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Operator: Good morning, everyone. Welcome to Exchange Income Corporation's conference call to discuss the financial results for the 3 and 12 months ended December 31, 2025. The corporation's results, including the MD&A and financial statements, were issued on February 24, 2026, and are currently available via the company's website or SEDAR+. Before turning the call over to management, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements, please consult the quarterly and annual MD&A, the Risk Factors section of the annual Information Form and EIC's other filings with Canadian securities regulators. Except as required by Canadian securities law, EIC does not undertake to update any forward-looking statements. Such statements speak only as of the date made. Listeners are also reminded that today's call is being recorded and broadcast live via the Internet for the benefit of individual shareholders, analysts and other interested parties. I would now like to turn the call over to the CEO of Exchange Income Corporation, Mike Pyle. Please go ahead, Mr. Pyle. Michael Pyle: Thank you, operator. Good morning, and thank you for joining us on today's call. With me today are Richard Wowryk, our CFO, who will highlight our financial results, along with Jake Trainor and Travis Muhr, who will expand on our outlook. Yesterday, we released our year-end results for 2025. Our annual performance in 2 words was incredibly strong. Our results set historical records for revenues, adjusted EBITDA, free cash flow, free cash flow less maintenance capital expenditures, net earnings and adjusted net earnings, both on an absolute basis and more importantly, on a per share basis. We also exited the year with no convertible debt on our balance sheet. We strategically wanted to simplify our financial structure, and we were able to redeem all outstanding convertible debentures during the year, with the vast majority of the convertible debentures being converted into equity, leading us to our lowest leverage levels in 15 years. Per share records and a delevered balance sheet in the same year is a difficult task. We are proud of this accomplishment. Furthermore, last week, we announced an investment-grade credit rating. This is an impressive achievement as it is a confirmation by DBRS on the stability and the diversity of our business. We now have the capability to issue long-term fixed rate bonds as a layer in our capital structure, which will provide a more permanent form of fixed rate financing at generally lower interest rates. However, I want to be perfectly clear, this does not change our conservative view on leverage. Rather, it is another tool for us to utilize debt effectively as we continue to grow EIC via either acquisition or growth capital expenditures. As I look back over 2025, these record results were generated during a year where global growth was subdued due to rising trade tensions and political uncertainty. Monetary policy was adjusted in both Canada and the United States to stimulate growth as inflationary pressures have begun to subside. Supply chains experienced significant disruptions due to United States tariff actions, international shipping delays due to geopolitical events and several climate-related disruptions, including significant wildfire activity in Northern Manitoba and elsewhere. There was also economic bright spots, including the surge in artificial intelligence investments and businesses with strong fundamentals and competitive moats showed their value. EIC is a shining example of how a diversified and resilient business can navigate periods of uncertainty and continue to thrive. We executed on our strategic initiatives and the proof is in the pudding with our annual results. Our overall results were driven by 20% increases in adjusted EBITDA in each of our segments. In our Aerospace and Aviation segment, the increase was primarily due to the highly strategic acquisition of Canadian North on July 1. Canadian North continued to meet and, in fact, exceed our expectations of profitability and culturally has been a great fit with our other air operators. Our maintenance capital expenditures experienced in the first 6 months were elevated. However, that was expected as we increased the anticipated increased maintenance capital expenditures for the first 12 months of ownership and then a return to normal maintenance CapEx in the future. The Aerospace and Aviation segment was also driven by strong yields in our passenger business, even though there was a temporary reduction in revenue and margins in the second quarter due to the significant wildfire season. We also saw overall strength in our rotary business with fire suppression work, coupled with continued strong performance in our medevac businesses as the scope in our contracts continues to expand. Our aircraft sales and leasing business continues to see robust demand and increasing rental rates for leased aircraft and engines. Parts sales and whole aircraft sales continue to be very strong as well as the demand for regional aircraft remains robust. Lastly, our aerospace business line saw the impact of the second aircraft commencing operations in the U.K., which led to strong Q4 gains over the comparative period. We also continue to see numerous inquiries from various parties around the world for our ISR experience. Recently, Canada released its defense industrial strategy, which aligns greatly with the activities of EIC and our aerospace business. EIC has pitched a Made in Canada solution for Arctic security and sovereignty, which aligns with this industrial strategy. Our Made in Canada team spans multiple provinces and territories with existing indigenous partnerships. We continue to have active discussions with various leaders and decision-makers and are hopeful that our proposal will be successful. I also want to provide an update on the status of the Australia ISR bid. We recently extended our bid for a second time to early April as the bid would have technically expired this month. We continue to believe that we submitted a very strong bid and are waiting for the government of Australia to finish their analysis and come to a conclusion. Our Manufacturing segment had a strong fourth quarter results from both a revenue and profitability perspective. Our Environmental Access Solutions business had a strong finish to the year with net rentals and sales driving the results in Canada. Canada also has strong growth prospects in the later part of '26 as large linear projects are anticipated to need matting solutions. Our composite matting business in the U.S. continued to have favorable customer feedback on the System 7XT mat. During our due diligence, we were very impressed with the testing and the capabilities. However, real-world experience has even exceeded those high expectations. Due to the significant demand signals and the overall confident matting business taking more market share from the traditional wood mat business in the U.S., we announced a state-of-the-art plant in the Southeast U.S. I'm pleased to announce that the plant will be built in Saltillo, Mississippi, and we anticipate the plant will be operational in the mid- to later part of 2027 so that we can execute on our strategic objectives for the North America wide matting business. Our multistory window solution business had somewhat of a stronger quoting season and booked some sizable projects in various jurisdictions in the U.S. and Western Canada. However, 2025 remained a difficult year. As we anticipated and previously disclosed, the reduced profitability was due to the competitive pressures and lower bookings experienced in earlier years. However, the team made progress on reducing our overhead and combining the physical footprint of the business, which will serve us well in the future. We will also continue to retain our experienced staff. When the business turns, we will be ready to capitalize and meet the pent-up demand that exists for affordable housing. Our Precision Manufacturing and engineering business led a strong first quarter as we continue to see positive demand signals within numerous underlying businesses. Business sentiment continues to improve. We see that our customers have accepted some uncertainty as the new normal and have been releasing purchase orders, resulting in increased sales activity in the back half of 2025, which drove strong results for the fourth quarter. Rich will highlight the key metrics for both the 3 months and the full year ended December 31. But before I turn the call over, I wanted to talk about the recent recognition of our business model and our share price. During the year, our market capitalization has increased substantially and today stands at well over $5.5 billion. The market capitalization and the underlying results are lagging indicators of the sustainable, resilient business model that we have built. We have a fantastic foundation of underlying subsidiaries with cultures and people that contributed to achieving these results. Our business model and principles have not changed for over 20 years. We know that we are set up for an accelerating growth profile in the future, and our head office and management teams could not be more excited. Jake and Travis will focus on the outlook for our segments for 2026. However, before I pass over the call, I wanted to speak about our 2026 guidance. While we have not changed our guidance range issued at the end of Q3, we announced 2 contracts since the prior guidance was issued, that being the Air Canada commercial agreement and the acquisition of Mach2. Both are accretive to our shareholders. And accordingly, we have updated our guidance by telling people we have a bias from the mid to the upper end of the $8.25 to $8.75 guidance range. I will now pass the call over to Rich. Richard Wowryk: Thank you, Mike, and good morning, everyone. For the fourth quarter, revenue was $930 million. Adjusted EBITDA was $216 million. Free cash flow was $165 million. Free cash flow less maintenance CapEx was $68 million and adjusted net earnings and net earnings were $58 million and $52 million, respectively. Earnings and adjusted earnings per share were $0.94 and $1.06, respectively, which were increases of 62% and 33% over the prior period. Free cash flow per share increased by 30% to $3, while free cash less maintenance CapEx increased by 38% to $1.24. The per share metric increase is remarkable because the weighted average shares outstanding increased by 14% during the fourth quarter compared to the prior period due to conversion of convertible debentures during the year, shares issued from our acquisitions. All the key performance indicators were fourth quarter high watermarks. These results were driven by both segments with 27% and 38% period-over-period increases in adjusted EBITDA for our A&A and Manufacturing segments, respectively. The Aerospace and Aviation results were driven by strong profitability at each of the business lines due to the acquisition of Canadian North, strong load factors at our various air operators, strong demand for leases and parts at our aircraft sales and leasing business line and the start of operations of the second aircraft for the U.K. home office in Aerospace, along with higher tempo flying under various contracts. Our Manufacturing segment profitability was driven by strong rental and mat sales within our Canadian Environmental Access Solutions operations, along with continued robust demand for our composite matting solutions in the U.S. operations. Lastly, Precision Manufacturing and Engineering had a strong fourth quarter, driven by underlying strength in telecommunications, data center and hydronic heating solution sales. Construction has commenced on a second state-of-the-art manufacturing facility for our U.S. composite matting business. Growth capital expenditures of approximately $4 million were made in 2025, and we anticipate that production should start up in mid- to late 2027. Estimated cost for the new facility is up to USD 60 million, and the expected returns are significantly above our required return threshold. We are seeing significant demand for our System 7XT mat, but further noting that composite mats are replacing traditional wood and mat market share in the U.S. is driving excitement within our management team. Maintenance capital expenditures in the fourth quarter of 2025 were $97 million and were higher than the comparative period due to the acquisition of Canadian North and the timing of maintenance events in our Aerospace and Aviation segment. Growth capital expenditures during Q4 were $134 million and were primarily driven by acquisitions of engines and aircraft in our aircraft sales and leasing business line to increase their leasing portfolio, coupled with King Air aircraft deliveries for the BC Medevac contract in our Essential Air services business line. From a cash flow and working capital perspective, we had a strong finish at the end of the year with a reduction in our net investment in working capital and a positive impact on our cash flow from operations, driven by efforts from our subsidiary management. Last year, we highlighted that certain government receivables were uncharacteristically behind historical collection patterns and those were resolved within 2025. Further, due to the reduced level of output within our multistory window solutions business line, we were able to return significant working capital during the year. We actively manage our working capital and worked with each subsidiary team to convert working capital from 2024 into cash, and we're very happy with the performance throughout 2025. The corporation's aggregate leverage is at historic lows. We had the goal of simplifying our capital structure and achieved that goal during 2025, which looking back was an incredible feat. More than 90% of the convertible debentures were converted into equity of the corporation. For 2026 and beyond, the only dilutive instruments on our balance sheet relate to deferred shares, which will simplify our dilutive EPS. After year-end, we announced that EIC has achieved an investment-grade credit rating with a BBB low rating with a stable outlook from DBRS. With the credit rating, we can access bond markets in the future and could utilize bonds as a fixed rate long-term form of financing. Based on the rate environment today, this would also reduce interest costs. We exited fiscal 2025 with an overall leverage ratio of 2.73, which is the lowest it has been in approximately 15 years. This also does not include the pro forma impact of growth capital expenditures for which a full year return has not yet been fully reflected in our financial statements, such as the U.K. Home Office second aircraft is one example. We've previously discussed that there is a time lag between making those investments and the timing of the adjusted EBITDA increases. With over $300 million of capital deployed by year-end, we anticipate meaningful returns in the years to come, which have been incorporated into our 2026 guidance. Our M&A pipeline remains very strong. Adam and his team executed on a strategic investment in the first quarter of 2026 with Mach2. We have always wanted to diversify our cash flows and provide another avenue for growth. We had looked at a number of narrow-body and commercial businesses. However, none of them met our stringent investment criteria based on their management teams, their niche focus or financial metrics. Fortunately, we found Mach2, which met all of those criteria. Regional One has built the data infrastructure and architecture that is capable of scaling into other aircraft types. And now with the Canadian North 737 data and the narrow-body and wide-body data for Mach2 and experienced personnel at Mach2, we can realize on significant opportunities in that space. Mach2 is situated very near our Regional One business and the management team is well known to our Regional One management team. 737 and narrow-body business is the world's largest aircraft aftermarket parts and leasing business. And therefore, we have a unique opportunity to leverage our strengths to create meaningful returns for that business line long into the future. In terms of other acquisition opportunities, our pipeline includes opportunities in both segments, which are similar to our existing businesses. We have a great foundation of businesses and to the extent that we can find ancillary opportunities to expand our competitive moats, we're always interested in those accretive opportunities. As a reminder on the seasonality of our business, the first quarter is our seasonally slowest quarter because of the impact of winter roads and weather-related impacts for our air operators, coupled with reduced demand for our Environmental Access Solutions business line as the ground is frozen and doesn't require the same level of matting protection. Third quarter experiences our highest level of activity across our businesses and the second and fourth quarters would approximate the average per annum results. Collectively, 2025 was a foundational year for EIC. We simplified our capital structure and executed on all of our strategic initiatives. We added Canadian North in a highly strategic acquisition. And after year-end, we announced Mach2 and our investment-grade credit rating. We are confident that our balance sheet is in a position that allows us to execute on future transactions and the foundation has been laid for future accelerated growth. I will now turn the call over to Jake, who will provide an update for the 2026 outlook for Aerospace and Aviation. Jake Trainor: Perfect. Thank you, Rich. Overall, we're expecting another strong year of growth from our Aerospace and Aviation segment as the trends highlighted by Mike and Rich are expected to continue into fiscal '26. The growth investments made in the past, in addition to the contractual wins, whether it be the second aircraft for the U.K. home office, the commencement of the Newfoundland and Labrador Medevac contract midway in 2026 or the expansion of the Air Canada commercial agreement and increased routes that we've been experiencing will all contribute to the increase in revenues and profitabilities. I will specifically focus on the growth factors by business line. Our Essential air service business line will see growth driven by a multitude of factors when compared to the prior period. The most significant impact will be the inclusion of Canadian North for a full fiscal year. Other increases include the expansion and extension of the Air Canada commercial agreement, which will see aircraft starting to fly midway during the year. We also anticipate stable load factors across our network when compared to 2025. Lastly, we expect continued growth in our medevac business, including the start of the Newfoundland and Labrador medevac contract, which is anticipated to start operations in mid-2026. Offsetting some of these gains is the impact of continued labor shortages and supply chain challenges. Although we're not seeing a worsening of these dynamics, the challenges still remain specifically on aircraft parts, consumables and overall costs, which are experiencing significant inflationary pressures. The aerospace business line is expected to see growth due to strong flying tempos for our surveillance and aircraft going into service for the U.K. home office, which will have year-on-year effects as that aircraft only started operations in the fourth quarter of 2025. Our aircraft sales and leasing business is also expected to experience growth as the investments made in aircraft and engines are leased to customers. There is always a lag between investment and cash flow generation as such, aircraft have to be readied and the lease contracts executed. Regional One remains an opportunistic buyer and stands ready to complete transactions that are accretive to the portfolio. The demand for Regional One and Mach2 remains robust as evidenced by increasing lease rates and shortages of critical parts across the industry, and we expect that trend to continue in 2026. On a long-term basis, we expect maintenance capital expenditures to increase consistently with increases in adjusted EBITDA in our Aerospace and Aviation segment, which is the biggest driver of our consolidated maintenance CapEx. We anticipate an increase over 2025 due to the full year inclusion of Canadian North, coupled with increased flying due to our recent investment in aircraft over the past few years. Lastly, we continue to invest in deferred maintenance at Canadian North and anticipate those investments to continue in the front part of the year. Growth capital investments -- or excuse me, expenditures in 2025 include the 3 remaining new King Air aircraft for the BC EHS contract. Regional One is always working on opportunistic aircraft and engine acquisitions, which may result in growth investments being made in the aircraft and sales business line. Before I pass it off to Travis, the other theme that I've been speaking about at external events and conferences, which is EIC's exposure to the defense and security as well as dynamics within that industry. The recently released Canadian defense industrial strategy is a clear and welcome call to action. When government focuses on an outcome it needs such as capability, readiness, availability or serviceability, industry will do what we do best: invest, integrate partners, manage risk and deliver. That's a model that we've proven around the world, and it's a model that Canada is now rightly setting out to use here at home. The strategy named 10 sovereign capabilities to be prioritized, of which many of these align with our EIC core competencies. These include aerospace, digital systems, in-service support, specialized manufacturing and training and simulation, among others. The defense industrial strategy aligns with our communications with officials within the government over the past year. And EIC obviously has defense and security ties within our aerospace activities, including in-service support and our ISR operations. However, we do have a number of other opportunities, which may not be as obvious. Our specialized manufacturing companies are already engaged in providing parts for defense and space-related applications. Another important capability that EIC can bring to bear is our unique infrastructure in the North. We are the leading experts in Northern aviation and operating in harsh Arctic climates. As people and goods are transported to the north to support enhanced defense activities, it will be a positive tailwind to our air operators. And finally, EIC and its training capacities, including MFC training and CTI can help solve training and development gaps. CarteNav, which is PAL's mission system, has a fully developed command and control digital system capabilities, which are world-class and utilized by several countries around the world for security purposes. I'll now pass it off to Travis to talk about some of the commentary on the manufacturing segment and some of the other opportunities within defense and security within manufacturing. Travis Muhr: Thanks, Jake. Our Manufacturing segment is also uniquely capable of providing solutions to the government. As the north is developed, there'll be a need to expand the transmission and distribution along with opportunities for long linear projects as resources get developed, which will provide further tailwinds for our Environmental Access Solutions business line. Our Precision Manufacturing and Engineering business line has several subsidiaries which have positive exposures to defense and security. Our West Tower business has over 35 years of installing towers and infrastructure into remote and demanding areas. There are numerous opportunities to install radar towers and other infrastructure across the north, and we have unique capabilities due to our scale, manufacturing capability and industrial technology benefits experience. Ben Machine already provides its precision CNC machining and welding of high-precision short-run critical components for defense and space companies across North America and around the world. Our hydronic heating company, DryAir, provides solutions for hydronic heating and hot water applications, which should also be critical for concrete curing and heating alternatives in the north. Looking at 2026 from a manufacturing point of view, we're anticipating materially consistent results overall when compared to 2025 due to changes within our business lines for 2 reasons. Firstly, we see the continuation of the strengthening business environment for many of our Precision manufacturing and engineering subsidiaries, coupled with a positive outlook for our Environmental Access Solutions business line. All the businesses within our Manufacturing segment were experiencing a strong level of customer inquiries in 2025, and we saw that strength converted to sales when looking at the fourth quarter results for both Precision Manufacturing and Engineering and Environmental Access Solutions. Our multistory business -- windows business line has also experienced strong level of inquiries. Performance was as expected in the fourth quarter with period-over-period declines due to the type of projects, production gaps and tariffs. Of note, the recent Supreme Court case on tariffs does not impact that business line as the primary source of tariffs were the Section 232 tariffs on aluminum and steel, which remain in place today. The business line for 2026 will continue to be impacted by project gaps and reduced margins due to the demand environment in prior year bookings because of high interest rates and developer uncertainty. We're starting to see some improvement in various regions around the U.S. and Western Canada. However, developers remain on the sideline due to the excess supply of small condo units, especially in Toronto and developer cost uncertainties. Our Environmental Access Solutions business line is expected to generate higher returns in fiscal 2025. Demand for our composite matting remains robust, and the plant continues to operate maximum capacity consistent with 2025. Our Canadian operations are expected to be a major driver for the business as we start to see strong results in the fourth quarter from a rental and mat sales perspective. Further, we anticipate that long linear projects will commence in the latter half of 2026 across several industries, including transmission and distribution, pipeline and oil and gas. The longer-term prospects of the business remain very robust as there will be material investments in transmission and distribution across North America due to growing electricity demands from homes, vehicles and more importantly, AI and data centers. The Government of Canada major projects office is focused on strategic nation building investments, which provide significant tailwinds in the longer term. This will result in continued strength for the business line into 2027 and beyond. The Precision Manufacturing and Engineering business line is expected to improve from a revenue perspective, but due to changes in project mix, profitability is expected to be materially consistent with 2025. The fourth quarter was a very strong quarter for the business due to product mix and delivery of hydronic heating units, which were deferred from earlier in the year, and we continue to see a strong quoting environment across the various companies. This business line is very diversified with exposure to the defense industry, technology industries, including data centers and telecommunications. The anticipated maintenance CapEx are expected to be slightly higher than the prior year due to the timing of replacement activities. We're also anticipating growth CapEx to be incurred in each of the business lines, but they should be relatively consistent with 2025 with the exception of Environmental Access Solutions where growth capital expenditures will be outlaid for the new state-of-the-art composite plant as discussed by Rich as well as investments in Canadian rental fleet based on market dynamics and anticipated projects. I'll now pass the call back to Mike. Michael Pyle: Thanks, Travis. 2025 and our strategic initiatives have been -- have set the foundation for EIC for the future. 2025 was an incredible year for our business as we set records in all of our key metrics. I am extremely confident in the future of our company. EIC is at the intersection of a number of critical themes and trends. We have remained true to our principles and what has made us successful for the past 20 years plus will continue to accelerate that success in the future. Thank you for your time this morning, and we would now like to open the call to questions. Operator? Operator: [Operator Instructions] Your first question is from Steve Hansen from Raymond James. Steven Hansen: First question, it relates to the matting business. It sounds like it has inflected here from previous levels. Just given some of your commentary about rebuilding the fleet in Canada and the growth CapEx, is it fair to say that visibility is improving through the balance of the year and into '27? I'm just trying to make sure we didn't have sort of a onetime or 1 quarter sort of bump in the business or just trying to understand that it's got better visibility going forward. Michael Pyle: It's a good question, Steve. The matting business -- our comments are sort of the sum total of 2 things. We had some abnormal project delays during the first part of 2025, particularly on integrity digs and some pipeline work that are regular things we do every year and didn't get done earlier in the year. In Q4, we returned to normal in that area. So that generated some improvement in this quarter and will help us into the beginning of next year. We have more mats on rent now than we did at this point last year. But I think the real story is in what's coming. We have a number of T&D projects in Eastern Canada that we're bidding on, and we will win our share of those. And the number of pipeline projects that are at the bidding stage or being awarded to general contractors. And while it's unlikely those generate revenue in the first half of next year, you'll start to see that in the back half of '26. And I think in '27, we're hitting back into a super cycle of the business, much like we did when we went -- when we originally purchased it in 2021 or 2022. Steven Hansen: Okay. Very helpful. And just a quick second one for me is just on the Mach2. I was just hoping you could maybe frame sort of the size of the market opportunity that you're stepping into here, recognizing that it's obviously a much larger set of aircraft out there. But then I guess, secondarily, how do you expect to approach that market from sort of a cadence perspective and tipping your toes in or growing more aggressively? How do you envision the growth profile evolving there? Michael Pyle: That's a really good question, Steve. The Mach2 is part of our strategy. It's not our whole strategy for moving into the narrow-bodies and wide-bodies. Just to back up, Regional One's secret sauce and the reason they're so phenomenally good at narrow at the regional jet turboprop market is they understand who the customers are, what products they need and the value of those assets. So when we're buying aircraft, we buy them with margin in before we lease them, before we do anything. And so we've always coveted the 737 market in particular because it's so huge relative to the regional jet market. But it's important to understand that most of the 737 market is an OEM market. When you're talking about a 737 MAX or those things, those are bought from the manufacturer. They're leased by finance companies. What we do when we lease aircraft is we're burning up green time. We're not a finance lessor. And so most of that -- the newer versions of those aircraft really don't apply to us. Where our opportunities lies as those aircraft age, the value of parts may exceed the value of the plane as pieces. And the knowledge with the team at Mach2, the skills of the people that work there, combined with the knowledge we're drawing from Canadian North's experience in the 737 business will let us dip our toe in there. I think it's safe to say that we're going to walk before we run here. There's a big comparison that if we went back 8 or 9 years in Regional One, we really didn't participate in the ERJ market, the Embraer market. And we were given a couple of opportunities. We slowly dipped our toes in. And now we do almost as much work in the ERJs as we do in the CRJs. I think you'll see a similar movement in the 737s where we'll invest in greater parts inventories, greater depth, develop our knowledge and then slowly move into it. It's not something that you should anticipate a light switch. I think it's a slow, steady growth and bringing in the expertise we got from Mach2 will accelerate that from what we could have done on our own. Operator: Your next question is from James McGarragle from RBC Capital Markets. James McGarragle: Congrats on the strong Q4 here. I got one for Jake here though on the Canadian defense opportunity. So obviously, some pretty big announcements recently. So can you just kind of give us an update on some of the conversations that you're having in Ottawa and what you see as the opportunity set for exchange here over the next couple of years? Jake Trainor: Sure. Thanks, James. A couple of things you got to keep in mind. Some of the big procurements that the government is working on are kind of generational when you're looking at shipbuilding, submarine acquisition, wrestling with the fighter jet issues. So again, there's some of those massive procurements that obviously, that's not our wheelhouse of activities. But what is, is defense and security in the North. And we're seeing -- in terms of opportunity sets, obviously, the ISR capability is one that, as we've announced, we've engaged with the Canadian government. But more broadly beyond that, there is -- and we're seeing it now in just terms of some of the volumes of the logistics support, the travel, the support to greater attention for folks in the north. They're traveling up to the north. That's certainly one. Some of the resource development that, again, comes with enhanced attention on defense and security around the critical minerals. We're seeing that. And then the last piece, and Travis touched on it briefly, was looking at some of our other subsidiaries where there's a general sense of renewal of infrastructure. So whether it's additional towers or maintenance of towers, and that's not only defense and security, that's with our air navigation provider, our ATC system. There's just, as I said, a general overview or a requirement to continue investing in infrastructure that we're going to see touch a number of our businesses across the portfolio. So again, something that we're truly excited about. James McGarragle: Appreciate the color. And then on -- just on the projected return thresholds for Canadian North, when you acquired it, you mentioned the returns would be a little bit below into '26. We should see those things improve. We saw the update on the -- you have to help on the pricing side, given that agreement you signed last year. But can you just give us an update on how things are tracking operationally against some of those return targets that you guys have internally? And then just a little bit more generally, what's the opportunity, what's the capacity in Canadian North to kind of take advantage of some of this Arctic sovereignty investment longer term? And I'll turn the line over after that. Michael Pyle: Thanks, James. When you look at Canadian North, I think it's safe to say that we had ambitious goals for the company. We had great faith in the management team there and that when teamed up with EIC, we could create some impressive results. And it's clearly exceeded our internal expectations. The EBITDA we're generating, we've made more changes and accomplished more than we anticipated at this point in the process. And so when you look at what we need to do from an earnings point of view to get to our 15% return, we're ahead of where we thought we would be. The part that will still take us through next year is the deferred maintenance stuff where we're catching up on some of the overhauls and stuff where they have used rentals as opposed to overhauls. And so that will continue through this year. In terms of capacity, there's room for year-over-year growth, which we expect. But if we get to the point where we're building a military base or there's a new mine or there's those things, the incremental investment in a couple of extra aircraft is modest relative to the returns because we own all of the fixed base infrastructure. Canadian North is well underway to building a new freight hub in Ottawa, which is nearing completion now. In fact, that was the majority of the growth CapEx we incurred in that company last year. It's nearing completion. So I would say that the infrastructure of the business to grow is there. As it grows more and more, we'll add aircraft to meet the demand. The one piece I would say that's a little bit different than that would be on the charter business. The first phase of liquid natural gas plant business is complete, and that you saw that come to a close in Q4. The balance of the charter business continues, although as I said several times, that's at much tighter margins that we're really interested in participating in. So we're in great discussions with our customers. If we're successful on renegotiating those contracts at their maturity, we'll continue in that. If not, we won't. And just as a reminder, we didn't pay anything for that part of the business. Those are the only aircraft in EIC that are leased, and we bought the Canadian North business for asset value. So we may be able to redeploy some of those leased assets into the core business if we needed to, to augment our capacity. Jake Trainor: And Mike, it's -- one other point I'd just like to add to add a bit of color is the other critical angle that we've got is the human capital. We're one of the largest employers in the north. We have incredible relationships with the Inuit and the indigenous partners out there. And again, just understanding the time and space constraints, building a workforce that is able to perform in a harsh environment is a significant -- one of the moats that Mike was talking about earlier. That's a significant challenge for anybody. So again, that's something that we can continue to scale, and it's a big opportunity for us. Operator: Your next question is from Cameron Doerksen from National Bank Financial. Cameron Doerksen: So I guess maybe my question on the balance sheet. Obviously, you've got the investment-grade credit rating, which is great. But I'm just sort of wondering, big picture, how you'd sort of like to see the structure of the balance sheet longer term. I mean, obviously, there's an opportunity to do a fixed interest rate debt deal here. But I guess, how would you like to see the split of the business kind of longer term between raising some debt in the public markets versus the credit facility? And maybe a corollary to that is what sort of interest rate savings do you think you might be able to achieve if you do tap the capital markets for debt? Michael Pyle: I'll take most of that, and then I'll give Richie the hard part, which is the savings part. I think it's really important to understand why we're excited about the bond market. We have tons of liquidity. Our current facility is $3.5 billion, and we've got about $1.25 billion of dry powder. So even with Adam's capability and investing money that we're in good shape there. What the bonds bring us is a fixed rate piece to our balance sheet. We've always had convertibles since our inception, and those served as a big part of our fixed rate exposure. Now with bonds at a far lower rate than convertibles ever were and quite frankly, at a lower rate, depending on term, of course, than our floating rate, I think you'll see over time, bonds make up a significant piece of our capital structure. In the past, we've used interest rate swaps to give ourselves exposure to fixed rates. The bond market is far cheaper than the swap market today. And so I think you'll see us grow that. And one of my personal phobias is when you get into refinancing risk when you have big pieces of paper. And so I like to stagger those over a number of years. And I think over time, as our bond part of our financing matures, you'll see us doing that with different lengths of bonds to make sure that we are unduly impacted depending on what's happening 5 years from now when a bond comes in. And I guess the other thing that's really important that our shareholders rely on us for is we've maintained a very consistent level of debt since our inception. Bonds don't change that. It reduces our reliance what we used to have on convertible debentures and it reduces our reliance on our operating facility, but it doesn't change the aggregate level of debt we're comfortable carrying. Richard Wowryk: Yes. I think, Cam, just to answer your question on savings. It really depends kind of where you're anchoring to. So if you're anchoring obviously to kind of the convertible debenture market, those savings are very meaningful, especially when you include kind of the amortization of the cost of that transaction. So you're 1.5%. If you're comparing it to our credit facility on a variable basis, that suggest that's less comparable in that it's a 4-year facility versus in the bond market, something that's 5 or 7 years. But even on a 5-year fixed basis versus a 4-year floating basis, you'd have some savings on the fixed side. But I think where the comparison versus the credit facility is more meaningful is, as Mike noted, as the debentures we completed those redemptions, but also we have 2 interest rate swaps that are maturing in April of 2026. We've started to ramp up our review of extending those. And when you compare the interest rate swap market versus the bond market, those savings when you're thinking about something of term in 5 years in the bond market versus the swap market, you are saving -- it's not as large of a delta versus the convertibles, but it is still meaningful savings for that certainty of term. So we're excited about it. And we'll still pick up some savings versus the floating, but it's really versus the other capital alternatives that we have to achieve a portion of fixed rate debt where the savings are more material. Michael Pyle: When you look at the fact that we basically carried about a turn of EBITDA on average over our history in convertible debt. And those were in round numbers, the low 6s in terms of interest rates plus the cost of raising versus a bond probably in the very low 4s with very little cost of raising. You're talking about something in the range of 200 basis points versus our historical capital structure, and that's a meaningful difference on our cost of capital. Cameron Doerksen: Okay. No, that's super helpful color on that. And just maybe one quick follow-up for Richard. Just, I guess, on the working capital, you had a big, I guess, positive swing in Q4. It looked like a big change in the accounts receivable. Just wondering what that was. And I guess maybe any thoughts around working capital expectations for 2026? Richard Wowryk: Yes, for sure, yes. So this is consistent with kind of the messaging that we've been giving throughout 2025, but also with the messaging that we gave for 2024. There were a number of government accounts that were kind of well behind our collection patterns in 2024, and we rectified those by working with our partners throughout 2025. And as we always do, we work to develop processes to make sure we don't end up back there. So that was significantly successful during the period. We talked about kind of the multistory window solutions. There's some drawdown of working capital there because of business volumes. And the other thing that we talked about throughout 2024 and early 2025 is just Regional One taking advantage of certain buying opportunities and finding the right place to sell those assets. And just the size of assets that we had purchased throughout 2024, late 2024 and early 2025, the timing of those sales resulted in kind of temporary bumps in working capital. And it isn't something that we apologize for. Regional One will be opportunistic. And if the intention is to resale the assets relatively quickly, those will sit in inventory. And we'll continue to undertake those types of investments as they generate the returns that Regional One does. So -- and to your question on 2026, we haven't provided something formally, but we would expect marginal increases in working capital throughout 2026 just based on the growth in the business. We'll continue our laser focus on working capital throughout the year as we've shown successes throughout 2025 and try to parlay those into other wins. But I wouldn't expect a repeat of 2025. It was driven by a couple of things that we've talked about for kind of the last 12 to 18 months. Operator: Your next question is from Matthew Lee from Canaccord Genuity. Matthew Lee: Maybe we can start with the step-up in manufacturing margin we saw this quarter. Can you maybe just break down how much of that mix or how much of that is mix versus the performance of the individual businesses? And then just maybe some guideposts as to how you're thinking about margin expansion in '26 and then '27? Michael Pyle: Sure. In the fourth quarter, it's more driven by product mix than a major change in the business. Fiscal 2024, the fourth quarter was a very tough period for DryAir, our heating systems company. Conversely, 2025 was a very good fourth quarter. So you've got a delta of a better-than-normal year versus a worse-than-normal year that helped support margins. We had increased rental activity at our Canadian matting business, which is strong for margins. And when we look at that, taking that forward, it's not dramatic in the first half of next year. But as the year progresses, as the rental, the fleet gets more and more deployed, the rental business is higher-margin business, which drives the aggregate margin across the segment. The other thing I'd point out is that the composite matting business ran flat out in the fourth quarter, and we did -- we had just got it the year before, and it wasn't quite running at the same level. So that strengthens it. There's not much of a delta coming up in that. The business is selling every mat it can make, and we anticipate that for the balance of '26 until the new plant opens in '27, which again should be good for margins as we go forward there because the SG&A with the business won't ramp at the same rate as revenues will when the new plant comes online. Matthew Lee: So if I'm understanding that on a holistic level, kind of further margin expansion from efficiencies in '26 and then '27 further ramp as the capacity comes online and of course, Quest starts to recover. Michael Pyle: Quest recovers and the -- I think we're heading into the beginning of a new super cycle in the Canadian matting business. The amount of bidding we're looking at on the pipeline business, but more so the transmission and distribution business, I think we're going to see that business being very busy as we head into the back end of next year and into 2027. So I think that's also very bullish for margins as we go into '27. Matthew Lee: Understood. And then maybe on the ISR front, obviously, a lot of talk about Australia amongst investors. But can you maybe talk about the conversations you're having with other countries and how those conversations have changed as the geopolitical environment has evolved in the last couple of months? Michael Pyle: I think what's changed in the geopolitical environment is 2 things. And Canada is kind of a poster child for it. One is, in the past, there was kind of do I really need to do this and the reliance on the group of NATO and a reliance on the Americans, the position of the U.S. President telling countries they need to help look after themselves has been great for this business. And the uncertainty politically. You can see it, as an example of Greenland. I mean, the talk that NATO partners dispute area of land is not something we've seen in a long time. And so the demand we're seeing from countries wanting to look after themselves is very heightened. And it's across the board. We're in discussions in a lot of places that I'm not at liberty to discuss. But I can say it's like countries to what we do. In the last 5 years, we've added work in the Netherlands. We've added work in Great Britain. We've expanded and lengthened our contract in the Caribbean. We're in discussions. I said we've talked to Greenland about their opportunities. We've been very public on the fact that we've had discussions with the government of Canada in providing them with a northern surveillance solution. So it's pretty pervasive and across the board. Wins tend to be choppy. You don't know exactly when a government is going to come to conclusion. Australia is a great example of that. The Australians are very sophisticated from a bidding point of view, and this process has been going on for over 5 years. We're surprised that it hasn't come to a conclusion yet, but it's going to. And we certainly aren't going to win every opportunity, but we are going to win some of them. And the magnitude of these projects, whether it's a hypothetical 10-plane deal in Australia or something smaller than Canada or something in that 2 or 3 plane range in European countries, all of those fit directly into our sweet spot. And if we're having this call a year from now, I'm pretty confident that we're going to announce some exciting stuff by then. Operator: Your next question is from Krista Friesen from CIBC. Krista Friesen: Maybe just to follow up on Matt's question there. As you think about the number of opportunities for your ISR business over the next 12 to 18 months, would it be fair to say that as you think about the opportunities for debt, it's mostly going to be prioritized towards future potential contracts? Or are you still very much open to other M&A? Michael Pyle: I think if I said to you that I was prioritizing my capital for ISR, Adam would beat me up when I got back to the office. We're kind of -- because they're driven by different parts of our company and different people, they don't really compete for capital so much as if we're successful on both the acquisition front and on earning new contracts, our leverage will creep up. And if it creeps up, we'll use equity if as and when we need it. But we're in a spot right now, Krista, where our leverage is the best it's been since like 2010, I think, at 2.73x and with $1.5 billion -- $1.25 billion, I'm sorry, of dry powder and maybe the opportunity in the bond market. I think we're in a great spot from a liquidity point of view. But I really want to be clear, we're not going to trade off opportunities. We're going to take them all, and we'll just make sure they're appropriately financed. One of our great strengths is if you look back over history, we've always had a balance sheet that lets us thrive in bad markets. So whether it was in 2009, where we were a $60 million market cap company, and we did a $60 million deal right in the middle of the markdown or when we had some silliness with a short attack during 2017, we grew dramatically or even in COVID, we maintained our dividend and did a couple of acquisitions and pay down debt. So we're fixated on maintaining the right level of leverage. And Rich's job is to make sure we have the right level of liquidity. And so we aren't really trading off one against the other. Acquisitions are a little harder to predict when we're going to be successful. But we typically get a couple of them across the line, and I see no reason why this year would be any different. Krista Friesen: Okay. Great. And then maybe just on the Air Canada announcement earlier this year, clearly, a strong vote of confidence in PAL Airlines. Are you able to share a little bit more detail on the cadence of deploying these additional aircraft with Air Canada? Michael Pyle: Jake, do you want to take that? Jake Trainor: Yes, for sure. Thanks, Mike. Great question, Krista. Again, you got to appreciate that we're -- as we continue to expand that offering, we've got to bring crews in. We've got to train. We're buying aircraft because we don't have them sitting on the shelf. So from that announcement, our intent is mid-2026 is when they're going to start being reflected in the scheduled operation. So -- and the other point I want to say is this is a significant vote of confidence as you stated, because it's only an extension -- it's not only an expansion of the number of aircraft, it's an extension of the entire package of aircraft with Air Canada by a further 4 years. So again, tremendous stability and again, strength in partnership. Operator: Your next question is from Konark Gupta from Scotiabank. Nathan Britto: One. It's Nate Britto, actually filling in for Konark Gupta. Just have a couple of questions. Are there any areas within the EIC portfolio where you are in advanced stages of AI adoption? And are there any subsidiaries that may significantly benefit from AI investments around the globe? Michael Pyle: We don't have kind of quantum AI projects that are materially changing the business. There is incremental investment being made in things, everything from airplane maintenance, airplane security and other things like that. But there's nothing that's really a quantum leap from AI. We do tend to use our head office team to help our subsidiaries deploy when they see an opportunity. Maybe one of the biggest benefactors from AI would be our CTI training business in the U.S. We spend a lot of time utilizing AI in the training and then training our customers on the use of AI in their business. And so probably the biggest impact would lie at CTI. Nathan Britto: Okay. That's very helpful. And just as an addition, I would just ask, in terms of your M&A pipeline, how are sellers' expectations these days? And do you think the manufacturing end market has more opportunities than aviation? Michael Pyle: I think it depends on how you look at that. The -- because there are rules in aviation about where you could operate, what ownership you can have in other countries. So by definition, aviation is more limited than manufacturing because manufacturing doesn't have those. Having said that, the areas where we're active in aviation have tremendous growth opportunities in the medium term. We've talked a lot about what's happening in Canadian North. We've talked about in ISR. We've talked about our continued desire to grow our air ambulance medevac business. We're already the biggest in Canada, and we intend to continue to grow that business. So if we talk about the overall macro, I would say there's more opportunities in manufacturing. But if you look sort of closer to home and the things that are bolt-on and things that are close to what we do, I would view them as very similar. I think you'll see a significant continued growth in the matting business. The opportunity in the U.S., the movement towards composite matting is real. It's long term. It's worldwide. And our product is quite simply the best. And so we're going to get that plant up and running, and we'll start taking on, whether it be rental opportunities, selling outside of the U.S., expanding our geographic coverage. We were ecstatic that we had a number of our mats used in the oil patch. And typically, the oil patch are the hardest on mats, and that's why wood matting has historically been what's used there. And we've had great success with our mat on a couple of projects there. Operator: Your next question is from Razi Hasan from Paradigm Capital. Razi Hasan: Can you maybe just talk about the margin implications for the Aerospace business, training versus ISR? And going forward, do you expect the Aerospace business to have a higher contribution than it did in 2025? And if so, just what are the puts and takes there? Michael Pyle: So the big macro you brought up first is bang on is that the margins in anywhere where we own the aircraft are always higher because of the capital deployed. So our training business is a very low capital business. Our return on investment is great, but our EBITDA margins are much, much lower. As we grow the ISR business, it tends to be the highest or near the highest of our aviation businesses from a gross margin point of view. So the growth of that will be good for margins. For competitive reasons, I'm not going to get too detailed about what those are, but they're commensurate with the risks and the capital we put forward on those aircraft. Razi Hasan: Okay. That's helpful. And then maybe just switching gears just on Canadian North. As much as you can speak to, can you just maybe walk through the revenue contribution from Canadian North? It looks like the segment was much stronger than we had estimated. So I just want to make sure we're modeling it properly. Any color there would be helpful. Michael Pyle: I don't have those numbers in front of me. What I would say is that maybe one of my guys can grab and see if they can pull up while I'm talking. But the -- you have to break Canadian North into 2 pieces, the regular business in the North, which is very similar to what Com Air does, which would have very similar margins to the balance of our Northern aviation. And then you have the charter business. And I'm not talking about the charters within the far north. I'm talking about the charter business servicing the oil patch and servicing the natural gas projects. In those cases, those margins are much lower. So as we make some of the changes in the Canadian North business and merging some of the purchasing capabilities and those things with EIC, you will see a continued improvement in gross margins at Canadian North and the margins continue to improve with the full price increase that was in the new contract with the government of Nunavut taking effect because when we took the contract, we signed the contract, there's a whole bunch of tickets that were already outstanding under the old pricing. And so the full impact is just showing up now. So that's part of the reason you saw increases in margins in that period. Richard Wowryk: And just -- while we don't normally disclose subsidiary by subsidiary financial information within our ICFR disclosure within the MD&A, there is a note that aggregates revenue for Newfoundland Helicopters and Canadian North from a revenue perspective. So you can pull what the 6-month impact was for those 2 entities. Canadian North is materially all of it based on the size of the deal. The one thing I would caution, though, is when you just think about projecting that into the future is that as we've noted, the LNG contract wound down in the fourth quarter of 2025 here. And so just multiplying that by 2 and saying that's what revenue is going to be in 2026 would be overstating the impact of those charter revenues because of where that contract is. Operator: [Operator Instructions] And your next question is from Amr Ezzat from Ventum. Amr Ezzat: Congrats on a very strong year. I've got just one very maybe conceptual question for you guys on guidance. So you guys reiterated 2026 with a bias to the upper end following Mach2 and Air Canada. But as I think about the defense and sovereign themes that you guys discussed in your prepared remarks, can you help us distinguish what's structurally embedded in your current 2026 run rate versus what would represent an incremental upside. And I do understand that you guys don't include any sort of ISR wins. But specifically, are you seeing stronger activity levels in defense adjacent parts of the portfolio that support the base case independent of ISR contract wins? Michael Pyle: Yes. It's a really good question. The simple way to look at it is our guidance is always based on what we know. So it's based on contracts we've won, investments we've made. And so when we looked at our guidance after the 2 things we've announced, the Mach2 and the Canadian North acquisition, we thought do we change our guidance based on this. And because neither of them were full years in the current year. And if you added what the portion of the year that we had to our internal budget, it would get us over the top of the range that we have, but closer to the top of it. We decided to move within the guidance we've given as opposed to replacing the guidance. In terms of opportunities and things we're seeing in defense, we haven't really included anything in there other than what we either have or very highly confident we will have in that guidance. So as we succeed on some of these defense initiatives, whether it be ISR or maybe it's West Tower building radar towers in the north or any number of those things or quite frankly, the development of a critical minerals mine in a Callaway. Those things would be additive to what's in the budget. We try not to predict what's coming in, and then you can get very choppy results versus your guidance. We want to make sure people can rely on what we predict. And so as a result, we really don't put much in there for positive wins that we aren't sure of yet. Amr Ezzat: Understood. What I'm hearing is it seems conservative. Michael Pyle: Those are your words, I'm not... Amr Ezzat: Yes, these are my words, exactly. If you allow one more follow-up, and I'm not sure you could answer this, like can you -- do you guys like quantify or can you quantify how much of your manufacturing, whether it's revs or EBITDA are exposed to defense and probably very hard to answer, but... Michael Pyle: It's really hard to quantify that. What I would say is when you take defense/investment in the north because the investment in the North is going to be much more than just ISR or a military base. The investment in the north is going to be developing in critical minerals. It's going to be work on the Northwest passage. It's going to be nation building. There's discussion of pipelines across there to Churchill. All of those provide dramatic opportunity for us. We are the north to steal the Raptors statement in terms of we now -- with the acquisition of Canadian North, we own the infrastructure to do whatever people need us to do up there. And that's something that we're -- to be honest with you, we're just cutting our teeth on. When we bought the company, we bought it based on what we knew it does, not what we think it can do in the future. And so I really believe the opportunity in Nunavut and the Northwest Territories in Yukon, we're just starting. Richard Wowryk: The only thing I'd add... Jake Trainor: Go ahead, Richard. Richard Wowryk: The one thing that I'd add is that it's a growing part. And we're leveraging the collective expertise across all of our organizations to work through bidding processes with our manufacturing folks who may not have the same experience going through large government procurement processes. So we are cross-leveraging resources and experiences from subsidiaries that have that experience to increase our exposure to the kind of the defense world on the manufacturing side. Jake Trainor: Yes. I was just going to -- I was going to expand the fact that while some of our businesses don't have direct defense exposure today, every one of our businesses had the opportunity to, whether it's the exposure to the infrastructure that is going to need to be built, whether it was the services provided to enhance defense and security or direct activity on behalf of the various government agencies for defense and security. So again, it's probably less about what specific percentage exists today and more about the roadmap of opportunities we're looking at moving forward. Amr Ezzat: Understood. And I do agree. I think it's a very underappreciated part of your business. Operator: There are no further questions at this time. Please proceed. Michael Pyle: I want to thank everyone for joining us this morning. I don't generally comment on stock price and those kind of things, but this is an exciting morning as the early trading has pushed our stock over the $6 billion market cap for the first time. So it's a good way to start the week. Thanks, everybody, and I look forward to talking to you with our Q1 results and at our AGM in May. Have a great day. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.
Operator: Hello, everyone. Thank you for joining us and welcome to the Hyliion Holdings Fourth Quarter 2025 Earnings Call. [Operator Instructions] I will now hand the call over to Greg Standley, Chief Accounting Officer. Please go ahead. Greg Standley: Thank you, and good morning, everyone. Welcome to Hyliion Holdings Fourth Quarter 2025 Earnings Conference Call. On today's call are Thomas Healy, our Chief Executive Officer; and Jon Panzer, our Chief Financial Officer. A slide presentation accompanying today's call is available on Hyliion's Investor Relations website at investors.hyliion.com. Please note that during today's call, we will be making certain forward-looking statements regarding the company's business outlook. Forward-looking statements are predictions, projections and other statements about anticipated events that are based on current expectations and assumptions. As such, are subject to risks and uncertainties. Many factors could cause actual results to differ materially from forward-looking statements made on this call. For more information on both factors that may cause the company's results to differ materially from such forward-looking statements, please refer to our presentation and press release as well as our filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on forward-looking statements and we undertake no duty to update this information unless required by applicable law. With that, I will now turn the call over to Thomas. Thomas Healy: Hello, and thank you for joining us for Hyliion's Fourth Quarter and Full Year 2025 earnings call. Heading into 2026, we are positioned strongly to deploy more early adopter units and move towards commercialization. As we shared on our last call, the KARNO power module is now performing at a level that meets our initial customer needs. On today's call, we'll provide more details on our early customer deployment plans and cover the current status of UL certification and product performance, demand we're seeing across commercial and military markets and how we are preparing to scale production to support growth. Turning first to UL certification. We made significant progress during the quarter and are now nearing completion of this important milestone. To provide additional context, UL certification for the KARNO power module occurs at 3 levels: the linear electric motor, the battery pack and the full power module. I'm pleased to share that we have successfully completed UL testing for both the linear electric motor and the battery pack, meaning we have completed 2 of the 3 certifications we need. We have completed our initial round of testing on the full power module. Through that process, we identified several small refinements, including gasket updates to further strengthen water ingress protection and the opportunity to incorporate recent power output improvements. With those enhancements now underway, we plan to begin our next round of UL testing shortly and expect to complete the certification in the second quarter. Overall, we are very encouraged by the progress and view UL certification for early adopter units as a near-term gating item towards delivering units to customer sites. Beyond certification progress, we now have 5 KARNO units at our facility, 2 development units and 3 early adopter customer units. These systems are being continuously exercised through a range of load profiles, extended duration testing, customer-specific operating scenarios and military representative applications. As we shared last quarter, we achieved over 150 kilowatts of power generation, which is sufficient for initial customer deployments. We have since demonstrated 175 kilowatts of power production and testing following recent upgrades and we expect to reach the full 200-kilowatt design power rating by year-end as we transition into commercialization. These improvements include refinements to the piston design and updates to cylinder liner material to enhance heat retention within the system. Importantly, we do not believe reaching the full rating will require any fundamental architecture changes, but rather a series of incremental optimizations across the platform. The steady progress we have made in the past couple of quarters, reinforces our confidence in achieving the final 200-kilowatt design specifications this year. Fuel flexibility continues to be a key differentiator of the KARNO system, and we have made meaningful progress in this area during the quarter. We successfully demonstrated dynamic fuel switching with the KARNO power module transitioning between natural gas and propane. The system can automatically switch between fuels without shutting down and without any user input to indicate which type of fuel is being utilized. We simply changed the incoming fuel supply and the unit continues to operate as designed, truly highlighting our unique fuel-agnostic capability. Another recent accomplishment was successfully running a KARNO core on diesel fuel and being able to export power to the grid while meeting Tier 4 final emissions requirements without the use of exhaust after treatment systems. We expect to begin incorporating diesel capability into customer-deployed systems this year. Diesel capability is particularly important for defense applications where it remains the dominant fuel source. More broadly, the majority of installed generators worldwide operate on diesel, which significantly expands the KARNO power modules addressable market in mission-critical and prime power applications. For example, many data centers prefer pipeline natural gas for prime power, but still require on-site diesel for resiliency. We believe our ability to operate on both fuels will allow customers to avoid purchasing separate natural gas and diesel generators, instead relying on a single flexible platform for both primary and backup operations. Next, I'd like to share our outlook for 2026, including our deployment plans, product development priorities, business development activity and manufacturing capability. We are entering 2026 with strong demand across commercial, data center and military markets. As previously shared, we have nearly 500 units under nonbinding letters of intent. In addition to a broader set of customers actively evaluating the platform. The primary focus now is transitioning from development into real-world, field deployments and moving towards commercialization and scaling. From a development perspective, our overall plan remains consistent with what we have previously communicated. We expect to deploy approximately 10 early adopter units prior to commercialization including the 2 units delivered to the Navy last year and a third unit that we have recently completed and that will go to a customer site following UL certification and product validation. Throughout 2026, we plan to deploy these systems into customers' environments with commercialization to follow late in the year. One area where we are seeing particularly strong long-term interest is the data center market. With recent industry announcements pointing towards a shift to 800-volt DC architectures for next-generation AI facilities. We believe our KARNO technology is uniquely well positioned. Our platform already operates at 800 volts DC, which aligns directly with this emerging standard and has the potential to reduce conversion stages, lower equipment requirements, improve overall system reliability and efficiency and simplified site electrical architecture. In 2026, we plan to demonstrate this capability in live environments to showcase the potential. Early this year, we successfully demonstrated a mission representative Navy load profile on a Navy-owned KARNO asset. The system managed rapid load changes and sustained performance under high stress operating conditions, reinforcing its suitability for shipboard and defense use. This is an important validation milestone and has accelerated discussions around additional defense platforms and with NASA, who is exploring coupling our KARNO technology with nuclear power generation. We have identified several near-term opportunities across multiple branches of the military that are moving towards potential contract awards, which we expect to finalize this year. We believe these opportunities could represent $40 million to $50 million worth of new revenue opportunities on top of the approximately $20 million of contracts with O&R that we are currently executing on today. As part of our current Navy program, we plan to deliver additional KARNO power modules and cores in 2026 for specialized shipboard testing. Once completed, these deliveries will represent about half of our early adopter units. One deliverable will be a multi KARNO power module for the ship, demonstrating our ability to create higher-power systems through coupling our 200-kilowatt cores. Building on our work with the Navy, I'd like to provide an update on plans for a previously discussed 2-megawatt KARNO power module, which we believe aligns well with the needs of data centers and other high-power applications. In 2025, we spent significant time developing a multi-KARNO power module configuration for shipboard use. Through that effort, we identified substantial overlap between the Navy architecture and what is required for higher power commercial deployments. As a result, we have leveraged that design foundation to advance a modular, scalable configuration suitable for data center applications. Our initial concept was a 2-megawatt system comprised of 10 200-kilowatt KARNO cores integrated into a compact footprint, roughly the size of a 20-foot shipping container. Recent customer discussions have led us to evolve the configuration into a more flexible architecture. The system is designed to scale in approximately 800-kilowatt increments, allowing configurations, such as 800 kilowatts, 1.6 megawatts, 2.4 megawatts, 3.2 megawatts and so on. This modular approach aligns closely with feedback from data center customers where power requirements vary depending on site electrical architectures. By enabling expansion through the addition of core sets, we can tailor output to specific customer needs while maintaining high power density and resiliency. Moving on to our commercial customer deployments. We recently entered into a strategic partnership with ABM Industries to support the deployment of integrated distributed energy solutions. This collaboration, combines KARNO technology with ABM site engineering, integration and operational capabilities, helping simplify deployment and broaden customer access across commercial, industrial, data center and mission-critical applications. ABM is also equipped to offer energy as a service contracts with their customers. This partnership allows us to remain focused on advancing and commercializing the KARNO platform while leveraging an experienced partner to support end-to-end customer solutions. Next, I will provide a brief update on our manufacturing readiness. Today, we operate more than 30 additive manufacturing machines the majority of which are located at our Austin facility. These printers span 3 different machine models with configurations that are able to produce 1, 2 or 4 parts at once. We expect to take delivery of several additional printers this year that we've had on order from last year. With these additions, we believe our additive manufacturing capability will be well positioned to meet planned production needs for 2026 and 2027, while providing a strong foundation for scaling further into 2028. Our current focus is on maximizing the speed, power and productivity of each machine. During the first quarter of 2026, we initiated efforts to improve printer throughput and we'll be dedicating both printer time and engineering resources to these optimization initiatives throughout the year. In parallel, we plan to take delivery of and begin testing one or more printers equipped with the latest laser technology from GE Colibrium, which we believe has the potential to further improve print speed and efficiency. On our last earnings call, we discussed the potential risk related to magnet supply, particularly given the export constraints from China. We are pleased to share that we have made meaningful progress in mitigating that risk and have already begun receiving components. While this does not fully eliminate supply chain risk, it substantially reduces our exposure and improves our confidence in supporting planned production. To wrap up, I'd like to share our key milestones for 2026, which are summarized on this slide and highlight the achievements we expect to deliver over the course of the year. We began the year with an early win by successfully operating the KARNO core on liquid fuel and meeting emissions requirements. Looking ahead, we expect to achieve UL certification for the early adopter KARNO power modules during the second quarter of this year, which will enable broader customer site deployments. In parallel, we expect to achieve the full 200-kilowatt design power by the end of 2026. We also plan to complete the remaining early adopter units during the year. These deployments are an important step towards validating system performance across real-world applications, and will support our plan to commercialize the 200-kilowatt KARNO power module in late 2026 which will then allow us to begin scaling production. In addition, we expect to complete a multi-KARNO core platform featuring the systems and controls required to coordinate multiple units operating in tandem. This configuration will serve as a stepping stone towards a larger multi-megawatt KARNO system designed to support data centers and other customers with high power requirements. We expect to secure additional U.S. military contracts with a total revenue opportunity of $40 million to $50 million, further advancing the development work underway to support autonomous navy vessels and other mission-critical defense applications. Taken together, these milestones support our expectation of generating approximately $10 million of revenue during 2026 from a combination of commercial customer activity and R&D service contracts. Looking ahead over the next 3 years, we plan to build on the progress to achieve in 2026 as the KARNO power module transitions from early deployment into scaled commercialization. In 2027, we expect to ramp commercial deliveries and expand the range of applications where KARNO is deployed. This includes advancing the development of our multi-megawatt KARNO power module for data center applications. We view 2027 as the year where we transition from initial commercialization into meaningful production scale. In parallel, we plan to expand our additive manufacturing capability in preparation for anticipated growth in 2028. By '28 and beyond, we expect to accelerate commercial growth as increased production capacity enables us to address a broader portion of customer demand. This includes fulfilling interest in multi-megawatt systems for data centers as well as continued expansion within military applications. To wrap up, 2025 was a year focused on resolving product and production challenges, strengthening the core architecture of the KARNO power module, expanding its operating capabilities across fuel and mission profiles and improving performance. In 2026, our focus shifts from development to deployment, and commercialization. With UL certification nearing completion, early adopter units moving into the field, growing military engagement and strong data center interest, we believe we are well positioned to transition from validation to scaled execution over the coming years. With that, I'll turn the call over to Jon to walk through the financial update. Jon Panzer: Thank you, Thomas, and good morning, everyone. In the fourth quarter, we recorded revenue of $700,000 from research and development services related to our contracts with the Office of Naval Research. Cost of sales was $600,000, resulting in a small gross margin gain. In the fourth quarter of 2024, we recorded $1.5 million of R&D revenue and a $100,000 gross margin gain. As a reminder, R&D services revenue reflects the sale of KARNO cores and related components to the U.S. Navy and the work we perform to test and validate these units. Total operating expenses for the fourth quarter were $15 million down from $17.2 million in the fourth quarter of 2024. The decrease was driven by lower R&D and SG&A costs as well as a $500,000 in gains from asset sales in connection with the powertrain exit and termination. R&D work continued at a strong pace in the quarter, but was lower than '24 when we were purchasing components at a faster pace. SG&A expenses were down about 6% compared to the fourth quarter of 2024, due primarily to lower facilities and insurance costs, partly offset by a small increase in labor costs. Our total net loss in the fourth quarter was $13.2 million, down from $14.4 million in the fourth quarter of '24. For the full year 2025, we recorded revenue of $3.5 million, all from R&D services and gross profit of $170,000. This compares with revenue of $1.5 million and gross profit of $100,000 in 2024. Full year operating expenses were $65.7 million compared to $64.4 million for all of 2024. The small increase compared to '24 is related to higher R&D expenses this year partly offset by lower SG&A and powertrain exit and termination expenses. Our full year net loss was $57.2 million compared to $52 million in 2024. Turning to our cash and investment position, we spent $12.4 million during the fourth quarter and $67.4 million for all of 2025. Full year capital spending was $23.7 million and consisted primarily of additive printing machines and related equipment, along with facility investments to support printer operations. Cash generated from asset sales for the full year was $2.2 million. As a reminder, asset sales related to the monetization of equipment previously used in our powertrain division and will continue into 2026. We finished the fourth quarter with $152.4 million of cash and short- and long-term investments on our balance sheet. While this outcome is a little lower than the $155 million we projected for year-end, we did end up deferring $10 million of planned equipment financing into 2026. Excluding that deferral, our year-end cash and investment balance would have been about $7.5 million higher than projected, mostly due to lower capital spending and lower operating expenses. Looking forward into 2026, as Thomas noted earlier, we expect to generate approximately $10 million in revenue this year from both R&D services and commercial customers. Commercialization of the KARNO power module is expected to occur late in the year. Also, as Thomas mentioned, we plan to slow capital spending in 2026 as we work to optimize the output of the printers that we have on hand today. We are planning to execute equipment financing for up to $10 million this year, although that amount may shift up or down based on actual capital expenditures and available lease capital. Overall, for 2026, higher revenue, thoughtful expense control, lower capital spending and planned equipment financing are expected to result in a lower level of total spending compared to 2025. Our current forecast is for net spending of just over $50 million during the year resulting in a year-end cash and investment balance of approximately $100 million. On past calls, we've consistently noted that we expect the capital we have on hand today to be sufficient to carry us through commercialization of the KARNO power module. Based on our current plans, that continues to be the case. Last quarter, we noted that we anticipate that additional capital will eventually be required to support production growth, particularly for the purchase of additional additive manufacturing equipment. In anticipation of that eventuality, we have filed a standard S3 shelf registration statement with the SEC to provide us with additional capital raising flexibility in the future. An S3 is a valuable tool commonly used by established public companies to efficiently and opportunistically raise funds from time to time through the issuance of debt or equity. Now I'll turn the call back over to Thomas. Thomas Healy: As we look ahead, our focus for 2026 is clear. We'll be building units and getting them into the field, expanding real-world operating experience and moving into commercialization. We believe this year will be defining for Hyliion as customers begin operating the platform in live environments, and we transition from development to scaled execution. Beyond initial deployments, we see significant opportunity in both data center infrastructure and military applications. The shift towards an 800-volt DC architecture in next-generation AI data centers aligns directly with KARNO's design and we believe our modular and fuel flexible platform is well positioned to position this evolution. At the same time, resilient and mission-critical power remains a priority for the U.S. military. We are excited by the opportunity ahead and our focus on execution as we move into the next phase of growth. I will now hand it over to the moderator to open up for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Martin Malloy with Johnson Rice. Martin Malloy: Congratulations on all the progress you're making. Wanted to ask about the commercialization later this year. And you mentioned, I think, half the units will be going to the U.S. Navy. Could you talk maybe about the end markets for the other units and where you're seeing customer interest from? You mentioned data centers. Is that where the other half of the units are going? Thomas Healy: Sure. Appreciate the question. So military is a huge focus for us this year. We're at the point where we're actually starting to put the systems together, that will go into that unmanned autonomous ships. So that's a very exciting one for us this year. Other applications include just prime power. So think about like powering facilities, providing power for EV charging, those sort of opportunities. And then the last one is that data center side of things. So ultimately, data centers are looking for that larger platform that 2.4, 3.2-megawatt system. But one of the focuses for this year is we can really showcase and provide the benefits to data centers even on a 200-kilowatt system. And so one of the things that we decided to do is take some of these early adopter units and actually use them as mobile units that we can showcase in various applications. And so one of the ones we do plan on showcasing this year is a data center opportunity. Martin Malloy: And just for a follow-up question. Could you maybe talk about the capacity that you'll have as you exit this year in terms of manufacturing on a megawatt annual basis or give us some measures what it would cost to add additional megawatts per year in manufacturing capacity so we can get a feel for how '27 might look? Thomas Healy: So at this stage, we haven't shared exact specifics around what you're asking. Reason being is we really want to showcase, improve this printer speed improvements that we are highlighting. So that's going to be a big focus for this year. Just to give a little background there, as you buy an additive machine and you start utilizing it, there are levers you can pull like how much power in the lasers, how many parts you're producing on a build plate, things like that to increase the throughput. And so that's going to be the focus for this year. And then with that, that will give us a stronger clarity on exactly how much capacity we have with the existing installed base. But all that being said, we are highly confident that we've the strong production capacity for '26 and '27. And then as we look at 2028, that's where we envision we'll really need to start adding additional printers to start scaling capacity. So I know that does not give you the exact color you were looking for, but hopefully, you understand why we want to focus on those printer speed improvements and proving that we can get to the throughput that we anticipate. Operator: Our next question comes from Sean Milligan with Needham & Co. Sean Milligan: When you talk about the incremental $40 million to $50 million potential from the military, I'm trying to understand, is that -- like do you consider that skilled deployments? Or is that like additional testing across different platforms and different agencies, things like that, that would then scale -- could scale beyond that $40 million to $50 million range? Thomas Healy: Yes. So it is really focused on additional applications and more unique development for the military and so right now, we have our Navy work we're doing. It's really focused around being the prime power on a fully unmanned autonomous ship platform. We are also looking at stationary power deployment. So think about like powering a base doing that with the Navy. These additional contracts are both a continuation of that work plus adding actually new applications, new opportunities. So think about like different ship platforms, think about other branches of the military, how they need prime power solutions as well and starting to expand the use cases of the KARNO technology. It's not so much just placing a standard PO to just buy additional equipment. But obviously, all this work we're doing with the military is in an effort to go to that stage. Sean Milligan: Great. And then on this new 800-kilowatt module that you're talking about. I think historically, you gave some numbers around KPIs for the KARNO versus like fuel cells or traditional gas. I was curious if there's any update in terms of like how this module might change that? Does it look more attractive for you as you scale up to the larger platforms here? And then what kind of risks are there scaling up from the 200 to the 800 and then the 3.2 ultimately, what do you need to work through on your side to prove that up and get that done? Thomas Healy: All right. So a few pieces to that question. So first is around kind of how it compares against other solutions in the market. So we see customers looking at kind of the conventional internal combustion engines, looking at fuel cell and then looking at technology like ours. In terms of how it shapes up, and I'll put some broad numbers to it, is with a normal internal combustion engine, cost per kilowatt. And maybe I'll use -- if you look at our 200-kilowatt system, what the end numbers would be, if you bought a 200-kilowatt internal combustion engine really designed for prime power and natural gas solutions. You're probably going to be approaching that $250,000, $300,000 for that actual solution. Then as you look at our system, we're more around $0.5 million. As you look at fuel cells, you're up closer to around that $700,000. So it really still puts us in the middle of those 2, which is what we -- where we're targeting to be. And then obviously, our system has benefits over those other solutions that really drive the payback, the return on investment. So that's improved efficiency, so you're actually going to use less fuel. And then on the maintenance side, having lower maintenance as well as what we're anticipating, which will then help you with driving a faster payback and return on your investment. So that's kind of how we shape up against competition. Now another one of the benefits of this modular platform is it allows customers to really match the power they need with the amount of capacity we're giving them. So different data centers have different architectures, and this 800-kilowatt system allows that flexibility. In terms of the risk you asked about of going from 200 to 800 to then the 3.2. So the key thing here is the actual power generation unit that 200-kilowatt KARNO core remains the same in every size iteration. And so once we validate and have confidence in that 200-kilowatt architecture, you're really just replicating it. I would equate it to think of like going and buying an electric vehicle, you can buy ones that have different ranges. At the end of the day, they're just putting more of the same batteries in the vehicle to get you longer range. We're taking the same approach to power generation, where we're putting more of the same KARNO cores back together to give you more capacity. So in '25, we actually spent a lot of time, a lot of effort on developing this 800-kilowatt system because that is what's being utilized in the -- for the Navy. And then from there, what we said is, well, as opposed to going and doing a reengineering and doing a 2-megawatt system, why don't we just take that 800-kilowatt and make that modular so that those can be stacked together. So we're already well underway with the development of that system actually. Sean Milligan: And then on the ABM deal or partnership, can you just give us a little more background on ABM and maybe like their expertise in terms of power deployment and like what end markets they are stronger in? Thomas Healy: Absolutely. So ABM has a lot of breadth and experience in this space in power generation. And their skills are widespread, everything from -- they've got a strong customer base. Customers are already working with that are coming to them saying, "Hey, we need additional power. We need to scale and expand." To then they can actually do the site engineering. So look at how do you integrate the actual power unit. Then they can actually do that integration work, the actual deployment and then they're set up to also do the long-term continuing service and upkeep of that site as well. And in addition to all that, they also offer energy as a service solutions to their own customer, which for background there, that means that ABM would actually come in and procure and buy the technology, the solutions and then they would charge the end customer based on a cost per kilowatt type of a purchasing agreement to make it easier for customers to adopt solutions for power gen. So ABM very well versed in this space, one of the large players there. And then there focuses range everywhere from things like airports to data centers, to mission-critical application. So we've already started discussions with ABM and end customers together, and we're excited to see where that will take us here in '26 and beyond. Operator: Our next question comes from Ted Jackson with Northland. Edward Jackson: So I've got a few questions for you. Let's start with just making sure I understand kind of CapEx and capacity. So right now, exiting, say, exiting '25 at 30 printers. And if I understand then, you're going to add 1 or 2 more during '26 and rather than expand the fleet the effort is really focused on using it better. But when we exit this year, roughly speaking, you'll be at 32 units, but you'll be running them at a much higher throughput rate. Is that the message? Jon Panzer: Yes. Ted, I think you've got it summarized accurately. We don't know exactly how many we'll add, maybe a handful this year. So I wouldn't say exactly 2, it might be a little more than that. But those are units we had on order from last year. But you're thinking about it correctly. We've got a certain amount of capacity, and that capacity rate has been growing as we get more of these printers commissioned and operating to their optimum state. As Thomas has mentioned earlier, some of these are the latest generation printers, which have higher laser power than what we're used to. So the work that we're going to do to increase print speed this year will be related to taking advantage of that higher power and also just other programming opportunities that just make the printers run faster. So that's a lot of -- the good news is that's a great increase in output with not a whole lot of investment in terms of dollars. So that's what our focus will be on this year. So yes, we'll end in 2026 with a handful more printers and more throughput from the ones that we have. Edward Jackson: And then the range of your printers is everything from -- there's the older ones with one laser, and then you have some with 2 and then you've had some with 4. And these -- the one we'd be purchasing will be more of these -- of the 4 laser printers. Is that correct? Jon Panzer: Actually, it's a mix. It's a mix. So Thomas also mentioned that GE is working on some new laser technology, and we're excited to help them out on development of that or trying to test out what that's capable of and that will actually be one of the printers with the smaller number of plates. So we've really got opportunities across the range of our printer fleet. Edward Jackson: And then, I mean, I know you probably won't tell me this, but to kind of get a sense in terms of just sort of understanding as you roll through this and then you start your capacity expansion and the CapEx. I mean, roughly speaking, for like the ideal printer whatever one it might be, what's the outlay for a singular unit? Jon Panzer: The cost -- what are you asking? For a printer or for... Edward Jackson: Yes. Jon Panzer: I mean these are commercially available printers. So our exact cost we can't share, but that is information that if you're looking at what additive printing machines cost that's pretty readily available. Thomas Healy: Maybe, Ted, just to add slightly more just some machines can actually come in less than $1 million and then other machines can be in the low single-digit millions. Edward Jackson: And then going over to the kind of your revenue forecast and the development work you do, you're guiding to $10 million of revenue mix between development work and I assume some unit revenue recognition. Starting with the development work. You had $20 million of revenue with the U.S. Navy. If you kind of go through it, you rolled through about $5 million of that so far. So you've got about $15 million of that kind of left to work through. You got another, let's call it, $40 million or $50 million across other things that you think you can bring in. When we look at -- start with the older stuff, I mean, will you recognize a significant piece of that remaining $15 million in '26? How do we think about that? And then what would be the time line if you would, for the new revenue related to get these contracts and where you would start seeing it happen? And then kind of what are the milestones that you have to do to recognize that and get paid? Jon Panzer: There's a lot of pieces there. So remind me if I forget one of them. So the -- you're correct that most of the revenue that we project to earn this year would be from R&D services, although there will be commercial revenue from following commercialization of the very initial units that are early deployment units. And that part that is R&D services revenue is part of that $20 million roughly of R&D contracts that we have. Part of that we spent in 2024. Part of it last year, I think you're right, about $5 million spent so far. There is upside opportunity that just based upon the pace of our work. Some of that could roll into 2027 as well. The new contracts that we were talking about today, we plan to get those -- we hope to get those under contract and those will -- are really more kind of next fiscal year and really will provide us that runway and pathway into 2027 and beyond. See, again, the time line for those new contracts, again, we expect it to be kind of late in the year. And then on the commercialization side, the milestones, obviously, we want to get a lot of hours on the units that we have, get these initial early adopter customer units in the customers' hands, finished testing at our location, put them on customer sites. They have to meet customer specifications in terms of their operating capabilities. We mentioned UL certification has to be completed, and there's some steps around just our manufacturing processes and so forth that have to be optimized and repeatable and so forth. So there's a lot of steps, fairly well-defined things that we have to do, which we expect to get done over the course of this year. Does that catch everything you were asking? Edward Jackson: It did. And then on the 10 systems, I mean, I know 10 Systems it's a rough guestimate for what you think you'll be able to put out in the field during '26. Half of those are from the military. So I'm going to assume those are not like the boxes, if you would, that I've seen in new testing facilities, but a little more bespoke, let's call it, the remaining, will you recognize revenue on any of those? I mean I'm hard-pressed to see like if you're going to do 10 that -- and you have $10 million in revenue that you're going to recognize revenue on all 10 units that you're kind of circling in for kind of being put to customers? But would you recognize revenue on KARNO modules outside of the military [ during '26 ]? Thomas Healy: Sure. So maybe just to start off with the color of the units. So yes, about half of them going to military now. That is actually a split of some of them in at that 800-kilowatt module designed for going into the ship plus actually, just to your point, Ted, about the military will also be taking delivery of boxes as well units that are in a full 200-kilowatt enclosure, which is more focused on base deployment and prime power applications. So we're actually doing both with the military, which is pretty exciting. And then on the units, the remaining units, which are more commercial ones, some of those will be going out to customer sites deployed. They are paying for these systems, even though we won't recognize revenue right on the front end. They are paying for the systems. And then some of those units, a couple of them, we're also anticipating having them as units that we can -- as we were talking about bringing out the data center, showcase the abilities there, integrate into customer sites and really prove that application because as we look at '28, '29, 2030, there is so much growth happening in the data center space that we want to make sure that people will view us this year as a viable solution in that market. And so that's where it's important for us to showcase that. I'll then hand it over to Jon on how it works in terms of actually recognizing that early adopter unit revenue though. Jon Panzer: Yes. So just as an example of some of the early units that we expect to deploy initially here and some that are already built and operating. Once we have reached official commercialization, then we would expect to recognize revenue for those. There could be some that are still in the process of acceptance and so on that may slip outside of that. But yes, that's the point of commercialization that we can recognize revenue and the earliest ones that we deliver would be the prime candidates for that recognition right away. Edward Jackson: Yes. But just to make sure I understand. You will recognize some revenue. But when you talk about the 10 units, it's not 10 units that are going to flow through in terms of your P&L, it's 10 units that you're actually going to -- for a lack of a better term, you're going to ship them? They're going to be -- saying they might not have been accepted and revenue recognized... Jon Panzer: Yes, you're correct. And maybe just to decompose the revenue a little bit further, there's going to be services related to R&D services, so testing and engineering work, even stuff we contract out. And then the deliveries that Thomas just mentioned on full systems and 800-kilowatt system. And then what we would call commercial customers, the initial units that we're deploying now with our early adopter customers, those will turn into revenue once we've crossed the threshold of commercialization as well as making sure, individually on those contracts that we've met the contract -- the customer contractual requirements. Edward Jackson: And then my very last question because I've taken up more time than I'm allowed, I think. But with -- you're up to 175 kilowatts with regards to the KARNO now, Thomas. You've got -- you said as you've kind of gone through testing. I mean, it's part of the process of why you go through beta and everything else under the sun is -- you got more tweaks to do to get up to the 200 kilowatts. Can you take a little time and kind of talk about where the things are that you need -- that you've discovered that you need to revise and kind of where you are in the process to resolving those issues for lack of a better term. So that we can -- so that you can get to that 200-kilowatt goal? That's my last question. Thomas Healy: Perfect. All right. So yes, obviously, great progress in the quarter getting to that 175. We -- another core thing is we don't see it as fundamental architecture changes to get to the full 200 kilowatts. It's really about refinement. So to use an analogy, like this is a heat powered solution, right? And so it's almost like squeezing a balloon. When you go -- contain the heat in one area like squeezing a balloon, it wants to expand and go out other areas. And so we talked about earlier in the year of '25 the regens, that's really -- that fine mesh, the thermal battery, we saw a deficiency there. Once we solve that, it was like squeezing the balloon in that area to then it showcased some other areas we needed to work on. So to give examples, those are -- over the past quarter, we've been working on a new cylinder wall sleeve that has better thermal properties, so it doesn't let heat transfer through as easily. We're working on a new piston design that reduces the amount of radiation. So heat that can actually flow through it as well as smaller things like improved thermal blankets around the solution that keeps heat in better. Some unique materials that can stop heat from transferring from one part to the other. All this, as noted, it's small changes. Some of the things that I mentioned just now have already been rolled in. That's what got us to those improved power levels. Others are at a stage where we just got the first batch of these new cylinder wall, sleeves in just this past week. Pistons, we expect to get those in, in the coming weeks. And so we are in the middle of still evolving that, but tying this all back together, it's important to note, like we're at the point where the power that these systems are producing now is sufficient to get the initial units out there. And so that is the prime focus right now. And then in parallel, we'll work on continuing to get up to that 200 kilowatts. So hopefully, that adds some helpful color. Operator: Our next question comes from Martin Malloy with Johnson Rice. Martin Malloy: Just wanted to ask about the control systems that you mentioned. Is that something you're developing internally? Or could we see some sort of partnership there? Thomas Healy: We've really taken the approach of developing all the software in-house. So it is Hyliion's IP, the design developed in-house by Hyliion and we see this as a key part of our solution and one that -- I didn't mention this in Ted's last question, but we even see some software improvements that we can make that will even squeak out some additional kilowatts out of the system. So with all that in-house solution owned by us, where we will integrate with others for site integration, right? So we will not be the primary controller on a site. That is something that we will integrate with other site systems or others EV charging pedestals, things like that and then let them operate it. It is key to note though, we do have the ability to integrate into other DC architectures. So think about like a battery pack, you can plug a battery pack right into the KARNO power module, and we can communicate directly with that and even control the battery. And so we see it as a very advanced software and one that customers who have been on site have actually seen it as a little bit of like a Tesla moment where Tesla was the first to really put a large screen and display into their cars. We're -- believe we're one of the first to really put a large screen and a lot of information that a user can look at real time on the actual power module and get feedback both at the unit or through the cloud. Jon Panzer: Yes. We've got a very strong software and controls team and they were -- many of them were some of our top people back when we had our powertrain division. So we've been really able to leverage those -- skill set of those people. Operator: [Operator Instructions] There are no further questions at this time. I will now turn the call back to Thomas for closing remarks. Thomas Healy: Thank you, everyone, for joining today's call. Apologies again for the technical difficulties at the start there, but glad we were able to get that resolved. And just setting the stage again for 2026, this is a year that we're focused on getting units out there into the field, getting those customer deployments out there and really showcasing the units working. We started the deployments of early adopter units last year, continue that this year and get units out into the field. And then as we look at the years ahead, I mean, a lot of exciting opportunities growing, not just in prime power, but then the other 2 that we mentioned heavily on this call with the military -- expanding upon military contracts and then also the data center space. So we look forward to hopefully sharing further good news in those 2 areas throughout this year. Thank you again for joining the call. We look forward to chatting again on our next earnings call. