, and that's positive operating jaws or translating this into concrete numbers, a further improvement of the cost/income ratio towards 47%. Well, obviously, this is a somewhat theoretical statement as our 2026 financials will fully include the financials of Erste Bank Polska as well as the special effects in NII and operating expenses. But given the industry-leading efficiency level that Erste Bank Polska is operating at, that will only lead to a further improvement of these efficiency metrics. Our best guesstimate and guidance at this point in time is around 45%. And with this, over to Alexandra for more details on credit risk. Alexandra Habeler-Drabek: Thanks, Stefan, and also good morning, and welcome to this call. I'm now on Page 19. In the final quarter of 2025, we booked risk costs of EUR 159 million or 27 basis points. This is better than a year ago, even though FLI and overlay releases in both quarters were more or less comparable. As shown on the left-hand chart, we continue to book risk costs in our Austrian retail and SME operations, so Erste Bank Austria and Savings Banks, but the asset quality situation in Austria has definitely stabilized, thanks to somewhat lower NPL inflows in 2025 versus 2024. Fourth quarter risk cost bookings in Central and Eastern Europe continued to be very low. Looking at 2025 overall at 21 basis points, we came in right in line with our improved full year guidance. As in the previous year, again, EB Group and Sparkassen savings banks accounted for the largest part of net allocations in the context of an exceptionally strong performance in the CEE region. However, again, both at Erste Bank Uusterich and at the savings banks, risk costs improved compared to 2024, in line with trends seen in the broader Austrian banking industry. As far as FLI industry overlay provisions are concerned, we now hold a stock of about EUR 350 million, down by EUR 109 million compared to the third quarter on the back of FLI and overlay releases. For 2026, we currently project further releases of roughly EUR 60 million. When it comes to the risk cost outlook, including Erste Bank Polska for 2026, we forecast 25 to 30 basis points as risk costs tend to be somewhat higher in the Polish market. This is adjusted for the already previously communicated one-off ECL provisions of EUR 300 million gross with a net impact of EUR 120 million that is required by IFRS 9 on first-time consolidation. For Erste excluding Poland, we would see risk costs similar to 2025 levels, somewhere between 20 to 25 basis points given the generally robust macro backdrop. Let's now turn to asset quality on Page 20. The group NPL ratio improved both quarter-on-quarter as well as year-on-year to 2.4%, thanks to a stable NPL stock and a dynamically growing loan book. The stable NPL stock resulted from lower NPL inflows as well as higher recoveries. Let me again comment on Austria in this context as it has been and still is in the spotlight. For Erste Bank Austria and the Sparkassen asset quality metrics are perfectly acceptable and have improved in 2025. We saw lower NPL inflows, higher NPL recoveries. And importantly, we saw hardly any new entrants into our early warning list. And we expect more of the same in 2026 as the Austrian economy is recovering slowly. In Central and Eastern Europe, the asset quality performance remained excellent. It is hard to single out a country for doing better than the other, whether we talk about the Czech Republic or Hungary or Serbia because all of them did really well. In Romania, you might recall, where we saw some NPL inflows early in the year, the situation stabilized. We sold some NPLs. And with this, our NPL ratio in Romania is once again below 3%. In terms of projections for year-end 2026, we expect that the group NPL ratio will stay more or less at current levels, and that applies to both Erste with and without Erste Bank Polska. NPL coverage is projected to slip slightly, but only slightly and should stay close enough to 70%. And with this, I hand back to Stefan. Stefan Dörfler: Thanks, Alexandra. Let's turn to Page 21. To top off an exceptional year, other result also turned in a tremendous performance in the fourth quarter, again, benefiting from positive one-offs in the form of real estate selling gains and releases of legal provisions, particularly in the Czech Republic and Romania. When looking at other results from an annual perspective, we saw the best print since 2007. Thomas had to go back that far in analyzing the data to find a better print. And to put this into context, back then, banking levies or resolution fund contributions, which today run into the hundreds of millions of euros and annually were unheard of. As a result of this extraordinary performance throughout 2025, one thing must be clear. This is a onetime event that is very unlikely to be repeated in 2026. We estimate that the net positive onetime items amounted to approximately EUR 270 million, as Peter already mentioned, pretax and that in 2026, other result will more closely mirror regulatory charges, which based on higher banking levies in Hungary and Romania should be in the order of approximately EUR 450 million. Typically, we already expect one or the other positive or also negative print there for the first quarter, we are anticipating a better print due to the closing of the Erste transaction in Croatia. Based on what you heard about record annual and quarterly operating performance as well as quarterly and annual other results, and I'm on Page 22. In the meantime, it follows that quarterly and annual net profits were comfortably record prints as well. And one could argue somewhat inflated, obviously, to the benefit of capital and capital ratios, so no complaints here. But still, therefore, it is only fair to adjust net profit for onetime items. And if we do this, clean net profit prior to AT1 dividend deduction, as Peter already mentioned, would be closer to EUR 3.3 billion rather than the reported figure of EUR 3.5 billion. By extension, the same comments apply to reported earnings per share and return on tangible equity, both benefited from one-off supported net profits. If one adjusts reported 2025 EPS of EUR 8.24 for this, then underlying EPS would amount to EUR 7.72 and ROTE would be closer to EUR 515.5 as opposed to the reported figure of 16.6%. When it comes to the outlook for 2026, we confirm everything we have said since the announcement of the Polish acquisition on 5th of May 2025. We expect a significant improvement on return on tangible equity to around 19% and an earnings per share uplift north of 20%. These targets are based on reported net figures adjusted for extraordinary items with EUR 3.3 billion serving as a basis for 2025 and a figure of greater than EUR 4 billion being the target for 2026 adjusted. And with this, let's move on to wholesale funding and capital, starting on Page 24. Stability and competitive advantage are the name of the game when it comes to funding. High granular and well-diversified retail and SME deposit base remains a key source of long-term funding. Wholesale funding volumes decreased year-to-date as higher stock of debt securities was more than offset by decline in interbank deposits. The stock of debt securities was pushed up primarily by issuance of covered bonds and senior preferred bonds. On to Page 25, in order to look in more detail at our long-term wholesale funding. My short summary would be that we successfully completed our 2025 funding plan and that we had a busy and successful start to the 2026 funding year. Next to several transactions of our subsidiaries, we have issued a Tier 2 and a senior preferred note, EUR 750 million each on group level in January. Overall, we expect similar funding volumes this year as in 2025 and we'll have more focus on MREL instruments compared to covered bonds. Let's now move to regulatory capital and risk-weighted assets on Page 26. In the context of other results, I talked already about a onetime event, and I think this is also a fair statement for the development of regulatory capital and risk-weighted assets. We saw a massive buildup in capital and at the same time, a massive reduction in risk-weighted assets in 2025. Of course, most of this did not happen by chance, but was the result of a well-executed strategy that was instrumental in funding the acquisition of Erste Bank Polska exclusively from internal resources. To give you an idea about the scale of the achievements, we grew loans by about EUR 14 billion in 2025, as already discussed, while risk-weighted assets were down by almost EUR 10 billion. The main drivers for this were the increased use of securitizations, positive portfolio effects and last, but not at all least, Basel IV implementation also came in handy. These factors more than offset the volume growth related up drift. The strong growth in CET1 capital by EUR 4.5 billion during 2025 is rooted in strong profitability and temporarily increased profit retention. The former also benefited from positive one-offs as detailed earlier in the presentation, but was mainly driven by strong business momentum, while the latter was supported by suspension of the share buyback we already announced early in the year and a lower dividend payout from 2025 profits. The result of these massive moves, you can see on Page 27, our CET1 waterfall, a 408-basis point increase in our CET1 ratio in 2025. Viewed differently, one could say that we absorbed almost the entire expected CET1 drawdown expected from the Erste Bank Polska acquisition within 1 calendar year. And I can only repeat what Peter said. We have far outperformed all capital commitments that we gave to the regulator in the run-up to the transaction. That's the CET1 ratio floor of 13.5% and the new increased target ratio of 14.25% to be achieved during the course of 2026. When it comes to capital distribution, we will stick to our communicated dividend policy for 2025, resulting in a payout of EUR 0.75 per share. I think it is also evident that we have the full capacity to return to our pre-transaction dividend policy of 40% to 50% and possibly even put share buybacks back on the menu if this is in the best interest of shareholders. When it comes to the CET1 ratio outlook for 2026, the triangle of profitability, loan growth and shareholder distribution will determine the extent and speed of any further buildup. In any case, we have created a space for many options for future growth. And with this, over to you, Peter, for concluding remarks. Peter Bosek: Thank you, Alexandra. Thank you, Stefan. Let's take a step back again and look at the bigger picture. What emerges in front of us, you can see summarized on Page 29. It's about strong organic growth momentum in the Erste's business without Erste Bank Polska. On a like-for-like basis, we expect loan growth of higher than 5%. We project mid-single-digit net interest income growth. We once again target fee growth of north of 5%, and we aim to push cost inflation down to 3%. With this positive operating jaws and improved cost-income ratio are firmly on the agenda for 2026. Risk costs are expected to stay at a very level. And even if other will be more in line with the reported net profit should at least be on par with what we achieved in 2025. Erste Bank Polska to the mix that the future will be brighter still. Growth opportunities will multiply by having access to the largest market in the CEE region. On the back of a better macro backdrop, we therefore project loans to surpass EUR 285 billion for the combined entity of new Erste, if you prefer. We see net interest income north of EUR 11 billion, fees at about EUR 4 billion and costs in the order of about EUR 7 billion. Risk costs will inch up to 25 to 30 basis points, leaving aside the one-off related to first-time consolidation. All of this is set to result in a significant increased return on tangible equity of 19% and an increase in earnings per share of more than 20%. Despite this very robust financial outlook, we are not getting carried away. Our full focus and attention is on integration of Erste Bank Polska and rebranding. At the same time, you can rest assured that we will not lose sight of strategic opportunities, which we expect to open up in front of us as the year progresses. Superior profitability and consequently, fast capital build will enable us to choose from a number of options ranging from increased capital return before further M&A, all of which have the potential to create significant shareholder value. And this, ladies and gentlemen, concludes our presentation remarks. Thanks for your attention, and we are now ready to take your questions. Operator: [Operator Instructions] And the first question comes from Jeremy Sigee from BNP Paribas. Jeremy Sigee: Could you just give us a quick update on the integration time line for Poland? What are the big steps in terms of systems migration or other big things? And when do they happen? And then second question, you've talked about the various options that you've got for growth. Could you talk a bit about both organic and M&A opportunities, what your priorities are, where you see opportunities presenting themselves? Peter Bosek: If I may start with the integration in Poland, we plan to be done with the integration when it comes to IT and technology within 24 months. We have already started to work with our colleagues in Poland. So, this is a lot of work in front of us, but we have both sides very experienced IT people. So, we know what we have in front of us to be able to manage. The second also very important part is the rebranding, which will take place in the second quarter. So, we have more than 400 branches, we have to rebrand. We have a lot of ATMs, we have cards, we have papers. So, a lot of things in front of us, but very much looking forward to use the opportunity to build up a very strong brand in the Polish banking market. When it comes to growth opportunities and potential M&A, it is very much depending on the market situation. I think it's much too early. I would like to -- just to remind you, although we have a very strong capital position now, we just had closing on of January. And again, now we are very much focused on integrating Poland. But if something pops up where we think it's a business opportunity and is creating value to our shareholders, we will definitely look at it. Operator: The next question comes from Gabor Kemeny from Autonomous Research. Gabor Kemeny: Thanks for walking us through the intricacies of the Polish consolidation. But my first question is actually on the business ex-Poland and the NII guidance there, I mean, 5% growth you guide for, which is decent, but it's actually similar to the Q4 run rate. It implies similar NII to the Q4 run rate, I believe. So, what makes you assume that NII will not grow sequentially from here together with loans? And the second question would be on cost. I mean you expect cost growth to half practically on an organic basis. Can you walk us -- which is a significant improvement. Can you walk us through what you actually expect to drive this slowdown and perhaps give us some quantification of those drivers? And then finally, on the capital deployment options, how do you think about your options for this year, including if you could comment on the possibility of raising your stake further in the Polish bank. Stefan Dörfler: Let me start with the remark on the interest rates for 2026. I understood you right. You wanted a reply to, say, on our growth expectations on the former Erste Group, I would call it. Look, let's not forget there are a couple of points that we need to observe when it comes to the translation of loan growth into NII. First of all, we all know that this is a buildup throughout the year. So, if we expect better growth on the loan side than 4%, 5%, then this will only get into NII numbers over the year, not only for the first quarter. The second element is, and I mentioned it on a side comment when running the presentation, we have paid EUR 7 billion for the acquisition of Erste Bank Polska. So that's in a simple calculation around EUR 130 million that we simply have less of interest on excess liquidity. It's not a huge amount given the overall dimension of NII nowadays, but it's not to be completely ignored and it is a certain churn on our growth year-on-year. And last but not least, the interest rate environment should be still okay-ish and kind of supportive, but definitely, we will not have tailwinds or tail storms from the interest rate environment. We've put ourselves in a position that is quite neutral to interest rate developments. So, from that end, we shouldn't expect too much of an uplift. And if you look at the 2025 developments, we've had a good momentum still from our investment book. This is still there, but significantly slowing down. So, I would say, at the end of the day, we are back into a game which is mainly depending on growth. You're perfectly right, but it's not a one-on-one translation of loan growth into NII. So, I think if we can deliver 5% on existing group, I would be very satisfied. The other point was on cost growth, look, it's very simple. Inflation is now really sharply coming down even in the countries like Austria, where we saw after really super elevated prints, we saw in January now a 2% number. That will help the negotiations for collective bargaining are ongoing. We hope that there will be a reasonable behavior on all sides like it was in other industries in this country. In the other countries, we see wage inflation still around, but significantly lower than in the past. So that's the external element. And the internal element, we have always communicated that the impact of the efficiency investments that we started already in the end of 2024 should have a first-time impact in 2026, and that is also something we are committed to deliver. And this in combination would land around this 3% level. Of course, a lot of integration efforts will be there, but you were asking about the core group. And then I think capital deployment. Look, Peter already made it clear in his answer just before. We are evaluating all options, but we are also not deviating from our super focus. We got everything very well done. We were achieving not only the signing, but also the closing in a very smooth manner. And I really want to praise the teams here on all sides who guaranteed very smooth operations day 1 already across the group, and we will build on that. But let's not forget that the integration will still occupy a lot of resources. And therefore, we will elevate very, very precisely how much we have still in our pockets to invest into, let me say, new adventures. I think you know the markets that we look at. There are some of the markets which are able to do transactions, for example, on themselves. If there are options opening, we will analyze them, but I think it's much too early to say. Last comment, since this is obviously also part of your question, we will not comment at this point in time about any kind of precise dividend indication for 2026, but it's natural that we have full capacity to at least -- let me stress this, at least get back to the capital distribution that you were used to up until the year 2024. Operator: The next question comes from Ben Maher from KBW. Benjamin Maher: I actually have one. It's just on the growth in the Corporate Center NII was very strong last year, effectively doubling. I think you mentioned the securities portfolio, that tailwind perhaps tailing off a bit this year. But any guidance around NII in the Corporate Center for 2026 to 2027 would be helpful. Stefan Dörfler: In short, it's going to be slightly up, not as strong growth momentum as you rightly observed for '25, but certainly also not falling from the slightly up is an indication that I can give you. Operator: The next question comes from Amit Ranjan from JPM. Amit Ranjan: The first one is on capital. What's the current outlook on balance sheet measures going forward, SRTs, et cetera? How much did you achieve in 2025? Because if I look at the credit RWAs, they declined by almost EUR 4 billion quarter-on-quarter. So, if you could highlight that and also the costs associated with that SRT in 2025? And how should we think about that in 2026? And then the second one is on -- you have provided very clear 2026 targets. How should we think about medium- to long-term targets for the group? Is that something we can expect to be provided during 2026? Are you planning a Capital Markets Day at some point for the combined entity? And last one, if I may, on loan growth. Are you seeing any pickup in corporate loan demand in the various geographies? And is there any assumption you're making around benefit from the fiscal stimulus in Germany and the infrastructure spending for countries like Austria, Czech Republic, please? Stefan Dörfler: I'll take the first question and then hand it over to Peter. So, first thing, the costs, not to forget around securitization, around about EUR 60 million, and that's in the fees. Maybe let me use this opportunity to say 2 sentences about fee development, which I'm very impressed from colleagues do a great job there. We have had already cost for securitization during the year 2025 in fees. It's even more remarkable to see the results. And that will be around about EUR 60 million in the year 2026, first point. Second point, I want to be precise on what I said on the fee trading stuff when it comes to our EUR 4 billion target. We have observed a little bit of a different treatment in the Polish market around FX fees or let's say, fixed trading revenues rather. And we will analyze in the next weeks whether we can also show this on the group level in fees or whether we have to put it in trading. So just that you can put my remark here in perspective because it fits to this point. And last but not least, in terms of planning for 2026, so nothing tremendous being planned at this point in time for securitizations in 2026. We will do 2, 3 further transactions for sure as we use this toolbox ongoingly, but significantly less than in 2025 since the effort here was directed to the capital -- I wouldn't call it rebuild, but the capital optimization effort in 2025. Peter, please? Peter Bosek: Yes. When it comes to midterm outlook, I think as we mentioned already before, I think this year, on the one hand, we are heavily focused on integrating Erste Bank Polska. It's very clear. we will see the full positive impact in terms of P&L, of course, in 2027. On the other hand, it's also fair to say that we are very -- again, very strong being up capital, which gives us a lot of opportunities. And this is exactly the other part for this year to make up our mind and see how markets are developing and what kind of opportunities are poping up in terms of M&A or further increase in our stake in Erste Bank Polska, also depending on the Polish scheme, how we are able to increase. So, there are still a lot of things we have to think through. But you can be assured that we are very well aware. And I think we are in a luxury situation in terms of our strengths being able to build up capital. When it comes to your question about the Capital Market Day, this is something we are making up our mind. Stefan, Alexandra and myself, we are, of course, discussing it. But it's also very obvious that we would go for a Capital Markets Day if we have something detailed to you, which is worth the effort of you and your colleagues to join. When it comes to potential impact of Germany, I mean, this is something we are waiting for already 1.5 years. Of course, we expect a positive impact in countries like Czech Republic, Slovakia, Poland, Romania, but the political procedure in Germany just takes longer as we expected. And therefore, we didn't take it into consideration, as mentioned during our presentation in our P&L for this year because we are sounding a little bit like broken record every time telling that there will be an impact, there will be an impact, there will be an impact and so far we cannot. Operator: The next question now from Mate Nemes from UBS. Mate Nemes: I have 3 questions, please. The first one would be a follow-up on your -- Stefan, on fee growth. I understand the uncertainty around the treatment of some of the FX commissions or FX fees in Poland. For the rest of the portfolio, putting that uncertainty aside, is there any reason why fee growth shouldn't be in the high-single digits given your track record, given strong volume growth, given good traction with the securities business and so on? That's the first one. The second question would be just a clarification, please. Could you clarify what exactly will be added back to get to the adjusted net profit in 2026, i.e., the amount slightly above EUR 4 billion. Is that the EUR 240 million intangibles amortization and the EUR 180 million integration costs or it's only the integration costs? So that's the second question. And the third question is just a, I guess, conceptual one perhaps for Peter. The outlook on retail lending, very, very strong performance in 2025, retail growth and within that housing loan growth in the CEE region is very strong. Could you talk about expectations whether that momentum can be maintained in one or the other country, be it Croatia, be it Czech, be it Hungary? Or we could see some moderation here and there? And also in that context, perhaps, what is your expectation in retail growth in Austria? Stefan Dörfler: All right. So let me take the number question first. So, we talk about roughly EUR 350 million that you should consider in this, so to say, adjustment logic, and this is the sum of ECL impact the integration costs, as you rightly assume, and the intangibles. Honestly speaking, we really try to manage, and I think we have kind of got 80%, 90% there to absorb everything as much as possible in 2026. So, you heard the question before, the earlier question to Peter regarding integration costs. That's also what we have been discussing internally. While we will be busy with a couple of the things on 28 when it comes to really absorbing most of the matters in P&L representation and so on, I would say, given the dimension of the numbers, everything that comes there after 2026 with the sole exception of the depreciation of the customer list I would personally from a CFO perspective, say you can pretty much forget, right? So, it's EUR 50 million here, EUR 30 million there, for sure, not numbers to be ignored in a bigger sense. But the way we look at, for example, NII of a base EUR 11 billion plus, yes, have an item here in 2027 impact of EUR 80 million, EUR 90 million. But frankly speaking, a small change in interest rate environment also does a much, much bigger impact, as you very well know. Fee growth. To specify the dimension that we are discussing here with the Polish colleagues and also with the audience is EUR 200 million, just to be precise. So, it's about EUR 200 million to be allocated rather to fees or FX. So that is around the -- if you map it to the EUR 4 billion total, it's around 5% difference, not to be ignored. Of course, it doesn't do anything to the total operating income. It's pretty clear. And that was the reason why Thomas and the Board discussed which guidance should we give. Otherwise, we would have been coming up with greater than 4. Now we are around 4%. We will clarify that. And by Q1, we will be very clear about where to book this. When it comes to growth, thanks for your confidence in our growth potential. I do not disagree. However, if we look around at what happened in the last 2, 3 years, let's also be fair. We had quite strong supportive factors, not the least, a positive inflationary environment, which, of course, by indexation of payment fees and so on, not only for us, but for the whole industry was supportive. And if we now go significantly down with our growth expectations on costs, it's also consequently clear that some of the tailwinds are slowing down on the fee side. That's point number one. And point number 2, as you know better than anyone else, if we have such a supportive capital market every year as we had in the last 2, 3 years, is also not a given -- and some not all, but some components of the income here on asset management fees and securities business depending on it. So do I rule out that we come up with higher than 5%. So, I think you said upper mid-single digit again in 2026? No. Do I want to guide for it at this point in time? Also no. Peter? Peter Bosek: Yes. Thank you, Stefan. When it comes to mortgage business, when we talk about volume, it's very much about Czech Republic, Austria. So, we don't see any -- or we don't expect any change in the demand in Czech Republic. So, the market is still strong I would expect even a little bit more positive momentum in Austria because demand has come back already over the last 12, 18 months, and we saw a clear correlation that demand was picking up and interest rates are coming slightly down. And Croatia, I think we are doing very well in terms of balancing between mortgage lending and consumer lending. So, which was true also for the whole year in 2025 that we have between these 2 product lines. Good that you asked for Croatia because we took a special effort in Croatia and set up an initiative to improve our mortgage lending there because there, I think it's fair to say that from our perspective, we are a little bit underpenetrated when it comes to mortgage lending is an area we would like to take more efforts to improve the situation. Operator: The next question comes from Riccardo Rovere from Mediobanca. Riccardo Rovere: Two or 3, if I may. The first one is on the NII guidance. I mean in Erste stand-alone a couple of billion per quarter in Q4. So, say before any growth land, you could land in the EUR 8 billion region without being too sophisticated. And Erste Bank Polska reported kind of anywhere between EUR 750 million and EUR 800 million in Q4. So that could be another, say, EUR 3 billion or so more or less. So, before growth will be in the EUR 1 billion ballpark and this before, again, loan growth. So, I was kind of -- I just want to understand what -- and you also say, Stefan, if I'm not mistaken, that you expect kind of supportive policy rate environment, if I got it right during the call. So, I was wondering if there is no margin pressure and if the growth stays as you land, what could to go above or well above EUR 11 billion and more than EUR 11 billion could be EUR 11.5 billion in your mind. Then again, on growth, I mean you're growing at 6.4% before Poland. Macro is expected to be to improve. Maybe you're going to have an impact from fiscal in Germany are at 7% and pretty good when they make their projections. So why 5% when the macro is improving and you're exiting '25 at 6.4%. The other question I have is on common equity. I mean, you end at 19.3%, take out EUR 460, you end at EUR 14.7 billion divided by 2, it's another EUR 2 billion, risk assets, say, EUR 180 million, EUR 150 million from you, 30, 30-something from Erste Bank Polska is another more than 100 basis point. So, as it is today, we will land anywhere between 15.5% and 16%. So, the question here, I just want to connect to what Jeremy asked right at the beginning of this call. What's the priority here? Is because the share price suffered quite a lot on in early 2025 when there was uncertainty about capital use. So just to be clear, what's the priority here? Is the priority more M&A? Or is the priority returning capital to shareholders as you have to integrate Poland, which is a transaction? Because the numbers do not adopt just don't adapt with the numbers what you said. Just to say so, but I think the market needs a little bit of clarity on that. Stefan Dörfler: So first, unfortunately, the sound was very bad. So, let's make sure that we got everything right because you started by saying 3 questions, I only identified kind of 2.5. But anyway, the first one is very clear. And I completely -- I completely can follow your thinking EUR 8 billion here because you guys are already at EUR 2 billion in Q4, then simply extrapolate that and then add the EUR 3 billion from Poland and they go EUR 11 billion plus the growth, why don't you talk about EUR 11.5 billion. That's in a nutshell what you said. Look, it's not exactly that easy this time for sure, at least from today's perspective. Number one, again, we have a clear subtraction. This is a super simple calculation of EUR 130 million from the nonrecurrence of the interest on our paid here. It's not a huge element, but not to be completely. Secondly, and I give you the precise description, we have EUR 170 million, and we always talk about the gross figures here, right? I said it -- talk about the gross figures because 11, 11.5 is also, of course, the gross NII for 2026 in the whole group. EUR 170 million impact from hedge accounting adjustments and the debt securities, both around about close to EUR 100 million adding up there, and there's a little bit of a counter effect on other positions. So, it's a total of EUR 300 million, please, Riccardo, that you have to take. This is not something which is kind of a question of optimism or pessimism. It's just the fact that this is 100% clear that this will be booked this way. So, I have to take this into consideration because then with your expectation somewhere between EUR 11.2 billion to EUR 11.5 billion, we are already talking a little bit of a different story. And the rest -- yes, the rest is a question of interpretation if everything goes fully our way, if interest rate environment is as supportive as we expected. And therefore, we decided to go for a greater than EUR 11 billion guidance, which I think is leaving also upside. And you know us then when we have more evidence for better development, we will adjust the guidance. At this point in time, I think it's a task to get there with all the moving parts around the first-time consolidation. And on capital, look, I think referring back to the first part of 2025, I don't believe it's really helpful because you know that we were negotiating the deal at that point in time. And you guys know much better than anyone else how strict capital market communication is on indicating anything that is not really watertight in terms of insider what the hell. So therefore, yes, it was also not my most pleasant quarterly call on the 30th of April 2025. I very, very much remember, and we were dancing around how we deploy capital. I agree. This was not a pleasure, but in the same moment, it was a pleasure then making very clear what we do with the capital 1 week later. It's not the case this time. This I can assure you. We are not in any whatsoever kind of negotiations or so. But what we are in is in analyzing our opportunities, both legally, Peter already mentioned it, but also in terms of how we can manage also a step-up in Poland in an efficient manner for our shareholders and in a way that we are not endangering, so to say, our economics. Other countries, I think, have been commented on by Peter and me already. I think it's fair to say, looking at my colleagues that after the first quarter, we will have a little bit more clarity. However, to satisfy everything of your expectations, what we will do with the excess capital, it might still not be enough. And it's going to be a question of the next couple of months to evaluate the deployment. We try to do the best with the excess capital, but there are many moving parts. I think there was a third kind of question, but I didn't get it from the sound. Operator: Mr. Rovere, you're still on the line. Riccardo Rovere: Let's move to the next question please. Operator: The next question comes from Jovan Sikimic from ODDO BHF. Jovan Sikimic: I would have also a question related to Poland. I mean, your colleagues from the new subsidiary, right, they indicated a kind of new strategy in coming months. But maybe at this stage, can you tell us just the key parameters, right, in terms of loan growth, in terms of NII year-over-year? And what is actually the interest rate which you incorporate because currently, it's like 25 to 50 basis points. Let's say, difference within consensus where the rates will end up in Poland, how the sensitivity is? And also from this perspective, if you can share what would be kind of cost/income ratio in the longer-term horizon because Polish subs or Polish bank kind of has significantly lower cost-to-income ratio compared to your current subsidiaries? And if you could also remind us what's the agreement on Swiss franc provisioning. I mean Q4, in my view, in Poland was a bit below expectations in terms of kind of adding to the current outstanding volumes. But what's the position at this stage in your case? Peter Bosek: If I may start in terms of strategy, please don't expect too many changes in terms of strategy in our Polish subsidiary because from our perspective, strategy is already very much aligned. So, we have a very similar approach in retail banking. We have a very similar approach in corporate banking. I think there's a lot of added value, of course, in the corporate area because the pure size of the economy in Poland is fantastic in the way how this economy in terms of economic infrastructure was built up over the last decades. I think this is a huge opportunity also for the rest of our group. And we see also kind of network value related to it because there's a lot of money flow between companies within our region now and a lot of Polish companies operating in other parts of our group and vice versa. So there, we have very, very positive client feedback. When you refer to cost-to-income ratio, of course, it's great how our colleagues are managing efficiency. Of course, it's all kind of very supportive where we have relatively high NII margins when it comes to cost/income ratio. And please, we ask for your understanding that we don't want to comment too much on local entities, especially when they are stock listed in terms of NII sensitivity. Stefan Dörfler: And that also, if I may add, Peter, that also holds true for the strategy of the local bank when it comes to Swiss franc. I think the colleagues are commenting on that. The read-through to the group is well known. So, there's nothing to add to that. Nothing has changed on that side. And all the rest is decided by our local colleagues and will be also communicated by them in their capital market communication. Jovan Sikimic: Great. And if I may add one maybe on -- it's maybe of a minor importance, but still your positioning in Hungary on rate cuts or further rate cuts and also in Romania. How would it affect the group NII? Stefan Dörfler: No, happy to take this in a very short manner. We saw the rate cut yesterday or the day before yesterday, I guess, in Hungary. We expect overall a relatively stable development of key interest rates for this year, at least for the next 2, 3 quarters. You know the policy of the Romanian National Bank. Further later in the year, there might be some changes depending on inflationary environment and so on. But at the moment, we do not see an aggressive rate cut cycle of either of the 2 national banks. Operator: We have a follow-up from Riccardo Rovere from Mediobanca. Riccardo Rovere: And just a quick follow-up on the previous one on loan growth. Why 5% when you're exiting the year at 6.4% and the macro is supposed to get better and maybe you're going to have some boost from Germany fiscal support. And then on bank taxes, if I may, can you shed some light what should be the situation in 2026 and if possible, onward, where do we stand there? Peter Bosek: If I may start with loan growth. From our perspective, we were even a little bit more aggressive than last year in terms of giving the guidance because we see loan growth above 5%, right? And as Stefan mentioned already during his presentation or answers, loan growth is accelerating over the year. So, you don't have the full impact immediately in the P&L in the first 2 months of the year. But be assured that we believe -- strongly believe in loan growth above 5%. Stefan Dörfler: What was the other question, Riccardo? Riccardo Rovere: Just on bank taxes, what should you expect? What should we expect for 2026 on bank taxes in general? Stefan Dörfler: The existing ones, I think you know precisely. It will go up in numbers a little bit. And then you know the situation in Poland, which again is to be commented mainly by our local colleagues, but we, of course, consider in our assumptions the elevated corporate income tax in Poland of 30% for the year 2026, which is expected to go down, not expected, it's in the law, to go down to 26% in 2027 and then to 23% in 2028. Those are elements that we have to consider, which all are in our guidance that we mentioned today. Other than that, forecasting or so to say, making any kind of assumptions around political decisions, I guess, is definitely not my task. And I think, Peter, you also don't want to probably say that. Peter Bosek: I would not expect any kind of material impact during 2026, but long-term trends are very, very much depending on how budget deficits in other countries will develop over the upcoming years from that perspective. We don't see any kind of that there will be additional taxes for this year. Operator: The next question comes from Robert Brzoza from PKO BP Securities. Robert Brzoza: Congratulations on the results. Sorry if I make a repeated question because I joined later during this call. I have 3 questions, actually. One on the adjusted net target. What are the adjustments actually? Is this only the integration cost or also the fair value adjustment? So that's question number one. Question number two, the 3% OpEx growth target for '26, does it include the indexation to wages? How do you manage this? And question number three, I've spotted that the NII in Hungary and Romania were relatively flattish despite great quarter-to-quarter loan book growth. What is it related to? Does it mean that you had to compromise a bit on the pricing of loans? Stefan Dörfler: Thank you very much. You were touching upon of the stuff we discussed already, but no problem. So, first answer, I specified already before, it's around EUR 350 million of adjustment. It includes the integration cost, but not only. It's also the onetime booking of the IFRS 3 related ECLs CLSA and the intangibles, as you rightly assume. So that's a correct assumption. Those 3 components play into there. When it comes to wage inflation, I mentioned in an earlier answer, it's supposed to come down. We see inflation coming down now even in Austria and other places, and that's what will certainly drive the levels of, let me say, wage and personnel cost increases down. But I also mentioned that another element of our guidance there is that we will benefit from efficiency gains that we invested in '24 and '25. And last but not least, you're right. We had a slower development in Hungary and Romania, and it is partially due to quite some pricing competition in these markets, which we usually do not take a part in as aggressively as competitors, but we cannot exclude ourselves completely. So that's certainly a driver of the NIMs in those 2 specific markets. Just adding that in Hungary, we always say, please don't analyze this market line by line. You will not get anywhere. Look at what our fantastic colleagues there have achieved in bottom line delivery, and that's really the measure that we look at. Operator: [Operator Instructions] There are no more questions at this time. I would now like to turn the conference over to Peter Bosek for any closing remarks. Peter Bosek: Yes. Thank you very much, ladies and gentlemen, for taking your time. Thank you very much for your questions. What I would like to mention is that our Annual General Meeting will take place on the 17th of April and the results for the first quarter of 2026 are on 30th of April. Thank you very much. Operator: Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.
Operator: Good afternoon, and welcome to the BJ's Restaurants Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead. Rana Schirmer: Thank you, operator. Good afternoon, everyone, and welcome to our fiscal year 2025 Fourth Quarter Investor Conference Call and Webcast. After the market closed today, we released our financial results for our fiscal 2025 fourth quarter. You can view the full text of our earnings release on our website at www.bjsrestaurants.com. I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission. We will start today's call with prepared remarks from Lyle Tick, our Chief Executive Officer and President; followed by Todd Wilson, our Chief Financial Officer, after which we will take your questions. And with that, I will turn the call over to Lyle Tick. Lyle? Lyle Tick: Good afternoon, everyone, and thank you for joining us today. Q4 was another strong quarter for BJ's, delivering our sixth consecutive quarter of sales and traffic growth as well as our fifth consecutive quarter of profit and margin expansion. From a top line perspective, in Q4, we delivered 2.6% same-store sales growth, driven by 4.5% in traffic growth. On the profit side, we delivered 16.1% restaurant-level operating margins and 10% adjusted EBITDA margins, representing an improvement of 70 and 40 basis points, respectively, year-over-year. Given the strong performance in Q4 2024, I'm particularly proud of how the team worked together to deliver a strong finish to 2025. Worth double-clicking on is the implied check compression between the comp sales and traffic in Q4. Our traffic momentum builds on the progress we have made throughout the year and underlines the continued improvements in operations, the resonance of the Pizookie Meal Deal and BJ's relevancy in the holiday and social splurge occasion. Two additional drivers in Q4 beyond these foundational elements are the buzz around our LTO Pizookies, which brought in a hard-to-reach younger demographic and drove an increase in the number of what we call Pizookie trial checks as well as our continued outperformance in late night. While both of these occasions carry a lower dollar check, they help us continue to introduce BJ's to new customers, give existing guests new reasons to come back and sustainably grow sales and profit dollars. For the full year 2025, on the sales side, we ended at 2% same-store sales growth, driven by 2.8% in traffic. And from a profit perspective, we landed at 15.5% restaurant-level operating margins and 9.6% adjusted EBITDA margins, representing an improvement of 110 and 100 basis points, respectively, year-over-year. As I talked about previously, 2025 was a year of strengthening foundations and learning, guided by our 4 strategic priorities. We created alignment, understanding and shared ownership of our strategy. We built trust, improved accountability and showed resilience when encountering performance challenges. We added 3 strong new leadership team members who have integrated well and made a difference with Jen Jaffe, our Chief People Officer; Tom Kowalski, our Chief Supply Chain Officer; and most recently, Todd Wilson, our Chief Financial Officer. We clarified our growth drivers and continue to refine how to leverage them most effectively. In Q4 specifically, the combination of better execution, value rooted in the Pizookie Meal Deal and compelling product news driven by seasonally relevant Pizookies and the renovated pizza platform allowed us to continue to deliver strong traffic-driven growth. We evolved our marketing strategy, leaning more heavily into social and word of mouth to support our product news, while leveraging broader paid channels to deliver value through the Pizookie Meal Deal messaging, further refining how we deploy media and message most effectively. Throughout Q4, consistent with 2025 overall, our key metrics continued to build confidence in our progress with improvements across our NPS scores, our team member retention, operational metrics and frequency across age and income cohorts. Some key callouts with respect to Q4. On the team member experience side, we completed the rollout of our new manager and hourly team member training. On the menu front, we built on our seasonal Pizookie momentum with 2 successful LTOs with the return of the Monkey Bread Pizookie and the introduction of the Dubai Chocolate Pizookie, which also had an accompanying Martini. We launched the renovated pizza platform, which is resonating well with guests and performing consistently with what we saw in test markets with incidents up just under 10% and check-in margin in line with expectations. We ended 2025 with a net reduction of 6 menu items and 4 ingredient SKUs. From a brand perspective, our marketing teams continue to do a great job optimizing how we deploy our media and messaging. In Q4, we leaned more heavily into word of mouth and social with relevant product news, which drove significant dialogue, interest and trial as reflected in our traffic numbers. Together, these launches generated a 4x increase in Pizookie impressions quarter-over-quarter, outperforming what had previously been our strongest social performance with Spooky Pizookie in Q3. It also drove overall organic social impressions up 12x year-over-year in Q4. On the operations front, we continue to lean into our core initiatives to drive everyday table stakes improvements and made further progress across our key guest and team member metrics with NPS recommend scores