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Kenny Green: Good day to all of you, and welcome to Allot's conference call to discuss its results for the fourth quarter and full year 2025. I would like to thank Allot's management for hosting this conference call. [Operator Instructions] As a reminder, this conference call is being recorded. If you have not received the company's press release, please check the company's website at www.allot.com. With me today on the line are Mr. Eyal Harari, CEO; and Ms. Liat Nahum, CFO. Following Eyal's prepared remarks, we will open the call for the question-and-answer session. Both Eyal and Liat will be available to answer those questions. You can all find the highlights of the quarter, including the financial highlights and metrics, including those we typically discuss on the conference call in today's earnings press release. Before we start, I'd like to point out the following safe harbor statement. This conference call may contain projections or other forward-looking statements regarding future events or the future performance of the company. Those statements are early predictions and Allot cannot guarantee that they will, in fact, occur. Allot does not assume any obligation to update that information. Actual events or results may differ materially from those projected, including as a result of changing market trends, delays in the launch of services by Allot customers, reduced demand and the competitive nature of the security services industry as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission. Also, the financial results in this call will be presented mainly on a non-GAAP basis. Allot believes that these non-GAAP financial measures provide more consistent and comparable measures to help investors understand Allot's operating performance in the quarter for all the data, please refer to the financial tables published in the results press release issued earlier today, which also include the GAAP to non-GAAP reconciliation tables. And with that, I would now like to hand the call over to Eyal Harari, CEO of Allot. Eyal, please go ahead. Eyal Harari: Thank you, Kenny. We delivered a strong fourth quarter, concluding a year of accelerated revenue growth, significant expansion in cybersecurity ARR and solid improvements in profitability and operating cash flow. In 2025, we returned to double-digit year-over-year revenue growth, reaching $102 million, up 11% versus 2024. We reported our highest level of profit and cash flow in over a decade, reflecting a significant step-up in operating leverage and demonstrating the scalability of our business model. Our primary driver of growth, our Cybersecurity as a Service offering continues to scale rapidly and is increasingly driving the quality and predictability of our revenue base. As of year-end 2025, the ARR was up 69% year-over-year, and we continue to experience very strong traction. Recurring revenue continued to grow as share of total revenue and increased to 28% of revenues for the fourth quarter, underlying our transition towards a structurally recurring and more resilient revenue model. For the full year, recurring revenue representing 62% of total revenue, significantly enhancing our revenue visibility. We ended the year with the strongest balance sheet in many years with over $88 million in cash and no debt, providing strategic flexibility to invest in growth initiatives while maintaining financial discipline. Overall, our results illustrate the success of our go-to-market focus and the power of our Cybersecurity-first strategy. At the start of 2025, I laid out Allot's strategy for renewed growth. We are focused on being a cybersecurity-first company operating globally under a unified business unit with a proven synergetic capabilities of cybersecurity and network intelligence. Our success in 2025 demonstrates that this strategy is working. We believe our integrated cybersecurity and network intelligence solutions uniquely position us within the service provider ecosystem. Our subscription-based cybersecurity offering as a service generates recurring monthly revenue and provide us with good visibility. The pipeline of new potential business continues to be strong, and our offering is gaining broad traction. The growth from cybersecurity as a Service offering is built on 4 pillars. First, we constantly are working to expand the number of CSPs and telcos that we work with to launch cybersecurity protection. Every new CSP we partner with immediately expand our addressable market as it brings us a large new customer base. We recently reported the Compax Venture selected us as a cybersecurity partner, enabling its brands and community-based MVNO customers to differentiate their services with built-in cybersecurity powered by our solution. This partnership significantly enhanced the value proposition that these MVNOs offer to their customers and opens for us another scalable avenue of recurring revenue, extending our reach into new customer segments and use cases. The second pillar, after launch, we expand our services to new end user segments at the CSP or telco, for example, from broadband to mobile customers. Third, we focus on growing penetration of our cybersecurity protection services among our end users by partnering with the customer to market the solution and ensure those subscribers understand the significant added protection they will get at the marginal increase to the monthly bill. And finally, fourth, we look to upsell new applications and product to customers. As part of this strategy, we recently released our off-net solution, an example of a product with significant value added because it ensures that the end user can remain connected and protected to the CSPs or telcos even when the end user is not on their network. These innovations enable our customers to introduce high-tier security plans to their subscribers, increasing ARPU and driving incremental recurring revenue for both the operator and Allot. We have already upsell this product to both existing and new customers. Looking ahead to 2026, as cybersecurity threats continue to intensify, we remain focused on protecting the consumer and SMB markets, segments that we believe remain underserved by traditional security solution. Our ambition is to evolve from providing 360 degrees protection of data to delivering 360 degrees protection of the digital life of the consumer. This expands security beyond networks and devices to the individual encompassing identity protection, scam prevention and AI-driven security services. This vision reflects how we see consumer cybersecurity evolving over time and is supported by a pipeline of new AI-enabled products that we have been developing for over a year, strengthening our competitiveness and long-term differentiation. AI is fundamentally reshaping the cybersecurity landscape. Attackers are increasingly using AI to operate at greater scale, speed, precision and personalization. At the same time, enterprises and consumer are rapidly adopting AI-driven application, introducing new and often unmanaged attack surface. This shift requires rethinking of traditional security approach. AI-enabled world must be proactive, seamless embedded into the everyday digital usage and require minimal to no end-user configuration. Our Cybersecurity as a Service platform already delivers real-time zero effort protection, providing scalable, always-on security that evolves in step with rapidly advancing AI-driven threats. In parallel, we are actively leveraging the latest AI technology to further enhance our solutions, addressing current risk while anticipating emerging AI-powered threats. The significant global investment in AI infrastructure is creating a growing need for advanced cybersecurity protections, and it is a meaningful opportunity for Allot. Within the SMB segment, we are executing aggressively to deliver more competitive end-to-end security solutions. We believe the small and midsized business market remains underserved in the cybersecurity landscape and that delivering protection via the network is the most effective approach. We now offer immense protection beyond the business network with OffNetSecure, have launched Firewall as a Service, which is already live and deployed, and we introduced DDoS protection for SMBs, enabling protection of inbound traffic, not just outbound. In addition, we expanded into identity with domain-level identity theft monitoring, helping SMB protect the digital identity of all the users across the organization. Together, these capabilities bring enterprise-grade security to SMB through a simple cloud-delivered model. Today, our Smart product is sold as part of our unified cybersecurity first platform with its best-in-class technology continue to drive strong demand. We are executing on recently won projects, including SG Tera redeployments and upgrades while continuing to invest to maintain our technology leadership. Interest in the SG Tera platform remains strong, supported by the healthy pipeline from both existing customers upgrading and new customer wins. We were recently selected by a Tier 1 telecom provider in Asia in a multiyear deal worth high single-digit millions to deploy our network intelligence solution. This deployment will enable the operator to gain detailed application level visibility into network traffic and extract actionable insights. This follows our largest customer win in over 5 years, a tens of millions of dollar agreement signed last year with a Tier 1 operator in the EMEA region. The deals include a long-term recurring maintenance and support component, underscoring the strength of our cybersecurity first strategy. Together, these 2 deals provide increased revenue visibility with Smart product revenues expected to be recognized in 2026 and 2027. Looking ahead, we have a pipeline of solid opportunity for Smart. While SECaaS is our primary growth engine, the recent multimillion-dollar project wins reinforce Smart's role in providing multiyear revenue visibility and supporting the overall profitability with potential upside depending on the project conversion timing. We continue to invest in marketing and sales. These investments are focused on strengthening our go-to-market capabilities, supporting new product launches and driving demand across both service providers and enterprise segments. As part of this effort, we will be participating in major industry events in the coming months. In a few weeks, we will attend Mobile World Congress in Barcelona, where we plan to meet with many of our existing and new potential customers and partners and showcase our latest product and services. We will also participate in the RSA Conference in March, one of the leading global cybersecurity conferences. At RSA, we will demonstrate our cybersecurity solution and capabilities. Our goal is to generate increased traction with new potential customers interested in our Cybersecurity as a Service offering. In summary, we are pleased with our 2025 performance, highlighted by the strong fourth quarter, double-digit revenue growth, improved profitability and cash flow and a significantly strengthened balance sheet. We believe 2025 mark for Allot a structural transition to a more scalable and profitable growth model, driven by our differentiated security first strategy and expanding recurring revenue base. Given the continued growth in our cybersecurity business, strong visibility and solid backlog, our momentum is set to continue in 2026. We expect SECaaS to continue delivering strong double-digit ARR growth, increasing its contribution to the total revenue and driving overall revenue growth in 2026 to between $113 million and $117 million alongside continued profitability improvements. Overall, I'm increasingly optimistic about Allot's future and excited to continue executing on our cybersecurity first strategy. And now I would like to hand it over to our CFO, Liat Nahum, for the financial summary. Liat Nahum: Thanks, Eyal. Revenue in the fourth quarter were $28.4 million, up 14% year-over-year. Revenue from our growth engine, Cybersecurity as a Service were $8.1 million in the quarter, up 70% year-over-year and comprising 28% of our revenue in the quarter. Cybersecurity as a Service ARR as of December 2025 was $30.8 million, up 69% year-over-year. For the year, total revenue was $102 million, up 11% versus $92.2 million last year, with Cybersecurity as a Service up to $26.8 million, representing 26% of our overall revenue. We finished 2025 with more than 60% of our total revenue being recurring revenue. I will now discuss the non-GAAP financial measures. For all our financial results, including the GAAP financial measures and the other various breakdowns of our revenue, please refer to the table in our results press release. Non-GAAP gross margin in the quarter was 71.9% compared with 69.7% in the fourth quarter of last year. Non-GAAP gross margin for the full year 2025 was 72% compared with 70.6% for the full year of 2024. Non-GAAP operating expenses were $16.8 million compared with $15.6 million in the fourth quarter of last year. Non-GAAP operating expense for the full year of 2025 were $64.5 million, similar to $64.4 million for the full year of 2024. We reported Q4 non-GAAP operating income of $3.6 million, up 101% compared with $1.8 million in Q4 2024. Non-GAAP operating income for the full year 2025 were $8.9 million, a significant improvement compared with $0.6 million for the full year of 2024. Allot had 490 full-time employees as of December 31, 2025. Non-GAAP net income was $4.1 million in the quarter or a profit of $0.08 per diluted share, up 105% compared with $2 million in Q4 2024 or a profit of $0.05 per diluted share. Non-GAAP net income for the full year 2025 was $10.9 million or a profit of $0.23 per diluted share compared with $1.6 million in 2024 or $0.04 per diluted share. We reported $8.1 million in positive operating cash flow in the fourth quarter and $17.8 million positive operating cash flow for the full year of 2025. Significantly improving our liquidity position and demonstrating the cash-generating nature and potential of our business model. Cash, bank deposits and investments as of December 31, 2025, totaled $88 million versus $59 million as of December 31, 2024. As of year-end 2025, Allot has no debt. Looking ahead to 2026. As mentioned in previous quarters, our non-GAAP gross margin depends on the specific product mix sold in the quarter. Our expectations for gross margin in the coming year is in the range of 70% as it has been in the previous years. Significant spending on AI data centers has created a sharp increase in demand and supply constraints for key components such as memory and servers. While we are actively managing our supply chain and cost structure, we expect this industry-wide trend to contribute to cost of goods pressure in the near term. As for operating expenses, we expect an increase in our sales and marketing expenses as we invest in sales and building our pipeline for the next 3 years. We also expect a modest increase in R&D expenses as we continue to invest in developing our products. In addition, since the beginning of Q3, the U.S. dollar weakened significantly versus the Israeli shekels. Given the fact that our headquarters are in Israel, we have significant operating expenses in shekel. Although we are hedging part of that expense exposure for 2026, the negative effect of this weaker dollar has been included in our profitability projections for 2026. Despite this FX and cost of hardware challenges, as Eyal noted, we are seeing strong traction with our security-first strategy that integrates cybersecurity and network intelligence, and we are forecasting double-digit revenue growth in 2026, driving revenues to between $113 million and $117 million. We also expect to drive continued profitability improvement. That ends my summary. Eyal and I are now happy to take your questions. Operator: [Operator Instructions] The first question is from Jonathan Ho from William Blair. Jonathan Ho: Congratulations on the strong results and guidance. I just wanted to see if you could give us a little bit of additional detail on maybe what drove the strength in the SECaaS business this quarter as well as any additional detail on your comments about robust double-digit ARR growth in 2026. Is there any way you can maybe triangulate that for us in terms of what that ARR growth could look like? Eyal Harari: Thank you, Jonathan. The results in the quarter for the SECaaS ARR were definitely strong and above our expectations. This was based on the very good adoption rates we see for the security services we already have launched with our customers. We announced in the last 4 quarters, multiple wins between Verizon and Vodafone and adding the new wins in MasMovil in Panama and additional services that were launched with new and existing customers. This expanded our addressable market. And we see that the traction for the security service continues to be strong and therefore, deliver this increased ARR number and revenue. As for next year, we are just in the beginning of the year. We are still seeing that the demand is very high for our security services. And we are expecting, as we said, robust double-digit growth, which means we are -- while our revenue for the total company is double digit in about 13% to 14% in the midpoint, we are expecting the SECaaS ARR to be much higher than that. While we don't have exact number to share in this stage, we believe it will be significantly strong. And this is why most of the growth for the year will come from the SECaaS ARR. The SECaaS ARR, just as a last comment, as you saw, was just passed 1/4 of our total revenue. So it starts to be affecting our total revenue with that increase. Jonathan Ho: Excellent. And then just in terms of your opportunity with the MVNOs, can you talk a little bit about what that could mean in terms of unlocking additional total addressable market? How long it takes for that partnership to maybe translate into revenue and bookings? Yes. Just help us with a little bit more detail there. Eyal Harari: So I will start with the general comment about the MVNO market. We identified that our cybersecurity as an add-on is a unique value proposition. While we started focusing on the MNOs, the network providers, we identified that if we target MVNOs that are coming with a unique business proposition, this might make a lot of sense because they are typically looking for a differentiator. And we are working to offer different MVNOs to add cyber to their base package. And by that come with a more secure network proposition. They are typically not differentiated by the network quality or the big network provider brand like the Verizon or the Vodafone. And we believe cybersecurity could be a nice differentiator. The partnership with Compax, which is an enabler to an MVNO launch is around embedded our security in their infrastructure, which makes it easier to the MVNOs to launch new services. We are currently targeting 2 new MVNOs that are about to launch during Q2 that the cybersecurity will be embedded in their offering. It's hard to know the exact influence because it's -- our success is relied on their success. We know they are targeting into going to millions of new subscribers, and therefore, it could be significant, but we really are dependent on their success in the market, and it's very hard for us to assess it internally at Allot. So overall, we believe it's a new seed we planted that might evolve into something bigger over time. It's not going to influence in the next couple of quarters. But over time, with their subscriber growth and their new network launch, this is another addition to the mix. And we are hoping that following the successful 2 new MVNOs, we will be able to continue to market to additional MVNOs across the world. Operator: The next question is from Nehal Chokshi of Northland. Nehal Chokshi: Congrats on the great results, fantastic cash from operations. On the SECaaS ARR, you've already given a lot of color here on the qualitative drivers. Could you remind us a year ago, you, I believe, described also in a somewhat nebulous way your SECaaS ARR expectations of double digit. And I guess this is additional characterization from robust ARR -- SECaaS ARR growth. So the first question here is, is the wording intentionally more positive than a year ago? Eyal Harari: I don't want anyone to speculate. We do see good demand for the solution. We are giving the visibility we have as we shared before, we are dependent on when we will bring the new customer wins, when there's new wins will be launched and go to market and the timing of those launches are not always in our control and also different marketing campaigns that our customers are having. We believe that the overall strong growth will continue, and this is reflected in our overall top line growth. And we will share more visibility as the quarter progress, and we have more certainty and clarity on service launches. I would say that a significant part of our growth is coming from services that are already launched and already in the market. And we don't see any reason why this should not continue to drive strongly. Nehal Chokshi: Okay. And then as far as the sequencing of incremental ARR as we go through calendar '26 by quarter, what are your initial thoughts on what that profile would most likely look like? I understood that there's a lot of uncertainty still. Eyal Harari: So again, we are looking for strong double digit. If you compare to where we are and you see the incremental growth quarter-by-quarter, you can see that we are progressing very well. And even if you just take Q4 number, compared to where we were in Q1, you'll see an increase. We believe that the incremental revenue and also incremental ARR to be in the same range. But as mentioned, this all depends on the go-to-market campaigns of our customers, which can bring us to even higher numbers as we see some strong campaigns going on in the market for the beginning of the year. And we will know more once we see the results coming in from the campaigns that are undergoing now and to see how they are successful. On the first quarter, we are not -- we are building mostly on what we already have launched. And this is the shorter-term growth as we described in the different growth pillars. And when we go down into the year, we are relied on additional service launches that will drive additional growth to the second part of year. So overall, we are very confident about our SECaaS opportunity this year. Nehal Chokshi: Okay. Great. Last question for me is that in the beginning part of your prepared remarks, you talked about a new SKU already being adopted by existing customers. Can you just give a little bit more detail around that? Eyal Harari: I mentioned the OffNet product that last quarter, we announced the first customer win since we are continuing to work with both our existing and new customers to add this OffNet security component. While our key differentiator is that our security is embedded with the network, we identified additional demand for customers that they want to keep the same best-in-class protection even when they are not on the home network of their customer or their carrier. So if I am now moving from a cellular connectivity to a WiFi, I want to make sure that I don't lose the same high level of protection. And this is where the off-net protection step in. This is an increased value that helps our customers to increase the revenue from the security package. It's like a higher deal of security. And by that is another revenue generator for Allot. As I also added, we are adding additional new products that are being launched as we speak. We are going to share more information as part of the product launch campaign to further increase and add more cybersecurity protections and capabilities that will add into our upsell, cross-sell growth opportunity and drive the shorter and midterm growth for the company. Operator: The next question is from Shaul Eyal of TD Cowen. Shaul Eyal: Congrats on completing a very solid year. Eyal, one of the topics [indiscernible] in recent weeks is whether AI is hitting software. And in that context, the more resilient cyber arena was not immune to sharp stock declines, although a lot shares showed great stability. Talk to us about what your customers are telling you in that context as you drive a different model than other pure security companies? And I have a follow-up. Eyal Harari: Thank you, Shaul. So we do see that AI is increasing the awareness of the cybersecurity threat. I remind we are focusing on the lower-tier customers, the consumer and the SMBs that are typically more open market for cybersecurity. So most of us as consumers and small business owners are still very much unprotected and the awareness is much lower compared to where other enterprise customers are. We see that it's easier to explain consumers that cyber threat is real and the whole buzz around AI and with all the good that it brings, but also the cybersecurity hazards that are created by it. This is something that we believe overall increase the demand and helps carriers to sell more cybersecurity protection in Israel, we see some commercial ads that are targeting for this audience. And this is why we believe that this will drive our demand for our product. And the beauty is that it comes from the network, and therefore, it's always on embedded in the solution and provide you a more secured service. Shaul Eyal: Eyal, maybe talk to us about progress at Verizon, maybe as an example. And how do you envision any potential upsells you haven't seen previously? In other words, how long does it take you to penetrate one of those CPSs and then start and upsell new capabilities that, for example, were not under the master agreement. Just curious. Eyal Harari: So obviously, working with CSP is a long sales cycle. The beauty is that once you are working with the CSP and once you show you are a trusted partner and you already have the contractual framework, the sales cycle is typically shorter. And we definitely demonstrate that in past expansions, even with Verizon that we, in the past -- in the middle of last year, announced the expansion from -- moving from the protecting the fixed wireless access to protecting the mobile business customers. Without getting into specific opportunities with specific customers, I would say that definitely those new additions of the OffNet, as mentioned, and the other new cyber protection engines that I shared on the prepared remarks, these are creating opportunity with our installed base to further enhance our revenue and ARR from those customers. Operator: The next question is from Jonathan Ruykhaver from Cantor Fitzgerald. Jonathan Ruykhaver: So the question I have -- the first question I have is just around the opportunity you're seeing from Sandvine. From what I've read, it seems like Sandvine has emerged as a new entity. It seems like the focus might be more enterprise, cloud and MSP relative to Tier 1 carriers. So I'm just curious if you're seeing any incremental change as it relates to share gains vis-a-vis Sandvine? Eyal Harari: In general, we are not commenting on competition. I would say that -- most of our focus, as you see in our plans and results is around the cybersecurity. So this is where we are mainly putting most of our R&D efforts and our strategic investment. We do see, as mentioned before, that our Smart product line is performing very well. As mentioned in my prepared remarks, we added another high 7-digit new agreement during the last few months that is adding to our backlog of opportunities around the Smart that give us good visibility into '26 and '27 to continue have the Smart product line as important contributor to our revenue growth and profitability. And we continue while executing well and capturing the opportunity in the network intelligence space, we continue to grow and invest strongly into the cyber and continue to grow strongly in this space. Jonathan Ruykhaver: Yes. No, that -- I understand that completely. It just -- it seems to me, obviously, the Smart business is still pretty meaningful overall. And as it relates to AI as a potential disruptor, I am just curious when you look at resources and where you're going to invest in the future and just how does that coincide with the potential increase in network traffic that could be driven by AI. It seems that, that could be a benefit for the SG-Tera III platform. Eyal Harari: Yes. Definitely, AI adds some network traffic in the AI data centers, and we are looking on ways how this adds more demand for traffic intelligence like giving more visibility on the AI use cases that are implemented, getting the right priority to make sure AI critical workloads are getting the right quality of service. And this is why we believe part of the Smart product line should add more capabilities that are in this space. Jonathan Ruykhaver: Yes. Okay. That makes sense. And then the final question, and you've alluded to this already, but from where I sit, it seems like being deployed across the telco infrastructure really has a lot of advantages as it relates to the traditional endpoint deployment for most consumer cyber vendors today. And I know you've talked about new capabilities on the cyber side coming out. Can you give us any more color on timing and specific products? It seems like AI-driven malware, phishing scams, identity theft. It's all a network native problem that you seem to be well addressed to -- well positioned to address. So any other details on that? Eyal Harari: Yes. So one of the things I mentioned before that we see that consumers are looking for a higher level of protection, not only from the network threats, but more from, as you indicated, fraud-related concerns. And part of our innovation and where we are going to add more value is how we can further enhance our protection around identity, how we can use the network data to identify fraud. For example, if you are trying to go into your bank account and suddenly you get a fraudulent domain like phishing attempts or that becomes today much easier to create. And we see that with AI, you create a new domain like instantaneously. And this is something we want to add as additional level of protection to our customers. Jonathan Ruykhaver: So from a timing perspective, are these opportunities that become monetizable as we look into 2027? Eyal Harari: Yes. We are going to launch those capabilities during 2026, the first batch of capabilities. And therefore, we believe this will start to contribute to our revenue, some of them even in '26 and some of them into 2027. Operator: The next question is from Matthew Calitri of Needham & Co. Matthew Calitri: This is Matt Calitri over at Needham. I wanted to stick on the fraud point for a second here. And I was wondering if you guys have any anecdotes you can share on what end users are seeing in regards to the rapid evolution and increased occurrence of AI-generated fraud attempts and how Allot's technology is keeping pace with these more sophisticated attacks. Eyal Harari: Yes. So I don't know if there is, again, a specific anecdote, but as pointed before, we see an increased sophistication and celerity in how often you are encountered with sophisticated impersonation when it's so easy to create new application and it's so easy to create new websites, it's easier for attackers now to go and target you with those fraudulent activities. While in the past, maybe it was done for larger enterprise because it required a lot of efforts to implement. We see that today, it's so easy that also all of us as consumers and small businesses are under attack. What we are trying to do is leverage the unique visibility we have to the network, the fact we see the whole network traffic. We see new network patterns that are happening. And by that, we have -- we are well positioned to identify those frauds in a faster and more accurate way and give this level of protection to our customers. Matthew Calitri: Got it. Very helpful. And then are you seeing any acceleration in pipeline progression? And specifically, I'm wondering if you're hearing from CSPs that they've either lost deals because they don't have a security offering or they've had customers get breached and need more protection there? Anything in that regard would be helpful. Eyal Harari: Yes. We definitely see around the globe, different occasions of cybersecurity events that affect dramatically the carriers around the globe. This usually gets front page on this -- on the country. And we all see that the risk on the consumer is higher, and we see different use cases and events that are populated. Now we are seeing that cybersecurity services are becoming more and more popular but still a lot of -- there are still a lot of CSPs in different countries that are not yet offering that. So we do see some countries which we start to work with and then some other carriers also want to add this service. We see regions that in a certain country, there is no offering, and they are looking to now get also this as cybersecurity becomes more important. So overall, the awareness for cybersecurity for consumer market is getting higher. And SMBs are -- weren't so concerned years ago, now are being more and more concerned with this and asking for higher level of protection. For example, we launched a new firewall as a service. Firewall is very well known and commoditized in the enterprise space. And we see that now also small businesses want to get the same level of protection from the incoming traffic, not only making sure their outbound is protected. Adding to that, we are also looking to add DDoS protection based on the assets we have from the Smart product line that we are introducing as part of the SECaaS. So small businesses could get higher care of protection with the higher risk evolves. Operator: The next question is from Rory Wallace of Outerbridge. Rory Donald Wallace: I was wondering if you could comment on book-to-bill in the Smart business in 2025. I know you mentioned securing the additional high single-digit millions order from an APAC customer in Q4 on top of the tens of millions order earlier in the year. So is it safe to assume that the book-to-bill was fairly positive? And if so, maybe you could contextualize the guidance for 2026 and what you're baking in as far as how much of the pipeline converts to revenue and backlog? Eyal Harari: So the book-to-bill we have is way over 1 as we announced during the year. Starting the year, we announced multiple new accounts of multimillion dollars, then further updating about the tens of millions of dollars and then another new opportunity that we talked about with high 7 digits. All of that is accumulated to many millions of dollars that are still not recognized and our backlog is in a very good shape. And as we start '26, we have very good visibility with the mix of those new wins that adds to the backlog, adding to the recurring revenue that we ended the year of north of 60%. So we are very well positioned to the year, and this is why we guided for continued accelerated double-digit growth on the total revenue for the company. Rory Donald Wallace: Got it. And with the new product launches, for example, the Firewall as a Service and even identity protection at the domain level, which you mentioned, I believe, for the first time today, how is Allot specifically well positioned to sort of modularly add on these additional products for SMBs and consumers? And is this something that's allowing you to stand out in current RFPs or bids with new carriers that see that you can offer more than just a simple anti-malware product, but you can actually bring this one-stop shop solution. Eyal Harari: So Rory, it's both. It's -- first of all, when we are now going into new customers, our offering in cybersecurity engines is more enhanced and we can meet more and more requirements and demand. Part of our strategy was always to this 360 degrees protection. So in the years of product innovation, we build protection from the network, from the WiFi routers and from the DNS. We added the OffNet protection, and we added more capabilities on those different touch points. So firewall, DDoS, identity are different additions that make our portfolio more robust and more attractive when we enhance with new customers. But as you pointed, it's super critical for our existing customers. We have more than a dozen of customers that contribute significantly into our ARR today. Large Tier 1 customers that are offering our current services. And all of those additions are an easier, quicker wins to add on top of the service because we already have the relationship, we already have the agreements. We already have the success in the market with the current service. And they like us looking to see how we can make more money together. And all of those additions are going to support the growth in the coming year. Rory Donald Wallace: Got it. And then with the vision on the consumer side and how you plan to sort of extend capabilities beyond just data protection to digital life cycle. Could you maybe elaborate a little bit on how you see that unfolding? Eyal Harari: Yes. So if we take the value of the networking as the anchor and the base of our protection, but once we are already offering a solution to the customer and with AI coming and creating those additional worries and threats, we want to have a wider and more robust protection to all of these capabilities or requirements. And identity is one example. So even if you are -- your identity is transverse in the network and exposed from different websites and different applications, while this is not a network security, that we are providing. We believe that for the same customers that have already sold from the CSP new service, they want to see and hear how we can protect from identity tests and how we can help them with fraud, how we can help them with increased phishing attempts. We all get those messages. And with the current technology, there are still a lot of concerns from customers. And we are trying to get and answer this demand and create this upsell opportunity for us. So networking is our anchor. This is our secret sauce. This is where we see a lot of the data. And we are taking this not only to protect the data part of the customer, but the whole identity, the whole experience and try to minimize all the threat that he has in the digital environment. Rory Donald Wallace: Got it. And then with the near-term environment, you mentioned kind of the incremental SECaaS ARR that we saw in Q4 of around $3.3 million. That's sort of a good level to use in Q1. And you mentioned promotional activity and go-to-markets that are going on. It seems like Verizon, in particular, is really leaning into the FWA business Internet security product. And is that something that you think could bode well, I guess, for the SECaaS business this year? Eyal Harari: Yes. We see a lot of potential and demand for the SECaaS. As mentioned, our existing customers are promoting the services in different campaigns without specifying which customer is doing what. And as you saw the incremental revenue and incremental ARR this quarter was very strong, we don't have any reason to assume it's going to be softer in the coming quarters. We still see a lot of potential demand coming from our base. And on top of that, we want to add more upsells and cross-sells with new customer launches that we are working -- our sales team are working to add new CSPs to the mix and upsell into existing CSPs, those new cyber protection. So we have all the reasons to believe that the SECaaS growth will continue to be very strong this year. And we are working to continue to ensure that it's going to be a multiyear opportunity and some of our investment is already to secure additional very strong growth into following years. Rory Donald Wallace: Got it. And sorry, I'm running on here, but one more question just on the cost side. Liat mentioned the DRAM shortages impacting margins, which I think is no surprise for people in the networking space. With the Smart gross margins at around 70%, is it safe to assume that the -- I guess, the percent of the BOM of the product that's DRAM is likely not too material. And so this is maybe a few hundred basis points of margin headwind? Or is there any way that you could help us think a little bit more about gross margin and the DRAM impact in 2026? Eyal Harari: Liat? Liat Nahum: Yes, sure. So in general, as we said, we factored some of the cost constraints that we see around the hardware due to the demand and the constraints that we see with AI and specific chips and related items. We are still forecasting the 70% gross margin. And as we also stated, SECaaS is becoming more and more material as a percentage of our revenue. So of course, it also compensates. So we don't expect to be on the lower ranges like previous years, still in the range of 70% factors in those constraints as we currently know [indiscernible]. Rory Donald Wallace: Got it. Eyal Harari: Just to add to this, Rory, we still look on -- as you saw in the prepared remarks, that our profitability will continue to improve. We are seeing that while this external pressure is there, there is an opportunity for -- some of it will be to increase the price with the customers because we cannot control the whole price of the supply chain. And some of it is going to continue to improve because of the SECaaS, as Liat mentioned, that is coming with higher margin, and this goes into a higher portion of our total revenue. So with all this pressure, we are still looking for expansion of our profitability. And with the growth that is expected, both top line and bottom line will improve very positively. Rory Donald Wallace: Understood. So it's more of an acknowledgment of the DRAM cost, but not a warning that it's going to significantly hinder the progress. Well, I think you -- great job with the results in the call. I think you really -- you laid out the vision here for why a lot is both the traffic management and security capabilities really play into the current environment and how AI is a force multiplier for the hacking side and requires that protection on the SMB and consumer side. And I think also talked a lot about how Smart is benefiting. So in light of the volatility in the stock today, would just encourage you and the Board to think about having a share buyback authorization to take advantage of days like today, I think with $88 million of net cash and $18 million of cash flow in 2025. You're more than adequately capitalized. And as we know, markets can be volatile and irrational in the short term. So just few steps from a long-term committed shareholder. Eyal Harari: Thank you Rory, noted. Operator: There are no further questions at this time. Allot's replay will be available on Allot's website in the next day. Thank you for your participation. You can go ahead and disconnect.
Operator: Good morning, and welcome to ODDITY's Fourth Quarter 2025 Earnings Conference Call. Today's call is being recorded, and we have allocated time for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Maria Lycouris, Investor Relations for ODDITY. Thank you. You may begin. Maria Lycouris: Thank you, operator. I'm joined by Oran Holtzman, ODDITY's Co-Founder and CEO; and Lindsay Drucker Mann, ODDITY's Global CFO. Niv Price, ODDITY's CTO, will also be available for the question-and-answer session. As a reminder, management's remarks on this call that do not concern past events are forward-looking statements. These may include predictions, expectations or estimates, including statements made about ODDITY's business strategy, market opportunity, future financial performance, customer acquisition costs and potential long-term success. Forward-looking statements involve risks and uncertainties, and actual results could differ materially due to a variety of factors. These factors are described under forward-looking statements in our earnings press release issued earlier today and in our most recent annual report on Form 20-F filed with the Securities and Exchange Commission on February 25th, 2025. We do not undertake any obligation to update forward-looking statements, which speaks only as of today. Finally, during this call, we will discuss certain non-GAAP financial measures, which we believe are useful supplemental measures for understanding our business. Additional information about these non-GAAP financial measures, including their definitions are included in our earnings press release, which we issued today. I'll now hand the call over to Oran. Oran Holtzman: Thanks, everyone, for joining our call today. 2025 was a strong year for ODDITY. We delivered record financial results with revenue, adjusted EBITDA and adjusted EPS all ahead of our plan. Revenue increased 25% to a record $810 million. We delivered record adjusted EBITDA of $163 million, representing 20.2% adjusted EBITDA margin. Across the year, we were able to once again raise our financial outlook every quarter on revenue and profit, and this is despite experiencing challenging user acquisition costs in H2 that drove an increase in advertising spend. Our strong and profitable repeat rates allowed us to once again deliver results ahead of our plans. And we accomplished all of this while investing heavily in our future. Notably, this year, we successfully launched our third brand, METHODIQ, which expands our reach into the medical grade space where we see enormous potential. In addition, we continued our ongoing investments in ODDITY LABS in our tech infrastructure as well as new products and new brands. We believe that our powerful platform, brand and technology, combined with our growth investments, create long runway for us to grow in a big, attractive and profitable category, where we are well positioned to outrun our competition. We finished the year with strong balance sheet position with $776 million in cash and cash equivalents. Even as we work tirelessly to address what we believe is a near-term dislocation in our user acquisition cost, there is no change to our long-term vision, strategy or our commitment to growth. First, the consumer immigration online where our brands maintain leading positions. One of the best indicators of our business health is our very strong repeat sales. In 2025, approximately 70% of ODDITY's revenue came from repeat sales. Customer cohorts repeat behavior remains very strong and continues to increase. 12-month net revenue repeat rates for our 2024 cohort of first purchases increased from the 2023 cohort and remained over 100%. We believe these are outstanding repeat metrics compared with other direct-to-consumer companies and reflect the health of our brands, the quality of our products and the high satisfaction from our customers. Moving to our brands. IL MAKIAGE grew revenue low double digits in 2025 to approximately $560 million. IL MAKIAGE Skin was a highlight as planned and finished the year at approximately 40% of IL MAKIAGE brand revenue, expanding from around 30% of brand revenue in 2024. The rapid success of IL MAKIAGE Skin since its launch in 2022 demonstrates the power of our platform and our ability to leverage our user base and technology to quickly scale new products and categories. International markets were also a key driver for IL MAKIAGE. ODDITY International revenue, the majority of which is from IL MAKIAGE grew 42% for the year. International markets represents 17.5% of overall ODDITY net revenue for 2025 compared with many of our competitors that generate more than 65% of net sales from international markets. SpoiledChild also had a strong year, increasing revenue double digits to approximately $250 million. This is an incredible accomplishment for an online-only brand that just launched 4 years ago and once again shows the power of our platform and ability to scale. We remain excited about SpoiledChild's long-term potential, including new product expansion in beauty and wellness. The launch of METHODIQ, our third brand, was a highlight accomplishment in 2025. METHODIQ is a medical telehealth platform that aims to deliver high-efficacy treatment at scale, starting in dermatology, addressing concerns like acne, hypopigmentation and eczema. It is off to a great start, and we are very pleased to see its initial success. Our early focus on acne hyperpigmentation and color products is showing good traction, and we believe this will be big categories for us. We are seeing good metrics and continuous improvement in our KPIs even as our customer cohorts increase in size. What we see in METHODIQ's app engagement reinforces our view that METHODIQ can uniquely deliver high standard of care for a broad audience and do it with great convenience. When we look at the app down rates, onboard completion, weekly check-in rates and care team engagement, we can see the demand, and we are bullish about how our app technology will drive user compliance satisfaction and success. Moving on to the second focus area of our long-term growth strategy, the consumer adoption of high-performance products that better address their pain points. Our product development pipeline for all 3 brands are focused on bringing the market top performers that we believe beat the competition on efficacy. ODDITY LABS continue to push the frontier of ingredient innovation in beauty and wellness. Over the past 18 months, we have made major strides in our capabilities and infrastructure to improve our work with the goal of shrinking our time lines and improving the probability of success in identifying game-changing molecules. Our efforts in process and infrastructure have driven significant improvements in our productivity, increasing the number of targets we can tackle and allowing us to push projects along faster with greater accuracy. One highlight area is our work in traditional biology, which expands on our strong in silico and in vitro foundations. This work helps us to get stronger reach on the most relevant biomarkers for our products, increases our predictive power of success and does it in a way that is scalable, representative and [ retrigerous ] science. Another highlight is our ability to identify biological targets that can influence a desired effect. We are focused on pain points with large commercial opportunities, including acne hyperpigmentation and aging. And our target list include pathways like reducing melanin production and boosting collagen and elastin. We are leveraging AI agent to map targets and structures and also applying our work in traditional biology to identify novel targets. We recently expanded our capabilities into peptides to add to our small molecule foundations and are working on peptide solutions in areas like acne and aging. This expansion into peptides gives us the flexibility to identify the right modality to address an individual biological target. At the same time, we are working in parallel to improve topical delivery of different activities to ensure they reach the relevant areas in skin and maximize the biological effect. We expect to have 8 products in market in 2026 made with ODDITY LABS molecules. The innovation for METHODIQ is especially exciting, including molecules that cover key categories, including acne, eczema and hypopigmentation and more to come in the future that we are bullish about. Turning to our acquisition costs. We experienced an unprecedented dislocation in our account with our largest advertising partner, which we believe is due to recent changes in their algorithms that slightly diverted us to less desirable auctions and traffic at abnormally high costs. These changes resulted in significant abnormal increases in our new user acquisition cost for ODDITY that are not correlated with the market or our historical experience. We have never seen anything close to those acquisition costs, not in ODDITY and also not in other beauty advertisers. This elevated acquisition cost is severely hurting our ability to acquire new users efficiently at high scale as we normally do in the first half of each year and have done consistently for the past 8 years very successfully. Both IL MAKIAGE and SpoiledChild appear to be impacted by these algorithm changes, although the impact on IL MAKIAGE was more severe probably due to its higher scale. After identifying the root cause in late January, we quickly moved to implement strong remediation actions, primarily around the modern infrastructure that we hope will get us back to the right options and ultimately drive improvement in our new user acquisition with significant progress in Q2 and normalization in Q3 or Q4. These types of algorithm updates are not new and have been ongoing through the years, and we've historically adapted to them. In this case, it was harder than before to identify how these updates were impacting our business, and therefore, it was harder to identify the root cause. We believe we got hit by the algorithm change due to our user acquisition strategy that includes a Try-Before-You-Buy offering, which is a rare in beauty and therefore, may be an [ edge ] case within the new algorithm changes. We believe the algorithm updates impacts on how this platform interprets and weighs the signals associated with Try-Before-You-Buy model, primarily due to its inherent higher return rates and diverted us to lower quality auctions at abnormally high cost disconnected from the market. For more context about the model, Try-Before-You-Buy is designed for the benefit of the consumer by reducing the risk of trying our products online. It is a pro-consumer model that allow us to replicate online the experience of physical stores like Sephora, where consumers can try products in real life and materially reduce the risk of purchase. This model is growing due to its complex execution. We believe it's an edge case and a nonobvious interaction within the platform's new auction dynamics. After assessing the driver of what we believe is hitting us, we quickly moved to fix it. Our remediation actions are designed to reduce Try-Before-You-Buy, down-weighting while preserving the ability for new customers to purchase products on a trial basis with minimal risk. Important to note, Try-Before-You-Buy isn't a dependency for us. We offer it as a better alternative for consumer, but our agile model allow us to rebalance towards the standard buy offering if we see it is needed. Unfortunately, because we only recently identified the root cause and despite working tirelessly to fix it, we have not had much time to take action, and it takes time to recover. Therefore, we expect negative impact on our 2026 financial results with the most significant impact expected in H1. But I want to be very clear, despite the dislocation in our new user acquisition we are currently facing, we are not changing our model, our strategy or our long-term focus on growth. The main objective of the company right now is correcting this issue and being in a position to immediately pivot back to growth. I want to close with some perspective on this moment in time. Over the past 8 years, we grew from $25 million of revenue to $800 million of revenue despite multiple changes on ad tech side, a prominent one with iOS 14. We have navigated algorithm adjustments by our ad partners in the past, and we believe we will be able to also address the [ chronic ] dislocation. Most importantly, we believe we understand the problem and in a world of complex online auctions, understanding the problem is always the hardest part. We don't see this as a structural issue or a secular disruption as you are seeing in other sectors or a negative macro trend for our category. It is a technical issue. And from here, we believe it is a matter of time and execution to deliver the strong outcomes we have constantly delivered over the past 8 years. And as I said, we believe we have a strong plan in place, and I hope to see normalization in H2. With that, I will turn it over to Lindsay. Lindsay Mann: Thanks, Oran, let's turn to our Q4 results, which I'll refer to on an adjusted basis. You can find the full reconciliation to GAAP in our press release. ODDITY delivered an outstanding quarter to cap off a record-breaking year. We grew net revenue by 24% in the quarter to $153 million. Growth was driven primarily by an increase in orders, while average order value declined slightly year-over-year. The 24% revenue growth we delivered this quarter exceeded our guidance for growth of 21% to 23%. Gross margin of 70.5% compressed 220 basis points year-over-year and exceeded our guidance for gross margins of 69%. The delta versus our outlook was driven in part by product mix. We delivered adjusted EBITDA of $13 million in the quarter and adjusted EBITDA margin of 8.2%, above our guidance for adjusted EBITDA of $10 million to $12 million. Adjusted EBITDA margin compressed by 410 basis points year-over-year due to planned investments for future growth, including the METHODIQ brand launch, ODDITY LABS and Brand 4 as well as higher media costs. We delivered adjusted diluted earnings per share of $0.20 compared to our guidance of between $0.11 and $0.13. Our adjusted EBITDA and earnings per share excludes approximately $8 million of share-based compensation. Turning to some highlights for the full year of 2025. We grew net revenue by 25% to $810 million with double-digit growth from both IL MAKIAGE and SpoiledChild. This 25% growth is ahead of our long-term algorithm target for 20% sustained top line growth. Net revenue growth was primarily driven by an increase in orders, while average order value increased slightly year-over-year. Gross margin of 72.7% expanded 30 basis points year-over-year, driven by cost efficiencies. We delivered adjusted EBITDA of $163 million. Adjusted EBITDA margin of 20.2% is consistent with our 20% long-term earnings algorithm target. And that's despite our planned investments in future growth initiatives, including METHODIQ brand launch and ODDITY LABS and despite increased advertising costs. Advertising costs increased approximately 50% year-over-year, reflecting growth investments in international markets and METHODIQ as well as higher acquisition costs for IL MAKIAGE and SpoiledChild. We delivered adjusted diluted earnings per share of $2.21. We exited the year in a strong liquidity position, including $776 million of cash, cash equivalents and investments on our balance sheet. The buildup in reserves in 2025 was driven by our successful exchangeable note offering and free cash generation of $84 million for the year. Free cash flow in the fourth quarter was negatively impacted by approximately $19 million of increased inventory due in part to new inventory investments in METHODIQ on top of our seasonal inventory build ahead of the Q1 selling period. We amended our credit facilities in January of 2026 to expand our borrowing capacity to $350 million. These facilities remain undrawn. As for potential uses of cash, we believe repurchasing our stock is attractive at recent share prices and intend to opportunistically return cash to shareholders through buybacks. There's $103 million remaining on our previously announced repurchase authorization. As Oran discussed, we experienced a significant increase in our new user acquisition spend Q1 to date. The timing of normalization is uncertain, although we're working hard to have this behind us. Our remediation actions have started but are still in early stages, so we're not going to make any predictions on their success. Due to the uncertain timing of recovery, we're not issuing full year '26 guidance at this time, but we'll provide updates to our progress and outlook as we get more visibility. A few things to keep in mind for your models. We expect Q1 sales will decline approximately 30% due to reduced acquisition revenue. We're still spending acquisition dollars today despite much higher CPA, and this is so that we can continue feeding the algorithms the signals needed to reset and normalize. At current CPAs, we are not profitable at first order, and that has material negative impact on our near-term EBITDA. We are, however, still profitable on a 12-month direct contribution margin basis because of the strong repeat we generate from acquisition sales. Based on the expected timing of CPA normalization, Q2 sales are also likely to decline, but it's too soon to determine the magnitude. Q1 and Q2 are historically our largest periods of user acquisition. And from that acquisition, we typically generate significant repeat revenue over the balance of the year. The reduced user acquisition activity today will therefore result in lower repeat sales later in the year, even if acquisition costs normalize. We're managing costs through this period to offset EBITDA pressure but continue to carve out investments in growth initiatives like ODDITY LABS, new brands, product development and our tech infrastructure, and we believe this is the right strategy to set us up for sustained growth if CPA normalizes. With that, I'll hand it back to the operator for questions. Operator: [Operator Instructions] The first question is from Youssef Squali from Truist Securities. Youssef Squali: Maybe dig a little deeper into the algo change. I'm assuming this is related to Google's Andromeda. When did the issue actually start -- when did you start seeing it? Has it -- is it continuing to -- is the trend continuing to worsen? Or has it kind of stabilized? And lastly, Oran, when you talk about the issue being related to Try-Before-You-Buy, does that mean that you guys are going to deemphasize that? Or is there work around it such that you can continue to differentiate yourself through that offering and still maybe rank higher? Lindsay Mann: Thanks, Youssef. We didn't specifically name the advertising partner, but the issue is we first observed that something was different in the second half of 2025, and we did call it out on our November earnings call, but it did get much worse as we entered 2026 and really began to scale our business. And I think at the time, when we've spoken to you, we had started to see some improvement, but it's always difficult for us to get a read on CPA as you go in the holiday quarter because it's just not a typical market. There's a lot of noise. And so as we moved into Q1 and we started to scale, that's when we saw the dislocation. Oran Holtzman: [ H4 ] moving from Try-Before-You-Buy, look, we believe that we can still solve it. We try, as I mentioned, we believe it's pro consumer. We believe it's the right thing to do. But I also mentioned that we can -- that we know how to move to buy like the rest of the industry. I want to say that more than 95% are selling via [ buy so ]. It's not something new, and we know how to do. As for what we do, there are a range of things that we need to identify the issue and working on fixing it. We Try-Before-You-Buy, including Deep Signals Audit, Final UI/UX adjustment, a lot of work on the infrastructure side, building new prediction models, offering adjustments and different audience strategies. We wouldn't sit here today if we didn't think that we can solve it, we try. We would say that we are moving to buy, but the fact that we believe that it's solvable with the current business model. Operator: The next question is from Anna Lizzul from Bank of America. Anna Lizzul: I just wanted to ask on the change or the lack of guide here, I guess, and what you can recover for the remainder of the year, it does seem like an uphill battle. Is it possible to shift this user acquisition really from Q1 or H1 into Q2 or H2? Or will there be more of a delay? And does this change your thinking at all on distribution, just given you are vastly sold on direct-to-consumer, would this make you think at all about going into retail? Oran Holtzman: As mentioned, no change in our strategy. Thank God, this is our strategy. Online is our strategy. Online continue to grow, and there is no change in our plans or no plans to move into retail at this point. We are confident we can go back to growth. We believe it's something that it's a temporary change that happened that we need to adjust to. So no change in distribution strategy. Lindsay, do you want to answer about the second half of the year? Lindsay Mann: Yes. Thanks Oran. So, we're navigating a situation today where CPA is significantly higher than last year, in some cases, 2-plus x higher in some cases. And as a result, we've dialed back on our acquisition to manage it. Remember that, as I mentioned in my prepared remarks, at current CPAs, we are not profitable at first order. And so that has a material negative impact on our near-term EBITDA. We are still profitable on a 12-month contribution margin basis. But in the near term, as we spend, you have pressure. And since Q1 and Q2 are our largest periods of acquisition, we'll have -- as I mentioned in my remarks, we'll have that carryover effect into the back half of the year as we lose the repeat. And so in the short term, we view this as a pothole that we'll have to recover from. But as the business in CPA normalizes as we hope it will in the back half of the year, we'll be on a track to normalize our financial model as well. Oran Holtzman: By the way, I would just add that Lindsay mentioned even more than 2x. If we saw something gradually increasing in terms of CPA, we wouldn't think that something is completely off. We know that the current numbers that we see in user acquisition are completely off market, and we know it's -- and therefore, we believe it's something technical, and we work really hard to go back to -- by the way, we never built the business on marketing margin, on making profit from better acquisition strategy or execution. We build the business on repeat. that can protect us from regular increase in media spend. By the way, we see it every year. But this is something completely off, very unusual. We never saw anything like it. And based on my understanding, like it doesn't exist elsewhere. Operator: The next question is from Brian Tanquilut from Jefferies. Brian Tanquilut: Maybe, Lindsay, just as I think about the model, right, I mean one of the things that we've always loved about your business is how you can flex the advertising spend. And obviously, as you said, CPA is up more than 2x in some cases. So when we think about how you would strategize around this, I mean, once things normalize, I mean, should we expect kind of like a steep pullback on advertising expense? Or just curious how you're thinking about strategizing around this once we get that normalization point? And then can you just give us any color on retention rates or reorder rates that you're seeing in the market? Oran Holtzman: I'll start and maybe you take it. Even when media is abnormal as now, you don't want to stop the train. You still need to feed the algorithm and continue to spend so that you are giving it signals, it needs to go back on track. We have balance between not overspending at this crazy CPA that doesn't make sense while keep them -- and the signals going. And that's our plan to keep balance that way until we fix it. Lindsay Mann: As far as what normalization looks like for us, it would be something in line with what the rest of the industry CPA is. That's typically how our business has operated. It's a very, very big auction. It's a lot of competitors in there, and we typically are around where we would see our competition in terms of CPA. Right now, we're completely dislocated and off market based on this dislocation and this malfunction of sorts. And as we address it, as Oran said, we should be getting back to track. I don't know if I remember your second question. Brian Tanquilut: Just on the reorder rate that you're seeing anything there as well. Lindsay Mann: Repeat rates remain very strong. This is one of the reasons why we know we don't have a brand issue. We don't have a saturation issue. We continue to see very good performance out of our repeat. Repeat revenue is for 2025, around 70% of our sales. And as we look at our 12-month net revenue repeat rates, those increased again. So the 2024 cohort that repeated in 2025, that number increased relative to the prior year. So that's well nicely over 100%. And even as we look at our more recent cohorts within who started in 2025, those net revenue repeat rates on a 6-month or so basis are better than they were in the prior year. That trend remains very strong. Operator: The next question is from Andrew Boone from Citizens Bank. Andrew Boone: Can you guys help us understand just what exactly is changing within your guys' funnel? Is this higher CPMs? Is this lower click-through rates? Is this worse on-site conversion, meaning it's a lower quality user that you're targeting? Help us understand that dynamic. And then one of the things that we've also always appreciated about the business is just your ability to be able to pull different levers to be able to sustain that 20% growth. And so can you just help us understand the size of this channel and your inability to be able to allocate spend elsewhere and help us understand just why this is an overly large impact versus what we would have thought was a more diversified ad platform? Oran Holtzman: Yes. When we refer to our ability to grow through multiple -- in multiple areas, one thing that is important to note because this change is for ODDITY is global and across brands, it makes it harder, and that's why we came to the market with 30% decrease target in Q1. It's very hard to continue to grow without overspending. And obviously, this is something that we don't want to do in those CPA levels. Lindsay, do you want to continue? Lindsay Mann: Yes. As it relates to mix, what I can tell you is that for our largest ad partner, if you just look at pure platform orders, -- so that's any order that can be attributed directly to an ad from this specific partner. Those revenues make up just under 1/4 of our revenue, and that's based on our internal attribution system. But keep in mind, this is just pure acquisition dollars. And on top of acquisition, you also get repeat, you have direct revenue. So there's additional impact. We have relationships with many different ad partners. I want to say almost -- I don't want to say all of them, but many, many different ad partners, but your ability to scale is only so much with each individual, and so this is impacting us. Operator: The next question is from Georgia Anderson from Evercore ISI. Georgia Anderson: You mentioned that you've made kind of significant actions to fix this. Can you maybe clarify if these are more structural, I guess, technical fixes to your internal, I guess, data feedback loops, maybe retraining your AI to find intent users, kind of things like that? Or is the rebound expected to come from like a strategic shift in budget allocation? Maybe just talk us through the fixes that you're making. Oran Holtzman: Yes, it's both infrastructure side, offering adjustments and signal adjustments. We do all. The good thing about us is those points of time, like when you need to make multiple changes, we do everything in-house. We are not dependent on third parties, data scientists, developers, media buyers, so we can run dozens of variants at the same time. And that's what we did in the past few weeks. And therefore, we believe that we are more prepared than most companies to address it. Operator: The next question is from Scott Schoenhaus from KeyBanc Capital Markets. Scott Schoenhaus: Lindsay, is there areas that you're currently seeing strength that you could possibly offset this weakness strategically? I want to focus here on international opportunities and then the Brand 3 rollout, which you mentioned was -- has seen nice success. Oran Holtzman: Yes. I'll start with the good news. We launched Brand 3 METHODIQ. It's growing more than what we saw in IL MAKIAGE when we launched IL MAKIAGE, it's facing SpoiledChild. So we are very pleased to see the demand and success of METHODIQ by the way, as we thought. As for international and other areas, you still need user acquisition, and we still don't want to overspend just to meet the revenue goals. I never run the business like that before. And that's why the business is profitable for many, many years and last year, 20%. So -- we first need to fix it and then we go back to growth. Operator: The next question is from Ryan MacDonald from Needham & Company. Ryan MacDonald: As we think about balancing sort of the near-term priority of sort of fixing the problem here versus sort of balancing with longer-term investments to sort of continue the growth sort of growth trajectory once these problems are solved. Can you talk about sort of what that balance looks like internally right now? And then what are some of the priorities, whether it's continuing down the path of product development with ODDITY LABS growing METHODIQ brand? Also, is there a risk here that we see a delay or a push out in sort of the Brand 4 launch plans as well? Oran Holtzman: Since we identify -- since we believe we identified the problem, we are not changing our investments in growth. We believe it's the right thing to do. We continue to invest in labs. We continue to build Brand 4, and we continue to work tightly on new products in NPD for IL MAKIAGE, SpoiledChild and METHODIQ. And that's for the first question. The second one, what was it, Lindsay? Lindsay Mann: What was the second question, Ryan? Ryan MacDonald: Yes. So it was just any concerns about a delay in Brand 4? And then as we kind of come out of this, whether you lean into investment more aggressive for growth as we work back towards the balance of 2020 or sort of work more towards margin expansion? Oran Holtzman: The current focus of my leadership is fixing the problem. That's the first priority. Most of the teams are working on that. At the same time, we continue to invest in ODDITY LABS, we continue to grow it, and we continue to build Brand 4. Operator: The next question is from Kate Grafstein from Barclays. Kate Grafstein: I was just wondering how does this dislocation impact the launch of METHODIQ? I know you had planned to step up spending in the first half of the year with this launch, and that was expected to have an impact on your EBITDA margins in the first half. Oran Holtzman: Yes. The fact that METHODIQ is relatively small, we can -- it means that we can continue to grow it without the negative effect that we see. It doesn't mean that the [ core ] problem doesn't affect METHODIQ. But since it's running at low scale compared to IL MAKIAGE, SpoiledChild, we can continue to grow and meet our targets for this brand for this year. Operator: This concludes the question-and-answer session. I would like to turn the floor back over to Oran Holtzman for closing comments. Oran Holtzman: Thank you guys for joining. See you next quarter. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to the Fourth Quarter and Full Year 2025 Matador Resources Company Earnings Conference Call. My name is Marvin, and I'll be serving as the operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay reprices, and a replay will be available on the company's website for 1 year as discussed in the company's in press release issued yesterday. I'll now turn the call over to Mr. Mac Schmitz, Senior Vice President, Investor Relations for Matador. Mr. Schmitz, you may begin. Mac Schmitz: Thank you, Marvin, and good morning, everyone, and thank you for joining us for Matador's fourth quarter and full year 2025 earnings conference call. Some of the presenters this morning will reference certain non-GAAP financial measures usually -- regularly used by Matador Resources in measuring the company's financial performance. Reconciliations of such non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP are contained at the end of the company's earnings press release. As a reminder, certain statements included in this morning's presentation may be forward-looking and reflect the company's current expectations or forecasts of future events based on the information that is now available. Actual results and future events could differ materially from those anticipated in such statements. Additional information concerning factors that could cause actual results to differ materially is contained in the company's earnings release and its most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q. In addition to our earnings press release yesterday, I would like to remind everyone that you can find a slide presentation in connection with our fourth quarter and full year 2025 earnings release under the Investor Relations tab on our corporate website. And with that, I would now turn the call over to Joe Foran, our Founder, Chairman and CEO. Joe? Joseph Wm. Foran: Thank you, Mac, and thanks to everybody who's listened and has taken the opportunity to anticipate in this conference call. The first thing I do really encourage you to look over the slides, particularly if you don't have time to read the whole press release that we had. There've been a lot of thought put into those slides to try to make important points that I believe are essential to the Matador story. Second, if you also do not feel you've been given an adequate opportunity to ask questions, we want to invite each of you to come visit us at our offices, where we will make sure that you're giving all the time that you want to ask your questions and get your answers. And in particular, we would invite if you do come, we will make sure that you get to have lunch with the executive team or most of the executive team that's in town, or if you'd rather -- we will arrange for you to meet or have breakfast or launch with a lot of our young leaders and get to know the people who are coming up and being pillars of support and activity and are just doing a wonderful job, great job in directing our various activities. And of course, they're, relative -- have some years of experience, but they're the ones who are actually on the job and the first level of supervision and executive action, which none of the seniors will be in there to give you that opportunity to get some very frank responses. And that invitation goes and just work through Mac to setup such a meeting. Then what I wish to emphasize today in this conversation is the quality inventory that we procured over time, particularly in the Delaware, where I've been -- I started Matador over 40 years ago, 43 to be exact, and that's where we started out in the Delaware. So we've got reflect -- over 40 years of experience and still think it's the best rock in the country. And we like the position that we built. It's now over 200,000 acres. And if you're going to -- my experience, having started the company is when you're in what you feel is the best rock. It's a lot easier to build than trying together some of these outlying area. So feel free to ask whatever tough questions you want on the inventory, I think our position stands out against anybody acre for acre. Second, is I hope you'll note the strong balance sheet that we have and that this past quarter, we increased production. Most importantly, we increased reserves by 9% as measured by the Netherlands and Sul. So we have a -- we increased production and reduced debt. And we had strong cash flow throughout even though prices went up and down throughout the last 90-day period. We believe this inventory balance sheet, the strong cash flow, all lead to growth optionality. And with San Mateo, we now have flow assurance outside the basin. Hugh Brinson has been a change maker for us, and we're excited to work with Energy Transfer on that opportunity. And with that, we'll take the questions. Mac? Mac Schmitz: So great. Thanks. Marvin, we're ready for Q&A. Operator: [Operator Instructions] First question comes from the line of Lauren [indiscernible], Bank of America. Noah Hungness: This is Noah here. So you guys increased sort of net undrilled lateral footage by 2% this year. I guess -- what was this delineation or a result of your brick-by-brick land strategy? And where these locations -- where were these location adds? And you also had some pretty significant inventory adds in the Avalon, third Bone Spring Carbonate and Wolfcamp D. Are you seeing something that you like from those formations? Joseph Wm. Foran: First, I'd just say. It was a lot more than 1 question. So which one of those do you want Tom to answer? Noah Hungness: Really just if you could, on the inventory adds, if you're seeing anything you like on the Avalon Third Bone Spring or Wolfcamp D? W. Elsener: Sure, Noah. This is Tom Elsener, EVP for Reserve Engineering. Definitely appreciate your question, and it's something we're very, very proud to answer. I would say the production out of the Avalon in particular, has been very strong. I think we highlighted a particular well in our kind of Southern Ranger area to a bit [ Gavilon, ] a very strong upper Avalon well that has been a very, very high performer. I think it's getting close to made over 400,000 BOE, very high oil cuts. It's something that we have a lot of running room in that part of the basin for. It's something that we've expanded our inventory in over the years. So it's something we see as it's been a big part of our campaign out in the Delaware Basin. The other zones, various adds all throughout the position is what I would say. I'm proud that you noted the increase in footage. Our teams have been very busy doing trades, extended laterals, and we're very proud to see the 6% increase in our average lateral length in our inventory from 2024 to 2025. We've noted that we've been doing some 3.4 mile on laterals, particularly on our Ameritiv acreage that have helped us to dramatically increase our [indiscernible] length. And I think that, that's something that I would tip my hat to Chris Calvert and all the operations teams for pushing our lateral lengths out to these types of distances and doing it very, very well. I think our teams have been able to improve the quality of our inventory through good geoscience support from Andrew Parker, identifying -- you mentioned the third month in carbonate was a zone that we had not originally included in our inventory several years ago, and it's one that we've drilled very successfully kind of all throughout our Delaware Basin position. Our teams had started with that target down in our Wolf area many years ago and then further north into some of our properties over in Ranger and then over across into Rustler Breaks, and it's been one has been a great add to our position. Operator: Our next question comes from the line of Neal Dingmann of William Blair. Neal Dingmann: I'll make sure to keep the one question. I don't want to get in trouble. Joseph Wm. Foran: Neal, the other thing is what maybe some of the others on the deal, you know the way to our office. And you've been here a number of times asking these questions, and we've always appreciated. It's been a very useful dialogue and the guys like [indiscernible] me come and ask you various questions. And so they're hoping you'll come back. Neal Dingmann: That you all have been very generous with the time, Joe. I definitely look forward to getting back there soon. Joe, my question to you, Brian. It's really just on the '26 plan, it seems you continue now to target free cash flow over production growth. You look this year, great plan out there for 3% oil growth with 11% reduced capital spend. This is -- I compare this to prior years, where maybe you were targeting higher production growth. So my question is, you all now believe, I know you talked about value creation being sort of the key driver out there. You believe the key to the value creation is just this capital and operational efficiency, or what do you all look at as the key for this value creation? Joseph Wm. Foran: Well, it's a good question, and it's a fair question. The way we do things, as you know, we like to collaborate with each other and several of us kind of lean one way and others lean another way on what's important. And then when we roll that all together, it comes out that I think it depends on the time, and what the nation's economy is to in political situation is which one you lean perhaps [indiscernible], what interest rates are. And so there's a lot of factors that go into it, as you would guess, just like what what sector of the economy would you invest in. It varies from year-to-year and time to time. But our first -- we began with first saying is look for the good acreage because if you have the good acreage, banks generally have a good outcome. And it's hard to turn bad acreage into profitable or highly profitable wells. So beginning with is this a well that's in the right areas and the zone that's been properly tested or is this an exploration in fact well. The other thing is, I lean more towards the long-term reserve growth because when you proved up the reserves, then it becomes optional when do you want to complete wells in those zones and and bring to the market, the -- and you want to do it in a deliberate style because as you drill these wells, the more you drill them, the better your per lateral foot or foot each rate is because you just are drilling them faster, you learned to adapt some ways of increasing your booties and reducing your costs. So last call we had, we were beaten up because we had grown our production, but we had also grown our CapEx and that CapEx was -- we took criticism for that. This quarter, we showed what we could do the capital efficiencies that reduced CapEx spending by 11%. And we were able to recover essentially the same amount of production. But to us, most important because of the fluctuation in prices we increased our overall reserves by 9%. That's not our numbers, but that's Netherland and Sul's numbers. And so we thought that was a good outcome in total for the 90-day period that we increased production a little bit, 1%, but we reduced cost by 11% for the same amount, roughly the same amount of lateral footage and our overall reserves went up by 9%. So we thought that's good, but you all be the judge of it and the market will be the judge of that. But we're pretty excited that we have those numbers headed in that way. Production is up, cost down. And that we proved up some new zones and that we're very excited about. And so with fewer rigs, and I'll let Chris take over from here, he feels what was most important accomplishments for the quarter. Christopher Calvert: Hi, Neal, Chris Calvert, Chief Operating Officer. Great question. When we look at value creation, specifically long-term value creation, I think the fundamentals of your question really you kind of build the foundation of what we think that value creation is. It's profitability profitability focus, not necessarily production focused. When we look at that, then we try to figure out the ways to optimize the levers that build that strategy. And so with -- on the revenue side, you look at the value of Hugh Brinton as that comes online towards the back end of this year to help improve gas realizations that we spoke to, the production impacts of that in the first quarter. You look at the CapEx spend, the 11% reduction, the $130 million in CapEx savings forecasted for 2026. I'd refer you to Slide 6 to look at our year-over-year improvements in well costs. And really, even more specifically, I would focus you to Slide 19, which I think tells a better story that shows that we're able to achieve these well cost reductions while delivering stronger well results. And so when we can go out and deliver 10% improvements from an EUR perspective and do it at a lower investment cost, I think being able to optimize those levers just continue to improve the fundamentals of that long-term value creation. And so I think it's a great question, something we are hyper focused on the CapEx component of our 2026 plan is something that we are extremely thoughtful to that is going to be underpinned by efficiencies, vendor relationships in these volatile times, and we'll look forward to deliver that plan. Operator: Our next question comes from the line of Tim Rezvan of KeyBanc Capital Markets. Timothy Rezvan: One question. Joe and Brian, we couldn't help but notice the second priority for 2026 in your earnings release was midstream value realization. We also saw your report aggregate San Mateo and Matador Midstream EBITDA guidance for the year. So as we think about the time line, knowing this is a high priority, it seems like a drop in Matador assets into San Mateo seems to be a precursor to anything. So is that something you could do now? Do you need to let the dust settle on the 5-point continuation vehicle first? Can you just kind of walk through the theoretical steps we could be looking at this year? Joseph Wm. Foran: That's a good one question. Let me try to answer, I was trying to make notes as you were asking that. But no, the limitation of the one question is we're not limiting our time with you all after these one questions you've gone through, if you still got them stay on the line. We'll stay here as long as you want to ask them, and we invite you to come and see us. Now an answer to your question that you're talking about is that we look -- approach this on a very holistic approach. And it's not me sitting in a room and telling everybody else what to do. We gather in here in this room, the same room, we thought [indiscernible], and we cashed out different. People have different views. But when we get through, we all feel like we've hashed out a good plan. And we try to be nimble enough that as the economic climate changes, we'll change with it. And so it's been that kind of a 90-day period in the past, where you had to move cautiously or I felt my 40 years experience out here is be cautious because cautiously, you have a president saying he wants $50 oil, that isn't going to work long term for the industry, needs to go more higher. You've got a world situation where you got the prospect of war in the rand, you've got Europe that we're having difficulties on both sides. I don't like some of the things we're doing. And I don't know who's right or wrong, but I hope they get resolved. There has been a good ally for us. And then in our own country, you have this relations with Mexico, Venezuela, all those different countries that -- so you have the world view, you got to take into account. And so the -- we hedged our bet. We're 50% hedged on oil to protect the balance sheet, no matter which way we -- which direction we ultimately had, but we've taken those precautions. We we've got great vendors. Patterson is always helpful to us on timing of rigs and quality of rigs. So it's a complex, multifaceted, and we get the various department heads in here, and we hash it out, making sure we're taking all this into account. Five Point has been very good to work with. And that simply is a situation that they have an exit period in their fund, and they've got a continuation fund working so that they can work out long term. And that's headed, that's making steady progress, and we expect it to be resolved in the near term. We don't have control over that, but Five Point's been a good partner, and they've done what they've said they would do. And so we're watching that. You got activities, oil is important to the state in Mexico. So you're going to deal with government agencies like the Bureau of Land Management and like the state land office on these matters, and what are their plans, so incorporating that and then we really like our bank group, and they've been very supportive, and we have an RBL. That, of course, has increased over time as we've proved up more reserves, which is something we take in into account and all night in the most recent redetermination by our bank group was that they came back and increased our borrowing base and all 19 were unanimous in their support and even raise the amount that they have been offering on the midstream system. So we thought that was a when the whole way through. Other suppliers, B&L [ Pitco, ] has been very supportive through time, and we'd like to confirm what direction pipe prices are because when you're drilling these longer laterals, you want to be sure you have the best quality pipe at the best prices. So give credit to all of them at Halliburton on our frac designs and execution. So I would say you're not going to make a decision in an afternoon but you're going to gather get everybody's proposals in there, massage them together and go from there. And so it's something that these long relationships that we have with these vendors really pays off because you just -- you really make that time together and planning this that much more efficient. And we think that planning has played a big role in the reduction in our CapEx as well as the efficiency gains and like the timing and the timing that we have in drilling these wells, we're just drilling them faster than we have in the past because everybody knows what they're supposed to do, and they -- people come up with ways to expedite the operation and the drilling plans. Chris, did I leave something out there? Christopher Calvert: No. I think Joe hit on a lot. And I think to the question, Tim, the relationships we have on the E&P upstream side that Joe has mentioned, I've been long-standing and part of the success story of the operational excellence of Matador. And I think to the story with Five Point and the continuation vehicle, I think what we're excited about is the structuring a deal that allows them to be part of the future growth of the entity. Now as the drop-down conversation moves forward, I think that's something that from the E&P side, we have referenced these 3.4 mile laterals. We've referenced the productivity of the Ameredev acreage that is now in our asset base. And so I think that is an exciting story from both the E&P side and the wholly owned Matador -- excuse me, Metador midstream side, the gathering side. And so I think that the cadence of any sort of drop down, I think that's something that we will continue to work on. But we're excited about the continuation vehicle simply because it's another sign of support from Five Point, and they've been supportive of everything from plant expansions to interconnects between Marlin and Black River. This is just another sign that they want to be a part of the growth story that is San Mateo. Joseph Wm. Foran: Chris, I think that's excellent. But I just want to add on to that, that we've gotten a number of questions recently about our artificial intelligence participation. And what we found most effective is to work together with our vendors, and where we can use artificial intelligence between us, most often, they have the program. They're ahead of us, maybe more often, and -- but work together, so it's a win-win situation. And -- so we're taking baby steps, but we are taking it in the deliberate fashion with our partners, some of whom have more experience in this area, and we feel like it's other win-win where we all are gaining from the collaboration. Operator: Our next question comes from the line of Zach Parham of JPMorgan. Zachary Parham: Can you talk about how you're thinking about using the buyback going forward? It was relatively limited over the last couple of quarters. I know you didn't plan to be formulaic with the boast, but just any chance on how you plan to allocate free cash flow to buybacks in the future? Robert Macalik: Hi, Zach, this is Rob Macalik, CFO. Definitely on the shareholder return, we're proud of the cash we've returned in the form of both the dividend and the share buyback. We've raised the dividend 6 times in the last 4 years and are really proud of the 3% yield that we have on that dividend today. We just instituted the share buyback in 2025, and we think it's a really nice extra tool that we have at our discretion. As you can see through the management and employee share purchases, including the guys in the field, we as a management team feel like the stock is undervalued. And so we've been trying to be prudent with our capital, but we do think that the share buyback is a nice tool that we have, that we can continue to use opportunistically and feel like between the dividend and the share buyback are really good shareholder return tools to use. And so I think you'll consider -- continue to see us use that in a very conservative way, but use it when there's a dislocation between our stock price and what the rest of the market is doing. Operator: Our next question comes from the line of Derek Whitfield of Texas Capital. Derrick Whitfield: Wanted to focus on surfactants with my question. Could you perhaps elaborate on the enhanced performance you're seeing in your well results, the degree at which you could expand the program in 2026, and how much of this is baked into your guidance? Christopher Calvert: Great question. This is Chris Calvert again. So I'll start with the back part we have not made any sort of uplift into our 2026 production guidance plan. So I'll put that out right now. As far as quantifying the successful results, we were excited about the pilot test we did in 2025. We have long used surfactants throughout completions. This is something that, as the technology advances, as we continue to delineate from a subsurface perspective in the parts of the basin that we feel could be more benefited from advanced surfactants. That was kind of the basis of our pilot test in 2025. So we're excited about the early results. As we look into 2026. Once again, no sort of uplift is baked into the production. However, I think it's a little early to speak to the enhancements or uplift other than the fact that we have noticed that it is formation specific, certain formations respond a little better, but I think that could delineate and differentiated as we move into 2026 as we test in different parts of the basin. So stay tuned. We're excited about the '26 plan. Once again, the capital is projected into the budget, but not production. Operator: Our next question comes from the line of John Abbott of Wolfe Research. John Abbott: My question is really on the Woodford. What is the strategy there? Is your position primarily held by production you're drilling your first well in the first half of this year. You have additional pipeline capacity by the end of this year. Is there further derisking in 2027? How are you thinking about that play? Christopher Calvert: Yes, John, this is Chris. I can take it again and probably pass it to Tom. We're excited about the Woodford. Obviously, our geoscience team has long looked at deeper parts of the basin. We're excited about we've delineated and have producing wells out of 23 discrete horizons in the basin. The Woodford would be additive to that. And so we have a geoscience team who's long looked at deeper parts of the basin. And I think if you've looked at public data about some of these well results in and around the ZIP Codes in which are being reported. You'll see that there is a nice overlap to what we think is the fairway of this basin that is existing to current Matador acreage on the map. And so we look at this as as additive, and I can kick it to Tom. W. Elsener: John, I appreciate your question on the Woodford. This is our -- this will be our first one in the Woodford. And so I would say our primary objective is to learn as much as we can about the Woodford and all the other zones immediately adjacent to it. We'll be drilling a pilot hole and running logs. And I know Andrew Parker can speak more to some of those things. But we do have a had a nice position over there on the eastern side of the basin where others have had some success further over into Texas in the Woodford. Clearly, we're very excited about it. And so it's something that is -- would be purely incremental to our current inventory. We have not yet awarded any inventory whatsoever to the Woodford. So it'd be a great win for Ameredev. But I'll pass it over to Andrew Parker to speak more. Andrew Parker: Yes. Thanks, John. Just to add on to Chris and Tom here. We've had our eye on this. We're really excited about the results in Texas, and we really like our rock in New Mexico. We think we have a lot of running room here. Again, it's very early, but we're excited to share more about the test later in the year. But the Woodford -- it's an important part of the petroleum system in the Delaware Basin, which -- this just adds to our confidence of being in the best basin here and our confidence in our inventory across the basin as well. So we're really excited about it. Operator: Our next question comes from the line of Scott Hanold of RBC Capital Markets. Scott Hanold: Can you -- Matador basically built itself on the brick fabric M&A as well as organic growth. And moving forward, it looks like, I think for the industry, the growth rate is obviously coming down as well as Matador. But as you -- what do you see in terms of the way to add values for Matador going forward? And do you see a lot of M&A opportunities left to continue to consolidate? Van Singleton: Hi, Scott, this is Van Singleton, co-President. Thanks for your question. I think you can see from last year that our brick-by-break approach was effective as it has been for some time and 175,000 acres without doing a major transaction that was 690-or-so individual transactions. I think you can count to see us be vigilant to protect the balance sheet, but always look for good opportunities in the future. We try to keep a pipeline of deals coming in, but they need to be the right deals in the right neighborhoods. So many of these are end units we have or adjacent to units that we have to form these longer laterals, and we're excited to see there's still opportunities out there, and we'll continue to make trades that are good for both sides. Again, just like doing the deals with [ EnCap, ] they've been good partners to work with. And we look forward to other deals like that coming up. And if some bigger deals do come up, we'll give them full evaluation and due consideration. But we need to stick to our strategy of protecting the balance sheet and putting ourselves in a position for future growth. Brian, do you want to add to that? Bryan Erman: Yes. Hi, Scott, this is Bryan Erman, Co-President, Chief Legal Officer and Head of M&A. Just to pile on to what Van said. I think we have shown that we can grow in different ways. We did the Ameredev and advanced deals in previous years. And then as Van said, we did 17,500 net acres and essentially replaced our inventory that we drilled last year through smaller deals. And so I think that's a differentiator for us that we can grow through the bigger deals, and we do think there will be some out there in the future to look at, but we -- in the years that those aren't there, we can grow through the brick-by-brick approach, and we really do feel like that's a differentiator for Metador. Joseph Wm. Foran: Scott, this is Joe. And let's put a little bit of this in perspective. I started, as you know, with $270,000 in 1983. And today, we've got over $10 billion in assets. So throughout that 40-year period, the same question has been asked and asked again, do you think you can grow anymore? Has there been so much consolidation that there are not opportunities out there. We've always been able to find opportunities, and I don't really see it much different, and that we think is -- we aim for being better, not just bigger. And in a lot of these situations by going after these areas like Woodford and they fit us very well. I'm not sure it fits a major. They need to be down there where they've got hundreds of thousands of acres and these are smaller, but they've still fit us, and we consolidated that way. And Van and others have an active trading circle where we give up here in their area, and they give back. So those arrangements are working. And as far as the profitability goes, I think we've proven over 40 years that we've managed our money well to reinvest in the right areas. And even at old Matador, we were investing in the right areas there in developing trades. So we've been active in each of these extensions, and we've had merger opportunities, many merger opportunities. But so far, we found -- this worked best to be as we are. We're a little unique in a lot of areas. And one thing is the collaboration with each other in the company as well as with our outside relationships, and a good example of this is working with plans as we have. And we've done some -- they might us [indiscernible] some very good ways to add to production and make sure we're in the right areas and right equipment, what's on pipe, and what's still on trucking. And there's another example is that -- so [indiscernible] about who's the next merger or anything. We try to work on the efficiencies and thinks it worked out pretty well that in 43 years, we moved from one rig and part of the time and having 300,000 new assets, which at the time, caused a lot of money, but not so much today when we're drilling 3,000 feet or more and gain efficiencies there. So the business has changed, but the basics about building relationship, being in the absolute best area you can afford and working trades to consolidate things and looking for the new technology, all that that's same the same thing in sports is that it's not how big your school is, but it's often about how good your people are. I mean you look at University of Indiana hadn't had a winning season or championship since 1800s, the late 1800s, but then they win the National Championship because they got better people. And it's not that we can drive people into coming, but we do have a dedicated group of professionals who try to get better every day. And you've been to our offices often, and Scott wouldn't you agree, it's a very motivated group here that works well together and has kind of a unique culture to it. But I ask that question of you if you respond. Operator: And our next question comes from the line of Paul Diamond of Citi. Paul Diamond: Just wanted to touch on D&C in '26 for a moment. You guys guided towards a midpoint of $7.95, talked a bit about cycle times, better land as development. Just wanted to get if you could parse that a little bit on how those improvements are kind of broken out amongst those groups or any other levers? Christopher Calvert: Yes. This is Chris Calvert. You kind of tailed off on the back end of the question, but I'll repeat it a little bit and then whatever I missed. So you said a little bit more commentary surrounding increased lateral lengths, reduced cycle times that led to the reduction in our D&T cost per foot to $7.95. And so I think, Paul, the first thing I would point to is, when we look at this improvement in D&C cost per foot, it is largely efficiency driven. As we look to -- we've talked a lot about these -- this well batch that sits on our Metador acreage, it's 3.4 mile laterals. We expect to turn in line in the first part of this year. That is contributory to the 10% increase in lateral lengths. And so I think when we speak to the ability to do more with less. And I think that is a standard story that is somewhat spread across the industry being able to drill the same lateral footage or accomplish the same with fewer rig counts. Stories like increased lateral length helped contribute to that. And so when we look at improvements in completion efficiencies, we were kind of the -- one of the first to do [ Simo and Trimofrac ] in the Delaware Basin. It has stayed a large part of our completion story. We've seen completion efficiency improvements of 20% year-over-year as far as completed lateral footage per day, all of which contributes to lowering your D&C cost per foot. And so when we think about cycle time improvements, that it really underpins the ability to turn in line the same net lateral footage in 2026 versus 2025. Do it with $130 million D&C capital savings year-over-year. And then also still be able to deliver moderate production growth in the form of 2% or 3% oil -- organic oil volumes. And so I think the underpinning story to the $7.95 number is largely efficiency driven, focused on, like I said, longer laterals and reduce cycle times. Operator: And our last question comes from the line of Philip Jungwirth of BMO. Phillip Jungwirth: Was hoping you could talk about the better wells for less money slide. And just what I was really interested in is, first, the forecasting of EURs and the bottom-up build here and then just second, the footnote around excluding wells drilled by Metador or Advance and whether this has been a drag on historical EURs and if Matador designed wells are demonstrating improvement across this acreage. W. Elsener: Philip, it's Tom Elsener, EVP for Reservoir Engineering. I'll take the first part of that one. What we're really proud of is the continued improvement in our well productivity over these years and really highlighted by our own operations and showing that how we've been able to improve our [ ViO ] per foot of lateral year-over-year. It's something we're really proud of. It's not something that just comes very easily. It comes from a combination of improved targeting, improved spacing, improved completions, many of the different operational improvements that Chris has been lining out, but also from our geoscience teams finding better places to buy acreage, better places to land the wells. Combined with the approximately 25% improvement in cost per foot over these years, there are some very big improvements to the rates of returns to the quality of the inventory. And we're certainly very proud of the Emeritus acreage and the advanced acreage. And those have been great acquisitions for us. As has been mentioned on the deal front. We've been very successful with big deals in the smaller brick-by-brick transaction. So Matador has improved its portfolio over the years through the wide range of different techniques. Joseph Wm. Foran: If I tag on to your note, Cal, it's just that, as an example of this, of these efficiencies, it isn't just it makes the well better, but it's generated additional cash flow that we've been able to pay down our debt. And last year, for example, we paid it down by $200 million. So we were getting our leverage ratio down there to about 1, which gives you more options having that kind of balance sheet strength. And so we tie those together in our discussions that I mentioned when we collaborate what does this mean. Operator: Ladies and gentlemen. This ends the Q&A portion of this morning's conference call. I'd like to turn the call over to management for any closing remarks. Joseph Wm. Foran: Well, I'd just like to say if anybody else on the call doesn't feel that they got your questions answered, please give a call in to Mac, and we'll arrange a separate conference call. But we want to make ourselves available to you because we think there's a lot of good progress is being made, and we're very excited about some of these new areas that we're developing. It's just hard to always fit it in a 90-day period. But as this year goes along, I think you're going to see why we are as optimistic about the year as we have been, and hope that oil prices will stabilize and that some of the disruptions will be settled over time. And the economy will remain strong. But I give much credit to this team has continued to grow and work that much better together and reiterate our invitation become seeing and meet the people in person that that have a direct effect on the value of the company and then meet some of the younger people because I think they have done a very impressive job. With that, I want to be sure and give a shout out to Glenn Stetson, Glenn, and then called on the say much, but he's watched over both the production and the midstream and kept both of them running even in bad weather and other times. And so Glenn, if you want to say anything, please do so now. And if you want me to ask you a question first to give you a structure to do that. But you're watching over those two very important areas have got work together, the production and the midstream. Glenn Stetson: Yes. Thank you, Joe. This is Glenn Gtetson, EVP of Production, I think Tom and Chris both gave examples of of things that we're doing on the efficiency side. I would like to provide an example of where both Matador, San Mateo, and on the completion side, the production side and the midstream companies that work together to achieve some of those efficiencies and one of them is on the produced water side using hydraulic -- using produced water for hydraulic fracturing operations. In 2025, 72% of the water that we used was was produced water, and that has the benefit of both reducing our CapEx per foot, but also reducing our lease operating expenses, and we couldn't achieve those results without the help of San Mateo and Matador's midstream -- wholly owned midstream properties or assets. And so I just wanted that just another area of where we are working together to help on all fronts. Joseph Wm. Foran: And trying to help the flow assurance, the importance of flow assurance into perspective, is if you're going to -- as I often heard, some of you've heard me say, if you're going to be a cotton farmer in Dawson County, Texas, you better own -- also try to own part of the cotton chain because you got to genuine cotton before it hits the market. And it's the same thing. After we produce the gas, it's got to be collective midstream entity and then take in the market. So we started in on that view when we went public, when first Matador public back in 2012 that it was important over the long run that have an interest in the midstream to be sure you have flow assurance. And that's delivered a lot of benefit to us through time. Now we're not cotton farmers, but I believe it's an apt analogy. Mac Schmitz: Marvin, with that, that concludes our closing remarks. Thank you. Operator: Ladies and gentlemen, thank you for participating today. This concludes today's program.