up just under 10% in the fourth quarter, led by improvements in pace, value and food scores. We deployed our AI-based activity-based labor model to 30% of the system at the year-end and intend to deploy to the full system in 2026 and pilot a follow-on use case. With respect to Keeping Our Atmosphere Fresh, in 2025, we completed 19 remodels, bringing the total to just shy of 50% of our pre-2016 fleet as of year-end. We also modernized our facilities program, tagging and tracking all of our equipment, moving from a more reactive to a more planful approach to ensuring that our team members have the tools they need to deliver on our high standards, and we can put our best foot forward with our guests. As we enter 2026, we've continued to see positive momentum in the business. While calendar shifts and weather always create noise in Q1, I'm pleased with our performance so far in the quarter and our performance versus Black Box, which continues to outperform on both sales and traffic year-to-date. As I look ahead through 2026, I'm confident in our plans, and we remain focused on delivering consistent growth and improving shareholder value by putting the guest and team member at the center of everything we do. Our 4 strategic priorities remain unchanged. We will continue to focus on Investing in our People, ensuring they have the tools and support needed to bring our brand to life every day. We will advance our operational excellence initiatives focused on making BJ's better and easier for both team members and guests. We will progress our menu renovation work and set the foundation for future net unit growth. Our team members are the heart and soul of BJ's. In 2026, our key priorities with respect to the team member experience will be training, embedding the new manager and team member training, ensuring our teams have the right support to deliver for our guests, leadership development, refreshing our high-potential development programs as we continue to build restaurant and above-restaurant management pipeline to support future growth and culture, continuing to build engagement and alignment around our values and behaviors. With respect to Handcrafted Food and Beverage, we will progress our menu renovation work across our priority categories. We kicked off the year building on 2025 momentum with the Butterfinger seasonal Pizookie, our first LTO pizza with Mike's Hot Honey, which quickly became our third most popular flavor out of 9 and a Korean Sticky Rib appetizer leveraging an existing wing sauce and ribs to create an easy and craveable new option. We also removed 2 lower-performing items that were heavy on single-use SKUs, which resulted in the removal of 5 single-use ingredient SKUs. As we move forward in 2026, our culinary priorities will be to continue to drive buzz and engagement with seasonal Pizookies, and I'm excited about the pipeline we've built, continue to renovate our core categories, refresh strong sellers with clear NPS and executional opportunities, and continue to find opportunities to simplify while maintaining and protecting the turf coverage that allows us to win across so many occasions and consumer groups. We're currently in market in the early stages of testing refreshes to our burger category and chicken sandwiches. Our culinary team has been hard at work, and we have a pipeline of category and core item improvement tests that will follow suit. These refreshes are still in their early stages. And like we did with pizza, we will follow a structured approach to gain operational and guest feedback and make adjustments ahead of rollout. And also like with pizza, I will provide further updates as appropriate. Our third priority is Delivering WOW Hospitality. Our focus in 2026 is to build off the foundations we've laid and continue to improve our guest satisfaction, throughput and efficiency. We'll continue to focus on great fundamentals and not seeding conceded ground by continuing to drive accountability through our directors of operations and GMs, having clear and consistent KPIs, lifting up our outliers and driving best practices. Our simplification team continues to work to remove unnecessary barriers and complications, things like integrating Apple Pay into pay at the table, simplifying split check procedures for our team members, simplifying Pizookie and cocktail ordering and ringing in processes and so on. As mentioned previously, we'll continue to advance our technology initiatives to help our GMs and managers have the right people in the right place at the right time. 2026 is an important year for our fourth strategic pillar, keeping our atmosphere fresh. We're going to continue to invest in our remodel program, which has shown strong results and pilot a refreshed BJ's prototype, setting the foundations to grow our restaurant portfolio. With the progress we're making on the core business, we're now laying the groundwork to reignite net unit growth. We're actively building a flexible pipeline as we target up to 2 new openings in the second half of '26 to pilot a refreshed prototype and set the foundation for further growth in 2027 and beyond. You will see this reflected in our capital allocation for 2026, which Todd will talk about in more detail. Before I close, I would like to once again express my thanks to all our BJ's team members from our restaurants through the support center for their passion and commitment. I'm proud of the progress we made in 2025 and excited about the road ahead. I will now turn it over to Todd to provide further color on how we closed the year and our 2026 outlook. Todd Wilson: Thank you, Lyle, and good afternoon, everyone. As Lyle has just outlined, the BJ's brand and business are healthy and thriving. In fiscal 2025, BJ's delivered growth across all key financial measures, sales, traffic, restaurant level profit, net income, EPS and adjusted EBITDA. Comparable restaurant sales increased 2%, restaurant-level profitability increased 110 basis points to 15.5% and adjusted EBITDA increased 14.5% to $134.1 million. Turning now to the fourth quarter. In the fourth quarter, we generated total revenue of $355.4 million, a 3.2% increase versus last year. Comparable restaurant sales increased 2.6%, led by 4.5% traffic growth and a 1.9% lower average check led by the drivers Lyle outlined earlier. Restaurant-level operating profit increased from 15.4% last year to 16.1% this year, led by the leverage benefit of growing sales and continued efficiency gains captured by our operators. Cost of sales was 25.5%, 40 basis points favorable to last year. The favorability was led by menu price increases and continued gains from our gross to net initiative focused on simplifying the efforts of our team members and more consistent execution for guests. This favorability outweighed food cost inflation led by beef costs of approximately 14% higher than last year and increases in produce costs, partially offset by favorable poultry prices. Total labor expense is 35.8% of sales in the fourth quarter. While this result is unchanged versus last year, our restaurant teams continue to operate more efficiently while also delivering higher guest satisfaction. The efficiency gains are a credit to the great work of our operators and overall simplification efforts with contribution from the activity-based labor management tool that is rolled out to approximately 30% of the system at year-end. These efficiency benefits were offset by increased bonus costs for restaurant management as a result of the sales and profit growth, and we continue to see higher workers' compensation expense due to rising medical costs despite our progress in reducing the number of claims. Occupancy and operating expenses, which include marketing, was 22.6% of sales in the fourth quarter, a 30 basis point improvement versus last year. Sales leverage more than outweighed inflationary pressure across the category. General and administrative costs are $25.1 million and 7.1% of sales, an increase of 20 basis points compared to last year. The increase is a result of 2 primary factors. First, we determined that certain previously capitalized expenses no longer held future value and expensed them in the quarter. Second, we incurred costs related to different aspects of leadership transition, particularly in the finance function. Excluding these unusual expenses, our run rate for the quarter would have been approximately $22 million or 6.2% of sales, in line with expectations. Depreciation expense increased 30 basis points compared to last year as a result of our investments in restaurant renovations and new restaurant openings. These components delivered growth across all profitability measures. Net income in the quarter increased to $12.6 million in 2025 as compared to a loss of $5.3 million in 2024. Adjusted EPS increased 40% to $0.66 per diluted share from $0.47 last year. And adjusted EBITDA increased to $35.6 million, a 7.4% increase compared to $33.1 million last year. In the fourth quarter, we repurchased and retired approximately 167,000 common shares for $5.4 million. During fiscal 2025, we repurchased approximately 2 million shares at an average price of $33.80. With over $90 million of Board authorization to purchase additional shares remaining, we have significant capacity funded by the business' durable and growing cash generation to repurchase shares when the market price is at a meaningful discount to its intrinsic value. Importantly, our balance sheet remains healthy as we ended the fourth quarter with net funded debt of $61.2 million, comprised of a debt balance of $85 million and cash and cash equivalents of $23.8 million. Now turning to 2026. Our financial guidance for 2026 is as follows. First, comparable restaurant sales growth from 1% to 3%. We expect continued traffic growth and a marginal increase in average check as we anniversary promotions that affected check in 2025 and implement prudent pricing action to address inflation. I would note, comp sales results to date in the first quarter, including the impact of Winter Storm Ben in late January are in line with this annual guidance. Second, restaurant-level operating profit of $221 million to $233 million. We expect sales gains and further efficiency from initiatives, including gross to net and cost of sales, activity-based labor management and multiple initiatives from our supply chain team to drive this growth versus 2025 and outweigh approximately 2% to 3% inflation in our commodity basket, labor rates and other costs. Third, adjusted EBITDA of $140 million to $150 million. In addition to the restaurant level operating profit, we anticipate total G&A costs will normalize near $90 million or 6.2% of sales, a 30 basis point improvement versus 2025. This G&A estimate is inclusive of approximately $11 million in stock-based compensation expenses. Fourth, capital expenditures of $85 million to $95 million. This is an accelerated pace from 2025 and represents incremental investments in IT and a restart of our new restaurant opening pipeline. On the new restaurant front, we expect to open up to 2 restaurants in the second half of 2026 with additional restaurants under construction in 2026 slated for 2027 opening. Fifth, we may repurchase up to $50 million of stock depending on market conditions. This is an important lever that demonstrates the cash-generating power of the business. We expect cash from operations to fund our CapEx, including an accelerated pace of new restaurant openings and have flexibility to return excess cash to shareholders through the share repurchase program or use it to further strengthen our balance sheet. As we demonstrated in 2025, we have the financial capacity and intent to put our capital to work, buying back stock when the market undervalues our shares. Finally, as we model the quarterly shape of 2026, I would note 2 items. First, inflation accelerated in the second half of 2025, led by beef commodities, and we expect that elevated inflation to carry through the first half of 2026 before moderating in the second half. Second, we expect a more even spread of G&A across the quarters in 2026 than 2025, resulting in a G&A increase in the first half of the year and reduction in the second half. While we expect to increase our profitability in all quarters, as a result of these factors, we expect growth to be more measured in the first half of the year then accelerate in the second half. In closing, 2025 was a tremendously successful year for the BJ's business. Financial results across all key measures increased significantly as the team executed across all aspects of the strategic plan. Congratulations, and thank you to our restaurant team members, field operators and everyone at the restaurant support center. As we look forward to 2026, we are confident in our strategic direction and our ability to continue to sustainably grow the business to create value for shareholders. With that, we'll turn the call over to the operator for questions. Operator: [Operator Instructions] The first question is from Jeffrey Bernstein with Barclays. Jeffrey Bernstein: Great. I wanted to talk a little bit about the comp components. Clearly, the traffic is very strong and seems to be driven by a lot of compelling value. But on the flip side, I guess, you talked about how the mix shift seems to be down somewhat large in the fourth quarter. I'm just wondering how you think about your mix of sales on value, however you define it, what -- where that is now versus where it was a year ago? And if you're comfortable with the balance of value versus premium or whether the value mix might be too high? Just trying to think about the mix shift in general and what your expectation is as we look through '26. Lyle Tick: Yes. Sure, Jeffrey. This is Lyle. I'll start off and Todd, you can build. I mean as you look at Q4, I wouldn't actually -- I mean personally, I wouldn't characterize it as value particularly in Q4, taking a larger role, right? Because it wasn't -- in Q4, it's not like the Pizookie Meal Deal suddenly took a much larger role, and that's what drove it. It's -- the Pizookie Meal Deal continues to resonate and have growth. But actually, what drove some of that delta between sales and traffic, which is the implied check compression was the kind of resonance of the seasonal Pizookie that we had. And so we have people coming in. They're not buying the Pizookies on a discount per se. They're just coming in to try Pizookies. And you see what we see is a younger cohort coming in, which I'm pleased with, right? It's a hard group to get, and we have more of those folks coming in. You combine that with better operations, hopefully, more of those folks will then choose to potentially come back. But we are seeing more of those checks where it's them coming in and having a Pizookie or not everybody is having an entree or you're having a Pizookie in some drinks. And so we saw a resonance and real movement there in mix. And then we continue to see the outperformance of late night in Q4. So the things that drove more check compression in Q4, I wouldn't necessarily think about as headwinds, right, so to speak, or like more from a discounting perspective. There's other small things in there like in our features for the holiday season. This year, we featured salmon over the ribeye given what was going on with the cost of steak. That carried with it a bit of a lower check but a better margin. So there's a number of little things in there, but I wouldn't say it was driven by a sudden jump in reliance on value in Q4 versus what we've been seeing. Todd Wilson: I'll just quickly add 2 items of building on Lyle's point of the any "trade down in check or lower check", it's just a mathematical equation of we drove incremental traffic at a lower check average with those -- especially those seasonal Pizookies. The other piece I'd call out, and I think it was part of your -- where you're going, as we look forward to 2026, we do expect -- we continue to see PMD grow, and that's obviously a good thing for us as that value message resonates with guests. And so we do expect to see some continued check trade down, but not to the degree that we saw in 2026, meaning we do expect some expansion of net check. And that's just a matter of the pricing to cover off inflation. Jeffrey Bernstein: Understood. And can you share the -- just on the inflation side, I think you called out a couple of particular commodities, but just wondering what the commodity and labor inflation was in the fourth quarter and what your outlook is for full year '26? Lyle Tick: Yes, absolutely. So the total basket in the fourth quarter was about 2.5%. We called out beef. We called out produce as the big drivers of the commodity basket. Labor was a similar ballpark between 2% and 3% in Q4. We think the first half of the year, quite frankly, will be in the 3% to 4% range in terms of total inflation. Those same drivers really drive the start of the year, but then we see that moderating in the back half. Operator: The next question is from Brian Bittner with Oppenheimer & Company. Brian Bittner: 4% traffic growth in the fourth quarter, really impressive. I think it was your sixth straight quarter of positive traffic. And as you look to '26, your 1% to 3% same-store sales guidance, I think it clearly builds in a more balanced check and traffic, I think, and that's kind of what you just said to Jeff's question. And just in your internal models, how are you anticipating the overall comp trends could be throughout the year? Do you expect them to be pretty steady throughout the year? Is there any interesting drivers we should be aware of that happened post first quarter? Todd Wilson: I don't think there's anything we call out. There's obviously some movement in our internal models, but I don't think it's enough to call out. I go back to some of the comments we made in the call, Lyle commented on this, and I did as well that we're pleased with the start of the year. I pointed to our annual 1% to 3% guide and that our results to date are in line with that. And so that gives you a sense of what we're seeing at least so far in Q1. I know there's been thought internally and externally about anniversarying PMD, which the company did successfully back in 2025. And so we're always looking ahead to make sure that we're planful in those things. I think you see that in the fourth quarter with the seasonal Pizookies that kept that momentum going. So we try to be very planful there. But ultimately, I wouldn't call out anything as big movements within the quarters. But to be clear, we are looking to grow comp sales and expect to grow comp sales and traffic in every quarter. Brian Bittner: Okay. And just a follow-up on the restaurant profit guidance, I think it assumes kind of a 50-ish basis point expansion in restaurant level margins. If you can just kind of confirm that. And you've been on this really strong margin expansion path recently. What's going to keep the margins expanding as we look forward in '26? If that 50 basis points is the right kind of base case, where is that coming from? Lyle Tick: Yes, I'll start, and Todd, you can jump in. The -- as we look at next year, I mean I think there's 3 components to it, right? One is delivering consistent sales growth, right, and having some leverage on the top line, which I think I've maybe been a little bit repetitive on is that we're really focused on delivering a more consistent and durable BJ's that delivers that kind of consistent growth. So that helps. Number two would be the continued focus on the programs that I've talked about previously, which is we have a really strong core set of KPIs that we're driving accountability down through our teams. We're really focused on bringing up our outliers or kind of our bottom quartile of performance. So continuing to bring that bottom up. And so you see ideally everybody getting more efficient, but that bottom coming up and getting more efficient than the rest. And then as you look at things like our gross to net, that is going to be a continued focus that we're pushing against with a particular focus on comp food and beverage, right? That is a continued area for us of real focus. Because for me, that is the best indication of when you're moving that, that suggests you're executing better, you have less bad conversations with guests, you can turn tables quicker. So none of that is totally wrung out. I think also I've talked about previously, as we look at continuing to roll out the activity-based labor model, that's going to be rolled out over 2026. We're going to do that in a measured fashion because you kind of roll it out, you need to learn, get adoption from the GMs and keep going and you don't want to see conquered ground. So it may be more of a 2027 impact. But that -- as that rolls out, the [ ABLM ] is suggesting there are some hours that we can save. I think I've talked about this a little bit before on the shoulders and on our lower shifts and in the high times, we actually need more labor. But the real focus for us on the [ ABLM ] has been consumer metrics, right? And are we seeing improvement across our pace, across our food quality, across hospitality. That's the real kind of, I think, focus on having the right people in the right place at the right time. But I think as you observed on a lot of those initiatives, I think last year, we were able to get a lot of what was kind of more obvious, if you will. And that as we come into this year, you are seeing the level of expansion not be quite as big, right? And it's because as we come over that, while there's more to have there, each year we come over that, we expect to get more efficient and effective. But the degree of it is going to evolve over time. Todd Wilson: Brian, just quickly confirming that the -- you mentioned the 50 basis points or so that we're thinking about it the same way, I'd say, in broad strokes, that's in the range of what we would expect. So your math aligns with ours. Operator: The next question is from Sharon Zackfia with William Blair. Sharon Zackfia: It's really interesting to continue to hear about the LTOs on the Pizookies bringing in younger demographics, and it sounds like it really accelerated for you in the fourth quarter. It may be too early, but what does engagement look like with those customers after they do come in for an LTO? Are you seeing kind of a tail of engagement with those cohorts? Lyle Tick: You're right. I mean given average frequency of our business in full service, it's too short of a time for me to feel comfortable saying, I definitively am or not. So I want to get more time under our belt. I think big picture, as we looked across 2025, we did see increases in frequency across our age and income cohorts with a little bit more on the younger and a little bit more on the older and more actually on the lower income cohorts. And I think those dynamics to me show -- and this is, again, my inference. But you look at it and you look at the growth and you look at the mix are correlative to the resonance of PMD and the resonance of Pizookie. But it's too early for me, Sharon, yet to definitively tell you that, that is true. Sharon Zackfia: That's completely fair. Are you doing something different in social media? Have you augmented your capabilities there? Or is that increase that you alluded to, is that just organic and coming from your consumers? Lyle Tick: No, no, no. It's -- we've changed kind of the way we go to market. I mean we did bring on a new team member here who's doing a great job, who is far more socially conversant than anyone than Todd or I or Rana, anyone in this room in fairness. We also have looked at some of our agency resources. But when you look at the shift, a lot of our social previously was what I would call kind of brand-produced top-down that we would then push out. And we've not only increased our investment as a percentage of our overall spend in social and influencer. But now that content is really influencer-produced versus brand-produced. So people speaking on behalf of us versus us just speaking on behalf of ourselves. Sharon Zackfia: Great. And then last question. Now that we've kind of fully lapped the meal deal, how does the weekend traffic look versus weekday? Lyle Tick: As we look through Q4, we saw growth through Q4 of all dayparts grew with the highest growth coming from late night. But yes, I'm looking at it right now. So as we look at all dayparts grew and late night was the biggest grower with mid-afternoon and dinner being quite similar and lunch growing, but not quite to the same amount. So that's what we saw from a daypart point of view in Q4. Operator: The next question is from Brian Mullan with Piper Sandler. Allison Arfstrom: This is Allison Arfstrom on for Brian Mullan. On the refreshes to the burger category in chicken sandwiches, curious if you could speak more about what led to the decision on these 2 platforms? And then what opportunity might be there and if we should expect a similar time line or stage gate process as the pizza relaunch? Lyle Tick: Yes. I mean so working backwards, in terms of the process, yes, the process will be similar for most things that we take to market, right? We're going to identify opportunities through 2 things. One is, as we look at our menu satisfaction, intent to reorder, value perceptions, all of those things, that helps us identify areas of opportunity. We look at kind of what are driver categories, so what categories attached to a lot of checks. And then generally, upstream on the big categories, we'll do some screener work to get a sense of conceptually, are we in the right space from a consumer. And then as we go to market, operations feedback, guest feedback. Just like with pizza, I would expect we'll have to do some tweaking when we get that and then go to market. So the process will be the same. I may have answered both questions there about kind of how we identify it. But we're too early in the -- it actually being in test market for me to have any material stuff to talk about. Operator: The next question is from Todd Brooks with Benchmark StoneX. Todd Brooks: First question, on the activity-based labor, I think you talked about a ratable rollout across the course of this year, 30% was in the barn last year. I mean by celebration season this year, you think you're kind of 50% penetrated with having it rolled out? Lyle Tick: I don't know if we'll be all the way to 50%. I would say celebration season is probably the season where we are most cautious about creating disruption. So I think in the first half, we'll have some more rollout. I don't know if we'll get all the way to 50%. I think our windows for rolling something out that we have to kind of intake and get comfortable with. Q1 is a pretty good window and Q3 are pretty good windows. So it's not that we won't advance it at all, but we want to be really judicious about any disruption that we might cause during celebration season as GMs get used to it because there is a getting used to it, right, when you go now to getting that labor schedule from the AI and kind of learning how to balance the GM's overlay with AI. There's a bit of a learning process, which we've seen in terms of getting comfortable with it. So we'll be judicious about how much of that happens over celebration season. Todd Brooks: And just kind of looking at some of the earlier units that have implemented the platform, you talk about wanting to see a bend higher in certain scores. Can you start to put a framework around how much improvement you do see once the store is on that platform? Lyle Tick: I mean I'm not going to be -- I won't give specific numbers at this point. But when I look at the shape where we're seeing improvement, we're seeing improvement pretty much when you look at the pre-post versus the control group across pretty much all of our metrics. The one that we're actually seeing move the most is pace, which is -- which I'm encouraged by because it's about getting the right people in the right place at the right time. So that's where I'd like to see the most movement. The others, we're seeing movement, but varying degrees of movement. But pace seems to be the one that's getting the most improvement, which would be, again, as you might imagine, a core metric for getting the right people in the right place at the right time. Todd Brooks: Okay. Great. And the final one for me. Todd, you said earlier in Q&A that you continue to see the Pizookie Meal Deal grow. Can you talk to what mix looked like in the fourth quarter maybe versus what you were seeing in Q3 as far as percent of checks on PMD? Todd Wilson: Yes, absolutely, Todd. When we look back at Q4, PMD grew almost 16% of checks in the fourth quarter. That was up almost 2% versus the fourth quarter a year ago and an increase versus Q3. So broadly, that platform continues to grow for us, which there's obviously been a lot of traffic associated with that over the last 5 or 6 quarters. So it's good to see that. That does come, Lyle hit on this. The check is just a little bit lower is what we see on the PMD checks. It's about 5% lower. So there's a little bit of a check trade-off there, but obviously, getting that traffic in is a big win for our business. Lyle Tick: Yes. And the only other thing I would build on there, the percentage margin of those checks looks a lot like the percentage margin of our other checks. If you look at over the course of all of 2025, it's about 15.5% of checks and Q4 was a little bit higher than that. And when you look at it as kind of a percentage mix of sales, it's more like 6%. Now that's full week, Brian (sic) [ Todd ]. I know we've talked about in the past, which remains true that during the week, you're in kind of a -- Todd, sorry, you're in the low 20s, Todd, when you're looking at during the week. Operator: The next question is from Jon Tower with Citi. Jon Tower: Maybe -- I'm curious to hear that you guys are seeing relatively strong late-night business. It's good to hear. I'm just curious, one, if you're doing anything special to drive it relative to what you've done in the past? And is that also inclusive of the off-premise business when you speak to the strength there? Lyle Tick: Well, so the -- I mean all of late night is growing. I'll let Todd pick up on the channel mix because I don't have that answer at hand. Jon, I wish I could tell you that we were doing something super unique to drive the late-night business. I think we have a great environment. I think we have a good offer because our happy hour offer we offer at late night. And I think I've talked about this before, I do think some of it is supply and demand. I think on balance, in the past several years, if anything, you've seen less people kind of either extend or go back to kind of full hours. And I think there's less late night supply. I think we probably have some demand coming back. And I think we are a great or better alternative to a lot of folks for late night. And I think that's helping us win. But we don't have like a specific marketing push or very specific unique like offer for late night that is uniquely driving it. Todd Wilson: Jon, I'll tag in on -- Jon, just to give you -- it's Todd here. I'll give you some quick color on off-prem versus on. As we look at -- if you just split our business into on-prem versus off-prem, the dine-in business, the on-prem business is incredibly strong. Obviously, that's the majority of our business in the quarter. Traffic in dine-in was up almost 7%, a little over 7%. So just tremendously strong there. The off-prem part of our business has seen declines. That wasn't new in Q4. That has been a headwind for us for the past few quarters. And so it's a matter of -- we've got folks dedicated to work to address that, but the strength of the dine-in business is particularly strong. Jon Tower: Okay. And just following up on the comment regarding late night. That anywhere near -- like if you guys were to recover, I guess, from an average weekly sales standpoint, back to peak, like how much more room do you have to go or better ask like how far has late night declined relative to your kind of peak times or peak windows or years? Lyle Tick: I mean honestly, I don't have the number to hand of whether we're there or whether late night, if we look back, I assume we're talking like kind of pre-COVID like what the late night AUV was. I mean what I can say is as part of what we talked about in Q1, which is the continued momentum we're seeing in Q1, the shape of that continues to see particular strength in late night. So that has continued into this quarter. I don't know, Todd, if you have [indiscernible] in terms of specific AUV. Todd Wilson: Jon, maybe we can tag those... [Technical Difficulty] Jon Tower: Okay. Hopefully, you guys can still hear me. Just one last question that I had. Okay, great. Just you had mentioned, obviously, you're going to be opening new stores in the back half of this year. Can you just speak to what the new prototype might look like, high-level features that are different versus the baseline they could even just be square footage. But I would assume there's probably a little bit of a differential even off-premise access to the stores versus maybe some of the legacy asset base that you have today and even the cost to build? Lyle Tick: Yes. So I mean as we look at it, right, I mean from a design perspective, I think what we're ultimately trying to achieve is a contemporized expression of our brand that is familiar to the people who know and love us, but also kind of exciting to new guests. And we leveraged our brand positioning to do that design work. And so I think it will feel familiar but contemporary. And we have, I think, some branding elements that we're bringing in that are evolved and new. I think how we're using some of the nods towards our craft beer heritage with the silos is going to be evolved and new. So there's a number of things, but it won't be -- it will be a familiar but contemporized version. As we look at the footprint of it, I'm a big believer in right size, right cost, right place. Now the first couple that you build in my experience doing this are generally relatively prototyping. And then as you kind of go forward, and so as we look into the next couple as we move into 2027, I think we will be looking to look at building them not always at the same square footage, maybe in certain markets, it would be relevant to go smaller. I think we're looking at conversions in the appropriate markets. So we're not going to be dogmatic about every time it has to be just a prototype ground-up build. And so part of that influenced the design process, whereby what we're really coming out with is a clear set of brand standards for BJ's that we can apply to different sizes, different shapes, but it always looks and feels like a BJ's. With that on a cost to build size, I mean, really, what we look at by each individual evaluation of a new unit is do we feel like it's delivering an attractive IRR so that we're being good stewards of the capital. But we are obviously conscious of what is going on with construction and inflation. And so as we built the new design, we are looking for opportunities with that kit of parts to be able to apply them flexibly and get the kind of cost to build to sales and profit and ultimately, IRR where we want it. But I think what you'll see going forward, Jon, is in certain markets, you're going to see something that looks quite like the size of a BJ's right now because it's appropriate for that market. And in another market, you might see something of a smaller footprint or a conversion that allows us to deliver the right return for the capital we put in. Jon Tower: Great. And have you shared those IRRs before that you're targeting? Lyle Tick: I don't know that we've -- I think that we've shared it before. I mean in the past, I think we talked about like mid-teens IRR would obviously have us at a place where it exceeds our weighted cost of capital. But I think our ambition is far better than that. Operator: This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. I will now turn the call over to Sarah Jane Schneider, Vice President, Investor Relations. Sarah Jane Schneider: Thank you, and welcome to NCR Voyix Corporation’s Q4 2025 earnings conference call covering our 2025 fourth quarter and full-year results. A copy of our earnings release and the presentation we will reference are available on the Investor Relations section of our website at www.ncrvoyix.com and have been filed with the SEC. With me on the call today are James Kelly, Chief Executive Officer; Nick East, Chief Product Officer; Darren Wilson, President, Retail and Payments; Benny Tadele, President, Restaurants; and Brian J. Webb-Walsh, Chief Financial Officer. Before we begin, please note that today’s remarks will contain forward-looking statements. These statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially. Please refer to our earnings release and SEC filings for additional information. We undertake no obligation to update these statements. We will also discuss certain non-GAAP financial measures, which we believe provide additional clarity regarding our performance. Reconciliations to the most comparable GAAP measures are included in our press release and supplemental materials on our website. With that, I will turn the call over to James Kelly. James Kelly: Thanks, SJ, and good morning, everyone. Thank you for joining us for our fourth quarter and year-end earnings call. Our results for both the quarter and the full year reflect the positioning of the company now as a platform-led business supported by our leading service capabilities and integrated payment solutions. As we began our transition, it became clear that while we had a strong product team, we lacked centralized product leadership at the executive level. Making this a critical leadership role, Nick was appointed our first Chief Product Officer across both retail and restaurant. Nick originally joined the company through a prior acquisition and brought the right combination of technology expertise and deep company knowledge to step into this role. Nick has been instrumental in accelerating the launch of our new platform solutions and repositioning us as a platform-powered company. Reflecting on 2025, my initial objective as CEO was to strengthen our executive leadership across retail and products, reorganize and fortify our sales organization, and deliver our platform solutions to market. Accordingly, I appointed Darren as President of Retail and Payments. Since stepping into the role, Darren has appointed new leadership across three of our four regions, revamped the sales compensation plan, and played a key role in outlining expectations for our platform solutions as we work to achieve sustainable growth. The most consequential achievement in 2025 was the completion of a five-year transformation that rebuilt the company’s software foundation from the ground up. More than 50 legacy on-premise applications were modernized and unified into a single scalable platform built to power the mission-critical operations customers rely on every day. In addition to these achievements, we executed a series of cost actions to address the termination of the hardware ODM agreement. We streamlined and sourced key functions and began consolidating redundant systems. We engaged with nearly 400 companies, including more than 100 new prospects, and hosted investor events featuring live demonstrations of our Voyix portfolio. A clear illustration of the market’s confidence in our go-forward strategy is reflected in the feedback received at the NRF show in New York this January. Our successful execution was on full display as we launched our modernized products, providing a strong foundation from which to scale. We are very encouraged by the response from both new and existing customers and the demand our new offering is already generating, as reflected in the more than 20 platform contracts we have signed, including three in the fourth quarter. This includes two new retail customers in the Philippines and Belgium, and our first enterprise restaurant platform customer Chipotle. We continue to broaden our payments offering across geographies and industry verticals and expand our payment capabilities. We are enhancing our proprietary gateway, Voyix Connect, to be able to scale our payments business together with the rollout of our platform solutions. Later on the call, Darren will discuss our recent progress in more detail. Next is services. With global scale and deep domain expertise, we operate inside some of the most complex retail, restaurant, and fuel environments in the world. Our services business represents over 50% of total revenue today and remains a clear competitive differentiator for enterprise business. We are leveraging our service organization to expand our existing customer relationships and win new business, particularly as we deploy our new platform solutions. This will improve operational efficiency and deployment speed for both retailers and restaurants. Finally, as we recently announced, the phased transition of our hardware business to EnerCom commenced in early January. We remain on track to complete the transition by the end of the first quarter. Brian will provide additional details on the financial impact later on the call. With that, I will turn the call over to Nick. Nick East: Developed over the past three decades across geographies and vertical markets, our end-to-end offering provides the flexibility and agility—as well as integrated payments and support services—to enhance the consumer experience and drive operational efficiencies. For the first time, we were able to showcase a fully integrated modern cloud platform that leverages our extensive global software library of more than 30,000 unique features, IT security, and insights for retailers and restaurants across supply chain and back office, and toward adoption of a comprehensive set of capabilities spanning point of sale, self-checkout, and platform management. The capabilities we previewed at NRF will be lab-ready by the second quarter, with initial customer deployments scheduled for the back half of the year. This represents a meaningful step on our path toward broader commercialization and scaling of our platform. Based on the more than 20 customer contracts we have already signed, we have a backlog that we expect to deploy consistently over the next nine to eighteen months, which aligns with the enterprise market segment and the technology roadmap to be able to accelerate new implementations, deliver seamless updates, and lower deployment costs for both the customer and the company. Further, our platform is designed for innovation at pace in the cloud and at the edge, allowing customers such as Chipotle to innovate their operations. In 2026, our product team is focused on AI innovation for the platform. For example, we are now leveraging AI to examine the business logic of the live production stores of our customers. This again demonstrates the innovation and speed at NCR Voyix Corporation. In addition, we have developed and demonstrated a store-in-a-box offering for major fuel that could be self-deployed in under fifteen minutes. These offerings are priced to meet the expectations of small and mid-market customers, and we will launch our restaurants and grocery offerings in the second half of the year. Since NRF, we continue to engage new and existing customers in our labs and at major trade shows globally. Darren recently returned from EuroShop in Düsseldorf, where our demonstrations generated strong interest and reinforced demand for our platform solutions. Next month, James will attend Retail Tech Japan to showcase our localized applications, and in May, Benny will be at the National Restaurant Association Show in Chicago. We are building on this early momentum to meet the growing demand for our modern cloud-to-edge solutions. With that, I will turn the call over to Darren. Darren Wilson: Thanks, Nick. I would like to begin with an update on our payments strategy. Historically, third parties have had the ability to connect directly. Going forward, all third-party integrations will route through the gateway, improving security, consistency, and scalability. We continue to scale our payments capabilities across industry verticals and geographic markets. Voyix Connect, our proprietary gateway, serves as the conduit between our platform—including payments—and third-party authorization processes. More broadly, the gateway becomes the single integration layer into individual applications for our platform. In the U.S., we continued to progress on integrating Voyix Connect with Corpay and WEX to be able to support commercial fuel payments. We achieved certification with Corpay in January and expect to be certified by WEX in the second quarter. We also migrated our remaining customers from the JetPay front-end platform. Our U.S. payment offering now includes both gateway and processing, and we are registered as an acquirer. Internationally, we remain focused on expanding Voyix Connect to integrate with local acquirers and enable processing through end-market referral partners to scale our payments business more quickly. Lastly, we recently signed a referral agreement in Mexico to support payment acceptance for our customers in Latin America. For example, we continue to implement pricing escalators where appropriate across certain retail and restaurant contracts with most agreements structured on three- to five-year terms. These escalators are being introduced upon renewal for both new and existing customers as they adopt our platform offerings. As a result, the financial impact will build gradually over time. Our primary focus remains embedding our end-to-end payment solutions with our enhanced gateway functionality later in the year. We will look to form similar relationships for our customers in Canada and Europe. This deepens integration, removes intermediaries between POS and payments, lowers customer costs and complexity, expands recurring revenue, and increases long-term value for both our customers and the company. Turning to retail. In the fourth quarter, our retail business signed 40 new customers. Our platform and payment sites increased 6% and 12%, respectively. Software ARR increased 8% and total ARR increased 4% in the quarter. The launch of Voyix POS and our fully integrated platform solutions continue to show early signs of success, as demonstrated by two new enterprise logos we secured in the fourth quarter. We secured a long-term agreement with Colruyt Group, a leading Belgium-based grocery chain, to implement Voyix POS for grocery across more than 850 stores in Belgium, Luxembourg, and France. These customers chose to adopt the Voyix Commerce platform functionality because of the flexibility and operational efficiencies it provides. These solutions will allow them to integrate their entire technology estate, improve both in-store and above-store functionality—including third-party applications—and seamlessly adopt additional capabilities following the initial rollout. In Asia Pacific, we signed a multi-year contract with 7-Eleven Philippines, the number one convenience retailer in the Philippines, and will implement Voyix POS for c-store across more than four and a half thousand stores beginning later this year. The rate at which we are attracting retailers to our platform solutions has further accelerated following our demonstrations at the trade shows we recently attended. I am confident that this trend will continue as we also ramp our initial platform contracts following our upcoming deployments across our global footprint. With that, I will turn the call over to Benny. Benny Tadele: Thanks, Darren. In the fourth quarter, our restaurant business signed more than 150 new customers. Software ARR increased 3% and total ARR increased 6%, while SMB performance was impacted by headwinds related to market dynamics and the legacy nature of our current SMB offering. Our enterprise and mid-market segments maintained steady growth this quarter, excluding our SMB business. Platform and payment sites increased 11% and 13%, respectively. In the fourth quarter, we renewed and expanded our long-standing relationship with Red Robin, a fast-casual chain with nearly 500 locations across the U.S. and Canada. Our new five-year agreement includes managing the service desk operations and delivering all tools, technology, and support. Additionally, as an existing user of Aloha point of sale, Red Robin will now be the first enterprise table service brand to adopt Aloha OrderPay, our next-generation handheld solution to improve ordering speed and guest satisfaction. As shared in November, the launch of Aloha Next enabled us to renew and expand our partnership with Chipotle through an exclusive six-year global agreement. The rollout remains on schedule, with Aloha Next now in their lab and both teams remaining aligned on readiness milestones. In addition to Chipotle, we are now in two additional enterprise restaurant labs, underscoring the confidence global brands are placing in our latest technology. We are advancing the deployment of additional platform capabilities, including Menu and SmartManager. Menu is being rolled out to multiple enterprise customers next month, enabling real-time unified menu management across channels. SmartManager is already in pilot with multiple