Operator: Good morning. My name is Stephanie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Trinity Capital's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Ben Malcolmson, Trinity Capital's Head of Investor Relations. Please go ahead. Ben Malcolmson: Thank you, and welcome to Trinity Capital's Fourth Quarter 2025 Earnings Conference Call. Speaking on today's call are Kyle Brown, Chief Executive Officer; Michael Testa, Chief Financial Officer; and Gerry Harder, Chief Operating Officer. Joining us for the Q&A portion of the call are Ron Kundich, Chief Credit Officer; and Sarah Stanton, General Counsel and Chief Compliance Officer. Earlier today, we released our financial results, which are available on our website at ir.trinitycapital.com. Before we begin, please note that certain statements made during this call may be considered forward looking under federal securities laws. Please review our most recent SEC filings for further information on the risks and uncertainties related to these statements. With that, please allow me to turn the call over to Trinity Capital's CEO, Kyle Brown. Kyle Brown: Thank you, Ben, and thanks, everyone, for joining us today. Trinity Capital is experiencing strong momentum right now, and our investors are seeing the benefits from our diversified platform, our internally managed structure and our continued growth. 2025 was a banner year for us. We achieved records in many major operating categories. Our 5 complementary verticals continue to drive real diversification and our internally managed structure creates accretive value for shareholders. Together, those advantages clearly differentiate Trinity in the private credit space. Major highlights from 2025 include excellent operating results with record-setting net investment income of $144 million, or $2.08 per share, a transition of monthly dividends, providing more frequent income for shareholders as well as continued consistency of our distributions. Sustained momentum with our originations engine as we achieved a record $1.5 billion of fundings and $2.1 billion of commitments and significant growth of our managed funds business through the establishment of several co-investment vehicles, which provide new liquidity to the platform and incremental income to Trinity shareholders. We finished the year with an especially strong fourth quarter. Here are some of the highlights from Q4. We delivered $40 million in net investment income, a 15% increase compared to Q4 of last year. Our net asset value grew 10% quarter-over-quarter to a record $1.1 billion. Platform AUM increased to more than $2.8 billion, up 38% year-over-year. We maintained strong credit quality with non-accruals at less than 1% of the portfolio at fair value. Trinity paid a fourth quarter cash dividend of $0.51 per share and announced a $0.17 per month distribution for the first quarter. Trinity shareholders have now been the beneficiaries of more than 6 consecutive years of a consistent or increased dividend. Trinity Capital continues to outperform in key metrics. Our return on equity and effective yield rank at or near the top in the BDC space. Our NAV has grown 33% year-over-year, while our credit metrics have remained strong and consistent. Since our IPO 5 years ago, TRIN stock has delivered a cumulative total return of 109%, far outpacing both the peer average of 70% and the S&P 500's 82% over that same time period. Looking forward, we have an ever-growing managed funds business as well as 209 warrant positions and 130 portfolio companies, which have the potential to provide incremental upside to our shareholders. We have entered 2026 with strong momentum. In Q4, we funded $435 million, bringing full year investments to $1.5 billion, 21% more than the prior year's total. Our investment pipeline remains robust with $1.2 billion in total unfunded commitments as of year-end. As a point of emphasis, 93% of our unfunded commitments remain subject to rigorous ongoing diligence and investment committee approval, while only 7% of these commitments are unconditional. Our originations activity reflects consistent growth in all of our verticals across the Trinity platform, powered by an elite team of originators and underwriters. We are a direct lender. We own the pipeline. We do not depend on syndicated deals, and we have immaterial overlap with other BDCs, all of which give our investors access to a highly differentiated portfolio of investments through our 5 business verticals. All the while, we remain deeply committed and disciplined to our underwriting approach and credit performance, which are crucial to our long-term success. I'd like to share a few thoughts that are newsworthy topics of late regarding AI and the software space. Really anyone saying that AI is going to end software is off base and anyone saying AI will not change software is also off base. The recent overreaction around AI's impact on the software industry is not new to us. We've been dealing with AI-driven disruption for more than 3 years and we've made thoughtful decisions to strategically diversify our portfolio and opportunistically invest in adjacent sectors to the AI space. Enterprise SaaS is currently 9% of our portfolio. Many of those are private equity backed lower middle market companies that have, over the last few years, introduced new AI tools to their offerings. Software and particularly incumbent and trusted software is the means of integrating these new AI efficiencies. The strongest companies continue to adapt and perform well. We're not seeing any weakness in our software investments. The companies with the best management teams, the strongest moats and most versatile strategies continue to separate themselves from the pack. More importantly, we're also not placing bets on individual AI winners and losers. We are proactively marketing our services to SaaS companies that want to on-prem their compute. Our equipment finance business has been active in the space for multiple years and has the ability and experience to provide CapEx financing for data centers, GPUs, CPUs and power generation equipment. We're investing in the picks and shovels that power the entire ecosystem. This is the infrastructure that every AI application depends on regardless of which companies rise or fall in the application layer. We strongly believe that AI versus SaaS debate is not a zero-sum game. We'll continue to keep the portfolio diversified, and our investment approach nimble as we identify new and underserved markets to generate alpha returns for our shareholders. Moving to rate cuts. So far, they've had a little impact on our business. Based on our modeling, additional cuts would likely have a muted effect on our earnings power. Unlike most other lenders, the majority of our loans have interest rate floors set at or near the original levels. So when rates come down, our income does not fall proportionately. In fact, much of the portfolio is already at those floors. Further cuts could actually accelerate early repayments, allowing us to capture prepayment or restructuring fees. And at the same time, lowering rates would reduce the interest expense on our floating rate credit facility, lowering our cost of capital. And lastly, PIK continues to be a nominal portion of our income with less than 2% of our income based on PIK, another one of TRIN's differentiators in the BDC space. We continue to strategically raise equity, debt and off-balance sheet capital to fuel our growth. In 2025, the first quarter of 2026, we closed several co-investment vehicles with leading asset managers, adding liquidity and generating management fees. We also converted a separate vehicle into a private BDC that is actively raising capital. At the same time, we're seeing strong momentum in capital raising efforts for our third SBIC fund, which will provide attractive low-cost leverage and is expected to add more than $260 million of incremental capacity to the platform once scaled. Together, these initiatives demonstrate our ability to thoughtfully grow, expand investment capacity and further diversify our capital base. What we are building is not your typical BDC. Our wholly owned managed fund business oversees third-party capital and generates new income, above and beyond the interest and equity returns from our BDC's portfolio investments. TRIN shareholders benefit from these fees collected by our managed funds business. We are building a platform that can scale while driving up earnings and NAV. We believe our consistent performance is driven by 3 things: our differentiated structure, disciplined underwriting and world-class team. Our 5 complementary verticals, sponsor finance, equipment finance, tech lending, asset-based lending and life sciences allow us to stay diversified while operating squarely within our core competencies. Each vertical has dedicated originators, underwriters and portfolio managers, creating a scalable and highly effective operating model. Structurally, as an internally managed BDC, our employees, management and board own the same shares as our investors, increasing alignment and a shared commitment to consistent dividends and long-term value creation. That structure also supports a premium valuation because shareholders own both the management company and the underlying assets. The management and incentive fees generated through our managed fund business flow directly to the BDC, creating incremental income, enhancing value, fueling growth, all for the benefit of our shareholders. From a talent perspective, we're passionate about fostering a vibrant culture rooted in humility, trust, integrity, uncommon care and continuous learning with an entrepreneurial spirit. Our unique culture enables us to attract, retain the best people in the industry, which fuels our continued growth trajectory. From day one, our objective has been simple, consistently outearn the dividend while growing the BDC, and we continue to execute on that commitment. Trinity is strategically positioned to capitalize on the opportunities ahead, supported by a diversified pipeline, disciplined underwriting, and an expanding managed funds platform. We are not your typical BDC and that differentiation matters. We're building more than a portfolio, we're building a durable, aligned and scalable platform, designed to compound value over time. And as we look to 2026 and beyond, we believe our best days are still ahead. With that, I'll turn the call over to our CFO, Michael Testa, to discuss our financial results in more detail. Michael? Michael Testa: Thanks, Kyle. Our operational and financial performance remained strong in the fourth quarter. We generated $83 million in total investment income, a 17.5% year-over-year increase and $40 million in net investment income or $0.52 per basic share, representing 102% coverage of our quarterly distribution. Beginning in January 2026, we transitioned to a monthly dividend of $0.17 per share, maintaining the same aggregate quarterly payout and aligning the timing of our distributions with the recurring nature of our investment income. Estimated undistributed taxable income is approximately $69 million or $0.84 per share, which we continue to reinvest for the benefit of our shareholders, while maintaining a consistent and meaningful distribution. Our platform continues to deliver top-tier performance, generating 15.3% return on average equity, among the highest in the BDC space. And our weighted average effective portfolio yield remained strong at 15.2% for the quarter despite the declining rate environment. Net asset value per share increased from $13.31 at the end of Q3 to $13.42 at the end of Q4, reflecting accretive capital raises. Full NAV rose 10% to $1.1 billion, up from $998 million at the end of Q3. We further strengthened our capital base by raising $95 million through our equity ATM program during the quarter, at an average premium to NAV of 12%. During the quarter, we also entered into a new secured term loan, extending the maturity profile of our liabilities and further diversifying our capital base. The facility was priced at a spread below our existing revolving credit facility, contributing to an improvement in our overall cost of debt. Additionally, in Q4, we raised $28 million of gross proceeds through our debt ATM program at a 1% premium to par. Our co-investment vehicles continue to enhance returns contributing approximately $3.1 million or $0.04 per share of incremental net investment income benefit in Q4. We syndicated $47 million to these vehicles during the quarter, and as of December 31, we managed $400 million in assets across our private vehicles. Our net leverage ratio remained consistent at 1.18x at quarter end, with strong liquidity, diversified capital sources and capacity across the Trinity platform, we are well positioned to underwrite a robust pipeline, maintain strict credit discipline and deploy capital in high conviction opportunities. To discuss our portfolio performance in more detail, I'll now pass the call over to our COO, Gerry Harder. Gerry? Gerald Harder: Thank you, Michael. Our portfolio continues to demonstrate exceptional strength driven by broad diversification across 22 industries with no single borrower representing more than 3.9% of total exposure. Our largest industry concentration, finance and insurance, accounts for 14.6% of the portfolio at cost and is diversified across 25 portfolio companies. Credit quality remained consistent quarter-over-quarter with over 99% of debt investments performing at fair value. On our 1 to 5 scale, where 5 indicates very strong performance, the average internal credit rating was 2.9, consistent with prior quarters and reflecting the addition of high-quality originations and continued strong portfolio management. Quarter-over-quarter, the number of portfolio companies on nonaccrual remained at 4. During Q4, 2 relatively small debt financings were added to nonaccrual status while 2 prior nonaccrual investments were realized and rolled off. As of December 31, non-accruals totaled $15.2 million at fair value, representing less than 1% of the total debt portfolio. At quarter end, 85% of total principal was secured by first position liens on enterprise value equipment or both. For enterprise backed loans, the weighted average loan-to-value remained consistent at 17%. During 2025, our portfolio companies collectively raised more than $7.8 billion in equity emphasizing the strength of our borrowers and their continued access to capital. Across our 5 business verticals, we're seeing deployment begin to smooth out more evenly, a trend we expect to continue in future quarters. The approximate breakdown of our fundings in Q4 was as follows: 27% to sponsor finance, 25% to Equipment Financing, 20% to Life Sciences, 15% to Tech Lending and 13% to Asset-backed Lending. Looking ahead, our portfolio remains defensively positioned with a strong first lien bias and low loan to values. Our momentum, disciplined underwriting and diversified platform allow us to continue delivering consistent dividends and NAV growth. With a shareholder-first mindset, our team remains focused on building a best-in-class BDC that generates sustained long-term value for our investors. Before we conclude our call, we'd like to open the line for questions. Operator? Operator: [Operator Instructions] Our first question comes from Casey Alexander of Compass Point. Casey Alexander: On most of these calls so far this quarter, we've been talking a lot more defense than offense. But I think Trinity appears to be in a position to play offense. And because of your 5 verticals, your software position appears to be indexed below most of the peer group. So I'm wondering is there an opportunity that is going to be arising for you to take advantage of the turmoil if other platforms are unwilling or unlikely to continue with software loans, is there an opportunity to convert some of those to equipment finance loans where you have a collateralized position on it in front of the enterprise value and thereby earn some better spreads and better risk-adjusted rates of return. Kyle Brown: Yes. Casey, thanks for the question. Yes, we see it that way. I mean, one of the reasons why our percentage of assets in that category is low is because we entered that space really in earnest in the last 2 years. And that's because valuations were significantly too high and pricing was very low. And we decided to enter when we did as valuations started to come down. And we thought that was a great entry point. Our attachment rates could be lower. We could have more aggressive pricing and -- so we are being opportunistic right now. I think, in particular, our kind of sponsor finance, I think, $3 million to $30 million of EBITDA, lower middle market software companies with AI -- that are AI-enabled, it's a massive opportunity. We think there's going to be a lot of consolidation of a lot of these companies that maybe couldn't get to scale. And so with access to the capital markets, with access in our fund management business to private capital, we have liquidity, and we will continue to be opportunistic there. Operator: We'll take our next question from Doug Harter of UBS. Cory Johnson: This is Cory Johnson on for Doug. So I was just wondering, are there any parts of your portfolio that give you any concern or either -- perhaps areas that you've lent to traditionally, but you're a bit more cautious around currently? And are there any verticals that you're particularly looking to lean into a bit more during the time? Kyle Brown: Cory, thanks for the question. So historically, we focus on industries that are emerging that are disrupt -- have disruptive technology, moats around that technology. They are well capitalized. Equity dollars are flowing into that particular industry that has always been part of our underwriting, and that hasn't changed. So our investment philosophy and kind of where we direct dollars continues to evolve and change over time as new and emerging technologies kind of ramp up. And so we'll just continue to see where the market is going, where equity dollars are flowing. And then, of course, with our loans being shorter-term duration and fully amortizing, in many cases, we continue to get paid off where industries are evolving and maybe not receiving as much equity dollars. And so that continues to bleed off in industries that are not getting the attention they used to and new dollars are being deployed into emerging markets. And so that has been our philosophy. That continues to be the philosophy going forward. Operator: We'll take our next question from Brian McKenna with Citizens. Brian Mckenna: Okay. Great. So I know the focus today is continuing to go deeper across all 5 of your verticals. I'm curious, though, and you touched on the deployment environment a little bit, but given the pickup in volatility, there's clearly dislocation across the sector. I mean, would you ever think about leaning into any strategic opportunities here if the environment stays like this. You clearly have a strong and liquid balance sheet. You have access to debt and equity capital. So I'm wondering if this would be a period where we could actually see go from 5 verticals to 6. Kyle Brown: Great question. And Sarah is kicking me no forward-looking statements here. So it's a great point. We are going to continue to be opportunistic. I mean, we are making sure that we have plenty of ample liquidity available to us so that in a market where there is volatility. And I would say most of the volatility that we're seeing so far has a little to do with kind of portfolio volatility, but much more to do with kind of valuation volatility. Our game plan all along has been to make sure that we have liquidity to take advantage of markets when there is less liquidity, less competition, maybe private companies with funds that have reached their duration where we can be opportunistic and jump in there. And so the answer is absolutely yes, and we'll continue to kind of keep our eyes open and be opportunistic as opportunities present themselves. Brian Mckenna: Okay. That's helpful, Kyle. And then one more, if I may. I know growth of the RIA and your third-party asset management business is a big focus area for this year. What are you hearing from these LPs, potential investors in some of these third-party funds with all the focus, all the volatility in and around private credit today. And I'm trying to figure out for Trinity, could this actually be a positive for this business related fundraising, related growth as some of these allocators maybe look to diversify away from some of the larger players in the upper middle markets. And really, as folks look to kind of have more exposure to uncorrelated assets and performance. Kyle Brown: Yes. I mean I personally love the volatility. There has been a massive amount of inflows for years going into just a small number of upper middle market firms and with rates low, they've been able to deploy and deliver decent returns. Well, that's changed. And now we have an opportunity to stand out in a unique way by delivering outperforming results. And I think investors they're going to love that. And we have the ability to generate higher returns, and we've been doing it consistently. And so there's outflows happening. You're seeing in the news often now. I think what we're seeing is more and more interest and more inflows as we continue to build out our fund management business. So I see this as a really great year and opportunity for us to stand out in a unique way in what has been a crowded space for the last 5 years. And so that's what we're hoping to achieve. And as we wrap up kind of SBIC fund and roll into kind of future fundraising, we're really positive on it right now. Operator: [Operator Instructions] We'll take our next question from Erik Zwick with Lucid Capital Markets. Erik Zwick: Just as I take a look at the kind of breakdown of your fourth quarter originations, both in terms of absolute amount in dollar terms more weighted towards the existing portfolio, which I think is just a testament that you selected solar companies to invest in, they're growing and have more needs. Curious looking towards the pipeline today? Is the mix still weighted maybe more heavily towards existing portfolio needs versus new needs and kind of curious also what that might mean in terms of your perception of the quality of new investments that you're looking at, whether tighten spreads or more competition has impacted the attractiveness there? Kyle Brown: Yes. I think over the last year, we've been focused on new logos and new investments, and that has been the majority of our deployment and then I think our portfolio is unique. When we are deploying to our current portfolio, a lot of that is going to be equipment financing facilities where they have multiple draw schedules. And if they're hitting their milestones and growing, then we're building out more capacity or if they're delayed draw term loans, these companies have reached some, again, hit milestones, hit hurdles and earned their ability to receive more capital. So it's all new investments to growing companies, and that's the vast majority of our fundings, and that's not going to change. I don't think you guys want to add anything to that? Ben Malcolmson: Yes. I mean, Erik, our backlog, as you've seen, it's over $1 billion, 1/3 of that is to our equipment channel. So as they build out their manufacturing lines, they're going to fund alongside that. And a small percentage of that $1 billion is subject to legal miles -- legally-binding -- most of it is subject to milestones or additional due diligence. Michael Testa: I think it would be fair to the number of -- the number of new logos in Q4 was relatively small, right? And so I think that's idiosyncratic. So I don't expect that to continue at that level. But we're pleased to deploy to those existing portfolio companies. Erik Zwick: I appreciate the commentary from all of you there. Just turning to credit quality a little bit. It's nice to see that nonaccrual still remain very low and well below peer averages, as you mentioned, did have 2 realizations, but then 2 new credits added to the nonaccrual. To the extent that you can comment on ZUUM and 3DEO. Anything noteworthy in their developments there that have been moved to nonaccrual and then how you are approaching working with them to get them through the difficulties. Ronald Kundich: Thanks, Erik. This is Ron. Yes, those two clients, those are legacy borrowers. They've been in the portfolio for quite some time. They're a bit storied and at the highest level, they got in positions where they stop making payments in Q4. So they're put on the nonaccrual list. We're actively working them as we speak. And we expect to have -- as of today, we'll see what the outcomes are. Operator: We'll move now to Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Gerry -- I think it was Gerry or Ron. You mentioned that you're seeing portfolio companies raise more capital equity. Can you give a little color? Is this private equity sales or these follow-on investments from existing investors, are these things mostly or tangentially related to AI. Gerald Harder: Well, it's all of the above, right? We've got some portfolio companies accessing the public markets. We've got other portfolio companies raising through their VC or PE sponsors. I don't know that within our portfolio, I would say much is directly related to AI. Ronald Kundich: I mean, yes, I've nothing to add to that. Kyle Brown: Yes. This -- I mean, I think what you're seeing is just what you've been seeing for years now, which is the VC market is robust. There's nearly $100 billion deployed in Q4. And so the companies we're lending to, they're growing, they're raising capital and so it's just -- it's really not a surprise that they were able to raise it with the size of the market where it is today. Christopher Nolan: Yes. The only issue with that point is 70% of the VC dollars going towards AI or AI-related stuff. So it seems to be pretty concentrated. Michael Testa: Yes, I would agree with that, Chris, except if you think about it, right, because our portfolio, we enter at that growth stage, right? So we're entering in businesses that are actively growing revenue base, right, and not sort of new entrants into a space. So I think maybe some of the newer VC dollars are going into AI-driven companies, but companies that were founded, say, 5 years ago that are now in growth stage and are raising equity, that's more what the trend portfolio looks like. Christopher Nolan: Great. And then as a follow-up question, given all the turmoil that's affecting software and things like that, is there any consideration of having the entire investment portfolio valued more frequently than currently is? Kyle Brown: Yes. I mean the answer is no. And I think maybe that would make more sense if you had a significantly larger exposure to enterprise SaaS. Our exposure is relatively low and it's relatively new. With -- in every 1 of those deals already had an AI filter and underwriting filter put into it. So meaning we are looking at these companies and understanding their moat, right, understanding how and what their AI road map looks like and so the investments we've been making, I mean, 2.5 years ago, they called the machine learning, and that's what we were looking at. And now it's called AI, right? And so I think AI will continue to evolve, and it will continue to be tools that a lot of our companies are utilizing, but it's not necessarily changing. And we have not seen within our portfolio any detriment to those companies. Michael Testa: Yes. And I would add, Chris, as Kyle said in his prepared remarks, right, enterprise software is about 9% of our assets. About 3/4 of that is originated by our sponsor finance team, so these will be 18 months or newer cohorts and backed by private equity, where we're in front of their dollars, right? They've got significant cash in these businesses. So from a valuation standpoint, we feel good about where we are in a first lien role there. Now has their equity valuation changed? Probably, right? But from our debt standpoint, we don't see degradation in the debt valuations in that case. Operator: We'll take our next question from Mickey Schleien with Clear Street. Mickey Schleien: Most of the high-level questions have been asked. Just one high-level question on my behalf. We see different ways of defining portfolios in terms of industry segments across the space. I do see your software allocation that you mentioned of, what was it, 9.3%? Is there software buried elsewhere in the portfolio or is that the total amount? Kyle Brown: Yes. I mean the answer is that is the total amount of enterprise software companies that we are currently invested into. Michael Testa: Yes. I mean that's the concentration of where Software-as-a-Service business model, right? Certainly, within other types of portfolio companies, they're going to be using software and AI and machine learning tools. And so yes, there is some embedded inclusion there. But this is something that as we underwrite these companies, we're keenly aware of that they've got to show how this AI revolution is accretive to them and not an imminent threat in underwriting. So yes, pure SaaS, 9.3% embedded elsewhere, sure. I couldn't tell you exactly where and how much, though. Mickey Schleien: I understand. Could you also give us a sense of the proportion of the portfolio that's invested in second lien investments? Michael Testa: Yes, it's 15%. I think that was in the prepared remarks. So we're going to be 85% attached to first lien on enterprise, equipment or both. Mickey Schleien: Terrific. And lastly, was there anything nonrecurring in interest expense for the quarter because interest expense went up more than your debt balances and the incremental debt was at lower cost. So I'm just trying to triangulate that. Michael Testa: Yes, Mickey, this is Mike. There was a tick up in early repayments this quarter. So you'll see there was some acceleration of OID included in interest income. Mickey Schleien: I was referring to interest expense. Michael Testa: On the expense side? No. I mean, I think you'll see that tick up with average outstanding loan balance of our revolver. But yes, on the expense side, it's been -- we actually improved our cost of debt this quarter with the secured term financing. But that's going to be fluctuated. The floating rate is the revolver in the term loan. Operator: At this time, we've reached our allotted time for questions. I'll now turn the call to Kyle Brown for any additional or closing remarks. Kyle Brown: Well, on behalf of the Trinity Capital team, thank you for joining us today. Now we appreciate your continued interest and investment in Trinity Capital, and we look forward to updating you on Q1 results during our next earnings call on May 6. Have a great day. Thanks. Operator: Thank you. This brings us to the end of today's meeting. 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Operator: Good day, and thank you for standing by. Welcome to the Dine Brands Fourth Quarter and Fiscal Year 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. And now I'd like to introduce your host for today's program, Matt Lee, Senior Vice President, Finance and Investor Relations. Please go ahead, sir. Matthew Lee: Good morning, and welcome to Dine Brands Global's Fourth Quarter and Fiscal 2025 Conference Call. This morning's call will include prepared remarks from John Peyton, CEO and President of Applebee's; and Vance Chang, CFO. Following those prepared remarks, Lawrence Kim, President of IHOP, will also be available, along with John and Vance to address questions from the investment community during the Q&A portion of the call. Please remember our safe harbor regarding forward-looking information. During the call, management will discuss information that is forward-looking and involves known and unknown risks, uncertainties and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release and 10-K filing. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We will refer to certain non-GAAP financial measures, which are described in our press release that is available on Dine Brands' Investor Relations website. With that, it's my pleasure to turn the call over to Dine Brands' CEO, John Peyton. John Peyton: Good morning, everyone, and thanks for joining us today. As usual, today, we'll discuss Dine's fourth quarter and full year 2025 financial results. I'll share some key insights into what we learned in 2025 and how we'll leverage those learnings to extend our strategy in the year ahead, and Vance will then discuss our financial results and 2026 guidance. Our brands' 2025 performance improved compared to 2024, and that was no accident. It was driven by deliberate execution against our clear set of priorities, enhancing the guest experience through operational improvements, strengthening our marketing to better connect with guests and advancing menu innovation and everyday value platforms across our brands. In parallel, we, along with our franchisees, continue to invest in the bricks-and-mortar experience of our restaurants through dual brand openings, supporting Applebee's remodels and improving the look and feel of our company-owned portfolio. These initiatives built trust with our guests and started translating into tangible results with improving unit level performance driven by positive sales and traffic trends and higher guest engagement scores across our brands. This progress came amid a still challenging consumer environment with guests remaining highly intentional about how they spend their discretionary dollars. Value remains a critical driver in that decision-making. Of note, in the fourth quarter, both the casual and family dining categories experienced some softening in comp sales and traffic as we moved into December. Overall, the value mix remained steady for both brands with Applebee's at 34% and IHOP at 20% despite IHOP's value menu increasing from 5 to 7 days. Over the past few years, we've been intentional in evolving how we define and deliver value, ensuring that we have compelling everyday offerings that are available at all of our brands anywhere, anytime. For us, value is not simply price. It's an all-encompassing experience that includes portion size, food quality and most importantly, the overall guest experience. We refer to that as the vibe. And that focus on the vibe, the food, the service, the atmosphere represents a meaningful opportunity to drive traffic and strengthen brand relevance. We believe this approach positions us well for sustained positive performance in 2026 and beyond. And as we look to 2026, we're staying the course. The progress we made throughout 2025 validated our strategy and our focus is on disciplined execution, continuing to drive steady improvement and building on the positive momentum we established. So with that, I'll walk through our financial results. For the full year, we generated $219.8 million of adjusted EBITDA compared to $239.8 million last year. In Q4, adjusted EBITDA was $59.8 million compared to $50.1 million in the same quarter last year. Adjusted free cash flow was $62 million. And in terms of comp sales, Applebee's comp sales were positive 1.3% for the full year compared to 2024's comp sales of negative 4.2%. And in Q4, Applebee's reported negative 0.4% in comp sales. IHOP had full year comp sales of negative 1.5% compared to comp sales of negative 2% in 2024. For the quarter, IHOP posted comp sales of positive 0.3%, driven by positive traffic. So now I'll share some updates across our portfolio, starting with Applebee's. In 2025, Applebee's returned to positive sales growth as we sharpened our focus on value, marketing and the guest experience. While the environment remained competitive, performance was in line with our expectations, underscoring our confidence in the strategy and momentum that we're building. In the fourth quarter, the 2 for platform represented approximately 22% of transactions, supporting both off-premise demand and check growth. The new Grilled Cheese cheeseburger launched in Q4 was our highest selling stand-alone burger ever and our highest selling 2 for burger of all time, reinforcing the strength of the platform. Also, our Ultimate Trio, which we launched in August, remained the best-selling appetizer of Q4, representing approximately 11.5% of transactions. In January, we launched our O-M-Cheese Burger available on both the 2 for platform and also individually at $11.99. This new burger was an instant hit and is now the newest highest-selling burger of all time on our 2 for platform. These launches highlight the momentum of our only at Applebee's menu innovation strategy and reflects strong guest demand for menu offerings that can't be replicated at home. Off-premise was a source of growth in 2025 as guests increasingly chose the convenience of eating with us outside the restaurant. In the fourth quarter and full year, off-premise comp sales increased 6.2% and 6.5%, respectively, with delivery up 10.5% for the year. On the digital marketing and social media front, Applebee's delivered year-over-year growth across key platforms in 2025, outperforming our organic social growth targets. Social media accelerated throughout the year, highlighted by an 84% increase in posting cadence and 107% lift in engagement in the back half of the year compared to the front half. Additionally, Club Applebee's, our data-driven personalization program is driving higher engagement among members. Looking ahead to 2026, we'll focus on core fundamentals that directly enhance the guest experience and drive profitability. Specifically, we're emphasizing manager visibility in the dining room, which is linked to higher guest satisfaction and more consistent execution and improved off-premise order accuracy, a key lever for cost reduction and repeat business. We're confident that the Applebee's strategy is working, and we'll continue to build on this progress. Since the start of the year, we've seen positive sales trends despite the severe weather, which position us well as we look to carry 2025's momentum into 2026. And now for IHOP. In 2025, IHOP's back to Basic strategy delivered meaningful progress and traffic is the clear highlight. Traffic improved throughout the year. And in the fourth quarter, IHOP delivered positive traffic and sales, outperforming Black Box in both metrics. Notably, this performance came during a year when the family dining segment remained under pressure. IHOP outperformed Black Box in traffic every month of the year, and that outperformance accelerated meaningfully in the fourth quarter. This is a strong signal that guests are responding positively to IHOP's approach and breakthrough marketing. In September, we launched the IHOP value menu, an expanded and rebranded version of House Faves, now available 7 days a week. This gives guests greater confidence that they can access meaningful value any day of the week while preserving a balanced menu mix. At IHOP, value is designed to drive traffic, not replace full margin items, and that's exactly what we're seeing. The value menu is drawing guests into the restaurant. And once they're here, guests are also choosing premium offerings such as our breakfast, combos and LTOs, like our pumpkin spice and coffee cake pancakes. As a result, average check comp improved 150 basis points during Q3 to Q4. Off-premise also contributed to IHOP's steady sales growth and a positive 4.5% comp sales increase in Q4. Targeted promotions through third-party supported delivery, resulting in delivery comps that reached low double digits throughout much of the quarter. These efforts extended the reach of our platform through digital channels and allowed us to meet guests where they are. Marketing and digital engagement also kept IHOP top of mind for our guests throughout the year. Social impressions and views increased significantly and overall engagement increased over 300% year-over-year. These results reinforce IHOP's relevance with younger guests and reflect the effectiveness of our investments in social media to reach broader audiences. Operationally, we remain focused on strengthening the fundamentals and in partnership with our franchisee committees, we are constantly evaluating different ways to improve efficiency and execution. Recall that at IHOP, we completed a full rollout of our new POS and handhelds in 2024. These tech enhancements, combined with process improvements supported better throughput and guest flow, delivering a roughly 7-minute or 12% improvement in table turn times versus 2024. At the same time, guest complaints declined for the second consecutive year, underscoring progress in the in-restaurant experience. And although we ended the year slightly below our comp sales expectations, the positive trajectory for IHOP continued into January despite the impact from the winter storm. As we move into 2026, our focus at IHOP is on disciplined, consistent execution, driving traffic through accessible value and culture-driven marketing, protecting margins through balanced menu mix and continuing to improve restaurant operations to deliver an incredible guest experience every day. Now at Fuzzy's, we saw encouraging progress beginning in Q3 that extended into Q4 and rolled into 2026 as different initiatives around our key priorities, improving the technology, engineering a more profitable menu and enhancing the in-restaurant experience started to gain traction. Enhancements to our off-premise offerings, including a revamped online ordering platform and expanded third-party delivery partnerships contributed to modest improvements in sales and traffic, with the brand outperforming the Black Box comp set in sales every month in Q4. Additionally, Fuzzy's expanded its Houston footprint by opening 2 additional Fuzzy's Taco and Mark's fast casual plus prototypes. This new hospitality service model is already encouraging higher beverage attachment and driving a noticeable shift toward premium Taco category orders. And now turning to international. We ended the year with 32 international dual brand restaurants, an increase of 14 for the full year. Dual brands are proven to be an effective, capital-efficient way to expand our footprint and introduce our brand into new markets with meaningful white space across our core international regions of Canada, Mexico, Latin America and the Middle East, we see our dual brand platform as an opportunity to drive international growth over time. And to speak more about development, we accelerated the pace of total gross new openings with 80 new restaurants globally in 2025 versus 68 in the prior year. Restaurant openings remain a key growth lever as we head into 2026. From dual brands and the Applebee's Lookin' Good remodel program to targeted investments in our company-owned portfolio, we're working to strengthen the physical experience of our brands and improve unit level performance. So I'd like to provide an update on dual brands. As we discussed last quarter, dual brands represent a meaningful long-term opportunity for net unit growth. In 2025, we established the foundation, proving out the model, refining the operating playbook and building confidence with our franchisees. The results further reinforce our conviction on the importance of dual brands. As of today, we've opened 32 dual brand restaurants in the U.S., including 3 company-owned locations with an additional 9 dual brands under construction. These restaurants continue to outperform single brand locations, delivering approximately 1.5 to 2.5x higher revenue. We continue to see evidence that the dual brand concept is highly complementary with balanced performance by both brands across all 4 dayparts. At the same time, we're identifying opportunities to streamline operations, including reducing table turn times and refining kitchen layouts that improve throughput and efficiency. Based on feedback from our franchisees, we continue to expect payback periods of less than 3 years. Franchisee interest remains strong and the pipeline is expanding as operators see the benefits of the model firsthand. Based on our current pipeline, we expect to achieve at least an incremental 50 dual brand openings in 2026, bringing us close to 80 domestic dual brand restaurants by the end of this year. As we move into 2026, our focus with dual brands is on disciplined expansion, scaling thoughtfully, applying what we've learned and ensuring we can deliver consistent results as the concept grows. Dual brands are not the right solution for every market, but where they make sense, they are powerful incremental unit growth and profit drivers for us as well as the franchisees. Beyond dual brands, we also made meaningful progress with the Applebee's Lookin' Good remodel program. We ended the year with 103 remodeled restaurants, more than our initial goal, and early results are encouraging with, on average, mid-single-digit lifts in sales when remodels are combined with marketing as well as improvements in operations and the overall guest experience. Refreshing the physical environment remains an important part of improving brand relevance and guest experience. And based on this progress, the remodel program continues in 2026 with the goal of remodeling another 100, if not more, locations this year. Development is an increasingly important part of our growth story. The progress we made in 2025 strengthens our foundation and positions us well to drive steady, disciplined growth in 2026 and beyond. And so now I'll turn the call over to Vance. Vance Chang: Thanks, John. We made meaningful progress in 2025. Applebee's returned to positive comparable sales for the year, and IHOP exited the year with 2 consecutive quarters of positive traffic. We also completed our debt refinancing in June and continue to return capital to shareholders, all while maintaining a strong balance sheet. On the top line, consolidated total revenues increased 6.2% to $217.6 million in Q4 versus $204.8 million in the prior year, primarily driven by the timing of when we took back restaurants from franchisees. This was offset by a decrease in franchise revenues, primarily due to the take back of restaurants and closures. For the full year, we generated $879.3 million in total revenues, which was 8.2% higher than the prior year, resulting from the timing of when we took back company restaurants, partially offset by a decrease in franchise revenues from the restaurants taking back and a decrease in rental income. Excluding advertising revenues, franchise revenues in Q4 decreased 2.8%. For the full year, franchise revenues, excluding advertising revenues decreased 3% due to the decrease in IHOP domestic same-restaurant sales, the company taking back restaurants from franchisees, closures and merchandise sales. Rental segment revenues for the fourth quarter of 2025 decreased compared to the same quarter of 2024, primarily due to lease terminations and the impact of company acquired IHOP restaurants in March of 2025. G&A expenses were $51.5 million in Q4 of 2025, down from $52.3 million in the same period of last year, primarily driven by the recovery of fees from the franchisee. We ended the year with $203.8 million, up from $196.7 million last year due to an increase in compensation-related expenses, predominantly incentive compensation and professional services fees, partially offset by the fee recovery. Adjusted EBITDA for Q4 of 2025 increased to $59.8 million from $50.1 million in Q4 of 2024. The increase in adjusted EBITDA for Q4 2025 includes the timing of national advertising fund benefit. Adjusted EBITDA for 2025 decreased to $219.8 million, down from last year's $239.8 million. Our 2025 EBITDA was unfavorably impacted by $10 million from our company-owned restaurants due to the investments and transitory costs we've discussed previously. Adjusted diluted EPS for the fourth quarter and full year of 2025 was $1.46 and $4.45, respectively, compared to adjusted diluted EPS of $0.87 and $5.34 for the fourth quarter and full year of 2024, respectively. Now turning to the statement of cash flows. We had adjusted free cash flow of $61.5 million in 2025 compared to $106.4 million for the same period of last year, driven by company restaurant operations, including restaurant CapEx and the launch of our remodel incentive program. CapEx for 2025 was $35.6 million compared to $14.1 million for 2024. The higher CapEx includes the cost from our company-owned restaurants, of which 70% is related to deferred maintenance and remodeling costs and 30% is related to dual brand conversion costs. We finished the fourth quarter with total unrestricted cash of $128.2 million compared with unrestricted cash of $168 million at the end of the third quarter. Regarding capital allocation, we returned $92 million of capital to shareholders in 2025 through buybacks and dividends. Due to the significant discount in our stock price, on our Q3 2025 call, we committed to repurchasing at least $50 million of shares during Q4 of 2025 and Q1 of 2026. In Q4, we repurchased $31 million, which was slightly over 7% of our shares outstanding. For the full year, we bought back approximately 2.4 million shares or 15% of our shares. We continue to believe our shares are undervalued and remain committed to our goal. In 2025, Dine System sales were approximately $7.8 billion, demonstrating the scale and size of our brands. Applebee's 2025 same-restaurant sales increased 1.3% year-over-year. Average weekly franchise sales per restaurant in 2025 were $54,300, including approximately $12,400 from off-premise or 23% of total sales, of which 11.8% is from to-go and 11% is from delivery. Off-premise saw a positive 6.5% lift in comp sales in 2025 compared to the same period last year. IHOP's 2025 same-restaurant sales were negative 1.5%. Average weekly franchise sales per restaurant in 2025 were $38,700, including $8,000 from off-premise or 21% of total sales, of which 7.5% is from To Go and 13.1% is from delivery. Turning to commodities. Applebee's commodity costs in Q4 increased by 0.5% and IHOP commodity costs increased by 3.5% versus the prior year. For the full year, Applebee's commodity costs increased 0.1% due to inflation, while IHOP saw a 6.4% inflation, primarily driven by the higher egg prices in the beginning of 2025. Excluding eggs, IHOP's commodity inflation was 3%. Our supply chain co-op CSCS, expects commodity costs in 2026 at mid-single digits for Applebee's and low single digits for IHOP. The primary driver for both brands commodity costs is higher beef prices, including the lapping of favorable beef contracts at Applebee's and the impact of tariffs more broadly on our market baskets. Our franchisee health remained resilient. Our most recent quarter indicates an improvement in both margin percent and dollars for our franchisees, driven by improved sales and cost management. CSCS continues to work across both systems to identify additional cost savings opportunities and support restaurant profitability initiatives through both operational improvements and input costs. In 2025, we implemented projects resulting in over $46 million of annualized savings across both systems, and we continue to partner with CSCS to leverage our scale and make progress on our cross-functional restaurant profitability initiatives. Lastly, our company-owned portfolio remains instrumental in strengthening brand performance and supporting the overall health of our system. Operating these restaurants also helps us maintain a presence in key markets while providing us the ability to reinvest directly in the business, test and refine initiatives and create proof points that can scale across the system, all while maintaining our asset-light business model. At the end of 2025, we operated 72 company-owned restaurants, including 2 new dual brand restaurants we just built, just about 2% of our system. In 2025, we completed 14 remodels and 2 dual brand conversions. Given the positive results we're seeing from these investments, in 2026, we expect to remodel approximately 23 restaurants as well as complete approximately 8 dual brand conversions. While we invest in the physical aspects of the restaurants, we are seeing sequential improvements with key operational scores such as reduced guest complaints and improved table turns since we have taken over the restaurants. Our approach and focus remains the same, which is to improve performance, strengthen brand fundamentals and ultimately refranchise these locations at the right time. Before turning the call back over to John for Q&A, I'd like to share our financial guidance for 2026. On development, we anticipate that we're moving closer towards a period of returning to combined net positive unit growth for our domestic Applebee's and IHOP brands. It's also important to note that the average unit sales of new restaurant openings are greater than older closed restaurants and it's not a 1:1 ratio. For the Applebee's brand, we're expecting 15 to 5 net fewer domestic restaurants. This reflects an increase in gross openings from both stand-alone and dual brand openings, offset by a similar amount of closures as prior years. For the IHOP brand, we're expecting between 10 net fewer domestic restaurants and 10 new domestic openings. This reflects continued growth of stand-alone locations, nontraditional and dual brand locations, offset by expected closures as a result of natural expirations of franchise agreements. In 2026, we're expecting domestic system-wide comp sales for Applebee's to range between 0% and 2%. The comp sales range reflects current trends as well as our ongoing focus on menu and bar innovation, marketing optimization and growth in our off-premise channel. At IHOP, we're expecting domestic system-wide comp sales to range between 0% and 2%. The comp sales range reflects current trends and the continued evolution of our IHOP value menu, check driving initiatives and increased engagement across channels. We're forecasting a G&A range of $205 million to $210 million, including noncash stock-based compensation and depreciation of approximately $35 million. This reflects a slight year-over-year increase primarily tied to investment in our dual brand initiative, given the strategic rationale and strong results we're seeing. On EBITDA, we're guiding to a range of $220 million to $230 million. Our outlook reflects the positive trends in our franchise business and modest improvement in our company-owned restaurants, which is based on our existing portfolio. To the extent portfolio changes, we'll update our shareholders. We anticipate 2026 CapEx to be in the range of $25 million and $35 million, which is slightly lower than 2025. Our CapEx reflects continued investment in our company-owned restaurants, including capital for dual brand conversions. With that, I'll hand it back over to John. John Peyton: Thanks, Vance. I'll close just with a brief recap. 2025 was a meaningful improvement for all of Dine, rooted in strong partnerships with our franchisees, driven by focused priorities across our brands and executed against clear long-term goals to generate value for the future. We will remain disciplined with capital allocation, accelerating share repurchases to capitalize on what we see as a meaningful valuation discount. Given the strong start to Q1, we're optimistic for the year ahead and achieving additional growth, led by improved comp sales, improved traffic and net unit development. And so with that, I will turn the call over to the operator for questions and answers. Operator: [Operator Instructions] And our first question for today comes from the line of Jeffrey Bernstein from Barclays. Jeffrey Bernstein: My first question is just on the comp trends. You seem encouraged by the strengthening fundamentals of both brands. I know both brands fell short of, I guess, the sell-side consensus for the fourth quarter comp, but I'm assuming that's just us perhaps not modeling it very well. I'm just wondering how the fourth quarter compared to your internal expectations? And then just to clarify, I want to make sure that the first quarter, I think you said strong start at both brands despite the weather. So is it fair to assume both brands are running within that flat to plus 2% that you guided to for the full year? John Peyton: Jeff, it's John. Vance will take you through the comp trends in the first quarter. Vance Chang: Jeff, this is Vance. For both of our brands, the momentum that we saw, we talked about in Q3 continue to build into Q4. But as you noticed with the best of the industry, we did experience some temporary softening in December. So that's the inter-quarter trend. But we're now seeing that momentum building back up in Q1 despite the winter storms and both brands have recovered to the pre-winter storm trend of positive trajectory, which allows us to provide the guidance that we just did. Jeffrey Bernstein: Understood. So it's safe to say that both are now positive and within that 0 to plus 2% despite the inclement weather? John Peyton: That's correct. Jeffrey Bernstein: Understood. And then my follow-up, Vance, the share repurchase, you talked about the acceleration in '25 versus '24. I think it was north of $60 million in '25, which, like you said, I think is like 15% of the market cap. I think you had already implied that between the fourth quarter and the first quarter, you're looking at a combined $50 million, which would leave, I guess, $20 million for this first quarter. Just wondering what your plans are for full year '26 with your view that such a significant valuation discount, how we should think about the share repurchase plans for the full year '26? Vance Chang: Jeff, our capital allocation priority is the same. We're going to invest organically to drive dual brand development to drive company restaurant improvement. But a key part of it is capital return, and we are net buyers at this price. So we're going to continue that buyback program as long as we believe there is a discount in our share price versus the price where we think the company should be. Operator: And our next question comes from the line of Dennis Geiger from UBS. Paul Gong: This is Paul on with Dennis. And my first one is just wondering if you guys have noticed any change in consumer behavior by different income or age cohort. And I think I recall last quarter, you guys mentioned there's some higher income shifting in -- some lower income shifting out. Just wondering if you are still seeing that happening in fourth quarter and maybe into first quarter? John Peyton: Paul, it's John. I can answer that on behalf of Applebee's and IHOP because we see very similar consumer behavior in both brands. The way I would characterize the consumer broadly for 2025 is that they were looking for both the value and the vibe. And by value, we mean, obviously, the price of the item, but also the taste, the quality, an abundant serving and most importantly, the vibe, which is a really good service. And we see that trend continuing to '26. In terms of specific consumer behavior, it was pretty consistent through all 4 quarters of last year. The value portion of tickets at Applebee's was about 1/3, and that number was about 20% at IHOP. And you're correct, of all of our cohorts, both brands saw growth in the higher-income guests. The other income categories were relatively stable. And then both brands also attracted new guests in the fourth quarter, which we attribute to our product innovation and our marketing. On the Applebee's side, that would be the Grilled Cheeseburger and the Ultimate Trio via 2 for $25 and at IHOP, the everyday value menu expanding to 7 days a week and all the promotion we had behind that. Paul Gong: Great. And then just on the dual brand openings, I think you guys talked about at least 50 in 2026. And I think the net opening between the 2 brands is about maybe down 25 to plus 5 units. Is that correct? And does that imply that there's going to be about like 45 to maybe 75 total closures? And how should we think about development and closures going maybe a little bit beyond 2026 based on the current projections and pipeline? John Peyton: Sure, Paul, it's John again. I'll take that in terms of the development strategy. And then perhaps, Vance, you can follow up with more detail about the net numbers. So when it comes to development, our strategy the last couple of years has been to make sure that we have multiple products available to our franchisees and to other developers so that we have the right product for the right franchisee in the right market. And at this point, of course, that includes the dual brands. It also includes individual Applebee's and IHOPs. And it includes both new builds and conversions. As we've mentioned in the past, more than 80% of new IHOPs are actually conversions. And so as we look at our total pipeline that's been accelerated by our dual brands, as you referenced, we see an inflection point coming where we get to positive net unit growth sometime in the next 12 to 24 months. And that's fueled certainly in part by the interest in the duals and the pipeline that we're building. Vance, can you speak more specifically to the unit count question and the closures that Paul referenced? Vance Chang: Sure. Paul, good to hear from you. So the way we think about closures, we've said this before, for a system our size, we typically see closures in the 2% to 3% of our portfolio in that range. So you can probably model it the same way going forward. That closure rate hasn't changed dramatically. In fact, it probably in the next few years, it should come down primarily because of, one, the dual brand possibility; two, the natural expiration of the franchise agreement is going to come down over the next few years. So we see that. But aside from that, I think the other side of the equation is opening, so you can net out the math to get to the net numbers you're talking about. And so that's -- for this year, globally, I think we opened 80 restaurants this year, and that number will continue to go up as we build our dual brand pipeline. John Peyton: And specifically, Vance, just to connect that last dot is that the closures are expected to decline because the dual brand is now serving as a mechanism to "save" lower revenue restaurants that might have otherwise closed. But now that they can add the second brand, it puts them back into a healthy space. Operator: And our next question comes from the line of Brian Mullan from Piper Sandler. Allison Arfstrom: This is Allison Arfstrom on for Brian Mullan. Curious what you're seeing at IHOP with the changes on value on the weekend. Is it bringing on the weekend working for franchisees? Or any other color would be helpful there. John Peyton: Allison, that sounds a good question for Lawrence. Lawrence Kim: As in all promotions and programs, we partner closely with our franchisee partners before bringing a program like that to life, and that is in particular, even with the everyday value menu. And as we converted the House phase, which is a Monday through Friday program into the everyday value menu, which launched this past September, we obviously tested this prior in key several markets to understand the incidents on the weekend impact. And the great news is that even on the weekends, our incidents remained at around 10% of total checks even as expanded from Monday to Friday into the weekend. And so in partnership with our franchisee partners, we've continued to maintain momentum of the everyday value menu. We're actually extending it all throughout 2026, and we're excited for the momentum it's bringing, especially in regards to traffic. Operator: [Operator Instructions] Our next question comes from the line of Nick Setyan from Mizuho. Nerses Setyan: In 2025, obviously, there was a big pivot towards value at both brands, which stabilized to accelerated traffic trends. How are we thinking about 2026? Is sort of the cadence of value? Is it enough now? Is there anything that we need to do more, whether it's in value or in addition to value? How are we thinking about incremental comp drivers in 2026? And then the second question is just on the operating cash flow side, any reason why it shouldn't be in line to above 2025 given the EBITDA guidance? John Peyton: Nick, it's John. I'll address Applebee's first and then Lawrence will take IHOP and Vance will take cash flow. So our strategy for Applebee's is to, number one, have fewer promotions in market for longer periods of time. And so in the past several years, we might have 10 to 12 different promotions in a given year. In '26 and at the end of '25, we're focused more on 6 to 8. And our primary message is the 2 for $25 menu, which on its own accounts for 22% of our tickets. We think that communicating that program more consistently and more often is exactly what guests are looking for in 2026, just as they were in 2025. The second component of that is that as we communicate 2 for $25 each quarter, we will introduce a new a new entree and a new appetizer so that we also have exciting new news and innovation along the way. And so as an example, when we introduced the Grilled Cheese Cheeseburger in Q4, that became our #1 selling burger of all time and drove the performance that we saw toward the end of the year before we slowed in December. And in January, as Vance referenced, we introduced the O-M-Cheese Burger, which if you haven't seen it, is a burger cut in half and served in a skillet of bubbling cheese. And that quickly became our #1 best-selling burger ever, blew up on social media and has been a big driver of our performance in Q1. And so our strategy for the year is to leverage 2 for $25, and we have other exciting new entrees like the O-M-Cheese Burger planned for the rest of the year. Lawrence? Lawrence Kim: Yes. And similar to Applebee's, for IHOP, we also, in the same light, have fewer promotions with longer period times in terms of sustaining those promotions. As you know, our current primary messaging is around the $6 everyday value menu, and you're going to continue to see that trend. But as mentioned in a prior call, we are complementing that with our barbell strategy. And this is including other promotions, for example, like our latest bottomless pancake promotion, which we tied in with a very strong cultural moment with fantasy football. But also, we have a great lineup of innovation. And you have to complement that with new news to balance that equation of value plus innovation and bring that excitement and awareness to new consumer bases as well. So we're constantly listening to our guests, looking at different trends. And coming into 2026, we're going to complement our everyday value menu with, for example, a new proprietary coffee because you got to have the best coffee in the world together with the best pancakes in the world. But also, we're going to be innovating around our omelet platform. So this March, we're also going to introduce a new barbecue pulled pork omelet, which we're excited because it's something our guests have been asking for. And then, of course, as we go further into the year, we have a whole lineup of innovation to balance that. But we're staying extremely focused and vigilant in terms of our key strategies of maintaining value as the core and driving that and complementing that together with innovation. Vance Chang: Nick, this is Vance. Good to have you back, man. So for free cash flow -- in this quarter, we -- there were some timing issues. So we actually had to pay 2 quarters of interest expense. And that's part of our -- that's impacting the cash flow. We also had higher remodel incentives. And obviously, you saw the nonoperating part, the CapEx and some of the working capital changes that's impacting this year's cash flow. But we do expect next year to be back on a more normalized basis. And given the higher EBITDA guidance, we expect cash flow to improve next year as well. Operator: And our next question comes from the line of Brian Vaccaro from Raymond James. Brian Vaccaro: Just back to the fourth quarter comps. Could you walk us through the traffic and check dynamics for each brand? John Peyton: Sure, Vance can do that. Vance Chang: So fourth quarter, let me see -- so we had negative 0.4% comp for Applebee's. Check was up about 3% and then the rest was traffic for Applebee's. IHOP comp was 0.3% and then our check was slightly down, call it, flattish, and then the traffic was up. So that's the makeup. Brian Vaccaro: All right. And in the quarter -- or in the year of 2025, the company operations, I think the EBIT loss was about $8 million, which I think was a little bit ahead of your expectations. But I'm just curious, what kind of an EBIT loss have you layered into your '26 EBITDA guidance for company operations? Vance Chang: Brian, so -- basically -- so you're talking about EBIT and then we kind of -- we're thinking about it in terms of EBITDA with a similar trend. But basically, we're expecting company restaurant portfolio to be at a breakeven level for '26. And then 2025, if you're backing out depreciation, company restaurant and backing out some of the onetime stuff, transitory cost type of things, company restaurant portfolio was negative $10 million of EBITDA. So we're expecting to see a meaningful swing in performance. Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to John Peyton, Dine Brands' CEO, for any further remarks. John Peyton: Jonathan, thank you for moderating, and thank you, everybody, for your questions this morning. I'll just summarize with where we started in that we're pleased that 2025 performed better than 2024. We certainly don't think that was an accident. We think it was because both of the big brands focused on marketing and social media with new messages and new plans. Both of them really put the value programs front and center in front of consumers and backed it up with great menu innovation like we discussed today. And we also made great experience in the guest experience in terms of operations and OSAT, which we didn't talk about this morning, but both guests improved their reviews in terms of guest satisfaction. So thank you all for your time this morning, and look forward to talking to you next time. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to The TJX Companies Fourth Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, February 25, 2026. I would like to turn the conference over to Mr. Ernie Herrman, Chief Executive Officer and President of TJX Companies, Inc. Please go ahead, sir. Ernie Herrman: Thanks, Charlie. Before we begin, Deb has some opening comments. Debra McConnell: Thank you, Ernie, and good morning. Today's call is being recorded and includes forward-looking statements about our results and plans. These statements are subject to risks and uncertainties that could cause the actual results to vary materially from these statements, including, among others, the factors identified in our filings with the SEC. Please review our press release for a cautionary statement regarding forward-looking statements as well as the full safe harbor statements included in the Investors section of our website, tjx.com. We have also detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and in the Investors section of tjx.com, along with reconciliations to non-GAAP measures we discuss. Thank you. And now I'll turn it back over to Ernie. Ernie Herrman: Good morning. Joining me and Deb on the call is John. I want to start today by acknowledging our global associates for their excellent work in 2025. I truly appreciate their ongoing commitment to both TJX and our customers every day. Now to an overview of our results beginning with the fourth quarter. I'm extremely pleased with our excellent fourth quarter results. Fourth quarter sales, profitability and earnings per share were all well above our expectations. Overall, comp sales were up a very strong 5% with comp sales strength at each of our divisions. I'm convinced that our exciting assortment of merchandise and great values resonated with shoppers across all of our retail banners this holiday season. Further, our teams did an excellent job transitioning our stores post holiday to the categories and trends that appeal to consumers and I am confident that our merchandise mix positions us well as we start the year. For the full year, overall net sales surpassed $60 billion, making a major milestone for our company. We are even more excited about the future and the global opportunities we see to keep growing our customer base and to capture additional market share by bringing excitement to shoppers with our values. Full year comp sales increased a very strong 5%. Profitability increased significantly and earnings per share grew double digits, all well above our initial guidance for the year. Importantly, we are confident that we attracted new shoppers to our stores in every country that we operate in. I want to again recognize the excellent execution of our teams and the collective efforts of our associates across the company, which led to this terrific performance in 2025. As we begin 2026, the first quarter is off to a strong start. We have many initiatives planned that we believe will keep driving sales and traffic this year. We remain confident that in-store shopping is not going away and believe our focus on offering customers an exciting treasure hunt shopping experience every day will continue to serve us well. Additionally, we are always looking at ways to further improve our in-store shopping environment and remain committed to investing in store remodels and new prototypes that we believe will enhance the customer shopping experience. In fact, I believe that our organization has done such a great job in this area that it has helped drive the remarkable consistency of comp increases across our store base. Availability of quality branded merchandise in the marketplace continues to be outstanding, and we are in a terrific position to flow a fresh assortment of goods to our stores and online this spring and throughout the year. Longer term, we are convinced that the flexibility of our business and our unwavering commitment to value will continue to be a winning retail formula. I'll speak more about our performance and our confidence in gaining additional market share over the long term in a moment. But first, I'll turn the call over to John to cover our fourth quarter and full year financial results in more detail. John? John Klinger: Thanks, Ernie. I also want to add my gratitude to all of our global associates for their hard work and commitment to TJX this year. Now I'll share some additional details on the fourth quarter. As I recap our fourth quarter results, I'm going to speak to everything on an adjusted basis, which excludes the net impact from a litigation settlement related to the credit card interchange fees and the related expenses associated with that settlement. Reconciliations detailing the net impact of these settlement of these settlement-related items on our results can be found in today's press release and on the Investors section of our website. Net sales grew to $17.7 billion, a 9% increase above last year. As Ernie mentioned, our fourth quarter consolidated comp sales increased 5%, which was well above our plan and on top of a 5% increase last year. I want to note that our quarterly comp was trending higher prior to the winter storms that swept across North America at the end of the quarter. Importantly, we saw sales pick up again after the storms passed. Our fourth quarter comp was driven by a combination of a higher average basket and an increase in customer transactions. Further, we saw strong comp sales increases in both our apparel and home categories as we have all year long. Adjusted pretax profit margin of 12.2% was up 60 basis points over last year's 11.6% and well above our plan. Adjusted gross margin was 31.1%, up 60 basis points over last year's 30.5%. This increase was primarily driven by a higher merchandise margin and expense leverage on sales, partially offset by unfavorable inventory hedges. Adjusted SG&A was 19.1%, favorable 10 basis points versus last year's 19.2%. Net interest income negatively impacted pretax profit margin by 10 basis points versus last year. All of this led to adjusted diluted earnings per share of $1.43, up 16% over last year's $1.23 and well above our plan. Fourth quarter adjusted pretax profit margin and adjusted diluted earnings per share were both well above plan. This was primarily due to lower shrink and expense leverage on above-plan sales, partially offset by higher incentive compensation accruals. As for our divisional performance in the fourth quarter, each of our divisions saw comp sales growth of 4% or better and had strong adjusted segment profit margins. Now to our fiscal '26 results. Once again, for our full year financial results, I'm going to speak to everything on an adjusted basis, which excludes the net impact from a litigation settlement related to credit card interchange fees and the related expenses associated with that settlement. Net sales grew to $60.4 billion, a 7% increase over last year. Consolidated comp sales were up 5% and driven by both a higher average basket and an increase in customer transactions. Adjusted pretax profit margin was 11.7%, up 20 basis points over last year's 11.5%. Full year adjusted gross margin was 31%, up 40 basis points over last year's 30.6%. This increase includes a 20 basis point benefit from shrink favorability. We once again saw shrink favorability across all of our segments. I want to take a moment to acknowledge the outstanding efforts of our associates who worked hard all year long to drive this improvement. I'm also pleased to share that shrink is essentially back to our pre-COVID level. We believe this speaks to our culture of working to quickly address issues that come up and our commitment and laser focus on fixing them. Full year adjusted SG&A was 19.5%, 10 basis points unfavorable to last year's 19.4%. Net interest income negatively impacted full year pretax profit margin by 10 basis points versus last year. All of this led to full year adjusted diluted earnings per share of $4.73, up 11% over last year's $4.26. Ernie will talk about our full year divisional highlights in a moment. Moving to inventory. Balance sheet inventory was up 14% and inventory on a per store basis was up 10%. We feel great about our inventory levels and the excellent availability we are seeing in the marketplace. I'll finish with our liquidity and shareholder distributions. For the full year, we generated $6.9 billion of operating cash flow and ended the year with $6.2 billion in cash. In fiscal '26, we returned $4.3 billion to shareholders through our buyback and dividend programs. Now I'll turn it back to Ernie. Ernie Herrman: Thanks, John. I'll cover some full year divisional highlights. I'm extremely pleased with the strong and consistent sales performance across each of our divisions. All of our businesses delivered comp sales growth of 4% or better this year. Importantly, each division drove increases in customer transactions and attracted new shoppers throughout the year. I truly believe our value proposition appeals to a wide customer demographic across our retail banners, which differentiates us from so many other major retailers. I am convinced that each of our divisions is set up extremely well to continue capturing market share around the world for many years to come. At Marmaxx, overall sales for the full year grew to $36.6 billion. Marmaxx's comp sales grew a strong 4% with increases in both their apparel and home categories. Further, comp sales were up across each of Marmaxx's regions and consistent across all customer income demographics. At Sierra, we were very pleased with their performance as they delivered healthy sales growth while accelerating their store openings across the United States. Additionally, our U.S. online businesses continue to add new categories and brands to deliver even more freshness and excitement for our e-commerce shoppers. As to Marmaxx's outstanding -- as to Marmaxx's profitability, adjusted full year segment profit margin increased to an outstanding 14.4%. Going forward, we are very excited about the opportunities we see to open more stores, attract more shoppers and increase sales at our largest division. At HomeGoods, annual sales surpassed $10 billion, a great milestone for this division. Comp sales increased a very strong 5% with broad strength across all regions of the country. During the year, we opened 27 stores for this division, bringing our eclectic mix of home fashions to even more consumers across the United States. As to profitability, HomeGoods' full year adjusted segment profit margin increased to an outstanding 12%. Long term, we see plenty of opportunities for HomeGoods and HomeSense to capture an even bigger share of the United States home market. At TJX Canada, full year sales increased to $5.6 billion and comp sales increased an outstanding 7%. It was great to see consistent and strong performance at all 3 of our Canadian retail banners, which each delivered similar comp increases. Adjusted segment profit margin on a constant currency basis increased a strong 13.8% -- increased to a strong 13.8%. Through our winners, Marshalls and HomeSense banners, we are one of the top destinations for apparel and home fashions in Canada. We continue to see a long runway for growth and are excited to further grow our footprint across this country. At TJX International, full year sales grew to $8 billion and comp sales increased a strong 4% with strength in both Europe and Australia. In Europe, we are the largest brick-and-mortar off-price retailer and believe our size and scale allow us to offer consumers an unmatched mix of merchandise at great value. Further, we are on track to open our first stores in Spain this spring and are excited to deliver our values to more shoppers in Europe. In Australia, sales were once again outstanding, and we continue to open stores across the country. As to profitability, I am extremely pleased with the TJX International division's improvement in 2025. Adjusted segment profit margin on a constant currency basis increased significantly to 7.3%. Going forward, we are confident that we can continue capturing more shoppers in each country that we operate in. We continue to be very pleased with our joint venture in Mexico and minority investment in the Middle East. In Mexico, we've made excellent progress on the merchandising side of the business and continue to see opportunities to further optimize the store assortment. In the Middle East, Brands for Less stores continue to perform well, and they have plans to continue opening stores across that region. We're excited to be participating in the growth of off-price in these regions of the world. Moving on, I'd like to highlight some of the key reasons why we are confident that we can continue to grow our company and gain market share around the world for well into the future. First is our relentless focus on delivering value for our customers every day. Availability of merchandise continues to be exceptional as our team of more than 1,400 buyers source from a universe of approximately 21,000 vendors every year, including thousands of new ones. We have developed very strong relationships with our vendors and believe they look to us to clear their excess inventory and to grow their business and introduce their brands to new customers. This gives us great confidence that we will have plenty of access to goods going forward and that we are in an excellent position to continue bringing shoppers joy and terrific value every time they visit. Second, we believe our strategy of operating stores across a wide customer demographic will continue to serve us well. With outstanding access to good, better and best merchandise, we can curate our stores with an assortment that appeals to various income and age demographics. This allows us to reach a broad range of shoppers, which we believe differentiates us from many other major brick-and-mortar retailers. Further, we continue to see an outsized number of new younger customers visiting our retail banners at each of our divisions. All of this gives us confidence that we can continue to open stores in new markets in each of our geographies. This leads me to my next point, which is the significant opportunity we see to grow our global store base. We see the long-term potential to grow to 7,000 stores with our existing retail banners in our current countries and Spain. We have an excellent track record of opening stores in the right locations in the right markets and are convinced that we will continue to do so. With the long-term opportunity to open 1,700-plus additional stores globally, we see a very strong path ahead for continued global growth. Fourth, we believe we are a retail leader in flexibility. Our business is centered around being flexible, including our buying, our store formats and our supply chain and systems. This allows us to quickly pivot to take advantage of hot categories and trends in the marketplace and get the right goods to the right stores at the right time, which we believe drives shopper excitement when they visit. Going forward, we are confident that our flexibility will allow us to successfully navigate ever-changing macro environments and economic landscapes, just as it has throughout our 50-year history. Lastly, I am convinced that the strength of our talent and our focus on culture have been major contributors to our success and will continue to drive the business for many years to come. I truly believe that the tenure, depth of expertise and off-price knowledge of our teams are unmatched. Further, we continue to invest in teaching and training our associates to develop the next generation of TJX leaders. I am confident that our global talent base and consistency of our culture will be tremendous advantages as we continue our growth around the world. In closing, we feel great about our terrific performance in 2025. We are confident in our plans for 2026, and as always, we will strive to beat them. Our value perception remains very strong. I'm convinced that our focus on value and delivering an exciting treasure hunt shopping experience will continue to bring joy to shoppers around the world. I am so excited about the growth opportunities we see in both the near and long term, and I'm confident we can achieve them. The entire TJX team is laser-focused on executing our business model to grow our top and bottom lines and to continue our global growth and to capture additional market share. Now I'll turn the call back to John to cover our full year and first quarter guidance, and then we'll open it up for questions. John Klinger: Thanks again, Ernie. I'll start with our full year fiscal '27 guidance. We are planning overall comp sales growth of 2% to 3%. For the full year, we expect consolidated sales to be in the range of $62.7 million to $63.3 million, up 4% to 5%. We're planning full year pretax profit margin to be in the range of 11.7% to 11.8%, flat to up 10 basis points versus last year's adjusted 11.7%. Moving to full year gross margin. We expect it to be in the range of 31.1% to 31.2%. This will be up 10 to 20 basis points versus last year's adjusted 31% due to an expected increase in merchandise margin. We are expecting full year SG&A to be 19.5%, flat versus last year's adjusted 19.5%. We're expecting incremental store wage and payroll costs to be offset by lower incentive compensation accruals this year. We're planning net interest income of $76 million, which we expect to delever fiscal '27 pretax profit margin by 10 basis points. Our full year guidance assumes a tax rate of 25.0% and a weighted average share count of approximately 1.12 billion shares. As a result of these assumptions, we're expecting full year diluted earnings per share to be in the range of $4.93 to $5.02, up 4% to 6% versus last year's adjusted $4.73. Lastly, I want to mention that we are evaluating the potential impact of last Friday's ruling on tariffs and monitoring the changing tariff environment. That said, our full year guidance assumes that we will be able to offset the tariff pressure on our business this year. Moving to the first quarter. We're planning overall comp sales to increase 2% to 3%, consolidated sales to be in the range of -- excuse me, $13.8 billion to $13.9 billion, up 5% to 6%. Pretax profit margin to be in the range of 10.3% to 10.4%, flat to up 10 basis points versus last year's 10.3%. Gross margin to be in the range of 29.9% to 30%, up 40 to 50 basis points versus last year's 29.5%. This would be due to an expected favorable inventory hedge comparison to last year and an expected increase in merchandise margin. SG&A to be 19.8%, 40 basis points unfavorable versus last year's 19.4%. This would be primarily due to incremental store wage and payroll costs. We're also planning net interest income of $22 million, which we expect to have a neutral impact to our year-over-year first quarter pretax profit margin. Our first quarter guidance also assumes a tax rate of 23.1% and a weighted average share count of approximately 1.12 billion shares. Based on these assumptions, we expect first quarter diluted earnings per share to be in the range of $0.97 to $0.99, up 5% to 8% versus last year's diluted earnings per share of $0.92. Moving to our fiscal '27 capital plans. We expect capital expenditures to be in the range of $2.2 billion to $2.3 billion. This includes opening new stores, remodels and relocations as well as investments in our distribution network and infrastructure to support our growth. For new stores, we plan to add 146 net new stores, which would bring our year-end total to well over 5,300 stores. This would represent a store growth of about 3%. In the U.S., our plans call for us to add 45 net new stores at Marmaxx, 35 new stores at HomeGoods, which includes 11 HomeSense stores and 24 new Sierra stores. In Canada, we plan to add 13 new stores. At TJX International, we plan to add 19 net new stores in Europe, which includes our first 5 stores in Spain and 10 new stores in Australia. Lastly, we're planning about 540 remodels and plan to relocate approximately 40 stores in fiscal '27. As to our fiscal '27 cash distribution plans, we remain committed to returning cash to shareholders. As we outlined in today's press release, we expect that our Board of Directors will increase our quarterly dividend by 13% to $0.48 per share. Additionally, in fiscal '27, we currently expect to buy back $2.5 billion to $2.75 billion of TJX stock. In closing, I want to reiterate that we are excited about the growth opportunities we see in the long term. We are in an excellent position to continue to invest in the growth of TJX while simultaneously returning significant cash to our shareholders. Thank you, and now we're happy to take your questions. Operator: [Operator Instructions] Our first question comes from Lorraine Hutchinson. Lorraine Maikis: Ernie, can you update us on pricing actions that you've taken? How is the customer reacting to some of the higher ticket prices? And is that reaction any different for different demographics? Ernie Herrman: Great question, Lorraine. First of all, it's all done along with knowing what the out-the-door retails are at competition around us, right? So when we -- on an existing item, if that price is moving around us and we want to ensure that we're maintaining the appropriate value gap, we could take a pricing action where it's changed. Again, it's not -- I want to call out that it's been selective on certain categories or items. Then we have pricing -- when you call pricing action where if you're referring to sometimes our ticket is going up, right, that can also be pricing action related to a change in our mix or you might -- that shows up as maybe an average retail change because our mix is changing. So for example, we, in Marmaxx, for fourth quarter had a lot of better goods at higher prices. That had nothing to do with what we would have had before. It was a change in the mix. And so there, the prices went up on certain items. So it's a combination of a couple of things. We have not seen, I think, Lorraine, when you were asking at the beginning, the -- we have had very consistent success across the board, as you can see from our business, our turns are all representative of our value. Our out-the-door value is still exceptionally strong. We do the -- we always -- and I think I've talked about this before, we do surveys to ensure customer perception of the value is still where -- and in fact, it's actually improved over the last 6 months. And the neat thing about our model is we don't dictate in many cases, the retail change. We kind of follow the market. So when the market moves down or up on an item, we want to maintain the proportional gap in value, exciting gap in value, and we'll adjust and take an action accordingly. So I hope I answered your question there. Operator: Your next question comes from Matthew Boss. Matthew Boss: Congrats on another nice quarter. Ernie Herrman: Thanks, Matt. Matthew Boss: So Ernie, what's your ability to further accelerate your offense globally if we're thinking about this year, maybe to take advantage of disruption in the marketplace, whether that's from tariff volatility and what it's doing to sourcing and supply chains or even the consolidation that's happening at luxury retail? And then I've got to ask my near-term question, which is, could you just elaborate on the strong start to the first quarter? Have you seen any moderation relative to the fourth quarter at any of your segments? Ernie Herrman: That's very good, Matt. Let me start with your first question first and on the offense because, by the way, I can't -- you're like a mind reader here because I was going to talk about some of the things we're doing that I think we're in a mode right now where the consumer is so open to trying new venues as clearly, they've been disappointed in some of their in-store shopping experience or merchandise content at various other retailers. And I believe our teams have taken advantage of that. And let me give you a few things that are offensive plays because this is why when you asked the question, I was thinking, man, this is exactly one of the things I was hoping to talk about. First of all, on offense, we want to continue to drive our top line, right? And so we feel as though the customer is really open to trying other things. So our marketing -- and we talked about this at our last meetings and a couple of times during the year, our marketing teams are very aggressive. We are using marketing as an offensive weapon more than we ever have before. In fact, I don't know if you've noticed, we have a new campaign in HomeGoods that just launched. We have a new campaign in T.J. Maxx that will be -- and in Sierra that we're going to be launching in the near term. We've been doing things like we've had Maxx linked up with the Olympics, had great promotional spots with the Olympics. We are -- on all the fronts, we're using marketing mix modeling methodology there to look at what do we -- where are we driving top line with our marketing approach. This is a very sophisticated approach that I think I've also talked about before, which the teams have been all over the last few years, but they are ramped up on this even greater so in fiscal '27 to continue to look at where we're spending and what the creative is like to try to capture additional market share. Secondly, we are going after brands, I would say, in a more aggressive manner than we also have ever had before. We mean more to the branded vendor community than ever as witnessed by some of the closures you're talking about. So our teams are doing a lot more regular meetings with some of the key brands through various levels of their management with our management. And that's not been something that we're initiating all the time, it really comes from a lot of the vendors because they want to do business with us. And that's across, Matt, good, better and best product. So that's been key. And then the other thing we're -- John mentioned it when he mentioned remodels, store environment, again, all under the heading of playing offense. So you start with marketing, you want the exciting -- I want to get them in the stores. Then when they're in the store, I want to give them the most exciting value mix possible. That's what we're doing with the branded merchandise market. And by the way, availability is off the charts. I think I mentioned outstanding in the -- and I know you guys like to have fun with whatever wording we're using. But today, it's outstanding and off the charts. But in all seriousness, we're having to slow the buyers down to a large degree in every division that we're operating in. So that's telling us something on availability. But store shopping experience, we're very aggressive about testing new remodels -- I'm sorry, new prototypes and being aggressive about refreshing our stores because that is one of the ways -- John and I talk about all the time, that's one of the ways we continue to drive consistent comps across all of our regions and stores in the world. When you have 5,000-plus stores, it would be easy to let some of that investing go by the wayside and you could fall -- you could deteriorate in your comp sales. So also another one we play offense on, again, I love your question, sorry, I'm going on, is store payroll. So we believe playing offense in our store -- I give my -- a lot of credit to our field management, the directors of stores in TJX, all are strong believers in staffing our stores to play offense, get the goods on the floor, take the markdowns aggressively, get the merchandise out where the customers can get at it in a very organized, pleasant shopping experience, get the customers through the register. And I think that's all part of playing offense and it shines against what some of the other retailers are doing today. So I think that sums up offense. John, do you want to? John Klinger: Yes. So on your second part of your question regarding the strong start, again, a lot of what Ernie has talked about here, just the focus on execution, just -- and customers continue to look for value and our store locations are a place that they're very pleased when they come in. And so we're just seeing a continuation of just strong performance. Ernie Herrman: Yes. And Matt, to piggyback on John's -- another thing that we analyze and the marketing team is also terrific at feeding to John and me information on income demographics, age demographics, right, John? John Klinger: Yes. I mean certainly, in Q4... Ernie Herrman: Very balanced. John Klinger: Very balanced. So it was -- we look at basically above $100,000 and below $100,000 in the U.S., and it was the same comp both above and below. And by geography, it was very consistent in the fourth quarter and just very consistent performance across all of our divisions. Ernie Herrman: Another highlight there also is that we skew -- versus the general population, we skew and have been because of some of the new customer acquisitions over the last couple of years, we're skewing a notch younger than the average customer. You take 18 to 34 and age 35 to 54 and 55 plus, we skew a little younger than the general population, which is -- I think, bodes well for our future. Matthew Boss: Best of luck. Congrats again. Ernie Herrman: Thanks, Matt. Operator: Our next question comes from Paul Lejuez. Paul Lejuez: SG&A leverage came in a little bit lighter than I think what you guided to despite higher sales. So just curious if you could talk about the flow-through and maybe what the offsets, what drove less leverage than you might have expected, if there was something to the TJX Foundation or incentive comp, marketing? And then just second, if you could talk a little bit more about traffic versus ticket or transactions versus ticket by segment and how you're thinking about those metrics as the drivers of that 2% to 3% comp assumption for '26? John Klinger: Yes. So yes, on your first question, the Q4 SG&A compared to our guidance is essentially the incentive accrual plain and simple. As far as the traffic and the ticket, both of them were up in the quarter. I would say that across all of our divisions, transactions were up with the exception of HomeGoods, which was essentially flat. Prior to the storm that swept across the U.S. late in January, HomeGoods' transactions were running up. But when I look at the driver, the bigger impact was the basket and within that was average retail that did drive that basket increase. And again, we've seen this over the last couple of quarters. So it's nothing new. We're quite pleased that -- again, that we continue to see customers, the transactions, the customer traffic through our store, to Ernie's point, between of the advertising, the age of the customer, it just -- it's leaning into the product mix that we have in our store and customers are quite happy. Ernie Herrman: Yes, Paul, I think the -- to John's point, and HomeGoods, it was only in Q4. For the year, HomeGoods was still up a little bit in transactions. And I think one of our reasons -- and I think you mentioned what's helping -- what would we be confident in helping the 2% to 3% on the combination of basket and ticket. And I think the route that we look at here, again, we're different from traditional retailers, this good, better, best combination and the teams and myself were, in fact, yesterday with one of the senior leaders at Marshalls, we talked about that balance and the word balance, I always like to leave you with is one of the things that I think our teams do the best, which is they balance good, better, best, but they balance even within those, having the right looks, not having fashion and balance to basic and balance to contemporary looks in home in a department versus basic traditional looks, things like that. The ticket, we don't purposely top down, drive an average retail situation or we do it off the value and then driven by having good, better, best and having a mix within each. And that's what gives us a lot of faith that we can meet and actually exceed our going-forward plans. Paul Lejuez: Got it. And Ernie, if you were to exceed that 2% to 3%, do you think it's more likely to come from more transactions or ticket? Is there one that you would favor and expect to be a... John Klinger: It's hard for us to predict that going forward. It's based on the customers. Ernie Herrman: Yes. Right now, all I would say without talking about going forward is it's just kind of a mix of all of those. There isn't one thing that if you look over this past year, it was -- right, John, it was kind of a mix of ticket and basket and transactions. And I think, once again, like for us, I think that's a good way for us to not plan on any one of those components, maybe a combination of them. John Klinger: As long as we're driving the top line, to us, it really doesn't matter whether it's coming from the basket or the transactions as long as they're both healthy. Ernie Herrman: Right. Paul Lejuez: Got it. Good luck. Ernie Herrman: Thank you, Paul. Operator: Our next question comes from Brooke Roach. Brooke Roach: How favorable was the stronger AUR and margin delivery in the quarter? And then looking forward, can you speak to the drivers of merchandise margin improvement that you're forecasting for the year and the most important areas of opportunity that you see there within the business? Ernie Herrman: All right. John, do you want to take the first. John Klinger: As far as a stronger AUR, we don't parse that out. I mean we basically said when we talked about sales that for the quarter, it was more the basket than the transactions that drove the comp. And within that, it was the average retail that drove that. So we can't really parse out any more of that. And then as far as merchandise margin. Ernie Herrman: Yes. So Brooke, you're asking -- so in other words, are you asking how are we delivering the merchandise margin improvement? Or is that what you're getting at? Brooke Roach: I'm asking what the forward merchandise margin improvement is based on where you see the biggest opportunity? Ernie Herrman: Okay. So well, one of the biggest opportunities is a couple of things going on in the market, which is good for us. First of all, we have the flexibility to bob and weave with a truly glutted market of merchandise, which allows us to wait out which buys are the best buys. So again, when you have 1,400 buyers in all these locations, so many of the buyers can cover so many categories. And the teams -- our merchants are trained to know that we don't have a commitment to have to have anything in stock. So when you operate under that premise, our merchants are able to say, I'm going to go for the most exciting buy for the customer that delivers the healthy merchandise margin at the same time, and we can negotiate it that way. So this is -- and this is really part of the secret sauce where we're different, I think, than many other retailers because we have so many tenured merchants here. As again, I mentioned that in my speech. And we have a university, we have training. And also our buyers are most of the time getting the first call on excess inventories because the market likes to deal with our buyers. They're straightforward. They're courteous, they're good to deal with. They're on -- yes, pay on time, fair. Now take -- so you take those into account, you have a glutted market. By the way, we're in a very good liquidity position as we enter the year. So I'm loving that. So again, we're off to a strong start sales-wise. The only thing that can make that better, which is what we have right now is a really strong liquidity positioning across -- every banner is in good shape on their liquidity. In fact, we've recently talked about that. So that always bodes well. And then setting aside, and this isn't key, is when there's confusion with the whole tariff thing or in and out. And generally, one way or the other, and I think you've covered us long enough to know, indirectly, our buyers are very good at navigating through that. And usually, we figure out a way to benefit in terms of our merchandise margin situation when there's confusion out there, which obviously that's probably going to happen again. So thank you for your question on that, though. I think it's spot on. And I think, by the way, this is how we also drive top line, not just margin because when they -- those buys benefit us both ways, merchandise margin, but they benefit us on driving sales with a more balanced, exciting value mix. Operator: Our next question comes from Aneesha Sherman. Aneesha Sherman: I have a couple of follow-ups on margin as well. The first one is on HomeGoods. HomeGoods versus Marmaxx, the margin gap has widened in recent years. And I know you've talked about the drivers being freight and fixed costs. Do you see an opportunity for HomeGoods to catch up to Marmaxx level margins, especially if we see continued relief on freight and potentially some lower tariffs on Asian source markets? And then a quick follow-up on your comments just now on gross margin drivers. Can you talk about what you're assuming for the non-IMU-related drivers like shrink, operating leverage as well as freight in the next year for your gross margin assumptions? John Klinger: Yes. I want to start with HomeGoods. So we're very pleased with the improvements that we've seen in HomeGoods. So HomeGoods, they leveraged 150 basis points in the fourth quarter, and they've leveraged 110 basis points on the year. So really happy with how they've been able to do that. And they've been able to do that with sales leverage, merchandise margin improvement, which is a combination of the buying, the freight favorability that we've seen come through and of course, shrink. And then the other thing is they've had a lot of operational efficiencies as well that we've seen come through. We're not going to speculate whether they're going to reach Marmaxx levels because Marmaxx continues to go up as well. And so -- but look, they they're doing a tremendous job at improving their pretax profit as they have over the last couple of years. Ernie Herrman: Aneesha, it's -- John and I talked about, but recently, I was with the HomeGoods team, and I think John would second this. They are so driven though to -- we don't put a number on it, but they -- it's funny you asked that question because they are driven to try to get as close to Marmaxx as they can without us putting a number on it. So as witnessed by these last couple of years, the incremental bottom line operating margin in that business has to be, I think, in the industry, one of the highest brick-and-mortar home operating margins, and they're proud of it, but I think there's room to go. But we -- again, to John's point, we're not going to commit to how high is up. I just know they don't -- how do I put it? They don't work to just meet these plans, as you can see. John Klinger: Yes. Operator: Our next question comes from Michael Binetti. Michael Binetti: Like the Olympics content, that was really nice. I'm curious at a high level how you thought about the macro and building the strategy into the macro this year or any differences you think are important versus the past few years when you think about how the consumer has responded to your business with stimulus in the past? Anything that you focus the playbook on to go after that share or whether you thought about drivers to spending like no tax on tips and over time and how that can be incremental? And then I'm also curious on -- when we saw you in December, you were talking a lot about being more aggressive in marketing, not necessarily that you would delever it, but I'm curious, I think you do want to grow that. You've seen a lot of success. Maybe just talk to us about where that plays in the leverage profile this year, if there is an opportunity to delever to go after some more top line? Ernie Herrman: Yes, Michael, great big strategic question on. And really part of what I think when I talked back before when I think it was Matt asking about playing offense, that has -- I think that applies to what you're asking, which is one of the big things we're doing this year, and we really started last year. By the way, when we started expanding into Mexico, for example BFL, we are bullish on the fact that we have the tenure of these teams here that I keep looking and the senior team piece looking at wanting to leverage that more than we ever have before. So we have this experience. We've trained up a lot of succession planned associates that are right behind them that is allowing us to play offense also. I did not mention that earlier when I talked about -- to answer Matt's question. So when John and his team and when we go to look at the financial plans and plan out and we look at years out, we say we have a lot of runway to keep growing TJX. As witnessed in my script, I mentioned just the current banners and countries we're in, including Spain, we have a lot of room, let alone, we have, I think, other room to keep expanding like Mexico and grow that business. And our investment in BFL. But the core business here just has more green space than I think we thought we did. And so I think with the store closures, with the -- I would call it the more -- the softer sales and maybe some of what would have been overlapping customer-based competitors, I think that allows us in the macro, to your question, to look at continuing to take more market share, and that's back to kind of Matt's question about playing offense more. So on all fronts, you're going to see us in a nice way, as we always try to do culturally, continue to be more aggressive, I think, than we ever have before. and driving top line, taking market share, opening stores wherever we think there's the right calculation of transfer sales, but new store opportunity. And I think every division is figuring out ways to do that. And that's kind of the difference. I think you're asking has our outlook changed. It's not radical, but I think it's been tweaked a little in the last couple of years. John, did you want to add anything else or... John Klinger: If the customers through tax benefits have more in their pocket this spring, we're certainly going to -- we're advertising. The advertising is very aggressive as far as showing up where the customers' eyes are. And again, Ernie talked earlier about the product mix, that good, better, best mix appealing to a broad range of customers. We're going to put our best foot forward and hopefully see increased market share. Ernie Herrman: What's been -- Michael, what's been neat is also we've talked about this and you from the meeting a couple of months ago, is our brands are even better for gift giving than ever before. I think they're cooler in terms of -- whether it's HomeGoods or Maxx or Marshalls or T.K. Maxx in Europe, winners and Marshalls in Canada, we are getting more and more of gift-giving, I think, purchases across all the different holidays, too. And I think that goes along with our image on each of the brands continues to upgrade. Sierra, same thing. So I think that is a whole other piece of business that we used to do well fourth quarter and other, but I think we're capturing gift-giving business throughout the year now. Michael Binetti: I appreciate it. Congrats again. Ernie Herrman: Thank you. John Klinger: Thanks, Matt -- Michael. Operator: Our next question comes from Simeon Siegel. Simeon Siegel: Really nice job. Ernie, I appreciate your comments on your own ability to work through tariffs. I was curious if you have any thoughts yet on impacts that the uncertainty might have on the vendors and channel inventory going forward? And then, John, I appreciate the shrink commentary. How do you think about that going forward? Sorry if I missed it. Is it just generally neutral at this point? Or is there anything else to keep in mind? Ernie Herrman: All right, Simeon. Well, in terms of the vendors, and this is so hot off the press. It's hard for me to say it's so early. We're not exactly sure what the vendors are going to do in terms of the looking back, by the way. In terms of looking forward, that's what's going to be really interesting to see if some prices come down on certain items, if tariffs get adjusted on certain categories. And then how does that play out with retail? Again, we don't -- we're very fortunate in our model because we just kind of -- we get to watch what happens at the retail level around us, and we react accordingly. But my guess is there could be some spots if a vendor wasn't doing too well with the category and part of it was due to tariffs, they'll probably take a look at those prices again and adjust their prices down where it makes sense. Provided everything -- the reason I'm hesitant to say anything is we don't know where things are going to actually land long term here. We have some idea as just -- as everyone around us, I'm sure, is watching. But that's kind of the best of our ability to guess right now. John Klinger: Yes. And then just getting on to your question about shrink. So the last 2 years, we've had 20 basis point improvements each of the last 2 years. And we're -- like we said on the call, we're essentially back to where we were pre-COVID. So we've done a lot of work, and the teams have really done an amazing job of creating an environment in the store that is safe for our customers, safe for our associates and also promotes people to shop and not make it a hassle for people to shop. So areas that we've increased our shrink -- or excuse me, our shrink methods have actually given us in many areas an increase in sales. And so over the last year, we did things that, again, we believe improved our shrink performance. Those will be annualized this year. And then currently, the teams are going through all the stuff from last year to see where are some of the other opportunities. We're not taking the foot off the gas here on shrink at all. It's just that now that we're pretty much back to where we were pre-COVID, we're going to continue to look for wins, but I don't think the wins will be as great as they were as we brought it back to where we were pre-COVID. Operator: Our final question of the day comes from Jay Sole. Jay Sole: Maybe, Ernie, I just want to talk about HomeGoods a little bit. Can you just really dive into that the 6% comp. Are you seeing opportunities in new categories? You're talking about so much opportunity buying. I think people always assume you need apparel. But are there other things, whether it's bed, kitchen, bathroom, home, like area rugs, lamps, anything that's adding to the store that's new that's driving that comp that you see more potential just because of everything that the company is doing? Ernie Herrman: Yes. Jay, great question. First of all, I can't give specific category information because that kind of puts it out there as to -- for others to kind of know, maybe they should go at that. However, what I will tell you is it's a very widespread there, which is one reason their business is so healthy across numerous categories. We're an open book. If you go in the store, you will see, and I think where the HomeGoods team has done an amazing job is going after some of the categories that around us, stores have closed in or downplayed. And so there's this opening need for demand in certain categories that the HomeGoods team has gone after because they have a bit of a captive audience now. If somebody wants a certain -- I won't say what the category is, they kind of have to go to home goods. And there's a half dozen of those. And then when you go to basic -- so let me give you basic categories I can talk about that aren't like this isn't a news flash. So if you go to basic bedding, sheets, towels, blankets, comforters, there's less competition out there and nobody touches the home goods values. On utilitarian categories, so whether it's deck, whether it's from picture frames to candles to stationery items, we're kind of a one-stop shop with fashion and functionality at crazy values. And I think the formula, I would say -- and by the way, remember in TJX now, we're over 30% of TJX's home business. HomeGoods, as you know, hit a monumental mark last year at the $10 billion. But John and I always talk about home and TJX is a key strategic advantage for us because we have so many homebuyers that collaborate and are able to put together this very fashion eclectic impulse-driven mix. And the neat thing is in every geography we're in, if you watch all the social media, customers have figured out that we are the most impulse-driven type of home store to shop, which is why I think our home goods shoppers get so excited and find it impossible to only spend $100 when they walk in. So I realize I can't give you as many specifics on the exact categories, but I can tell you, it's very widespread. And I give all that credit in the world to our merchants and HomeGoods and our home merchants across the corporation. Okay. That was our last question. Thank you all for joining us today. We look forward to updating you again on our first quarter earnings call in May. Take care, everybody. Operator: Ladies and gentlemen, that concludes your conference call for today. You may all disconnect, and thank you for participating.
Adrian Hallmark: Good morning, everyone, and thank you for joining us today for Aston Martin's 2025 full year results. It's a pleasure to be here alongside Doug Lafferty, CFO. And before Doug takes you through the financial performance in detail, I'm going to provide a summary of our key achievements and areas of strategic focus during 2025, followed by a review of the work we have done on the future product lineup. As we've outlined throughout the year, we have navigated a highly challenging trading environment, an unprecedented backdrop of geopolitical uncertainties and macroeconomic pressures, including heightened tariffs in the U.S. and China weighed on our performance and ability to execute our plans effectively. Despite this, we have delivered some critical milestones. None more so than the commencement of Valhalla deliveries in quarter 4 last year, our first mid-engine plug-in hybrid vehicle supercar. Alongside this, we've expanded our thrilling core lineup with high-performance derivatives such as the Vantage S and the DBX S, voted the Super SUV of the Year by Top Gear Magazine and the Vanquish Volante with the Vanquish also being recognized as Car of the Year by Robb Report just last month. Whilst maintaining a disciplined approach to balancing production with demand throughout the year, with retails outpacing wholesales, we also took the necessary proactive actions to invest in quality, lower our operational costs, and find ongoing capital expenditure efficiencies. Along with other transformation initiatives, these actions have benefited our performance in 2025, but very importantly, will support enhanced delivery over the coming years. Finally, we took action during the year to strengthen our balance sheet. Proceeds from the sale of shares in the Aston Martin Aramco Formula One Team, investment from Lawrence Stroll and his Yew Tree Consortium, and improved cash collections in quarter four 2025, resulted in a year-end total liquidity of GBP 250 million. Further enhanced by the proposed sale of Aston Martin naming rights to AMR GP for a consideration of GBP 50 million in this quarter, 2026. Taking all of this together and looking ahead, I remain confident that our strategy and upcoming products will position us strongly for future success. In the full year 2026, we expect to deliver a material improvement in our financial performance and continue to delivering year-on-year improvements over the short to midterm, with a focus on margin improvement and cash flow generation. Let's begin with a review of what's at the beating heart of Aston Martin and core to our DNA. That's our range of exquisitely designed and handcrafted vehicles. Today, we have the most thrilling and diverse lineup of models in our 113-year history. As we said at the start of 2025, our focus was on continuing to refresh and expand the core model range. Aston Martin has a long-standing tradition of applying the S suffix to special high-performance derivatives of core models, which we've continued with the introduction with the Vantage S, the DBX S, and most recently, the DB12 S. We now have convertible models available for all of our core range of sports cars. We celebrated the 60th anniversary of the iconic Volante name with the release of limited-edition Q by Aston Martin DB12 and Vanquish models. As I previously mentioned, the awards and recognition for these vehicles were a consistent theme throughout the year and have continued into 2026. As a result of the extensive range of new core models, the order book for these vehicles extends for up to 5 months for the core, and the average selling price has increased by more than 5% to GBP 185,000. A trend we expect to see continue into 2026, with more Aston Martin versions to come as we keep the core range fresh for our future and current customers. Now, undoubtedly, the most anticipated highlight of the year was the start of production and deliveries of Valhalla in Q4 2025. Valhalla has been a monumental project for Aston Martin, with the first 152 units produced and wholesaled in 2025. A further circa 500 units will be delivered in 2026. The current order bank takes us through to the fourth quarter of this year. Uniquely designed from the ground up at our Gaydon headquarters in the U.K., this supercar with hypercar performance is our first mid-engine plug-in hybrid. It's an important component of our future plans. The financial benefits have already been evidenced in our quarter four, 2025 performance. Reception from customers and the media to driving the prototype has been overwhelmingly positive. Following extensive global driving events during the second half of 2025, we have much more to come in 2026, beginning with over 50 global journalists joining us in Spain next week to drive the first full production versions of the car. Expect to see the reviews of this by the end of March. With our product portfolio now well-established, let's turn our focus to the current market environment and how we are refining strategy, transformation program, and our future product plans to best position Aston Martin for success and solid financial performance in the future. During my first full year as CEO in 2025, the global luxury automotive market faced one of its most turbulent years in recent times. Consumer demand has been impacted negatively by escalating geopolitical uncertainties and macroeconomic challenges, the most notable being the introduction of tariffs in the U.S. and in China. We were forced to navigate an unpredictable policy landscape and manage supply chain issues that ultimately impacted our volumes, our efficiency, and our margins. We have taken, and will continue to take, proactive steps to strengthen our overall position by maintaining a disciplined approach to balancing production and demand. This has been key to this year's performance and how we've planned for 2026. It includes establishing a more balanced production cadence through each quarter, while building on the success of our initial Valhalla deliveries. We passed through a second 3% price increase in the U.S. from the 1st of October to offset more of the impact we've been absorbing due to the tariff increases announced earlier this year. We continued to engage with the U.K. government regarding the first-come, first-served U.S. quota mechanism, with volumes allocated on a quarterly basis. This system creates uncertainty for our planning and forecasting. Where possible, we will try to optimize production schedules to reduce this risk associated with the quota mechanism and prioritize working capital management. As we said at the half-year results, we provided support for our dealers in China with the intention of positioning us strongly to enter 2026 from a low stock perspective. We continue to build more robust relationships and management across our supply chain, including proactively mitigating risks with some of our partners. We're taking immediate and ongoing action to reduce our cost base in order to deliver operational leverage. Simultaneously, we reviewed our future cycle plan to ensure we meet the needs of our customers as regulators and priorities shift. This resulted in a CapEx reduction of about GBP 300 million over the coming five years. 12 months ago, I communicated a strategy that built on the foundations laid by the industrial-scale turnaround undertaken by Lawrence Stroll and the team since 2020. This strategy seeks to turn this high-potential business into a high-performing one. Underpinning this strategy are our unique strengths, namely our iconic global brand, our uncompromising customer focus, the relentless pursuit of innovation and technical advancement, and the license to operate in the high-performance sector through our F1 association, which feeds into the exclusive, limited edition, high-margin specials. Finally, and most importantly, our highly skilled and capable and loyal workforce. Building on these unique strengths, we took proactive steps and advanced our transformation program in 2025, anchored around our six strategic focus areas. As we look ahead, we will continue to operate with a laser focus on these six areas, because they are the way to achieve our high performance and create value for our stakeholders and shareholders. Many of the achievements this year I've already referenced, I'd like to call out just a few more over the coming moments. As we seek to drive market demand, we've recently established a private office, which ensures our top 500 clients are assigned a primary Aston Martin contact, supported by head office VIP specialists with a dedicated 2026 events plan. This will be further supported by the opening of the Q London flagship in Berkeley Square later this year, adding to the ultra-luxury flagship store at New York and at the Peninsula in Tokyo. In terms of product creation, we were the first global automotive manufacturer to integrate Apple CarPlay Ultra into all of our models. Additionally, we're expanding our range of personalization, options, and bespoke Q offerings, giving our customers even more choice when it comes to curating their unique Aston Martin. Culture and change management is critical at a time when we are right-sizing the business to align with our future plans. To demonstrate that we're making changes throughout the organization, my executive committee a year ago, comprised of 11 members, and we will be nearly half that size by the end of this quarter in 2026. Our focus on quality has seen us make additional investments, which are delivering ongoing benefits. The Valhalla program has established a new benchmark for Aston for product launches, and our customer satisfaction scores have rocketed compared with the previous year across all new models. Whilst we are instilling a disciplined approach across our operations, it's important that we don't ignore other key factors, like the health and safety of our colleagues. This is of paramount importance, and I'm pleased to report that our reduced accident frequency rate in 2025 is another step change. Finally, cost optimization. As you know, this has been a constant theme throughout the 2025 period and will continue to be so in 2026. One of the benefits of having a more disciplined approach to our operations with a smoother production cadence is that we can deliver greater efficiency. As such, I expect us to drive operating leverage in 2026 that will support our improved financial performance and profitable growth. As we look ahead to the future, the key to success of this business will be the next generation of vehicles that we develop. We announced in October that a review was underway of our future product cycle plan, with the dual aim of optimizing capital investment whilst continuing to deliver innovative products that meet customer demands and regulatory requirements. We now have a clear roadmap that will ensure our product proposition builds on the strong foundations we have established over the past five years. For the remainder of this decade, we will initially focus on extending existing core model lines before the next full refresh commences. This is a capital-efficient approach and the best utilization of funds, whilst being able to offer new and exhilarating products that meet our customers' needs and beat the competition. The derivative approach of the past year is a great example of what to expect over the next three years. We will gradually start shifting from pure combustion engine powertrains to incorporating electrical assistance. That doesn't mean full electric, yet. That strategy will continue to be reviewed and subject to further communications. We don't believe our customers want that technology right now. We won't be pushed down that path by regulation either, due to the changes that have occurred. What it does mean is hybrid technology, alongside ever more efficient and compliant combustion engines, will be the core part of our business going forward. This will be complemented by our continued specials program, a fundamental part of our future financial and competitive success. As we look further into the following decade, that s when we plan to incrementally add all-electric drivetrains that will incorporate the latest innovative battery technology at a time when customer demand has likely shifted to be more closely aligned with regulatory requirements. I'm really excited by what we have to offer in the years to come. At the appropriate time, we'll provide more color on our thrilling and innovative future product lineup, which puts customers' requirements at the heart of everything that we do. For now, thank you, and I would like to hand over to Doug, who will take you through the financial detail. Douglas Lafferty: Thank you, Adrian. Good morning, all. Before we move into the Q&A, I'll take you through our financial performance for 2025, and our guidance for 2026 and onwards. Overall, our full year 2025 performance reflects, as we guided, fewer specials deliveries and the disciplined approach we took to operations as we navigated the heightened challenges and uncertainty in the global macroeconomic and geopolitical environments, particularly in relation to tariffs and the quota mechanism in the U.S. Looking at the detail on the slide, wholesale volumes were down 10% at 5,448. Retail volumes outpaced wholesales as we continued to maintain a disciplined approach to managing the balance between production and demand. As expected, Q4 was the strongest period in 2025, benefiting from our planned expansion of the core derivatives and the first 152 deliveries of Valhalla, supporting marginally positive free cash flow in the quarter. In terms of revenue, at GBP 1.26 billion, this reflected a 21% reduction compared to the prior year, largely as a result of the core volume decline and the guided fewer specials deliveries compared to 2024. Core ASP increased by 5% to GBP 185,000, benefiting from our expanded range of derivatives, while total ASP was broadly flat due to the mix of specials. Demand for unique product personalization continued to drive strong contribution to core revenue of 18%, broadly in line with the prior year period. As a result of the lower specials volumes, dealer support to reduce aged stock, increased warranty costs and other investments made in enhancing product quality, as well as the impact of tariffs in the US and China, adjusted EBIT decreased to a negative GBP 189 million, with depreciation amortization decreasing by 16% to GBP 297 million, also primarily driven by fewer specials. The split of our wholesales for 2025 is shown on the left-hand side of the slide. Core volumes for sport, GT, and SUV were down in line with the overall trend, whilst fewer specials were due to the timing of the Valhalla deliveries commencing only in Q4. As expected, Q4 wholesales increased sequentially, up 47% on the previous quarter, benefiting from both the expanded range of core models, including the DBX S, Vantage S, and Volante 60th Anniversary Limited editions, as well as initial Valhalla deliveries. As Adrian has mentioned, we expect to continue to realize the benefits of our full range of new core derivatives through 2026. On the right-hand side of the slide, total ASP decreased by 15%, again, reflecting the fewer specials deliveries and the mix compared to the prior year, while core ASP, as I've already mentioned, increased by 5%. On a constant currency basis, I would expect to see a similar improvement in core ASP in 2026, whilst total ASP will benefit from around 500 Valhallas we expect to deliver, as well as the Valkyrie LM editions. Overall, volumes remained similarly balanced across all regions in 2025, with the Americas and EMEA, excluding the U.K., collectively representing 63% of wholesales. This was despite the ongoing challenges related to the U.S. tariff implementation. In addition to the reasons previously outlined, the timing of various model transitions and deliveries across the regions impacted volumes compared to the prior year. The movements in volumes across EMEA and APAC were weaker due to market conditions and destocking activities. Despite tariff-related volatility in the U.S., volumes there and in the U.K. remained reasonably robust relative to overall group performance. While China is a market with long-term growth potential, demand there remained extremely subdued, in line with other luxury automotive peers, due to weak macroeconomic environment and changes to luxury car tariff effective from July 2025. We continued to support our China dealer network through 2025 to help position them well to benefit from our next generation core model range when the market conditions improve. As we turn to the next slide, the impact of fewer specials deliveries is reflected in the decline in gross margin year-over-year. The impact of core wholesales, despite a slight improvement in the mix from the next generation of derivatives, was also diluted to gross margin as a result of the previously communicated additional warranty costs, increased dealer support, and other investments made in product quality, which amounted to an increase on the prior year of around GBP 65 million. Additionally, gross margin was impacted by the U.S. tariff increases. Q4 2025 gross margin improved sequentially to 31% from 29%, supported by core volumes and specials, whilst ongoing warranty costs and dealer support to reduce aged stock still impacted the period. I'll come on to guidance shortly. We expect a material improvement in financial performance in 2026, including gross margin, benefiting from our ongoing transformation program and continued disciplined approach to operations, new core derivatives, and the enhanced contribution from Valhalla. We remain steadfast in targeting a minimum 40% gross margin for all of our new vehicles. Adjusted EBIT decreased year-on-year to a negative GBP 189 million, primarily reflecting the gross profit movement and foreign exchange, which were partially offset by a 16% decrease in both adjusted operating expenses, excluding D&A and adjusted D&A. The decrease in adjusted operating expenses aligns with our focus on optimizing the cost base as part of our ongoing transformation program, and to drive operating leverage through disciplined cost management from 2026 onwards. It also includes the previously announced GBP 11 million benefit from the revaluation uplift of the secondary warrant options associated with the disposal of the group's AMR GP investment. As shown on the right-hand side of the slide, net adjusted financing costs decreased to GBP 109 million from GBP 173 million, primarily due to a GBP 71 million year-on-year gain of non-cash US dollar debt revaluations, resulting from a weaker US dollar. Turning to free cash flow, the year-on-year outflow increased by GBP 18 million to GBP 410 million. This reflects both the decrease in cash inflow from operating activities and increased net cash interest paid of GBP 143 million, partially offset by the GBP 60 million reduction in capital expenditure. As expected, working capital improved year-on-year to an inflow of GBP 6 million, compared to the GBP 118 million outflow seen in 2024. The key drivers here being the deposit inflow relating to Valhalla, with deposits held increasing by GBP 3 million, compared with GBP 187 million outflow in the prior year period, in addition to a GBP 2 million increase in receivables, compared to a GBP 107 million decrease in 2024, following improved cash collections at the year end. Capital expenditure of GBP 341 million was below the comparative period, in line with the group's revised guidance, reflecting the initial benefits from the immediate actions announced by the group at Q3 2025, to reduce both cost and CapEx. As Adrian has mentioned, we have completed a review of the group's future product cycle plan, resulting in the five-year CapEx plan reducing from around GBP 2 billion to around GBP 1.7 billion. This is through a continued focus on utilizing existing platform architecture for internal combustion engine vehicles, in line with regulatory trends and customer demand. To finish with cash and debt, we ended the year with total liquidity of GBP 250 million, flat on Q3, given the strong performance in Q4 2025, and improved cash collections at the year end. Total liquidity reflects the GBP 410 million free cash outflow in the year, partially offset by the around GBP 106 million inflow of net proceeds following the completed sale of the AMR GP's shares, and the GBP 52.5 million investment from the Yew Tree Consortium. This has been further enhanced following our recent announcement of the proposed sale of the Aston Martin naming rights to AMR GP for a consideration of GBP 50 million. Net debt increased to GBP 1.38 billion, reflecting a decrease in the cash balance and increased drawing on the RCF. Combined with the decline in EBITDA year-on-year, this resulted in an adjusted net leverage ratio of 12.8 times. As we prepare to deliver the material improvement in 2026, and through disciplined strategic delivery and profitable growth in the future, we expect this ratio to materially improve over the coming years. Finally, and looking ahead, as Adrian has outlined, we expect to deliver a materially improved financial performance in 2026. As the indicative EBIT walk on the right-hand slide highlights, key to this improvement is our enhanced product mix, including the 500 Valhalla deliveries that we expect, and benefits from the ongoing transformation program and a disciplined approach to operations. We continue to acknowledge that the global macroeconomic and geopolitical environment impacting the wider automotive industry remains challenging. This includes the U.S. tariff and quota mechanism uncertainty, which Adrian has already mentioned. Taking this into consideration, we still expect to continue delivering year-on-year improved financial performance over the short to midterm, with a focus on margin expansion and cash flow generation, benefiting from the ongoing transformation program initiatives and an enhanced product mix from the future portfolio of both core and special models. You can see the group's detailed 2026 guidance on the left-hand side of the slide. What I would highlight is that we have planned carefully for 2026 to align production with retail demand and expect a much smoother delivery cadence from the second quarter onwards. This will support more efficient delivery of our plan, which, in addition to the ongoing benefits from our transformation program, will generate operating leverage. We expect the adjusted EBIT margin to materially improve towards breakeven. Free cash outflow is similarly expected to improve, and following the majority of the cash outflow occurring in Q1 2026, we expect a cumulative year-on-year improvement from Q2 onwards. As you would expect, we remain laser focused on cash optimization and liquidity management. Thank you. I'll now hand back over to the operator to open for the Q&A.[ id="-1" name="Operator" /> Our first question comes from Henning Cosman of Barclays. Henning Cosman: I have a few, but maybe start with three and get back in the queue afterwards. Maybe I can ask on inventory first. Perhaps for Adrian, if you could please comment on where the channel inventory stands now. I think you spoke to China and low stock at year-end in China specifically. If you could help us understand when you think wholesale and retail can start converging because you've reached a normalized stock level. In the context of that, the costs that you've had for support, mainly dealer support, in 2025, do you think they will be fully non-repeating in 2026? That is the first question. Second question, perhaps on free cash flow and liquidity, maybe more for Doug. I don't know, Doug, if you're prepared to comment on a target liquidity level by year-end 2026, or alternatively, on a ballpark free cash flow corridor that you have in mind. Could you confirm perhaps whether GBP 50 million to GBP 100 million negative free cash flow corridor is that a realistic ballpark? And do I understand you correctly, therefore, a substantially neutral free cash flow development starting with the second quarter of 2026? Finally, on free cash flow, would you entertain that you are targeting a positive free cash flow for 2027? Maybe just finally on volumes, back to maybe Adrian. Adrian, is there an updated volume target at all, perhaps for the core volume range? You re obviously guiding to sort of flattish volumes with higher specials, implying declining core volumes in 2026. Do you have an updated mid-term volume target in mind? What would be the key building blocks to get you there in terms of the things you can control outside of improvements in the macro? Adrian Hallmark: Okay. Thanks, Henning. I'll do both the kind of demand questions first, then we'll finish with Doug on free cash flow. I think as far as inventory is concerned, we are -- we hoped to have got the inventory fully balanced by the end of last year, as you know, there were a few disruptions during the year that knocked us off track. I won't go through those. We ended up where we did. We've been, again, quite ruthless in the first quarter and in the first half of this year, replanning. We are destocking further in quarter one. Most of the destocking that we need to do for the year will be done in quarter one, it's already fully on track, both from the January performance and what we're seeing in February. What does that mean? We've talked in the past about getting all models and all markets in balance. The aged stock profile is now radically improved compared with the beginning of 25 and even the end of 2025. By the end of Q1, we'll be into tens of units around the world, less than one per dealer, that is what we would define as aged, and that is more than six months since it was passed to sales. That includes shipping times as well, don't forget. It's not that they're really old, we just like to keep stock as fresh as possible. The aged stock profile is massively improved. The total stock by the end of March, in the major markets, will be balanced. From Q2, we should see retails matching wholesales. There's still a bit of overhang in China. The aged stock is now -- is fully under control, the total stock, almost under control, and that will be end of April, approximately, by the time we get corrected in China, too. Overall, in the next one to two months, we'll be in a really good position. In terms of ongoing cost, it's -- there \'s no question that the quarter four last year, to accelerate the sale of those older cars in all markets, we did double down. That cost will not be recurring. We'll revert back to normal levels of support on lease programs, et cetera, after the first quarter of this year. We are in that cleansing phase of the stock, and as we get into the second quarter and the second half of the year, we'll start to see that normalize. As far as volume is concerned, yeah, absolutely, as per the previous guidance, we don't see a path to 8,000 to 10,000 units a year. We -- sorry, in the near term. We've reset our expectations and then rightsized the business to meet that new business model structure. I won't give specific numbers, but the core models are selling 5,500, 6,000 a year, even in the current market conditions, with different levels of BM effort. We see that is a conservative and achievable level that we can continue with. The specials, depends on which year you look at, we should be in the 250 to 500 range with Valhalla, and then with other specials coming in over the next 3 years. One thing I would say is that the derivative strategy, and there's other questions being raised about that, so I'll answer some of them preemptively. The derivative strategy is all about an opportunity to relaunch each nameplate every year, to improve the product offer and quality and optionality each year, and to destock the previous models and continually shift the mix of cars so that we support residual values. The good news is that the order cover for those S derivatives is much, much higher than the residual stock, which shows that it's worked, and the dealers are positive about them. That's part of the strategy for derivatives. 5,500, 6,000 is the core business that we expect in the midterm, and the specials on top, with a significantly improved revenue per car and margin. With the cost structure measures that we've taken, the SG&A improvements that we've planned, we can see a way to that cash flow inflection and to profitable operations in the midterm. Douglas Lafferty: Okay, nice segue. Morning, everyone. Morning, Henning, and thanks for sticking with us through the technical challenges this morning. Henning, I guess probably somewhat unsurprisingly, I'm not going to put a number on the free cash outflow that we expect in 2025, but obviously, we have stated that we expect -- sorry, 2026, we do expect a material improvement versus last year. I think linked very closely to what Adrian has just been describing in terms of the flow for the year, we've said that we're going to see the majority of the burn or the outflow in the first quarter of this year, and then a stabilizing through Q2 to the end of the year, in sync with that stabilization and transformation in the operation. I fully expect us to have momentum as we exit 2026 into 2027. As we've also said today, from a short to midterm perspective, we do retain that focus on cash optimization, profitable growth, and the objective of getting the business into a form which generates its own cash as soon as possible. Sorry, I can't put any numbers on it or specific timing on it, but the sentiment and the message is still very much there, and the focus is on delivering exactly what I've just said. Henning Cosman: Especially the granularity on the remaining stock is very helpful. [ id="-1" name="Operator" /> And the next question comes from Christian Frenes from Goldman Sachs. Christian Frenes: Yes, I'll just kick off with deleveraging and free cash flow. You've talked about a material improvement in 2026 free cash flow. I think the CapEx is clear. You've also made comments on the top line. But in terms of the P&L improvement, can you comment a little bit on some of the key buckets that could drive the material free cash flow improvement? So for example, I think savings are talked about the nonrepeat of GBP 65 million is talked about. You alluded -- you commented just now on the dealer support. But if you could just walk us through some of those buckets and the cadence of that, including net working capital impact. And also if we should include any more assumptions on nonorganic deleveraging aside from the disposal of the Nemi rights? Maybe that's question number one. And then I'll ask question number two. Douglas Lafferty: Okay. There's a lot of questions in question number 1, Christian, but, good morning. Let me have a crack at that. Yeah, look, I think the margin build, in 2026, we tried to illustrate, I think, in the final slide of the deck. Obviously, that is going to be largely underpinned by the fact that we have, you know, a strong sort of specials volume returning back to the mix in 2026. With the 500 Valhallas versus the number of specials that we delivered last year, and obviously that comes with accretive margin, and that will flow through. Specials is a big chunk of that. Within core, you're right, we expect a stronger performance from the core perspective as well, because we don't expect to see a repeat of the full GBP 65 million of headwind that we suffered in 2025 on the things that we've already talked about, being the dealer support, obviously the investment that we've made in quality and the warranty costs. We'd expect, you know, to continue to invest in the quality of the products, of course, but not to the extent that we did it to last year, with things such as, you know, the big upgrade on thousands of cars on the software earlier in the year. Indeed, we'd expect some of those quality improvements to mean that the warranty costs start to come back down and normalize. We will be sort of lapping, those as we go through the year. With regards to working capital, I think, relatively stable throughout the course of the year. We're definitely not going to see some of those big swings that we've seen in the last couple of years when it comes to deposit, outflow. We think that'll be much more, sort of normalized and neutral during the course of this year. Then look, as regards to, the F1 IP deal, we're delighted to get that done. I think, you know, it's a good deal for us and a good deal for them. So GBP 50 million to sort of bolster liquidity to a certain extent as we go through the course of this year, but no further plans to announce at this point. Christian Frenes: And just to clarify on your response there. So we should expect the full GBP 65 million incremental savings next year. And should we add savings of GBP 40 million, I think, there on top of that? Douglas Lafferty: Well, we've guided to SG&A will be below GBP 300 million. That's how we guided SG&A this year. Don't forget that last year's SG&A benefited from an GBP 11 million uplift in the revaluation of the AMR warrants, which obviously won't repeat this year. So there's a couple of headwinds in SG&A, but we expect to remain below GBP 300 million. And on the GBP 65 million, as I said, we don't expect all of that to recur. In fact, I would expect the majority of it not to. But as Adrian said, we will still have a little bit of additional dealer support in Q1 before that sort of normalizes and there'll be ongoing incremental improvements in quality, but nothing like the extent to which we saw in 2025. Christian Frenes: Okay, that is clear. Thank you. My second question is just on the Valhalla average selling price. If you could just comment on your expectations for that going forward. Should it be the same as we saw in Q4, or any change? Also specifically with respect to the U.S. market, where you talked about an October price increase. I'm just curious also how that applies to the Valhalla. Also, associated with this, the Valkyrie Le Mans edition in Q4, could you just comment on how many units you actually shipped in Q4 and what the implication for 2026 is? Adrian Hallmark: First of all, on Valhalla pricing or Valhalla ASP, I think first of all, the retail base price of the car, we have listed from 1st of April in 2026. That will come into effect on the 1st of April '26 for orders thereafter. What we've seen on option uptake and specification of the first cars that have been delivered and are in the pipeline, is a significant uplift versus the base price. We expect the ASP to continue similar to quarter four as we get through this year. We've seen no fall off in the average value per car. That price increase should give us a little bit of a lift in the second half of the year or last quarter, because that is when it would be effective. You can assume pretty much consistent with what you've seen on Q4, with a slight upside. In terms of overall pricing -- sorry, in terms of the Le Mans cars, we delivered two cars physically. The rest of those cars will be delivered this year. [ id="-1" name="Operator" /> The next question comes from Michael Tyndall from HSBC. Michael Tyndall: A couple of questions, if I may. One for Doug. Doug, Q1, you've been pretty clear about what's going to happen on cash flow. You've got the GBP 50 million in from the F1 naming rights. That puts you, I guess, at about GBP 300 million gross cash. Where are we -- I mean, without asking you for a number on Q1, but I mean, will you stay within that comfortable GBP 200 million to GBP 300 million range that you've spoken to before? I'll come back with the second one. Douglas Lafferty: Okay. All right. Yes. Look, again, I'm not going to get into the specifics. I think we've been pretty clear on how we expect the shape of the year to be from a free cash flow perspective. For Q1, it's the majority of the burn. I'd like to think that we stay close to the range that we've talked about previously. So Q1 this year, we would expect to be an improvement on Q1 last year, but still the majority of the burn for this year. Michael Tyndall: Okay. And then the second question for Adrian. Just with regards to cyclicality, which I guess at least from where we sit, but I would imagine from where you sit, has been one of the burdens of the business, the cyclicality, which we are trying to kind of move out. I just -- I wonder a bit about why we've released all the specials broadly at the same time. Does that not exacerbate cyclicality? Is there a way that we can sort of start to space these things out? And is that in the plan? Adrian Hallmark: Okay. Thank you, Michael. It's a dilemma, isn't it? Because we wanted to get the specials in because we want to support the life cycle volumes. And yes, there is always a trade-off to make. I don't think that the specials -- sorry, the derivatives, will increase the cyclicality. Why is that the case? They're designed to do the exact opposite. If you just think about DBX, I'll give you one simple example. What we've now done is evacuated the production pipeline of pretty much all non-S derivatives of DBX S, DBX. Which means if you want a non-S version, you buy a stock car. If you want an S version, you'll wait three to six to nine months before you get one, depends on which market you re in. What that does is pre-loads a pipeline with sold orders and encourages the sale of the cars that are in stock or a deposit for a future car. Because we're doing them all at the same time, but they're all different, there's very few customers, I can't think of one that would come in and want a DBX, a DB12, and a Vantage all at the same time. They will be looking for one of those cars. They have the choice of a stock car, which is an older model, or a fresh car, which is a new model with a different price value proposition and a very different product proposition. We actually see it as a way of bolstering the future order cover and giving the customers a clear choice. When we get through the DBX S, for example, we'll be introducing another derivative for early next year. Again, we'll back off the S production in the plan, ramp up that new derivative, and people can still order an S, but it will be to order. We get back to that order bank situation. The whole idea of this, again, is to smooth out the actual order profile and to give the customer a clear choice. We know it works from other brands; we just haven t done it before. We are now. Michael Tyndall: Got it. Got it. One last one, if I can, just for Doug. It's around the agreement with Lucid. You talk in this statement around a GBP 73 million cash liability, which is due in 2026 or later. I'm just curious to know what determines whether it happens in 2026 or later. The comments you made, Adrian, about the future for electric, you know, and this minimum spend of GBP 177 million, how does that work if electric is getting pushed to the right? Is that commitment still there, or is it negotiable? Douglas Lafferty: Hi, Mike again. Yes, so let me take both of those in one sort of answer. You know, we made the initial payments to Lucid back in 2023 when we signed the agreement, I think obviously an awful lot has changed since 2023 with regards to, you know, the way the market sees the evolution to BEV and our transition. We've talked quite openly about the delays as we've gone through the last couple of years that we're expecting. We're in discussions with Lucid over, you know, the timing of those payments relative to when we now expect to start production. That is both with regards to the initial access fee payments and also the commitments on the volumes. It's all a discussion to when are we actually going to start production on a BEV. [ id="-1" name="Operator" /> The next question comes from Horst Schneider from Bank of America. Horst Schneider: Not many are left. The first one that I have is more on the details regarding the model mix in FY '25, but also in Q4 on the Range cars. Maybe you can provide more granularity on the split within sport cars, city cars. Here, the split between Vantage, DB12, and Vanquish. Regarding the outlook on model mix on the Range models in 2026, where do you expect overall, you expect these flat unit sales, flat wholesale, but within that and the Range models, where you expect the movements, what is going up, what is going down? In that context as well, you talked about this 5 months visibility order book. What is the order intake by models that you are seeing? Is there any highlight you would point out? The last one is, if you could give any insight into your residual value development, because I think that is a key metric, and we hardly have good insight into that. Any insight into that would be appreciated. Adrian Hallmark: Okay. Thanks, Horst. I'll start with -- going in reverse if I may, I'll start with residual values. I think the key message, as most of you will be aware, is that if we -- when we get supply and demand in balance, and when we get the derivatives launched and the pull from the market for those derivatives, our residuals will improve further. We've already done a lot of work in 2025 on residual values. I'll give you some examples. If you go back a year and a half, we were 5-10 points below the competition, as I say, a three-year period on leasing in the major markets on RVs. We're now much, much closer. I'll give you an example of Vantage without going through every single model in every market. Specifically Vantage, Vanquish as well, are incredible in terms of the way that they've been set. We are absolutely on par with the strategic competition. The key to supporting residuals is making sure that we don't oversupply. Whilst we've had excess stocks, oversupply is inevitable. As we get through quarter 2 and quarter 3 this year, I already mentioned earlier, this will balance out. Together with those strong, third-party residuals offered on core models, we're heading in the right direction. I still think it's going to take another 3 to 9 months to properly stabilize all of the above, but we're good on track. Vanquish and Vantage are already strong. DBX -- sorry, DB12, just behind them. It's DBX where we need to do the work. In the meantime, we subvent, marginally, those cars to make sure that they're competitive on the leasing rate. In terms of model-by-model description of order bank, we won't do that. To give you an indication, the S models are well over 50% order cover. The rest of it, we've got about a five-month order bank on average, but the Ss are way stronger than the non-Ss. Valhalla, of course, is about nine months. If I look across the spectrum, it is improving. As we balance supply and demand, it will naturally improve even further. That s all the foundation for residual value improvements as we move forward. Douglas Lafferty: Try and pick it up a little bit without going into, you know, vast details. Just try and give you a couple of soundbites. If I look at last year, you know, it was relatively stable from a mixed point of view through the year. For that, Q4 was a little heavier on DBX, on the SUV, because of the launch of the S. Obviously Q4 benefited, obviously, from the strong mix of specials with 152 Valhalla deliveries. As we, as we go into this year, I mean, there's not really too much to highlight. It's relatively smooth, I would say. Q1, probably a little bit light on the SUV mix. We've said today that we expect up to 100 of the Valhallas to be delivered in Q1, so they'll be sort of reweighted Q2 to Q4, a little heavier. Other than that, it's just the ebbs and flows of when the derivative launches come, so nothing particularly special to remark on. Horst Schneider: Okay. But in summary, I think the DBX is most critical model, right? So that's maybe where some weakness is. I think it's just the segment, the market, right? It's not the product. Adrian Hallmark: Yes. I think -- well, if you look at the results of all the road tests that have been done on DBX S, it's incredible. I mean, a car that s been in the market a couple of years with some really solid technical improvements to create S, and some visual ones, has beaten Urus and Purosangue repeatedly now in different markets in road tests. The product substance and performance is tremendous. There is a sectoral issue. I mean, you'll probably know, most brands are seeing a shift in 2025 and 2026 compared with, say, '23 or early '24. The market has definitely changed. That said, if you look at the outlook, the macroeconomic rather than the geopolitical, the outlook going forward is, say, mildly positive. It depends which market you look at. We don't expect a deterioration. We expect stability or slight improvements in conditions as we get through the year. We're well placed with those derivatives to take full advantage of any upside that occurs. [ id="-1" name="Operator" /> The next question comes from Philippe Houchois from Jefferies. Philippe Houchois: I've got 2 questions. The first one may be for Doug. is on the 40% gross margin. You reiterated it in your speech, that clears one hurdle. I'm trying to understand, with 29%, if I give you the benefit of the warranty span, we get to 35%, who is above 40%? It almost looks like from the outside that Valhalla could be diluted. Could you confirm that Valhalla gross margin is above group average, or is it below? If it is below, what gets it above? What are the hurdles to really get to 40%? The initial guidance was that it's going to be, you know, valid for all the vehicles range as well as specials. If you can help me navigate that'll be very helpful. Douglas Lafferty: Well, I can certainly confirm that Valhalla is accretive to the overall group margin, you know, significantly above the 40%. As I said earlier, the 40% remains the target on all new vehicles we're bringing to the market. I think, you know, we'll see an improvement in the margin for some of the reasons that we outlined earlier in terms of lapping some of the costs and investments that we made during the course of last year, and also as we continue to stabilize the operations. You know, we can see the path to the high thirties for this year, which is still the plan. The target still remains to get every car at 40% or above as we move forward. Obviously, complemented by both the Valhalla being materially above that sort of margin level, but also, you know, a continuation, and I think this is an important point, a continuation of other special models that we will bring to the market that are out there today unannounced, that I think is important from a financial point of view, that you understand that program will continue. Cars like, you know, the Valour and the Valiant and the DBR22 that we've done in the past will continue as part of our cycle plan in the future. And obviously be accretive to margin on the go forward. Philippe Houchois: Yes. And we can assume those are effectively the most accretive because they leverage a Range car into a special. Is that a fair assumption? Douglas Lafferty: I think we've talked about that in the past where we've looked at, yes, like the Valiant and the Valour, certainly in the era of the Valkyrie, those costs were materially more accretive to margin than the Valkyrie, yes. Philippe Houchois: Right. And can I get another question on -- I'm a bit confused right now between what we hear from you today. And by the way, a good presentation. I think you've reassured us in many ways. But then I guess stuff from the press, which is not part of your communication. We hear about 20% staff reduction, GBP 40 million savings. I don't see that in the release. Are you validating those numbers we get separately from you? Or what's going on? Where is the mismatch between what you're telling us and what the press is basically talking about right now? Adrian Hallmark: Yes, I'll jump in. Adrian here. We have talked about that openly. That's not speculation. It's actually in the release. So the part of the SG&A push that we can't solve our right sizing or resolve our right-sizing needs purely through headcount, but it is an important part of the overall picture. We have said that we will -- there's already a process underway. We're in consultation. We will reduce the total people costs by circa 20%. It doesn't necessarily mean a direct 20% reduction in absolute headcount numbers, because of the mix of people, and we also account in that headcount cost for some contract and kind of contracted services resource. That is in the plan. It is part of that SG&A restructuring approach. It's not the biggest lever, but it's an important one in order to get us lean and effective for the future. Douglas Lafferty: Let me just specifically pointing to where it is in the release on Page 4 paragraph. So it's all in there, and I guess just an indication of how other people pick up the news and what's important to them in terms of the story. [ id="-1" name="Operator" /> The next question comes from Nikolai Kemp from Deutsche Bank. Nicolai Kempf: Well done on the 152 Valhallas delivered in Q4. And that's also my first question. The 500 you target this year, is that production driven? Or do you have clients backing all these 500 units? And my second one, just to get some color on the cash out in Q1. Do you have any magnitude how big that could be? Adrian Hallmark: I'll start with Valhalla. We have -- first of all, we have a good order bank for Valhalla, which takes us through almost to the end of this year for delivery. We still have some to sell, but it's quite low numbers. So the build rate and the shipment rate in the next 6 to 8 months is more related to production capacity. This is a very complex car. It was a ground-up development, and we plan for certain capacities in our supply base, which are very difficult to increase. So we're pretty much fixed at the rate that we're currently at, plus or minus a car a week, something of that order of magnitude. So no major opportunity to do it quicker. We could always go slower, but no opportunity to go quicker. So that's the situation with Valhalla. Douglas Lafferty: Yes. And then on the second one, I think, referenced earlier. So obviously, we've been quite clear that Q1 is going to be the biggest outflow. I don't expect it to be worse than the first quarter of... [ id="-1" name="Operator" /> This concludes today's Q&A session. So I'll hand the call back to Adrian and Doug for any closing comments. Adrian Hallmark: I'd just like to thank again, everybody, for participating in the call today and apologize profusely for the technical issues that we had at the beginning. It may be bad for you, but we had to listen to ourselves twice, which was a great start to a Wednesday morning. So thanks for your time, everybody. Douglas Lafferty: Thanks, everybody. Speak soon. [ id="-1" name="Operator" /> This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.
Véronique Bédague-Hamilius: [Foreign Language] [Interpreted] is in line with our WCR and co-development projects, and this reflects operations that are going to be launched at commitment margins and the current market conditions. Our backlog has no longer fallen since the 30th of September. We're being more selective about our operations, and this means that we're replenishing the backlog with quality operations that are robust. Our operating cash flow is positive, EUR 107 million. It should be noted that even without opportunistic decisions, our operating cash flow would still be positive, plus EUR 54 million for the year 2025. I'd also like to remind you that all of our bond maturities in 2025 have been repaid via proceeds from disposals made in 2024, and our liquidity is EUR 588 million. That's very good, which means that we can meet our medium-term maturities, and we can redeploy with selective and profitable operations. The second message is that we have organized a pickup of COP that's now positive at EUR 25 million as compared to losses of EUR 118 million in 2024. So this is an improvement of plus EUR 140 million over that period. The units that have been launched during the crisis that had to be recalibrated, restructured in 2024 are gradually being phased out. They represented 70% of revenue in 2025, and it will be more balanced in 2026. So those bad years are being absorbed. All of the operations being launched today are at the level of our commitment margins. That's an average of 7%, reflecting our product mix. As you know, we have orchestrated a major drive to reduce costs. These are operational and production costs. In 2024, we launched a major savings plan, EUR 100 million by the end of 2026. So we have already achieved EUR 92 million. Nexity is now at the same size as it was 10 years ago, and the market is comparable to that of 2025. So our structure is fully in keeping with market size today, meaning that we can capture the very best business in terms of margins. There are a number of upsides. In particular, we are rolling out a major performance plan to reduce the production costs of our housing units, and this will gradually have a positive impact as we move into new operations. And more broadly, the production costs of housing units on the market is higher than our potential clients' purchasing power. So we need to constantly challenge our cost structure, and we will continue to do this in 2026. 2025 saw a major increase in profitability of services. Our third message is that we've consolidated our leadership role. We recorded 12,000 reservations, residential reservations over the years. So this confirms our leadership position. Our market share is 13%, up 10 basis points. And this means that we are really a leader for buyers, home buyers, which is a very good market. Our commercial performance is better than the market for all of the segments for the second quarter in a row, and Jean-Claude will come back to this in more detail. New Nexity is completely operational. It's organized in a territorial multiproduct and refocused way, focused around the planning, developer and operator model. The business is much simplified and organized around skills that are integrated into our operations. All the assets that don't come under this scope have had tough decisions taken on them. This new organization means that there will be a new generation of leaders essential for Nexity of the future in the Executive Committee. This is key success and confirms that this organization and this momentum are relevant. In Nantes, for instance, we have a major urban renewal project on a former administrative site on the island in Nantes. And this is mixed development project, 28,000 square meters, derisked financial structure. In Tours, we're developing a whole neighborhood, St. Paul with three buildings, including a 14-story tower and student residence. This will bring in more than EUR 100 million of revenue and EUR 8 million of margin. And for the medium-term perspective, the pipeline currently represents five years of business activity with high-quality potential, 42,000 housing units that have had sales purchase offers for them, 3.5 years, and this potential will be maintained. So by the end of 2025, Nexity is a derisked company ready to move into the new real estate market cycle that's opening up. And I'd like to talk to you about how I see this market. It's true that the real estate cycle is still somber, but there are a number of encouraging signals, which would seem to indicate we're on the dawn of an about turn. Political consensus has changed a lot over the course of the last year. Measures to encourage housing, particularly with new status for private landlords reflects this consensus at national level. The new housing law was difficult to get voted, but it was voted, and there is this new consensus. And then there are municipal elections coming up at the moment. And in Nexity, we're looking at this very closely and housing is a key issue in all large towns. These elections means that we'll be able to have a new development momentum with the new teams in place for whom housing is inevitably very important. So Nexity is the leader. It's agile to respond to this new demand. Regarding bulk sales, we've worked on an offering, which takes on board the changing market and demand for smaller housing units with a focus on climate adaptation. Nexity is a historical recognized partners with more than 100 social housing operators, both regionally and nationally. The second key market is that of homebuyers. We're very careful about the equation of location, price, product and quality to the highest standards. In 2026, we will be supporting the new measures of loan rent, which will bring the personal contribution to -- down from EUR 600 to a more acceptable level between EUR 150 and EUR 500. We draw on historical expertise for these products, these investment products and whatever the status, we are going to have to make sure that buy-to-let investment be at the core because it means that People can use bank borrowing to buy a long-term asset, which will bring new value for them and help to create value in the future. And I will hand over to Jean-Claude. Jean-Claude Bassien Capsa: [Interpreted] Good evening, everybody. I'd like to talk about the business activity in 2025. The slide you see here shows the indicators of business activity. I will go through this in some detail. So commercial offer is well suited to the market. It's high quality, and this is key for derisking Nexity. Particularly, we don't have any completed unit stock, and this shows that we've managed the portfolio in a cautious and effective way. 90% of the units that are available are positioned in areas where there's high demand. These are the A, Abis, and B1 areas. This is up 15% points rather compared to 2022 and 17% for those where demand is higher. This reflects good alignment and concentration of demand on the market. Regarding reservations, we have more than 12,000 that were recorded over the year. Nexity is outperforming the market on all market areas in the second quarter in the row. And our market share is slightly up 13%. The volumes are down 10%, but the national market, as Veronique said, is well down 11%. But as far as we're concerned, we notice continuous improvement quarter-by-quarter. Regarding retail sales, two factors. First of all, private investors are not as present because the Pinel scheme was wound up at the end of 2024, but strong momentum for home buyers, up 19% on 2025 with 2,600 units reserved. Regarding bulk sales, as expected, we're seeing that there's been a good pickup in H2 and particularly Q4 with 3,800 units. That's 15% of the bulk sales for the year as a whole in the last quarter. And this confirms the message that we reiterate over and over. There is a seasonal trend for bulk sales, and this shows that. Bulk represented 7,450 units for Nexity. Now if we now focus on the sustained momentum of home buyers, it's up 19% over the year, 2,600 reservations. That's significant in volume. We're back to the precrisis level. Good momentum for commercial units with 100 commercial projects launched for retail sales since the beginning of the year, very targeted and attractive operations. And finally, we are present in areas where there's high demand and low offer, which are eligible to VAT at 5.5% and our capacity to have offerings with good attractive solutions for zero loan schemes, zero-rate loan scheme. And this is all part of our Loan = Rent scheme approach as well. So 14,000 building permits were obtained in 2025. Now looking at the commercial mix, two points. continued good momentum for homebuyers, 21% for reservations, the total. That's up 5 basis points in 2024, and of course, bulk sales, which are more than 60% of the total. Looking at service properties, student hospitals and co-working spaces displayed solid indicators for or Studea, the momentum is driven on the one hand by the growth of the fleet with the opening of four new student residences over the year with service properties of over 17,000 units in 54 cities and record occupancy at 98%. For co-working activities, we continue to see very high occupancies compared to the market at 83% with constant emphasis on improving profitability as opposed to chasing after volume. And finally, on distribution activities, which we recall were very much oriented investor-driven until 2024. reservations are up plus 9% in a private investor market that is down without the P&L, reflecting the agility and the ability of our teams to reposition themselves on other products for distribution. Finally, looking at the pipeline at the end of 2025, this represents five years of business in hand, quality potential of 42,000 housing units that are signed for, namely 3.5 years of revenue, 83% of the potential is in high demand areas, Abis, A and B1. This potential is committed through our commitment committees commensurate with our target of 7%. The backlog accounts for 1.5 years of business in hand. It is stable compared to Q3 and secured to the tune of 48%. We continue to seek selective replenishment of the backlog in order to go towards the margin rate target of 7%. I'll now hand over to Pierre Henry, who will give you the details of our financial performance. Pierre Pouchelon: [Interpreted] Thank you very much, Jean-Claude. Good evening, everyone. First slide here goes over our main -- our key figures that I will go through one by one in the presentation. Let's start off with revenue. New Nexity revenue stands at EUR 2.7 billion, EUR 2.8 billion for the group revenue, down 14% on a like-for-like basis, impacted as expected by the decline in revenue of service -- commercial property of 87%, namely due to the delivery of the major projects in 2024, for example, La Garenne and Colombes. Residential housing accounts for 83% of revenue of the group, down slightly by 5% due to the decline of business since 2022. On service, services, the revenue of service properties is up 9%, mainly due to the pickup of the fleet and very strong occupancy. Distribution until 2024 involved distribution mainly of P&L investment products and had to be repositioned on smaller investments such as student residences in 2025. Now looking at the operating income for the year. what you see here is the return to operating profitability of New Nexity. This is a key point. First of all, the most important thing is for the core activity of the group, restructuring of the margin in residential properties with the launching of new transactions in 2024, which are consistent with target margins and take into account the cost of the works and the production costs in the market in 2025. The second driver is the improvement of the profitability of services with a 13% margin on service properties and a return to equilibrium in the distribution business. The current operating income for New Nexity comes out at EUR 25 million, an improvement of EUR 143 million versus 2024, of which EUR 120 million on the planning and development model that we explained earlier. Current operating income for service properties is up plus EUR 15 million at EUR 38 million, driven mainly by service properties with a margin of close to 13%, which is due to the high level performance on Studea, very high occupancy and a decline in cost distribution is back to breakeven. Net income for 2025 includes a nonrecurring negative result of minus EUR 128 million, reflecting the bookkeeping of the determined action taken over the financial year, seeking to deleverage the balance sheet. Breaks down into three main categories: nonrecurring costs due to the finalization of the disposal plan over the management business and the opportunistic approach, mainly on commercial property in an office -- commercial property market that has significantly declined, in particular, in the Paris region. Cost due to -- arising from the discontinuing of transactions, which were our own decision. Finally, reorganization, and we are looking at deleveraging the group by -- in 2025. WCR came out at EUR 606 million at end 2025, down by almost 30%, minus EUR 226 million on end 2024. The WCR of the Planning act and -- the Residential Planning and Development act business is up EUR 161 million due to the continued cost cutting, greater selectivity in purchasing of land, optimization of the time lines between acquiring land and the first funding commitments. And the decline of EUR 17 million internationally is due to the delivery of the [ Plana resi ] project in Italy. Now on the net debt stood at EUR 278 million before accounting for the increased stake in Angelotti. So meaning down EUR 52 million. This accounts for a decline of 16% on 2024. Net financial debt stood at EUR 328 million, well below guidance, which stood at a maximum of EUR 380 million. As said before, continued deleveraging has been enabled through positive cash flow with a return to profitability continued optimization of the WCR and our investment, our disposals mainly on commercial properties and proper control over our financial costs. The structure of financial debt reflects, first and foremost, gross debt of EUR 914 million, down 17% over one year by EUR 182 million, down 40% over two years. And this has a favorable impact on the cost of debt, which comes out at 2.8%, down 40 basis points. We talked about the debt ratio that came out at 4.9x, ahead of the trajectory of the covenant. Liquidity after redemptions of EUR 321 million in bond maturities in the first half came out at EUR 588 million. And on the right-hand side of the chart, we have the average maturity of our long-term debt. We have given you on this slide, the trajectory of the banking covenant in order to give you a full visibility on our progress on the debt ratio end of 2025. I'll hand over to Veronique. Véronique Bédague-Hamilius: [Interpreted] Thank you very much. To conclude, 2025 was a year of continued deleveraging and of recovery in our operating profitability. As a systemic actor and market leader, we have taken stock of market developments, not only from a cyclical standpoint, but also structural. And we have not waited for the cyclical recovery, but we have launched a deep restructuring of the group. The balance sheet is now in a clearly deleverage financial situation. And management has also prepared and organized the group for structural adjustments in the market, and we are now able to capture all profitable growth opportunities. Through this financial -- this financially more healthy situation and our capacity to exploit a return to growth, we are now at a time where the potential for value creation for Nexity shareholders seems significant, and the group's management is extremely committed to this value creation process. The trajectory of our financial leverage remains a priority. We have proved this in 2025 by getting below a leverage ratio of 5x, well ahead of covenants, and we will continue this in 2026 with the goal being as soon as possible and no later than '27 to achieve a leverage ratio below 3.5x. We will, therefore, continue our financial discipline on net debt, in particular, combined with the gradual increase in EBITDA, notwithstanding a top line momentum, which will still remain under some constraints in 2026. And finally, to conclude, I'd like to share with you our guidance points. We are aiming for improved operating profitability with a return on capital of New Nexity up as well as continued decline in the leverage ratio back to less than 3.5x at latest 2027. Before answering your questions, I would like on a more personal note to thank Jean-Claude, who has been with me for the past seven years and who has decided, as you've seen in our press release, to resign with effect from the next General Meeting. Jean-Claude will continue to accompany me in the transition until then. Jean-Claude has done a remarkable job in implementing the transformation of the group. He has supervised our financial trajectory and has contributed to preparing us for the new real estate cycle. The [ co-MACs ] and myself would like to say how grateful we are to him and to emphasize that he has made a decisive contribution to building the New Nexity. I'm ready to answer. We're ready to answer your question. Unknown Analyst: [Interpreted] Good evening. Congratulations for the current operating income result. That's EUR 160 million up compared to last year despite the decline in sales. I've got three questions, if I may. The first question is, could you go back and explain how you deal -- dealt with the difficult years, the stocks from the difficult years. And what's going to be the share of bulk sales in 2026? The second question relates to the noncurrent income. Pierre Henry, you've explained this a little bit, but I'd like to have more information on this. And then the status of private landlord. If we look at this in some detail, it only really pay off for about 20% of households, but not for the others. Do you think that this will really help to support the real estate development market in France? Pierre Pouchelon: [Interpreted] I think it's by him who's asking the questions if we didn't hear you announce your name, but I think I recognize you. Regarding the previous years where we had to restructure, we did that in 2024. We had to adjust to the previous cycle to sales prices at the moment. These were operations that were launched before 2024. And those years still represent about 70% of margin and revenue. It will be more balanced in 2026. That's the percentage to completion method that we're using. The ones that have been started up, that's buying the divisions, negotiating or starting the building. So all of this is contributing increasingly to the margins in 2024, 2025 and 2026 and will account for the majority in 2027 when we will have cleared finally, the previous cycle. Regarding bulk sales in 2026, we always said that we have a medium-term vision. We don't think that the mix is going to be that different from the previous two years. So as Jean-Claude showed you, about 60% of our sales bulk, and 40% retail. The noncurrent income, there are a number of categories here. First of all, you've got the capital losses. We've wrapped up some management activities. So now we're focusing on operational and distribution. We don't have management anymore. We've got a small subsidiary of property management, but that was -- disposal took place in 2025. So that's been wound up. And then we've got balance sheet risks. So we have disposed of some operations that were underway. We got offers for those. This is mainly commercial business. And in some cases, we've discontinued operations. That was our decision. Our idea was to have a mix of bulk and retail, but the social housing operators backed out, and we didn't want to move more towards the retail market because it's a very tight market at the moment. set for homebuyers. And then there's a reorganization costs. And this relates in 2025, mainly to the winding up of transformation of Nexity with an approach of really having a mapping of the geography, identifying target markets, and we had to take tough decisions about whether to keep our brands, the Edouard Denis brand, for instance, in some geographies, we decided to discontinue that in some areas and move everything to Nexity. These decisions were taken with a special agreement where we had to redundancy agreement for 120 employees. Véronique Bédague-Hamilius: [Interpreted] Regarding the private landlord status, so this is something that one could discuss at great length as compared to the P&L scheme. I think that it does have some potential. You can make more savings, the higher your marginal tax rate, obviously. But it's still got a lot of potential for many households because it generates a real incentive. We can see our clients are showing interest. Real estate investment is not just driven by tax incentives, although that's significant in the decision, but deciding to invest in property is also to generate some income. And when people retire, they often think of doing that. It's the only way to set up capital by borrowing, and it's also something you can pass on to your children. And it's a kind of life insurance policy. If something happens to you, well, you've invested in real estate, in property, and that is then handed on to your children, grandchildren. I don't think it's going to have the same impact as the P&L scheme, but it will have a significant impact. And that will begin to pan out around June and July because the banks who are the main sources that distribute to this will have to get themselves organized. But don't underestimate the value of this scheme. Jean-Claude Bassien Capsa: [Interpreted] I see a written question from [ Cristian Rastasanu ], which relates to the reservation trajectory. And it mentions the fact that at the beginning of 2024, our objective was 14,000 units, and now it's 12,000 units. Do we have additional adaptation measures planned for Nexity given that trajectory and also the whole issue of the momentum on the market, which we mentioned at the beginning of these presentations. Going back to the past, don't forget where we've come from. In March 2024, most people on the market thought that we were coming up for a rebound. And everybody on the market got repositioned with that in mind. But actually, macroeconomic events had -- and political events, you're right, had a major impact on that trajectory. We bore the brunt of that as did everybody else on the market. But we did have a cost reduction drive and we stepped it up. And as Pierre Henry has just said, we put in place a streamlining drive for our brands, and this led to a reduction in our business scope, particularly for Ecuador. Regarding the outlook, I think we need to be perfectly clear on this. Veronique has made it clear at the beginning. There are some encouraging signs, but these don't show that the market is growing yet. What we see is that there's growing awareness at a political level that housing is a major issue. And this is across the board. And this has given rise to concrete results at a political level, which will bear fruit, but that will take time. And that's the first point. And the second point is that I think you can all see that the municipal elections in France which will take place in March are driven to a very large extent by concerns about housing, and this is bound to have an impact post elections with the new teams in place. Is our size in line with these developments? Pierre Henry said, we're back to the size we had 10 years ago in terms of headcount and units. All of this is more or less in keeping with the situation 10 years ago. So we are in line with the new market situation. As Veronique said, we undertake to take all necessary measures to be able to have complete control of our cost trajectory. We need to do that. We have to be -- have that discipline because the market is that households do not have sufficient purchasing power to buy housing or to rent housing. And so we're going to have to face cost reductions. Pierre Pouchelon: [Interpreted] We have further questions. Maybe I'll try and answer those. We have one here about the minus EUR 130 million for service properties. On the opportunistic decisions on the equity method, we have one project impairment under the 2025 consolidated financial statements because we -- on commercial property projects, we do not want to have WCR at risk, and we have a partner here, and we have aligned on that, and we have reflected this in our 2025 financial statements and this will be disposed of in 2026. On the trend in reservations, but as Jean-Claude has recalled, and I think for the first quarter means nothing for a developer. This has to be emphasized. And regarding retail sales is stable on last year. For bulk sales, it's too early to make a forecast because, as you know, there are very strong seasonal effects, and we will look at this again in April when we release our results, but we're in line with what we did in 2025 at this point. And on clarification of guidance, well, clearly, we're looking at an improvement in improved profitability, improved margins, in particular in residential property because that's where the margins have to improve. Revenue will decline in 2026 because this is a mechanical effect due to the decline in reservations. And the turning point will probably be in 2027. So this guidance means that we are focusing on improved operating profitability, in particular for our core businesses and the development margin and together with a decline in the debt ratio to get to the 3.5x debt ratio as soon as possible, and we are on a positive trend there. Next question from Christophe Chaput from ODDO. you may go ahead. Christophe Chaput: [Interpreted] I hope you can hear me well. First of all, I'd like to go return to the disposal of assets in Slide 25. you were talking about EUR 54 million. Just to be clear, the sound is very poor as the interpreter. Looking at operating cash flow, EUR 107 million. This includes the minus EUR 54 million further to the disposal. And we see this in the WCR in -- on Page 26. Well, in the EUR 107 million without including the EUR 54 million arising from the disposal at the end of the year. So put otherwise, as Veronique said, restating the investments, the cash flow stands at EUR 57 million. That's right. Okay. Looking at the guidance, you have been speaking in 2026, the decline in the debt ratio. But what about the debt level? Is this going to continue declining the actual mass of the debt load? Pierre Pouchelon: [Interpreted] Well, Christophe, at present, what we're talking about, and this is the message from this release, is that we feel that we deleverage the balance sheet and deleverage Nexity. As you -- so our track record over the past two years means that we are going to be using -- having very strict discipline on net debt, but that's no longer the main topic. What we're looking now is the improved return on capital, improved EBITDA. And over the past two years, we have significantly deleveraged the WCR in residential property and we are now achieving satisfactory WCR and cash flow generation. Nexity now means involved EBITDA and improved EBITDA means improved profitability in residential properties. So we're focused on that. This means ironed financial discipline. And the key point now is generating cash flow and improving operating profitability in our core business, namely in development and planning. Christophe Chaput: [Interpreted] And on improved profitability, the sound is very poor, as the interpret. Cost savings, when can we expect a return to the 7% operating margin? Pierre Pouchelon: [Interpreted] Well, in 2027, 2028, are very much dependent on our capacity to roll out these new transactions in 2026. And the local election are going to be very important for us because we have many projects where we are going to be aggressive, but we're going to be even more aggressive at 23rd of March of this year. Christophe Chaput: [Interpreted] And just an update perhaps on the Carrefour transaction, if I may ask you about that. Pierre Pouchelon: [Interpreted] The Carrefour transaction, we're still looking at three planning permission requests, which we haven't had yet. This -- we still have to wait until after the council elections and 10 planning positions to be submitted in 2026. So significant step-up on all of this after the local elections and Carrefour is very much part of that focus post local elections. And in the forecast for Nexity, both in potential and in backlog, I must clarify that there is nothing at present regarding Carrefour, just to be very clear on that. Since there's no land permit granted, this has no impact on the backlog, and it should be the same in 2026. Véronique Bédague-Hamilius: [Interpreted] There are no further questions. Apparently not. If not, then thank you all very much indeed, and have a good evening. Goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Erik Lapinski: All right. Hi, everyone, and thank you for joining Axon's executive team today. We may notice we have a longer call schedule this afternoon. We're going to report our fourth quarter and full year results as we normally do, and then we'll transition into a short presentation where we'll introduce you to our new 2028 financial targets and share more about our vision. Our remarks today are meant to build upon our most recent shareholder letter and investor materials, which you can find on our investor website at investor.axon.com. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our expectations as of today and are not guarantees for future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially as discussed in our SEC filings. We will also discuss certain non-GAAP financial measures. Descriptions and reconciliations to GAAP are included in our shareholder letter and available on our investor website. Now as always, before we begin, we have a quick video to get us started. Let's pull it up. [Presentation] Patrick Smith: All right. Thank you, Erik, and thank you, everyone, for joining us today. We completed another incredible year at Axon. I'm humbled by what our team has accomplished. It goes beyond products and financial performance, it's about our mission and the work we're doing to accomplish even more in the years to come. As Erik mentioned, we're going to do things a little different today. After you hear from Josh and Brittany, I'll come back to tie it together with how we see Axon evolving and why I believe there is no better position to be in than the one we are in right now. Josh you're up. Joshua Isner: Thanks a lot, Rick, and good afternoon, everybody. I'm very proud of our team. They earned this result and they deserve the credit. They are this good. It's a privilege to work with such talented people who are passionate about serving our customers and pursuing our mission. And in 2025, their hard work yielded a number of exciting outcomes worth highlighting. First, when it comes to our key indicators on our scoreboard, there is no metric more important than bookings. You may recall that over the past few quarters, we laid out an ambitious plan to drive record bookings, I'm proud to say the team left no doubt. 2025 full year bookings surpassed $7 billion and were up more than 40% from last year. That's on the back of Q4 bookings up more than 50%, representing a major acceleration relative to 2 straight years of bookings growth in the high 20% range. To me, this is the beginning of a trend. We just booked almost as much business in the quarter as we did in the full year just 2 years ago, and we see no sign of that slowing down. Generally, we are big on singling out specific teams because, frankly, so many of them at Axon are operating at a world-class level right now. But given the Q4 results, I want to call out a few standout performances. First, our U.S. state and local team led by Jessica Duncan. This is our best team at the company and possibly the best team in the entire industry. In 2025, they delivered not 1, but three 9-figure deals. A few years ago, that didn't even seem possible. This demonstrates the tremendous reception that our new products are receiving. Speaking of new products. A second highlight was that new product bookings, which include AI and Fusus totaled over $1 billion for the year and were nearly triple 2024 as a result. For 2 years, we have recognized that for software companies to win in the age of AI, they must convert their existing customer base to AI users before someone else does. And I believe Axon is doing that better than any company in public safety. To that end, in our first full year of selling the AI Era plan, it accounted for approximately $750 million worth of bookings or about 10% of the overall bookings total. We are positioned to be a winner in this AI-driven environment, and we intend to lap the field. Along those lines, we see a lot of runway across our new product portfolio. ALPR and Vehicle Intelligence is another one that has barely scratched the surface. Our pipeline is sitting in the 9 figures for that new product set and we expect that to continue to grow. These are exactly the signs we need to see to know we are on the right track, and it's why we keep building more. The industry-wide scrutiny on data privacy and license plate readers is real, and we believe it's a tailwind for Axon. Our early and sustained investment in privacy by design and ethical governance has positioned us well. We're hearing directly from customers, some of whom came to us from other vendors that our track record on privacy and ethics was a deciding factor in their decision. Customers aren't just buying hardware and software, they're buying confidence that will help them deploy technology responsibly. That's a durable competitive advantage. Next up, we have new and emerging markets. Bookings in this category, which include everything outside U.S. state and local law enforcement, surpassed $2 billion on the back of record results in international corrections and justice. A huge shout out to our international team specifically, who crossed $1 billion in annual bookings for the first time and delivered 2 of our largest deals in Q4 both of which were large European cloud deployments, coupled with Connected Devices. We're seeing this type of progress across multiple regions as our land and expand strategy continues to gain momentum. Additionally, it's impossible to talk about explosive growth at Axon without mentioning our corrections team. A few years ago, it would have sounded crazy for me to predict this, but the largest single customer booking in Axon company history was delivered by our corrections team. And what's really important about that is what's included, TASER 10, Body 4, real-time capabilities, AI and more, showing we have product market fit across the platform. Corrections has become one of our many verticals to prove it could punch well above its weight. While 2025 was a great year, and we're thrilled with such a strong result, we stopped celebrating this at about 12:10 Pacific Time on January 6. That was 10 minutes into our 2026 company kickoff event. This is a team that is on to the next play. We are 15% of the way through 2026 already. And as we assess what's ahead, I have never been more excited to kick off a new campaign. We have opportunity in front of us everywhere. Of course, 2026 starts with selling new products to our existing U.S. state local customer base. At this point, hopefully, if there is no more confusion we are accelerating in this market and delighting customers along the way. As we sell new products to existing customers, we also sell existing products to new customers and several of those new customer markets represent exciting days ahead. Enterprise is a big one. The market is enormous and what we're good at translates perfectly. While 2025 is about putting the right team in place to start scaling fast, we also solidified our second high-volume U.S. enterprise customer. What's particularly exciting is that they will be fielding the recently announced Axon Body Mini, which is getting rave reviews in beta and will launch later this spring. On top of the Mini, expanded capabilities in Fusus, new AI offerings, counter drone technology and Axon Lightpost and Outpost will contribute to stronger and stronger product market fit in the enterprise space. U.S. Federal is also showing promising signs. There is a major opportunity across federal law enforcement for a number of our core products as well as counter UAS technology. As I look ahead, our patience and persistence in this customer set is paying off. Some of our largest opportunities in front of us for 2026 could come from federal customers, and we're excited to help. Our confidence is also bolstered by the arrival of our new federal leader, Claudia Davidson, who is well respected in the federal space and is off to a great start. Rick will talk more about this but as we enter the new year, we believe Axon is positioned very well. At our core, we sell integrated hardware and software solutions that help collect and leverage the power of data for our customers that have highly complex regulatory and liability requirements where technology has lagged for decades. That's a unique combination that lends itself to swift adoption of AI capabilities as our $750 million of bookings in this category demonstrates. So the takeaway is simple. We're seeing broad-based demand and we're seeing it at increasing scale in a lot of places. This is a defensible, rapidly expanding business built on a foundation of customer trust and we can't wait to put up another record year. Over to you, Brittany. Brittany Bagley: Thank you, Josh. I echo Rick and Josh's comments when I say that I am truly thankful for our team and impressed with everything they were able to accomplish over the past year. First, I'll walk through our fourth quarter performance, and then we'll move to guidance, our new 2028 targets and how we think about the future. Q4 was another very strong quarter across the Board. Revenue grew 39% year-over-year to $797 million, our eighth quarter and fourth year in a row growing above 30%. Our growth is supported across our product lines. Software and Services grew 40% year-over-year to $343 million. Expansion within existing customers and growth with new customers both drive this segment. We see strong demand with new products, including Fusus, AI, VR and counter drone, each contributing to our software growth alongside our digital evidence management platform. Net revenue retention expanded to 125% in the quarter and demonstrates the adoption of our new products by our existing customers. ARR grew 35% year-over-year to over $1.3 billion. We're also gaining new customers in diversified end markets, as Josh called out, including strong wins in corrections and International this quarter. Connected Devices was up 38% year-over-year with revenue of $454 million. TASER revenue of $264 million grew 32%. Personal Sensors revenue of $109 million grew 28% and Platform Solutions revenue of $81 million grew 81% in the quarter. TASER 10, Body 4, counter drone equipment and VR training solutions were all drivers. Adjusted gross margin came in at 61.1%, down sequentially due to the impact of tariffs and increased mix from Platform Solutions, partially offset by continued strong growth in high-margin Software and Services. We expect to see quarter-to-quarter volatility from product mix. But over time, we will see the benefits of our software mix flow through to gross margins. Adjusted operating expenses of $1.1 billion increased $245 million sequentially and decreased as a percentage of revenue from 39.2% to 38.2% year-over-year. Increased operating expenses were driven by continued investment in R&D and our go-to-market functions as we scale the business to support future growth. This was partially offset by leverage on our G&A functions as we work to scale efficiently. Adjusted EBITDA grew 46% year-over-year to $206 million and adjusted EBITDA margin of 25.9% outperformed our expectations on higher revenue than forecasted and operating leverage. Operating cash flow of $217 million and free cash flow conversion on an adjusted EBITDA decreased year-over-year due to investments in inventory and the timing of collections, which we expect to catch up on in the coming quarters. We continue to target free cash flow conversion on adjusted EBITDA of 60% and expect 2025 to represent a low point as we get back closer to that 60% level in 2026. On our balance sheet, we leveraged our financing during the year to update our capital structure and completed the redemption of our outstanding convertible notes, limiting dilution while ensuring we have capital available to support our growth strategy. We closed the acquisition of Prepared in Q4 and closed our acquisition of Carbyne this month. Now turning to guidance. Our strong 2025 bookings, scaled manufacturing capacity, continued investment in new products and a growing bookings backlog supports our expectations for another year of robust growth. Our forecast for 2026 is revenue growth in the range of 27% to 30% year-over-year, which is the strongest outlook we have had heading into the year. We see robust growth and are maintaining our adjusted EBITDA margin of 25.5% for the year. This expectation includes the impact from our increased investment in several product and market areas as well as impacts from global tariffs, inflationary componentry costs, including memory and acquisitions, which are still scaling. Obviously, there was big news on tariffs last week. Right now, for us, very little has changed going forward given the implementation of the new 15% global tariff, and that is what we have baked in. We're not assuming anything on refunds until the process is clearer. In addition to our full year guidance, I'd like to provide some commentary on seasonality. Q4 is usually our strongest quarter for bookings, which we absolutely saw. Q1 is a period where we build pipeline for the year, resulting in our slowest quarter for new bookings. We also paid bonuses and commissions in Q1, resulting in a quarter that typically has lower free cash flow conversion than our average. We expect both dynamics again as we head into Q1. We do expect year-over-year revenue growth to be consistent with our overall guide for the year in Q1, and we expect to ramp into our average adjusted EBITDA margins as we scale revenue through the year, which may result in lower adjusted EBITDA margins than our annual target in Q1. Now that's the recap of our quarter and results for the year. As Rick mentioned, we are doing things a little differently today, and we've prepared a brief presentation to walk through our new 2028 target model and the long-term strategy behind it. Let's pull up the presentation. Thank you. Our agenda is a brief overview of our financials and targets from me, and then I'll pass it over to Rick to cover our longer-term product vision. As I look back on the last 5 years, I am impressed by the transformation the company has gone through, more than tripling revenue over 5 years with a 33% CAGR over the past 3 years. Scaling new hardware products and managing through ongoing supply chain disruptions and tariffs with stable gross margins, generating strong operating leverage as we expanded adjusted EBITDA over 500 basis points over 3 years to 25.5% and delivering over $700 million of EBITDA in 2025. Our products have expanded significantly, including TASER 10, Axon Body 4, our VR training portfolio, Fleet 3, Air and AI with software at 43% of our business. We've seen traction in markets like enterprise and corrections, each producing some of our largest bookings, and we've had our best year ever in international. As I look forward, we are going to keep that momentum, more than doubling revenue, expanding gross margins over time and delivering adjusted EBITDA expansion of almost 250 basis points as we continue to innovate, add problems, solve problems for our customers, add products, solve problems and gain traction in new markets. We've also continued to mature as a company with a strong balance sheet, clean capital structure and a track record of strong M&A with disruptive companies that complement our organic R&D efforts. Let's look a little closer at 2025 and some of the metrics underlying our business that highlight the quality of what we're delivering and underpin the future. First, we did $7.4 billion in annual bookings. That acceleration, growing bookings at 46%, along with our 125% net revenue retention is a great sign that our products are resonating with our customers. Today, only about 30% of our customers are on premium versions of our subscription plans, and that includes prior premium plans from several years ago, which actually look more like our entry-level plans today. We think that means we have meaningful room to drive adoption of the new products we continue to deliver. Our current officer-based subscription plans can deliver ARPU of nearly $600. And when we add in other products such as Fleet, Fusus, Dedrone and ALPR, that ARPU can get much larger. That's relative to our subscription plan 5 years ago where our most premium offering was under $250. Those new product offerings, which did over $2 billion in bookings are a major driver of future growth. International did over $1 billion of bookings. There is no one product alone that drives our success, but the portfolio delivers value across our customer base. Our success is driven by being customer-obsessed, innovative, embracing new technologies like AI and having the data and experience to make it work. We've always been careful with our customers' data, but we're seeing increasing value in how we can use it to deliver powerful AI solutions, all while respecting privacy. Within our software business, more than 40% of our software growth was driven by products outside our core DEMS business in 2025. In our hardware business, Platform Solutions drove more than 30% of our growth, also largely driven by newer products. For our 2028 targets, our 2028 revenue target is approximately $6 billion. This more than doubles our revenue today. Along with this growth, we are targeting a 28% adjusted EBITDA margin in 2028. This implies approximately 250 basis points of margin expansion over the next few years, balancing profitability with continuing to invest as a disruptive innovator and reaccelerating margin expansion after this year. As I mentioned before on free cash flow, we expect average annual conversion of approximately 60% over the longer term and expect to get back close to that level next year. We believe 2025 conversion will be a low point as we look ahead and maintain our conversion target of approximately 60%. We have a compensation plan that is highly performance-based, attracts and retains the best talent and met our goal of less than 3% annual dilution from stock-based compensation. We are now dropping that to less than 2.5% on a go-forward basis. No material M&A is contemplated in the forecast, but we expect to continue our strategy of tuck-in deals to expand our ecosystem and bring the best talent to Axon going forward. We will also continue to mature our business, our operations and our best practices while staying true to our culture and what makes Axon special. Another way we benchmark this model is through the lens of the Rule of 40. Over the last several years, we've consistently operated around 50% or higher with the most recent years among our strongest and well above 55%. Our target model implies we can continue to operate at these levels as we grow and expand margins, maintaining 55% or better. Let's go through what we need to do to get there, deliver for our customers, solve real problems and innovate. A core element of our strategy will continue to be reinvestment in the business. We are funding new product development organically that has been and will remain a primary driver of our growth and our investment. New organic products have included our TASER devices, body cameras, in-car cameras, VR training solutions, vehicle intelligence, evidence management and our suite of AI products. Our ability to fund organic investment positions us as an innovator, disruptor and category leader. We are not simply entering existing markets. We are creating them or taking a new approach. It is a testament to Rick's visionary leadership and ensures we are not the disrupted but the disruptor. That's why investing is critical. We won't get complacent. These investments are in both hardware and software as the deep integration is a strong advantage for us. The dynamics of our software business today with the nascent adoption of AI and strong trends in our other core software products means we expect software growth to be faster than hardware, but both are critical and valuable. You are seeing us drive upsell and adoption in our existing markets. We continue to have a lot of opportunity in state and local, and it delivered amazing results again this year. We also have tremendous opportunities outside domestic state and local in federal, corrections, retail, health care and other enterprise customers. This isn't hypothetical. We've demonstrated this with strong customer wins in each of these markets. We're investing behind them thoughtfully, and we will execute on and grow those opportunities as we drive longer-term results. We're incredibly excited about what we're going to deliver over the next 3 years in the business, but we always take a long-term mindset. So let me turn it over to Rick to talk through our product vision. Patrick Smith: Awesome. Thank you, Brittany. It excites me that our team is thinking longer term, and I believe that will be a competitive advantage for many years to come. 5 years ahead -- 3 years ahead is no time at all and even in the history of TASER and Axon, but with the technology advancing faster than ever, I have no doubt the world will look unrecognizable in just a few more short years in a good way. Now before I talk about where we're going, I want to ground us in where we are today and what anchors us to do so much of what we do. Let me start with our Moonshot. A few years ago, we introduced a Moonshot to cut gun-related deaths between police and the public in the United States in half by 2033. We do a lot of things at Axon. But when you step back and you think about impact, I believe it all harmonizes under this goal and our mission to protect life. I'm also excited to share and look, this is still preliminary as data is still coming in from last year, but 2025 appears to be the first year where the number of gun-related deaths between police and the public actually went down substantially in the U.S. It's too early to claim Axon had a direct causal impact, but I'm encouraged to see the trend is turning the right direction for the first time. We do have numerous anecdotes of specific instances where the capabilities of TASER 10 saved the life in situations where previously people would have been shot and killed. See this video I'm going to show you now from our hometown here in Scottsdale, Arizona, where a woman called 911, she wanted to be shot and killed, she wanted to commit what's called suicide by cop. [Presentation] Patrick Smith: Alright. As you can see there, there was another officer with a lethal weapon. I talked to some of the [indiscernible] day and they said she very likely [indiscernible]. Go and advance to the next slide, please. I also want to share that we've had customers now coming back and telling us they are seeing a result. We are in major county sheriff's office. That means they're one of the largest in the U.S. tell us that they had a 42% reduction in deputy involved shootings, and they believe that TASER 10 was a major contributing factor, along with de-escalation training, much of which happened in our VR system. So in addition to that quote, I just want to talk about like where this translates into our mission. Our mission translates into the products we build and the scale that we're now operating at. TASER is becoming synonymous with de-escalation and saving lives more than ever before and in more places. Today, we estimate a TASER cartridge is fired in the field approximately every 30 seconds in the U.S. In just the time I was speaking, another TASER cartridge has been fired. Every time a TASER device is used successfully, it has the potential to save life, and that's what grounds us in how we think about this product line. Training is also a critical element. We can build the greatest device ever created, but if people aren't trained to use it effectively, it doesn't deliver its true value. That's why we invested in building a suite of virtual reality training solutions over the last 5 years. We took a risk. VR training was not common or widely adopted when we started. And as Brittany mentioned, we leaned in to be the innovators and disruptors here. And today, we see that was definitely the right direction. Last year, customers completed nearly 0.5 million VR training sessions, and that number continues to grow. VR training is nearly sold 1:1 with TASER 10 deployments, and it can do much more than trained users on our devices. This year, we are infusing our VI platform with AI-powered features that will transform how police are trained in the decade ahead. Because we lean in and make bold bets before it's safe to do so, we garner significant first-mover advantages. And now we have what we believe is the most widely deployed VR training platform in the U.S. public safety sector and are well positioned to layer in AI capabilities just as we are across our massive sensor and software network. Another part of our strategy has been transparency and better decision-making in the moment. That led us to body cameras nearly 15 years ago. And today, our cameras are the standard in public safety. We have stored and enabled recordings of more than 60 million hours of body-worn camera footage on our latest two generation of cameras, Body 3 and Body 4 in just the last year, and we're helping customers use that body camera footage to drive more efficient workflows, provide transparency and support faster and more effective justice. Beyond body cameras, our real-time efforts expanded into fixed cameras, vehicle intelligence and real-time operations. Through Fusus, we now power more than 1 million monthly live streams with more than 300,000 community cameras connected. That's powerful connectivity and insights unavailable anywhere else. And finally, we're leading and supporting and driving toward the future in the AI era. We already have more than 500 public safety -- I'm sorry, public safety agencies live with Axon Assistant, generating more than 200,000 monthly messages. We were the first to introduce a suite of industry-leading AI tools for our customers, and we're not just enabling the ability to query. We're pioneering the ideas and the ways they will use AI and its features to do their jobs more safely and more effectively. We're just getting started with what that assistant can do. And you'll continue to see us push the envelope well ahead of the pack. I know that sounds like a lot already. But in my view, you haven't seen anything yet. It's about to get a lot more exciting, and it's going to happen faster than ever before. Let me summarize it in a succinct vision. This is how I think about Axon developing. Axon can be the provider of the world's largest global sensor network, fully connected and supercharged by AI. We will power the most intelligent connected safety devices globally. We will connect those sensor devices across the full life cycle of how they're used, and we'll build AI into every workflow safely, securely and reliably. Let's go to the next slide. And now let's dive into what that means in more detail. Building the leading global sensor network means more than just our body cameras used by law enforcement. We believe our devices can be the primary connected AI-powered assistant across many different use cases and industries. We're a leader in AI-powered wearables. Workers for the government, retailers, utility