customers. These early implementations are providing valuable insight into sequencing and workflows and further strengthen our value proposition for restaurant operators. As we enter 2026, we are encouraged by the momentum in our enterprise pipeline and the depth of customer engagement. Our strategy is resonating in the market, and we are well positioned for accelerated growth in the year ahead. In our SMB business, we are reengaging with customers in preparation for the launch of Aloha Next. Designed for the SMB space, our modern and cloud-native store-in-a-box solution, Aloha Next for SMB, will launch in the second half of the year. It streamlines workflows, reduces costs, supports quick self-installation, and allows restaurants to easily scale features as they grow. We will look to sell our latest solution into our existing base and to new prospects to address the recent performance of this business and enhance the growth profile of our restaurant segment. I will now turn the call over to Brian. Brian J. Webb-Walsh: Our results for the quarter and for the year were in line with our expectations and reflect the progress we have made to streamline our organization and reposition the company as a platform-led business supported by our leading services offerings and integrated payments capabilities. For the quarter, total revenue increased 6% to $720 million due to higher hardware sales in the period, partially offset by lower fees earned from the transitional service agreements with NCR Atleos and Conduent. Reported recurring revenue increased 1% to $422 million, and 3% when excluding a certain divestiture. Software ARR and total ARR both increased 3%. Platform sites increased 8% to 80,000, and payment sites increased 4% to 8,600. Adjusted EBITDA increased 17% to $130 million as margin expanded 170 basis points to 18.1%, driven primarily by our cost containment actions. Non-GAAP EPS increased 48% to $0.31, while GAAP EPS was $0.49 in the fourth quarter. The GAAP EPS included a $65 million tax benefit related to a legal entity restructuring we completed in Q4. The cash from this will likely be received in 2027. Turning to our segment results. Retail segment revenue increased 9% to $508 million, primarily due to higher hardware sales. Recurring revenue increased 3% to $279 million, driven by an improvement in software revenue. Segment adjusted EBITDA increased 12% to $114 million, as margin increased 70 basis points year over year to 22.8%, driven by revenue growth coupled with our cost initiatives. Turning to restaurants. Total segment revenue of $212 million was flat, which reflects hardware growth offset by a decline in one-time software and services revenue. Recurring revenue increased 6% within our enterprise and mid-market businesses, and weaker performance in the SMB business, as Benny outlined. Segment adjusted EBITDA decreased 3% to $66 million, as margin decreased 110 basis points to 31.1% due to lower one-time software and services revenue compared to the prior-year period. Lastly, net corporate and other expenses decreased $9 million, or 15%, to $50 million. Turning to our cash flow. Adjusted free cash flow, excluding restructuring, for the full year was $136 million, about $40 million below expectations due to timing, including a $13 million delayed tax refund and higher working capital use primarily from increased hardware sales and inventory. Restructuring cash outflows of $109 million were related to severance, stranded costs from the spin-off of the ATM business and the sale of the digital banking business, internal infrastructure investments, and, to a lesser extent, ODM transition costs. We invested $46 million in capital expenditures during the quarter and $165 million for the year, inclusive of accelerated product investments. These investments directly enable the launch of our new platform solutions unveiled at the NAC show last October and the NRF show this January. In December, we also sold a non-core warehouse and training facility, which generated an additional $60 million in cash for the quarter as we continue to streamline our footprint. We ended the quarter with net leverage of 2.1x based on our net debt as of December 31 and the full-year adjusted EBITDA. Finally, we repurchased approximately 69,000 shares, or 25%, of the Series A convertible preferred stock for $74 million, in addition to $4 million of common shares. We expect to complete the ODM transition by March 31. Thereafter, hardware will be sourced through EnerCom, and we will earn a commission rather than carry it in inventory. Turning to our 2026 outlook, we expect reported revenue of $2.210 billion to $2.325 billion, down 13% to 18% due to the ODM implementation, effective April 1. On a pro forma basis, adjusting for the change in hardware revenue recognition, revenue is expected to be down 2% to up 3%. Adjusted EBITDA is expected to be $440 million to $445 million, or 4% to 7% growth, and non-GAAP adjusted EPS is expected to be between $0.93 and $0.96, or 3% to 6% growth. Seasonality remains consistent with 2025, with Q1 expected to be the lowest quarter. For both retail and restaurants, we expect recurring revenue to improve throughout the year. We expect margins for both segments to step up in Q2 upon implementing the hardware ODM model. Restaurant margin will improve modestly through the year, and retail margin should show additional expansion. Adjusted free cash flow is expected to be between $190 million to $220 million, reflecting the partial-year working capital benefit from the ODM transition, offset by approximately $120 million of anticipated cash outlays related to the following: severance actions taken in 2025 and 2026, stranded costs associated with the completion of the spin-off, internal infrastructure investments, costs related to the ODM transition, and an accrued litigation matter. We anticipate the elevated restructuring will step down in 2027. I will now turn the call over to James for closing remarks. James Kelly: In 2025, we completed a heavy lift. Using AI and our application library, we modernized more than 50 legacy solutions into a unified cloud-to-edge platform. That five-year effort leaves us with a modern architecture, full-feature capability, and the ability to serve all segments of the market domestically and internationally on one integrated platform. I view this as a three-year term with year one complete. Now we move from transformation to scaling. In 2026, the focus is building backlog across all markets, accelerating deployments, and driving adoption across retailers and restaurants. We are no longer building the platform. We are selling it and delivering it. Enterprise implementation takes time. Enterprise relationships know our markets, understand how to position the comprehensive value of our platform, and are executing with discipline and focus. As a modernized infrastructure, we are well positioned to continue delivering the full functionality they rely on today through a modern platform that provides materially greater capability. What gives me the strongest belief in our ability to deliver is our seasoned sales leadership and the team behind them. A critical component of that conviction is building meaningful sales backlog this year. The backlog we build in 2026 begins to accelerate revenue in the second half of the year into 2027 and beyond. As a reminder, we support approximately 400 of the world’s leading enterprise retail and restaurant customers across the 35 markets in which we operate. Making backlog a key metric, this is complemented by new customer logos we are winning in the market, accelerating recurring revenue and overall revenue growth this year into next. I will now turn the call over to the operator for Q&A. Operator: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad. If you are called upon to ask your question and are listening by a loudspeaker, please pick up your handset and ensure your phone is not on mute. Your first question comes from the line of Matt Summerville with D.A. Davidson. Your line is now open. Matt Summerville: In the back half of the year when it comes to organic revenue, is there any sort of comparison versus the prior year, the prior couple-year period, and how that metric informs the sort of inflection you are pointing to? And then I will follow up. Thank you. Brian J. Webb-Walsh: Thanks, Matt. I’ll start and then hand it to James. As we look to the back half, the organic trajectory ties closely to the timing of deployments from our growing platform backlog. James can add more color on cadence and enterprise timelines. James Kelly: Our customer base, while we cover the full spectrum from SMB to enterprise, the enterprise side is our most significant segment. And that group, as I mentioned in the comments, takes time for them to modernize—nine to eighteen months is what I’ve seen here, sometimes even longer. The products that were on display at NRF in January are the ones now in active demand. We’ve done 25 demos since NRF, and Darren just came back from Düsseldorf with strong interest. We’re at the beginning of this modernization cycle. We already have more than 20 customers that have signed contracts, and those will be deployed this year into next. One of the things Darren, Benny, and I, along with a broader team, worked on was a revamp of the compensation plan. This is the first time in a long time the company has come to market with something truly material rather than re-selling legacy applications. For right now, backlog is the more important KPI for us to focus on. It’s not new to the company, but we’ve now structured incentives to reward signing accounts. We see backlog starting to build because we have 20 customers that have already purchased and signed, and we are focused on accelerating those deployments this year. Nick can add a couple of concrete examples. Nick East: Maybe just give you a couple of concrete examples because it does vary by customer and also by product that they are adopting. Right now, over the next two weeks, we have a customer rolling out our AI Pick List Assist functionality. That’s a simple add-on, the deployment is automated, and it will roll to all stores after a couple of months of pretesting—so three to four months end-to-end across a large estate. But for major POS changes, in retail especially, there are seasonal freeze periods around November when you can’t make changes. So any complex rollout invariably bridges a year and has to navigate those blackout periods. The pace depends on the extent of environmental change and integrations—whether it’s a simple add-on like Pick List Assist or a more complex transformation. James Kelly: There are components to it. The product can deploy in under an hour into a store environment, but there’s still training. Even though we can modernize and emulate existing screens to ease migration, stores must learn new features. As Darren mentioned, 7-Eleven Philippines—4,000 to 5,000 stores—will take time. We’re accumulating backlog across nine to eighteen months, and we’ll move as fast as possible, but this is “heart surgery” for these customers—mission-critical to their revenue. It has to go smoothly with no disruption to store operations. Hopefully that clarifies your question. Matt Summerville: Appreciate the color. And then, a follow-up: I was hoping you could expand a little bit on Benny’s SMB comments and the headwinds you saw in the quarter. Is this something more acute as far as the guide for 2026, or something more chronic? And kind of frame up what that means. James Kelly: Historically, the SMB is the smallest piece of the business here. The SMB market is highly competitive and fast to churn, and over time—especially following acquisitions of portions of the dealer network—we’ve seen contraction. More recently, the announcement around Aloha Next and the legacy nature of our SMB products versus modern competitors have been headwinds. Unlike enterprise, SMB has a large number of ISVs and new entrants. Our prior SMB offering didn’t fully leverage cloud benefits in the way the market expects. I made the decision over the summer to pivot quickly to next-gen, and with Aloha Next and our store-in-a-box approach, we’ll be positioned in the second half to address this more effectively. I expect improvement over time. Benny, anything you’d add? Benny Tadele: James summarized it well. Three points: first, there’s the historical context of how the SMB business was managed and integrated. Second, the SMB buying journey is very price-sensitive, fast to switch, and highly fragmented with many entrants—so competition isn’t just about product, it’s about a crowded market. Third, the product we had in that segment contributed to the pressure. With Aloha Next launching in the second half as a cost-effective, easy-to-implement store-in-a-box, we expect to address these issues and improve performance. Operator: Your next question comes from the line of Kartik Mehta with Northcoast Research. Kartik Mehta: Hey. Good morning. Hey, James. You have made a lot of changes at the company. It seems like things are moving in the right direction. You are on this ODM hardware transition. Once that is complete, what do you think is the organic revenue growth rate of this business? James Kelly: Thank you, Kartik. It’s evolving. As I said in my comments, we expect 2026 to improve in software, services, and payments, excluding hardware. One headwind the market is seeing is AI-driven chip demand and related pricing, which could have an impact. But culturally, we’ve also shifted: historically, there wasn’t consistent price escalation on the retail side. I’m confident we’ll see ARR and total revenue grow and accelerate locations into 2026 and especially 2027 as deployments ramp. As we deploy these applications, we’ll see a software step-up—our platform is market-leading in configuration across retail and restaurant—and we’re embedding payments with new sales rather than retrofitting legacy estates. I expect this to be a good year, and next year to be even better. Kartik Mehta: Perfect. And just a follow-up, Darren, in your prepared remarks, you talked about the third-party integration and maybe change there. What is the benefit? Is there a revenue benefit, cost benefit, cross-sales benefit? What is the benefit to Voyix from the changes you are making? Darren Wilson: The key benefit for customers is a single, integrated solution—one throat to choke. With our gateway as the integration point, we control the end-to-end proposition across hardware, software, deployment, payments, and service. Commercially, we capture pricing upside by switching revenue from third-party payments providers to ourselves, often at similar cost to the customer, and we can optimize incentives across the total solution. Strategically, end-to-end payments data in our platform—tracking from supply chain through SKU, checkout, reconciliation, and settlement—unlocks value for retailers and feeds loyalty and analytics. So the benefits span service quality, revenue capture, simplification, and data-driven value. Kartik Mehta: Perfect. Thanks, Darren. Really appreciate it. Operator: Again, if you would like to ask a question, please press 1 on your telephone keypad. Your next question comes from the line of Daniel Perlin with RBC Capital Markets. Your line is now open. Matt Roswell: Yes. Good morning. It’s Matt Roswell filling in for Dan this morning. Two questions. First, more of a guidance modeling question: can you walk through some of the puts and takes around adjusted EBITDA and margin—the accelerated investments, the ODM transition, etc.? It looks like a 250 to 300 basis point margin improvement over last year, with some from the shift to the ODM model April 1. Brian J. Webb-Walsh: Thanks, Matt. EBITDA is growing 4% to 7%, a bit faster than revenue. We are lapping some tailwinds from last year—specifically TSA fees that helped 2025 and roll off in 2026—which tempers the year-over-year growth. The accelerated investments you mentioned were largely CapEx last year, so they don’t impact EBITDA in 2026. The remainder is margin improvement from cost actions already taken and additional actions as we move through the year, plus the mix and margin benefits from implementing the ODM model beginning in Q2. Matt Roswell: Okay. Excellent. And then bigger picture question. Where do we stand with the Worldpay agreement in terms of payments? James Kelly: The agreement was signed earlier in the year and the plan remains consistent. The focus of that agreement was on JetPay, and as Darren mentioned, that migration is complete. On enterprise, rather than retrofitting legacy applications, we’re prioritizing embedding payments with new platform sales as customers modernize to our architecture. As we meet with customers, we’re positioning holistic new installs that include payments as part of the platform deployment. Operator: That concludes our question and answer session. I will now turn the call back to the CEO for closing remarks. Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect. James Kelly: Thank you, operator, and thank you all for your continued interest in NCR Voyix Corporation.
Stella Mariss: Hello, everyone. Thank you for joining CLINUVEL's Investor Webinar. I'm Stella of Monsoon Communications. In today's webinar, CLINUVEL will share their half year results and operational highlights for the 6 months ended on 31st December, 2025. I will now hand over to Malcolm Bull, Head of Australian Operations and Investor Relations, to conduct the proceedings. Malcolm Bull: Thank you, Stella, for the introduction. I'd first like to welcome members of CLINUVEL's management team to the webinar. Not surprisingly, reflecting the focus of the webinar on the financial results for the half year to December '25, we have Chief Financial Officer, Peter Vaughan. We are joined by 2 executives who are leading the business in key operational areas: Director of Clinical Affairs, Dr. Emilie Rodenburger; and Director of North American Operations, Dr. Linda Teng. We're also joined by our Managing Director, Philippe Wolgen. I'd like to acknowledge there are several analysts on the line who cover CLINUVEL and we'll ask some questions in the webinar. It would be remiss of me if I didn't say on behalf of management and the Board that we appreciate your work on CLINUVEL, your role in telling our story to a wider audience than we could reach ourselves and your involvement in this webinar. It's pleasing also that there are over 175 participants to the webinar, reflecting increasing interest in CLINUVEL. So welcome, one and all. Before going further, I think it's appropriate to highlight why we have 5 executives in today's webinar. So you frequently see Philippe; our Chief Operations Officer, Lachlan Hay; Peter Vaughan; and Investor Relations presenting the company to a range of stakeholders. We have received feedback that it would be good to have greater access and the opportunity to hear from other executives. So for today's webinar, noting this is not the forum for a strategic review, but as a courtesy to you all, we include Dr. Rodenburger and Dr. Teng to answer questions and provide their insights direct to you. Today's webinar will be in 2 parts. First, a discussion of the half year results; and second, the analysts online will be called upon to ask questions of the CFO and management. We will be talking today about plans and intended outcomes. So I'll draw your attention to the forward-looking statement or safe harbor statement on screen that identifies a range of risks that can materialize and impact their achievement. So I think 10 seconds to review that is enough, and that is on our website and on all of our announcements. I now kindly invite the CFO to summarize the results. Peter? Peter Vaughan: Thanks, Malcolm. Good evening, and good morning, everyone, from wherever you're calling in from. It's another set of very consistent results at CLINUVEL, I'm pleased to announce, with our revenues up 4% on the prior year, maintaining a steady growth pattern. Our expenses were up 22% for the period, and this really was part of the supporting the expansion initiatives that we'd foreshadowed previously that we were going to be undertaking during this period. We continued our strong positive net operating cash flows, and this saw our cash reserves over the 6 months increase by $9 million to $233 million. We're closely monitoring all of our expenditures and any discretionary spending is being scrutinized really closely. And the good news is that our profitability for this period, whilst lower, continues to be maintained despite the increasing level of expenditure during this expansionary phase. Malcolm Bull: Thanks, Peter. I'll now ask Philippe to comment on the results. Philippe Wolgen: Thanks, Malcolm. Welcome to all the analysts and shareholders. Well, in a nutshell, we follow a plan, a strategy, which is gradual and with purpose. And for this strategy to play out, we need to manage our finances tightly in a very controlled manner. In the past 12 months, we intentionally increased our expenses. And therefore, naturally, one expects to see the net profit decrease. These expenses towards R&D, the clinical trial in vitiligo and regulatory filings. We are very much in line with our own forecast, so we're content with the results, and we will proceed on this basis. And with positive cash flows, we can expand the activities of the company, the group. We gave expense guidance from 2021 to 2025. And for the financial year, we expect to spend about $55 million to $58 million, excluding the capital expenditures. So in summary, the business model we chose is playing out really well. Malcolm Bull: I agree. So let's delve into the results and call on Peter to look at in turn revenues, expenses, profit and indeed the balance sheet. Peter Vaughan: Thanks, Malcolm. So our revenues for the period continue to grow year-on-year. And this period, I'm pleased to say we saw our highest ever sales revenue result. This period marks the 20th consecutive profit for CLINUVEL since the commencement of our commercial operations. And our expenditure, as I touched on before, whilst increasing, is very focused, controlled and targeted around the specific areas of the business that we're focusing on. Our expansion saw key developments in our R&D activities across our ACTH-NEURACTHEL program; our vitiligo study, CUV105; and of course, our peptide drug platform that we developed at our Singapore Research Development and Innovation Center that we recently announced we'll be undertaking a large expansion of. Now all of this expenditure and all of this growth has been achieved without sacrificing our overall profitability, which is really a fantastic result for the organization. Only 4% of biotechs deliver a profit and even fewer are able to sustain a profit for an extended period of time. So where CLINUVEL has done this for over a decade, it's truly a remarkable outcome. In turning forward to our revenues, specifically, we saw our revenues from sales increased by 4% from the prior period to just under $37 million. As I mentioned before, this is our highest first half year sales results we've ever seen. This reflects the increasing and continued demand for SCENESSE right across our sales regions. In particular, we saw strong growth in volume of sales across Europe. And as we announced in September 2025, the approval by the EMA, lifting the number of maximum implants per year from 4 to 6, has already seen some of the patients take up that extra initiative, and we expect other patients to follow suit as well. In the U.S., our team and -- led by Linda has able to increase the number of sites to meet the target that we had for December, which was 120 sites across North America. The patient demand has been consistent throughout the period, and our U.S. team operates extremely well given the evolving U.S. medical reimbursement landscape that is constantly changing at the moment. Perhaps at this point, Linda, as our Head of -- Director of North American Operations, I might ask you, could you provide some insight to the people listening in around the U.S. reimbursement process and in particular, the prior authorization scheme that enables us to have such a high success rate of reimbursement? Linda Teng: Sure, Peter. So first off, please excuse me for my raspy voice, as I'm still recovering from the flu. But thankfully, the technology allows me to share the insight without spreading the flu. Philippe Wolgen: Linda, we can't hear you well. Linda, we can't hear you. Linda Teng: Can you hear me now? Philippe Wolgen: No. It's very muffled. Malcolm Bull: Go off the headphones if you can. Linda Teng: Is that better? Philippe Wolgen: No. Malcolm Bull: Not