companies, health care providers and in many more places today taking massive amounts of data into their brains. And they process that data manually and they carry out the task they've been asked to do and then they spend hours typing it into systems. Our sensors will become their partners. Their virtual eyes, ears, mouths bring that real-world data into a digital backbone where it can be analyzed, utilized and relayed. Because we have the proven track record of ingesting and managing some of the most sensitive data on earth, enterprise customers of many varieties now see us as the safest choice to help them use sensors and AI to securely capture multimedia information and transform it into useful knowledge and work product. Today, we connect body cameras, in-car cameras, TASER devices, fixed cameras, drones and robotics. We've been the industry leader in introducing customers to these sensor product solutions, and we've built them in close partnership to understand or to ensure that we understand how they can be used to help. So I want to take a moment to step back and speak to something I believe is fundamental to Axon's long-term value creation. We build for durability, not for the metric of the moment. A decade ago, when our SaaS business was gaining momentum, there was real pressure to shed hardware and chase software margins. I disagreed. My conviction was and remains that the most important customer problems require integrated solutions, not point products. That decision looks prescient today. As AI increasingly commoditizes software development, the companies with defensible positions are those that own the full stack, including hardware, and we do. What we've built is an interconnected ecosystem of hardware, software and cloud services embedded in a heavily regulated industry through long-term government contracts. That's not just a business model. It's an ecosystem that grows even more valuable, the deeper our customers go into it. And rather than being a target for disruption, we are the disruptor. The current environment is accelerating our growth as customers consolidate around platforms that they trust to scale with them. The ability to capture data at the point of action and integrate it seamlessly across complex, regulated ecosystems is a rare capability and one that we believe will define the next generation of public safety technology. What you see in our sensor and product portfolio today is compelling. What it becomes over the next few years is what truly excites me. Our sensor network is most valuable, not as a system of record, but as a system of action. The ability to surface and connect data in real time across active incident and task workflows is what separates a truly integrated platform from a collection of devices. Post-incident analysis has its place, but real-time intelligence is where outcomes change. That is the capability we're building toward and one where we believe very few organizations in the world are positioned to deliver. What makes this even more powerful is, of course, AI, not bolted on after the fact, but embedded natively within the workflow and accessible directly through each device. This is the difference between technology that assists and technology that transforms. We are giving our customers genuine superpowers, the ability to do things that simply were not possible before. And we believe that potential has only begun to be realized. For most of my career, people thought we were crazy. But now the breadth of what Axon has built and the vision that connects it, it was not obvious to the outside world for a long time. And there were moments it was easier to just keep our heads down and build. But things have changed. The vision that has driven every product decision, every acquisition and every bet is now coming into focus for the broader market. People are starting to see what we have always envisioned. Let me give you a few examples of why I believe that. So here's one to make the vision tangible. A 911 call comes in and it's answered instantly. If it's not a true emergency, it's handled automatically by AI, freeing human capacity for the moments that matter most. If it is an emergency, the full weight of the Axon ecosystem activates in seconds. The call is transcribed and translated from just about any language in real time, breaking down language barriers that have historically cost critical minutes. Location confirmed, context captured, crime center notified, live video from city cameras, public sources, from the 911 caller's phone and vehicle intelligence all flowing in real time. A drone already airborne and gathering awareness before the first responder has left the station. By the time the boots hit the ground, the situation is already understood. And in a growing number of cases, the drone does not just inform the response, it is the response where it holds the situation safely, creating the time and visibility needed for a better outcome. This is the power of sensors connected and supercharged with AI. Next, emergency response is just one dimension of what this ecosystem makes possible. Consider the challenge of connecting physical infrastructure and protecting it against a new class of threat. Drones are the physical equivalent of a cyberattack. They're low cost, widely available and capable of causing outsized disruption and harm in the wrong hands. A single consumer drone can shut down an airport, compromise a stadium or create chaos at a public event. The question is no longer whether this threat is real. It is whether you are ready for it. At a major venue, an unauthorized drone enters restricted airspace. Our integrated sensor network flags it immediately, location of the aircraft, flight path and origin point of the operator are identified in seconds. Security engages on the ground. Law enforcement has the same real-time picture. The operator standing in a nearby parking lot realizes the response is already underway, and this disruption ends before it escalates and the event continues. But detection is only half the equation. Knowing a threat exists means nothing if you cannot neutralize it. Our DeDrone Defender uses the same sensor network that identified the threat to aim a sophisticated jamming system directly at the drone, delivering precise electromagnetic interference on the exact frequency it is using to communicate, not a broad blanket, a surgical one, a surgical response. Today, active drone mitigation is reserved for federal agencies, but the threat has democratized faster than the law has adapted. And many times, we will build ahead of the law and be involved in helping to change the law. So we're active at all levels of government. And what once only mattered at a presidential inauguration now matters at your county fair or your Friday night football game, drones are a threat everywhere. And we're not building for today's threats in today's regulatory environment alone. We're building for tomorrow's. When the law catches up, and we believe it will, Axon will already be there. This is the same connected AI-powered ecosystem applied to a different threat, and it works exactly the same way. Now let's take this ecosystem in a completely different direction. A retail associate faces difficult situations regularly. Before they ever encounter one, they've already been trained for it through our immersive AI-driven MetaCoach, scenarios designed to build the confidence and judgment to stay safe, deescalate and prevent situations from spiraling. It's AI-centric, and it can be delivered on any screen conveniently and effectively. When an incident does occur, they're ready, camera activated, panic feature engaged. Their security team is live within seconds, communicating directly through the device and pulling additional camera angles to guide the response in real time. The incident is automatically summarized and transmitted as an emergency to the local appropriate police department. The closest officer with retail crime training is dispatched. They arrive, deescalate and documentation begins immediately. That is where most systems stop. Ours does not. The post-incident reporting system cross-references the individual against prior incidents, aggregates the supporting evidence and delivers a complete prosecution-ready summary directly to the prosecutor's office. Justice is served, and that associate comes back to work the next day, not rattled but confident, knowing they have the training, the tools and an entire ecosystem behind them. This is end-to-end community safety, not a product, not a platform. It's really a promise. Sensors deployed citywide by governments, businesses and private citizens, unified in a privacy-preserving way into a system that detects threats, accelerates response and drives outcomes that matter. Every stakeholder is connected, every incident better handled than the one before. The goal was never just faster response times or better documentation. It was a community that works together, feels safer together, is more connected and trusts one another more because of it. That's what we're building. And again, we're just getting started. So what excites me most is this. We're not building for just one use case. We're building for many of them. Corrections, retail, health care, federal, the courtroom, the back office, every environment where safety, documentation and accountability matter is an environment where Axon belongs. A correctional officer with the tools to deescalate before conflict starts, a retail manager with real-time visibility into store operations; an ER nurse whose documentation burden drops so she can focus on the patient in front of her, a federal agent with the same integrated platform as the local officer on the be; a prosecutor who walks into court with a clear evidence-based picture of exactly what happened. The platform is the same. The impact scales to every corner of public safety and now beyond. That is the opportunity in front of us. So let me be direct with you. We are at a moment unlike anything I've seen in 30 years of building this company. AI is not an incremental shift. It is not a bubble. It is not overblown. It is a fundamental disruption. It is a force, and it will break companies that are not ready for it. I've watched tech cycles come and go. This one is different. The speed is different, the stakes are different, and it's what we've been building for, for the past decade or more. And I've never been more confident in Axon's position. We're not a simple all software company waiting to be undercut by a cheaper model or a faster startup. We're an integrated ecosystem of hardware, software and real-world data embedded in regulated environments, trusted by the customers who depend on us most. And that trust is not a marketing line. It is the result of 30 years of showing up, delivering and earning the right to be a partner rather than a vendor. Here's how I see the opportunity. If we deploy AI more aggressively and more thoughtfully than anyone else in this space, while honoring the responsibility that comes with operating in the environments we operate in, we will create value that our customers simply cannot replicate, cannot replace and most importantly, they will not want to because they trust us. They will reward that with deeper partnerships, larger opportunities and bigger problems for us to go solve together. None of this gives us permission to relax. Complacency is fatal. In a world moving as fast, yesterday's success is not a foundation. It is a liability if you let it make you comfortable. As Josh says, we got to focus on the next play. We had a great year, but Axon is not about getting comfortable. We're leaning in harder than we ever have. We will take bold risks. We will invest aggressively. We will reimagine everything AI can touch in what we do, and we will do it without losing sight of the mission that has always driven us. Axon has never been built on smooth sailing. We've been built on reinvention, on finding a way through when others said there was none. That is not just our history, it's our competitive advantage. And right now, it has never been more relevant. So let me leave you with this. What I've described today is not a vision deck. It's not a road map for the next few years. It's happening now, and it's arriving faster than any of us anticipated. The pace of what our teams are building, the creativity I see accelerating across this company, the acceleration they are delivering against their original road maps, this is the Axon I've always believed in. And right now, we are hitting -- we are firing on every cylinder. We're living through a pivotal chapter, not just for Axon, not just for public safety, but for humanity, the moment where human and machine intelligence begin working together to solve problems that once felt permanent. It's not hyperbole. It's what I see when I walk halls to this company every day. I've been doing this for over 30 years. I've never been more energized than I am right now. We're pushing the arc of history away from violence toward a world where killing is no longer necessary or acceptable. That mission hasn't changed. Our ability to deliver on it has grown and it has never been greater. Now what matters is execution. And by that measure, we've never been stronger. Let's roll. Erik Lapinski: Thanks, Rick, everyone. So we'll spend the next half of the call today taking everyone's questions. Up first, we have Mike Ng at Goldman Sachs. Michael Ng: Historically, you've given us a sense of what bookings growth could look like on an absolute basis or relative to revenue growth. I was just wondering if you could talk about what you're expecting around bookings growth and discuss the demand environment in 2026? And then relatedly, are you expecting to see any meaningful product or customer vertical inflections over the next 3 years embedded in the guidance? Joshua Isner: Yes. Thanks a lot, Michael. I'd say at this point in time, we probably want to stay away from any bookings guidance. But I would say qualitatively, as we get toward the later part of the year and I start to have more visibility just like in the past years, I can certainly give more information then. But from a demand perspective, never been more confident across the Board. Like we knew our core was rolling, and we're excited about that. But seeing these new products layer on and just the stand-alone demand for them in some cases and the kind of bundled demand in conjunction with some of our other products, it's just -- it's coming together really nicely. And I think it's very, very possible that all 4 of our core markets are in a place to have banner years this year. And it's going to take a lot of execution and a lot of focus, a lot of discipline, but I'll bet on our team. Michael Ng: Great. And just as my follow-up, just on the strategy to become the #1 global sensor network, it seems like Axon 911, building on prepared and Carbyne should be really foundational to that. Could you talk a little bit about the differentiation that you guys have relative to the incumbents? What does the go-to-market look like to address this wider group of constituents that you may have done a little bit less with in the past, like Fire and EMS? Joshua Isner: Sure. Jeff, why don't you cover the product and then -- or Rick cover the product, I'd be happy to cover the go-to-market motion. Patrick Smith: I'm going to give Jeff a little chance to speak here, and then maybe I'll top up after. Jeffrey Kunins: Yes, sure. Thanks for the question. Michael, I think like we talked about before, the combination of sort of two steps. One is within 911 and then 911, how it connects to the rest of the ecosystem and everything Rick just talked about. So within 911, the combination of Prepared and Carbyne and why we were so excited to bring both of them into the Axon fold is because it's breadth and depth. And so what Prepared does is it is this AI-powered modern overlay that instantly adds value with almost 0 deployment complexity that can be done in extremely short order to any PSAP anywhere instantly turbocharging their ability to have a faster and more efficient workforce and to feed real-time data about incidents into a real-time crime center like Fusus and the like, and I'll come back to that in a moment. So it is not competitive with the legacy systems. It is an add-on and an instant overlay that's extremely efficient and effective. And then Carbyne comes right around behind that and says as an agency is ready whenever they're ready and many and many and more of them are getting ready sooner to say, we want to modernize our overall call handling infrastructure and have top to bottom the absolute best full stack for powering 911, Carbyne has already proven and continues to prove that pound for pound, they can outperform on every metric that matters those incumbent systems. And so the combination of those 2, we think, sets us up very, very well, both right now and in the years to come. And then both of those connect to the ecosystem in a very advantaged way in the vignettes that Rick already shared. So the ability to as seamlessly as possible, take that signal from 911, flow it right into the RTCC with Fusus, flow it right into DFR with Skydio and more, and then all the way connected from there to all of our other sensors and signals, including the ones that are being worn by officers. And so again, agencies will pick individually which pieces they want the most, but the complete combination is really unmatched and unbeatable. Joshua Isner: Thanks a lot, Jeff. And from a go-to-market perspective, Michael, you're right to identify the fact that while there's overlap in the real-time crime center, the PSAPs are an extension of our customer base. I think Prepared's brand -- and look, the Carbyne acquisition closed just very recently. So most of my comments will be more geared toward Prepared as we've made a little more headway given that the acquisition was last year. These folks are very well ingrained in this customer set, and they're very well liked and respected. And I'd say any acquisition we do ever starts with the quality of the team, like it doesn't really matter to us who's ahead and who's behind. In this case, we believe Prepared is ahead and Carbyne is ahead in next-gen call handling, but these teams are very, very talented. So not only are we placing a bet on this technology, we're placing a bet on the leaders here. And specifically, Michael Chime, CEO of Prepared, this guy is going to win in 911. We're betting on him. We're arming him with what he needs, coupled with the mirror at Carbyne, we think we're going to be a very, very, very competitive group into the future, and we're excited about that. Patrick Smith: One thing I want to just pile on with one other thing. If you look at -- there's sort of 2 general acquisition strategies, I'd say, in our industry. There's buy the mature cash cow industry leader and you sort of do that sort of a roll-up, which is not what we do, or you look at who are the disruptors that bring a fresh tech stack, Fusus, Dedrone, Prepared, Carbyne. These are all category upstarts that have a fresh technology stack that we can bring and integrate with what we're doing. The alternative is you buy a ton of tech debt. And so just because you've got a bunch of sort of legacy businesses under one brand doesn't mean that the systems play well together. And especially if we don't get the cultural elements right, driving change in large organizations is ever harder. So I want to thank Jeff, in particular, and Josh, I mean, I drive these guys nuts. They're trying to run a large business. And I'm always coming in like, hey, we got to push over here. We got to be changing. And I'm really proud. I mean, Jeff has shown me just great examples. I think our team is adopting AI internally at a speed that I'm just really proud of. And it's not easy. There's also -- frankly, at times, there's pressure to, hey, should we be more focused, stay in one market, stay in one product segment. But you look at the breadth of all the different things we're doing across that portfolio and now in so many different markets, -- and the benefit of that is when the ground is shifting beneath our feet, we're not just relying -- I would not want to be a software-only company right now. I think this whole SaaS box looks has got some real risk to it. But when you combine like doing integrated hardware and software and all the data handling and network effects of sharing across all these different users and now in each new market we go into, I just met with a huge company in the medical response space. The ability we can give them to directly communicate and share data with other first responders without going -- having to rely on a radio right out of the 1970s, we think sets us up to continue to really build this ecosystem for the future and disrupt many of the category incumbents. Erik Lapinski: Up next, we have Will Power at Baird. William Power: Okay. Great. Well, really strong results. Congratulations to the whole team. And Rick, probably most importantly, great to hear some of the early green shoots. It seems like you're seeing out of the moonshot land. So best of luck on that, obviously moving forward. Look, as I look at the future contract bookings, that provides really strong visibility seemingly for 2026. So I guess I want to focus on '27 and '28 and maybe better understand the confidence and visibility to sustain similar growth rates. Anything you can share on contribution from existing products versus new products? Any particular standouts there? And then I have a quick follow-up. Joshua Isner: Sure. I mean I think, Will, in general, I think we're still growing into these new offerings, the AI Era Plan, the new version of OSP that launched this year. There's just more and more products. We have essentially more arrows in our quiver to keep selling and all of the buying signals are there. And frankly, we see a multitude of ways to get to that CAGR. I mean, we have, like I said, 4 markets that are all really showing signs of growth and a bunch of new products that we're really excited to see the adoption of. Maybe I'll call out one, which is Dedrone. That one, I think, has the potential to be really exciting, both because in state and local, we have the opportunity to really make an impact there with it, but it's really opening doors into both federal and international and often like the land and expand might not always be TASER into something else anymore. It might be Dedrone into something else. And we're just seeing that play out so beautifully across both federal and international. It gives us a lot of confidence in the out years. And so certainly, everything we're looking at in terms of indicators suggest that the next 3 years is going to be really exciting here. Brittany Bagley: Yes. The only thing I would add for everyone is I don't think you need to assume anything differently than what we have just delivered in this last year, right? There's no major change that you have to forecast or underwrite for 2028. All of the product lines are growing. We're seeing traction in all the markets. You can just continue to roll that forward. William Power: Okay. I just -- that's all very helpful. Just maybe to follow up on some of the AI commentary. Great to see the bookings strength there. It'd be great to get any kind of perspective on kind of what any year. I mean, I think last year was kind of the first big year for bookings, right, given when it was rolled out. Is that something that could double this year? I mean what's kind of the -- what does the pipeline look like? And what is the product road map there? Anything you can share on that front? Joshua Isner: Well, I take a lot of craft at Axon for sports analogies. So you're not helping me out here. But I would say we're in the very early innings, like bottom of the first, top of the second, we're talking about here. We've got a lot of pipeline ahead of us in AI, and we've got the opportunity to continue deploying more and more AI products every year into this plan. And as such, the value will continue to increase in it and certainly attract more and more customers along the way. So this is one where this is like we're -- game just started, National Anthem is over and teams are running out on the field here. Erik Lapinski: Up next we have Jonathan Ho at William Blair. Jonathan Ho: Let me echo the congratulations as well on the strong quarter. Can you -- I also appreciate sort of the additional detail on your AI moats. And so I wanted to start there and maybe dig in a little bit more. Can you help us understand some of the domain knowledge and data moats that you have in the AI world? And maybe how does that relationship -- the vision for working with some of the frontier models, how does that look like now and in the future? Patrick Smith: I was going to see if Jeff wanted to take that one. Jeffrey Kunins: Maybe I'll start and then, Rick, you can chime on. So I think, first, I think that the grounding, and you've heard us talk about this before and goes with what Josh was saying, too, is that I think differentiation and success here in AI at its core in a world where everybody has access to the same commodity but very powerful frontier models is really, one, having the right physical sockets, and that's why hardware plays such a big role, right? So if you think about something like even translation that we came out with last year that is having such a big hit, the raw technology of translation comes with the core models. That's not where our -- either our innovation or our differentiation or our moat is. The key is that we are marrying that up with a clear and present, very real specific need for our customers all day, every day in their real job, and we are embedding it ergonomically and physically into the device that a very, very, very large number of the people in this category are already wearing every day. And that's why -- and like if you think about an officer carrying a phone and trying to pull out the phone and launch an app and this and that and the other or add some other piece of equipment that they're not used to or have -- all of those things are radically simplified when we simply can build in that functionality into an experience and a physical artifact that we already have that socket for. The second, as you said, is ultimately about the data. And as you know, we simultaneously have, I think, the highest bar of anyone out there in our own or even other segments about thinking ethically and responsibly about how we use any kind of data and certainly customer data in the right ways. But ultimately, even with the highest possible bar of dedication to responsible innovation, our responsibility and our ability, given that massive -- you talked about the millions of hours of video and everything else is for us to use the state-of-the-art as it keeps evolving with what the models can do to get differentiated results out of the same models that everybody else can use by leveraging in a responsible way, the unique customer data that we are the custodians of. Joshua Isner: Maybe I'll just add one really, really simple add-on to that, which is like our CEO is in the top 0.0001% of AI users globally. So you can imagine what that means for everyone else at the company when that's Rick, right? And so I think I'm particularly proud of the push we've gotten from Rick, but also Jeff equally leading the charge on this and really establishing our identity as an AI company in public safety. Patrick Smith: The only thing I would add on to the tail end of that is also the fact that we are managing these business process flows of this critical information because of the whole Evidence.com ecosystem, right? The evidence comes in, we store it, we move it around workflows that have traditionally been manual. The opportunity for us to automate more and more of that with AI is just like we're in this incredible position to automate away just a ton of work for our customers. And then it goes to the prosecutor, it goes to the defense attorney. And now we're now selling premium products there years ago. And we -- I think we still do have a free version of Evidence.com for prosecutors to be able to just receive evidence, but they're now buying premium versions because, boy, they sure love that evidence to come in and get processed for all the things they've got to do with it, make sure we're helping track discovery requests and helping them find where the needles in the haystack, the things they need to look at, most importantly, when they get 100 hours of video in a case. So I think the -- it really is that we've got sort of the manual version of these workflows with this highly secure data, and it's shame on us if we can't be the ones who really delight our customers by bringing AI in to solve more and more problems for them on their existing workflows and then doing new things that they never thought possible. Jeffrey Kunins: Sockets, workflows and real jobs to be done. So many companies out there that are trying to work their way through this situation, they are trying to sort of, as Rick said before, kind of do AI for AI's sake or paint it on as an afterthought. Foundationally, we are always grounded in actually solving the real everyday workflows for our customers, and we have the benefit of having these incredibly sticky all day, everyday workflows and physical sockets that they are already depending on us for, and they are the perfect conduits to insert AI done right to help accelerate what they're trying to get done. Jonathan Ho: Excellent. It looks like you're a clear beneficiary of this AI trend. One thing I wanted to also better understand is with the enterprise opportunity, you've now called out sort of multiple large contracts. It seems like we're just at the beginning here as well. What maybe has to happen from a go-to-market perspective to achieve that vision? What do you have to do to build out a channel and to sell this even more into newer enterprises? Joshua Isner: Sure thing. I think, look, while it's a different market, I think we've seen this play out before. Some of us were here in 2009, 2010, 2011 when we were building the Video business in public safety, and we understand what it takes to like get momentum out of the gate to make your first customer successful to parlay that into customers 2, 3 and -- and the reality is it's like -- it's an exponential curve. It's not linear. Like we go from 1 to 4 to 12 customers and each of those kind of is the next like stone across the creep that we have to cross, and it's going to take a little time. But for me, the most important thing out of the gate is not how many enterprise customers we sign up in short order. It's how many enterprise customers we make successful and delighted with the products early on. And then the rest has a way of figuring itself out. And so for us, it's much more about getting the right team, focusing on the right early customers, focusing on the right channel partners in certain markets like private security. And so that's just a process that's playing out. But every year, we see a few more indicators that this is something that's truly turning into a valuable business. And while we've got some work to do, for sure, like my opinion is, as long as we keep things simple and put one in front of -- put one foot in front of the other, we're going to end up in a very exciting place in the enterprise business. Erik Lapinski: Thanks, Jonathan. Up next, we have Andrew Sherman at TD Cowen. Andrew Sherman: Congrats on the quarter. Josh, TASER saw a huge acceleration to 32% growth. Congrats on hitting $1 billion run rate there and also the decline in the officer-related debts. Talk about any specific drivers in the quarter that helped that? Where do you stand from a capacity standpoint? And is the Apollo cartridge still slated for this year? Joshua Isner: So I'll let Rick weigh in on the Apollo DART project. In terms of TASER demand, I think it's a matter of just execution. I think one thing people have got to realize a little bit about bookings, and I think Q3 and Q4 were a good example of this is the bigger the deals get like sometimes Q3 like last year will be a decent quarter, but not a double over the last year, but then we come back in Q4 with a couple of these large, large deals that we thought had a chance to close in Q3 and they closed in Q4. So with 9-figure deals and these bigger and bigger deals, there's just a little more variability quarter-to-quarter. And I think that's more of what happened. I think it was -- the demand was there, and we are very confident in it. It's just some of those large deals pushed from Q3 to Q4, and the team did a good job getting them soon up before the end of the year. But we certainly feel like TASER demand is very strong. And it's exciting to see, obviously, the progress on the moonshot and to hear the testimonials from customers saying in or coming in. We're only talking about a low thousands number. So when you hear an agency say, "Hey, there were 5 or 7 of these that would have resulted in a shooting, that's like a statistically significant amount that we're starting to see in terms of saves instead of shootings in public safety. And so we're really encouraged to see the trend line. And again, a lot of work to do, but feeling like we're on the right track. Rick, did you want to cover the Apollo DART? Patrick Smith: Yes. Apollo is testing extremely well, better than we even expected in laboratory testing, meaning the percentage of time we can get through heavy clothing being very high and the percentage of time we get an over penetration is very low. So that's great. It's going to be going shortly up to the Arctic circle for some field testing. We've made heavy investments in the automation. It is not an easy product to make. If you look at the videos, it kind of looks like this pretty cool object. The thing is a flying hypodermic needle that we have like cut with incredible precision to create these cascading crumple zones so we can use the physics and fluid dynamics of skin function to create a chain reaction that makes this thing stop cutting through materials and penetrating. So I think it's a really big technological breakthrough. And I would say it's probably not going to be a meaningful contributor to revenue this year, but it will start to be in real customers' hands for the next cold season is the goal. Andrew Sherman: That's great. One more quick one for you, Josh. Europe, obviously had a huge year. Great to hear the 2 big deals in Q4. How is the pipeline for this year tracking? How do you keep up that momentum? What's driving that? Joshua Isner: Sure thing. It's a story of -- we had 2 huge deals at the end of the year that certainly helped the result, coupled with a lot of medium-sized deals. And I think that's kind of the thing. Like as it's growing, we saw this in state and local, we feel good about the foundational level, but for things to really grow fast, we've got to have more and more big deals. And so we've got a bunch of big deal hunters over there in Europe now, and they're bringing back more and more opportunity every quarter. And while the timing is going to vary a little quarter-to-quarter, we feel like we've got a few really, really exciting opportunities in international this year, and the team is going to focus on closing them. Erik Lapinski: Thanks, Andrew. Up next, we have Mike Latimore at Northland. Mike Latimore: So I think you've mentioned that within the longer-term guidance, maybe software grows a little faster than hardware. I guess is there any thought that maybe the software growth rate actually improves or accelerates a little bit given some of the AI applications that are going in there? Brittany Bagley: I mean I think we're obviously really excited with the performance we saw, but our hardware business is also doing great. So I mean, I think they're both performing so well. It's hard to really call which will be a bigger contributor. I think you've seen in the last couple of years, though, that software has been slightly outpacing hardware growth, and that's a tailwind for us from a gross margin standpoint. Joshua Isner: We do have monetary dynamics there with like how much software historically we've booked, when you just layer on the AI Era Plan on top of that, now there's just so many more dollars available in software and AI relative to hardware. So certainly, we're excited about that and seeing more and more software start to pile up here. Patrick Smith: We do have some more hardware magic up our sleeve over the next couple of years here. So I do want to give a shout out to Brittany as well. She had her work cut out working with me on the long-term plan because one of the things I worry about is that if we underinvest in continuing to build out the hardware elements of the ecosystem, which are going to -- they're not going to be as high margin, at least initially, especially as the software, but I think it's important to the health of the business. And Brittany and her team really did a nice job really rigorously modeling this out to show me we have plenty of room to be able to hit all the investments we want to invest in and continue to deliver growing profitability to our shareholders. Mike Latimore: Great. And then just a second question for me. It seems like you've won some good international cloud deals lately. Do you see sort of an acceleration there? Is that kind of loosening up where the dam sort of broken and now international cloud is going to -- they're more comfortable with that model? Joshua Isner: Yes, for sure, for sure. And we think AI is the thing that takes that opportunity to the next level as well. Now it's like if you want to deploy things on-premise, you're essentially signing up for 0 AI tools into the future, which I think is becoming pretty clearly not a winning formula. And so I think that is a nice push to the cloud for some governments that have been slow to adopt it. And we're here certainly waiting for that moment with a lot to offer, not only in cloud, but also in AI. Erik Lapinski: Up next, we have David Paige at RBC, and welcome to the calls with us. David Paige Papadogonas: Erik. Nice to be here. Congrats on the great results, team. I had a question -- maybe jumping back to what Jonathan Ho had asked, in terms of driving growth in the enterprise market and the go-to-market, I guess if I think about like U.S. public safety, police station, like the Chief of Police would then call like the neighboring chief of police and say, "Oh, hey, I have this great Axon product. Why don't you look at it, look how beneficial it is." But like a big box retailer wouldn't exactly call their biggest competitor and say, "Hey, I have this great camera that's reducing theft and all the benefits that it has." So I was just curious, maybe you could flesh out just how you're going after new business there. Patrick Smith: Yes. Let me take on that one to start because I would actually tell you, they do colleagues, the security departments are mostly former law enforcement. And they're under a lot of pressure, and they don't view that as a competitive advantage in any way. It that's an area like we partner with Auror, which is one of our investment companies out of New Zealand that basically runs a case management software similar to Evidence.com for retailers. And they share wildly with each other because they want to track -- they're all being hit with these organized retail crime organizations. And so there is actually much more collaboration than I was expecting. I expected a more competitive dynamic, and there certainly is on the retail side, but I'm not seeing anybody viewing this as an area of competitive advantage. They're quite collaborative. And then similarly, on the medical side, I was just with a major medical provider. And it was interesting there, there's a fair amount of mission-driven stuff, too. This company, in particular, operates a ton of ambulances and vehicles and EMS services. But there day-to-day, they're pretty geographically segmented, and they're constantly deploying ambulances that calls that may come into a competitor or they'll have a call that comes in that they'll end up shunting over to a competitor. And I think in those cases, I've not seen in those industries that a negative competitive dynamic. In fact, there's a lot of the same collaboration. Joshua Isner: Yes. I'd just add, it's incumbent upon us to build the business case also for every customer. Ultimately, I think you're right, in general, like there's an element of competition, at least a little more so than in public safety. But ultimately, all of these decision-makers understand what an ROI looks like and that our products drive that ROI and solve real problems for them. So our lead gen efforts and our -- how we show up for new prospects matters probably a little more here than in public safety. But at the same time, I think the market is so much bigger as well that I don't think the opportunity slows down as a result of that nuance. Erik Lapinski: Up next, we have Jordan Lyonnais at Bank of America. Jordan Lyonnais: Rick, you touched on it a little bit in the Go Boldly podcast where things had gone where you expected. So when we look out to 2028, having this joint sensor just under the Axon tool belt, what do you worry about could go wrong? Patrick Smith: I think for us, a misstep around sort of privacy and data handling. We are seeing that those are concerns right now out in the public. I think that would be one where we could make a mistake that would have outsized negative consequences. I think also if we -- our customers are going to expect that we continue to deliver more and more value. I mean they're all hearing the same things we all are that you can do more with less cost in terms of developing technology. And so I think it's incumbent on us to make sure we're still earning our way up the value chain the way we always have. It something I'm particularly proud of, like when Josh talks about where we were 5 years ago with a much lower peak price point, it was, I think, like in the $200 range. We haven't just like raised prices to get there. We've launched a ton of new products that didn't exist. And I think that we've got to just continue to deliver there. And Jeff and his team are pretty busy making sure that I think expectations for what we deliver in the AI Era Plan are going to continue to grow, and we've got to hit it. Erik Lapinski: Thanks, Jordan. Up next, we have Keith Housum at Northcoast. Keith Housum: Just unpacking the enterprise opportunity a little bit more. Perhaps you guys can provide a little bit of color about, one, I guess, which verticals are you having the initial success in? And perhaps any color you can give on the second large customer that you guys have in terms of which vertical they buy in? And then finally, I guess, as you guys are going after the enterprise market, are you leading with Fusus? Are you leading with the Mini or what's kind of like the lead product there? And are people signing up for a multipack or are they going with one product and the goal is to land and expand? Joshua Isner: Yes. Thanks, Keith, and good to see you. I would say, look, like our salespeople, we're like as allergic as to the like show up and throw up mindset as you possibly could be. Like we want our salespeople showing up and asking a million questions to identify the opportunity and then figure out what product is going to solve the problem. And so I think there's moments where ABW Mini leads or Axon Body Mini leads to more conversations around software and AI. I think there's moments where Fusus is really the exciting part. I think there's moments where Outpost and Lightpost or DFR or counter drone are the exciting first opportunities. And I think that's -- it's similar to international. It's like the beauty of it is -- you just got to get in with one product and then everything works so synergistically, we'll bet on ourselves and our ability to sell more over time. And so I think now more than ever, it varies. Like for a little while, it was a Body cam and then you go to the next step. Now it can be a number of different first products. Keith Housum: Great. Great. Any color on the large customer that you guys announced in your second one in enterprise? Joshua Isner: Yes. So I appreciate you asking, Keith. Personally, I'm not sure that we're going to be announcing logos from us on enterprise deals. I'm not sure that it serves us. And I think we'll see. I think some of these will just come out in the press or hopefully, some of you guys are walking into these major businesses over time and you see our products just being used in the wild. But I think we're trying to do the calculus of like is it worth starting to identify these by name for competitive reasons or not. And so that -- hence our trepidation on that. Erik Lapinski: Thanks, Keith. Up next, we have Meta Marshall at Morgan Stanley. Meta Marshall: Congrats. I guess just maybe first question on the 911 market. Just is that a different buyer kind of within the organization? Or just how much can you use kind of cross-selling and leveraging the relationships you already have within kind of some of the state and local environments? And then maybe just a second quick question for Brittany. You mentioned the 30% on the premium OSP plan. Understanding that continues to kind of get enhanced over time. But do you see any major changes to that percentage kind of driving some of your expectations for 2028? Joshua Isner: Brittany, do you want to start with the second one first? Brittany Bagley: Yes, sure. I mean, look, the interesting thing about that is the premium plan goes up every year. So each year, we start with a new premium plan. I do think that over time, we will continue to roll more of our customers on to our most premium plans. That's a little bit of what you're seeing underlining the 125% NRR number. So I think you can continue to see it moving up over time. I also think, though, that we continue to add amazing new products, and that takes that premium plan price point up. So it's not like I see us getting saturated on how many people are on the premium plan in the next few years. Joshua Isner: And Meta, great question on the buyer persona and 911. I don't think it's cut and dry with like one buyer. Sometimes the RTCC really has a lot of say over that, the real-time crime center. Sometimes the police department or county operates their own 911 center and there, again, it's a very tight decision loop. Sometimes a PSAP supports 5, 10, 20-plus different accounts. And there, that's probably the case where we get the lease network effects from our existing customer base, but there's still some. And I think Prepared and Carbyne over the past several years have really built up their own brands and relationships in those spaces. So I think we view this as an opportunity to bring more potential buyers into our universe, not necessarily like an uphill battle to go meet a bunch of new buyers for the first time. Erik Lapinski: Thank you, Meta. Up next, we have George Notter at Wolfe. George Notter: All right. I think I heard you say earlier in the call that you have 500 agencies deploying Axon Assistant. I think Axon Assistant is an element of the AI Eras Plan. I guess I'm inferring that you have 500 AI Eras customers at this point, and that translates into $750 million in bookings. Is that the right math exercise? Am I looking at that correctly? Joshua Isner: Not quite, George, because you could buy some of these as a stand-alone as well. And so it's not one for one, any customer who adopts a Draft One or an Axon Assistant is automatically an AI Era customer. But directionally, that's kind of the right line of thinking that a number of those deals will be on the AI Era Plan and translate into a certain number of bookings. And we're -- you know what the pricing is, we publish it. It's not a secret. It's just a matter of covering the market. Brittany Bagley: I think also, George, what we were calling out is that's one of our very newest features inside the AI Era Plan. And so not every customer turns on a new feature immediately. So we're sharing that because it's a really nice indicator that customers are excited for it and they're starting to adopt it, but it does not tie exactly back to how many customers are on our AI Era Plan. George Notter: Got it. Okay. I guess where I was going with this is I'm trying to understand sort of the penetration rate you've got at this point on AI Eras. And I guess if I think about 15,000 law enforcement agencies in the U.S., roughly just the U.S., and I kind of use that 500 number as a proxy for your penetration. Like am I in the right ballpark in terms of where you are in penetration rate? Brittany Bagley: I would go back and I would look at what we charge on a per officer per month basis for that, consider that inside of the $750 million of bookings that we shared, and then you can tie that sort of back to the officer count. Erik Lapinski: Up next, we have Jim Fish at Piper Sandler. James Fish: Look, going back on TASER, TASER noticeably reaccelerated, and we've been hearing customers that had been on TASER 7 were sort of being told end of support on that as they come up for renewal, not a forced refresh by any means across the base, but encouraging them to move to TASER 10. So I guess how much refresh of TASER 7 to 10 could we see this year? Or what percentage of the base is still actually on some of the legacy offerings that we can actually have a bit of an upgrade cycle on top of the fact that if I look back 5 years ago, your incremental bookings really improved versus this time last year. So should we be expecting a larger portion of your growth this year actually coming just from contract renewals? Joshua Isner: So Jim, great question. I don't think it's the case. We view it as failure when a customer buys TASER 10 and then their upgrade is a TASER 10 5 years from now. So we're really focused on trying to get the new version of the TASER out to market as fast as we can. I would say TASER 7, there's -- we would never not support the product. Part of our -- actually, part of our inventory strategy is like, hey, we launch a TASER. We know it ships for 15 or 20 years before it's discontinued. And that kind of is the hedge on being more aggressive with holding more inventory upfront. So we'll continue to support TASER 7. There's plenty of customers on it and using it. Of course, we view those as the population. We've got to go earn the right to upgrade, and we believe we will. But high level, I think you should think of the TASER business this year as plenty of demand and orders to support the revenue guidance. So certainly, we don't see anything different than that. Brittany Bagley: Yes. I would maybe just add, I mean, that's all spot on. I mean, including the fact that like we still have customers we're selling X2, too. So yes, TASER 10 is doing incredibly well, but that's driven a lot more by the efficacy of the product than it is us not supporting it. But I think the thing I wouldn't miss is as we have big corrections deals and we have big international deals, you're seeing new customers come in, right? So there's always this conversation around TASER of like what is the upgrade cycle. That still exists. Customers do 5- to 10-year contracts. We upgrade TASER every 5 years. But don't forget the piece in the TASER business as new customers are coming in and actually adopting TASER. Erik Lapinski: We'll go to Tim Long at Barclays next. Timothy Long: Just 2 quick ones, if I could. First, obviously, a lot of success in these other markets outside of state and local. So just curious, anything jump out that's different there relative to deals that are in more of the core, things like win rate, deal sizes, bundles, anything like that, that you can point to directionally on those? And then second, I did want to follow up on the hardware comments on T10 and AB4 both seem to have a ton of incremental utility compared to prior products. So Rick, I think you talked about some magic in hardware, but -- just curious, as you've taken such big leaps on this last set of some of the core products, does it get more and more difficult over time to innovate further and take bigger steps compared to what was just accomplished with the really successful ones? Patrick Smith: No, I actually can see, I think our next generations of hardware are all going to be pretty compelling. We've got at least one new category in the pipeline as well. But I'm knee-deep in the next-generation TASER, knee-deep with Rubén Caballero, who Jeff hired on his team, who's leading our sensors space. His last gig -- well, I don't know if it's his last gig, but he worked for Steve Jobs directly as a hardware lead on the iPhone. So bringing him in, a lot of new creative energy looking at our personal sensor space. So I think we still have a lot of room to innovate. Jeff, how would you answer it? Jeffrey Kunins: No, I think that's spot on. I was just -- I was half jokingly saying we have at least 2 whole new categories in the pipeline. But I thought that was good. And I think to the -- everything we said on the call, it all just keep coming back to, I think, where we continue to differentiate on being the world's best combination in this area of hardware and software working together and on having a full spectrum portfolio of products that we grow both organically and through bringing on early-stage disruptive winning teams and product lines and bringing them into the fold in a way that is just as natural as if they were organically built, which is a completely different approach to just sort of GE style stacking together a bunch of independent separate nonintegrated companies. Brittany Bagley: I don't think we're anywhere close to running out of ideas and things to be innovative on, not on the product team, but neither Rick nor Jeff nor their teams are slowing down in any way. Joshua Isner: And Tim, on your first question on the different market dynamics depending on which buyer we're talking about. Ultimately, state and local is a market that values premium products even if they carry premium prices. The only buyers that are buying anything else are doing that on price. They're willing to take a more primitive product at a lower price that is not full featured. And that's happening very, very rarely in state and local, and I believe that will continue to happen very, very rarely. Internationally, we've said for years, hey, if you're a customer that wants on-prem with primitive tools and you want to pay a very inexpensive price for that, we're probably not the vendor for you. And there is some of that internationally. But the good news is more and more, we're seeing customers that value the premium workflows and products and tools between hardware and software, and those are becoming Axon customers. And so I think it just comes down to the intersection of price and quality and the buyers that really value price above all, they'll generally buy something else. But the good news for us is there are fewer and fewer of those buyers in public safety. Erik Lapinski: Thanks, Tim. Up next, we have Joe Cardoso at JPMorgan. Joseph Cardoso: Maybe just one for me, just to be respectful of time here. When we think about the AI Era Plan traction today, just curious if you could touch on now that it's been in the market for a while or at least a year plus, if you could touch on customer behavior around adoption of the plan and whether you're seeing any interesting trends. And like maybe specifically, curious if adoption is being more done in isolation, meaning like you're just seeing folks go out and basically purchase the AI Era Plan or if you're seeing customers expand spend in other areas of the portfolio at the same time? Just trying to get a sense if you're seeing any pull-in as you're kind of going out to customers and pitching kind of the new plan there. Joshua Isner: Yes. Thanks a lot, Joe. And I think, look, oftentimes, OSP and the AI Era Plan at this point are bought in tandem with each other, and that often includes a newer version of OSP with more new products in it. So I think it's fair to say that it's not in isolation that customers are buying the AI Era Plan, they're buying it along with other capabilities. And I think, look, we've got our customer success team, their sole measure of success day-to-day is adoption of new products. And so that's really what they're focused on. When we sell AI Era Plan, getting customers comfortable with using it is -- it takes a little bit of work, and that's what our customer success team does day in and day out, and they're very, very good at it. I'm particularly excited. I think as we ideate and talk about new AI products that are going to go into that plan, I think this is going to be an exciting year for that, and we're going to start unlocking some new capabilities in that plan for customers over the coming months. And going into next year, I think there'll be a lot to talk about in terms of new capabilities in that plan. So certainly very bullish on what the future of AI adoption looks like amongst our customers. Erik Lapinski: Thanks, Joe. We'll squeeze one more in here. I know we're running up a little over on time. But -- so Trevor Walsh at Citizens. Joshua Isner: Erik, let's get through them all. I mean all these -- everybody waited 1.5 hours here might as well let them ask the questions. Trevor Walsh: All right. Cool. I like it, Josh. Rick, maybe for you just on the commentary you made around drone legislation. You sounded like you were -- there was a little bit left to be desired about what's kind of currently out there. But as we kind of read through the most recently passed National Defense Act, there was a pretty robust language in there about letting -- moving from federal agency overview to giving state and local powers around both kind of drone tracking, taking down or mitigation of threat type drones. So I guess what do you think is lacking there still? Or what still needs to be done for you in that regard? Patrick Smith: Well, I just think it's a continued evolution. Like I know there's some special accommodations being made for the World Cup for those cities. And then there's some more broad-based stuff. But I've been walking all the Congress. We got a bill to create a new less lethal category that would exempt the T10 from the Firearms Act. And then I understand why people say it will take an act of Congress with something that's going to be pretty hard to do. But we're just -- we're continuing to engage there. So to be honest, I haven't checked in on the latest status of the -- where each type of regulation is on this. But I think just directionally, today, state and local really can't mitigate drones directly. I think in a few years, they'll all get that capability. And we may see it go to a fair number of private security type folks, too, like sporting stadiums and people are running critical infrastructure. So the main point is it's narrowly allowed capability today, but we're building the center network to be able to expand and be able to do mitigation work as well. And we just think that that's going to grow as the regulations loosen up. Joshua Isner: And I'd also say, like to the administration's credit, they've been very open to modernizing policy around drones and counter drones, which we view as very helpful, like the engagement and conversations have generally given us a lot of confidence that the government is going to adapt with the technology. Erik Lapinski: We've got Josh Reilly at Needham. Joshua Reilly: All right. Just 2 quick items for me. On the international business outside the Commonwealth countries, would you kind of characterize that 2025 was that an inflection point in terms of that becoming a much bigger contributor to international? And then secondarily, on Carbyne and Prepared impact to the guidance, I got a number of e-mails into the quarter asking about the impact there on revenue and EBITDA. I know it's relatively immaterial, but any comment there? Brittany Bagley: I can take one... Joshua Isner: I'll let Brittany with the second one, yes. Brittany Bagley: I'll start with the second one. On Carbyne, there's literally 0 impact because Carbyne wasn't even closed until this month. And to your point on Prepared, it was only partway through the quarter. It was really an immaterial impact. So we're very excited for both businesses, but you can expect to see those really start to impact going forward. Joshua Isner: And Josh, what was the first question again? I think it was international related, but sorry. Joshua Reilly: Yes. Is there an inflection point in the international business that could be a good bode well for this year? Joshua Isner: Look, it's only an inflection point if we follow it up with an even better year, right? And so we'll see at the end of the year if it was or it wasn't, it certainly feels that way, but it's not going to feel that way if we don't show up and do our jobs well and continue to bring on more and more international customers. So that will be the focal point. We feel like we have some wind at our back, and now we got to capitalize on it. Erik Lapinski: All right. And our final question will come from Jeremy Hamblin at Craig-Hallum. Jeremy Hamblin: And I'll add my congratulations. I'm going to ask a high-level question. So I think what's interesting, if we go back 3 years ago when you unveiled the FY '25 plan, at that point in time, you were assuming a 20% sales CAGR. And with each successive year, you've actually raised your expectations on your sales growth, your revenue growth for the year on your initial guidance here in February, including this year where it's 27% to 30%. I want to just understand in terms of the visibility, like clearly, which must be significantly higher and how you feel about that today than you did about the business 3 years ago. What's providing that type of confidence? Is it that you just have a lot more shots on goal and a lot more ways that you can win? And obviously, the business has tacked on a lot of different areas, whether it's Axon 911, whether it's Dedrone, et cetera. But just can you provide a little more insight? You guys are typically pretty conservative. I don't know how many quarters in a row of beat and raises in the 20s, I think. But I just wanted to get some insight. Joshua Isner: Yes. Jeremy, it's a great question, and I appreciate it. I think some of what you said certainly factors into it, but the biggest thing is the bookings growth rate, right? Like when we issued that guidance a few years ago, we were seeing bookings in that range as well in terms of year-over-year growth. Now all of a sudden, they're accelerating each year into a high point last year, and hopefully, we'll be able to trump that this year. But when you look at that type of growth and you factor in what like all those guaranteed dollars already mean for us as they come in, certainly, it gives us more confidence that revenue will continue to be exciting in its growth rate. And at the end of the day, even 5-year normalized bookings were accelerating nicely year-over-year. And so again, even when you zero in, it gives us more and more confidence that these bookings are going to continue to translate into growing revenue. And so that's probably the #1 consideration. Certainly, we see the pipeline and some of these larger deals take longer to close. And so we're talking about deals now that are going to hit next year in some of these markets. And so I think it's a combination of a few things. But ultimately, one of the things we think we do very, very well early every year is establish what the floor looks like. And then as things start to become more and more true throughout the year, we can update that guidance as we go. So that's a little bit of commentary about how we look at the growth rate. Brittany Bagley: I would echo that. I would -- Jeremy, just mechanically, if you look at it, we've got our future contracted bookings, and we talk about how 20% to 25% of that will convert in the following year. So if you think about how we did guidance, last year based on our future contracted bookings number. We're actually taking a very, very similar approach to our future contracted bookings number this year and how much we think bakes into it. We just have a bigger future contracted bookings number. So you have more that is naturally carrying over into the next year. And then the delta between that future contracted bookings number and our guidance is based on the pipeline and what we think we can go get. And there, to your point, we just continue to see these underlying metrics like our NRR and the potential ARPU and what customers can do because we have so many more products and so many more markets, you can imagine that, that gives us comfort in hitting that relatively larger number with our pipeline each year. And you can actually roll that all the way forward to 2028 and sort of keep a consistent math philosophy. Erik Lapinski: Thank you. We'll kick it to Rick to close this out. Patrick Smith: All right. Hell of a year, as Josh would say, next play. Again, just really pumped to be part of this team, getting to work on these problems and have supportive shareholders, especially as we enter this does feel like this year is different. Just the world is changing really fast. And for years, I keep putting up pictures of Charles Darwin quote that it's the adaptable that survive. And I think that's really the incumbent. Can we be as adaptable as the company we are today as we were when we were smaller. And only time will answer that, but we're sure focused on it. So thanks, everybody. Stay safe, and we'll see you maybe at Axon Week, where we may have a few announcements. Joshua Isner: Thanks, everyone. Erik Lapinski: Thank you.
Peter Podesser: Good morning, ladies and gentlemen. Thank you very much to all of you for taking the time here for the first time in this calendar year to join us for our presentation for the preliminary numbers and at the same time, also the publication and the presentation of the guidance and outlook for 2026. Together with my colleague, Daniel, we will present you the key elements of the preliminary unaudited numbers so far and naturally also look forward to our question-and-answer session after this. Let me start off with, let's say, a critical and quick look back. I think we are looking back at 2025 as a year definitely of challenges, but also a year of consolidation. And at the same time also, I think we have made good use of this period here for a further strategic alignment and focusing ahead of starting era of growth again. Back to growth, I think, is also what we see here with our last quarter of the year 2025, the fourth quarter with about EUR 40 million of revenue, also recording the strongest quarter during this year, also with decent profitability. At the end of the day, if we look at the growth drivers here in the closeout of the year, we are looking again at our industrial fuel cell business here with, let's say, the known end markets. And we are also looking at the European power management Besides, let's say, consolidation, I think it was a clear focus and we, let's say, allocated the right resources to further implement the long-term strategy during 2025, looking at 2 elements from today's point of view. The one is really expanding our international footprint, further the international presence, the customer proximity. But then at the same time, I think, again, investing into our competitive advantage, our competitive strength through technological leadership through new attractive products introduced into the market. Let me look into the international element first, expanding our footprint by establishing a more significant site in Orem Salt Lake City, establishing and preparing also for the local production in the U.S., again, driven by the need for customer proximity, the expectations of our U.S. customer base, but at the same time, actually also shielding us relatively well then against, I'd say, tariff and other trade hurdle implications over time with the local supply chain to be built up. Looking at, let's say, the assets that we, some time ago, also purchased here in Denmark in the hydrogen fuel cell business, I think we have turned this into an operating and profitable hydrogen fuel cell business with a customer base in critical infrastructure from telecom to data network operators. Well, and the third one, yes, the planned strategic investment here into our partner in Singapore, where we expect to close, let's say, in the near future, creating a regional hub for the further expansion in Asia, but also giving us and allowing us access to a fast-growing security as a service business here with government customers. On the technology end, I think apart from, let's say, the existing product suite, I think especially in Defense and Security, we have 2 new offerings that are already contributing that already have contributed to the business here in the low single-digit million format. The one maybe new for some of you, a defense power supply platform developed together with a French OEM here out of our power management business in Denmark for laser application portable and land or vehicle-based lasers, one of the key applications drone defense. We are showing this since yesterday as one of the news here also at the [ membrane ] tech in Nuremberg and have quite some positive feedback also from, let's say, not just the existing users, the existing customers, but also from potential new OEMs. The second one in Canada, we have invested a good 2 years of collaboration here with a customer developing what we call the EFOY ProShelter, an Arctic power and energy solution shelter-based for extreme climate and temperature exposure below minus 40 degrees C with extremely long autonomy between 12 and 36 months of autonomy. The first systems are already deployed in the northern part of Canada, the northern border also of Canada. Totally, we expect here from both product lines, a scaling effect already, let's say, in the running year with the existing customers, but definitely also new customers. And if we look into the Arctic energy supply, naturally, there are other regions in the world where we see already explicit demand. There is, with all of this, a structural shift in our business towards defense as well as the public and civilian security applications. If we look at all of this in 2025, this all added up to almost 50% of the total group revenue. With existing products scaling, but also new products now contributing to further growth, we see significant momentum in this field of the business naturally also against the known geopolitical situation. As per today, we are, I'd say, unfortunately seeing the fourth year of war ongoing here in the Ukraine. What do we expect here? Significant preparation for OEM programs in the defense sector, mostly auxiliary power systems either for vehicle or dismounted applications. But we are also looking at, let's say, the general hybrid energy solutions as a need for resilient and dependable power. So it's at the end, a combination of our fuel cells with batteries and wherever possible also with solar capabilities. We also expect a regional growth in this sector. And I think important also for all of us who have -- for all of you who have witnessed with us also these delays in programs in India. In the last recent discussions over the last couple of weeks here in India, we see a, let's say, a resumption of some of those programs happening also near time at least during the course of the year. The expectation here for this part of the business to increase to approximately 15% to 20% of the revenue seems realistic. But then also if we add the civilian security part, all the Security as a Service business, I think we also see 60% as a mark to be reached within this year of the total group's revenue as realistic sales, good products and solutions with attractive margins, and Daniel will go into this in a second. Apart from this, we also expect our industrial business to contribute and deliver, I'd say, organic growth here across the fuel cell as well as the power management business. We also look at the order intake there, we also see a return to growth with the fourth quarter recording about EUR 40 million of order intake, which was the highest intake of all quarters of last year. And we've seen also a dynamic development in the recent, I'd say, 2 months or also first part or the first part of 2026, we see several major projects out for decision within the foreseeable future. And based on all of this, we expect a very strong first half of 2026 in terms of overall visibility. If we now look into the sales and earnings of 2025 in a more concrete way, yes, we are seeing sales of EUR 143.3 million at almost the same level of 2024, 1% down. This is slightly below the lower end of the target corridor we had published also by November. I think also a conscious decision from our side not to overstretch, let's say, revenues and push projects here in the last weeks of the year simply at the cost of impacted margins. We also see this in the profitability of the fourth quarter and that we also -- we see the overall factors leading to this EUR 143 million not reaching the original plan for last year. If we look at the major deviations, I mentioned it already, we had to digest delays in defense projects in India impacting our Asian business. The overall uncertainty, also macroeconomic uncertainty, also delaying decision-making processes hurt us in the new business development in the U.S. Finally, I think we delivered still an organic growth of around 20%, which per se is nothing bad, but still behind the historical growth numbers in the U.S., but also below, I'd say, our own expectations as well. And the third element, currencies, functional currencies going against the euro here had also an impact metric on our euro-based group's revenue. With this, I think I would hand over to Daniel to lead you through the earnings part of the preliminary numbers. Daniel Saxena: Good morning everybody. Thank you for joining the call. So neither wanting to repeat the last quarter's discussions or preempting that we will have. I think the major drivers when it comes to earnings this year were characterized by high losses from exchange rate translation and high cost for the implementation of our ERP system at the group level as well as investment in IT security. So I think this is the overall topic that we've discussed in the last quarters. And I think this is also the topic that we're looking at the fourth quarter with some slight changes and what seems to be a light at the end of the tunnel. You've seen our EBITDA, adjusted EBITDA, which is EUR 16.7 million, translating into a margin of 11.6% and our adjusted EBIT, which amounts to EUR 8.9 million, translating into a margin of 6.2%. So both of these key financial indicators are slightly above the higher end of our latest forecast, which we published in November. One of the reasons for the better performance in the first quarter than we anticipated. I think one of the reasons is the product mix in the first quarter, which was quite favorable. The second one is a good price implementation that we have, especially in SFC Netherlands as well as SFC Canada, but also SFC Germany. We had some, to a small extent, onetime effects, all of this leading to a higher -- slightly higher gross margin than we anticipated in the worst case in our last forecast in November. Also, what we saw in the first quarter is that for the first time in 2025, we had a balanced result from exchange rate losses, i.e., the losses were very, very low in the fourth quarter, which also helped. So there was not a significant negative impact from other operating expenses. And all over, keeping costs at a decent level also helped in generating the slightly above EBITDA and EBIT. We see that the margins are that is not a big surprise, below what we have seen in 2024. We're looking, as I mentioned before, at an EBITDA margin of 11.6%, still a double-digit one, but apparently away from the 15.2% that we saw in 2024 and also slightly lower of what we anticipated for the given reasons that we have discussed in the first 9 months of the last year. I think to make a summary and we'll discuss the results much more in detail once we publish our final numbers, it is a, I would say necessarily super happy result for 2024 -- 2025 apologies. we've seen in the fourth quarter some factors really driving our profits up again and most of it being apparently the gross margin, which goes straight into the EBITDA margin. So very short and sweet from me this time, I'll pass it back to Peter. Peter Podesser: So also from my side. Now looking into, I think, the guidance and the outlook for the year. We, I think, can give a confident outlook based on facts for 2026 after, I'd say, the challenges I think we have to address last year, as mentioned just before. At the end, we see still a consistent increase of energy demand for dependable, resilient and sustainable energy, decentralized applications driving, let's say, our customers' needs -- at the same time, I mentioned this before, we have the structural shift in our business to the defense, public and civilian security business with the existing customers, existing products, but also new and scaling applications and some significant decisions still pending in this area. And regionally, we expect larger impetus coming from the European and Asian, especially Southeast Asia, but also a rebound in India, bringing a significant growth impulse. We are not neglecting the risk. I think we are still operating under a challenging overall macroeconomic environment. Geopolitics strikes to a certain extent, actually our customers' needs. We still see tariff risks and trade policy and trade hurdles being a factor to be, let's say, also assessed. But at the same time, we have, I think, also experienced a certain shielding in some of our core businesses and by localizing, especially in the U.S. and having already localized in India, we also see a shielding out of this. So overall, we expect a healthy growth. The corridor, we see, let's say, between EUR 150 million and EUR 160 million of revenue for 2026 with the Clean Energy segment growing slightly faster as also historically seen. And at the same time, we also see an overproportional impact on margins and improvement of margins. Daniel has mentioned also the effects already in Q4. We are consistently also expecting a proper implementation here, but also an operational leverage for growth. At the same time, we are not neglecting the risk here of precious metal prices developments and also currency risk. But the range we are seeing as a target range is an EBITDA adjusted between EUR 20 million and EUR 24 million for 2026. And on the EBIT adjusted level here on group's results, we expect the range between EUR 11 million and EUR 15 million as the realistic end rate from today's point of view. So after a year of consolidation, you see us here with, I would say, a sensible planning, a realistic view for risks and opportunities. But at the same time, we see ourselves back at the growth trajectory needed and doable. And I think we are also, let's say, as mentioned, seeing a number of initiatives that are, let's say, that have been worked on for quite some time also during the last year coming to a decision-making stage. So with this, I would like to conclude here and hand back to Moritz to open the floor for the Q&A session. Thank you very much. Operator: [Operator Instructions] And the first question comes from Karsten Von Blumenthal from First Berlin Equity Research. Karsten Von Blumenthal: Happy to hear that especially regarding margins, EBITDA margins, EBIT margin, you are back on track. It's better than I expected in Q4, and Daniel mentioned the reasons for this. My first question is regarding the U.S. business. Peter, you said that overall in 2025, you grew roughly 20%. As far as I remember, in the first 9 months, the U.S. growth was roughly 29%. So this is an indication that Q4 in the U.S. was relatively subdued. Is that right? Peter Podesser: Karsten, Peter here. I think what we see here is some shifts between quarters. I think it is not something that we see a slowdown here. I think what we see in the what we saw in the third quarter was, let's say, the softest demand in the fourth quarter coming back again and also, let's say, a much broader customer base. Well, getting in starting the year with a significant dependence from our largest customer. I think we now have started to, let's say, see the distribution of the customer base becoming broader and broader. So at the end, what you also see naturally, if we look at the 20% growth, and this might be also some differential here, we'll look into this offline. This is naturally after currency effects, we are seeing, let's say, 19% to 20% growth. Karsten Von Blumenthal: All right. That helps. And happy to hear that your customer base has broadened. Could you give us a bit more details regarding the state-of-the-art of your U.S. production site. So what has happened in the last few months? Where are you exactly? Could you shed some light on that? Peter Podesser: Yes. We have, let's say, continued with the hiring, the training of people. We had them over here. We had them in Romania. The classical preparation work. All systems are in place. ERP system is up and running. And pilot production can, let's say, start any day at this point in time, I think we feel well prepared here for delivering, and this will be a major shift products for the U.S. now out of our Orem facility as of this quarter. Karsten Von Blumenthal: Perfect. In this quarter, I'm happy to hear that. I remember that last time we talked about your relatively high working capital. That is nothing we have now discussed with the preliminaries, but have you perhaps a qualitative update on your working capital? Were you able to improve your position there? Daniel Saxena: Karsten, so we've not been able to improve our position significantly in the fourth quarter. So overall, I think from our call, which we had in November, working capital is still at a decent high level. Most of the components, if you look at the inventory, there's nothing in there. I mentioned already in November. A lot of stuff that we have in anticipation of an increased business, which we've seen in the fourth quarter. But also with a strong quarter in the fourth quarter, you know that accounts receivables tend to increase as of the 31st of December. So the message is the 2 drivers, inventory and accounts receivables are still expected to be at a rather relatively high level, but we expect that now as the business increases and goes up again that at least inventory will go back to these levels. Accounts receivable will remain what it is with the growing business. Karsten Von Blumenthal: That means we should rather look into, well, H1 figures to see you coming back to the levels you had, say, at the beginning of 2025? Daniel Saxena: I think H1 is the right period to look at. Remember, some of the components, especially platinum has increased in pricing significantly. So that also has an impact on the working capital, i.e., the inventory, not saying that it is driving the inventory. We are managing inventory, but we still want to make sure that we have sufficient components in -- on our stock. And the second driver as a general driver of increased inventory is, of course, as we open up new manufacturing sites inventory will go up if we -- as we start ramping up certain sites, inventory will go up because in the beginning, and that's very similar to what we've seen in the last years with India and with the U.K. you have a higher level of -- or double level of inventory in the German as well as in the new manufacturing. Karsten Von Blumenthal: All right. Thanks for that update regarding working capital. Perhaps one question to your surprisingly for me, surprisingly high EBITDA guidance for 2026 and the margin. So I assume better product mix and the costs, the one-off costs in 2025 will not -- will no longer burden you in 2026, say IT cost, ERP software, security, all this seems to be through. And yes, you go back to a decent margin level in 2026. Is that right? Daniel Saxena: In part, it is right. But if you look at the expenses in a different way, when it comes to the gross margin range, we will see a bit of a wider than normal range with the gross margin development, which could be gross margin remaining stable to gross margin improvement. I think what we're dealing with, and I mentioned that about when I discuss the inventories, of course, you've seen that platinum prices have increased significantly in the last 6 months. So that has a result on our bill of material. We, of course, intend to pass on those costs to customers. Let's see how the platinum prices will develop that will have -- and let's see how we can pass on to our customers that will have an impact on the rate of the gross margin. You've seen the whole custom discussion having reopened just in the recent days also remains a factor that could have an impact on the gross margin one or the other way. And still exchange rates tend to be volatile also impact on the gross margin. So when it comes to the cost basis and the margin, the EBITDA and EBIT margin, gross margin has a direct impact and the range of the gross margin is a little bit wider. When it comes to sales and marketing, I think we'll see a slight increase of those expenses, nothing significant, mostly driven by the regional expansion and new markets. So where we would expect lower expenses in 2026 is the R&D expenses is R&D expenses expensed over the P&L, the R&D spending, which is the expenses plus what we capitalize will increase or we expect it to increase slightly. But what we also expect this year again is that the capitalization rate as we're doing new products and investing in new products will be higher than what we've seen in 2025, which will then lead to a lower portion of our R&D expenses hitting the P&L. G&A, we will still see high investments in the IT and ERP. So I would not say that those costs will go significantly below what we've seen in 2025. The probably remain at a very similar level over the entire year. What we do not expect or it's very difficult to forecast. I think this is one of the drivers in the margin is, remember, we have losses from exchange rate conversion reaching almost EUR 4 million. Of course, in our forecast, we do not consider losses at this high level, which has a huge impact on the EBITDA. Apparently, if the U.S. dollar and the Canadian dollar and the Indian rupee start depreciating at the same speed or the same amount as we've seen in 2025, that would have a negative impact on our EBITDA and our EBIT. For the time being and also based access to that we have. We don't see it in this amount. But again, that remains a risk. Does it help? Operator: Then the next question comes from Usama Tariq from ODDO BHF. Usama Tariq: Congratulations on the great results. I have a set of questions, 2 to be precise. Firstly, on the FX going forward. So there was a lot of expectations for negative FX impact this year. And of course, that has been realized. But going into 2025, could you -- you already indicated that the higher adjusted EBITDA guidance will somehow be affected from a relatively better FX. Are you going to actively get involved in hedging FX in 2026? And my second question would be a little bit more general in nature. That will be -- I see a lot of fuel cell peers in the last 6 months have had a really good run, Bloom Energy and [ SLS ]. They are primarily focusing the data center market. I understand that the power generation for the units for SFC is not as strong as required for data center, but is that also a market you are looking at? Or is that just totally not something that you target? Daniel Saxena: Nice having you on the call. When it comes to FX, what I mentioned just to Karsten is that, of course, we are more conservative with our FX assumption for 2026, still based on what we see or what we saw as a consensus in the market from FX research. So a little bit difficult to really say we're going to end up within a year, but we would expect a slight stabilization. We don't see any gains from FX development. When it comes to hedging, so of course, we're looking here and there into some hedging of FX may enter into some hedging. I cannot exactly tell you yet because hedging has become very expensive. And then if you look at it, it has 2 impacts, right? So of course, the hedging will if FX decreases or depreciated, improve your EBITDA, but it will decrease your cash flow. Hedging those positions have become very expensive given the volatility of the exchange rate and also the exchange rate that we are dealing -- so you will see on the one hand side, and you know this much better than I do, a positive effect on the EBITDA and a negative effect on the cash flow. That's why if you look at the cash flow also in the 9-month cash flow, we don't see a huge impact from the FX expenses because most of them are noncash long-term intercompany financing. So let me look at it really on a basis what the cost of hedging is and what the benefit of it means actually also in terms of what is the cash impact and the cash impact will not be low. Remember also, we're looking at IFRS 18 being introduced mandatory from 2027 so they're going into details from 2027 with the IFRS, you'll see the presentation of AX results differently from what we see it right now, but I'll comment on that a little bit later. Peter Podesser: And then I come back to the data center question. Well, just recently, we had a very, very -- and I personally also was there with the team, a very interesting meeting with the largest data center provider in the UAE -- when the CEO there showed me the 32 diesel gensets here in the backyard as the backup power, it was obvious they are looking for a more sustainable solution there just replacing the conventional backup power. We are looking at data center projects also in India as India wants to become a hub here also on a global scale. It's one of the initiatives. But I would be really negatively surprised if we could not secure our first project, although recognizing that there are power levels for the, let's say, largest sized data centers that are beyond also fuel cell capabilities even of other players. I think there is a good starting point here at midsized data centers, and we are working as we speak on... Usama Tariq: Very grateful. So if I understand correctly, please correct me if I'm wrong, data center as a general opportunity is for you and you are actively working in that. And you wouldn't be surprised if you get some order in 2026 this year from the data center end market. Peter Podesser: Well, we are making all efforts and focusing naturally on the higher power range on our hydrogen-based product range here on this as one of the upcoming markets. And I can confirm what you reiterated. Operator: Then the next question comes from Robert-Jan van der Horst from Berenberg. Robert-Jan van der Horst: So I have 2 questions. The first one is, could you just give me maybe a quick update on what you -- or maybe just a little bit more color on what you expect from the Indian defense program. When I understood correctly, it was in part delayed and in part, funds were repurposed for drones. So do you expect it to come back significantly this year? Will it stretch out more? Or will the volume overall decline? Just an idea where we are at now. The other question is regarding the one-offs for the IT and ERP projects. Could you give me a rough estimate how high the effect was in 2025? So that would be my 2 questions. Peter Podesser: This is Peter. Talking about the Indian defense programs, as I said, we just recently returned from India having a yearly kickoff there and also the review of the forecast, we are expecting, let's say, some of those programs now again resuming and restarting. And I think we also got a good data point in the discussion with also a major defense player there in India in the defense vehicle business. They had to suffer from the same fact that funds were repurposed and literally was said basically, well, for 9 months, we didn't get an order and now it starts again. So I think we were not the only one suffering from it, which for us also was a validating point to say to clearly state, yes, the business is intact. The business case is intact that the moment the programs resume, I think we will see a rebound here. Also in conjunction with this, we did a very conservative planning, call it, a sensible planning in our Indian defense business. And I think we have all the reasons to believe that we will, I'd say, have a good chance to come in above the current planning. Daniel Saxena: So when it comes to European IT and one-offs in 2025, I'd say that we're probably looking at anything between EUR 2.6 million and EUR 3 million one-off -- that does not reflect the entire investment that we had in IT and ERP system. So a certain portion of that will be recurring, especially stuff like licenses, like maintenance, which will be higher going forward on a recurring level. I think one-off really mostly in consulting, mostly in implementation of software components is, like I said, anything around 2.5 million to 3 million. Operator: Then the next question comes from Michael Kuhn from Deutsche Bank. Michael Kuhn: I'll start with, let's say, the visibility. You mentioned good visibility, especially into the first half. Should we make out of that, that, let's say, the guidance as we look at it today is front-end loaded? And also in that context on backlog conversion, I think backlog around 80% at year-end. How quickly will that translate into sales? And let's say, what major projects you're working on where you would foresee entering it into the backlog over, let's say, the next 6 months with the realization of the project in the same year? Peter Podesser: Michael Well, I think if we look at the planning as we have it right now, I think we see as, again, repeating myself as sensible and I think realistic, also taking a learning also of the experience of last year. And then if you look into the order intake over the last couple of quarters, yes, you see a consistent increase here over the last 4 quarters here, culminating in Q4 with over EUR 40 million, but still my, let's say, the backlog alone, I think, is not that decisive part. As you rightly said, it's about the conversion. We have also significant parts of the business, especially on the clean energy fuel cell side, industrial fuel cell business where you usually have, let's say, an in-quarter conversion. And therefore, I think it's always a combination also as you rightly concluded, it's the backlog, but it's also the project pipeline. And as mentioned before, we are seeing some significant decisions here being worked on to be expected and painting really for the foreseeable future, talking about, in some cases, weeks, some cases, maybe, let's say, something in the next quarter. On the defense side, it's about, let's say, OEM decisions, but also regional programs. the rebound also we discussed it in the Indian programs. their fiscal year starts on 1st of April. So that's something expected, let's say, for the second half of the year and the summer. But then also on the civilian part of the business, and as I said, it's a combination. It's, again, a solid and robust growth in the civilian part of the business, but it's, let's say, a more dynamic view and a more dynamic situation in defense and public security. And if you give us a couple of weeks and we watch out for, let's say, we together watch out for what we can, let's say, execute here, I think we get, let's say, even more visibility beyond, let's say, the first half of the year. Michael Kuhn: Understood. Then on the U.S., with the production about to ramp and first product to be delivered soon, will that do you think influence the behavior of your U.S. customers by, let's say, removing tariff uncertainties and delivering a U.S.-built product. So should we expect a, let's say, more dynamic buying behavior in the U.S.? Peter Podesser: Well, I think definitely, it is going -- it has an impact because it's one of the concerns voiced to us by customers at the end, having a key component coming, let's say, from Europe, be it from Germany or Romania as we have it right now is seen widely as a risk per se in the supply chain. We are removing this. And naturally, they can also, let's say, reduce, let's say, their cycle times, be it an advantage for us or not. But at the end, for the customer, it's a good thing. We are able to, let's say, satisfy their demands also on shorter notice without, let's say, longer planning, including logistics times. So overall, definitely, does it eliminate all impact of uncertainty looking at the last couple of days, I do not think we can take this general conclusion here. But long term, it's the right path. They want us to be there. They want it made in the U.S., and I think that's what we have to deliver apart from not ignoring, but apart from, let's say, the uncertainties out of the trade policy of this administration. Michael Kuhn: Yes. No, fair point. One more on business mix. You mentioned 15% to 20% defense. And then did I get that rightly, another 60% on top from security/surveillance? Peter Podesser: No, this is, let's say, additive. So the 60% is including also the military part of the business. Michael Kuhn: Okay. Understood. And then last question on this product you mentioned being deployed in Canada with the very long working times and temperature resistance. Is that also something thinkable for, let's say, Eastern European or Scandinavian border protection, where there's a lot of talk going on, obviously. And could that be a, let's say, significant use case going forward? Peter Podesser: That is definitely our expectation here. As I said, we have a clear path of scaling here with our existing customer. And that's, let's say, at the end of the day, a NATO force, and we have naturally made use also of the presence of many of our customers and decision-makers here during the Munich Security Conference to get this out and show it as a solution here for all the other NATO and non-NATO forces. So it is -- what is the application? It is uninterrupted dependable power here with -- with low to no temperature and noise signature. And at the end, it's for sensing surveillance and data transmission and operating periods between 12 and 36 months in really remote locations. Right now, yes, along, let's say, a new marine let's say, logistics course in the northern part here of the Arctic based out of Canada, but naturally there are, let's say, all other locations also suitable and Scandinavia and, let's say, Northern European and Northeastern European locations, too. So scaling this year with the existing program, but deployment in other regions is exactly the plan. Operator: Then the next question comes from Malte Schaumann from Warburg Research. Malte Schaumann: First question is a follow-up on the defense part. Could you remind me what the defense revenue share was in 2025? Peter Podesser: Around 10% due to the drop also in India and expectation this year is there's a healthy chance to at least double this. But the part is at the 15%. Malte Schaumann: Okay. And what do you expect to be the main drivers beside the recovery expected to happen in India? So can you provide maybe some more color on what are the major building blocks for the increase? Peter Podesser: Absolutely. Yes, we are expecting some, let's say, OEM decisions, but we are also expecting some, let's say, decisions out of regions where we have had, let's say, a lot of business development and a lot of project-based business, new projects are up for decision. So it's OEM and regional expansion. And we have developed those 2 new products there. We talked about Canada a minute ago, but also on our power supply offering. We have this product out there in a fast scaling laser platform, portable land-based vehicle-based main application drone defense, and it is, let's say, the scaling with this OEM. By the way, we have approximately, let's say, 400 of those units already out there in the field. And naturally also other OEM users here in terms of laser technology on the defense side. So it's a combination. It's not the one big project that makes it all. So we also think this is, let's say, taking risk out. And as I said, in India, I think as of April, we expect, let's say, to come back to, let's say, a growth curve. Malte Schaumann: Okay. Good. Defense alone, the growth you expect in defense alone is broadly covering the full revenue range you expect for 2026, which would then imply you expect basically no growth in all the other areas. So maybe you can add some more what do you think about that thought? Do you see any opportunities in security applications, industrial applications, et cetera. So with a strong growth in defense, so then the guidance does not look very ambitious regarding all the other businesses. Peter Podesser: I think naturally, there is also an element of learning in there out of last year's experience where at the end, let's say, an add up of multifactors led us to miss the original and I would say, justified ambitious plan. I think we have, let's say, taken as I think as a reaction to this, a more conservative, but still, let's say, ambitious growth plan, not neglecting that still, let's say, risks are out there. We know how fast delays in defense projects occur. And half a year, let's say, goes by without the decision is not something unheard of. So at the end, I think the truth is somewhere in between. We see still, let's say, the organic growth in the industrial business, fuel cells and power supplies intact. We had an impact in Canada on the power business last year with a single project being, let's say, not decided. But overall, also there, we saw, let's say, a very stable environment with, let's say, which is also the underlying assumption here. But yes, if everything adds up in a positive way, we will be all happy to look at this and think about, let's say, the guidance again. Malte Schaumann: Yes. Good. Then on the gross margin again, you mentioned several factors, Daniel. But if I got you right in the end, you expect flat to slightly -- potentially slightly increasing gross margin. Is that right? Daniel Saxena: Yes. Looking at from comparison to 2025, which is right now still the gross margin, but it's not bad. I would expect a flattish gross margin on the lower end, but I will still look on the upper end gross margin which increases. As always, remember that the rough guidance we're giving is gross margin can go up on an annual basis, anything between 1 and 1.5 percentage points. So we will not see any jumps on the upper side, which is beyond that. Operator: Then we have one follow-up question from Usama Tariq from ODDO BHF. Usama Tariq: Just one follow-up question for 2026. How do you see the balance sheet going into 2026? Do you still expect it to be net cash? Do you think you will take some debt financing? Any pointers there would be really nice. Daniel Saxena: So when it comes to the balance sheet, yes, I would see still net cash. I would still see us to be cash generating. doesn't need super complicated math. If you look at the 9 months, if you see the results of the fourth quarter from a purely operating cash flow, we are positive on operating cash flow. The key liquidity driver of consumption is really working capital. So that's where the cash is getting consumed. If you look at CapEx, we do not expect any huge CapEx programs in 2026, similar as we've seen it in 2025. So to get to the point is, yes, still net cash positive. when it comes to leverage and financing. Let us see, we do have certain credit lines in place and see how we can draw them down given the current liquidity that we have, we may not use that excessively. And then, of course, we still have the variable. We are still looking and that is not a surprise at potential acquisition and/or investments into strategic partners. As always, those processes are something where you can say could happen, could not happen. There's a lot of variables out there. But of course, we're confident we would not go into the exercise we believe that there would be a positive result or outcome of such a transaction. And depending on where and how we do a transaction, we could look into leveraging the purchase price of such a transaction. Usama Tariq: And if I may just add on it on the acquisition part, what geography would you be targeting? Would you still be looking towards an aggregator? Or is it still -- or something on the technology side? Is there something in the pipeline? Or do you really are just looking currently? Any pointers there would be great. Daniel Saxena: Well, it hasn't really changed the strategic focus of what we have done in the past and we've been looking for. First of all, yes, it's a regional expansion and getting deeper into certain region markets. Of course, North America remains on our radar screen. Let's see how the overall environment develops. Of course, Southeast Asia remains on our radar screen. The same thing here, regional penetration getting quicker into the market and/or into certain sectors. We're also looking or maybe looking at some opportunities in Europe. And then from a technology point of view, also, yes, we are looking at potential higher power opportunities on the technology side where the technology complements our and PE portfolio. There are assets out there, which we would consider to be attractive. So yes, we are looking, but we're looking purposefully. And when we're looking, we are also engaging into discussion being understood that we invest prudently and looking at opportunities very cautiously. But yes, the opportunities are out there, discussions and you see that if you look at our transaction expenses that -- which are good level of the transaction expenses is a good level indicator of the level of engagement. Operator: Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Dr. Peter Podesser for any closing remarks. Peter Podesser: Well, yes, again, thanks, everybody, for your time, your interest. As always, I'd say, Susan, Daniel, myself, we are available for any direct interaction and follow-up. Yes, you see us here, I'd say, confident for 2026, optimistic based on facts. But at the same time, I think you also see us inspired and motivated with the dynamic environment, by the dynamic environment we are experiencing here in the first part of this year. And we will be happy to report on further milestones as soon as we have them. Thank you very much.