really. Linda Teng: Is that better? Can you hear me now? Philippe Wolgen: Yes. Much better. Okay, let's move on. Malcolm Bull: Yes. Linda Teng: Can you now hear me? Philippe Wolgen: Yes. Okay. Linda Teng: Can you hear me now? Philippe Wolgen: Yes. Please proceed, Linda. Linda Teng: Yes? Philippe Wolgen: Yes. Linda Teng: Okay. So all right. So we're going to continue with what Peter said about prior authorization. So in short, basically prior authorization is a way for health insurance companies to control their cost, by making sure that they are only paying for treatments that are medically necessary for their patients. And so because SCENESSE is the only FDA-approved treatment for EPP, and it has a strong and also a long-standing safety records. We haven't seen any prior authorization denials for the EPP patient. And we also have a dedicated in-house team that works very closely with the physicians to really streamline the submissions and also speed up the approvals. And for SCENESSE, most of our PAs that are already approved, they are only renewed annually. There really is minimal paperwork for the physician, and so they don't have to get approval for every single treatment visit. And for those who are familiar with the U.S. healthcare system, you might notice that our approach is very unique. Most high-cost drugs, they go through the middleman or the pharmacy benefit managers or we call them the PBM. And they usually drive up prices up even more. So we made that deliberate decision to avoid the PBMs. And I think that is moving like a smart moves, especially now because the government is increasingly the scrutiny of them. And we said the 2026 Consolidated Appropriations Act, which has really signed into law a few weeks ago, including the provisions aimed at the PBM industry. And as for the patients, the feedback has been consistently positive. And I think the reason for the continued treatment year-after-year is because they are seeing real clinical benefit. And we even saw some patients are increasing their treatment dose within the year because of the clinical benefit. And I do want to be clear that we don't pay physicians or patients for any testimonials. Everything is completely organic. The feedback from the patients are voluntary and genuine. And usually, they can share more within -- happily within their patient communities or directly with my team. So I hope this gives you some insight into our prior auth process. Peter, handing back to you. Malcolm Bull: You're on silent, Peter. Peter Vaughan: Thank you, Linda. As we look forward to the other areas of revenue for the period, our interest income was up to $5.3 million this period, which was a 14% increase on the prior year. And this was really the result of a larger cash reserves balance that we continue to maintain. We generally take our surplus funds that we have at the time and invest them into term deposits to help to build and grow on that balance. And at the moment, we're extending the length of our term deposits to be able to take longer-term maturities at higher yields. So we're seeing our average term deposit for about 300 days at the moment, and we're receiving an average yield of about 4.5% across the portfolio. Our other income, now this number has swung the other way from the prior period, and it's a difference of about $4.6 million. Now just to explain, this is an unrealized foreign currency translation that occurs each balance date, so each reporting date. It's really a non-cash transaction that's effective at balance date for accounting purposes. And it takes the process of taking all of our foreign currency balances and bringing them back to account at balance date into Australian dollars. So it's not a real loss. It's an unrealized loss just purely to be able to balance the books at balance date. So if we look at our revenues overall, I would mark them as being stable, growing and also consistent. Historically, our second half of our financial period generally tends to be proportionately higher from a revenue perspective, with the EU and U.S. summers coming into effect through that second half of the year. So we're really excited to see how the second half of the year plays out given we've still got that maintaining growth. Perhaps moving to expenses, Mel, now more specifically. Malcolm Bull: Yes. Peter Vaughan: So we saw a 16% increase in our personnel expenditure. And I'd probably -- I'd just like to provide some context around that for everyone to understand. This is a strategic part of our expansionary team and increasing the in-house capability of CLINUVEL. It provides greater control and oversight of our activities. But at the same time, we're upgrading the skill and expertise within our organization. Now as everyone will know, skill and expertise within the life sciences sector is really important. And recently, we've seen regulatory challenges and hurdles that some other life sciences and biotech companies have faced in just recent times. So this highlights the need to really develop and create the skill and expertise within that team and make sure we've got the right people around the decision-making process. And when we look at CLINUVEL, CLINUVEL's never had a market authorization knock back in over 20 years of being active in the pharmaceutical sector. Now if that was to occur in some shape or form, a regulatory rejection of some sort can really have a significant effect on an organization. It erodes shareholder and market confidence in the company. It raises doubts around management's decision-making and assessment of processes and events. It can push commercialization time frames back up to 3 years as seen in some of our peers where another study or more data may need to be gathered before a resubmission can take place. And clinical trial designs and endpoints around the quality of data may suit one region, which brings in revenue, but not always both revenues -- both regions to bring in revenue across the globe. And this can really affect the total revenue pie that's available from the advancement and the approval. Our people are really critical to the process. And in plotting the path forward, we're really confident that they'll be able to obtain the right outcome around our clinical programs. In turning specifically to our clinical and non-clinical expenditure, the expansion of our CUV105 expenditures was somewhat offset by the orderly wind down of some of our earlier phase programs. We've reallocated and focused our resources towards our later stage and strategically significant programs aimed at achieving the nearest-term commercial results and prospects we can. Preparation for CUV107 has already commenced and is well underway, and we'll start to see those expenditures flow through in the second half of the year also. Commercial distribution, if we look at that area, that was up 42%, but this is predominantly off the back of increased volumes of shipments, particularly in Europe, as I touched on before. So it's all increased proportionately. There has been some temporary one-off costs that have been associated with some transitions that we've made in our supply chain to some of our warehouse providers to ensure the long-term stability of that supply chain as well as being able to scale with us for the future. The other area that is somewhat affecting the commercial distribution area is also some of our regulatory fees. Previously we used to sit under an SME discounted scheme in some of those regions for the FDA and EMA annual fees. And now that our revenues have increased to the point that they are, we're no longer eligible for some of those discounts, so we're having to pay full annual service fees now to those organizations, which is also increasing the expenditure in that area. The next area to touch on is really finance, corporate, and legal. Now this did increase proportionately from the prior year to up 47%. And really, this is the direct cost of a lot of it is being our ADR program uplift from Level 1 to Level 2 that I'm sure you're all aware of as we uplift that program for the U.S. to list on NASDAQ. There's been a substantial amount of work undertaken across that area by the finance team, but also in conjunction with our accountants, auditors and legal firms, both here in Australia and in the U.S. And this process we had to go through undertook a 3-year reaudit of all of our financials into U.S. GAAP -- converted into U.S. GAAP financial presentation, and then that was submitted to the SEC for review. Our other expenses, that's up 191%, and it's predominantly driven by the increase in our R&D programs and all the consumable materials that we use within those programs, whether it be ACTH, PRENUMBRA or NEURACTHEL, any of those developments. Our non-cash expenditure was down for the period. This is usually a change in our inventories in our balance sheet differences from period to period, that's really what reflects quite a bit of that expenditure. This period, that's a lower number than it was previously because we've actually increased our manufacturing during the period, so therefore, there hasn't been as low a drop in our inventories. It stayed more on par. Our share-based payments have also been much lower this period than in previous years, and we recently changed our share plan at the start of 2025, which meant the expenditures will now appear differently, but also it's now a 1-year plan instead of a 3-year plan. Now I've spoken fairly at length around all of the expansionary activities that we're undertaking and some of the critical advancements to our program. But this expanding expenditure should really be seen as an investment in the organization rather than just being pure expenditure. So from a financial perspective, it does take time to build up these resources internally, but it is cheaper than outsourcing to a CRO. CROs can add 25% or more costs to the bottom lines of a clinical trial program. But by having that skill and expertise in-house, it's critically important for us to maintain that control and oversight of the program. We've got Emilie Rodenburger on the call, who's our Director of Global Clinical Affairs. Emilie, in speaking around our expansionary activities and what's been undertaken, I guess, would you be able to provide some insight into why that was necessary? And what are the specific advantages of doing them in-house? Emilie Rodenburger: Yes, absolutely, Peter. I can give some additional context to the numbers. So first of all, good morning, good afternoon, good evening, everyone. It's good to be here. In my capacity as Director of Clinical Affairs, I really think more on the deliverable and how to achieve them, but it certainly ultimately impacts the numbers we report. So clinical expansionary activities are twofold. It's talent growth and building the infrastructure into which the talents operate. As Peter mentioned, the company has taken a conscious decision to build our capabilities in-house, which is not the norm in our industry. Where most are relying on outsourcing their studies, we have chosen not to rely on these models and not to work with CROs. It increases cost and can result in loss of control and oversight over studies and data. In order to deliver the CUV105 study, we had to invest in new talent and these professionals will be retained through the CUV107 and beyond. Currently, the clinical affair department that I lead is the largest department in the company spread across U.K. and U.S. with a great range of expertise, operations, data science with data management and statistics, and medical affairs and clinical quality. In addition to bringing new talents in, we have also trained and upskilled existing talent. So building and retaining the expertise in-house. And again, I repeat what Peter said, it's really critical for the health of our business. In terms of infrastructure, it's really the processes and the systems, and we've also been investing in this. This investment will continue further for us to be able to manage a significant data set that are coming from the vitiligo studies and deliver efficiently on the studies. So when we build in-house, we both supporting the present and investing for the future. I mentioned the talents, the expertise, the ownership, processes and systems. They can be seen as a platform assets that is transferable to any studies and programs that we will be conducting in the future. So in a way, we're building a CRO in-house. Peter Vaughan: Excellent. Thank you, Emilie. In turning to our balance sheet, Malcolm. If we look at our balance sheet, it keeps going year-by-year from strength to strength. As I touched on, our cash reserves increased by $9 million to just under $233 million, and it's the highest cash balance we've had in the company's history. Our net assets have also increased by $8.2 million to just under $250 million, which again is the strongest point in the company's history. And we remain debt-free for the 21st consecutive year with no equity dilution since my March of 2016. A strong balance sheet with positive net cash flows is really a strategic priority for CLINUVEL as it enables us to see clinical programs through to commercialization without any additional funding required. It also provides resilience for any unforeseen events or economic uncertainty, particularly in the current geopolitical times. It provides flexibility to ensure expansionary opportunities, acquisitions or investments that align with our objectives, can be taken advantage of, which many peers in the industry aren't able to consider without having to raise additional capital. It also enables strategic objectives to be delivered such as the expansion of our Singapore research and development facility, which we've slated for over the next 5 years to provide vertical integration of ongoing peptide and formula development and innovation. A number of our peers have recently announced capital raisings, some as much as at a 45% discount to market to fund these sorts of activities that we can take on and that we can develop without having to raise any further capital. Some of these peers are raising for clinical program developments, for raw material supplier scale-up or for product rollout into a new jurisdiction. As already touched on, CUV is funded for our full clinical trial program for vitiligo. Malcolm Bull: Thanks, Peter. I mean that was a comprehensive overview, I must say, but I'd like now to move to strategy. I mention and shared with you that a number of institutions, particularly in the U.S. have asked us why CLINUVEL stands out in its strategy. They even ask, are we a bit dogmatic and a bit rigid in our strategic focus and execution. Philippe, can you comment on this? Philippe Wolgen: Well, I'll pick up the 2 words: dogmatic and rigid. The contrary, we've built in the flexibility and optionality in this business model, and that allows us to navigate markets and cycles in pharma. But the objectives are really clear, they're fivefold. We need to expand the EPP commercial market, advance the vitiligo programs as a focal point of the company, advance the NEURACTHEL dossier, which is a large opportunity in the use of ACTH in a number of indications, advanced PhotoCosmetics, and bring in-house the manufacturing of the new and next formulation. So in any given business model, there are a number of options. We can serially raise funds like most of our peers. We can change the business strategy altogether, step away from melanocortin and do something totally different. We can self-fund the program starting gradually as we've done. And the fourth option is, we can cease operations and say, ladies and gentlemen, it's too difficult, it's too hard, and let's give the cash back to the shareholders. And we haven't chosen that because we believe that there are a number of opportunities that we worked on for decades that are worthwhile pursuing. And there are a number of underlying assumptions that the Board and management take into account that we are privy to and no one else is. And first of all is, are we conducting an honest genuine business, no one indicated in further activities. Do we keep the teams in check? Do we have technologies that are safe and work? And third of all, do the patients -- do the investors have the patience to see out the strategies? But the most important underlying assumption is whether there is perpetual funds available for this company. And we've come to the conclusion that this model is very appropriate for the way we need to reach the vitiligo and the ACTH markets. So in summary, Malcolm, we needed to accumulate these funds to execute a program, which we all believe will lead to a sustainable multi-dollar a billion-dollar enterprise. But we also need to be conscious of the realistic risks that evolve around clinical, regulatory and execution. And for that, you need to have optionality and optionality is cash. And that will eventually lead to a diversified company. So that's how the company stands out. Malcolm Bull: Thanks, Philippe. So moving to another area where we've had numerous questions, and this is on the readout of vitiligo. And Emilie, it's good to have you here, and this is where you come in. What can you tell us about the regulatory process and path to market on vitiligo? Emilie Rodenburger: Thank you, Malcolm. I will address your question by providing a number of specific observations that support the regulatory process and path to market for SCENESSE in vitiligo. Some of these observations are unique to SCENESSE and some you might also be familiar with, but allow me to go through them. The first one is SCENESSE is already on the market for another indication, EPP. It's a product for which we have accumulated 2.5 decades of safety data and a safety profile that has been maintained over time. The regulatory agencies know the product well from the Annual Report or regulatory and pharmacovigilance teams are and have submitted for 1 decade now. In regards to vitiligo, vitiligo is a condition with visible symptomatology and the treatment effect -- skip that one. And the treatment effect that we desire, repigmentation, is visible. So from the cases we received and cases published by physician, one can gain much confidence that the effect of the treatment are visible. From an operational point of view, the trials can't be blinded. The work -- the drug either works or not and physician and patient can see the effect very quickly, the visible efficacy. So what I'm trying to say here is that in vitiligo, the photographs do not lie. And part of the analysis is to have centrally assessed photographs up to 32 per patient, which is up to 6,000 assessments. Very importantly as well is the patient experience and how they appreciate the return of their pigments. JAK inhibitors, some currently in Phase III, one recently submitted to the EMA and FDA for marketing approval, they take a long time to work, thereby suppressing the immune system. And last but not least, we are living in a very dynamic regulatory landscape where the concept of generating clinical evidence is evolving. EMA speaks about totality of evidence for drug approval, while as I'm sure you've seen the FDA recently announced that single trial will now be the default for drug approval. So what I really wanted to convey by all of this is that, these are positive considerations for SCENESSE to come to market for vitiligo, as we are continuing on the same trajectory. I can't tell you exactly when. But for sure, vitiligo is the natural home for afamelanotide, a pigment activating peptide, which is an analog of hormone that's naturally produced by our own body. Thanks, Malcolm. Malcolm Bull: Thanks, Emilie. So before we go to analyst questions, all stakeholders want to know what's next. Philippe, can you summarize that for us, please? Philippe Wolgen: Sure. So there are a number of catalysts that we're approaching over the next 2 years. The most immediate ones are the top line results from vitiligo CUV105 in the second half of 2026, the start of the vitiligo CUV107 study, and the preclinical results on the peptide formulation in the latter half of this year and the listing of the ADRs on NASDAQ that we await the SEC answers for. So the catalyst will naturally change the complexion of the company, and this is exciting, and we've navigated the waters over time to arrive at this point. And so we all need to get patients and see what the impacts are from these results. So there's much to look forward to, yes. Malcolm Bull: Indeed. Thank you, Philippe. So let's go to analyst questions. But thank you, Peter, Emilie, Linda, Philippe for the discussion. Some good insightful comments there, and I hope those on the line also have got some insights and appreciate that. The first analyst to ask a question is Dr. David Stanton of Jefferies. Hello, David, are you there? David Stanton: I am. Can you hear me? Malcolm Bull: Yes, David. Please go ahead. David Stanton: So my question is, do you have to wait until you have the results of CUV105 -- sorry, CUV105 and CUV107 before you file for approval in vitiligo? And in which geography would you file in first and why, please? Emilie Rodenburger: I'm going to take this question, Malcolm. Malcolm Bull: Okay. Emilie Rodenburger: It's a -- yes, it's a good follow-up and from what I was mentioning a couple of minutes ago. So thank you, Dr. Stanton for this question, question that's relevant and often asked. Our intention is to complete CUV105 and CUV107 before going to the EMA and FDA. And the recent announcement on single trial for drug approval from the FDA doesn't change this strategy. So based on the ongoing interactions we have with both agencies, EMA and FDA on the specificity of our work that we are conducting, we will need the CUV107 study to complete our program. For the second part of the question, we opt to file with the EMA first and then FDA second. And this really -- this strategy really much follows the approach we had with EPP back in 2012. I want to say more. I think it's important for me when we speak about regulatory agencies, I want to give a bit more color. An agency, as you know, it's a conglomerate of thousands of people, so at the EMA in Amsterdam, there are more than 1,000 permanent staff and more than 4,000 part-timers and experts. We are dealing with 2 European reporters that are representing the National Competent Authorities, which are Lithuania and Poland, with a scientific adviser representing the Scientific Advice Working Party, a very knowledgeable German physician. At the FDA in Silver Spring, there are more than 8,000 permanent staff and another 6,000 elsewhere consultant part-timers. We interact with the Division of Dermatology and Dentistry now led by Dr. Jill Lindstrom in the Center of Drug Evaluation and Research. And we have a new Commissioner, as you know, Dr. Martin Makary, who has reshuffled the agency, bringing new procedures and new approach. In our EMA reporters, we find willing listeners and may I say more supportive of our regulatory and market strategy. We are the only company focusing on patients of darker skin color and this point resonated very well in our recent discussions with the EMA. The approach we have on vitiligo is so novel that we deem the European regulators to be the first protocol, and then it will make it easier for the FDA to assess similar data. Malcolm Bull: Okay. Thanks, Emilie. The next question is for -- from Dr. Melissa Benson of Barrenjoey. Hi, Melissa. Melissa Benson: So I had a question in regards to the ACTH program, so NEURACTHEL. Just to help us understand, you've mentioned there later this year, you expect to file with EMA. A similar question to the lining of vitiligo, but understand like how does filing with Europe first and then the FDA, how does that kind of expedite the U.S. opportunity? And then secondly, any color you can kind of provide on the differences, I guess, between the commercial landscape for a product like this in Europe versus the U.S.? Because I understand one market is quite a synthetic peptide-based and the other is a natural hormone based. So that would be great. Malcolm Bull: Philippe, for you. Philippe Wolgen: Thanks, Melissa. Yes, we've talked about this in the past. NEURACTHEL will first be filed in Europe through the route of mutual recognition. And as you know, the analogues of ACTH, in our case, NEURACTHEL are used by many institutions, both as a therapeutic and as a diagnostic. And so we opted to go to Europe first and U.S. second. Once you've filed through the mutual recognition procedure, you can file shortly in the U.S. after. ACTH products are mostly distributed to specialty centers in Europe. They prescribed by internal specialists, endocrinologists. And we believe that it's