Operator: Good morning, everyone, and thank you for waiting. Welcome to GPA's fourth quarter -- to announce the results of the fourth quarter of 2025 of GPA. [Operator Instructions] This conference call is being recorded and will be available at the company's Investor Relations website, where the complete earnings release is available. [Operator Instructions] The information on this presentation and any statements made during this conference call regarding GPA's business prospects, projections and operational and financial goals constitute beliefs and assumptions of GPA's management and are based on information currently available. Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions because they refer to future events, and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors could affect GPA's future performance and lead to results that are materially different from those expressed in such forward-looking statements. Today with us, we have GPA's CEO, Alexandre Santoro, and GPO's IRO, Rodrigo Manso. Now I'll give the floor to Alexandre Santoro to start the presentation. Alexandre Santoro: Good morning, everyone. Thank you so much for attending the announcement of the results of the fourth quarter and full year of 2025 for GPA. I took over the leadership of the company with enthusiasm due to the relevance and strength of the company's history, but also fully aware of the responsibility of the market. I arrived here less than 2 months ago, and from day one, I have been very close to the operation, deepening the understanding of the business and interacting directly with team, suppliers, customers, creditors and shareholders. GPA holds relevant assets, consolidated brands and a loyal customer base, supported by a team of more than 37,000 employees, the basis of our business. We have a strategic position in Brazilian food retail and competitive attributes that are significant. More than 60% of our revenue is concentrated in the premium segment. We have more than 5 million active customers in our loyalty program, and we recorded a gross margin of 27.6% in 2025, the highest in the segment. This margin shows the strength of our position. Still we have -- we see room for evolution and to increase the profitability of our brands. There are clear opportunities to improve efficiencies, assortment, loss reduction, overall to improve the operational execution. Part of this potential lies on the fundamental equation of our business. Our expense structure proportion is still very high and offers significant room for additional gains in efficiency that are significant as we adjust processes and adapt costs to the operational reality of the company. Our work here is focused on 3 very clear fronts: generating operating cash, financial discipline and improving the customer experience. As of the end of last year, the company announced an efficiency plan to improve efficiency. And as we have deepened the analysis in recent weeks, we have identified several additional opportunities both in SG&A as in CapEx. And in this manner, we are going to expand even further the scope of the initiatives already announced. We also have reinforced internal governance and expense discipline by creating a specific committee for the approval and prioritization of expenses and investments. We are reviewing all of the company's expenses, all relevant expenses of our day-to-day operations, such as service provision, technology, rental, sometimes canceling contracts that make no sense, reducing, changing their scope to make them more adherent to the reality of our businesses. We also reinforce our focus on profitability, both to generate margin both in brick-and-mortar stores and e-commerce, prioritizing growth that is healthy with good margins. This is one of the reasons that the whole company decided to discontinue a program such as the Allies program that brought sales, but the bottom line did not provide any good results and it was operating at a loss, and we are not interested in that. That agenda has been conducted with discipline and responsibility, preserving the experience of our customers and maintaining a constructive relationship with our suppliers, who are fundamental partners for deploying our value proposition. Financially speaking, as it has been broadly announced, we have significant upcoming maturities along the next few months and we are addressing this issue as a priority. This action is in progress. And in November, we announced we are going to defer a significant portion of our debt. This is not something that started when I took office. It's something that had started before. We were directly monitoring it, of course, always in compliance with good governance processes. Now on the next slide, we are going to talk specifically about the results of the fourth quarter. Now looking at the highlights, the fourth quarter showed an improvement in many relevant operating indicators. We recorded an adjusted EBITDA margin of 10%, a significant reduction in net loss with consistent progress in operating cash generation. So this is related to the business seasonality that helped us. We grew 2.7% in same-store sales, advancing in all formats despite the challenging macroeconomic environment. Pao de Acucar grew 1.8% in same-store sales with a market share gain in the premium segment. Now Extra Market advanced 4%, reflecting the maturity of the activities implemented. The Proximity format also showed relevant growth in total sales. And in Digital, we reached almost BRL 700 million in sales, up 6.7% over 4Q '24. The focus here, as I said before, remains on improving the profitability. These results reflect the first impacts of our efficiency agenda that we started to implement. This is the beginning. There is still a significant way for us to improve our operational and financial aspects. Now I would like to give the floor to Rodrigo Manso, my partner and IRO, that is now going to give you more details about our operations. Rodrigo Manso: Good morning, Santoro. Good morning to everyone. On Slide 5, we highlight the evolution of gross profit and adjusted EBITDA. We continue to make consistent progress in gradual improvement on profitability. Gross margin reached a 27.7%, 50 bps year-over-year. And this movement continues to be supported by greater efficiency and assertiveness of our commercial strategy by the improvement of store operations, highlighting, for example, retail loss and out-of-stock loss and by the evolution of Retail Media, which shows higher margins. Nominal SG&A decreased by 2.5% and now amounts 18.3% of net revenues. This is an important highlight, especially in view of the inflation pressures faced over the last 12 months. The result highlights our ability to capture efficiencies in this line and reflects the initiatives implemented over the last year. Within the context of operating costs and expenses, it's worth mentioning that we are executing an efficiency plan for 2026. It includes reduction of at least BRL 415 million in our operating costs and expenses. The plan is at an advanced stage of mapping and execution, already capturing benefits since the first quarter '26, which reinforces our confidence in the continuity and profitability improvement. In addition, we continue to evaluate additional efficiency opportunities with the potential for incremental captures throughout the process. As a result, the adjusted EBITDA margin reached 10%, an expansion of 40 bps. This consistent performance reinforced the robustness of our operation and gives us the necessary flexibility to calibrate when necessary the promotional levers, balancing profitability and competitiveness. The next slide, Slide 6, I would like to present the details on the net loss from continuing activity amounting to BRL 523 million in the quarter. As shown in the chart, most of the loss is related to a nonrecurring effect with no impact on cash, referring to the net effect of the impairment accounted for the sales of GPA stake in FIC, our financial service partnership with Itau. The impairment amount was BRL 527 million due to the difference between the sale value and book value. In addition, we recognized deferred tax assets related to this transaction in the income tax and social contribution line amounting to BRL 179 million. Excluding these nonrecurring effects, continued net loss for the quarter would be BRL 175 million. On Slide 7, we present the cash flow from the managerial perspective of the past 12 months, a period in which we generated BRL 699 million in operating free cash flow after CapEx. It represents a result 2.6x higher than what was accounted during the previous period. This performance reflects a combination of 3 main factors: improvement of pre-IFRS 16 adjusted EBITDA, which reached BRL 848 million or BRL 36 million growth; efficiency in working capital management, especially in suppliers; and variation of assets and liabilities and the reduction in CapEx. In working capital from goods, we achieved generation of BRL 230 million in the period as a result of an improvement of 6 days in the working capital cycle compared to the previous period. This result is mainly due to one-off negotiations with suppliers, in addition to efficient management of in-store inventories. In CapEx line, we invested BRL 612 million in the past 12 months. It's already possible to see a turning point, reduction of BRL 62 million in the accumulated amount. It all began in the fourth quarter '25 with the review of the company's investment plan and is expected to intensify throughout 2026. Let me take a step back and provide more details about CapEx within our efficiency plan. We have defined a budget of BRL 300 million to BRL 350 million to this line with reduction in investments in expansion, renovation and technology, preserving the investments necessary to sustain the operation and initiatives directly related to customer experience. Moving on to other operating expenses. We continue to observe a reduction compared to the previous year. This line totaled BRL 549 million in the period, down BRL 153 million. Out of the total, BRL 151 million refer to recurring effects and BRL 398 million correspond to extraordinary items, mainly related to tax agreements, labor lawsuits and restructuring. Finally, the net financial income totaled BRL 920 million, an increase of BRL 325 million over the same period last year. This variation reflects the concentration of surety bond renewals linked to tax issues in addition to new issuance, also the increase in Selic interest rate, which impacts the cost of debt, and the reduction in average cash in the period of the last 12 months. Next, on Slide 8, I present the details of our financial leverage. As we've shown on the previous chart, net debt increased by BRL 686 million in '25, also impacted by extraordinary effects already mentioned in the other operating expenses and the net financial cost lines. As a result, pre-IFRS 16 financial leverage ended the quarter at 2.4x compared to 1.6x in the same period last year. It should be noted that in 2026, we'll continue to employ initiatives that can contribute positively to the company, together with the operational improvements already mentioned throughout the presentation. Among these events, I highlight the sale of FIC already announced, which should generate amount of approximately BRL 260 million after the closing of the transaction. In addition, we have been negotiating a new contract for the operation of financial services at GPA branches. It is going to generate short-term additional value and recurring revenue with higher potential than the structure we used to have. I now hand it back to Santoro, who will make his final remarks. Alexandre Santoro: Thank you, Rodrigo. Before we open for questions and answers, I would like to emphasize some important topics. So despite I've been leading this company, running the company for less than 2 months, it's absolutely clear to me how important the time is. This is a moment of change, and more than that, it's a moment of transformation. GPA has gone through many changes over the last few years, different priorities, different guidelines, but the fact is that we need a structural and cultural change here. A company with the operations, brand and market positioning that GPA has cannot spend for many years without generating cash, whether it is because of inherited partners, investment decisions that are disconnected from the company's operational reality or a mismatch between the businesses and the reality. So what we have here, there is a mismatch, and it's not related to the size and reality of the company. There are many different fronts that needs to be addressed herein, and this is the time for us to solve the problems. And this is my homework. This is my mission. This is what I have to do that is supported by a very representative Board of Directors that are holding more than 70% of the company's capital aligned with priorities with the need to solve the structural problems of the company and also bringing stability and focus for us to move forward. And I say they are fully aware of the structural liabilities that we have. We have the tax liability, labor liabilities. And everything is being addressed in a very responsible way. And as I said in the first part of my address, we have longer -- debt profile is part of our mission. We are fully aware of how important it is for us to continue working on that to have conversations with our creditors within the formal limits of governance of our company. To reinforce this, my term in office is to address the structural issues of the company with discipline and responsibility, aligning operation, profitability and cash generation. I am fully aware of the challenges lying ahead of me and -- but I trust our strategies, the strength of our brands, the strength of our team and the support of our partners and suppliers. We are going to move forward consistently. In this manner, I give the floor back to our operator for us to start our questions-and-answer session. Operator: [Operator Instructions] So let's move to our first question, comes from Lucca Biasi, an analyst of UBS. Lucca Biasi: I have 2. The first one is about suppliers. So what was the driver for the increase in suppliers? And how sustainable is that looking into the future? How do you expect it to behave in the future? And my second question is, in the release, you say that you performed well for both brands, both Pao de Acucar and Extra. Do you think this is related to the use of GLP-1? And how do you see the use or the impact of GLP-1 in your basket? Rodrigo Manso: About suppliers, if you look at the increase in suppliers, it's very much in line with what we had last year, a revenue that is also very similar in the movements, especially discontinuing allies. So this average term for suppliers comes from specific negotiations related to Q4. So the expectation of the company for Q1 also looking into the company's history is to have times that are more in line with Q1 or Q2. So in Q1, you are expecting a more significant effect in terms of consumption of cash in the line of suppliers with the payment of a significant part of seasonality at the end of the year. So this is related to specific negotiations that take place at the end of the year. And your second question about GLP-1, well, I'm going to address part of it, which is the variation in revenue and what we saw in perishables. Yes, it is clear that there is both in Pao de Acucar and Extra, reminding that Pao de Acucar has a concentration of 50% of the revenues in suppliers -- considering the scenario that we have been mentioning since last year with a slowdown in demand in the overall market, we see that the categories related to perishables had a performance that was superior to Q3. It's an improvement. So we can clearly see that in our numbers. As to GLP-1, and I will give the floor to Santoro, it's important to emphasize that we have a platform that is much focused on health and well-being. But the trend with the new medication -- and this has been something that has been going on, is that people want to buy healthier products. And undoubtedly, once they walk in Pao de Acucar, even Extra, we can clearly see that we have a positioning and a value proposition that is focused on the public that seeks well-being and wellness and health. So the GLP might expedite or increase it over in the short term. Alexandre Santoro: I would like -- I don't have much to add, but just going into a little bit more detail, we really see a change in some categories that have some connection with the GLP issue or the pursuit for a diet with fewer carbs and more protein, so slightly more premium customers. There are some trends that we've been seeing, that we've been monitoring. And as Rodrigo said, I think that we are well positioned to accommodate this kind of change. And 50% of our sales, as they said, in Pao de Acucar is related to perishables. Operator: The next question comes from Dann Eiger, an analyst with XP. Danniela Eiger: I have 2 questions. First, the efficiency plan, which is already in place in the first quarter '26. Tell us more about how we can think about how fast you are going to capture new efficiencies. Are they quick things, adjustments of headcount, maybe termination of some contracts? Or should we expect something more long term? This would be good if we could have some more clarity about that. Secondly, concerning the situation of liquidity, Santoro, you made it very clear that this is your main priority, and in your release, you also listed a number of initiatives to deal with it. I would like to know how much is really in your hands. What do we see in terms of appetite of measures, in terms of renegotiation? Just for us to understand how this is going to evolve. In terms of tax liabilities, you used to be very active in renegotiating them in the past. But do you think this is going to be put aside because of limited liquidity and the fact that you have more urgent matters to address? Alexandre Santoro: Well, first of all, efficiency plan. This is a combination of actions, and I'm going to give you some examples. A number of things that have already been executed and we are capturing the benefits, such as adjustment of infrastructure. Some decisions that are made in terms of CapEx, we are not going to expand that. This is a decision that has been made. And quarter-over-quarter, you are going to see that compared to last year -- last year, it was BRL 700 million. This year, it's probably going to be half of it. So these are decisions that have been made already. As I said in my speech, there is core responsibility. In other words, CapEx is not going to be 0 for obvious reasons. Our priority is to maintain a positive client experience. It's a CapEx to support our businesses. We are going to maintain that. But if it's innovation, technology projects or further expansion, we have agreed that we are not going to make these investments. Within expense control, we are also making some decisions towards that, because historically we have spent a lot on lawyers' fees, consulting services. And these are contracts that are being optimized. We've made this decision, and we are going to start seeing results in the very short term. One more example. We had a number of retail assets that we didn't -- were not using it. They were closed down. So we have already negotiated some of those shop floors that are no longer in our mix. So things that we've already started doing since the end of last year, and now we are speeding up our implementations. Some others will require renegotiation of contracts, different contract scope, for example, especially if it's something which is not aligned with the company new perspective. There are a number of examples, contracts that involve service provision mainly. Now concerning liquidity, we have a number of debt maturities. They are all known. Nothing has changed. We are not higher or we are not more or less in debt. It has all been expected to be paid. We have successfully renegotiated one debt. And we are right in the middle of this process, very active in negotiations, showing our partners and creditors what our implementation plan is, showing them numbers and what it will mean for 2026. Ultimately, we are a company that generates cash from an operational perspective and we expect to improve margins, reduce SG&A and ultimately impacting the bottom line. But at the same time, it's a company that has a tax liability. We're still discussing it. But it's difficult to predict when it's going to be over. We also have labor debts, which are equally relevant, and debts which are part of the equation. We've been conducting a number of negotiations, and I would say this is a very important moment to all of us. And the company, the Board and the creditors are discussing all the different situations. And together, we are going to get to positive results. Now concerning taxes, our strategy has not changed. We are still very active, looking for opportunities and agreements that we may make. This is something very relevant to the company, which concerns liquidity, of course. I told you a little bit about the cash use and the financial income. We need a number of surety bonds because some of the discussions that are at the court levels. So we are still focusing on that, providing the necessary collaterals. And we are going to update the market as we evolve in our initiatives. Operator: The next question comes from Eric Huang with Santander. Eric Huang: I have 2 questions. First, considering the stores, you've closed down some stores. Do you think it's going to be optimized further? And what can we expect for 2026? Secondly, concerning your expense reduction plan, what would be nonrecurring elements resulting from these adjustments? And how this is going to interact with the line of other recurring expenses? Trying really to anticipate what we can expect for it in 2026. Alexandre Santoro: Let me start addressing the issue of stores. In retail, we are constantly revisiting and analyzing the performance of stores. The last thing we want to do is close down a store, of course. It's usually the last resort. There are a number of actions that can be taken before it. And we are really focusing on it and emphasizing all concepts of the business. I have no guidance that I would be able to share with you concerning what would be done towards that line. But quite to the contrary, we are emphasizing operational elements. I can give you an example, which is also part of our efficiency plan. We have it rolling around in place. So we are revisiting the assortment of Proximity stores, for example. Proximity store have a higher logistic cost than larger stores because there is a smaller inventory area, you need constant replenishment in fractions. In some stores, we are running a test, reducing the assortment, the number of items being sold in these Proximity stores, which would have an impact on logistics and operations, consequently, profitability. And it improves the performance of that kind of store. Now talking about timing, which was the previous question as well. There are some things which are to the point. Some other things are more -- they involve logistics, structure, some, let's say, slower processes. But about closing down stores, we don't anticipate to have any significant reduction of our stores. And what we are going to do is try to have stores performing as best as they can, always trying to avoid closing down stores. Rodrigo Manso: Now Eric, speaking about the efficiency plan and the effects -- nonrecurring effects that we expect, our plan has more than 10 initiatives in place. So contract renegotiation, revisiting our organizational structure. And we've also been considering nonrecurring effects, which are going to impact the results throughout 2026. But at the same time, we've also talked about the effect that non -- the other -- the line of others, nonrecurring effects have from extraordinary payments. We've paid some tax credits or we purchased some precatory notes. Things are going to be reduced throughout the year of 2026. I wouldn't be able really to tell you exactly how much it would be, but we believe it will be absorbed by the lines of others because of the reduction of other items which were extraordinary events in the previous year. Operator: Our next question comes from Nicolas Larrain from JPMorgan. Nicolas Larrain: I have 2 questions. One is related to the stores. You had mentioned that GPA is on a waiting atmosphere in some regions. In some stores, you need to wait, whether they make sense or if we are going to sell. I would like to understand your mindset. So are you thinking that there are some branches that you could sell? And the second question is more related to sales. January according to the industry is slightly better than Q4. How are you seeing the performance of stores in the first 2 months of the year? Alexandre Santoro: So a great question that you have asked. In the first 2 months -- this is one of the fronts, one of the things that we've been looking at this issue that you have just mentioned. There is a clarity of what we should prioritize in terms of our investments and efforts that should be more concentrated in Sao Paulo, Rio and DF, which are 3 regions that are our top priorities. We're going to focus our team, attention, resources and to improve stores and everything. So I would tell you that this thing of reassessing is something that is very significant that is going on right now, and we have been analyzing and talking about that internally with our teams, first of all, to understand and to have an accurate diagnosis. And we are going to try and find opportunities that seem to make sense to us. And the other question about sales. Well, what we've been seeing and what you said about the overall market and other players whose sales have improved in the beginning of the year, we are seeing the same trend. I think that we have managed -- considering our value proposition and the concentration of more than 60% of our revenues in the premium segment, we have been able to stand out, even though in the first quarter of 2025 -- when we look at the market, our growth is always above. So we are going to move on that are significant and important processes along this year. We are actively working on our brands. And along '25, we had an improvement of Extra with a growth that stood out with 4% in same-store sales. So in addition to Pao de Acucar, there was a growth. And our Proximity brands have same-store sales growth. Despite the scenario in Q4, we saw a slight growth in same-store sales. We are working on that intensely and we can see that we have some resilience and a differentiated value proposition, and we want to capture gains that are above the overall market. Operator: Our next questions come from Alexandre Namioka from JPMorgan -- or rather Morgan Stanley. Alexandre Namioka: Just a follow-up on Eric's question. You had said that closing a store is the last thing you do, it's the last resort. Before getting to that point, you implement many initiatives to try and improve the performance of those units. Could you try us -- try to explain to us and to quantify how many units in your current complex that are underperforming? Alexandre Santoro: I would say to you that about 20%, 25% of our stores have a performance that are below what we wish or what we see as their potential. So of course, we have a much deeper analysis. And the first thing that I can tell you is something along those lines. So when you look at the entire portfolio as a whole, so this percentage is slightly higher in Proximity, smaller in Pao de Acucar and slightly smaller in Extra. I think that this analysis to be thorough. It involves staffing. So number one, it starts with sales. So if you can have a better operation, you unlock leverage that you know in this business is really huge. So we start the day with 0 revenue. And expenses, I know what it is. So any leverage with sales changes very rapidly the reality of a given unit. So this first understanding. And of course, there is the operation itself of structure, rental. Sometimes the rental is disproportional. And this involves an attempt of renegotiating the contracts. And if you fail to do that, sometimes we decide to close a unit. So -- but the first number on the top of my head that I would tell you, that 25% of our units, we are focusing very much on improving their performance. Operator: The next question comes from Gustavo Fratini with Bank of America. Gustavo Fratini: I have 2 questions from our side. What is the B2B profitability? I would like to understand how much it has helped you gain in gross margin, which was very significant. You've also said that you had 1/3 of the surety warrant bonds related with contingency. How much do you expect to renew in 2026? And what is going to -- how it's going to impact your financial costs? Alexandre Santoro: The first point about B2B. We have actively adjusted our business, and that has been so since 2024. In 2024, we started a process of profitability with the segment called Aliados Allied, something that had been in the area for a while. It delivered a very small margin, however. And in 2024, we wanted to improve profitability aligned with the other areas of the company. Throughout '24 and '25, there were a number of macro elements that had a negative impact on the total equation. But throughout '24, as we realized that we could not operate within the expected profitability level, we started focusing on it, which has led to our discontinuity. It's a contribution margin. I would say that the profitability was close to 0, very low profitability. It got somewhat better in one or other quarter, but it was not consistent and it was too volatile. No value proposition for GPA. We were simply placing orders, something that wouldn't impact margins really differently from all other business lines we operate on. Now going to your second question. Throughout 2025, there was a significant concentration of renewal of insurance policies. The financial impact of this line will be much smaller in '26 than in '25. These are 5-year contracts on average and the financial impact happens in the first year, the unsure payment. The impact on cash flow was quite relevant throughout 2025 because of the renewals, the concentration of renewals of these insurance policies. What we anticipate for 2026 in the specific breakdown of insurance is to have an improvement. We are also working on different initiatives. We've been trying to swap collaterals and guarantees and reduce our financial costs. This is also being done with all the ongoing suits. Unfortunately, I cannot give you any precise figures, but the trend that we anticipate is to have a reduction on this line, because of the high concentration of renewals we had last year, something which is not going to happen in '26 and '27 and as a result of our active work of reducing financial costs by making swaps and replacements. Operator: We thank you all for joining us. And with that, we are going to wrap up our investors meeting. Well, our Investor Relations office will be glad to entertain any questions you might have. Thank you very much. Have a good... [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Greetings, and welcome to the Interparfums Fourth Quarter 2025 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Devin Sullivan, Managing Director of the Equity Group. Thank you. You may begin. Devin Sullivan: Thank you, and good morning, everyone. Thank you for joining us today. Joining us on the call this morning will be Chairman and Chief Executive Officer, Jean Madar; and Chief Financial Officer, Michel Atwood. As a reminder, this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. These factors may be found in the company's filings with the Securities and Exchange Commission under the headings Forward-Looking Statements and Risk Factors. Forward-looking statements speak only as of the date on which they are made, and Interparfums undertakes no obligation to update the information discussed. Interparfums' consolidated results include two business segments, European Based Operations through Interparfums SA the company's 72% owned French subsidiary and United States Based Operations. It is now my pleasure to turn the call over to Jean Madar. Jean, please go ahead. Jean Madar: Thank you, Davin. Good morning, everyone, and thank you for joining us on today's call. 2025 was a record year for Interparfums with sales rising to $1.49 billion, including fourth quarter sales of $386 million representing our best-ever fourth quarter performance. We saw the industry, including ourselves, return to a more historically normalized level of growth. And while new and ongoing challenges such as tariffs and exchange rate pressures have influenced the environment, we have been able to manage through them with disciplined operational execution. Fragrance remains a resilient category and is widely considered an everyday essential luxury that delivers an irreplaceable experience of self-expression and daily indulgence. In 2025, we energized our portfolio through the launch of several blockbuster fragrances and new line extensions across our brands, including the introduction of Solferino, our first proprietary ultra-luxury offering and strengthened our marketing efforts with impactful advertising and promotional support. Our diverse portfolio of fragrances attracted consumers throughout the year with impressive annual performances by several of our top brands as well as brands newer to our portfolio such as Lacoste and Roberto Cavalli. We generated growth in the majority of our markets, made meaningful progress to improve efficiencies and optimized our supply chain to mitigate cost pressure and support long-term growth and continue to deepen our sales reach on increasingly meaningful platforms such as digital and travel. We delivered a high level of client service, maintained a strong financial position and continued to skillfully navigate lingering macroeconomic headwinds in certain key markets, mainly caused by the effect of tariffs and trade destocking and, of course, geopolitical conflicts. Innovation will continue to define our success, including the rollout of brands recently signed or acquired, namely Longchamp, Off-White and Goutal as well as the 15-year extension of our GUESS license and our strengthening partnership with Authentic Brands Group and their exciting brand portfolio. We will touch on that shortly. I'm very proud of our team for their hard work and dedication. This record results and continuing operational progress reflect their shared commitment to our pursuit of excellence. Now on to a discussion of our results and operating activities. As we noted on last quarter's call, we expected that fourth quarter sales will be supported by new rollouts late in the third quarter and the robust holiday sales season and that is exactly what happened. Consolidated 2025 fourth quarter sales rose 7% on a reported basis and 3% on an organic basis, driven by higher sales for both U.S. and European Based Operations. Sales by our U.S. operations increased 4% in the fourth quarter of 2025, driven by performance from our two largest U.S.-based brands, GUESS and Donna Karan/DKNY and even greater growth from Cavalli and MCM. Excluding the phaseout of Dunhill fragrance that was completed in August 2024, full year '25 for U.S. operations, sales declined 3%. Fragrance sales of GUESS and Donna Karan returned to growth in the fourth quarter with increases of 7% and 8%, respectively. GUESS continues to benefit from the ongoing success of the Iconic and Seductive franchise as well as the Q3 introduction of GUESS La Mia Bella Vita. Donna Karan growth was mainly driven by the Cashmere Mist and DKNY Be Delicious franchises. For the full year, GUESS sales were flat and the Donna Karan/DKNY, decline of 4% was mostly due to unfavorable growth comparisons related to the timing of 2024 product launches. In just the second full year under our management, Cavalli fragrance sales rose 33% in both the fourth quarter and full year, a testament to our ability to elevate a brand's profile creatively and strategically. The exclusive May-August introduction of Roberto Cavalli Serpentine at Dubai Duty Free was highly successful and has helped drive significant brand market share growth in the region. We have expanded the distribution of Serpentine globally through multiple retail channels where it is enjoying ongoing success. Additional 2025 Roberto Cavalli rollout included the Gold Collection extension, the Paradiso extension, the Paradiso Rosa and the striking three-scents Marbleous [ sub ] collection and the dual gender Just Cavalli Give Me Magic fragrance duo. In 2026, we plan to keep this momentum going with additional extension that reflects and reinforce the brand's established allure. MCM fragrance sales rose 40% in the fourth quarter and 17% for the full year, driven by continued performance of a new six-scent MCM collection launched in early 2025. In 2026, we expect to debut new extension to expand the brand. We are excited to be at Milan Design Week this April, where we will have an MCM-centric display, highlighting the newest fragrance that we launched in early 2026. Despite a challenging year where the brand declined 9%, and despite the launch of Fiamma, fragrance sales at Ferragamo held steady in the fourth quarter, supported by the third quarter launch of Sublime Leather. We remain confident in the brand's potential heading into 2026, where we plan to roll out new extensions across pillars. Sales from our European Based Operations increased by 9% in the fourth quarter, driven equally by a 4% rise in organic growth and a 4% positive effect of foreign exchange. Coach, Lacoste and Montblanc led the way in the fourth quarter. For the year, sales increased 7% on a reported basis and 4% organically. While channel performance was mixed among regions, sell-through has been strong thus far in 2026. Jimmy Choo, our largest brand, continued its momentum and delivered another year of sales growth. The success of the Jimmy Choo I Want Choo women's franchise has continued to strengthen since its launch in 2021. Particularly in the United States, the launch of I Want Choo With Love, combined with the strong performance of the Jimmy Choo Man franchise helped drive 6% growth of Jimmy Choo fragrance in 2025. We have two new extensions in the works for 2026, and we'll be using the year to prepare for a new women's franchise in 2027. Coach fragrance sales increased 5% in the fourth quarter and 15% for the full year, reflecting strength across essentially all of the men's and women's line reinforcing its timeless, multi-generational appeal as a mainstay of casual elegance. We benefited from the launches of Coach for Men and Coach Gold in the first half of the year. We have had a wonderful relationship with the Coach brand since 2016, and we are incredibly happy to extend our agreement for an additional 5 years through 2031. We expect to introduce new extensions for the men's and women's line in '26. And similar to Jimmy Choo, we will be using the year to prepare a new women's franchise in 2027. In much of the same way that we rejuvenated Roberto Cavalli, our success with the Lacoste brand was certainly a positive highlight in 2025. In just the second full year under our management, Lacoste fragrance sales grew 23% in the fourth quarter leading to 28% increase in the full year, reaching $108 million, exceeding our initial expectation of $100 million. The Lacoste license took effect in January '24, and we immediately go to work, crafting and implementing strategy, and then curating and introducing a collection of fragrances for men and women that key into the timeless elegance of a brand. In 2025, we enriched the original line with a new men's fragrance called Original Parfum and the line's first women fragrance, Original Femme. We also introduced a new L.12.12. dual gender duo, Silver Rose and Silver Grey. In 2026, we will further expand the Lacoste fragrance lines with additional extension, leveraging the solid foundation we have built in our first 2 years overseeing the brand. Montblanc sales rose 22% in the fourth quarter, reflecting the success of Montblanc Explorer Extreme in the second half of 2025 and the strength of the original Montblanc Legend line. This strong fourth quarter performance in combination with favorable foreign exchange helped to offset the sales softness we experienced in the first part of 2025 resulting in full year 2025 sales that were broadly in line with '24. We plan to launch two new little extension in '26 and are preparing for a big launch of a new men's franchise in 2027. The men's fragrance market remains underdeveloped in general, presenting a substantial opportunity for us to continue offering meaningful innovation and expand our reach across our entire portfolio for years to come. We remain optimistic about the future potential of Solferino, our first ultra-luxury direct-to-consumer offering that includes a collection of 10 unique premium scents designed to cater to the growing niche high-end luxury market. Our flagship store in Paris and dedicated e-commerce platform are attracting encouraging levels of consumer traffic. Solferino reached 40 doors worldwide by the end of 2025, and we are on track to expand this artisanal fragrance house to an additional 50 in the first half of 2026 with a long-term goal of up to 500 doors at the end of 2030. We are excited that Solferino has entered the U.S. with the launch of Bloomingdale's online store and in 7 store locations with additional store rollout to come this fall. We have always taken a strategic approach to portfolio expansion, adding brands that strengthen our global reach and long-term growth profile. This year, we advanced that strategy with new partnership that further enhance our competitive position. In January, we announced separate exclusive long-term worldwide fragrance license agreement with David Beckham and Nautica, along with a 15-year extension of our license agreement with GUESS that maintains the relationship through 2048. These distinctive brands reflects our approach to an increasingly global and diverse fragrance market, identify iconic category leaders and apply our proven operational expertise to build a sustainable franchise. Our opportunity pipeline is expanding as our ability to elevate and in some cases, revive brands is becoming increasingly recognized in the market. I want to thank Authentic Brands Group, ABG, the company who co-owned and manage both the David Beckham and Nautica brands, we look forward to a continuing mutually beneficial relationship. While brick-and-mortar remains competitive, e-commerce is running strong, and we are benefiting from our expanded presence at Amazon and early foray into TikTok Shop among others. This platform significantly enhanced our global visibility, deliver rich consumer insights and enable us to introduce smaller-sized products that serves as an affordable entry point into prestige and luxury, supporting both recruitment and premiumization efforts. Amazon remains one of our largest and fastest-growing channel, generating rising consumer engagement and premiumization. We are very encouraged by our early success on TikTok Shop, most notably, select products within our Donna Karan/DKNY brands. We are continuing to explore ways to leverage the increasingly significant sales potential of this platform, which has firmly established itself as a top 10 beauty retailer in the U.S. as well as the fastest growing. The travel retail market continued to perform well with sales growing by 6% in 2025 and representing today approximately 7% of our total net sales, consistent with prior years. Brands, including Cavalli, Lacoste and Coach performed well throughout the year. Our strong appeal among traveling consumers illustrated by the success of Cavalli Serpentine in Dubai is helping us secure additional shelf space and broaden our SKU footprint across duty-free locations. We anticipate steady growth in our travel retail business going forward. With respect to operational improvements, we've made some good progress against our stated goals in the areas of tariff mitigation, inventory management and operating efficiencies. For example, our transition to 100% third-party providers for packing, shipping, warehousing and order fulfillment should be completed by the end of March of this year. We are also making progress in shifting our manufacturing closer to the point of sales with a focus on changes that provide a measurable impact. For example, as of December 31, 2025, we moved production for three GUESS lines, Italy, and have since diverted all components shipment from China to Europe instead of the U.S. This one change, which represented approximately 15% of our U.S. manufacturing, produced tariff savings of $3.5 million. Retailers maintained a cautious stance on inventory levels throughout 2025, carefully managing their positions amid a dynamic demand environment. However, we began to see meaningful relief in Q4 2025 as ordering patterns, stabilized and inventories declined. Encouragingly, that momentum has carried into 2026 with healthy ordering patterns since the beginning of the year. The tariff situation has become increasingly dynamic given last week's Supreme Court ruling and the aftermath. While it is too early, way too early to determine the long-term future of tariffs, we continue to focus on controlling what we can control in our own operations and have seen encouraging results. At present, we estimate that tariff costs will remain a headwind in 2026. We will continue to implement strategies and cost savings to blunt this anticipated impact. These actions will be enhanced by the select pricing actions we took during the second half of 2025 that averaged approximately 2% across our brands, primarily focused on prestige and luxury and the U.S. market. Our pricing adjustments remained more modest than the prestige fragrance industry average as of late 2025. We do not plan to implement any further pricing actions beyond what we initiated last year unless a significant change in the market occurs. Our creative innovation, the continued resilience of the fragrance market and the breadth of our brand portfolio position us to deliver long-term growth. We expect a continuing period of transition in 2026 leading to a more stable market conditions as we prepare for what we expect will be a more favorable operating environment in 2027 and beyond. As such, we have maintained a quite conservative posture with respect to our guidance, but we will revisit it as the year evolves. Over our 30-plus year history, we have earned a global reputation for excellence and where there is opportunity, we will be there to capitalize on it. I'm also pleased to share that I will be speaking at the Women's Wear Daily's CEO Summit in Palm Beach this May, representing our company on an exciting industry stage. With that, I will now turn it over to Michel Atwood for a review of our financial results. Michel? Michel Atwood: Thank you, Jean, and good morning, everyone. I will begin by discussing the consolidated results before breaking them down into our two operating segments, European and United States Based Operations. As reported, we delivered net sales growth of 7% to $386 million during the fourth quarter, leading to a record $1.49 billion in sales for the full year in 2025. Foreign exchange movements positively impacted our top line, contributing 3% to growth in the fourth quarter and 2% for the full year. However, as outlined in recent quarters, the stronger euro has also driven higher costs across the rest of our P&L as well as on our balance sheet. Organic sales, excluding FX and the completed phaseout of Dunhill and initial Solferino sales in late 2025 rose 3% in the fourth quarter and 2% for the full year, respectively. Gross margin contracted 20 basis points to 63.6% in 2025, and this was primarily driven by the higher costs due to tariffs. Tariff resulted in about $12.8 million in higher costs in 2025 or 0.9% of sales. We have been able to partially mitigate these impacts through favorable segment and brand mix which each contributed to 20 basis points of margin expansion as well as pricing and leaving us with a gross margin erosion of only 0.3%, considering the situation and the tariffs. We expect tariffs will continue to represent a significant headwind in 2026 as we annualize these tariffs for the full year. We continue to actively work on cost saving programs and tariff mitigation strategies to help limit these impacts. We estimate that these programs in combination with the full year impacts of the price increases we took in August 2025 will enable us to maintain our gross margins flat in 2026. Moving to SG&A. SG&A expenses as a percentage of net sales were relatively flat in the fourth quarter at 54.3% compared to 53.4% in the prior-year period. For the full year, SG&A increased 80 basis points to 45.5% of net sales from 44.7% last year, and this was driven by higher A&P spending as well as an unfavorable segment mix. A&P investments rose 10% and 5% for the fourth quarter and full year periods as we continue to invest ahead of our growth and in line with our expected sell-out trends. Royalty expenses, which are included in SG&A, averaged approximately 8% in 2025, in line with our 5-year run rate. Overall, consolidated operating income and margin declined for both the quarter and the full year as compared to the prior-year periods, due primarily to the combination of lower gross margin and higher A&P. Fourth quarter operating income was $28 million for the quarter, resulting in an operating margin of 7.1% as compared to $36 million and 10% operating margin in the prior-year period. Full year operating income declined by 2% to $270 million, resulting in an operating margin of 18.2% or 80 basis points decline from the prior year for the reasons laid out before, just above. Below the operating line, we reported a gain of $1 million in other income and expense compared to a loss of $6.4 million in 2024. The year-over-year change primarily reflects the following factors: first, we realized a onetime gain of $7.6 million related to a debt extinguishment during the fourth quarter. The second factor was a $1.2 million increase in interest income to $5.8 million during 2025 compared to $4.6 million in 2024 as our cash position improved. Third was a reduction in interest expenses on borrowings of $0.7 million. These gains were partially offset by a loss on foreign currency of $3.7 million compared to a gain of $500,000 in 2024. The significant swings in the euro-dollar exchange rate throughout the year helped our top line but have led to larger-than-usual FX losses throughout our P&L. Our consolidated effective tax rate for the year was 23.3%, down 90 basis points from 24.2% in 2024 as we benefited from a onetime favorable net tax gain of $2 million in '25, following a positive outcome from prior-year tax assessments. These factors, combined with our disciplined execution and cost management enabled us to deliver net income growth despite the challenging operating environment. Fourth quarter net income was $28 million or $0.88 per diluted share, a 16% increase from prior-year period. For the year, net income reached a record $168 million with a diluted EPS reaching $5.24, also a 2% increase compared to 2024. Now moving to our other -- moving to our two business segments. I'll start with European Based Operations. We delivered solid net sales growth in both the fourth quarter and full year of 2025. Fourth quarter sales increased 9%, driven by 4% organic growth and 4% favorable FX impact. For the full year, reported sales rose 7%, including a 4% organic growth and 2% favorable FX impact. Gross margin for the full year was 66.1% and as compared to 67% in 2024. The bulk of the 90 basis points erosion in gross margin was driven by tariffs, which represented $8.6 million in 2025. While SG&A expenses increased 7% to $474 million, SG&A as a percentage of net sales remained relatively flat at 46.7% compared to 46.3% in 2024. The increase in SG&A was primarily driven by a 9% rise in A&P expenses the totaled $219 million for the year, representing 22% of net sales compared to 21% last year. Overall, net income attributable to European operations rose 2% to $144 million, but as a percentage of sales declined 60 basis points to 14.2%. Now turning to our United States Based Operations. In the fourth quarter, we achieved a 4% net sales growth on a reported basis and 2% organic growth, aided by a 2% favorable FX impact. Excluding the phaseout of Dunhill fragrances that was completed in August 2024, full year '25, operating sales declined 3%. Gross margin expanded by 40 basis points to 58.3% for the full year, driven by favorable brand mix driven by the 2024 Dunhill discontinuation, channel mix and pricing actions, which more than offset the negative 0.9% impact of tariffs. SG&A expenses decreased 2% for the full year. However, SG&A as a percentage of net sales rose to 42% from 40.5%, and this was largely driven by our lower net sales with the discontinuation of Dunhill. Additionally, in 2025, we kept our A&P investments steady at 16% of net sales compared to 2024 and made the choice not to reduce other areas of SG&A in light of new licenses, which will be joining our portfolio in future years. Overall, the full year net income attributable to U.S.-based operations was essentially flat at $69 million, representing a 14.3% of net sales compared to 13.3% in '24, so improving margins. At December 2024 (sic) [ 2025 ], our balance sheet remains strong, was $295 million in cash, cash equivalents and short-term investments and working capital of close to $700 million. Accounts receivable was up 17% compared to 2024 on a reported basis. However, the balance is reasonable and based on 2025 record sales levels and higher FX impacts of the euro-dollar. While days sales outstanding was 73 days, up from 66 days in 2024, driven by changes in channel mix and FX, we are still seeing strong collection activity and do not anticipate any issues with collections of accounts receivable. Despite FX headwinds, inventory levels were down 6% at year-end compared to 2024, and inventory days on hand decreased to 244 days compared to 259 days in 2024, marking our lowest level since 2022. These decreases are a direct result of our effort to manage down inventory levels. We have also preserved a favorable inventory profile with a higher mix of finished goods relative to components. These improvements position us well to continue to drive further inventory efficiencies, and we will continue to optimize our inventory levels going forward. By effectively managing our working capital in line with sales, full year operating cash flow increased to $215 million, up $27 million from prior-year period, and representing 103% net income compared to $188 million or 92% of net income in 2024. We also took advantage of our stronger cash position and the lower stock price levels in the back half of '25 to continue to share -- our share repurchase program. In 2025, we purchased $14 million in shares, and we'll continue to evaluate additional share repurchases if the stock price remains below what we believe is the intrinsic value. In the same vein, we are pleased to be able to maintain our annual dividend of $3.20 per share. Now moving to guidance. As shared in our earnings release published yesterday evening, we are maintaining the outlook we provided in November. We expect sales to remain steady at approximately $1.48 billion and diluted earnings per share of $4.85. A decline from 2025 that is referenced above, included a onetime gain recognized in 2025, impacts from tariffs and significant investments we are making to develop our newest brands and support our broader portfolio for 2027. We continue to anticipate a return to significantly stronger growth in 2027, driven by enhanced innovation across all of our key brands, including the development, distribution of our newest brands. While we are seeing moderating demand in some international markets, our core fundamentals remain solid. We continue to advance a strong innovation pipeline supported by a long-standing relationship with global distributors and retailers. Combined with a stable and resilient consumer base, these trends reinforce our confidence in delivering consistent performance and long-term value. Before we begin the Q&A section of the call, I want to note that we are anticipating filing our Form 10-K early next week. All audit and reporting procedures are continuing to progress. With that, I'll open up for questions. Operator: [Operator Instructions] And your first question comes from Sydney Wagner with Jefferies. Sydney Wagner: So in terms of revisiting your guidance later in the year, what are some specific metrics that you'll be looking for or do you need to see to give you confidence to update the guide? And then just curious, like is the category or your own pipeline or innovation uptake more of the swing factor in that? And then my other question, just on promotions. Some peers have called out some pressure there. Can you share a little bit more about what you've seen? Jean Madar: Michel, do you want to start on guidance? Michel Atwood: Yes. Sydney, look, I mean, we're just starting the year. We had a really strong Q4, but we're waiting to see really what happens. The environment remains very, very volatile. We are seeing a slowdown in market growth. The market growth in the fourth quarter for the markets that we're tracking was up 2%, and it's definitely starting to slow down. For the year, we're at about 3%. So definitely a slowdown in the market. The destocking situation was a lot better in the fourth quarter. We shipped better than expected, and we saw some restocking. At the same time, we believe that structurally, destocking will continue to be a factor as retailers and distributors normalize their inventory levels. It's just a normal part of the cycle. And so we're waiting to really see how all of that kind of plays out. In terms of our innovation pipeline, I mean, we have a very, very strong innovation pipeline for 2027. But for 2026, our strategy is really more of a flankering strategy. So we're waiting to see also how that basically holds up and how that's basically being received in the market before we feel comfortable updating our guidance. I don't know, if you want to add anything... Jean Madar: Yes. Thank you, Sydney, for the question. Regarding the guidance, as you know, this company has always been conservative. And we spent a good amount of time reevaluating the guidance, and we have decided to keep it, not to change it because even though we had a quite good January and February, and I think we're going to -- we're anticipating a strong first quarter, the visibility is not great. So we are cautiously optimistic. And instead of retouching the guidance many times, I prefer to wait a little bit more. So it's not a sign that things are not going well. It's just we continue in our approach of being prudent. So that's regarding the guidance. The promotion, Michel, do you want to answer on the promotion? Michel Atwood: Yes. I mean we've -- as you know, we -- pretty much the whole industry in the U.S. took pricing related to tariffs. Those price increases largely went through. But we did see an uptick in promotions in the fourth quarter, a little bit more discounting than usual. I think this is normal. In this category, as you know, we don't typically do a lot of discounting. We typically offer the consumer value in the form of gift sets and GWPs. But I would say there was a little bit more of these friends and family discounts than we have seen normally in the fourth quarter. Jean Madar: But nothing out of the ordinary. Michel Atwood: Yes. Nothing significant, but maybe a slight uptick. but nothing significant and nothing of any large magnitude. Operator: Your next question comes from Aron Adamski with Goldman Sachs. Aron Adamski: I have two. First, on the portfolio. After signing of the two new brands that you recently announced, do you have any further capacity to secure additional licenses? And in that context, would you prefer to add brands more in the mass end of the fragrance industry or build up the prestige presence further? And then my second question is on the flanker pipeline that you have mentioned for this year. Can you please give us a sense of your expectations of which brands do you expect to gain market share in 2026? And conversely, which parts of the portfolio are you relatively more cautious about at this stage in the year? Jean Madar: Okay, Aron. Let me try on the first one. Do we have a capacity to take more after the signing of these two new brands, which are David Beckham and Nautica. Before I answer the question, let's take 2 minutes to analyze what we think we can do with these two brands. David Beckham is an icon. David Beckham has a huge name recognition. And we think that in this lifestyle world, we can do well. This is not the first transfer of license that we'll do from Coty. We've done it with GUESS, we've done it with Lacoste, we've done it with Cavalli, all went well. I think that these two new brands are a good addition to the portfolio. Let's not forget that the portfolio of [ Interparfums ] is very diversified. We go from very high end, Van Cleef, Graff, Boucheron to a very lifestyle. So we think that this addition and what it brings to us and what we can bring to them is a great fit. So this being said, do we still have capacity after these two brands? And the answer is yes, absolutely. We have the structure, we have the human structure and also the process and the desire to grow the portfolio. So we can take more. And we are working on more and without any guarantees that we will be able to make announcement. We are working on very important brands. So for us, the evolution of the portfolio is a natural thing to do. We will edit some smaller brands. We will add newer and more important brands. We have the capacity. We have the distribution also. Let's not forget that we are present in 110 countries -- 120 countries through -- either directly or through our distributors. And there is an appetite for newness. So this is for the portfolio and the new brands. Michel, do you want to answer on the flankers? Michel Atwood: Yes. Maybe I'll just -- maybe just build a little bit on what you said. I think coming back to our design and our structure, I mean, the fact that we operate with two segments gives us a lot more capacity to manage bigger -- to manage more brands. We also have our hub in Italy, which is run by U.S. operations. So that gives us a third hub. And it gives us the opportunity also to put the right brands in the right places where they will get more -- where they will have access to people that will have more affinity with the brand. So for example, we will be managing the David Beckham brand out of Italy, whereas we'll be managing the Nautica brand out of the U.S. and obviously, the Longchamp brand out of France. So again, that's part of this. Now I think the other thing is we believe there are many brands out there that are underserved and that could benefit from our expertise, as Jean pointed out. We spend a lot of time looking for new opportunities, and we will continue to do so. The timing, obviously, between the moment when we have conversations and we get brands can take time because, as you know, licenses have an expiration date. And if you look at what we've announced recently, even if we have announced the licenses, we don't get them immediately. So that's always a factor and that continues to play in that fact... Jean Madar: Michel, you're breaking up. Michel Atwood: Yes. Can you hear me? Jean Madar: Yes. Michel Atwood: Yes. Okay. And then on the flankers, look, our flankers are really designed to hold share, not necessarily to build share, but they are necessary to drive healthy top and bottom line growth. When a flank -- when a line starts to basically get a little bit more worn out, that is when we go out and design basically new blockbusters. And we have a significant pipeline of new blockbusters in 2027 across all of our key brands, whether it's Jimmy Choo, Coach, Montblanc, Lacoste, GUESS. So we have a significant amount on top of the new launches that will be coming. So really, for next year, what we believe is we still have brands like GUESS, Lacoste and Cavalli will outperform. And Montblanc, Jimmy Choo and Coach, I think, will be more moderate growth, but we'll continue to do well, we believe, with our existing flanker strategy. Jean? Jean Madar: Yes, I agree. We are really looking at 2027 as a very special year because the five biggest brands in the portfolio will have five very important launches for blockbuster. It's quite unusual for us. It happens once every, I don't know, every 10 years. So we are gearing up for that. But we'll have a reasonable growth in 2026 with our strategy of flankers. Operator: And your next question comes from Susan Anderson with Canaccord Genuity. Susan Anderson: I guess maybe just to follow up on the gross margin. I think you guys were originally expecting maybe a little bit less deleverage in the fourth quarter. Maybe if you could just talk about what happened there versus your expectations? And then also looking to this year, how should we think about the cadence of the gross margin? Should we expect it to be, I guess, down in the first half as we still have the tariff impacts and then potentially up in the back to get to that flat for the year? Jean Madar: This is a perfect question for Michel. Michel, go ahead. Michel Atwood: Thank you, Jean. Susan, yes, look, I mean, the gross margin in quarter 4 looks pretty -- erosion looks pretty scary. I think when you see the 300 bps. And it's a combination of a lot of puts and calls that all basically went in the opposite direction, right? So sometimes these things tend to neutralize themselves. But in this particular case, basically, they were all unfavorable. So really, if you really look at what happened, first of all, you have the tariff impact, which hit us fully. We -- there's always a ramp-up with a FIFO and as we buy inventory, it kind of makes its way through. It made its way fully into the fourth quarter, and that basically represented about 2 points for the quarter. The other thing that we talked about is foreign exchange. So foreign exchange helped us on the top line, but really hurt us significantly because a lot of the products that we sell are actually made in Europe. And so what the cost based in euros were -- while our sales were basically in USD. So that represented -- and just for perspective, the euro was at $1.07 last year and it was at $1.16 this year. So that represented about 50% of our sales are denominated in dollars. So that also had a significant impact. And the last piece is it's a little technical, but it's channel mix. As you know, some of our businesses with direct to retailers with higher gross margin, but also higher A&P, and some of our businesses with distributors with lower gross margins and lower A&P. And in the fourth quarter, we had significantly more of our business was through the distributors rather than direct to retail. It was about 68% mix of business versus 63%. So it's a combination of all those factors. And it's true that it looks a little bit scary. But overall, going back to next year, we feel that we have good mitigation strategy in place that will enable us to kind of get to roughly a flat gross margin. And yes, we should see some hurts in the first and second quarter, and we should see improvements in the third and fourth quarter as we lap our tariff impacts in the back half of the year and our cost savings and cost savings and efficiency programs actually start to kick in. Operator: [Operator Instructions] Your next question comes from Hamed Khorsand with BWS Financial. Hamed Khorsand: Just want to ask you, you've talked a lot about the top 5 today. Is there anything in your other brands that could be a breakout situation for you to get into the top 5? Or you're not expecting that this year? Jean Madar: This year, breaking to top 5, I don't think so. Michel? Michel Atwood: No. I mean, Hamed, look, I mean, I think our top -- our largest brands are really -- basically are really our engines of growth. And they're diverse, I mean, in the various categories, price points, gender, I think those are really where we're going to get the growth going forward. And I think effectively, the tail end of the portfolio will either be stable with brands like Lanvin and Rochas or will probably continue to decline. And then those will eventually bleed out and probably be opportunities for us to consider exits, as Jean talked about cleaning up our portfolio. Jean Madar: I don't think that -- the top 5 are brands that are anywhere above or around the $200 million. The second tier is really below that. So there is quite a difference between the first tier and the second tier. But we will add with new license that we are taking. I think that Longchamp has a great potential. We think that Nautica has a great potential. They come also. So let's not forget, if we take Lacoste, we took Lacoste, we doubled the sales in less than 3 years. We took Cavalli. We increased the sales 50% in 2 years. So we know how to -- what to do with new brands. And I think that there is a lot of potential for the new brand in the portfolio. Hamed Khorsand: Got it. And Michel, on the working capital end, there was a considerable amount of free cash flow generation in Q4. I think that's very seasonal. But is there potential for more here as you try to wind down some of the inventory? Or is that more just a function of how the industry is right now with the destocking? Michel Atwood: Yes. Well, look, I mean, one of the upsides of sales starting to normalize is you kind of -- you're not investing as much in working capital, right? So definitely, the sales normalization has helped us basically deliver working capital improvements, but we've also done a lot of good work in terms of managing down those inventories. And I think we're going to continue to see that, and we're going to continue to see strong operating cash flow productivity going forward. Operator: And your next question comes from Aron Adamski with Goldman Sachs. Aron Adamski: I wanted to quickly ask on the trends that you're seeing across your key regions, so by geography so far in 2026. Where are you seeing the strongest, whether it's your own -- the demand for your own brands or for the category as a whole so far in 2026? And conversely, in which geographies have you seen maybe a relatively slower start to the year than you expected? Jean Madar: So I'm going to try, but Michel follow this very carefully. What I see is the U.S. is doing well. In a very quick, short word, the U.S. is doing well. Southern Europe is doing fine. Northern Europe is more difficult. Eastern Europe is okay. This is for the U.S. and Europe. Asia for us, China continues to be slow, nothing new. Australia is showing some strong signs of growth. We traveled a lot in the first 2 months of the year to make sure that the Christmas went well. What I see is, in general, the level of inventory in stores or at distributors is not high, which is a good sign. Sell-through was good. Nobody is holding too much. The level of reorders is quite strong. So we're not really worried. Michel, I'm sure you can add more... Michel Atwood: Yes. I would just build on that, Jean, say -- LatAm obviously continues to do very, very well. I think our brand portfolio is really resonating well with the consumers. And then in Asia, while we had a little bit slower sales, we fixed our distribution in India and Korea, and I think we'll expect to see some good bounce back in 2026 behind that intervention on top of what effectively you just said for Australia. Operator: And there are no further questions at this time. So I'll hand the floor back to Michel Atwood for closing remarks. Michel Atwood: All right. Well, thank you again for joining our call today. Before I end the call, I'd like to express my sincere appreciation once again to our teams for their tremendous effort throughout 2025. Our achievements are a direct reflection of our people, their dedication, creativity and the unique contributions they bring every day and particularly the agility that we've had to deal with this year with all of the moving pieces that we all are aware of. If you have any additional questions, please contact Devin Sullivan from the Equity Group, our Investor Relations representative. And thank you, and have a great day. Jean Madar: Thank you. Thank you. Operator: Thank you. This concludes today's conference.
Suzanne Ennis: Good morning, and welcome to Hut 8's Full Year 2025 Financial Results Conference Call. Joining us today are our CEO, Asher Genoot; and our CFO, Sean Glennan. Following the presentation, we will open the line for questions. This event is being recorded, and a transcript will be made available on our website. In addition to the press release issued earlier today, our full annual report on Form 10-K is available at hut8.com, on our EDGAR profile at sec.gov, and on our SEDAR+ profile at sedarplus.ca. Unless otherwise indicated, all figures discussed today are in U.S. dollars. Certain statements made during this call may constitute forward-looking statements within the meaning of applicable securities laws. These statements reflect current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Certain key risks are detailed in our Form 10-K for the year ended December 31, 2025, and our other continuous disclosure documents. Except as required by law, we assume no obligation to update or revise any forward-looking statements. During the call, management may reference non-GAAP measures such as adjusted EBITDA. We believe these metrics alongside GAAP results provide valuable insight into our performance. Reconciliations of GAAP and non-GAAP results are included in the tables accompanying today's press release available on our website. We will begin with a moderated Q&A session with our CEO, Asher Genoot, followed by a detailed financial review from our CFO, Sean Glennan. Okay, everyone. So let's get started. So to start Asher, fiscal 2025 was a big year for Hut 8. We executed on several important milestones, including the carve-out of our legacy Bitcoin mining business and the execution of our first AI data-center transaction. So what were the guiding principles that enabled us to achieve these outcomes in your mind in 2025? Asher Genoot: 2025 was about rebuilding Honey around capital efficiency and durable cash flow. So 2 years ago, we rebuilt the company from a first principles approach after our merger with Hut 8 and going public. And everything started with the electron. We chase megawatts, not chips, and we want to control the power layer first. And so we don't view electrons as a commodity, but rather strategic assets, and the ABC carve-out shifted us from cyclical CapEx exposure to contracted infrastructure like cash flow. So that was a big theme of last year. We also reallocated capital from volatility to long-duration agreements, and with ABC being able to self-fund on itself on the mining and Hut 8 providing the infrastructure. And then River Bend validated that model. We had a true greenfield development. We didn't convert a site. We developed the site from the ground up by a power-first thinking. It was really the first domino to fall under an AI infrastructure platform. And we focus only on what compounds, power control, scalable campuses, disciplined capital structure and repeatable execution. And so 2025 was about building the right foundation, and now we compound and we scale going into 2026. Suzanne Ennis: In your mind, what specific operational and strategic milestones were prerequisites before the business could meaningfully accelerate? Asher Genoot: 2024, as I shared a little earlier, was about restructuring. We started a company, we merged with Hut 8, and then I took over shortly after. And it was restructuring the business and creating the ability for us to create a foundation. 2025 was about building credibility and so credibility started with our shareholders. In 2024, when I took over the helm, our institutional ownership was sub-10%. We're at approximately 70% today. And some of our earliest shareholders, who invested in us when we started the company 5 years ago, still hold a large percentage of the stock. There's -- we've given shareholders, disciplined capital allocation that they've seen through us in the years and with us in the public markets. And then honestly, transparent execution, we told people what we were going to do, and we focus on getting that done and delivering a fully built solution when we execute, and we intend to do the same. We built credibility with team members. We scaled intentionally. We institutionalized processes while maintaining an entrepreneurial speed. I think that's critical. As you grow, you naturally build bureaucracy, and having the mindset to say, you know what, we will continue to operate as a lean culture, even as we build an institutionalized process. I spent a lot of my time thinking about that in terms of how do we scale at the same rate that we have historically. Credibility with financing partners is really important for us to secure Tier 1 lenders with JPMorgan, Goldman Sachs to lock in nonrecourse project financing. It was harder, but we believe it's the better path. And we believe early investors in us like Coatue, they backed us before the theme was a consensus. And I'm glad that they're happy, right? I meaningfully spoke on a panel the other week, and I'm glad that we're able to drive a good return on their investments. And lastly, credibility with our partners. That's local partners, for example, at River Bend with Entergy, Louisiana, West Feliciana Parish, the Governor's office and being able to deliver on them and our commitments to them when they took a bet on us. And so acceleration only happens when credibility is on, and we would like to compound on that as the years go by. Suzanne Ennis: So you were under a lot of pressure last year to talk about a deal and guide the market to when it would come, what it would look like, but we kept our cards very close to our chest. So can you talk about why we were patient in what we wanted to see come together first? Asher Genoot: So I'll separate my role in speaking to the public markets and our shareholders, and my role in running the operating business and making sure we're able to build that over the long term. In my role in the public markets, I knew what shareholders wanted. They wanted a deal. They want to know that we can build the data center infrastructure platform, and they wanted to see what that would look like and to build the first domino as a part of the platform. For the business itself, we weren't waiting to announce a deal. We were really building a fully locked and executable program. And so for us, we didn't feel like there was a reason to add public market complexity, while negotiating a super complex structure with a lot of moving pieces. We didn't want to just announce a headline. We wanted a complete financeable program. We wanted demand secured, financing secured, execution partners aligned on construction, delivery, engineering, long lead time items. We wanted our power path defined, and we wanted risk allocated properly across counterparties. So instead of guiding towards a deal that's coming, which everyone knew we were working hard at, we optimized for building the right structure for the company in the long term. And when everything was negotiated and aligned, we announced the full framework in one step. And I think that discipline hopefully reinforces the credibility that we're building with our shareholder base. And as we move forward, we're going to be really thoughtful about what we share with the market versus how we think about those impacts to our customers as well. Suzanne Ennis: So our first AI data center transaction generated significant market attention. And how should investors think about this transaction in the context of our broader strategic evolution without over-indexing on a single data point? Asher Genoot: I think this is a fair market deal. It was designed to compound relationships and not to maximize one transaction. And so we structured that market clearing economics. A lot of private deals are getting done, we believe, are done in a similar range. We focus on long-term creditworthy counterparties that can grow with us. And we built to scale the program beyond just the first phase across our customers and across our financing counterparties, execution partners, supply chain partners. And so it took a very customer-centric approach on how do we de-risk execute and give them confidence, we're not optimizing for headlines. We're trying to build repeatable partnerships because that's going to be the secret sauce in our ability to grow and scale. Suzanne Ennis: So let's drill down into River Bend, then. As we look at River Bend even more holistically as well, can you update us on the progress of some of those power expansion discussions with Entergy? And how is construction tracking? Asher Genoot: Look, 2026 is 1,000% going to be about execution and delivery. That's going to be the theme of the market, in my opinion. And so we're super high for its construction right now, it's tracking according to plan. We have tight coordination with Jacobs Engineering and Vertiv. Long lead time procurement is progressing and getting manufacturing delivered. Our customer engagement is really, really high with Fluidstack and Anthropic. We have many working sessions a week, multiple standups on-site in their offices, and really strong collaboration as we move towards delivery. The 1 gigawatt expansion plan at River Bend, the power is there. It's not about if, it's about when. And so now, we're optimizing on delivery time lines and cost scenarios in terms of collateral upfront to make sure the rate base doesn't get impacted. We're working through different structuring paths to maximize efficiency and speed, meanwhile solving for what we're looking for and also what Entergy is trying to solve for, for their constituents. And so the focus now is simple: execute, deliver and derisk. Suzanne Ennis: So how should investors think about long-term expansion opportunity at some of our other sites like Corpus Christi? Obviously, we've been seeing an uptick in pushback with respect to data centers getting done. We've seen new rules proposed out of ERCOT. How should investors think about the expansion? Asher Genoot: Something I've been saying for years is we're building an energy infrastructure platform on digital infrastructure. Our edge is power-first development. And oftentimes in markets that others overlook, and so our Corpus Christi site that we announced, we have an approved interconnect in ERCOT that's increasingly valuable. And it was put in before all of these recent changes in batch studies. It was put in 2023, in a changing regulatory environment, permitted power and transmission access matter more than ever. The interconnect and the permitting matrix at Corpus Christi, I think, gives us a structural advantage to be able to build quickly and get an access to power quickly. So if we were using the traditional developer playbook, we wouldn't have a low redundant data center solution for Bitcoin security as our tool for our underwriting assets. And we probably would have passed on this 1 gigawatt interconnect like many others did, but we didn't because we have multiple use cases of our megawatts as we develop the platform. It's really similar to what happened about 1.5 years ago in Louisiana. When we first talked about the site, started marketing the site, people thought we were crazy. I thought we were early, and I think, we were right. We really validated the thesis of what we believe in terms of the value and the assets in the power and how much you can get at scale in the local regulatory environments that you're building this infrastructure at. And now you see that in Louisiana, you have other hyperscalers like Meta and AWS that I have announced projects there as well. And I don't want the market to forget that alongside our River Bend announcement, we also announced a strategic partnership with Anthropic. And so they're a partner that we continue to look at opportunities with alongside other demand signals that we've built along the last 2 years as well. And so if you look at our development pipeline, we have 8.5 gigawatts across various stages of development. We are energy developers first. We understand grid dynamics, regulatory shifts and permitting realities. And that's what gives us confidence that we can navigate the evolving environments. It's a lot easier to go and build a large-scale data center with the dollars that we're bringing into these economies than it was developing Bitcoin mining facilities when no one wanted Bitcoin in their neighborhoods. And so we've navigated through different environments. We've gone through changing ERCOT procedures. We've done this for the last 5 years since we started the business. And this is just another hurdle that comes along the way as demand continues to increase and we need to continue to show our competitive edge in developing power assets. Suzanne Ennis: So you often referenced first principles and value engineering and innovation as a core edge for Hut. Can you walk us through how Vega delivering 180 kilowatts direct liquid-to-chip at $455,000 per megawatt from scratch and our codeveloped infrastructure design with Vertiv that we're using at River Bend. How do those two things reflect that philosophy and effectively position us for the future? Asher Genoot: We think that no one has fundamentally challenged, how data center infrastructure, I guess, now AI infrastructure is built. And that's our opportunity. We reject the status quo. In the short term, there's a huge supply and demand imbalance that allows us to get deals done from a power perspective, and that's our competitive moat. In the medium term, the differentiation will come from value engineering and the infrastructure stack innovation as supply and demand reach equilibrium. And so Vega is a great example, too, because Vega, we developed 180 kilowatts per rack direct-to chip cooling technology earlier last year when NVIDIA was only at 120 kilowatts per rack. And the reason we did it was to show the markets we could develop that type of infrastructure as you see on the screen here, but most importantly, we were able to develop that for $455,000 per megawatt. And I'd like to tell customers when we show them the site that, that includes the office furniture, the whiteboards and everything and the fit out in the data center. And the reason we were able to do that is because we built the site from a grass field from scratch. There were no legacy constraints. We figured out what areas of the infrastructure stack switch gears, PDUs, the rack conveying structure that we want to vertically integrate, design ourselves and contract manufacturer, what areas of the construction we want to self-perform and manage ourselves? And that's what I'm really excited for. Once we can get the next couple of deals done and we get to a large multi-gigawatt platform in terms of data center, how do we think about the next phase of our competitive moat. And that's around innovation and that's around value engineering. The Vertiv partnership is a good example of our early kind of stages into that. We codesigned the approach, the architecture with them and with Jacobs to show not only supply chain visibility, but how do we take risk off of the site how do we speed the efficiencies of these development, these builds, so we can have them in controlled environments for a lot of the infrastructure that we're building and how do we have long lead time mitigation risk. I had the opportunity to keynote Vertiv's main event earlier in January this year, because we believe that that's where the edge will live in the second phase, as we monetize the power assets in our pipeline in this first phase. And so when demand and supply normalize, infrastructure efficiency will matter more and more, and I think, we're perfectly positioned for that, and it's a story and a theme that people haven't really even delving under the Hut today. Suzanne Ennis: So we're executing on large and complex infrastructure projects that require significant capital and coordination. And obviously, with that kind of scale comes risk. How are we structurally mitigating down that exposure and protecting equity if things don't go according to plan? And how is your experience, how you got here and how you think about things like this? You talk a lot about being a credit guy. Can you elaborate on that? Asher Genoot: So I actually don't talk a lot about being a credit guy. Sean talks a lot about me being a credit guy. He's like, for your age, you're really more of a credit guy than anything else when we talk about underwriting these sites. And I think, the stars that I've gained from living in kind of the business and building infrastructure around Bitcoin has really rooted us in how we think about underwriting opportunities, how we think about building the business long term. We lived through cycles, for example, in 2022, where Bitcoin prices crashes, our only revenue; energy prices skyrocketed, because Russia attacked Ukraine and profits were squeezed and we had fixed debt and amortization payments. I sat as a chair at UCC committees of companies going through restructuring and bankruptcy. We were the planned sponsor of taking Celsius out of -- taking a business segment they had out of bankruptcy and turning into a company. So I learned firsthand meeting with creditors on what could go wrong when you're building in a hypergrowth environment and the music stops thing. And so that sticks with me honestly, forever. And so as we think about these projects, what I always told the team is, if we have the privilege to sign a data center deal, that contract is a liability until we deliver and start generating cash flow, and that's why we're so thoughtful in how we structured this deal. We didn't just want to announce a deal and then figure out the rest afterwards. We want to announce a deal that was able to have financing, execution, manual labor, steel for the buildings, long lead-time items, regulatory permitting, all secured when we announced it to the market. And that was a key part of the timing and the things we want to get done. And so as we think about debt obligations, construction risk, power risk delivery, counterparty risks, those were all the things that we've mitigated through on long lead time contracted cash flows, creditworthy counterparties, structuring nonrecourse financing and really disciplined underwriting as we look at kind of the T's and C's of how we thought about the overall risk framework between us and our counterparties and what we were committing and what we were all receiving. I think durable credit really compounds. If you want to build a business over the long term, it's about compounding value over time and about continuously doing that. And I feel like over the last 2 years, we've done that, and we've already seen the rewards of those actions, and we're really just getting started. Another element that I'd like to note is if you look at our balance sheet, I think we have one of the cleanest balance sheets in the market today. We -- if you think about the debt structure that we have, we have three pieces of paper at the parent level. The first is our Coatue convertible note that we did almost 2 years ago. That's heavily in the money and most likely gets converted out this year. That's the only parent recourse piece of debt we have. The other 2 pieces that we have is 1 coin base, which is recoursed against the Bitcoin only without parent resource, and the next one is the one we have with NextEra at King Mountain, which is recoursed against our equity stake in that 50% JV on the Bitcoin mining facility and does not have parent recourse. And so as we really think about it with Coatue heavily in the money, we have no recourse debt on our balance sheet. We're bringing on great financing in terms of the projects, but as we think about growth, we're thinking about growth in credit really, really well to manage through kind of these markets and hopefully be able to grow at a faster and faster rate. Suzanne Ennis: So Sean is going to walk us through our results shortly. We're going to do a little Q&A with him. But let's touch on a few areas in our results. G&A, for example, what drove that this year. Asher Genoot: Stock-based compensation aligns everyone with the long-term and long-term value creation. So at the company, every single person has equity from our site-level team members to the CEO, myself and the CFO, Sean. So real ownership culture and skin in the game is something we've optimized from day 1 and continue to do so even in the public nature that we have. And so total G&A was about $122.8 million this fiscal year compared to $72.9 million. Stock-based comp was around $57.8 million versus $20.8 million in the year prior. And that has to do with a lot of the upscaling that we had in the investment in our engineering, development, institutional infrastructure team. The cash SG&A only rose from $52 million to about $65 million in the year, and that includes all of those transactions we did from the carve-out of American Bitcoin to the deals that we've done. And so our belief is that we're building the team and investing in the team for the future financial profile of where we're going, a lot of the dollars we're spending are on growth, not on managing the current business, not on even executing River Bend, on the growth of all of the sites that we're looking to execute and commercialize. And we don't believe you can scale a multi-gigawatt infrastructure platform without building and training that team in advance. And so we're rightsizing for where we believe the company is going. Suzanne Ennis: So before we wrap up with you and move on to Sean, is there anything we haven't covered that you want investors to keep in mind. Specifically, there's been a lot of internal discussion around moving from simply building infrastructure for AI, to actually building infrastructure with AI. How are you thinking about that evolution? And why is it strategically important for us over the long term? Asher Genoot: Yes. We're sequencing the business pretty deliberately. And the next layer of our advantage is technological convergence. So Phase 1, which is about 1 to 2 years in my mind, is lock in the right deals, establish durable counterparties, build the right financing framework and monetize our power capabilities. Phase 2 in the 2- to 5-year range is value engineering the infrastructure stack, driving cost down per megawatt, improving speed, efficiency and repeatability. And then Phase 3 is more in the 5- to 10-year range, which is be at the forefront of how AI and robotics reshape infrastructure development. We're not just building infrastructure for AI, we have to be building infrastructure with AI and leveraging it to change in how we think about charging our innovation cycles. So we're deeply thinking about how AI integrates into our business. From a workforce perspective, increasing productivity across the organization, and from a design and engineering perspective, I mean hundreds of thousands of engineering hours go into these builds. AI is going to fundamentally change the way that, that work can be done. We can model, simulate and optimize every variable for capital is deployed. And in the build process, we're in the early stages of exploring robotics and automation embedded directly into construction workflows. This is not a distraction. It's an awareness of where the technology curve is heading and we intend to meet it at the moment of real inflection when it meaningfully changes how infrastructure is built at scale, and that will be the next compounding layer of advantage after the first two, I've spoken about earlier in this call. Suzanne Ennis: That's super exciting. So with that foundation set, 2026 shifts us from prove to scale, right? So what should investors look to from us moving forward? Asher Genoot: 2026 is about execution and delivery, full stop. Converting the pipeline to additional contracted revenue, advancing power origination, delivering River Bend on time and on budget, maintaining capital discipline, no trend chasing. The foundation is built. Now we execute and we scale. Suzanne Ennis: All right. Now let's move on to Sean. Sean. So let's walk through the results. Maybe we can start with what defined fiscal 2025 performance? Sean Glennan: Yes. Thanks, Sue. I think there's 2 main things that really define fiscal 2025. First, I want to talk about margin expansion and operating leverage and second is bottom line results. On the first topic, revenue grew 45% to $235.1 million, driven primarily by our compute segment, while cost of revenue grew by 24% to $107.8 million. This resulted in gross margin expansion from 47% to 54%. I also want to highlight sequential Q4 2025 over Q4 2024 results where revenues grew by 179% and gross margin expanded from 36% to 60%. I think each of these data points highlights and is indicative of enhanced operating leverage in the business. In other words, the foundation is sound and what we've set in place will compound over time. Next, moving to bottom line results. Net loss was $248 million, and we had an adjusted EBITDA loss of $135.4 million, compared to net income of $331.4 million and adjusted EBITDA of $555.7 million in 2024. importantly, I think to note, that swing was largely due to a $220 million primarily unrealized mark-to-market loss in 2025 of our Bitcoin stack versus a $509.3 million gain in the prior year. Suzanne Ennis: Now let's walk through segment by segment. Can you walk us through the power digital infrastructure and then compute segment results? Sean Glennan: Absolutely. In our power layer, revenue was $23.2 million versus $56.6 million in 2024. Cost of revenue declined to $20.5 million from $21.5 million in the year prior. The revenue decline reflects the termination of our ionic digital agreement in managed services. This was somewhat offset by increased revenues in our Far North segment due to increasing power market tightness, which I think that power market tightness is kind of some of the fundamental underpinnings of the business. So it's showing up in other places, too. On digital infrastructure, revenue was $9.6 million compared to $17.5 million last year. Cost of revenue declined to $8.9 million from $15.6 million last year, and margins improved sequentially as Vega entered commercialization, and we transitioned to colocation-based payments from American Bitcoin. And finally, compute. This was the real growth engine. Revenue more than doubled to $202.3 million from $80.7 million the year prior. Cost of revenue increased to $78.4 million from $45 million in the year prior. And this was driven by infrastructure upgrades, higher deployed hash rate and a full year of steady-state operations of Highrise AI, which added $7.4 million year-over-year. I think important to note also from -- as we talk about operating leverage, here, segment margins expanded from 44% to 61%. Suzanne Ennis: Now let's get into capital structure and strategy. How are we thinking about our capital structure evolution? Sean Glennan: Yes. I think 2025 was an incredibly important year for capital structure evolution. Spinning out our Bitcoin mining business through our American Bitcoin subsidiary, shifted us from a very high cost of capital, high CapEx cyclicality business to a much lower cost of capital business with a lot more focus on infrastructure, low cost of capital lower, risk and longer duration. Suzanne Ennis: Okay. And then heading into 2026, what are some of your top financing priorities? Sean Glennan: Yes. I think about this is what I spend most of my days thinking about. And as I think about looking into 2026, there's four main things I'm really focused on. One is protecting shareholder value through disciplined equity use. Two is minimizing enterprise risk; three, diversifying liquidity sources, including private markets; and then four, maintaining strong balance sheet that allows for strategic flexibility and a path towards an investment-grade rating. I think one thing that's important to note is we continue to evaluate all financing options and we say no to a lot of things. We're not just trying to get capital wherever it's available. We're looking for the lowest cost of capital. And I probably got 10 things across my desk every day, most of which I say no to because we want to continue to drive that and be innovators on capital structure rather than just following the back. Suzanne Ennis: So then, to wrap up, how would you, as the CFO, summarize our position heading into 2026? Sean Glennan: Yes. So I mean, it's amazing to think relative to when I joined 1.5 years ago where we are entering 2026. We have greater scale, both from an exahash market cap and future cash flow position. We have improved margin durability, which I think the numbers speak for themselves. We're declining cost of capital. And I think the project financing we're working on with JPMorgan and Goldman Sachs is indicative of that. That's the lowest cost of capital that anyone in our sector has raised ready to support AI infrastructure growth to date. And then I think as I kind of mentioned in your first question in the section, a capital structure that's aligned with long-term value creation. And I think those are the things that are really kind of setting us apart, and it's very exciting to be in this position, and we feel grateful to our shareholders for entrusting us with their capital as we go into 2026. So with that, I think we'll go into Q&A. Suzanne Ennis: Yes. Let's go into the Q&A here. Asher Genoot: Well, Sue, looks at some of the questions, we want to shake things up this earnings a little bit, go on a video style, so we'll get feedback from our investors if they enjoy today or not. We're also if we keep the video format, we'll -- I want to be able to hear people when they ask questions, and we talked a bit about that. And as we set-up this first structure, Sue is going to kind of read the answers that people are submitting, we weren't able to with the platform today to be able to allow for that for today. But if people like this current format, then I really want to hear them and see them if possible as well. So we'll look at that on the next earnings calls. But hopefully, you guys enjoy the new shake up here and approaching this from first-principles as well. Our goal was to use this call to have you to really get to know us, get to know how we think about the world, how we think about problem solving. You guys can look at our financials and our business through our public filings, but the purpose of this call, when we really broke it down from first principles, was speaking to our shareholders in very direct honest, transparent way, and we hope this new format helps drive closer to that as well. Suzanne Ennis: Okay. So let's get into it. So from Greg Miller at Citizens, will the company be defining what portion of its pipeline will be allocated to Bitcoin mining and what percentage will be allocated to HPC as the 2 represent very different value propositions? Asher Genoot: That's very fair. If we look at our existing capacity under management in the gigawatt that we're managing today, we have 300 megawatts of power generation that we've told the markets that we're selling to TransAlta, and we have -- that we've closed on that transaction, and we have 700 megawatts of compute that currently support American Bitcoin. In our capacity under construction, we have 330 megawatts of utility that's River Bend Phase 1. And then we have a multi-gigawatt pipeline as you go further and further up the development cycle. And so currently, the core focus is converting those sites for AI use cases. Having Bitcoin as an alternative use case, allows us to continue to develop confidently in building the substations on the land that we acquire in interconnections knowing that we'll have a consumer there in all scenarios rather than just have risk development capital. And I think that's a unique edge that we have. So our key focus around our current full development pipeline is around AI utilization and development, and we're seeing more and more focus on just power at scale and location really being a lower and lower factor in that as well. And so as we talk about all of the sites that we're developing right now, the primary goal is development around traditional data centers for AI computing. Suzanne Ennis: Okay. So George Sutton from Craig-Hallum, can you give any detail behind the $163 million deposit for future sites? Asher Genoot: Yes. Sean, do you want to jump into that? Sean Glennan: Sure. So as we look at kind of developing some of the future sites, we have lots of land options, and we're also procuring long lead time equipment at some of these sites. So I don't want to get into the detail as to how much dollars are for which sites. I think that will give away some of our secret sauce, very competitive industry, but effectively, that's kind of what the -- those dollars are allocated towards. Asher Genoot: And one key thing to know on how we approach development, historically, and moving forward, when we think about risk dollars out there, whether it be land options or they'd be developing, we've historically been very, very low upfront until there's real feasibility, right? So a big portion of those long lead time items are malleable pieces of equipment that we can allocate specifically around high to medium voltage breakers at the substation, different transformers once we set things down to 34.5 kV. And so malleable infrastructure that we can allocate across multiple campuses. And then the investments we do at the early stage of development are really lower in terms of development, unless it's a kayak payment or an infrastructure upgrade as we locked in the power. And as we see collateral payments kind of increasing, we're also looking at other kind of project level financing and balance sheet borrowing that we're looking at doing to drive down our cost of capital as well, but we're very, very thoughtful in what dollars we're spending, what's truly at risk and what's malleable. Suzanne Ennis: All right. So from Brett at Cantor, you guys effectively set the market with your Fluidstack and Anthropic deal. Can you talk about how pricing has changed since then? Do you think the next deal will see a step-up in economics? Asher Genoot: I don't think we set the market. I think the majority of transactions in the market happened in the private markets. Everyone is kind of focusing on the public companies, but feels like 80% plus of the transactions are happening in the private markets with kind of the private equity funded development platforms on the data center side. And so I think our deal was market. It was middle of the fairway, and it was structured appropriately. And so as we continue to talk to customers about the deal and deal economics, we think that these are kind of market terms in the private markets, and we've held ourselves to the standard of a blue-chip data center development company. I think, I've brought in the partners to validate that thought process and that approach as well. Suzanne Ennis: Okay. So from Stephen Glagola at KBW, a recent job posting pointed to a potential scale up of the Highrise AI GPU platform from roughly 1,000 GPUs to 20,000 GPUs. Can you provide more detail on your growth plans for the Highrise AI cloud business? And how do you envision scaling that trajectory. Asher Genoot: So Hut 8, the parent company builds in the power layer and build in the digital infrastructure layer, front meter, behind-the-meter interconnects, obviously, we own power generation, and we build digital infrastructure on top of that, i.e., the River Bend campus we announced. In a lot of these deals, there's an opportunity where we can fund the compute as well. The funding compute and ASICs on the American Bitcoin side GPUs on the AI side are fundamentally different cost and risk profiles, which is why those businesses are separate companies, ABTC, being a public company now on its own and then Highrise still being a private company that is growing. And so what's really unique about Highrise, we've been pretty quiet about it because we've been building the foundation of that business. It's not just the story is and we're managing a little over 1,100 GPUs, the story is we built a cloud network. We built a software stack. We offer bare metals. We offer multi-tenant solutions. And we announced this in one of our press releases in Highrise, but the current CTO of that business ran AI in the IDF and was there for a decade and half. And so as we look at different opportunities, there are opportunities in these data center deals where Highrise can come in and provide the financing around the GPU stack, provide the services and technologies that I can build on top of the chip stack as well. And so Highrise is our new cloud business. It's one that we haven't spoken much about because as everyone knows, we're much more about talking about things when they come into fruition rather than what's on the come. But across the whole board, we are building the company and hiring people to the place that we're going, and that's where you see a lot of that investment in talent into the business that we're going to be building and scaling into. Suzanne Ennis: Okay, so another one from George here that I really like because I don't think we talk enough about this in the market. So Anthropic is the major -- is a mega disruptor in the space. How important is our existing relationship with them as part of the Phase II and Phase III opportunities? Asher Genoot: They're great, right? And they're very open to thinking about things from a first principles approach. It's not a company where we have to do it this way just because. It's a company where we can talk about what are we trying to solve for and what is the best way to be able to solve for that. So if you think about Phase 1, give additional capacity, get additional power converted for our customers. Phase 2 is how do we drive down costs with really thinking about value engineering. And value engineering is 2 ways. One is, how do we engineer and more efficiently drive the cost down for our existing infrastructure stack. The second is, how do we think about the actual demands that a customer has, which is also why we have Highrise to understand the full stack from electron to compute, from megawatt to token. And so by understanding that, we can more optimize the infrastructure to support for really what's needed, and we can have open discussions and discussions with Anthropic have been great in terms of solutions and malleability over how things are built to get to the final outcome. And the last one in terms of AI and robotics, obviously, that they're at the forefront of building the technologies that support all industries. And so we're excited to continue to build those relations and compound, but I'm really, really excited for Phase III. We have to build Phase 1 and 2 to have the privilege for me to work on Phase III, but this year will be focused on Phase I and really scaling up our data center platform. Suzanne Ennis: So I've got one here from Kevin Dede at H.C. Wainwright. Trump in his State of the Union last night asked the big tech -- asked big tech to commit to building their own power. How do you think your customers, partners and Hut 8 react -- will react to that should it become law? Asher Genoot: It's a natural progression of where things are going. If we think about the overall sentiment and what should happen right now is when a data center is built that should be net positive to the community and the environment and the actual energy grids that you're impacting, right? And so when we think about sites like River Bend or Corpus Christi, we pay for the system upgrades that pull the power to where we are. We commit to the capacity on the energy side. And so that's kind of table stakes in my mind in the world that we're developing today and smaller utilities have gotten infinitely more sophisticated on that which is or to see kind of collateral coming in. I think in some places, it's getting overindexed and will kind of come back to the mean. But in general, that's the general sentiment. As power generation gets constrained as more and more demand comes on to the grid, I think what you'll see more often is not island generation or bridge generation, where you kind of wait for the interconnect, but when you're building a load asset, you want the redundancy from the grid. There is value in that. When building a generation asset, you want the grid and the demand that's in the grid for the power. And so I think more and more what will happen in the markets, is people will bring load and people will bring generation. And so we're trying to kind of have a net equal impact into the grid, but interconnect that all in the long term. And so then you'll have power generation increasing in the grid, you have load increasing. A lot of that will be financed and capitalized through the demand of the end customers and users and we think that's the best way to be able to scale and compete in the AI race on the global markets. Suzanne Ennis: So from John Todaro at Needham, can you walk us through where you stand on the OSA negotiations with Fluidstack and more broadly, give us an update on construction cadence. How many data falls in the initial phase? And are you seeing any supply chain or contractor bottlenecks? Maybe we can talk about where we're at as well on the procurement side at River Bend. Asher Genoot: Sure. Happy to do so. When we announced the deal, everything we locked in from people, contractors, long lead time items, equipment. And so all of that was locked in. There was nothing open when we announced the deal at the end of last year. On the delivery and the execution itself, as we mentioned, and we guided towards. When in the beginning of Q2, we'll have the first data center coming online, and then we'll have a data center coming online every 60 days thereafter. There are 4 data centers in this data hall. And so as we think about the actual construction right now, everything is going really, really well. People are very excited. There's a lot of local talent in Louisiana because of the heavy industry that was there before. And so that's really, really great. Jacobs has been a great partner. Vertiv is fully cranking on the long lead time items that they're bringing and procuring for this project. So overall, from a constructability and delivery perspective, feel very, very good. And we gave ourselves a healthy time line to deliver this as well. And so we're not crunching every single thing. We put buffer in. We hope to deliver earlier if we can. And so that's how we've really developed this program. From a financing perspective, things are going very well as well. We announced that we're going to target 75% -- 85% LTC at a SOFR plus 225 rate. We've recently been able to improve that to 90% LTC at SOFR plus 240 to account for the increased loan-to-cost ratio. But we've been able to get more project financing on the projects and something that Sean and I like to talk about, even when a deal is done, we still like to further improve and figure out how to make it better. And so overall, in terms of delivery, feeling very, very good. We're currently in active negotiations on the OSA in terms of operations and delivery, but we have some time until we actually are operating in the campus so working through those kind of contracts now as well? Suzanne Ennis: So maybe just to quickly piggyback on that from one of our new friends, Robert Boucai at Newbrook. In considering future deals, do you require credit enhancements as with Google on the Fluidstack deal? Or would you be willing to have one of the LLMs be a counterparty? How much of a gating issue would this be? Asher Genoot: I think overall, it's really thinking about our overall platform that we're building and the exposure that we're taking on investment-grade counterparties on non-investment-grade counterparties and really everything kind of in between. And so as we think about developing our platform, we want to make sure that the cash flows that we have and that we're projecting to be able to fund the growth and the expansion of our business are durable and are reliable. And obviously, that affects cost of capital and financing and LTCs as well. And so as we look at future growth opportunities, we're obviously optimizing towards investment-grade counterparties, but it's really about, like any portfolio anyone has including all the shareholders on this call, it's about risk allocation, what percentage of your platform is on high growth, high-risk companies that have kind of a ton of upside. What percentage is on stability on the platform as well. And so I think for us, it's not binary. It has to be this or that, but it's around risk allocation. And obviously, as we've kind of told and shown in the market, we have a heavy lenience towards folks with investment-grade counterparty and as we think about financing on the debt and the equity investments as well, but there's always a place in the portfolio for high-growth companies as well, but it's all about percentage exposure that we have to them. And every time we announce a deal, we'll walk through the thought processes in those. But right now, we continue to be focused on investment-grade counterparties that we're financing towards. Suzanne Ennis: Okay. So a question from Mike Grondahl at Northland. Can you describe the demand environment and how it's evolved over the last 90 days for HPC? Obviously, there's a few new dynamics that have transpired in the market. So how has that evolved in terms of your guys' customer conversations? Asher Genoot: It's really interesting. I mean, last year on the same time, this DeepSeek news came out, right? And everyone was scared that the demand has gone and the markets were scared. The Microsoft has traded down a lot. But the reality is at that time, we were still seeing the demand and demand signals. And you saw a heavy uptake towards the end of the year. I think right now, especially with the Agentic AI and a lot of -- I mean, the Mac Minis are sold out across the U.S. If we look at Highrise, the utilization on our cloud is at record highs. And so the actual applications and use cases are continuing to grow and increase in pickup. I think that will result in the compute that's needed. And so where we are today is also a little bit different than where we were last year. We have much deeper relationships with a variety of counterparties because of the last two years of relations that we built. We've gone through a lot of negotiations on the actual contracting multiple counterparties. We've gone through engineering design drawings for months with multiple counterparties. River Bend wasn't one counterparty that we worked with for 1.5 years. We went through multiple iterations with multiple counterparties, and we had one that got to finish line first. And so those relationships are stronger than ever. And what's nice from where we are today and the credibility that we have as well is, we can have a lot more frank and meaningful discussions around, what is their capacity demand over the long term? How do we play into that? How do we support them? And so for us, honestly paying less attention to the stock market these days and spending way more time on the customers, what are their demands and how do we build the competitive moats, because that is what's going to drive our business and grow and compound over time. But I think all the noise you're seeing, we're seeing really the exact opposite. The demand is still there, demand is still strong, people are still growing. You see that with some of the announcements like yesterday with Meta and AMD in terms of additional capacity. They just announced a deal with NVIDIA for that. And so overall, I think demand is healthy. A bigger theme that we're seeing that's real is that power is becoming more constrained, right? You're seeing every utility, every transmission operator trying to go through and restudy and change the approach that they're going in terms of the study. And I think that's healthy as well because you have so many developers that may not have the balance sheet or the capabilities to actually develop sites, and all they're trying to do is lock in an interconnect and then flip it to someone else to buy it. We get -- Sean talks about getting 10 inbounds on financings, probably get 100 inbounds on sites for us to look at from an M&A perspective. And so clearing out some of that FUD, I think we'll actually make the queues better. And then also from a development perspective in terms of land development, you're seeing some places that don't want this in their backyards and some places that do. And so I think you're seeing consistent strong demand on the demand side, and then I think you're seeing kind of volatility on the supply side in the markets, which make us excited. Suzanne Ennis: Yes. Agree, we support any sort of initiative that helps trim some of the fat in these queues, and also education is key in some of these new markets where we're seeing stakeholder pushback for data center development. Okay. So from our friend, Greg Lewis at BTIG. He wants to know what I'm sure a lot of people want to know is any update on the power that is under exclusivity and steps and processes needed to move that into development? It doesn't seem like we saw a lot of that happen in the current queue. Asher Genoot: Yes. Currently working through it, we obviously have a pretty big amount of capacity in development right now to trying to move that into commercializing and signing those agreements and signing them, because if you think about our stages in the pipeline, we go from capacity under diligence, which is we have a large energy origination development team, and they're out there, they're hunting, they're negotiating and they're looking at opportunities that make sense for us. Then we get into capacity under exclusivity. That's where we're investing more dollars from a team perspective and legal dollars perspective as well. In those scenarios, we have exclusivity, land options. We're investing into legal resources, preconstruction resources, high-voltage transmission engineering resources. And then when we get into capacity under development, that's when we're actually buying the land or locking in the kind of contractual agreements on the power and putting in the kayak payments or any collateral obligations. And then from there, we go into commercialization, construction and then ultimately, management and operations. And so I think we have a strong amount of megawatts over 1 gigawatt in capacity under development right now that we're working on commercializing and the capacity exclusivity will kind of be following that as well. And so if you think about timing, capacity and exclusivity, we have an exclusive access on that opportunity, whether it be the land, the power or both. And in that scenario, like why go and spend the money if you still have option value there and work on commercializing the things that you already spent money on. And so when you think about those and how they interplay together, that's kind of a big part of it. And so from a timing perspective, it's really getting more sites commercialized and having that funnel continue to grow and increasing the capacity under exclusivity from the capacity under diligence. And so as we continue within this year, there will be a lot more conversations about the pipeline, how we think about conversion, more transparency into the sites that we have under capacity under development as well. And so we're excited as we mentioned, we're building a robust energy infrastructure platform in the digital infrastructure world and River Bend, again, to remind everybody, was a site that started at capacity under diligence and went -- made it all the way through to capacity under construction within the last 2 years during the theme and during the market rush of power. This was not a site that we converted from the Bitcoin mining days when it was less competitive to get power. And so we've shown that we can do it once, and we will continue to do it. Suzanne Ennis: Thank you. So from our friend, Chris Brendler at Rosenblatt Securities. On funding River Bend CapEx, any early read on the project level financing deal given the recent volatility in the market? And how do you view your Bitcoin holdings as a potential source of funding for the equity portion? Asher Genoot: We feel very good. So the equity as of right now is already fully funded, because we've had to fund the projects, our deposits with Vertiv and so forth. So when the project financing actually completes, we're going to get a multi-hundred million dollar cash out of the transaction, then we'll fund our 10% on an ongoing basis. And so as we mentioned, we went from 85% LTC to 90% LTC on the financing. We're pushing aggressively towards closing. JPMorgan and Goldman are committed. They wouldn't have given us quotes and put us on the press release when we announced to see it was just an idea. And so we're very excited, we're very committed. And we have connectivity at the highest levels. I've had lunches with the CEOs of the firms. And so I'm very, very excited that we have partners, not only to finance this project, but on go-forward projects to replicate this program on a go forward. From a Bitcoin perspective, our balance sheet and our Bitcoin on the balance sheet in the beginning of last year was core to us executing on throughout last year. Being able to tell customers, don't worry about our ability to finance with this amount of Bitcoin on the balance sheet was really important. Where we are this year, Bitcoin on the balance sheet is not -- it doesn't -- it's not the focus. It doesn't matter. It's just like asset on our balance sheet. And so the reality is we're going to remove Bitcoin exposure on our balance sheet as we move forward. And how we do it is what we're focused on right now. And our exposure will be through the equity ownership that we have in American Bitcoin. And so the Bitcoin on the Hut 8 balance sheet is not going to be a thing that we continue to hold for the long term. And the beauty is we're able to hold that exposure through the equity that we were able to create in American Bitcoin for incubating and building that business. I think we're really good at creating value and our focus is how do we drive down cost of capital and continue to create value by building businesses and what we're excited for building Hut 8, building ABC, building Highrise. And so that's a big change in focus on kind of the importance of Bitcoin on our balance sheet and our perspective on it on a go-forward basis. But River Bend, currently, from an equity portion, we don't need any more equity funding. We've already funded the projects. We're actually getting cash back once the financing closes, and hopefully, we can talk about it in our upcoming earnings call. Suzanne Ennis: Great. Okay. So let's talk about, we touched on this a little bit. But why don't we talk about, where is the -- I'm just trying to find where Brett was asking us a question. Okay. So it seems like co-locating generation on-site with data centers is going to be more prevalent. We did touch on this a little bit. What are we doing specifically to participate in this trend? Asher Genoot: You're saying -- sorry, repeat colocation data centers, is that traditional colo you mean instead of single kind of campuses? Suzanne Ennis: No single tenant campuses, yes. Asher Genoot: Sorry, repeat the question. Suzanne Ennis: It seems like co-locating generation, single-tenant campuses on site with -- yes, is going to be more from doing to participate in this trend. Asher Genoot: So let's use River Bend, that's a perfect example. The Entergy Louisiana has given us a plan in terms of when they can deliver power, right? And we're talking about the full gigawatt and there -- they want to build generation added to their rate base, have us be able to make sure we commit to it, so they're not taking spec dollars at play here. We're having discussions around them of maybe we can bring the generation faster to the site to drive the full gigawatt at a faster time frame, right? We don't want to wait 5 years, what if we brought it in a lot earlier? And so as you think about the sequencing, what percentage of the gigawatt can we pull from the open markets in terms of capacity, and what percentage do we have to build that new generation, right? And so that's first, not -- the 4 gigawatt is not treated as the same. And so the discussions we're having is how do we think about bringing generation to this campus. We have a lot of land. We have the ability to scale to almost 3,000 acres. We have access to pipelines and the ability to generate and to produce. And so as I mentioned in earlier Q&A or in the actual fireside chat, bringing generation with load, we think is going to be a bigger part of the story, a bigger part of the development. And luckily, we have those capabilities in-house. We manage 4 natural gas power plants with Macquarie as a partner, and we not only manage those, that's another asset. Those were 4 assets that we bought out of bankruptcy. We turned around. We signed long-term offtake agreements with the utility in Ontario, and we sold them to TransAlta, which is a large utility in Canada. And so we have the expertise in-house. We're continuing to build and compound on the expertise we already have, but it's going to be a bigger and bigger part of the story. I don't think it's going to be around island generation. I think it's going to be around bridging and having load and generation interconnected to the grid at your campuses. Suzanne Ennis: Okay. So we are coming up on the hour here. So we're going to do one more... Asher Genoot: We have like 31 questions in the queue. So I think we'll reduce that number when we get people to come on stage with us next time. Suzanne Ennis: That's right. So we talk a lot about the importance of our energy origination team of diversifying the pipeline of not being overweighted to a single market. Can you, and maybe, Sean, talk about some of the areas where we are still finding pockets of opportunity. For example, in a previous conference, we talked about how we were interested in studying a development in Pennsylvania. Maybe just talk a little bit about sort of some of the areas that we're looking at well outside of ERCOT. Asher Genoot: We're looking across the whole U.S. Every single area in the U.S., as we mentioned, power and land in a regulatory environment that allows for building this infrastructure at scale are the key pieces in building, right? Fiber has been less of a bottleneck. We've been able to bring fiber to a lot of the campuses that we're developing and that we're building. And so it's following the power. It's taking a first principle approach to where is their power. Using River Bend as another example because I think it's our first fully kind of vetted case study, and we can do the same about future sites that we announced. But that project was around the transmission lines. That project was around the generation near that campus. Then we came together and we pieced multiple pieces of land that were held for generations as kind of hunting properties by people, and we built this 3,000 acre opportunity to go build a large-scale mega campus. And so we're looking at those similar characteristics as we look across the whole United States and we look at its ability to scale power, its ability to build with a friendly regulatory environment that wants this project there and see the impact and the benefit that we can bring, a place that we can have talent to actually execute and build these projects and do so with the speeds that we're looking to build them at. And so our team -- the reason why we're scaling is we're continuing to increase the breadth and the depth across our energy origination pipeline across the full United States. And there are some areas that are more complex than others, obviously, that aren't kind of traditional data center markets. And so we're kind of focusing on Tier 1, Tier 2 and Tier 3 markets. and there's a little bit of a different allocation of priority risk capital that we put on to each of them, based on our confidence level of commercializing them. In some sites, we know that we'll always have kind of another market through American Bitcoin has a demand of a captive consumer that we have with the power where the energy prices work. In other areas, we know that this is primarily built and there is no backup option for developing this campus. And so overall, we're excited. I think, we're one of the first to talk about our development pipeline and our energy pipeline because that was a core focus. And now we're 2 years into that journey. We've been able to take one project fully through the getting to almost near the end of the process. Now, we got to get it to capacity under management, but we'll start having more sites kind of coming through that pipeline. And it takes time to develop these projects and you're starting to see some of those come to fruition as they move down the pipeline as we start talking about them more. Suzanne Ennis: Awesome. So... Asher Genoot: More projects -- similar, I guess, to River Bend, we've had a lot more projects get into the press than we've shared with the markets because of all the local zoning and panels that we do. So you guys will see that as well if you keep your news alerts on Hut 8. Suzanne Ennis: Okay. So we've got one minute left in this call. Maybe any closing thoughts, Sean and Asher that you want to leave our audience with. Asher Genoot: I've talked a lot, Sean, why don't you close this out? Sean Glennan: Yes. Happy to. Thanks, Asher. Look, I think Asher said a lot of it, but this is a year about execution, this is the year about growth and scaling the company. We're excited about the foundation we've built. Like when I started, I told Asher, I felt like where we are now is inevitable. And I feel like the growth of the company is inevitable. We put it together a really good development business, a really good funding mechanism, and we're looking to continue to repeat and compound that over time. So we're excited to have you along as shareholders. We hopefully do believe we've done you well so far, and we look forward to continuing to do so in the future. Suzanne Ennis: Thanks, Sean. Okay. Operator, you can close the line. Thank you, everybody.
Nini Arshakuni: [indiscernible] joining Lion Finance Group PLC's results call. Today, we are presenting our results for the fourth quarter and the full year of 2025. My name is Nini Arshakuni. I'm Head of IR, and I'll be moderating today's call. I'm joined, as always, by the Group CEO, Archil Gachechiladze. We also have on the line the CFO of Ameriabank, our banking subsidiary in Armenia, Hovhannes Toroyan; and our Group Economist, Akaki Liqokeli. First, we'll start with the presentations. And in the second session of this call, you will be able to ask your questions. And with that, I will hand over to Archil first for opening remarks, and then we'll dive into our performance and the operating environment. Archil, you can go ahead. Archil Gachechiladze: Thank you, Nini. Hello, everyone. Thank you for joining the call. I will just have opening remarks followed by the macro review by Akaki. So as you can see, we have delivered a record quarter and a record year, in fact, with our net income growing by 20.9%, just shy of GEL 2.2 billion, delivering 28.4% return on equity. And in the quarter, that was just above 30% return on equity with 35.5% cost-to-income ratio and cost of risk, which is about half of what we usually expect through the cycle. So for the quarter, it was 0.3%, but then for the full year, it was 0.4%. Both of the strong franchises have delivered very good increase in the quality of the franchise, which we measure by the satisfaction of the customers as well as the pickup of the monthly active users on the retail front. And also, both of the franchises delivered above average or above expected or above guidance growth in our portfolio, especially on the credit side, but also on the deposit side. So we are quite happy with the results, and I would like to thank our Armenian and Georgian colleagues who have done a very good job in 2025. And as a kind reminder, Ameriabank full year -- in 2025 was the first year when Ameriabank was the -- for the full year part of the Lion Finance Group, hence, the renaming, as you know. And as you can see, it has delivered substantial good growth, not only on the balance sheet side, but also on the retail coverage side. With this bright note, I would like Akaki to cover our macro. As you know, both of the countries have enjoyed a record-breaking macro performance over the last few years, which is continuing year-by-year. So Akaki, would you tell us what to expect? Akaki Liqokeli: Thank you, Archil. Hello, everyone. I will be presenting the macroeconomic update for our core markets, Georgia and Armenia. Starting with growth performance, 2025 was another strong year for both countries. The Georgian economy expanded by 7.5%, fully in line with our expectations and supported by strong consumption spending and resilient external inflows. Meanwhile, Armenia surprised on the upside, delivering 7.2% real GDP growth. For 2026, we expect this strong growth momentum to persist, supported by ongoing strength of services and public capital expenditure. Real GDP growth in Georgia is expected at 6% and within the range of 5.5% to 6% in Armenia. Due to this strong growth in recent years, as you can see on the right-hand side, per capita income levels in both economies have been steadily growing and converging towards Central and Eastern European peers. While the baseline outlook remains positive, uncertainty is still elevated. Geopolitical tensions in the region creates downside risks. However, both economies are well positioned to withstand potential shocks, supported by solid macroeconomic buffers and prudent policy frameworks. Upside opportunities could also emerge, especially from the ongoing implementation of the historic peace agreement between Armenia and Azerbaijan. Solid external inflows have also supported local currency strength. Georgian Lari and Armenian Dram have been relatively stable in recent years, recording modest but consistent gains against the U.S. dollar. Notably, real effective exchange rates for both currencies have stabilized, reinforcing our assessment of that currency valuations are broadly in line with fundamentals and supporting stable medium-term outlook. Currency strength is also important for low and stable inflation, which the 2 countries have enjoyed in recent years. The recent headline inflation uptick in Georgia is mostly related to food price pressures and core inflation remains low, reflecting well-anchored inflation expectations. Over 2026, we expect inflation to stay close to the Central Bank's 3% targets in both countries, underpinned by prudent monetary policies. In the second half of this year, we see a room for around 50 basis points cuts by National Bank of Georgia, while the policy rate of the Central Bank of Armenia is expected to remain unchanged as the current policy stance is assessed as broadly neutral. Both central banks have been very active in accumulating foreign currency reserves due to strong foreign currency inflows and stable exchange rates. By the end of 2025, current exchange -- foreign currency reserves reached record high levels of USD 6.2 billion in Georgia and USD 5.1 billion in Armenia. Importantly, the current reserve levels are above the minimum adequacy thresholds, and they continue to increase. Another key pillar for macroeconomic stability is prudent management of public finances. Georgia and Armenia have demonstrated fiscal discipline over the years. The Georgian government remains on a consolidation path with tight management of fiscal deficits at 2.5% of GDP and declining debt-to-GDP ratio. Meanwhile, the Armenian authorities have been successful in balancing ongoing spending needs with fiscal sustainability objectives. Despite elevated fiscal deficits in recent years, they managed to keep debt-to-GDP ratio broadly unchanged. This year, we expect fiscal policies in both countries to remain sound and supportive to growth, particularly through sustained public capital expenditure. And lastly, financial sectors in both countries have benefited from favorable macroeconomic environment and continue to support growth. We observed solid and strong expansion of lending, lower levels of loan dollarization and solid capital buffers. So this concludes my part. Back to you, Nini. Nini Arshakuni: Thank you, Akaki, for the overview. Now we're back to Archil, who will discuss our performance first in Georgia. Archil Gachechiladze: Just one second, let me share the presentation. So in Georgia, the numbers were, as we said, ahead of our expectations. So our net profit for the quarter was just shy of GEL 460 million, which was 17% growth on year-on-year and return on equity of 32.7%. And in terms of loan book growth, we were at 16.1%. As you may remember, we guide 10-plus percent. So 16% was a strong showing. And our digital monthly active users continued to grow by 15% year-on-year, reaching 1.8 million. We have our retail app and the business mobile app, both quite capable applications that do a lot of different things, and we have a list here. But what's interesting is that second year in a row, we won the World's Best Digital Bank by Global Finance. And there were very big names in the run-up at the end, big mobile digital banks basically, the biggest in Europe. So in terms of the monthly active users, you can say that we are up by 15%, but also on a daily active, it's up by more than that, which was 24%, achieving just shy of 1 million customers, which gives you an idea that the engagement is increasing. Customer engagement is ever increasing number, which is very good showing. Also on the legal side, so on the company side, we had increase of 14% year-on-year, achieving 133,000 companies that use our mobile application. And obviously, Internet then is used there as well. We are increasing our sales with digital and there, we have achieved new highs of 71% in the fourth quarter, achieving 71% of all products are being sold digitally. And you can see that in loans as well in deposits, we are increasing the share of sales which are done digitally. And that is based on small differences or small improvements that we do through to each product. On the Net Promoter Score, which is part of our DNA, no customer satisfaction and the focus on that is part of the DNA. And this NPS is more like a quick measure of how we are doing overall. We have achieved new highs of 76 showing at the end of December and it just shows you that our franchise is enjoying a high moment or the highest quality it has ever been, in fact. In terms of our payments acquiring volumes, we are up by 22.6% and market share of 55.8%, 0.1% down year-on-year. But basically, it's the strongest showing. As you can see, what makes me also very happy is number of people using our Visa, Mastercard or, let's say, the cards, not just Visa, Mastercard -- Visa, Mastercard and AmEx, because AmEx debit is something that we do as well. It's up by 13% year-on-year to 1.64 million people in Georgia, which is -- it keeps us -- it makes us happy to see that although we are a leading retail franchise in the country and in the region, we can say -- is also we can say that it's still increasing double-digit number of people using our cards on a monthly active user basis, which is something that makes us happy and lays a strong ground for further growth going forward. Our loan portfolio, as we discussed, grew by 15.9% or 16.1% in constant currency basis. On a quarterly basis, that was 4.5%. Deposits continued to grow 13.6%. Having said that, and we'll discuss it later that high liquidity is weighting on our NIM. So we would like to go below 40% market share. We are at 41% and we would like to do it so that we don't hurt the franchise so that people still have Bank of Georgia as the top choice for keeping their money. On the capital position side, as you can see, there are very strong buffers there on the liquidity side, slightly higher than we usually keep. On this note, I would like to ask Hovhannes to cover the Armenian side, which has delivered fantastic results, please. Hovhannes Toroyan: Thank you, Archil, and greetings, everyone. I'll be showing the presentation. Yes. So as Archil mentioned, this quarter was another breaking record quarter for us in terms of performance. Our net profit for the quarter grew 38% and annualized stand-alone net profit grew about like 24%. Our return on equity was 26.8%. And the loan portfolio growth was also astonishing 28% in constant currency basis, and this was very diversified between both retail and corporate portfolios. Our time deposits grew 33% year-over-year, showing the very strong trust of our customers towards our franchise. Total attractions from customers grew 22% on a constant currency basis. And again, we are very happy with this. All these are well above the benchmarks and guidelines that we have shared earlier. We are very happy also to mark that our MAU and DAU ratios are growing at astonishing over 25% per annum. In terms of digital infrastructure, we do continue to heavily invest into improving our digital infrastructure, both internally as well as customer-facing part. And our mobile app has already incorporated most of the beyond banking services. So it has become a very good ecosystem for our customers to meet a number of their needs, including investments in terms of brokerage, my home, my car and so on and so forth. We have enhanced the digital payments in our ecosystem and mobile application. And technically, the number of transactions through our online banking have more than doubled within 1 year's span. We have launched our loyalty program in Q4 of 2025, and we are very happy and enthusiastic about it. We hear a lot of compliments from customers already. So we do believe that it's going to be another very strong pillar for us to bond our long-term relationship with our customers. And again, we do continue to invest heavily into financial education, both for the kids as well as for the adults. And MyAmeria Star is the application targeting kids and mostly educational part of that. And we are very happy to see the uptake on that as well. We do have very positive dynamics in terms of coverage of retail sector. Here, you can see more than 45% of growth for MAUs and DAUs. And we are currently serving 1/3 of the adult population of Armenia, and this gives us much bigger opportunities for growth in the local market, and we are very happy with it. At the same time, I cannot fail mentioning about very positive dynamics of digital uptake and engagement ratios that show that whatever improvements we are doing into our systems are actually to the benefit of our customer base. In terms of portfolios, the very strong macroeconomic situation in the country leads to very healthy and positive demand for loans. And you can see that we were able to increase our loan portfolio by 28% in Q4 of 2025 year-over-year. And we do expect to see very positive dynamics going into 2026 as well. As I mentioned, the growth has been very balanced between retail and corporate. But within retail portfolio, we see that the share of consumer loans is growing a bit faster than mortgages that constitute about half of the portfolio of the retail banking in Armenia. Deposits and attractions from customers are also growing very, very fast. And we can see that 22% roughly growth of total attraction from customers comes to prove it. It's very important also to note that 60% of our deposits already constitute deposits in AMD. And this is a result of a rapid increase of the number of customers. Over the last year only, we have increased the number of customers by 33%. At the same time, it is also a result of the very stable macroeconomic situation and very stable currency of Armenian Dram. Ameriabank has been continuing to improve its market share. We are at 21.7% in terms of loans and 19.5% in terms of deposits. And as we have announced earlier, this really shows the additional growth opportunities that we see in the local market. In Q4 alone, 96% of all the loans disbursed by Ameriabank retail sector were loans that were underwritten through our online channels, technically AI and machine learning based underwriting algorithms that cover it. That gives us opportunity to reach out to technically any Armenian citizen across the country with very low costs. In terms of liquidity, just like the Georgian peer, we have been over liquid towards end of the year. You can see from the ratios. And at the same time, in terms of capital position, I want to mention that while technically, the capital position was tight by the end of the year, we did enhance our capital position already in December. It just came into factor in January when Central Bank of Armenia approved it as part of our regulatory equity. We're talking about EUR 30 million. And effectively, by end of January, our capital position was only 17.5%. And later in early February, we were able to do the first inaugural USD 50 million AT1 notes that will elevate our capital position by another 86 basis points further. So we are very confident on both in terms of our capital position and liquidity position. This is very short. I'm going to hand it over back to Archil. Thank you. Archil Gachechiladze: Thank you, Hovhannes. Those are very impressive results from Armenia and Armenia is continuing to deliver very strong results also on the macro side. And as Hovhannes mentioned, it's very good that we are increasing the number of customers that we are serving. And having said that, we only serve about 1/3 of the adult population in Armenia. So there's plenty of growth that can happen there. So now I will summarize what it means for the group results. So overall, the operating income up by 16.4% in the quarter and by 20.8% for the year, as you can see here, the net interest income was very strong showing of 19.9% for the quarter and 25.9% for the year. The reason why we don't show Armenia here for the year is that in the base year of 2024, 1 quarter is omitted. So it will not be a right comparison. As you remember, we acquired the bank end of March in 2024. So net noninterest income was up by 10% for the quarter and by 10.8% for the year. And I'll discuss a little bit there because there was some details there that we should discuss. And we did disclose it in the results. But I'll just mention that in the fourth quarter, net fee and commission income was up by 33.8%, but that was partly due to the fact that we got a new deal from the system providers for the card payment system providers, which was starting from the 1st of April. So it covered the last 3 quarters. In fact, it was booked in 2020 in the fourth quarter. So we got a few questions earlier today that what should you think going forward? And on the net fee and commission income side, I think going forward, we should expect growth to be somewhere between 15% and 20%, so on the high teens side because it -- not only we benefited for the last 3 quarters, but we benefit for the next 5 years with improved terms with the system providers. On the net FX side, we have seen a decrease in both markets. On an annual basis, it's up by 5.1%. So there, I think it's important to note that both of the currencies have been very stable. So we make more money at better margins when the volatility is there. volatility has been down. The competition has increased as well in Georgia specifically. But especially when you have a one-sided bet when the currency is getting stronger and the National Bank provided a backstop to about GEL 2.7, GEL 2.68 per dollar. That basically is a one-sided bet. It's hard to make money there. So that's what we have been experiencing, similar kind of trends in Armenia as well. But if there is volatility, we'll make more money. If there's no volatility, we will be flattish to slightly increasing going forward. So I think it's already reflected that low volatility is already reflected in the numbers. And going forward, we expect positive dynamics. Operating expenses were up by 14% for the group on the Georgian side, slightly higher than the revenue. But going forward, as we said, that overall as a group, we are expecting to have neutral or positive operating leverage. As you can see, in the fourth quarter, the group was 35.2% cost income, but notably, Armenian side was 40.5%. That kind of drop is partly for the cost control and partly due to the fact that third quarter was the last one where we amortized the retention bonus arrangement that we had with the key managers of the bank. So going forward, as I said, we expect neutral to slightly positive operating leverage going forward. Loan portfolio growth was well ahead of our guidance, close to 20%, 19.7% and the last quarter was 5.8% where Georgia, as we said, contributed 4%, 4.5% and quarter-over-quarter growth in Armenia was 8.5%, which was very significant. Overall, I think Hovhannes did mention that 28% was ahead of our expectation in Armenia in terms of growth. But what's interesting also is that last quarter -- fourth quarter of 2024 was a very big jump in loan growth. So with that high base to grow at 28%, especially on a Q-over-Q basis, you get the idea that the activity was very strong. Armenia overall is -- there's a lot of positive dynamic happening there and a lot of businesses are expecting to grow. So on the deposit side, we grew 17.3%, as you can see the breakdown there as well. Both of the franchises are enjoying very high liquidity, which shows strength on one side, but it also is a weight on our cost of interest. Net interest margin was slightly reduced in fourth quarter, as I said, partly due to the fact that it was increased cost in Lari and AMD. So local currency is becoming both markets, in fact, higher proportion and the costs there have been a bit higher. That will be a big focus going forward over the next couple of quarters. Cost of risk, we were down at 0.3%. So for the annual costs came 40 basis points. Our NPL ratio remained 2.1%. And although we had a slight increase in Armenia, but slight decrease in Georgia. So overall, as a group, we are at 2.1% NPL ratio, which is just fine. In terms of NPL coverage, mainly the decrease there is automatic. We didn't change any rules. In fact, the main reason why that change happens is because the proportion of the NPL ratio is increasingly towards the unsecured. So there, basically that's what it's resulting. Profit before one-offs, as you can see, we had 22.7% growth in the quarter. So it was a very strong quarter, in fact, a record quarter. And for the annual growth was also by 20.9%, which is very strong and Armenia played a very good role there. With return on equity for the quarter at 30.1%. Nowadays, every time return on equity starts with 3%, I'm relatively happy. And for the full year, I was less happy because it was 28.4% and not starting with 3%, but who knows. Return on average assets, as you can see, was up slightly from the previous quarter and for the full year, it was 4%. All in all, I think it's something to note that leverage ratios in Georgia and Armenia are very low. So we have almost twice as much capital as our peers in Eastern Europe. As a result of this, we have declared a dividend, which is an increase for the full year of 16.7%. Having said that, we are laying significant buffers in both banks for strong growth because we have been -- over the last 3 years, in fact, we have been growing more than we indicated as our medium-term guidance, and we want to be able to have that flexibility of deploying capital where the growth opportunities are. For example, in Armenia, we did indicate at the acquisition that we were going to deploy the retained earnings, which are quite strong, to fund the growth. And that is very important to have that flexibility and ability as a group, which is well funded, on one side, to pay dividends, which is growing year-by-year and a CAGR of 28.8%. But just last year was 16.7%. And going forward, we expect positive dynamics there as well as ability to deploy our capital in growth opportunities, be it organic or inorganic if it comes along. That's basically that. And as a reminder, our strategy is to be the main bank for our customers and be excellent in customer experience and with our eyes on profitability with annual book growth of about 15% and profitability of 20-plus percent, over the last few years has been closer to 28% to 30% and dividend payout ratio between 30% and 50%. And there, we have, as indicated, in fact, a couple of years ago, we've been on the lower side, which reflects our higher than guided growth over the last 3 years. That about that. And let's open up for questions because I think questions -- Q&A is usually the most interesting part, not only for our audience, but also for us. Nini Arshakuni: Yes. So we can open the floor for questions, and we have a few raised hands from the analysts. So the first will be Sheel Shah from JPMorgan. Sheel Shah: Great. I've got two questions, please, if you can help me. First, can I ask about the NIM outlook for the business going forward in the context of rate cuts coming in Georgia or expected some of the funding pressures you've seen in the fourth quarter. And then you've also said the local currency deposits, you're going to be focusing on those, I presume on the cost of those going forward. So I'd be interested to hear, firstly, on the NIM outlook of the business going forward. And then secondly, I'd like to know a bit more about the tech infrastructure of the bank because we can clearly see the output of the tech in terms of the NPS score, the growth in the number of mobile active customers, the number of sales on the digital channel. But I'd be interested in how many of your applications are on the cloud? What sort of platforms are you using? How many core banking systems are you using? What are you doing in terms of AI, which I noticed is newly on the slide. So a bit more information on the tech stack would be interesting, please. Archil Gachechiladze: So on the NIM side, you did mention all the negatives, and you didn't mention the positive, which is deploying this extra liquidity. I mean, we are drowning in extra liquidity, which we either will deploy or push out of the bank. So that's -- so on balance, we'll either be flat to slightly positive on the NIM side, and that's in both markets. On tech side, we are either the largest or second largest technology company in the whole region. We employ 1,000-plus tech specialists either or digital specialists, in fact, be it on the programming side or just digital workers. We have translated that into the good numbers as well on the customer acquisition side as well as the balance sheet growth. A few years ago, we basically -- first of all, our core banking in Bank of Georgia is homemade. So it's fully homemade as well as the main applications, the retail app and the -- on the mobile app on retail as well as business. In Armenia, I'll ask Hovhannes to cover it in a couple of minutes, but mostly homegrown there as well. But basically, we have a few years ago, said that we want to be on cloud or cloud ready. So about 3, 4 years ago, we started to integrate that thinking in the design and everyday development, and we have been chopping up our core system into smaller pieces connected with APIs, which allows for the scale up not to be too expensive in different parts of the business. So it's -- many parts of our data is on cloud and the rest can be on cloud any minute, but it's a cost-benefit exercise on which case because -- yes, that's because it's not cheap. But otherwise, in terms of technical capability of putting everything on cloud and having it in smaller pieces, 90% is done. I mean there are small pieces that we are rewriting and changing. But otherwise, it's very well developed. Also on the AI side, we are experimenting in many different directions. Chatbot is the most obvious one, but we have done a lot of different testing of different capability now in the processing, payments processing, AML and other types of applications as well as on the risk and underwriting. So there's -- while we focus on AI, a lot of times, we understood that there's more to be done on the automation side. So there's a lot of work going there. But not much more to report there. Only thing I can say is that it's a big focus and going forward, it will deliver efficiency, but also more importantly, the speed of execution and quality, which will benefit our customers. Hovhannes? Hovhannes Toroyan: Yes. In the Armenian operations, we are using the 2 major software from third parties. The core banking is from the leading provider in the country. And at the same time, CRM is one of the leading international solutions that we use. Other than that, the other major parts, namely mobile banking, online banking are internally developed. At the same time, we are also technically one of the largest technological companies in the country despite tech being one of the strategically important sectors for the country with a number of employees engaged into tech development that we have. And we also have this agile framework. So product teams are working through this agile mechanism. And we do deploy machine learning and AI in certain areas, namely in a number of areas to improve internal efficiency as well as to improve the customer experience. For example, one of the latest beta types of the AI applications we've seen internally was analyzing the needs or potential needs of the customers to be able to come up with the best next offer for the customers. As I mentioned, 96% of all the retail loans that we've disbursed in fourth quarter were through our online and automated models, machine learning and AI models. So technically, for us, that means, a, underwriting process is 38x cheaper than it would have been through conventional lending technique; and b, it also means outreach to technically anybody on the territory of Armenia. And obviously, I mean, that's another perspective that we look at it. And clearly, we are also at the doorsteps on unleashing all the opportunities that these new technologies in hand for our sector. So we are very optimistic that we're going to be using AI in general wider with better benefits. Sheel Shah: That's very helpful. If I can have just one quick follow-up. When you say that you have the potential for outreach to all of Armenia or all of Georgia, is this a direct-to-consumer method? Or are you using sort of online tools -- online aggregators? What's your method of distribution of these loans? Hovhannes Toroyan: In case of Armenia, it's technically mostly direct. We are rarely using other platforms as an aggregator to outreach our customer base. But technologically, and we do have a number of customers today that can become a customer of Ameriabank remotely sitting on their couch. They can apply for a loan remotely sitting at their home or office. So this actually -- with the pretty significant penetration ratio of mobile and Internet usage across population, we see our digital platforms, our own digital platforms gaining very good and positive traction over the last few years. And that's actually also being represented by more than 45% growth of our MAUs and DAUS. As I said, our transactions more than doubled, 96% of retail loans through online platforms. So all these are kind of early indicators that whatever we have been doing for the last 4 or 5 years are actually kind of giving their results already. Archil Gachechiladze: I'll cover the Georgian side. So we have 1 million users daily in the country of 3.7 million people. So short answer is, yes, we do it directly. And the long answer is that we are the biggest brand, not only in the financial intermediation where the top of mind is 57%. But we are the biggest brand in the country, period. I mean, it's bigger than any other brand. So when we say, do we do it directly or not, yes, we do it directly. We still have a very significant branch network, very significant ATM network. And we are the biggest brand in the country overall and plus in finance. So that basically gives you an idea that we are not the back office or some kind of intermediary, but we are the main intermediary in the country. Nini Arshakuni: So the next question is from Alex Kantarovich from Roemer. Alexander Kantarovich: Yes. Can we please differentiate between outlook for loans between Georgia and Armenia. Clearly, the dynamics are somewhat different. This is my first question. Yes, and I'll follow up with the second one. Archil Gachechiladze: [indiscernible] I'll do it. So 10-plus in Georgia, 20-plus in Armenia. Alexander Kantarovich: That's very short and sweet. And if I can address the elephant in the room, inclusion in FTSE 100, do you expect it to happen imminently? Archil Gachechiladze: As economists like to say, all else being equal, yes. Alexander Kantarovich: Yes, that's great. That's great. And finally, I appreciate that you deploy your capital very, very efficiently. But is there a scope for increasing the levels of distribution from 30%. Archil Gachechiladze: Absolutely. But as long as we grow at 20% instead of 15%, as long as we are open to the M&A opportunities being major banks and smaller economies, and such opportunities may come along, we would like to keep a little bit of buffers there. If either one or the other don't play out for a longer period of time and we grow at, I don't know, 12%, 13% instead of 20%, like we have been growing over the last 3 years, then of course, we will return more capital and our distribution is between 30% and 50%. So I think it's a mirror image. So either we grow more and we deploy capital. And I think we have been very disciplined and showed to our investors that we don't throw around the money. So we either deploy it in businesses which are generating 25% to 30% return on equity or we are looking at acquisitions of similar kind of returns. So if this doesn't happen, then of course, we will return more. But I hope it will happen. So until those things are happening, we will be on the lower side of the distribution guidance of 30% to 50%. And if it happens less, then we'll grow capital returns. Nini Arshakuni: The next question is from Jens Ehrenberg. Jens Ehrenberg: A couple of questions from my side. Firstly, just on Armenia, I suppose it's very good to see more sort of digital uptake there. It feels like with sort of 11% of penetration, the growth headroom there is still really enormous. Is that the right way to think about it, given you're sort of roughly 47% in Georgia. Is the opportunity really that big. Secondly, on Armenia, I think we've had quite a material improvement in the cost-to-income ratio in the fourth quarter. And I appreciate you touched on that earlier. But just going forward, is sort of the low 40s level, do you reckon that is sustainable for Armenia going forward? And then lastly, I suppose, on the Georgian side, I believe we had -- one of your key competitors talk about their strategy yesterday and the intention to try and grow more on the retail side in Georgia. Just curious to see how you see the competitive situation on the ground at the moment and really what you expect going forward there? Archil Gachechiladze: Hovhannes, do you want to take the opportunities of growth on the Armenia side? Hovhannes Toroyan: Sure. We have indicated earlier that currently for midterm, we do envisage to grow our market share to 30%. So this is our midterm strategic objective as of today. Obviously, I mean, that's going to be a moving target as we go forward. And you have seen that over the last few years, we have improved our market share significantly. And we do anticipate to be outperforming the market in the year 2026 and next 2 years as well. So in that case, theoretically, maybe in a bit longer term, we could get closer to the market share where our Georgian peers are, but current target is at 30%. So that's kind of where we want to be first, and then we'll see how it goes. In terms of cost-to-income ratio, we do believe that the ratio that we have reported in fourth quarter is more than sustainable. Moreover, as I mentioned, a number of initiatives that we've done within the bank have significantly improved our cost base. So we do expect to continue in that direction further. So I would say I would not be very surprised to see the higher 30s in terms of our cost-to-income ratio in the coming years. Archil Gachechiladze: Yes. Regarding the competition, I think, first of all, I cannot comment on competitors' statements. The only thing I can say is that competition on the ground in each and every direction is nothing new. So as you can see, over the last 20 years, there has been a pretty strong competition between the 2. Having said that, I think both players have been cognizant of the fact that they don't want to destroy the profitability. So I think we are seeing a significant push and effort on the side of the quality, in terms of user experience, in terms of easiness of use, et cetera, et cetera. And all of that, I think, will continue. Having said that, we believe that we are very well placed to continue delivering the strong numbers well ahead of the whole banking system. Nini Arshakuni: So we have the next question from Ben Maher from KBW. Benjamin Maher: Yes. Just got a couple of questions. The first one is on market shares. Obviously, you mentioned you've been growing it in Armenia. I noticed there was a small decrease in the quarter in Georgia. I was just wondering if there's a particular reason for this? And also, could you just please clarify your -- I think there was a point on liquidity where you said you wanted to keep the deposit market share below 40% in Georgia. And my second question is just on consumer lending. It has been very strong through the year. Is this just household releveraging? Or do you think that's potentially early signs of some financial strain. I will say asset quality has been doing very well. So just interested in your thoughts. And then on the share of time deposits in Armenia, that's risen year-on-year, although it was down slightly in the quarter. How do you expect the share of these deposits to evolve in 2026? Archil Gachechiladze: I think, Ben, I would not read too much into the quarterly changes of market shares. They are rather volatile. So let me show you the -- what you're referring to. So you're referring to this change here, the last quarter. And I would say, look at the longer term, look at 10 years or more. For this particular year, you can see that 37.6% has become 37.8% for the full year. So it's flat to slightly increasing and competitors' numbers are different. So that's that. And in terms of the retail deposit market share also is very strong. Here, on the total deposits, we're trying to decrease it below 40% without losing the preferred status in people's mind in terms of keeping their money. So we feel very strong on the local market, in fact. So when you look at the -- I think the key characteristics when you look at the quality of the franchise is the NPS score, which kind of is like a body temperature measuring the health of the service. But inside, there are a lot of different subsegments. Top of mind, most trusted, those are some of the things that we are watching at, and all of those are basically at record highs. So we are in a very, very strong position. I can say that probably the strongest position that the franchise has ever been in terms of the quality of the franchise. And that's on the back of a very strong macro performance over the last few years and double-digit growth of average incomes as the unemployment rate comes down. So overall, very strong macro and a very strong franchise. So that's the combination that we have and very similar in Armenia. Hovhannes? Hovhannes Toroyan: Yes. It's very similar technically in Armenia, but we do expect to grow, obviously, our market share in the coming years, as I already mentioned. In terms of the structure of deposits, I think it would be fair to anticipate similar changes in coming years because we do anticipate very stable macroeconomic performance and FX exchange rate in the country. At the same time, the more we cover retail segment, the more AMD-denominated deposits share is going to grow over years. So I'm not sure about the same dynamics in terms of the speed of change, but it would be fair to expect that in the coming years, share of AMD deposits and current accounts will be slightly growing. Jens Ehrenberg: Great. Sorry, on the consumer lending, strong growth. Is there any obvious reasons behind that you see in both markets? Archil Gachechiladze: So consumer growth in both markets has been very strong. In Ameriabank, I think it's partly due to the fact that our offering has become much higher quality in terms of the user experience and the reach in terms of offering has been much wider as well. In Georgia, we are in a leading position, and we have seen Georgian consumer, their incomes growing double digit 5 years in a row and first 2 years was high teens as well. So I think it's a very strong base. We are not seeing any signs of any credit quality deterioration. We watch it very carefully in different subsegments of credit. So yes, so no signs whatsoever at this point. And in fact, if anything, there are very, very strong signs on the credit quality side on all around. The only part where we saw a little bit of issues were smaller hotels in the regions, which is like 1% of portfolio or less. And there, we have tightened the underwriting 2 years ago, and we described it in different qualities. But in terms of the large corporate, in terms of real estate, in fact, there was a big focus, and we have seen a much stronger performance than anticipated. In terms of all different types of consumption, investment, there has been a very, very strong performance all around. And in fact, people underestimate the amount of investment portfolio that is geared up to invest in a lot of different segments in Georgia, especially on the energy side, especially on the logistics side and other things. And Armenia is slightly different sectors, but same. Please, Hovhannes? Hovhannes Toroyan: Yes. I mean, I'm totally in the same line. So technically, the disposable income of the households over the last 5, 6 years have grown immensely. And as Archil mentioned, our digital propositions have improved. But also, please keep into consideration that during the last 2 years, we have doubled the number of customers that we're serving. So technically, in our case, we have also this very significant growth of the customer base. And clearly, this also is additional market for us to go out there and present our different propositions, including consumer finance opportunities. Nini Arshakuni: So we have another question from [ Dmitry Vlasov ]. Unknown Analyst: Congrats on a very strong set of results. So my first question is about cost of risk. You have a guidance of around 100 basis points over the cycle. And my question is, do you have a view for 2026? And how will it be different for Armenia and Georgia? The second question is about the potential M&A. Is my logic correct that it's mostly about the right opportunity, right timing and the right price rather than you waiting to maybe scale Ameria first and then sort of deploy capital elsewhere. Yes, those are the two questions. Archil Gachechiladze: On the cost of risk side, you rightly said that between 80 to 100 basis points is through the cycle guidance that we provide. Having said that, we've been well below those numbers when the macro growth has been bigger and the performance has been much stronger than average in the history for both countries. And I think you can apply that rule. In terms of the M&A, you're absolutely right. I mean, we are opportunistic. So we scan different markets, and we look for the right opportunity and right price, and we are quite disciplined about it. So we don't have to do any M&A. But if the right opportunity comes up, we would like to be in a position to do that. So that's our approach. So it may be that we do something and maybe we don't do anything. And in terms of what we are looking for, we are looking for major players and that by -- just by our scale, that means that we're looking at smaller markets, unfortunately. But we do prefer to look at well-established players. And in fact, if we can add value in terms of applying our approach to customer care and technology, usually, we do, we like those kind of stories where it's a well-established player, and we can add value by putting some of the approaches that we have to customer care and technology in place. And that, I think, can be very beneficial for the franchise, for the country where we may be going as well as for our shareholders. Also, we look at -- we don't like turnaround stories. So banking is a leveraged business. So we are very careful there. And we like good teams. We are very lucky with the team in Armenia. It's a fantastic team, and we have done everything possible to retain the whole team, and we are very happy to see them stay and deliver fantastic results. We may not get as lucky every time, but that would be the idea. Unknown Analyst: That's very clear. Maybe one small additional question, if I may, about how 2026 started for you so far? Is it in line or maybe even a bit above your expectations? Archil Gachechiladze: 2026 started very well. So a strong start. Nini Arshakuni: We have one more question from Simon Nellis. Simon Nellis: Apologies if this question has already been asked because I had to drop off just for a little bit. It's around your capital return strategy going forward because I think you've been at the lower end of your guidance range as you reinvest into the Armenia business. Is that still the case? Or are you going to up the payout over time? Archil Gachechiladze: Until we are able to grow at the rates which we have been growing, which is blended 20%, probably we will be on the lower side of the capital returns. Also, I think our buffers allow for us to be a bit more opportunistic if nonorganic comes along. If one or the other of those do not happen, then obviously, we would be increasing to the higher side of that guidance, which is between 30% and 50%. So we've been on the 30% side. But obviously, as things mature, then we will be increasing that significantly. But Short term, I think we are luckily in a situation where we're growing well above our midterm guidance. Simon Nellis: And are you still reinvesting the dividends into -- I mean, you're not paying dividends out of Armenia and you don't intend to. Archil Gachechiladze: We have not, but we will be looking at slight upstreaming, especially because we have had ability to put the Tier 1 instrument in place, which provides significant buffers there. But we'll be watching the growth opportunities there. Quite frankly, I believe that Armenia has been doing very well. In fact, as a macro story and geopolitically, they are huge positive moves. And when big investments happen, I mean, there have been just a couple of big investments, so honestly, you want to mention that have been announced. Hovhannes Toroyan: Yes. Very recently, the Vice President of the U.S. was in Armenia and around this whole peace treaty and TRIPP corridor, there have been mentioned several very significant investments into AI, data center, technology institutions, nuclear power plant and a number of other infrastructure projects like railway, roads and so on. So we are talking about USD 4 billion to USD 9 billion of potential investments into the country. And for our economy, it's really huge and the potential positive impact of that on the economy and subsequently on the financial sector could be really very decisive in the coming years. Archil Gachechiladze: So Simon, all of these positive things, they need banking, and we want to be able to bank them properly without much limitations. And I think our capital position and liquidity position allows us to be flexible. And if we find that we are growing at, I don't know, 12% instead of 25%, then we return more capital. I mean we are quite cost conscious and quite disciplined on capital side, and we act as shareholders, in fact. So yes, I mean, so far, we have been growing more than we guided medium term, and that's true for the last 3 years in a row, almost 20% growth of balance sheet. And going forward, if that continues, we'll be returning capital, but on the lower side. And if we grow less, then we'll return more capital. Nini Arshakuni: So I don't see raised hands. There is just -- maybe two questions that I'll read. One is on Armenia. Can you please confirm the growth in Armenia is self-funded? And also if there are any inorganic growth opportunities in Armenia. So there is two questions. Archil Gachechiladze: Yes and no. Hovhannes Toroyan: In Armenia, we are self-funded in terms of not receiving any funds from within the group. So there are not any intra-group funding allocations or capital allocation as of today. But at the same time, we are also very actively working with a number of development financial institutions. And in 2025 alone, we were able to attract USD 400 million equivalent funding from the DFIs that also improved our liquidity position in foreign currencies. It's kind of long-term financing for us to be able to serve the needs of our customers. So technically, as a fully independent entity, yes, we are funded by the funds of our customer base as well as our partner DFIs, if that's the question. Nini Arshakuni: And then this question is for Archil on MBS. So it says a couple of years ago, you said you won't push on MBS as hard given the costs associated with it, but yet it keeps improving. How did you do it? Archil Gachechiladze: Just can't help it. It's part of DNA now. I think customer satisfaction and the focus on that is key to long-term success of any franchise, especially when you are touching lives of millions of people. So I would keep that focus. Nini Arshakuni: We don't have any more questions. Archil Gachechiladze: Excellent. On this bright note, I would like to thank you for your interest and for your support that we have felt not just today, but over the long period of time, for your trust. And I would like to thank the Armenian and Georgian team and the whole Lion Finance Group team for really doing your best and delivering consistently very good results. As long as we make our customers' lives better, I think we'll be in business and going well. So thank you for your support, and let's look forward to a very strong start of the year, and I hope some good news very soon as well. So thank you. Nini Arshakuni: Thank you, everyone, and see you next time. Thank you. Take care.