possible to make the first inroads directly to these centers in Europe. Reimbursement in Europe is albeit lower than in the U.S. So both markets are sizable and are attractive, but we have experience in leveraging the European regulators and the resonance there is high. So it's a slightly different strategy than most of our competitors, but so far it worked. Malcolm Bull: Okay. Thanks, Philippe. We've just lost you on camera. So if you can try and get back to us, we'd like to continue to see you. Let's move to Dr. Thomas Schiessle of Parmantier in Germany. Thomas, you're a long way away, but let's hope you're connected. Thomas Schiessle: I would like to ask a question, what does the recent FDA decision on Disc Medicine's Bitopertin mean for your business and growth outlook, please? Malcolm Bull: Okay. Peter? Peter Vaughan: Sure. Yes. No problem. I can answer that one. So I guess thank you doctor for your question. From a finance perspective, I'm happy to answer that. So I see it from a way of increasing our monopoly in the market with the other player, obviously, not being able to enter that market yet as we're really the only approved drug treatment for EPP with a proven safety and efficacy record in the U.S. So it could take them, I would estimate about 1 to 2 years to come back or even longer to enter the European market. So it could be quite an extended period of time that we still maintain a monopoly within that market. So I guess that's how I see it, doctor. Malcolm Bull: I'll come back to you, Thomas, to ask another question because we've covered that fairly succinctly. But I'd like Linda to make some comment because some shareholders have asked what's our reaction to the FDA's decision on this. So can you make some comment on that, please, Linda? Linda Teng: Sure. First, can you hear me okay? Malcolm Bull: Yes. Linda Teng: Okay. Right. So first, I definitely can comment. However, I do prefer not to comment on the setbacks of other companies or their management. And I will just leave that to the external observers. And while competitors may have made critical remarks about our work, I don't consider it to be elegant to respond in kind. However, what I will say is that it is not easy to get a regulatory approval in one go. Our team have done this by working thoroughly and diligently. And at the end of the day, it is really all about the patients, making sure that the drug is safe and that it shows significant clinical improvement in their quality of life. And the FDA really raised questions regarding the bioavailability and efficacy of Bitopertin, which, by the way, I'm sure most of you already know. This was actually originally developed for an antipsychotic drug for schizophrenia before it was abandoned by Roche. And so for EPP, the company had then had to increase the dose from 20 milligrams to 60 milligrams to achieve a statistically significant reduction on the biomarker of the protoporphyrin level. But higher doses also mean that there's going to be extra stress on the patient's liver or kidneys. And this is very concerning, especially for EPP patients because they are already at a higher risk of liver disease. And on top of that, oral pill higher dose also increased side effects, complications and drug-drug interactions with other medications. So as the pharmacist, I really cannot see how this is a benefit for the EPP patients. And the other point that the FDA also raised, a very valid concern, was its primary endpoint. And this was based on the change in the biomarker protoporphyrin IX. So in case -- I don't know how much you guys know about biomarkers. Well, biomarkers are a very helpful tool for scientists, for physicians to really understand what's happening in our body, but it does not always reflect real-world meaningful clinical benefit. And an example that comes to mind is there was a drug that was received an accelerated FDA approval back in 2016 for an advanced soft tissue sarcoma, and this was approved based on a biomarker endpoint. But once they came to real life, the real-world clinical outcomes did not show any survival benefit. And so at the end of the day, the FDA had to pull the approval soon after. And from a bigger picture pharmacological perspective, it also seems very unusual to me to prescribe a lifelong oral pill that affects the central nervous system to lower the protoporphyrin IX marker -- biomarker levels. So I guess, I suppose, we'll really have to wait to see the results of their future trials to see whether this drug can really show both the efficacy and the meaningful clinical benefits for the patients. Malcolm Bull: Right. Very insightful. Coming back to you, Thomas, do you have a follow-up -- a quick follow-up question? Thomas Schiessle: Yes, indeed. Thank you, Malcolm. Absolutely another issue. The FDA -- no, no, no, no. That's a second one. What impact does NASDAQ listing have on CLINUVEL's future regular reporting concerning frequency and content, please? Malcolm Bull: Okay. Peter, for you. Peter Vaughan: Sure. I can answer that one, Malcolm. So we'll be listing on the NASDAQ or uplisting our ADR program and listing over there as a foreign private issuer. So what that basically means is that we'll continue to lodge half year and full year financials. In the U.S., we'll be reporting in U.S. dollars and also in U.S. GAAP accounting. But I guess, in short, Thomas, it's -- it will be exactly the same as what we currently do every 6 months and then every 12 months for the half year in the annual reporting. So no real change to the frequency. Malcolm Bull: Thanks for dialing in Thomas. I just mentioned that several shareholders have asked for an update on our listing application. So Peter, give us an update, please. Peter Vaughan: Sure. No problem. So we lodged our initial filing, which was a 20-F document to the SEC in mid-December or 18th of December to be specific. And we did foreshadow that there may be some delay in the turnaround time because it was also -- it was Christmas period, but also the government was -- had come out of shutdown mode and the SEC that obviously affected them. So they needed to catch up and clear the backload of filings and other documentation they had. But we have had some further correspondence back and forward with the SEC, and we're refiling our response to them. So we're hoping to be able to receive clearance from them in the very near future and then move quickly to implement the ADR program uplift. So watch this space. Malcolm Bull: Okay. We sure will. Let's now call on Sarah Mann from Moelis. Sarah, please. Sarah Mann: My first question is just on the EPP market. Could you provide us any details around what percent of your patients are covered under Medicaid? And just curious how you anticipate some of the cuts to Medicaid potentially impacting your ability to reach those patients? Malcolm Bull: Linda, for you. Linda Teng: Sure. I'll take this one. Sarah, thank you for your question. So we're actually seeing less than 5% of our U.S. EPP patients on Medicaid benefits. So in short, we don't really have a noticeable impact. And in fact, like you mentioned the One Big Beautiful Bill, it actually broadens the orphan drug exclusion. It now allows orphan drugs to -- with more than one rare diseases to remain exempt from Medicare price negotiations and potentially so far looking like it's indefinite unless the drug is later approved for a non-orphan indication. So one can theoretically say that the TAM would increase through curing the federal programs. But given that most of our patients are commercial insurance patients, we don't really see a worthwhile impact in the U.S. market at this time. Malcolm Bull: Okay. Sarah, a follow-up question. Sarah Mann: Just on a separate topic. Just curious if you could provide more color around the cosmeceutical strategy. Obviously, it's been in market for a couple of years in, I suppose, prototyping or early stage testing. Yes, just curious how you expect it to ramp up this year and any learnings that you've had over the past couple of years as well, please? Malcolm Bull: Philippe, can I call on you? Philippe Wolgen: Sure. First of all, good to see you back, Sarah. It's been a long time. On numerous occasions, we mentioned that the PhotoCosmetics are in development, and they accompany a complement our pharmaceutical program. That's quite an unusual strategy to have both pharmaceuticals and the PhotoCosmetic franchise, not many pharmaceutical companies do that. And so the first was the P line, the photoprotection lines, providing polychromatic photoprotection in population of the highest risk and extreme conditions. And then that will be followed by the M line, the melanocortin containing peptides. And they intend to provide assisted DNA repair and self-bronzing or the so-called sunless tanning. And in all these properties, the endeavors goes really to launch products with a substantial marketing effort. And that needs to provide visibility to our products. And we started to gradually increase our marketing spending online to focus groups, advocates, target populations and channels. And so we are in the prelaunch phase where we get feedback on these products. But ideally -- and nothing is ideal, but that was the anticipation and the model, when the vitiligo trials start to yield results, we then see a parallel large-scale effort to promote the M lines, because the concept was that the medical tanning that you see in vitiligo follows a parallel path to the PhotoCosmetic self-bronzing properties. So in short, we advance, but we're not really ready to launch these products, not from a scientific point of view and not from a marketing. But what we aim to see is lotions and serums applied a number of times a day that assist the self-bronzing in the epidermis. And we're not quite there yet, but we're advancing. The other part is in order to make this a commercial success, the company needs to differentiate itself in all aspects. The retail experience needs to be changed or disrupted, if you wish. The primary packaging, the secondary packaging, the way we distribute it, the retail store concept and all that at a reasonable large scale. But thereby we are conscious of the spending and the budgets we put aside for this exercise while keeping the company profitable. So it's a balancing act that we do need to navigate all the obstacles, but to decrease the risk of failure and that we do that in a very gradual and deliberate manner. Malcolm Bull: Okay. So let's move to Madeleine Williams of Canaccord. Please, Madeleine. Madeleine Williams: So I think, firstly, I was just wanting to know, you've got a few things happening at the moment. Obviously, last year, Europe allowed the increased number of doses and then also in the U.S. as the Disc Medicine trial completes this year, I assume there's sort of going to be more patients available. Just thinking about how you're thinking about the growth in those jurisdictions and sort of the splits going forward. Malcolm Bull: Well, Peter, do you want to comment initially on... Peter Vaughan: For me? Yes, sure. No problem, I can comment on that. So I would say that there's a segment revenue note that we've included within the half year report that does show the breakdown. But I guess a quick summary would be the U.S. revenues have increased year-on-year. And this period, we saw a rise more predominantly in the European volumes, partly spurred on by some patients taking up that increase from 4 implants being a maximum during the year up to 6 that was announced in September 2025. I guess at the moment, the current revenue split is about 53% U.S., 47% for the rest of the world. So that kind of -- that's the insight that I can provide there. I guess on the peptides side, that's probably more Philippe perhaps might be able to answer that one. Malcolm Bull: No, we'll park that. I think we'll move on to Mark Pachacz, because I think he's got to leave pretty soon. So Mark, if you're still there, can you ask your question? Stella Mariss: Malcolm, looks like Mark is no longer here. Malcolm Bull: Okay. That's all right. Well, fortunately, we have another analyst, Thomas -- Thomas Wakim of Bell Potter. Do you want to ask a question please, Thomas? Thomas Wakim: Yes. It's a bit of a follow-on from the previous one actually. So in that revenue segment, the split between U.S. and non-U.S. sales for the period just gone, where we saw a decline in the U.S. and a significant increase outside the U.S. So can you just kind of explain in a bit more detail what those factors were that were at play there leading to that? And how does that look moving forward? Peter Vaughan: Sure. So there was some effect on the U.S. side from the government shutdown. So the government shutdown met delays in Medicare processing as well as also the processing of reimbursements. So in some instances, some of the smaller centers didn't want that longer-term delay on their payment cycles and things like that. So that did cause some headwind there for them. And then we also passed on a CPI increase in 2025 and some of those have caused some negative reimbursement pressure on some of the centers. But overall, we anticipate that the U.S. is still stable and still growing across that, and that's where we've continued increasing the number of centers across North America. So we're seeing new centers come online and start to bring patients to the floor as well. So there is that difference between prior year and this year, but I think it's really explained by the U.S. government shutdown predominantly. Malcolm Bull: Okay, Peter, thanks. And as I was talking with Madeleine before and also with Mark Pachacz, there was a fair bit of interest in peptides. So let's come back to peptides and ask Philippe to comment on the potential of that new area of development. Philippe Wolgen: Well, we spoke for a long time in public about the skill set of the company and how it was expanding concentrically. So we started off as a company focused on clinical affairs. We understood the melanocortin peptides really well. Then we focused on the delivery methods, the best way to deliver and administer a drug into a human body. And from that, we built our Singapore labs and progressed fundamental research into new formulations. We call it formulations of the next generation using liquid injectable peptide platforms. And so naturally, once we mastered these technologies, it opened up the realm of fantasies of what other peptides could you use to deliver a product in a sustained or controlled manner. And that's where we are. So you're going to expect much more from that team and our activities in Singapore. Malcolm Bull: Thanks, Philippe. Very exciting. It's about time that we wrap up, but I didn't want to conclude without addressing a couple of shareholders who asked me about the company's dividend policy and whether we have one, and I can say we certainly do. It's available on the CUV website, but I can tell you that it is the Board's intention to pay a dividend subject to the sufficiency of our funds and the operating and investment needs of the business and indeed future growth and needs to fund that growth. So the Board will determine that, and you can investigate, as I say, the dividend policy online. So I want to say thank you to all the analysts online for asking their questions. Peter, Emilie, Linda, Philippe for their contributions, good insights and all attendees, thank you very much. A link to the webinar will be posted to the CLINUVEL News website as soon as possible for other stakeholders to review. So I'll now close the webinar, wishing you all good health and fortune. Thank you.
Operator: Thank you for standing by, and welcome to the Ridley Corporation Limited, RIC 1H FY '26 Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Quinton Hildebrand, Managing Director and CEO. Please go ahead. Quinton Hildebrand: Thank you, and good morning to everyone. Thanks for your attendance on our conference call today. I have with me Richard Betts, who will present his final set of financial results before retiring from Ridley after 5 successful years. We also have Chris Opperman, incoming CFO, who started at Ridley on the 5th of January. Chris joins us from Energy Australia, where he was CFO. And prior to that, he was with Dyno Nobel, where he held a number of executive leadership roles, including CFO and later President of Incitec Pivot Fertilisers. For this morning's address, I'll be talking about the slides that are uploaded on the ASX website. So starting on Page 2, the financial summary. The business delivered a first-half underlying EBITDA of $55.4 million, a 9% increase on PCP. This result included 3 months' contribution from the new Fertilisers segment and a strong performance in Bulk Stockfeeds, which carried the softer outcome in the Packaged and Ingredients segment. I'll speak to the performance of each of these segments in the next few slides. As you will see, we had a very positive operating cash flow, and this has reduced our net debt, with the leverage ratio post-acquisition now at 0.8x. On the back of this performance, the Board determined a progressive dividend of $0.051 per share, fully franked. Moving to Slide 3. The Bulk Stockfeeds segment delivered an EBITDA of $27.1 million, up 25% on PCP, a very pleasing result, especially when you consider that there were $1.7 million in lost earnings in FY'25 from the Wadley feed mill, which was sold on the 30th of June 2025. This result was achieved by 13% volume growth in ruminant sales and 7% volume growth in monogastric sales, together with higher-margin supplementary feeding of beef and sheep at the start of the period. Once again, Ridley Direct, now in its fourth year, was able to generate profit by leveraging our grain and co-products procurement flows and accessing a broader customer network. Moving to Slide 4. As we foreshadowed at the AGM in November, the Packaged and Ingredients segment had to contend with a number of short-term challenges, which decreased the EBITDA by 28% to $25.6 million. Short-term ovine supply constraints at OMP due to lower lamb slaughter rates across Australia impacted sales through this period. We endured lower prices for protein meals when compared to the prior year. And lastly, we experienced some temporary processing challenges. The first was due to a slip in the main cooling dam wall during a rain event at the Maroota rendering facility. This made this dam inoperable and imposed processing constraints, requiring us to incur costs diverting material to Laverton and other processes. The second temporary processing challenge has been with the commissioning delays at the new OMP Timaru greenfield facility, which has impacted our daily throughput and yields. On the positive front, the raw supply volumes to the rendering plants grew 7%, and the packaged dog sales also grew 7%, taking up the extrusion capacity vacated from the aquafeed transition. So a challenging period for the Packaged and Ingredients segment, which should correct itself through the second half as we've added additional supply of land bones to OMP and are addressing the processing constraints with capital projects, and I'll address these in greater detail later in the presentation. Moving to Slide 5. The Fertilizer segment delivered an EBITDA of $10.3 million, above the top end of our expectations and above the PCP under the previous owner. This was achieved through good cost control and margin management in a period that is known to be the lowest seasonal demand quarter. To provide some context, on the right-hand side of the slide, we've provided the average monthly volumes dispatched by Incitec Pivot Fertilisers over the past 7 years. This clearly illustrates that our Q2 is the lowest seasonal demand period and also shows how our dispatches build in Q3 and Q4. The table below the graph offers some more detail on the timing of the various crops and the volume intensity in each month. I'll now hand over to Richard, who will take you through the financial results in more detail. Richard Betts: Good morning, everyone, and thank you, Quinton. I will now present the financial results for the first half of FY'26, beginning with the profit and loss summary on Slide 7. Quinton has already talked you through the operating segments, which delivered a combined EBITDA for the half of $63 million. The corporate costs increased by $0.8 million to $7.6 million, with the increase primarily associated with the employee incentive schemes, which now incorporate all the employees of the IPF business. The reported underlying EBITDA of $55.4 million represents a 9% increase on the PCP. During the period, the business reported net individually significant gains after tax of $31.4 million, which related to the acquisition of the IPF fertilizer business. I will cover this in greater detail in a later slide. Depreciation and amortization for the period was $18.6 million, a $3.5 million increase on the PCP. This relates to the depreciation and amortization of the newly acquired IPF business, which totaled $3.6 million. The underlying depreciation included several significant capital projects that were depreciated for all or part of the period, including the recently completed debottlenecking projects. As anticipated, finance costs increased from $4.9 million to $8.7 million on the back of debt funding relating to the acquisition of the fertilizer business, which was partially offset by the interest received from the half 2 FY '25 capital raise. The income tax expense for the underlying operations decreased by $1.6 million as a result of the lower profit before tax. The underlying effective tax rate was 29.9%, an increase from prior periods, but in line with the lower available research and development deductions. Turning now to Slide 8 and the balance sheet. The balance sheet looks significantly different from 30 June 2025 following the acquisition and related debt financing. The pro forma balance sheet highlights the impact of the acquisition on the movement since 30 June in order to better understand the movements that relate to operations. Excluding the acquisition, working capital has reduced by $72.5 million during the period. This gain will be covered in further detail on a later slide. Property, plant, and equipment has increased by $15.3 million, with the increase relating primarily to the Ridley growth projects, including OMP's new facility at Timaru and the debottlenecking projects within both bulk stock feeds and rendering. Net debt reduced by $22.4 million, driven by improved EBITDA and the reduction in working capital, partially offset by the increase in CapEx, dividends, tax, and interest payments, all associated with the higher earnings. Now turning to Slide 9. As outlined on the previous slide, the group working capital increased significantly following the acquisition of IPF, where the business acquired $387 million of working capital. In line with what the business would traditionally hold at a September balance date, together with the additional inventory held to support the transition of the Single Super Phosphate business, or SSP, from being a manufacturing business based out of Geelong to an import-only model and the associated longer supply chain. Subsequently, the fertilizer working capital has reduced by $98 million. This was due primarily to the timing of receipts and payments associated with the export products sold by fertilizers from the Phosphate Hill facility, and management's focus on ensuring working capital reduced to align with the seasonal sales cycles. The working capital for the Ridley business units increased by $26 million, with $14 million related to receivables associated with the increased volumes. Debtor days remained at a very healthy 33 days, in line with the prior period. Payables reduced despite the higher volumes due to the shorter payment terms associated with the strategic decision to purchase increased volumes of raw materials directly from Farmgate. Moving to Slide 10, capital management net debt. During the period, net debt increased by $321 million, with $358 million used to fund the acquisition of the fertilizer business, with the difference relating primarily to the cash from operations that was used in part to fund the CapEx and the increased dividend. The business has increased its available funding lines by $500 million to $690 million through a combination of a $200 million revolver facility and a new $300 million working capital facility. Our existing and new revolver facilities have been split between 3- and 5-year tenors to provide greater certainty regarding the long-term financial capacity of the company. The working capital facility is uncommitted and provides the flexibility to manage the annual seasonal highs in the working capital cycle of the new fertilizer business. Bank leverage for covenant purposes was 0.8x, comfortably within covenant levels despite the recent acquisition of the fertilizer business. Turning now to Slide 11 and the capital allocation framework. First implemented in FY '21, this remains pivotal in prioritizing the capital within our business and ensuring we are aligned to making the best investment decisions to maximize shareholder returns. This will become an even greater priority now that have acquired the fertilizer business. During the period, the business delivered strongly against the model, including ensuring the improvement in underlying business translated to a very healthy operating cash flow of $128 million. We continue to prioritize reinvestment in our underlying asset base through the focus on maintenance capital, with spend of 60% of depreciation aligned to our committed range. We continue to deliver on the targeted leverage range, supporting the decision to increase the interim dividend to $0.0510 per share, up from $0.0475 in half 1 FY '25 and in the middle of our targeted range at 59% of underlying NPAT. Pulling all this together, the business has been able to deliver the acquisition of IPF for $357 million and still report a covenant bank leverage that is below the 1.2x targeted range. On Page 12, we have set out the individually significant items that were reported during the period as a result of the IPF acquisition that occurred on 30 September 2025. The total consideration for the fertilizer business was $433 million, which included a cash outlay of $357 million. This is $57 million higher than originally reported as we acquired higher working capital, mostly associated with the take-on balances associated with the Geelong SSP business, the higher inventory associated with the Geelong SSP business, which totaled roughly $30 million. The fair value of the assets acquired has been assessed at $489 million, which is primarily made up of $386 million of acquired working capital. Following the acquisition for less than net assets, the business has booked a provisional gain on bargain purchase of $56 million. The gain is provisional as further work will be required in half 2 to finalize the carrying values of land and buildings, long-term leases, and any future additional site rehabilitation costs. Partially offsetting the provisional gain was acquisition costs of $17.8 million, which related to stamp duty, legal, and advisory fees for the acquisition. And separately, the business has incurred $1.7 million of project office and IT integration costs. The business also incurred a cost of $5 million relating to the unwinding of the inventory step-up created as part of the provisional gain on bargain purchase. The unwind was required as the inventory has now been sold. The net effect on profit of this item during the period was nil. All of these items resulted in a net gain of $31.4 million. Before I hand back to Quinton, as he said, this will be my last official duty as CFO. And as such, I want to thank all of you that I have worked with over the journey. The 5 years have been a great ride. And as I look at these results for the half, they align with what we reported for the full year just over 5 years ago. The acquisition of IPF was a career highlight, and I genuinely believe represents a golden opportunity to transfer this company again. I wish Quinton and the team all the luck in this journey. And as a significant shareholder, I will be watching with interest from the golf course or racetrack. I will now hand back to Quinton, who will take you through the remaining slides. Quinton Hildebrand: Thanks, Richard. I'll just take you through the strategic progress on the year-to-date and starting Slide 14. I'm very pleased with the progress we're making with the transition and integration of Incitec Pivot Fertilisers. Having owned the business for 4 months, and being confident that our pre-acquisition thesis of a regional distribution model is correct. In the last few weeks, we flattened the structure and reduced the matrix model with the appointment of regional general managers in 5 regions. They'll each have responsibility for both the sales and the execution of those sales through the primary distribution centers, making us more responsive to the customer and driving accountability for cost control. This is the model that we applied in the Bulk Stockfeeds business back in 2019, and has seen us grow to the business that we are today. The outcome of this initial restructure is the removal of 45 roles, reducing costs by $8 million per annum from FY '27 with a one-off cost of around $3 million in FY '26. The migration from Dyno Nobel's SAP platform to Ridley's Microsoft Dynamics platform is expected to take place in calendar year '26 at an estimated cost of $30 million. And once complete, should release corporate synergies of $7 million per annum from calendar year '27. And lastly, just to keep you informed, the urea offtake agreement with Macquarie Commodities is on track to commence in FY '28 upon the commissioning of the Perdaman facility. And the decision on the future supply contract with Phosphate Hill is expected in this financial year as Dyno Nobel run a process to find a buyer for that business. Moving to Slide 14, the Bulk Stockfeeds strategic progress to date. Ridley's flywheel strategy continues to drive momentum in this period, and we've secured significant new layer and dairy business. On the back of additional demand and as we are already operating 7 days a week at the Lara feed mill, we have committed to a $5.7 million debottlenecking project to complete in calendar year '26. And in November, we completed a 1.6 million concentrates production line at the Gunbower feed mill, adding a new product to our offering. On Page 16, we outlined the investments we are making in the underlying assets within Packaged and Ingredients to improve our processing performance. The first 2, the commissioning at Timaru and the replacement of the billing dam at Maroota are to address the short-term impacts we have endured in recent months. And the third additional small pack line at the Narangba extrusion plant is to replace labor and meet new customer expectations. All these investments provide the runway to significantly improve the operating cost base and deliver incremental volumes. Turning to the outlook statement. Ridley's diversified businesses and market exposures provide the group opportunities and resilience in commodity and weather cycles. In FY '26, Ridley expects group earnings growth to be driven by 9 months contribution from the Fertilizer segment, including the second half seasonal peak demand, increased market share and volume-related operational efficiency in the Bulk Stockfeeds segment, processing improvements from capital investments in the Packaged Feeds and Ingredients segment and modest commodity price recovery in the second half. For the longer-term outlook, this will be presented in the form of the FY '26 to '28 growth plan at the Investor Strategy Day on the 10th and 11th of March 2026. On the next page, we've included the program for the Strategy Day and site visits, and we're excited to take you through the expanding opportunity in Australian agriculture and how we can position ourselves as #1 in each business sector to give ourselves a competitive advantage. We'll outline what we are doing to support our customers to become a critical player in their supply chains and how we look to unlock value from the fertilizers acquisition. Ultimately, we want to demonstrate to you the resilience and opportunity of our diversified portfolio and to give you some appreciation for the platform that we are establishing for future growth. That concludes the formal part of our presentation, and I'll now hand back to the moderator and ask to facilitate the questions. Operator: [Operator Instructions] Thank you. The first question is from the line of Apoorv Sehgal from Jarden. Apoorv Sehgal: First question, just on the core business EBITDA, excluding the fertilizer contribution. I think going back to the AGM, you were indicating modest growth for the core business for FY '26. I can't see your line in the presence for that today. But are you still expecting the core business EBITDA to grow modestly in FY '26? Or has the weakness in that Ingredients segment potentially changed that? Quinton Hildebrand: We are AP for the full year expecting modest growth. We expect there to be ongoing momentum in the Bulk Stockfeeds segment, and we expect a modest recovery in the Packaged and Ingredients segment in the second half. So the combination of those playing through to the statement. Apoorv Sehgal: Let's unpack the Ingredients segment a bit more then. So the Ingredients segment EBITDA was down $10 million year-on-year. Could you maybe allocate that across the different dot points you got there on Slide 4, I'm just sort of calling out 3 things. You've got the OMP issues with the slaughter rates and the Timaru delays. You've got the lower protein meal prices and then the capacity constraints at Maroota. Could you like just allocate that the $10 million headwind across those different buckets? Quinton Hildebrand: Well, I'll give you a high-level split on that. And as you can appreciate, there are some positives as well that are partly offset. So on Slide 4, we've got the volume increases in rendering and the packaged performance there. So I think the first impact, which is the reduction in land bones in Australia for supply to OMP would account for roughly half of what we're considering here. And then lower protein and meal prices would be about half of the balance quarter and the capacity constraints at both Maroota and Timaru accounting for the final quarter. Apoorv Sehgal: Then if we're then looking into the second half, how much of those headwinds do you think you can recover? So I guess looking at the commentary here, okay, you're expecting higher commodity prices in the second half. So there's a little tick up there. That's good. I would presume the Maroota and Timaru commissioning issues get fixed. But the slaughter rate issue, which is obviously the bulk of the earnings fall, I think slaughter rates are still pretty weak, aren't they looking at the MLA data over the last sort of 1 or 2 months. So just keen to explore into the second half, to what extent do those headwinds kind of recover? Quinton Hildebrand: So just starting with your last point first, which is the slaughter rates. Our supply of bones into OMP in Australia is back on track. And as I indicated just in the address, we have brought on some additional supply. So whilst slaughter rates across the sector are not back up substantially, we've sourced additional raw material. So in the second half, we are processing back at the level that we would expect. I just flagged that our main market is North America, and there's a lag in the supply chain. But for the majority of the second half, we will see that recovered position. Then in terms of the Maroota dam wall, subject to weather, that should be complete within a month, and that would return us to that position. As we progress the commissioning of the Timaru facility, we would expect incremental improvements during the second half. Apoorv Sehgal: And actually, the one headwind I missed, I'm not sure if it was discussed on the pro. remember the $3.5 million or $3 million to $4 million hit you had from the avian AI export restrictions back in the second half of '25. Did that impact from those restrictions remain all the way through the first half of '26 as you're working through the excess inventory? And if that's the case, are we now back to normal in the second half of '26? Like is that a headwind that now gets recovered? Quinton Hildebrand: So AP, the AI that led to the excess poultry meal in the marketplace, yes, that's there are still higher volumes in the market. And this is a combination of both that we started with high levels from avian influenza. But if you look at alternative protein sources, canola meal, soybean imports, those the protein complex was lower priced in this first half. And there is some improvement now, and that should also facilitate the movement of stocks. Apoorv Sehgal: Yes. Sorry, last final follow-up before I jump back. Overall then, just to round out the Ingredients business, should the Ingredients segment EBITDA grow for the full year of '26 versus full year '25? Or is that too optimistic? Quinton Hildebrand: That's too optimistic. I think where we see it, AP, is that we will see improvement in the second half over the first half. But as we reported at the AGM, that won't be caught up in terms of delivering a stronger result in terms of the PCP. Operator: We have the next question from the line of James Ferrier from Canaccord Genuity. James Ferrier: Richard, thanks very much for all of your efforts and support over the last few years and good luck with the next stage of your career. Can I ask, first of all, on the fertilizer business. So that from an EBITDA perspective, you talked about the growth on PCP being driven by cost control and margin management. Firstly, how did volumes compare to PCP just thinking about the sort of the tail end of winter cropping and whether or not you're seeing any early season pull forward sales volumes for the upcoming season into the quarter. So firstly, just how volumes were in that 3-month period? Quinton Hildebrand: So it is traditionally the lowest demand quarter. Volumes were slightly lower than the prior than PCP. But as we indicated, more than offset by margin and cost control. James Ferrier: So on that basis then, Quinton, if you think about that early run rate of cost control and margin management, which that's the sort of hitting zone for what Ridley is trying to achieve and focus area for improvement. When you look at that run rate and appreciate it's only 3 months and it's the smallest seasonal period, but how do you think that compares if you extrapolate it to the full business case earnings for the business and assuming all else equal, how do you think you're tracking relative to that business case earnings on an annualized basis? Quinton Hildebrand: I think Ridley's philosophy is starting to get early traction. within the business. And our recent restructure and focus will support that together with the savings in the underlying cost base. So yes, early signs, but we think there's more to come through engaging the teams, particularly in the regions to be able to embrace the new approach. And obviously, some of this will be shared with customers as we grow, but that will support our volume position, which is what we see as a critical advantage relative to competitors. James Ferrier: On the margin management side of things, a lot of what you've referenced today with organizational structures and the like is probably more OpEx centric. But within margin management, can you talk a bit about where gross margins are for the business at the moment and whether or not it's sort of BAU there or perhaps there's some management-led improvement coming through there as well? Quinton Hildebrand: Yes. We're being very cautious in that area. We need to make sure that as we take on the business, we manage those risks effectively. And so we're engaging directly with the expertise and the team that we've inherited, where we have some significant strengths. Then Chris Opperman joining and bringing his previous experience to this part of the business is also all part of the key process for us transitioning the business into Ridley. So we're taking a conservative approach in how we manage the supply chain in that regard, although we do think as a business, we should be able to bring our general commodity risk management philosophy over time and make sure that we act decisively in the process. James Ferrier: The second topic is on the Bulk Stockfeeds segment. AP covered a lot of the content in the packaging ingredients. But on bulk, I mean, that was a super impressive result. And we could see the volume growth accelerated from what was achieved in FY '25 across both Ruminant and monogastric. And you've referenced there some of the mix of the volumes with supplier margin subs volumes coming through. So I get that. But I'm just interested in your views on where the bulk business sits today from an operating leverage perspective and asset utilization perspective. On the assumption that volumes keep growing in this business, are you still in a sweet spot in terms of incremental volumes and the operating leverage you get from that? Or are you starting to bump up against capacity limits. And so maybe in the period ahead, you don't quite get as much operating leverage before your debottlenecking efforts kick on again? Quinton Hildebrand: Yes. So in the South, so Victoria, Tasmania, we have got high utilization rates. And it's for that reason, expanding Lara gives us further runway. And as you can appreciate, we do operate as a network. So you do a relatively significant expansion at Lara, and it gives you all your monogastric feed mills some capacity. So in the South, where we are highly utilized and we're continuing our debottlenecking journey. In the North, so the 2 mills in New South Wales and the 2 mills in Queensland, at those facilities, we're underutilized still as in we were using only 1 or 2 shifts a day over a 5-day operation. So we have got growth capacity. They have been running at high utilization within those shifts, which is very positive. But we've got further capacity should dry conditions support increased demand. James Ferrier: And last one for me, and maybe you could try this one to your colleagues, given you've been carrying all the load there, Quinton. Working capital expectations going into the second half, noting where you were at the December balance date for the existing business and for fertilizer? Richard Betts: Yes. I mean, look, James, as we've always said, this business tracks against the seasonal sales cycles. So we will head into a period of significantly higher working capital within the fertilizer business. And in fact, we'll probably peak somewhere in the area of around $200 million higher than where we are at December. That is fully funded within the facilities and was always assumed in our thesis. So June will obviously be a little bit dependent upon which side of -- because obviously, June is right smack in the middle of the peak season. So there will be a little bit of where are we against that. But certainly, by the time we get to June, we will see a significantly higher utilization of the new working capital facility to allow us to adequately fund all the working capital requirements to take full advantage of that peak season. James Ferrier: Yes. And any callouts on the business expert? Richard Betts: Business expert? James Ferrier: From a working capital perspective. Chris Opperman: You're spot on. You are going into the highest point of the season, especially in February, you get the ultimate high February and March and your stock holding and you start to sell that down. And your June, July is really your 2 months that could swing around your working capital. But your general swing is about that 200 up, could be less depending on how good we go with sales in June, and that's all pharma demand. Operator: [Operator Instructions] We have the next question from the line of Richard Barwick from CLSA. Richard Barwick: I just wanted to do a more general discussion given the rainfall outlook looks pretty ordinary, at least on a 3-month view. So for starters, just from a Bulk perspective, I'd imagine that presents quite an attractive backdrop. And so just interested to hear your comments just then about the Queensland facilities being underutilized. How quickly can they be ramped up? And then if you got capacity in the North, but you're constrained in the South, you did mention that you operate as a network, but that network effect, does that work across the full geography? I'm just wondering if we do have a dry period, how can the Bulks actually respond? Quinton Hildebrand: Yes. So in Bulk, the network is more regional, so state-based. So transporting finished feed from Victoria to New South Wales happens only at the margin. And what we have done in the past is set up temporary depots in the dry areas in New South Wales, and we've shipped full loads of feed direct into those regions. So we can at the margin. How quickly can we ramp up? In Queensland and New South Wales, it requires additional shifts. So it just takes training. You're looking at a 3-month period to get to full capacity as we stretch. And in the past, we have said that in an extended period of dryness, so with buildup, there's a circa $5 million EBITDA potential upside per annum in the Bulk Stockfeeds from supplementary feeding in a drought. Richard Barwick: And that comment would relate to a widespread drought as opposed to something that we've seen more recently is very centered in the South. Quinton Hildebrand: Yes. Yes. For the full benefit, so to speak, for the Bulk Stockfeeds business, that would have to be across the network. Richard Barwick: And then from a ferts perspective, you talked about the other situation. So if we are running into a dry period, I know obviously, you haven't owned the business very long, but I don't know to the extent that you can see the historical data, how much of a swing factor which might we expect in the ferts business from the same conditions. So extended dry across the eastern growing regions and how negative might that be for the fertilizer business? Quinton Hildebrand: If we look back over the history, the range in volumes is about 1.8 million tonnes a year up to 2.2 million tonnes a year. So that would demonstrate the extremities of the fertilizer volume exposure. As you can appreciate, we're geographically well spread from the North Cairns all the way through to Tasmania, South Australia Port area. So if you look at across that, you normally have a fair bit of diversification. But nevertheless, your point is absolutely right. And I think I would expect the diversified portfolio of Ridley, the fertilizer impact in a drought circumstance would be greater than the benefit to the Bulk Stockfeeds. And hard to know and all depends on what region, what timing. But if Bulk Stockfeeds is $5 million EBITDA you might find that fertilizer could be double that to the negative. So that's sort of how we're interpreting it at this point. Chris, anything to add to that? Chris Opperman: Yes, Quinton, I think you're right, especially the width of the swing isn't that much because the 1.8 billion you were talking about, that's really extreme dry weather conditions. We're not seeing that at the moment. And then just for in year, more specifically, the business do write contracts throughout the season going into the high season. So as we stand today, we've already got a fairly large position written, which you can basically lock in. Quinton Hildebrand: So I hope that answers your questions, Richard? Richard Barwick: Yes, it does. And just the last one on the first. Just looking at the map in a very simplistic view. I look at some of the placement of the blue dots and the red or pink dots, some of them sit pretty close together. So in the fullness of time, do you see opportunities here for potentially some consolidation in the number of sites? Quinton Hildebrand: So yes is the answer. We bought the distribution-only part of the business and Incitec Pivot used to be a manufacturing and distribution business. So the footprint can be enhanced as we go forward over time, and that is part of our planning. So if you're able to attend the Strategy Day on the 10th and 11th of March, we'll give a bit more color to that. Operator: There are no further phone questions at this time. I'll now hand the conference back to Mr. Hildebrand for closing remarks. Quinton Hildebrand: Great. Thank you, Myron. And thank you, everyone, for your attendance today and appreciate the questions. I just want to take the opportunity to publicly thank Richard for his contribution to Ridley over the last 5 years. And during that time, we have substantially driven the earnings of the business, and he has played a significant role in that. Then culminating in the acquisition of IPF last year and the mountain of work that he did in concluding that transaction. So I'd just like to thank Richard and appreciate the conscientious handover that he's done with Chris. We look forward to working for him as a critical shareholder on the other side. So thank you, everybody, for your attendance today, and thank you to Richard. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.