Denise Reyes: Good morning, everyone, and welcome to Nemak's Fourth Quarter 2025 Earnings Webcast. I am Denise Reyes, Nemak's Investor Relations Officer, and I am pleased to host today's call along with Armando Tamez, Nemak's CEO; and Alberto Sada, CFO, who are here this morning to discuss the company's business performance and answer any questions that you may have. As a reminder, today's event is being recorded and will be available on the company's Investor Relations website. Armando Tamez, our CEO, will lead off today's call by providing an overview of business and financial highlights for 2025 and the company's outlook for 2026. Alberto Sada, our CFO, will then discuss our financial results in more detail. Afterwards, we will open for a Q&A session, which participants may join live or submit written questions using the Q&A function. Before we get started, let me remind you that information discussed on today's call may include forward-looking statements regarding the company's future financial performance and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions you not to place undue reliance on these forward-looking statements. Nemak undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. I will now turn the call over to Armando Tamez. Armando Tamez Martínez: Thank you, Denise. Hello, everyone, and welcome to Nemak's Fourth Quarter 2025 Earnings Webcast. I will begin with an overview of our 2025 results and strategy execution before moving on to our 2026 guidance. Throughout 2025, Nemak remained focused on strategic and financial objectives, demonstrating resilience amid an increasingly complex trade environment. Supported by a solid commercial position, the company successfully navigated shifting external conditions while continuing to advance financial priorities. Given the slower pace of electrification, Nemak leveraged opportunities in the ICE powertrain segment while also maintaining a steady progress in the e-mobility, structure and chassis application segment, ensuring a balanced and adaptable market position. Full year EBITDA was within our guidance range at $591 million, reflecting the company's continued focus on operational discipline and profitability. The top line remained stable at $4.9 billion, supported by resilient customer demand despite the changes in the global trade landscape. Continued efforts to enhance operational efficiency contribute to generating positive cash flow and reducing our debt by $130 million year-over-year. A key highlight of 2025 was the announcement of the agreement to acquire Georg Fischer Casting Solutions. This acquisition is a milestone and represents a significant step forward in strengthening Nemak's long-term strategic position. The business brings highly complementary capabilities in lightweighting, enhances our skills in high-pressure die casting and expands our offering of complex aluminum and magnesium components for the e-mobility structure and chassis application segment. In addition, the acquisition broadens our global footprint and customer reach, particularly by providing meaningful access to leading Chinese manufacturers. Building on this strategic step, in February 2026, the acquisition received full regulatory approval and closed successfully. I would like to extend a warm welcome to all GF Casting Solutions employees joining Nemak. We're excited to bring together two highly talented and complementary teams. With the transaction now completed, we are fully focused on executing a disciplined integration plan, which is essential to realizing the full value of this acquisition. Effective integration will allow us to align operational processes, capture cost synergies, accelerate technology sharing and ensure continuity and service excellence for our global customers. By combining the strengths of the two organizations, we are positioned to unlock meaningful operational, commercial and innovation opportunities in the years ahead. Another important remark for the year is the successful ramp-up of production at our new facility in the Czech Republic, dedicated to e-mobility components. This plant incorporates advanced joining and assembly technologies and is now manufacturing highly complex engineering components that support our customers' electrification programs. This achievement underscores our ability to adapt to evolving market needs, strengthen our global footprint and expand our advanced manufacturing capabilities. In 2025, we secured $440 million in annual revenue from awarded business across our global operations, of which 85% corresponded to ICE powertrain programs and 15% to e-mobility, Structure & Chassis applications. The significant amount of ICE business awarded underscores the extended life cycle of this segment while still capturing opportunities in e-mobility and Structure & Chassis components. Importantly, most of these programs will utilize existing assets, reinforcing our disciplined approach to capital allocation and helping drive a meaningful reduction in CapEx. In parallel, we are pursuing a robust pipeline of approximately $1.9 billion in new business, positioning ourselves to capture future growth opportunities across our key segments. We remain firmly committed to delivering competitive and cost-effective solutions to our customers, reinforcing our focus on operational excellence and long-term value creation. Moving on to innovation. Throughout the year, we continued to build on our technological capabilities, advancing key initiatives to enhance process efficiency and expand our technical toolkit. Across our operations, we made meaningful progress in improving the high-pressure die casting process, implementing efficiency and cost optimization measures and scaling these improvements across additional facilities to broaden their impact. We also enhanced our real-time job floor information system, adding an AI-powered layer designed to transform complex operation data into actionable insights. This reflects our ongoing commitment to leverage advanced technologies to strengthen process control and improve our competitive position. Moving on to sustainability. I am pleased to share that Nemak achieved an A- rating from the Carbon Disclosure Project for the second consecutive year, once again, placing us within the leadership band, which is the highest tier of CDP's scoring system. This recognition reflects the company's strong environmental governance, our comprehensive science-based actions to reduce emissions and our commitment to transparent climate disclosure. We are proud to see our efforts consistently recognized at this level. Once again, we pledge our long-term dedication to responsible operations and climate stewardship. In addition to progress on climate initiatives, Nemak was again recognized for its commitment to people and workplace excellence, earning top employer certification in Brazil, Germany, Mexico, Poland and the United States. Notably, Nemak ranked in the top 5 certified companies in Brazil. This distinction reflects the strength of our people-focused practices, including talent development, organizational culture and employee well-being. Achievements such as these underscore the importance we place on creating an environment in which our teams can grow, innovate and contribute to long-term value creation. We recognize the key role our employees play in advancing the company's strategy. And despite our high marks, we continually seek to improve. This concludes my initial remarks. Thank you for your attention. I will now hand the call over to Alberto. Alberto Sada Medina: Thank you, Armando, and good morning, everyone. I will begin with an overview of Nemak's business performance for the full year and fourth quarter of 2025, followed by a summary of industry developments and financial results. During 2025, we continue to prioritize free cash flow generation through sustainable margin improvements and disciplined capital allocation. On the results front, both the fourth quarter and the full year 2025 had a high comparison base versus the same periods of last year due to customers' onetime compensation. During the year, we saw stable industry performance across our main markets as global light vehicle sales increased 3% to 91.7 million vehicles, while light vehicle production increased 4% to 92.9 million units. From a regional perspective, during the fourth quarter, the seasonally adjusted annual rate for light vehicle sales in the U.S. was 15.7 million units, 5% lower than last year, mainly due to the rollback of the EV tax credits. For the full year 2025, this metric increased 2% to 16.4 million units as consumers continued showing resilience amidst affordability concerns, partially offset by OEM incentives. Light vehicle production in North America during the fourth quarter decreased 2% year-over-year to 3.6 million units amid cautious production schedules and certain supply chain disruptions with inventories stable at 46 days of sales. For the full year 2025, production was 15.2 million units, 1% below the 15.5 million units in 2024 due to the same factors. In Europe, light vehicle seasonally adjusted annualized sales increased 7% in the fourth quarter to 17.4 million units due mainly to increased imports and higher sales of entry-level vehicles, supported by stable macroeconomic conditions. For the full year, light vehicle sales were 16.4 million units, up 2% year-over-year, driven by similar dynamics. During the fourth quarter, light vehicle production in the region decreased 2% year-over-year to 3.8 million units, due mainly to reduced export demand as well as supply chain constraints, particularly microchip shortages. For the full year 2025, light vehicle production totaled 15.4 million units, 2% lower than last year due to the same factors. In China, the seasonally adjusted annual rate of light vehicle sales declined 4% year-over-year in the fourth quarter to 27.2 million units, due mainly to the expiration of local government incentives. For the full year, light vehicle sales in China were 27.1 million units, 6% up compared to the previous year. This is attributed to intense competition among local OEMs and government trading incentives as well as export activity. In terms of light vehicle production, China posted 1% and 10% year-over-year increases for the fourth quarter and full year 2025, respectively, amounting to 9.6 million and 32.7 million units, driven by domestic and export demand. In Brazil, the seasonally adjusted annual rate of light vehicle sales for the fourth quarter and full year 2025 was 2.9 million and 2.6 million units, respectively, reflecting a steady growth in the quarter and a 3% year-over-year increase for 2025 on resilient consumer behavior. South America's light vehicle production experienced a 4% decrease year-over-year in the fourth quarter of '25, amounting to 0.8 million units due to calendar effects. On a full year basis, light vehicle production in the region increased 2% year-over-year to 3.0 million units due mainly to stable local demand and higher exports. Turning to our financials. Volume increased 2% and decreased 3% compared to the fourth quarter and full year 2024, totaling 9.2 million and 38.4 million equivalent units, respectively. This was due mainly to customer inventory management strategies due to geopolitical pressures and the declining e-mobility adoption rates among our customers during the year. Despite this, full year volume exceeded the high end of our guidance of 37 million units. Revenue in the fourth quarter of 2025 totaled $1.2 billion, 1% higher than during the same period of 2024 due to higher volume and higher aluminum prices. For the full year, revenue was $4.9 billion, stable year-over-year. Lower volume was partially offset by higher aluminum prices, the carryover effect from repricing achieved in previous years as well as favorable effect from the euro appreciation. During 2025, we continue to navigate alongside our customers, the transition between ICE and electric powertrains, relying in our talent, footprint and technology, which enable us to deliver solutions independently of the propulsion system of the vehicle. Our electric mobility, structure and chassis applications segment accounted for 9% of our total revenue, highlighting our ability to adapt across different electrification scenarios. EBITDA for the fourth quarter and full year 2025 decreased 25% and 7% year-over-year, totaling $117 million and $591 million, respectively. This reduction was related to extraordinary launching expenses and currency effects in North America in addition to high comparison effect from commercial negotiations recorded in the fourth quarter of 2024. In turn, EBITDA per equivalent unit for the fourth quarter and full year were $12.8 and $15.4, respectively, down 26% and 4% year-over-year, respectively. During the fourth quarter, we recorded impairments and reorganization expenses for $85 million related to footprint optimization initiatives. This included the write-off of assets in our facilities in Monclova, Mexico and most in the Czech Republic, where we are ramping down and ceasing operations and we relocate production to nearby facilities, respectively. This amount compares against $83 million in 2024. All this said, during the fourth quarter, the company recorded a $56 million operating loss compared to $39 million loss in the same period of last year related to the aforementioned impairments and reorganization expenses. For the full year, operating income was $97 million, which compares to $145 million in 2024 due to the same factors. During the quarter, Nemak reported a net loss of $100 million compared to a $51 million loss in the same period of the previous year. Net result for the year was a $116 million loss compared to a $25 million profit in 2024, mainly due to the combination of the aforementioned impairments and foreign exchange losses mainly related to the effect on our liabilities of the appreciation of the euro against the dollar. Excluding these noncash effects of impairments and foreign exchange losses, the net result for the full year would have been a $75 million profit. Turning to our financial position. Our net debt at the end of the quarter was $1.4 billion, a sequential improvement of $190 million and 9% lower year-over-year. Cash flow generation during the quarter was strong, driven by extraordinary favorable seasonal net working capital dynamics. Our cash balance as of the end of December was $516 million. Our net debt-to-EBITDA ratio was 2.4x, stable versus 2.4x in the previous year. In turn, the interest coverage ratio improved to 5.5x from 4.9x at the end of the same period of last year. Capital expenditures in the fourth quarter and full year 2025 were $99 million and $306 million, respectively, a 9% and 21% reduction compared to the same period of 2024. We remain committed to streamlining our capital investments. Moving to our regional results during the quarter. In North America, revenues declined 1% year-over-year to $653 million due to high comparison base associated with onetime commercial negotiations in the fourth quarter of '24. EBITDA was $43 million compared to $121 million in the same quarter of last year. The year-over-year reduction reflects extraordinary operating expenses of approximately $30 million in the fourth quarter of 2025, primarily related to production ramp-ups and the appreciation of the Mexican peso, combined with the high comparison base from onetime commercial negotiations recorded in the fourth quarter of 2024. In Europe, revenue increased 5% year-over-year to $410 million despite lower volume due to the translation effect of the appreciation of the euro. In turn, EBITDA in this region was $55 million compared to $19 million in the prior year, reflecting improved operating efficiencies and a favorable currency translation effect. Revenue in the rest of the world was $160 million, up 2% compared to the fourth quarter of '24, due mainly to favorable volume and product mix. EBITDA in this region increased to $20 million, benefiting from the same factors. Related to capital allocation, during 2025, we repurchased around 68 million shares. And by the end of December of 2025, the shares held in treasury represents approximately 6.8% of our total outstanding shares. We will propose the cancellation of these shares in an extraordinary shareholders' meeting, whose date we will announce in due time. As a reminder, our Annual General Meeting will take place on Wednesday, March 4. We kindly invite you as shareholders and to ensure your shares are represented. For any questions or inquiries, please contact our Investor Relations department. As recently announced, we successfully closed the acquisition of Georg Fischer Casting Solutions automotive business for an enterprise value of $336 million on a cash-free and debt-free basis. The upfront closing payment amounted to $216 million funded with existing cash. This reflects the agreed base purchase price, the inclusion of $113 million of cash at closing and customary adjustments, including the assumption of $44 million of financial liabilities. The remaining consideration consists of holdbacks and a portion of vendor financing to be paid over a 5-year term. We are very pleased with the successful completion of this transaction, which strengthens our strategic positioning, expands our technological capabilities and enhances our overall business profile. We will start consolidating Georg Fischer Casting Solutions operations effective February 1, 2026. As our product portfolio has significantly evolved over the years from primarily cylinder heads in the 1990s to a broader range of products, including engine blocks, transmission components, structural parts, battery housing assemblies and now even additional materials such as magnesium and other alloys through the integration of Georg Fischer Casting Solutions, the relevance and comparability of our historical equivalent volume metric has diminished. Given the increasing diversity of products and materials, calculating a meaningful head equivalent measure has become less representative of our business. Accordingly, starting this year, we will discontinue reporting equivalent volume and instead provide further visibility into our revenue by segment. Our financial guidance will focus on revenue, EBITDA and capital expenditures, which we believe better reflect the performance and strategic direction of the company. In summary, during 2025, we continued executing our disciplined financial agenda, reducing net debt, streamlining capital investments and strengthening free cash flow generation. With the integration of Georg Fischer Casting Solutions, we are reinforcing our competitive position and advancing our ability to create sustainable long-term value for our stakeholders. This concludes my remarks. I will now turn the call over to Armando. Armando Tamez Martínez: Thank you, Alberto. I will now provide an update on our outlook for this year. We expect to see a resilient industry environment with stable volumes across our main regions. Trade dynamics will continue to play a relevant role throughout the year; however, we are well prepared to face these developments as we will continue to rely on our solid commercial foundation, prudent financial decisions and close communication and collaboration with our long-standing customers. Effective consolidation of GF Casting Solutions began in February, and it is incorporated accordingly in our full year guidance. This integration strengthens our portfolio and further positions us to meet customer needs across regions. Nemak will maintain a selective and strategically focused investment approach, consistent with our capital allocation priorities. In parallel, the incorporation of GF Casting Solutions will require additional capital to advance the completion of a new manufacturing facility in the United States. Given these considerations, I would like to announce our guidance range for 2026. Revenue in the range of $5.3 billion to $5.5 billion, EBITDA in the range of $630 million to $650 million and CapEx ranging from $385 million to $395 million. As we close, I would like to briefly address the leadership transition announced earlier this year. After 42 years at Nemak, including 13 years serving as CEO, I will be concluding my tenure in this role by the end of March. This planned succession reflects our commitment to long-term value creation and strategic execution, and I am confident that Nemak is well positioned for the road ahead. The Board has appointed Herve Boyer as CEO effective April 1, 2026. Herve brings extensive global experience in the automotive industry, and I am certain he will provide strong leadership as Nemak enters its next chapter. I want to express my appreciation to our entire team, customers, suppliers, shareholders, financial analysts and all the stakeholders for the trust and partnership throughout my tenure. It has been a privilege to work together to advance Nemak's strategic priorities and strengthen our position in the industry. My passion for the automotive industry remains strong, and I look forward to watching Nemak thrive. With that, we conclude our presentation and would now like to turn the call over to Denise to open the Q&A session. Denise Reyes: Thank you, Armando. We are now ready to move on to the Q&A portion of the event. [Operator Instructions] The first question is from Alfonso Salazar from Scotiabank. Alfonso Salazar: Armando, first of all, congratulations for all these years in Nemak. We will be missed without any question, but a great job in very challenging times that have apparently will continue. The first question that I have, I have 7 questions. I will not use my time with that many. I will have only a few. The first one is, if I understand correctly, you mentioned that you will not report volumes anymore. So this is something that -- is this correct? Because definitely, we need to have a metric on volume going forward to understand what's going on in the company. So I just want to clarify that point. The second is if you can provide some color on what happened with the working capital in 2025 was very strong. So I just want to understand what drove that. Apparently, part of that was working capital. And what is your expectations for the first half of the year, maybe? And finally, any comment on the [ USMCA ] renegotiation outlook? This is very important, as you know, in July, we have to come up to see if there is any conclusion of this process. It's going to start. But what is your view on how this could drive the North American business unit of Nemak if there is no -- especially if there is no agreement. And with that, I will stop for now my questions. Armando Tamez Martínez: Thank you, Alfonso, for your kind words. Related to volumes, one of the things, and this has to do a lot with the recent acquisition of GF Casting Solutions. As we have mentioned before, the company -- the acquired company is producing a lot of different components that are, for instance, even in different materials, including aluminum, magnesium and iron. And it was very, very difficult to homologate to the current, let's say, parts that we are making. So for that reason, we are deciding to only report volumes -- I'm sorry, revenues, EBITDA and CapEx going forward. We tried several exercises, but it was almost impossible to really homologate what we are doing today. Alberto Sada Medina: Yes. And Alfonso, this is Alberto. Related to your second question on working capital, certainly, we had a very favorable closing of the year on the working capital accounts. And as you know, I mean, as a company, we always are looking for ways how to optimize our cash needs. In this particular end of the quarter, we had extraordinary benefits on the working capital side that would revert most likely on the first quarter. So around the entire, let's say, turnaround of working capital, which normally on a seasonal basis is lower in the end of the year, about $60 million would be most likely reversed on the first quarter of 2026. So it's -- part of it is temporary and other part is part of our push towards improving improvements in working capital. And then related to your third question on USMCA, we'll have to see how everything evolves. I think it's also important to highlight that our products are all compliant. Everything that we do in Mexico that gets exported to the U.S. either directly or indirectly is fully compliant with USMCA rules. So I mean, so long as everything stays the same, we shouldn't see any impact in the development of our business in North America. Yes, we're close to the administration to make sure that everything is correctly incorporated into the negotiations. Alfonso Salazar: That's very clear. But yes, the volume thing, we need to talk later about it because we really need to have some metric to work with. Alberto Sada Medina: For sure, Alfonso, but as Armando highlighted, it becomes very difficult to give a head equivalent measure. In the past, one or two products was fine, but now with multiple products with multiple value adds the weight relationship doesn't have any more a correlation with the revenue. But we'll give a little bit more color on different segments on the revenue side. So I hope that, that can help better on your models going forward. Denise Reyes: The next question is Jonathan Koutras from JPMorgan. Jonathan Koutras: I also have three questions on my side. So please bear with me. The first one of the $85 million in charges in the quarter, right, if you could walk us through how much of this is recurring and if you expect these markdowns to continue in the coming quarters or years. This has been impacting results in the last 3 years or so, as you know. So just wanted to understand where we are in this process of reassessing assets. And the second question, on gross margins. Fourth quarter is historically softer given seasonality and there was no commercial negotiations or tailwinds in this quarter. So should we assume the last two quarters of gross margin at around 9% is somewhat the new normal for Nemak post these one-offs? Or do you see recovering back to the 11% level in the next quarters or so? And if that is the case, how come? And the third one -- last one as well on CapEx full year came in slightly above the guidance range. So if you could shed some light on this as well, please? Alberto Sada Medina: Yes. Thanks, Jonathan, for the questions. Related to the first one on the impairments and extraordinary charges that we registered this year, these are fully aligned with the need to realign and reallocate capacity where we have -- volumes where we have capacity. So based on that, we had to take certain footprint decisions to optimize our operation. And therefore, we had to write off a few of those capital assets on our books. We do that all the time. We had a similar figure last year where we had to write off certain of our EV assets. In this case, there was other ones. And yes, going forward, as of now, I mean, we see smaller figures, but we will have obviously to assess how everything develops. And yes, based on how some of the volumes move on, we will see if there is a need to do something else on the right side or not. But for now, I think most of it was done for now. Related to your second question on margins, yes, as you correctly point out, last year, particularly in the fourth quarter, it was heavily influenced by one-offs commercial claims that we closed with certain customers. So meaning 2024. In 2025, there was less activity on that front as of the closing. So at the end, the EBITDA margins that we're expecting should fall between the 12% range going forward on average based on revenue. And that essentially takes care, yes, all the combined effects that we see going forward. On one side, we saw that there were extraordinary expenses this last quarter related to special costs that we had in our operations in North America. But also there are things that may have both positive and negative effects related to how the evolution of the exchange rate happens as well as on the mix effects. So I think on an EBITDA basis, around between 11.5% to 12.5% would be what we would expect for the year. And last on the CapEx guidance. On the CapEx side, it is certainly calendarization effect. It's hard really to put it down to the last million. I think at the end, we closed pretty much within the guidance, plus/minus a few millions. So if we are a little bit higher, a little bit lower, most of it has to do with calendarization of the CapEx. Denise Reyes: We will proceed with the next question from Andres Cardona from Citi. Andres Cardona: Regarding the EBITDA CapEx, could you give us a sense of how much of the EBITDA is coming from the recently closed acquisition, so we can have also a picture of the legacy business. Alberto Sada Medina: So your question, Andres, is on the CapEx for guidance? Andres Cardona: No, EBITDA, the EBITDA, like how much of the EBITDA is coming from the new business and how much is coming from the legacy business? Alberto Sada Medina: Well, yes, I mean, we will certainly give you a little bit more color around how everything evolves in 2026. As indicated, it's both the EBITDA from Nemak and 11 months of Georg Fischer. So at this point, we're not breaking down the EBITDA on, let's say, on the both effects. We'll certainly be sharing a little bit more color about that on a regional basis as we move along the year. But you can easily make probably a little bit of calculations based on what we performed last year, perhaps a little bit less of associated claims and then everything on top of the number that we're giving is associated with Georg Fischer. Denise Reyes: The next question is from Alejandro Azar from GBM. Alejandro Azar Wabi: Alberto, Armando, before my questions, just to add my congratulations to Armando on an outstanding 42-year run at the company, wishing you the best in your next ventures, Armando. Now switching to my questions, and I have 3. The first is a follow-up on working capital, Alberto. How much of the benefit is structural and sustainable versus timing related and potentially reversing in 2026? That would be the first one. The second one is on GF Casting Solutions integration. If in your guidance, you are accounting for synergies you already noticed. And if not, if you can share with us the top 2, 3 levers that we should see? And how should we expect synergies to show up in EBITDA maybe in 2026 or perhaps 2027? And my last one is on AI and automation. If you can share a bit more color on where are you most advanced on these topics across your footprint? And if you are seeing meaningful productivity or cost benefits yet? Any examples would be really helpful, guys. Alberto Sada Medina: I'll take the first question, Alex, related to working capital. As we have seen in previous years, there is seasonality on how working capital moves up and down. And what we see normally at the end of the year is the reflection of, let's say, reduced activity at our customer plants as they stop for holidays and they do scheduled maintenance and the like. So a portion of that seasonality picks up again in the first quarter. So we will see a reversal as we have seen in previous years. And on top of that, we will see about $60 million of additional, let's say, of those extraordinary elements that we saw in December reversing most likely in the first quarter. So on a, let's say, seasonal basis, we see a recovery of working capital. And then part of that -- or let's say, on top of that, we will see a little bit of the one-offs that we saw in December coming back. Alejandro Azar Wabi: So for the full 2026, you expect to require additional amounts of working capital? Alberto Sada Medina: For the full ' 26, at least the $60 million that we saw on an extraordinary basis, unless there is any extraordinary happening at the end of -- or, let's say, during the year, we will see, yes, at least $60 million, let's say, benefit that we saw this year. Armando Tamez Martínez: Yes. Thank you, Alex, for your nice words. I appreciate it. Related to the GF integration and synergies, this is a very important point for us, Alex. We retained a firm that has been helping us in the past, in the major acquisitions that we have made to really focus in a very dedicated team and plan to get the best integration possible. We are true believers that integration of acquired companies is key. We already, for instance, contracted this or hired this external adviser with a lot of experience not only in the industry, but also with Nemak. And we already started actually since last year, to plan ahead what were the main, for instance, potential synergies. We visited all the GF Casting Solutions plants that they have in Europe as well as in China and the facility that is under construction and planning to be launched this summer in the U.S. And certainly, that has a cost, but also we are expecting in the midterm to reach synergies in the range of about $30 million to $40 million. We are fully committed. The company is fully committed to achieve those synergies. Of course, it will take some time. The main drivers for those synergies are related to sharing best practice and improving productivity, also best practices and sharing on the commercial front, how we can, for instance, get better pricing with some customers as well as better contracts as well as CapEx avoidance, which I think is very important in this industry, especially to, again, better use existing capacity. So those are some of the areas, Alex, that we are targeting. Of course, there will be some additional synergies. And if we find any redundancies, certainly, we would try to become leaner. So you will see, again, in the midterm, or expected, for instance, synergies, as I indicated, in the range of $30 million to $40 million that will be added value, in addition to getting, for instance, a relationship with very important Chinese OEMs and improving also our market position. So those are -- related to your last question in the AI, and this is an area that Nemak has devoted a lot of technical resources, and we're making very good inroads and very solid progress in terms of using, for instance, AI. We have invested heavily over the last probably 14 years in our company in installing a monitoring system in which we have a real-time data that it is available. We can, for instance, get every single facility, every single product line with real-time information of the products that we're making. That has been helping us a lot because we have a lot of different parameters that we need to control. And certainly, that has helped us in terms of getting better, for instance, quality, getting better productivity and so on. And with the help of the artificial intelligence, now what we are doing is in some of the plants, we are using these techniques and facilities to help us predict potential issues that we may have in the operations. And that has been already deployed in some of our facilities in Europe as well as North America. And certainly, we are planning to install similar approach in our facilities in China as well as the new facilities that we are acquiring from Georg Fischer. So those are some of the areas that we are taking advantage. This is on the operational side. In addition to that, of course, on the administrative side, we are using AI to help us again get some of the operations that we are normally doing in a much faster way. And certainly, that is helping us to reduce cost and optimize resources. Alejandro Azar Wabi: If I may go back, Armando, the $30 million to $40 million in synergies, do you think it's better to think that as free cash flow given you talked about CapEx? Armando Tamez Martínez: I think it's a combination of both CapEx avoidance as well as, for instance, also improving our productivity, improving our cost position, improve our commercial front. So it will be a combination of both increasing EBITDA in the midterm as well as reducing CapEx. Denise Reyes: Thank you, Alex, and thank you, Armando. We will move on to the written questions. We have one question from [ Pablo Dominguez from ION Group. ] The question reads, how -- does the 2026 CapEx guidance include the upfront payment of the GF acquisition? Also, does it include the additional CapEx needed for GF U.S. plant under construction? And if not, how much CapEx will the plant require during 2026? Alberto Sada Medina: Yes. The CapEx guidance for 2026, it's only associated with the capital expenditures of both the Nemak legacy business and Georg Fischer. So it includes the investments that Georg Fischer has for the new -- or let's say, the old Georg Fischer has for the new facility in the U.S. in Augusta. And the payment for the acquisition is not included in the CapEx guidance. Denise Reyes: Thank you, Alberto. We received another live question from [ Isaac Gonzalez from GBM. ] Unknown Analyst: I have a last question. I'd like to ask you by taking out volumes on the revenue, are you willing to open by segment or by EV/SC and ICE? Is it possible? Alberto Sada Medina: Yes, [ Isaac, ] thanks for the question. And as I highlighted before, I think in order for everyone to get a little bit more granularity on how the business develops, we'll share the revenue on a per segment basis. So I think that will help see how the business is evolving. With the cooperation of Georg Fischer, that segment grows significantly. So you'll start seeing some of the -- yes, how the revenue develops both on the legacy as well as on the new segments. Denise Reyes: The next question is from Alfonso Salazar from Scotiabank. Alfonso Salazar: Yes. Just a follow-up. Well, one, this is more than a question, a request. Years ago, Nemak had a very interesting guidance on how the breakdown of future sales between legacy business ICE and EV markets will unfold over time. It was very helpful. I mean it was very important for us to understand. In the end, the situation -- the market situation was very different to what you were expecting, what we all were expecting. But it would be a great way to understand, especially with the integration of GF Casting to see or to have some sense on where is Nemak going from here and what are your expectations regarding future growth, both in the legacy and new business lines. So that is more than a question -- a request that would be very interesting to see. The second -- the question is only regarding dividends. We see buybacks, but any comments on when dividends would be back? Armando Tamez Martínez: Thanks for the question, Alfonso. I think in the past, certainly, we were informing on a quarterly basis, for instance, how our EV and structural, components portfolio was growing. I think we will need to recalculate based on certain volume reductions that we have seen in different regions of the world. As I indicated, we are seeing a significant higher appetite in the industry overall for ICEs. So I think we will need to recalculate and also add I think 80% of revenues that are coming with the acquisition of GF are for the new products or the EV and structural components. So only 20% is in the powertrain. So I think the team, certainly, we will be able to recalculate and provide certain guidance on the two main components that the company is making. So certainly, we will share that. Alfonso Salazar: That will be fantastic, really helpful. And any comment on the dividend? Armando Tamez Martínez: Yes. I think the company certainly before the pandemic was giving a substantial amount of money in terms of dividends. Now I think the entire Board and the management team have been a little bit more prudent in terms of, again, first, looking how we can reduce our leverage. And then, of course, once the company is in a more reasonable leverage, which is below 2x net debt divided by EBITDA, I think the company will be in a position. And certainly, in our projections, we are looking that the company will be able to generate enough free cash flow to reduce our debt as well as pay dividends, but not this year. Denise Reyes: The next question is from [ Hinden Barredo ] from PGIM Group. Unknown Analyst: Just two quick ones for me. Can you remind us what the -- how much the closing payment is for the GF acquisition? And also, are you planning on issuing possibly new debt for the new manufacturing plant? Or are you just thinking about generating that with internal cash flows? Alberto Sada Medina: Yes, just to remind us, it was highlighted before, the payment that we did for Georg Fischer was $216 million, a little bit higher than what we had said before because we acquired the company with cash on their balance sheet and acquired a little bit of loans that they had on their balance sheet. And then on your second question, can you just repeat that, please? Unknown Analyst: And the second question is for the new manufacturing plant in the U.S., are you planning on maybe issuing new debt for that? Or are you just going to fund that with internal cash... Alberto Sada Medina: Yes. No, good question. With the CapEx that we have on our guidance, we should be able to cover that with our own cash and generation of the company. So no, we will not issue any substantial debt other than just maybe some liability management here and there. Denise Reyes: We will move on to another written question that we have from [indiscernible]. Hello, everyone. What is the expected free cash flow in 2026? And with a market value of less than $600 million, are you expecting to ramp up on buybacks? Alberto Sada Medina: Yes. Well, thanks for the question, Diego. We don't give any guidance on the free cash flow for the year. We expect it obviously to be positive. And for that reason, we'll continue with our share buyback in the same way that we did in 2025. We'll present that on our next general assembly for approval, but it will be consistent with what we have done in the past. Denise Reyes: Thank you, Alberto. There are no further questions at this time. And with that, we conclude today's event. I would just like to take this opportunity to thank everyone for participating. Please feel free to contact us if you have any follow-up questions or comments. This does conclude today's earnings webcast. Have a good day.
Jean Poitou: Good morning, and welcome. Thank you for joining us for this presentation of the 2025 annual results. I have been the new CEO since last September. My name is Jean-Laurent Poitou. I met some of you already. So not just the 2025 annual results, but also in line with what we announced on 22 January when we presented our Horizon strategy for the next few years. We'll tell you about the outlook. I will not reiterate what was said then, but we are -- we'll be looking at the implications of Horizons for 2026. I have next to me Olivier Champourlier, our CFO, who will give you details about the numbers. So the key figures for 2025. EUR 2.525 billion in revenue. That's an organic growth of 0.6%. Now that's less than the ambition that we have for future years. Nonetheless, the profitability is in line with what we announced for 2025 since we have 12.8% in operating margin before accounting for the dilutive effects of operations conducted in 2025, particularly the acquisition of the BVA Family and infas. Now then growth is less than hoped for. However, with a tight budget policy in the 50 operations, we were able to observe the necessary discipline to stay in line with our expectations for future years. So a few words about what we announced back in September and now the numbers as they have come out in the press release. In the EMEA region, that's about half of our revenue, organic growth stood at 2%. Now it was 5.5% in 2025 compared to 2024. So there's a continuing momentum on the EMEA region. Now if you look at the various businesses or the various markets or the audiences for the private sector, consumers, customers, patients, physicians. We find that organic growth stands at 2.1%. And so we emphasize this because on the citizens part, then there is Ipsos' activity with the public sector decision-makers, and that has a significant weight on growth. Our business there in the private sector has pursued this momentum with a 2% growth. And so in those areas where the automated services are most used by customers, we still enjoy good growth, including in those areas where services are automated, and that is particularly visible for the Ipsos digital platform. That's a platform that enables our customers either directly or with the help of our teams to conduct their surveys using that platform with the questionnaires, enabling them to have access to our human response through our panels and having an automatic rendition of the results on the platform, organic growth 27%, about 30% since the beginning. And since this is an automated platform that generates profitability twice as high as the group's average, and that is very promising indeed because in a world where technology, automation, artificial intelligence make it possible to conduct a significant amount of research using these solutions such as Ipsos Digital. This is very promising indeed, even if we can still do better. And then, of course, we're returning to significant acquisitions, the BVA Family and infas, so we are in France, or businesses in Italy -- so that business is growing. And also PRS IN VIVO, you may remember, this is assessing packaging. With PRS IN VIVO, we have a significant presence in a number of big markets, including the United States. And so infas, which enables us to have a reinforced presence in Germany and the public sector. Now the public sector, public affairs, now this weighs heavily on growth, several hundred million, but this is negative growth this year, minus 8%. So we're talking about EUR 30 million decline compared to last year, nonetheless. Public affairs is a major strategic asset for Ipsos. We reaffirmed this at Capital Markets Day for a simple reason. With our better understanding of citizens, we have items of background that produce and justify our -- well, not just the recommendations, the insights in line with responses we get from respondents as consumers, our patients, but also taking on board their own background, their opinions. And that, of course, enhances the quality of our surveys. But then this is a resilient business, and that's, of course, the unfortunate side of the -- well, the cyclical dimension of public affairs. This was hit, as you can well imagine, by complex and challenging political situations in our big markets in the U.S., in France, but also in Australia, New Zealand, India. And of course, budget situations and the shutdown in the U.S. certainly didn't help. So significant ups and downs. But in some cases, this business can be countercyclical. And that is, of course, one of the reasons why we keep the business. And then we didn't make the most of that growth potential. Our presence in many countries, a global presence really when you've conducted surveys on major public policies, transportation, health or whatnot, we can inform decision-makers in other countries. And so we can leverage that. Our presence in public affairs in many countries should enable us to relaunch that business. And of course, I didn't want to spend the whole time discussing public affairs. But even though the performance in -- was a bit disappointing. But without further ado, I'll give the floor to Olivier Champourlier, our CFO, who will give you details about the figures for 2025. Olivier. Olivier Champourlier: Good morning, ladies and gentlemen. So as Jean-Laurent pointed out, total revenue for the year 2025 stood at EUR 2.525 billion. Total growth, 3.4%. You have organic growth, 0.6%, scope effects 5.8%, and that is essentially related to the acquisitions, the BVA Family and infas, but also negative currency effects of minus 3%. And that, of course, weighed down on revenue. And that is a consequence of euro's performance vis-a-vis the U.S. dollar and other currencies. Looking at regions, EMEA growth stood at 12%. This is significant growth with a positive impact from acquisitions because the main acquisitions from the previous year, infas and BVA were in Europe, infas in Germany, BVA Family in France, Italy and Britain. Within the EMEA region, organic growth stood at 2%. And that, of course, is a good performance after -- well, in 2025, the growth stood at 5.5%. So within that region, there are several movements. Continental Europe enjoyed a significant growth, upwards of 2% in Germany, in Spain stood at 6%, Belgium 3%. And Eastern Europe, upwards of 10% and driven -- that was driven by Turkey. Same region, you have the Middle East, and this is enjoying dynamic growth, 8%. Nonetheless, it should be pointed out that you have one country with negative growth, and that's France. France suffered a 3% decline. That was mostly due to lower orders from the public sector if you -- and that is, of course, related to fiscal conditions, political uncertainty. But without that, had it not been for that, then we would have had some growth in France. Americas, 0.3% total growth, minus 3.4%. The difference between the 2 is negative FX with the depreciation of the U.S. dollar vis-a-vis the euro. So you have Latin America with sustained growth plus 5%. North America, by contrast, had a slight decline, minus 0.14%. That business in the U.S. was penalized because there was less public affairs business. And as Jean-Laurent pointed out, the shutdown in the U.S. and fiscal budget restrictions had a negative impact and the revenue was down 15% in the U.S. but restated for that, in North America, growth would have been 2%. Some businesses are resilient in the service lines, and that's consumer goods -- on the consumers market. That did well last year. Finally, you have Asia Pacific. You have 2 subregions there. China, of course, is the largest country, the biggest country in that region, and their growth was stable last year. And that in itself is pretty satisfactory in what is actual a challenging and indeed shrinking market. And for the rest of the region, growth was negative, minus 4%. That's Asia Pacific, not including Mainland China, minus 4%, and that was impacted by less business in public affairs in Australia and New Zealand, but also India. There was, of course, a host of elections in 2024. Now if you look at revenue by audience, we have service lines for consumers and clients and employees with a similar growth, 2.1%. That includes mostly understanding the markets and brands, the significance of the advertising market and what are known as mystery customers. Citizens, that includes public affairs then and what we call corporate and corporate reputation, and that had negative growth -- organic growth, minus 8%. The main markets were the U.S. and France that suffered, as Jean-Laurent indicated in an uncertain political environment, the shutdown in the U.S. and fiscal restrictions in a number of states. But a source of satisfaction is the business on doctors and patients that had positive organic growth, 2.4% compared with minus 3% last year. And so we have resumed growth there. That's mostly to do with innovation in oncology, rare diseases and studies on GLP, which concerns the treatment of type 2 diabetes and obesity. That these were growth factors for us. Business on the digital platform also enjoyed significant growth, 27%, but that platform enables us to deliver studies -- service for consumers, and that is the first line on this table. Restating for services to citizens, so the minus 8%. On the private sector, growth was 2.1% and you have to emphasize this, our business with private players remains very satisfactory indeed. Now looking at the income statement, revenue enjoyed 3.4% growth. Gross margin was up 2% so not quite as fast as the growth of revenue. The ratio stood at 68.7%, down 90 basis points compared to last year. Now how do you account for that? There are 2 effects. You have scope effects, and that is the acquisition of BVA and infas. And so this had an impact gross margin to the tune of 60 basis points. Infas is a public affairs business and so not using online platforms. And so the margin there is lower than the group's average. And so that was to be expected. And so no surprises there. At constant scope, we have a decline of 30 basis points decline in gross margin. That's because we have a high cost of data collection. That trend is only temporary. And for the year 2026, we expect -- in fact, we expect that margin rate to improve in line with previous years. Below that, you have the wage bill and SG&A. These were up -- well, because of the acquisitions mostly, but restating for that, that is acquisitions. The wage bill remained stable. So we were able to adjust our cost structure to the scope of our business. And regarding SG&A, that remained stable as well. There are 2 factors there. We kept investing in technology and information technology. So that's a significant increase, but then we were able to offset that with the savings on other items, SG&A items, mostly on offices on rents. There, the tax -- income tax rate was 25% in line with the rate for 2024. The operating ratio is 12.8% compared to 13.1%. It's on a constant ratio -- constant scope, it was 12.3%. So that is because of the acquisitions, but this is in a situation we are trying to keep costs under control. Net profit attributable to the group stood at EUR 240 million. You have -- the earnings per share adjusted is EUR 5.5 per share then. Regarding cash flow, gross operating cash flow stood at EUR 410 million compared to EUR 430 million last year, and that is, of course, in line with the lower operating margin. Regarding change in WCR, that was negative to the tune of about EUR 30 million, and that is for 2 reasons, higher business because the business grew 3.2% in Q4 2024. And also, we had provisions for the bonuses for variable compensation, and that was down compared to last year, and that is the disbursement that will occur in H2 2026. The intangible assets, and that's the CapEx standing at EUR 78 million, up EUR 78 million -- sorry, EUR 78 million, up EUR 9 million compared to 2024. And that is in line with what we told the market. We keep investing in strategic solutions, platforms, panels and generative AI, sorry. Free cash flow stood at EUR 181 million to be compared with an average of about EUR 200 million. So free cash flow is more or less in line, at least close to the average performance of the last 4 years. If you look at below that line on free cash flow, you have acquisitions and financial investments for the year, EUR 178 million, and that is, of course, the acquisitions, the BVA Family and infas again. We bought back some shares to deliver free shares to our employees to the tune of EUR 14 million. Then there was dividends paid about EUR 80 million. And regarding financing operations, there's an increase in that, about EUR 100 million. And that's -- you have 2 operations there. We issued a bond of EUR 400 million in January 2025. And in June of the same year, we paid back the previous bond, EUR 300 million. So the net effect is EUR 100 million. And then finally, let me conclude with the financial position, the group's financial position. It's an outstanding situation. The balance sheet is sound. Net debt stand at EUR 219 million compared to EUR 57 million last year, but that's because of the acquisitions. The debt-to-EBITDA ratio remains sound at 0.5x EBITDA so above -- way above last year, but that's because of the acquisitions. But regarding gross debt, it stands at EUR 525 million because of the refinancing of the bond, we don't have any short-term deadline. The next one is 2030. And we have undrawn credit lines above EUR 400 million. And so we have, of course, plenty of cash available. Thank you for your attention. And now I'll give the floor back to Jean-Laurent, who will give you a more detailed analysis of our business. Jean Poitou: Thank you, Olivier. So we've discussed 2025. 22nd of January, we discussed the future 2 time Horizons, '26, '28 and the longer out to 2030. We're going to briefly return to that to focus on what it entails both in terms of intervention and actions on our activity in terms of numbers for the current year. Our priority is a return to organic growth by continuing to maintain current margin levels and our prime obsession is that of stronger organic growth than the 0.6% that we've just mentioned. We're in a dynamic industry. So we're continuing to see our clients and the example of our change in our activity, excluding public affairs, continues to demonstrate that in 2025, our clients require ever more capacity to predict, to compare information from several source to inform their decisions, investment -- new products, advertising, new packaging, new points of sale, either physical or digital. So we're in a market that will continue to drive our growth. And for that, we've taken 6 strategic choices that I'll return to briefly. It was a subject of a longer intervention, January 22 that I'll recall here. Firstly, we've decided to retain all the activities that we can cross all our 70 activities and 16 service lines, giving us a clear understanding of the people that we pull and then we provide data on the basis of the surveys to our clients. Secondly, our global footprint because it allows us to take global mandates from key accounts for Ipsos, but also allows us in each and every market to have the insights of that market to know how we pull people in villages, in towns in Peru, how we pull people online in the United States. They're very specific to each market. So our global footprint guarantees the quality of our access to respondents and also the ability to deploy solutions globally. Third, conviction, third belief, we must move ever fast in supplying answers to our clients at a time where we can with a well-crafted prompt, have a first version of a storyboard or an image for an ad campaign. It's -- there's obviously no question of waiting for weeks to know what will be the impact, the possible score of a particular storyboard or image. Fourth convention to do that, we must leverage technology and AI. Ipsos started years back to invest in contemporaneous tech and AI, but it must transform the way we work to achieve this priority of speed. I mentioned respondents and how our local as well as our global criteria was a criteria for access. Human respondents are the basis on which we can then recalibrate synthetic data, human respondent through the millions of people we can pull each and every day of quality and relevance for our clients will obviously continue to improve to invest in our panels to continue to bring in-house our ability to pull people on a regular basis and therefore, grow our proprietary panels. Sixthly, our activity remains centered on data information to our clients, but we must improve our position on value-added services, predictively analyze data, integrate data from varying sources that our clients can get either from social media, their own tools, CRM or surveys we supply them or surveys supplied by other marketplace. So these strict 6 strategic choices are key. But what's important is execution. In 2026, the first thing is to implement in terms of technical solutions of the systems and operating models that we're currently developing to have globally managed services that are managed consistently with the same methods, the same price ranges, the same technology, the same way of processing and retrieving the information wherever we operate. Identification, we have 6 heads of 6 globally managed services, 6 out of 70 is a small proportion, might you say, but in fact, that's several hundred million euros. These are well-established services where these GMS heads throughout the world will be responsible for driving growth and profitability of those services with local teams, not a matter of doing it fully centralized way, consistent with our approach, combining global presence and local relevance with the tools and we invest, and that's where we focus our investment on new tech AI-based solutions so as to recover it to the full DRI that only a uniform approach allies. We invest in the same platform across the board and develop it and deploy it consistently. We managed and leverage the ROI, making the first 6 of these GMSs globally managed services. First 6, once we have an operating model combining centralized management of the service and local rollout, we'll continue. It's but a beginning, we'll have others over and above the 70s. We'll extend it to other products that can be deployed across the world with a more centralized model. Secondly, we must continue to accelerate the rollout of digital and the use of -- by our clients, EUR 140 million, a platform that has a profitability higher than double that of Ipsos growing 40%, but we must do far more. When we look at our regions, the use of Ipsos digital is broadly dissimilar. So we're going to strengthen usage where we consider. We're not maximizing market opportunities with the platform. We'll continue to enrich the solutions based on this platform, allow us to treat specific services, focus groups, quality, brand insights and surveys, a set of solutions simpler and easier, essentials on the digital platform, allowing our clients to access services that they wouldn't be able to access without. And lastly, we'll open Ipsos Digital to new audiences. Concretely today, a client who conducts a survey with our help or directly on Ipsos Digital has access to our panel. We'll be able to connect other sets of respondents, the data of our clients, respondents who are not just consumers, but business leaders to supply trends on B2B or doctors and patients. So we'll open this up through the APIs. Access to panels other than those currently available today on Ipsos Digital, we believe that the accelerating growth of Ipsos Digital is a priority within our reach this year. Thirdly, around commercial efficiency. Today, we have a growth that is lower than that we're seeking. Obviously, we're going to go all out on empowering all leaders, the business leaders of the main countries of the business lines in our major markets so that each can have 1, 2, 3 clients with costed explicit targets to which is linked their annual performance. We're going to increase empowerment on commercial efficiency. And then there are a number of large contracts, more efficient platforms, greater in-housing, we must be even more competitive on these major contracts. We're also going flat out on what we have to retain that in terms of renewals to leverage the contracts that we don't currently own. So commercial activity on those major contracts. And then with the economic equation of having a local development team for the smaller accounts, we will bolster our activity, continuing to conquer new logos with business development teams where that is justified. So with that, we should rely on our heightened commercial efficiency to drive organic growth. But none of that is possible without the strengthening, as I mentioned, of our tech capabilities and to leverage opportunities open to us with AI. So we strengthened our management team with the appointment of Nathan Brumby as Chief Platforms and Technology Officer of Ipsos in charge of all our tech developments and solutions of data processing and AI with 2 simple priorities. On the one hand, continue to ensure that all tools where we've already invested major differentiating factor for Ipsos some more widely used where they can be. It's not the case currently today. And secondly, by investing in solutions, which for the service lines are AI-based solutions to reach our speed target to automate far more than is the case today. Our production chains speed because we said that tech should allow us on our production chain to accelerate and ensure, as we said at the CMD, responses provided real time for others, less than 48 hours. It's an upheaval. It's a radical shift in the way we work and the tools that we use. Obviously, it's not going to have at the drop of a hat. This is going to be -- it started in 2026. It won't add in '26. It needs to be broken down service focus where the speed factor is key for our clients, where our automation capacity must be leveraged rapidly. And so we've broken down and separated this speed requirement over several years by leveraging our platforms, reinventing our production chain with agents that can automate tasks done by our teams and by rethinking the way we work around many of our major services. For that, of course, we're capitalizing on the strengths that remain, our people, clients and innovation. I've been in professional services for some 10 years. We have teams that measure the employee engagement rate, do that for the clients, sometimes for us. 76% engagement rate is far higher than the average engagement rate that we're seeing at 72%. That's a benchmark. We have people who have a passion for what they do. They're committed. And then we have loyal clients over all clients spending at least EUR 1 billion so that we supply insight data production services. There's one in 100 who leaves us every year. So we have a churn rate of our client base that's very low. Lastly, innovation. [ GRIT ], an organization that looks at the various market player point named Ipsos, the most innovative company in the sector. We see this importance of innovation at this turning point of market surveys. It's absolutely critical to have this competitive edge brought to us by innovation on playing to these strengths, we're reaffirming our ambition to make Ipsos the world leader on actionable insights in which our clients take major decisions, product innovation, advertising, commercial rollout with a high impact and AI-based. What does that lead to in terms of the number? These are the targets in our CMD average growth '26 to '28 between 3% to 4%, accelerating in the out years, '29 to '30 to exceed 5%, operating margin of 13.5% in 2028 that must exceed 14% in the following period. Free cash flow cumulative over those -- over the order of EUR 1.4 billion, coupled with our low leverage that Olivier mentioned, our capacity to mobilize debt. If we need to invest primarily on acquisitions, many on solutions and tech accelerators, but also on our panels and acquisitions closer to Ipsos, EUR 1.2 billion that we plan to mobilize over 5 years. In 2026, our organic growth outlook is in the range of 2% to 3%. So we're embarking on this trajectory that will lead us to an average organic growth between 2% and 3% over the next 3 years. Operating margin of the order of that achieved in 2025. Turning now to the other commitment made at the CMD, an increased return to shareholder of 40% to 50% shareholder return of adjusted diluted EPS. This return will comprise 2 parts: one, an increase of our dividend per share, EPS adjusted diluted at EUR 2. But in addition, we consider that we have the ability without changing the trajectory that I've just mentioned, investing in acquisitions and in our tech and panel to have a share buyback program cancellation, which will be submitted to the AGM in May of EUR 100 million in 2026. So those are the main outlook points that I wish to share with you before opening up for Q&A with 2 items on our agenda, 16th April for the Q1 results and May 20 for our Annual Shareholders' Meeting. Thank you for your attention. We'll now take your questions. Operator: Question number one. Emmanuel. Emmanuel Matot: Good morning, gentlemen. My name is Emmanuel Matot of ODDO BHF. I have several questions. Regarding your target for organic growth for 2026, we note a significant acceleration to 3% compared to 0.6% in 2025. Do you believe that this will be for all audiences, all types of audiences? Or are you looking mostly at the Citizens business, which should go back to normal, having suffered an 8% decline in 2025. So are we looking at a year where -- with a sort of steady growth from H1 to H2? Or do you expect H2 to be significantly higher than H1? That's regarding the momentum on revenue. Second question about moving parts and the operating margin expected in 2026. Are you looking at something stable at 12.3%? I expect that is to do with organic growth in revenue, this gross margin where you want an improvement in margin and yet the data collection cost went up in H2 2025. And so was that only temporary? And then I imagine that the acquisitions -- well, they are useful, but they themselves should improve their own performances. And then I was a bit surprised by this share buyback program, EUR 100 million. It's about 7% for the shareholder. What prompted that decision? Unknown Executive: Well, we'll take the question about organic growth. And where is this to occur mostly? Well, we have a strategic plan where we propose to invest in what are known as Globally Managed Services. And so these are businesses to do with the first line of business, namely consumers. And so we expect growth there to accelerate because we've been investing in GMS specifically on that line -- on that business line. On public affairs, we were at minus 8% in 2025, and we certainly hope -- expect the situation to improve. Having said that, that was low ebb at minus 8%. So we are looking at a resumption of growth, at least a better performance in public affairs and stepping up business in the other business lines. Regarding the operating margin, we said it would be higher, well, equivalent to that of 2025. And so 2025, we published a margin of 12.3%. So it should stand at about that. There, again, various factors involved. There were acquisitions and they had dilutive effects in 2025, but the dilutive effects should peter out in 2026 and indeed -- and they should dwindle away in 2027. But we will keep investing. So there will be capital expenditure there. That's, of course, regarding technology acquisitions. And then there will be -- we expect some productivity gains because we will be managing our panels and other instruments to make our tools more productive. Regarding gross margin, historically, well, gross margin has grown over time. This year, of course, it was down because of acquisitions, but there are 2 types of acquisitions. You had infas. Infas is mostly a public affairs business, and there's not much to be gained from synergies. But the BVA Family is a more traditional line of business covering all areas. And so there, we do expect synergies. Indeed, with the BVA Family, we started merging our teams, and we are proposing new solutions and the teams from BVA are joining our organization there. And so we expect gross margin and operating margin in these businesses to be in line with the profitability of the rest of the group by 2027. Regarding the share buyback program, well, if you look at the present share price, this was a good opportunity. But also, we believe that the share price does not reflect the actual value of the company in terms of growth, profitability, the debt ratio and all these factors are not fully reflected in the share price. And indeed, we -- even though organic growth was slightly less than our expectations, we still have a good performance. And so when the share price is low, this is a good time to buy back a significant amount of shares to be canceled. And indeed, that will be proposed to the AGM later this year. On revenue seasonality, what are the expectations for 2026? Well, look, we are engaging in an in-depth transformation of our business, new tools, new ways of working, commercial effectiveness and such like. So we are looking at a 3-year horizon. We cannot break down this. We cannot look at this on a quarterly basis. Unknown Analyst: My name is [indiscernible]. I had 2 questions, a technical question first on digital data, digital twins, new players that are banking on the fact that the digital twins may well replace panelists in the long run. Do you -- are you using that at all? I mean that's the question. And then in view of productivity gains, thanks to AI, Ipsos Digital is growing pretty fast. Why aren't you banking on much higher growth in margin? I mean, you could be more ambitious than that surely. Unknown Executive: Regarding virtual data, we don't want to get into the detail of that, but we have 2 strong beliefs. Number one, of course, AI in general, makes it possible to generate virtual twins or equivalents of individual data collected from actual respondents. So if you have a digital twin of the population, say, patients of that category, all you need to do is ask the question and you get the right answer and you don't need to go out and actually send questions to real people with phone calls or surveys and such like. But that's the theory. Well, one thing, though, is these things are changing slowly but surely. But of course, the actual people change as well. We need to recalibrate things. Some responses will need to be adjusted. And well, you have audiences that are more difficult to access. So we can use virtual twins instead, but we have to control for all that. But at the end of the day, we want precise information because if you launch a new product and the virtual respondent is left behind actual development, well, then our customers is spending money in the wrong place. So we can do this, but we have to rely on actual respondents. We have academic partnerships who are working on that, but cautiously. Regarding the impact on profitability, if you look at 2026, we will be rolling out some of the solutions we have been investing in, but we will need to keep investing to grow these solutions with -- to have differentiated solutions using AI with a broader and broader spectrum of services. So profitability is because, of course, some services such as Ipsos Digital are automated, so profitability increases, but we still need to invest in panels and in other technical solutions. So we are looking at growing margin, and we expect it to grow all the way to 2030. Nonetheless, we have to remain at the forefront of innovation. Eric Blain: Eric Blain from Finance Connect. About the profit margin, you say that the platform has generated 30% growth. What's the revenue of the platform? EUR 640 million. And so with a good profit margin. So that certainly drives the group's margin up, doesn't it? You said that there was dilution effects that these should be -- that would be petering out next year. And so the gross margin at the end should improve, but capital expenditure is remaining stable. So surely, given that, you should do better than last year, not the same as last year. And the second question about EUR 100 million worth of share buyback. Why is this? And if the price -- the share price goes down in spite of that buyback program, will you delist it? And if you look at the profit margin by geographical area, very much like the previous presentations where you had some granularity on margin by territory. Could we have some color on that? Unknown Executive: Well, on question number one, the operating margin in 2026. And that is a bit like the previous question. You have to keep in mind that we are looking here at a trend over 3 years. We have a strategic plan, and we are looking at operating margin of about 13.5% by 2028 and 14% for the years after that. So as early as this year, we have been -- there will be capital expenditure with new solutions, and we do expect this to bring fruition later on. Right now, we are rolling out the plan. Some tools are available. Others will arrive in H2, but we have to be realistic here. These new assets will bear fruition later on, maybe by 2027. So for the time being, we simply would like to confirm that, well, we're pretty confident, at least we expect to keep operating margin the same level as 2025. On the matter of profitability because you are referring to capital expenditure, that increased significantly in 2025 compared to 2024, 18%, up EUR 80 million. So we're looking at growth through innovation here. And so we need to keep investing. That, of course, does eat away at the profit margin. If we look at the payout policy, we are -- well, we repeat what we said, we're looking at anywhere between 40% and 50% of net adjusted income paid back to shareholders through dividends, of course. Having said that, we have no further comments on future buyback programs in the following years and depends on a number of factors. I mean, we do not propose to delist the company. We do propose to remain autonomous and independent. And if you look at a breakdown by geographical area, normally, we do not communicate on that. Eric Blain: But maybe you could at least tell us about numbers in the U.S. or specifically. Maybe you can... Unknown Executive: Well, the U.S. market has higher margins than other territories. But the low dollar is a dilutive factor. Yes, there was an effect on currency effect. You didn't mention. No, we didn't mention it because it's not significant. Operator: [indiscernible] Unknown Analyst: Congratulations for this. A question on the major tech players such as Meta, Google, Alphabet. You mentioned in the past that you were going to generate significant revenue with those key accounts and to be added in your services. Is that still the case today? Could you detail better for us what you're doing for the major U.S. tech clients? Unknown Executive: Yes. Well, coming from a world where I had a lot of dealings with the major tech players, the fact that they're amongst our largest key accounts. This is something that interested me keenly, and it ties in with the question about synthetic data to a certain extent. One of the added values we're bringing is our detailed knowledge over and above the mere processing and presentation of data, the lessons learned and access to real respondents because these tech players have access to the people who access their platform. So each has primarily access to the people who access their platform. We have access to everyone, those who access their platforms and the others. So when it's a matter of pulling their reputation on the market to have access to specific audience segments, well, they rely on our capability. And that's our fifth strategic conviction. It's a major differentiating factor in this important world through its economic and social importance of the major tech that we're very relevant for them. Operator: Questions on the line? The first question comes from Berenberg. Over to you. Unknown Analyst: Jean-Laurent, Olivier, just a few questions from my side. Firstly, could you give us some insights on what you're seeing in terms of activity? Are you seeing a slight improvement over Q4 '25? And secondly, what's the percentage of the utilization of your own panels? And what percentage you're targeting by 2028? And recently, in your presentation, you mentioned GMS. You plan to extend GMS to several service lines. What is the time horizon for that unfolding? And how much might GMS is represented in 2028? Jean Poitou: Well, we're not -- well, we'll be presenting the Q1 figures on April 16, as indicated on the slide. So we have no comment at this stage on the activity for Q1. But on the panel percentage, well, we're not going to disclose on the percentage utilization of our panels, but we have an internalization issue. The proportion of our own panels in the activity will increase by '28 to answer your question, this internalization, in-housing an important effort for us. And then after extension of GMS today, 6 services, which we're investing in specific platforms where we're changing the operating model to manage them globally, we are going to land this model in 2026, continue to extend them in the second half of '26, early part of '27, depending on the speed of change. I haven't modelized in '28 what the percentage will be. But what is clear is that we're going to go for a few hundred million to a growing share that will probably top at that horizon half our revenue. Operator: We have another question on the line. From UBS. Hai Huynh: Hai from UBS. The first one is just a little bit beyond '26, right? Because you guide for 2% to 3% for '26, but the average for '26 and '28 is 3% to 4%. Now Ipsos Digital is already growing 27% this year. So can you help us bridge towards that gap to 3% to 4%? Are you expecting Ipsos Digital to grow even further than the 27% rate? Or where do you see the acceleration to get -- to bridge that gap? That's my first question. And the second question is just how should we think about the pricing and margin dynamics for GMS versus your traditional ad hoc research? And then the third question is on the free cash flow. So you delivered EUR 181 million this year. And in your CMD, you're expecting EUR 1.4 billion to basically fund your acquisitions and your strategy over the next 5 years. So could you help us also explain on where do you expect free cash flow to ramp up? Is that going to be back-end weighted? Jean Poitou: So on Ipsos Digital, indeed, however, remarkable this growth of 30% is it's EUR 140 million. If I just look at the dissimilarity, heterogeneity of usage, and we can beef up the portfolio based on digital solutions. Ipsos Digital will be far higher growth. It's a major focus areas for speed and for obvious economic reasons. On the growth profile and profitability of GMS, that drive innovation through new products, new solutions, new products of our clients based around creativity or the ad segment and behavior analysis. These are sectors that are both today in the portfolio, a few hundred million euros of those 3 broad categories of services that we manage globally, growth and profitability above the Ipsos average. Lastly, on FCF for the next 5 years, yes, we announced an FCF over the next 5 years of EUR 1.4 billion when comparing to what we achieved in '25. You'll see that there's an acceleration pathway versus 2025 to reach that EUR 1.4 billion over the 5-year period. I think that's about it in terms of questions. It remains for me to thank you, and see you on April 16 for the Q1 results. Thank you. Have a great day.
Jean Poitou: Good morning, and welcome. Thank you for joining us for this presentation of the 2025 annual results. I have been the new CEO since last September. My name is Jean-Laurent Poitou. I met some of you already. So not just the 2025 annual results, but also in line with what we announced on 22 January when we presented our Horizon strategy for the next few years. We'll tell you about the outlook. I will not reiterate what was said then, but we are -- we'll be looking at the implications of Horizons for 2026. I have next to me Olivier Champourlier, our CFO, who will give you details about the numbers. So the key figures for 2025. EUR 2.525 billion in revenue. That's an organic growth of 0.6%. Now that's less than the ambition that we have for future years. Nonetheless, the profitability is in line with what we announced for 2025 since we have 12.8% in operating margin before accounting for the dilutive effects of operations conducted in 2025, particularly the acquisition of the BVA Family and infas. Now then growth is less than hoped for. However, with a tight budget policy in the 50 operations, we were able to observe the necessary discipline to stay in line with our expectations for future years. So a few words about what we announced back in September and now the numbers as they have come out in the press release. In the EMEA region, that's about half of our revenue, organic growth stood at 2%. Now it was 5.5% in 2025 compared to 2024. So there's a continuing momentum on the EMEA region. Now if you look at the various businesses or the various markets or the audiences for the private sector, consumers, customers, patients, physicians. We find that organic growth stands at 2.1%. And so we emphasize this because on the citizens part, then there is Ipsos' activity with the public sector decision-makers, and that has a significant weight on growth. Our business there in the private sector has pursued this momentum with a 2% growth. And so in those areas where the automated services are most used by customers, we still enjoy good growth, including in those areas where services are automated, and that is particularly visible for the Ipsos digital platform. That's a platform that enables our customers either directly or with the help of our teams to conduct their surveys using that platform with the questionnaires, enabling them to have access to our human response through our panels and having an automatic rendition of the results on the platform, organic growth 27%, about 30% since the beginning. And since this is an automated platform that generates profitability twice as high as the group's average, and that is very promising indeed because in a world where technology, automation, artificial intelligence make it possible to conduct a significant amount of research using these solutions such as Ipsos Digital. This is very promising indeed, even if we can still do better. And then, of course, we're returning to significant acquisitions, the BVA Family and infas, so we are in France, or businesses in Italy -- so that business is growing. And also PRS IN VIVO, you may remember, this is assessing packaging. With PRS IN VIVO, we have a significant presence in a number of big markets, including the United States. And so infas, which enables us to have a reinforced presence in Germany and the public sector. Now the public sector, public affairs, now this weighs heavily on growth, several hundred million, but this is negative growth this year, minus 8%. So we're talking about EUR 30 million decline compared to last year, nonetheless. Public affairs is a major strategic asset for Ipsos. We reaffirmed this at Capital Markets Day for a simple reason. With our better understanding of citizens, we have items of background that produce and justify our -- well, not just the recommendations, the insights in line with responses we get from respondents as consumers, our patients, but also taking on board their own background, their opinions. And that, of course, enhances the quality of our surveys. But then this is a resilient business, and that's, of course, the unfortunate side of the -- well, the cyclical dimension of public affairs. This was hit, as you can well imagine, by complex and challenging political situations in our big markets in the U.S., in France, but also in Australia, New Zealand, India. And of course, budget situations and the shutdown in the U.S. certainly didn't help. So significant ups and downs. But in some cases, this business can be countercyclical. And that is, of course, one of the reasons why we keep the business. And then we didn't make the most of that growth potential. Our presence in many countries, a global presence really when you've conducted surveys on major public policies, transportation, health or whatnot, we can inform decision-makers in other countries. And so we can leverage that. Our presence in public affairs in many countries should enable us to relaunch that business. And of course, I didn't want to spend the whole time discussing public affairs. But even though the performance in -- was a bit disappointing. But without further ado, I'll give the floor to Olivier Champourlier, our CFO, who will give you details about the figures for 2025. Olivier. Olivier Champourlier: Good morning, ladies and gentlemen. So as Jean-Laurent pointed out, total revenue for the year 2025 stood at EUR 2.525 billion. Total growth, 3.4%. You have organic growth, 0.6%, scope effects 5.8%, and that is essentially related to the acquisitions, the BVA Family and infas, but also negative currency effects of minus 3%. And that, of course, weighed down on revenue. And that is a consequence of euro's performance vis-a-vis the U.S. dollar and other currencies. Looking at regions, EMEA growth stood at 12%. This is significant growth with a positive impact from acquisitions because the main acquisitions from the previous year, infas and BVA were in Europe, infas in Germany, BVA Family in France, Italy and Britain. Within the EMEA region, organic growth stood at 2%. And that, of course, is a good performance after -- well, in 2025, the growth stood at 5.5%. So within that region, there are several movements. Continental Europe enjoyed a significant growth, upwards of 2% in Germany, in Spain stood at 6%, Belgium 3%. And Eastern Europe, upwards of 10% and driven -- that was driven by Turkey. Same region, you have the Middle East, and this is enjoying dynamic growth, 8%. Nonetheless, it should be pointed out that you have one country with negative growth, and that's France. France suffered a 3% decline. That was mostly due to lower orders from the public sector if you -- and that is, of course, related to fiscal conditions, political uncertainty. But without that, had it not been for that, then we would have had some growth in France. Americas, 0.3% total growth, minus 3.4%. The difference between the 2 is negative FX with the depreciation of the U.S. dollar vis-a-vis the euro. So you have Latin America with sustained growth plus 5%. North America, by contrast, had a slight decline, minus 0.14%. That business in the U.S. was penalized because there was less public affairs business. And as Jean-Laurent pointed out, the shutdown in the U.S. and fiscal budget restrictions had a negative impact and the revenue was down 15% in the U.S. but restated for that, in North America, growth would have been 2%. Some businesses are resilient in the service lines, and that's consumer goods -- on the consumers market. That did well last year. Finally, you have Asia Pacific. You have 2 subregions there. China, of course, is the largest country, the biggest country in that region, and their growth was stable last year. And that in itself is pretty satisfactory in what is actual a challenging and indeed shrinking market. And for the rest of the region, growth was negative, minus 4%. That's Asia Pacific, not including Mainland China, minus 4%, and that was impacted by less business in public affairs in Australia and New Zealand, but also India. There was, of course, a host of elections in 2024. Now if you look at revenue by audience, we have service lines for consumers and clients and employees with a similar growth, 2.1%. That includes mostly understanding the markets and brands, the significance of the advertising market and what are known as mystery customers. Citizens, that includes public affairs then and what we call corporate and corporate reputation, and that had negative growth -- organic growth, minus 8%. The main markets were the U.S. and France that suffered, as Jean-Laurent indicated in an uncertain political environment, the shutdown in the U.S. and fiscal restrictions in a number of states. But a source of satisfaction is the business on doctors and patients that had positive organic growth, 2.4% compared with minus 3% last year. And so we have resumed growth there. That's mostly to do with innovation in oncology, rare diseases and studies on GLP, which concerns the treatment of type 2 diabetes and obesity. That these were growth factors for us. Business on the digital platform also enjoyed significant growth, 27%, but that platform enables us to deliver studies -- service for consumers, and that is the first line on this table. Restating for services to citizens, so the minus 8%. On the private sector, growth was 2.1% and you have to emphasize this, our business with private players remains very satisfactory indeed. Now looking at the income statement, revenue enjoyed 3.4% growth. Gross margin was up 2% so not quite as fast as the growth of revenue. The ratio stood at 68.7%, down 90 basis points compared to last year. Now how do you account for that? There are 2 effects. You have scope effects, and that is the acquisition of BVA and infas. And so this had an impact gross margin to the tune of 60 basis points. Infas is a public affairs business and so not using online platforms. And so the margin there is lower than the group's average. And so that was to be expected. And so no surprises there. At constant scope, we have a decline of 30 basis points decline in gross margin. That's because we have a high cost of data collection. That trend is only temporary. And for the year 2026, we expect -- in fact, we expect that margin rate to improve in line with previous years. Below that, you have the wage bill and SG&A. These were up -- well, because of the acquisitions mostly, but restating for that, that is acquisitions. The wage bill remained stable. So we were able to adjust our cost structure to the scope of our business. And regarding SG&A, that remained stable as well. There are 2 factors there. We kept investing in technology and information technology. So that's a significant increase, but then we were able to offset that with the savings on other items, SG&A items, mostly on offices on rents. There, the tax -- income tax rate was 25% in line with the rate for 2024. The operating ratio is 12.8% compared to 13.1%. It's on a constant ratio -- constant scope, it was 12.3%. So that is because of the acquisitions, but this is in a situation we are trying to keep costs under control. Net profit attributable to the group stood at EUR 240 million. You have -- the earnings per share adjusted is EUR 5.5 per share then. Regarding cash flow, gross operating cash flow stood at EUR 410 million compared to EUR 430 million last year, and that is, of course, in line with the lower operating margin. Regarding change in WCR, that was negative to the tune of about EUR 30 million, and that is for 2 reasons, higher business because the business grew 3.2% in Q4 2024. And also, we had provisions for the bonuses for variable compensation, and that was down compared to last year, and that is the disbursement that will occur in H2 2026. The intangible assets, and that's the CapEx standing at EUR 78 million, up EUR 78 million -- sorry, EUR 78 million, up EUR 9 million compared to 2024. And that is in line with what we told the market. We keep investing in strategic solutions, platforms, panels and generative AI, sorry. Free cash flow stood at EUR 181 million to be compared with an average of about EUR 200 million. So free cash flow is more or less in line, at least close to the average performance of the last 4 years. If you look at below that line on free cash flow, you have acquisitions and financial investments for the year, EUR 178 million, and that is, of course, the acquisitions, the BVA Family and infas again. We bought back some shares to deliver free shares to our employees to the tune of EUR 14 million. Then there was dividends paid about EUR 80 million. And regarding financing operations, there's an increase in that, about EUR 100 million. And that's -- you have 2 operations there. We issued a bond of EUR 400 million in January 2025. And in June of the same year, we paid back the previous bond, EUR 300 million. So the net effect is EUR 100 million. And then finally, let me conclude with the financial position, the group's financial position. It's an outstanding situation. The balance sheet is sound. Net debt stand at EUR 219 million compared to EUR 57 million last year, but that's because of the acquisitions. The debt-to-EBITDA ratio remains sound at 0.5x EBITDA so above -- way above last year, but that's because of the acquisitions. But regarding gross debt, it stands at EUR 525 million because of the refinancing of the bond, we don't have any short-term deadline. The next one is 2030. And we have undrawn credit lines above EUR 400 million. And so we have, of course, plenty of cash available. Thank you for your attention. And now I'll give the floor back to Jean-Laurent, who will give you a more detailed analysis of our business. Jean Poitou: Thank you, Olivier. So we've discussed 2025. 22nd of January, we discussed the future 2 time Horizons, '26, '28 and the longer out to 2030. We're going to briefly return to that to focus on what it entails both in terms of intervention and actions on our activity in terms of numbers for the current year. Our priority is a return to organic growth by continuing to maintain current margin levels and our prime obsession is that of stronger organic growth than the 0.6% that we've just mentioned. We're in a dynamic industry. So we're continuing to see our clients and the example of our change in our activity, excluding public affairs, continues to demonstrate that in 2025, our clients require ever more capacity to predict, to compare information from several source to inform their decisions, investment -- new products, advertising, new packaging, new points of sale, either physical or digital. So we're in a market that will continue to drive our growth. And for that, we've taken 6 strategic choices that I'll return to briefly. It was a subject of a longer intervention, January 22 that I'll recall here. Firstly, we've decided to retain all the activities that we can cross all our 70 activities and 16 service lines, giving us a clear understanding of the people that we pull and then we provide data on the basis of the surveys to our clients. Secondly, our global footprint because it allows us to take global mandates from key accounts for Ipsos, but also allows us in each and every market to have the insights of that market to know how we pull people in villages, in towns in Peru, how we pull people online in the United States. They're very specific to each market. So our global footprint guarantees the quality of our access to respondents and also the ability to deploy solutions globally. Third, conviction, third belief, we must move ever fast in supplying answers to our clients at a time where we can with a well-crafted prompt, have a first version of a storyboard or an image for an ad campaign. It's -- there's obviously no question of waiting for weeks to know what will be the impact, the possible score of a particular storyboard or image. Fourth convention to do that, we must leverage technology and AI. Ipsos started years back to invest in contemporaneous tech and AI, but it must transform the way we work to achieve this priority of speed. I mentioned respondents and how our local as well as our global criteria was a criteria for access. Human respondents are the basis on which we can then recalibrate synthetic data, human respondent through the millions of people we can pull each and every day of quality and relevance for our clients will obviously continue to improve to invest in our panels to continue to bring in-house our ability to pull people on a regular basis and therefore, grow our proprietary panels. Sixthly, our activity remains centered on data information to our clients, but we must improve our position on value-added services, predictively analyze data, integrate data from varying sources that our clients can get either from social media, their own tools, CRM or surveys we supply them or surveys supplied by other marketplace. So these strict 6 strategic choices are key. But what's important is execution. In 2026, the first thing is to implement in terms of technical solutions of the systems and operating models that we're currently developing to have globally managed services that are managed consistently with the same methods, the same price ranges, the same technology, the same way of processing and retrieving the information wherever we operate. Identification, we have 6 heads of 6 globally managed services, 6 out of 70 is a small proportion, might you say, but in fact, that's several hundred million euros. These are well-established services where these GMS heads throughout the world will be responsible for driving growth and profitability of those services with local teams, not a matter of doing it fully centralized way, consistent with our approach, combining global presence and local relevance with the tools and we invest, and that's where we focus our investment on new tech AI-based solutions so as to recover it to the full DRI that only a uniform approach allies. We invest in the same platform across the board and develop it and deploy it consistently. We managed and leverage the ROI, making the first 6 of these GMSs globally managed services. First 6, once we have an operating model combining centralized management of the service and local rollout, we'll continue. It's but a beginning, we'll have others over and above the 70s. We'll extend it to other products that can be deployed across the world with a more centralized model. Secondly, we must continue to accelerate the rollout of digital and the use of -- by our clients, EUR 140 million, a platform that has a profitability higher than double that of Ipsos growing 40%, but we must do far more. When we look at our regions, the use of Ipsos digital is broadly dissimilar. So we're going to strengthen usage where we consider. We're not maximizing market opportunities with the platform. We'll continue to enrich the solutions based on this platform, allow us to treat specific services, focus groups, quality, brand insights and surveys, a set of solutions simpler and easier, essentials on the digital platform, allowing our clients to access services that they wouldn't be able to access without. And lastly, we'll open Ipsos Digital to new audiences. Concretely today, a client who conducts a survey with our help or directly on Ipsos Digital has access to our panel. We'll be able to connect other sets of respondents, the data of our clients, respondents who are not just consumers, but business leaders to supply trends on B2B or doctors and patients. So we'll open this up through the APIs. Access to panels other than those currently available today on Ipsos Digital, we believe that the accelerating growth of Ipsos Digital is a priority within our reach this year. Thirdly, around commercial efficiency. Today, we have a growth that is lower than that we're seeking. Obviously, we're going to go all out on empowering all leaders, the business leaders of the main countries of the business lines in our major markets so that each can have 1, 2, 3 clients with costed explicit targets to which is linked their annual performance. We're going to increase empowerment on commercial efficiency. And then there are a number of large contracts, more efficient platforms, greater in-housing, we must be even more competitive on these major contracts. We're also going flat out on what we have to retain that in terms of renewals to leverage the contracts that we don't currently own. So commercial activity on those major contracts. And then with the economic equation of having a local development team for the smaller accounts, we will bolster our activity, continuing to conquer new logos with business development teams where that is justified. So with that, we should rely on our heightened commercial efficiency to drive organic growth. But none of that is possible without the strengthening, as I mentioned, of our tech capabilities and to leverage opportunities open to us with AI. So we strengthened our management team with the appointment of Nathan Brumby as Chief Platforms and Technology Officer of Ipsos in charge of all our tech developments and solutions of data processing and AI with 2 simple priorities. On the one hand, continue to ensure that all tools where we've already invested major differentiating factor for Ipsos some more widely used where they can be. It's not the case currently today. And secondly, by investing in solutions, which for the service lines are AI-based solutions to reach our speed target to automate far more than is the case today. Our production chains speed because we said that tech should allow us on our production chain to accelerate and ensure, as we said at the CMD, responses provided real time for others, less than 48 hours. It's an upheaval. It's a radical shift in the way we work and the tools that we use. Obviously, it's not going to have at the drop of a hat. This is going to be -- it started in 2026. It won't add in '26. It needs to be broken down service focus where the speed factor is key for our clients, where our automation capacity must be leveraged rapidly. And so we've broken down and separated this speed requirement over several years by leveraging our platforms, reinventing our production chain with agents that can automate tasks done by our teams and by rethinking the way we work around many of our major services. For that, of course, we're capitalizing on the strengths that remain, our people, clients and innovation. I've been in professional services for some 10 years. We have teams that measure the employee engagement rate, do that for the clients, sometimes for us. 76% engagement rate is far higher than the average engagement rate that we're seeing at 72%. That's a benchmark. We have people who have a passion for what they do. They're committed. And then we have loyal clients over all clients spending at least EUR 1 billion so that we supply insight data production services. There's one in 100 who leaves us every year. So we have a churn rate of our client base that's very low. Lastly, innovation. [ GRIT ], an organization that looks at the various market player point named Ipsos, the most innovative company in the sector. We see this importance of innovation at this turning point of market surveys. It's absolutely critical to have this competitive edge brought to us by innovation on playing to these strengths, we're reaffirming our ambition to make Ipsos the world leader on actionable insights in which our clients take major decisions, product innovation, advertising, commercial rollout with a high impact and AI-based. What does that lead to in terms of the number? These are the targets in our CMD average growth '26 to '28 between 3% to 4%, accelerating in the out years, '29 to '30 to exceed 5%, operating margin of 13.5% in 2028 that must exceed 14% in the following period. Free cash flow cumulative over those -- over the order of EUR 1.4 billion, coupled with our low leverage that Olivier mentioned, our capacity to mobilize debt. If we need to invest primarily on acquisitions, many on solutions and tech accelerators, but also on our panels and acquisitions closer to Ipsos, EUR 1.2 billion that we plan to mobilize over 5 years. In 2026, our organic growth outlook is in the range of 2% to 3%. So we're embarking on this trajectory that will lead us to an average organic growth between 2% and 3% over the next 3 years. Operating margin of the order of that achieved in 2025. Turning now to the other commitment made at the CMD, an increased return to shareholder of 40% to 50% shareholder return of adjusted diluted EPS. This return will comprise 2 parts: one, an increase of our dividend per share, EPS adjusted diluted at EUR 2. But in addition, we consider that we have the ability without changing the trajectory that I've just mentioned, investing in acquisitions and in our tech and panel to have a share buyback program cancellation, which will be submitted to the AGM in May of EUR 100 million in 2026. So those are the main outlook points that I wish to share with you before opening up for Q&A with 2 items on our agenda, 16th April for the Q1 results and May 20 for our Annual Shareholders' Meeting. Thank you for your attention. We'll now take your questions. Operator: Question number one. Emmanuel. Emmanuel Matot: Good morning, gentlemen. My name is Emmanuel Matot of ODDO BHF. I have several questions. Regarding your target for organic growth for 2026, we note a significant acceleration to 3% compared to 0.6% in 2025. Do you believe that this will be for all audiences, all types of audiences? Or are you looking mostly at the Citizens business, which should go back to normal, having suffered an 8% decline in 2025. So are we looking at a year where -- with a sort of steady growth from H1 to H2? Or do you expect H2 to be significantly higher than H1? That's regarding the momentum on revenue. Second question about moving parts and the operating margin expected in 2026. Are you looking at something stable at 12.3%? I expect that is to do with organic growth in revenue, this gross margin where you want an improvement in margin and yet the data collection cost went up in H2 2025. And so was that only temporary? And then I imagine that the acquisitions -- well, they are useful, but they themselves should improve their own performances. And then I was a bit surprised by this share buyback program, EUR 100 million. It's about 7% for the shareholder. What prompted that decision? Unknown Executive: Well, we'll take the question about organic growth. And where is this to occur mostly? Well, we have a strategic plan where we propose to invest in what are known as Globally Managed Services. And so these are businesses to do with the first line of business, namely consumers. And so we expect growth there to accelerate because we've been investing in GMS specifically on that line -- on that business line. On public affairs, we were at minus 8% in 2025, and we certainly hope -- expect the situation to improve. Having said that, that was low ebb at minus 8%. So we are looking at a resumption of growth, at least a better performance in public affairs and stepping up business in the other business lines. Regarding the operating margin, we said it would be higher, well, equivalent to that of 2025. And so 2025, we published a margin of 12.3%. So it should stand at about that. There, again, various factors involved. There were acquisitions and they had dilutive effects in 2025, but the dilutive effects should peter out in 2026 and indeed -- and they should dwindle away in 2027. But we will keep investing. So there will be capital expenditure there. That's, of course, regarding technology acquisitions. And then there will be -- we expect some productivity gains because we will be managing our panels and other instruments to make our tools more productive. Regarding gross margin, historically, well, gross margin has grown over time. This year, of course, it was down because of acquisitions, but there are 2 types of acquisitions. You had infas. Infas is mostly a public affairs business, and there's not much to be gained from synergies. But the BVA Family is a more traditional line of business covering all areas. And so there, we do expect synergies. Indeed, with the BVA Family, we started merging our teams, and we are proposing new solutions and the teams from BVA are joining our organization there. And so we expect gross margin and operating margin in these businesses to be in line with the profitability of the rest of the group by 2027. Regarding the share buyback program, well, if you look at the present share price, this was a good opportunity. But also, we believe that the share price does not reflect the actual value of the company in terms of growth, profitability, the debt ratio and all these factors are not fully reflected in the share price. And indeed, we -- even though organic growth was slightly less than our expectations, we still have a good performance. And so when the share price is low, this is a good time to buy back a significant amount of shares to be canceled. And indeed, that will be proposed to the AGM later this year. On revenue seasonality, what are the expectations for 2026? Well, look, we are engaging in an in-depth transformation of our business, new tools, new ways of working, commercial effectiveness and such like. So we are looking at a 3-year horizon. We cannot break down this. We cannot look at this on a quarterly basis. Unknown Analyst: My name is [indiscernible]. I had 2 questions, a technical question first on digital data, digital twins, new players that are banking on the fact that the digital twins may well replace panelists in the long run. Do you -- are you using that at all? I mean that's the question. And then in view of productivity gains, thanks to AI, Ipsos Digital is growing pretty fast. Why aren't you banking on much higher growth in margin? I mean, you could be more ambitious than that surely. Unknown Executive: Regarding virtual data, we don't want to get into the detail of that, but we have 2 strong beliefs. Number one, of course, AI in general, makes it possible to generate virtual twins or equivalents of individual data collected from actual respondents. So if you have a digital twin of the population, say, patients of that category, all you need to do is ask the question and you get the right answer and you don't need to go out and actually send questions to real people with phone calls or surveys and such like. But that's the theory. Well, one thing, though, is these things are changing slowly but surely. But of course, the actual people change as well. We need to recalibrate things. Some responses will need to be adjusted. And well, you have audiences that are more difficult to access. So we can use virtual twins instead, but we have to control for all that. But at the end of the day, we want precise information because if you launch a new product and the virtual respondent is left behind actual development, well, then our customers is spending money in the wrong place. So we can do this, but we have to rely on actual respondents. We have academic partnerships who are working on that, but cautiously. Regarding the impact on profitability, if you look at 2026, we will be rolling out some of the solutions we have been investing in, but we will need to keep investing to grow these solutions with -- to have differentiated solutions using AI with a broader and broader spectrum of services. So profitability is because, of course, some services such as Ipsos Digital are automated, so profitability increases, but we still need to invest in panels and in other technical solutions. So we are looking at growing margin, and we expect it to grow all the way to 2030. Nonetheless, we have to remain at the forefront of innovation. Eric Blain: Eric Blain from Finance Connect. About the profit margin, you say that the platform has generated 30% growth. What's the revenue of the platform? EUR 640 million. And so with a good profit margin. So that certainly drives the group's margin up, doesn't it? You said that there was dilution effects that these should be -- that would be petering out next year. And so the gross margin at the end should improve, but capital expenditure is remaining stable. So surely, given that, you should do better than last year, not the same as last year. And the second question about EUR 100 million worth of share buyback. Why is this? And if the price -- the share price goes down in spite of that buyback program, will you delist it? And if you look at the profit margin by geographical area, very much like the previous presentations where you had some granularity on margin by territory. Could we have some color on that? Unknown Executive: Well, on question number one, the operating margin in 2026. And that is a bit like the previous question. You have to keep in mind that we are looking here at a trend over 3 years. We have a strategic plan, and we are looking at operating margin of about 13.5% by 2028 and 14% for the years after that. So as early as this year, we have been -- there will be capital expenditure with new solutions, and we do expect this to bring fruition later on. Right now, we are rolling out the plan. Some tools are available. Others will arrive in H2, but we have to be realistic here. These new assets will bear fruition later on, maybe by 2027. So for the time being, we simply would like to confirm that, well, we're pretty confident, at least we expect to keep operating margin the same level as 2025. On the matter of profitability because you are referring to capital expenditure, that increased significantly in 2025 compared to 2024, 18%, up EUR 80 million. So we're looking at growth through innovation here. And so we need to keep investing. That, of course, does eat away at the profit margin. If we look at the payout policy, we are -- well, we repeat what we said, we're looking at anywhere between 40% and 50% of net adjusted income paid back to shareholders through dividends, of course. Having said that, we have no further comments on future buyback programs in the following years and depends on a number of factors. I mean, we do not propose to delist the company. We do propose to remain autonomous and independent. And if you look at a breakdown by geographical area, normally, we do not communicate on that. Eric Blain: But maybe you could at least tell us about numbers in the U.S. or specifically. Maybe you can... Unknown Executive: Well, the U.S. market has higher margins than other territories. But the low dollar is a dilutive factor. Yes, there was an effect on currency effect. You didn't mention. No, we didn't mention it because it's not significant. Operator: [indiscernible] Unknown Analyst: Congratulations for this. A question on the major tech players such as Meta, Google, Alphabet. You mentioned in the past that you were going to generate significant revenue with those key accounts and to be added in your services. Is that still the case today? Could you detail better for us what you're doing for the major U.S. tech clients? Unknown Executive: Yes. Well, coming from a world where I had a lot of dealings with the major tech players, the fact that they're amongst our largest key accounts. This is something that interested me keenly, and it ties in with the question about synthetic data to a certain extent. One of the added values we're bringing is our detailed knowledge over and above the mere processing and presentation of data, the lessons learned and access to real respondents because these tech players have access to the people who access their platform. So each has primarily access to the people who access their platform. We have access to everyone, those who access their platforms and the others. So when it's a matter of pulling their reputation on the market to have access to specific audience segments, well, they rely on our capability. And that's our fifth strategic conviction. It's a major differentiating factor in this important world through its economic and social importance of the major tech that we're very relevant for them. Operator: Questions on the line? The first question comes from Berenberg. Over to you. Unknown Analyst: Jean-Laurent, Olivier, just a few questions from my side. Firstly, could you give us some insights on what you're seeing in terms of activity? Are you seeing a slight improvement over Q4 '25? And secondly, what's the percentage of the utilization of your own panels? And what percentage you're targeting by 2028? And recently, in your presentation, you mentioned GMS. You plan to extend GMS to several service lines. What is the time horizon for that unfolding? And how much might GMS is represented in 2028? Jean Poitou: Well, we're not -- well, we'll be presenting the Q1 figures on April 16, as indicated on the slide. So we have no comment at this stage on the activity for Q1. But on the panel percentage, well, we're not going to disclose on the percentage utilization of our panels, but we have an internalization issue. The proportion of our own panels in the activity will increase by '28 to answer your question, this internalization, in-housing an important effort for us. And then after extension of GMS today, 6 services, which we're investing in specific platforms where we're changing the operating model to manage them globally, we are going to land this model in 2026, continue to extend them in the second half of '26, early part of '27, depending on the speed of change. I haven't modelized in '28 what the percentage will be. But what is clear is that we're going to go for a few hundred million to a growing share that will probably top at that horizon half our revenue. Operator: We have another question on the line. From UBS. Hai Huynh: Hai from UBS. The first one is just a little bit beyond '26, right? Because you guide for 2% to 3% for '26, but the average for '26 and '28 is 3% to 4%. Now Ipsos Digital is already growing 27% this year. So can you help us bridge towards that gap to 3% to 4%? Are you expecting Ipsos Digital to grow even further than the 27% rate? Or where do you see the acceleration to get -- to bridge that gap? That's my first question. And the second question is just how should we think about the pricing and margin dynamics for GMS versus your traditional ad hoc research? And then the third question is on the free cash flow. So you delivered EUR 181 million this year. And in your CMD, you're expecting EUR 1.4 billion to basically fund your acquisitions and your strategy over the next 5 years. So could you help us also explain on where do you expect free cash flow to ramp up? Is that going to be back-end weighted? Jean Poitou: So on Ipsos Digital, indeed, however, remarkable this growth of 30% is it's EUR 140 million. If I just look at the dissimilarity, heterogeneity of usage, and we can beef up the portfolio based on digital solutions. Ipsos Digital will be far higher growth. It's a major focus areas for speed and for obvious economic reasons. On the growth profile and profitability of GMS, that drive innovation through new products, new solutions, new products of our clients based around creativity or the ad segment and behavior analysis. These are sectors that are both today in the portfolio, a few hundred million euros of those 3 broad categories of services that we manage globally, growth and profitability above the Ipsos average. Lastly, on FCF for the next 5 years, yes, we announced an FCF over the next 5 years of EUR 1.4 billion when comparing to what we achieved in '25. You'll see that there's an acceleration pathway versus 2025 to reach that EUR 1.4 billion over the 5-year period. I think that's about it in terms of questions. It remains for me to thank you, and see you on April 16 for the Q1 results. Thank you. Have a great day.
Carina Chow: Good afternoon. This is Carina, Head of Corporate Communications and Sustainability at Champion REIT. Welcome to the Champion REIT 2025 Annual Results and Analyst Briefing. Today, our CEO, Ms. Christina Hau; and our Investment and Investor Relations Director, Ms. Amy Luk, will present our 2025 annual results. And after the presentation, there will be a Q&A section. So without further ado, please, Christina. Shun Hau: Thank you, Carina. Hello, everyone. [Foreign Language]. This year, 2026 is the 20th anniversary of Champion REIT. We are the second largest REIT in Hong Kong by market cap at this moment. And over the past 2 decades, we have been adhering to proactive asset management strategy on enhancing asset quality and delivering long-term value for our stakeholders. The property portfolio has grown by an acquisition of Langham Place Office and Mall, unification of ownership of Three Garden Road and the first overseas acquisition in London. And on sustainability, our Three Garden Road has attained the first Quadruple Platinum Existing Building in Hong Kong in 2024, and we will continue our commitment to ESG going forward. So let's look at the 2025 result highlights. The overall market sentiment in Hong Kong has improved, supported by stronger stock market, tourism rebound and interest rate drop, which restore business confidence. The robust capital market is driving solid office demand. Site inspection for Three Garden Road increased by 61% in the second half of the year compared with last year. On retail side, our proactive tenant management is paying off. The sales of our new tenants across different categories in 2025 record a remarkable increase of 80% compared with previous operators. IP-driven pop-up stores tied to major marketing campaigns delivered triple-digit sales growth. That's 8 -- generating 8-digit sales and 7-digit extra income. And on financial management, we continue to adopt a prudent approach and successfully secured a HKD 1.5 billion of banking facilities for refinancing the bank loan due in 2026 ahead of maturity and lower average HIBOR in 2025 has resulted in meaningful interest savings. So I now pass to Amy to walk through the overall financials. Amy Ka Ping Luk: Thank you, Christina. Let's look at the 2025 full year results highlights. While we saw signs of market recovery and stabilization, the overall operating environment remained challenging, given abundant oversupply in the market and also change in consumer behavior. Under this market backdrop, occupancy of our portfolios remained stable and resilient and lower interest expense partially offset the impact of negative rental reversion. For the full year of 2025, total rental income dropped by 9% year-on-year to HKD 1,988 million and net property income dropped by 11% to HKD 1,613 million. Distributable income dropped by 10% to HKD 859 million. And then our distribution per unit dropped by 11% to HKD 0.1263. And looking at our balance sheet, looking at the debt profile, our gearing ratio maintained at a healthy level of 25.4% at the end of 2025. And for the debt refinancing completed in last year, we brought in new lenders into a syndicated loan, and we also secured a new bilateral facility with an existing lender. For debt maturing this year with outstanding balance of HKD 2,285 million as at the 30th December 2025, we took a proactive approach and secured HKD 1.5 billion of bank loan facilities for refinancing ahead of maturity. And we are now in active discussion with lenders for the remaining portion and got positive feedback from our lenders. The lower average HIBOR in 2025 brought 60 basis points drop in average effective interest rate to 3.8% comparing with 4.4% in 2024. This brought a meaningful interest savings, driving down cash finance costs by 13.5% to HKD 557 million. We also obtained inaugural A rating from Japan rating agencies, JCR and R&I last year, affirming our stable capital structure. And turning into valuation, our portfolio value stood at HKD 56.2 billion with unchanged cap rate at the end of last year. The per square foot valuation of Three Garden Road was less than HKD 20,000 per square foot, which is undemanding comparing with the notable transactions of central office. I'll now hand over to Christina to walk through the property portfolios. Shun Hau: Thanks, Amy. And let's begin with Three Garden Road. The improving financial market sentiment has driven up demand for central office, and we observed increasing leasing inquiries from third quarter last year, while second half site inspection increased to -- increased by 61% year-on-year. And we have secured new tenants from the asset management and family office sectors last year. Currently, 67% of Three Garden Road tenant is banking and asset management related. And we adopt a proactive approach in lease renewals and over 75% of leasing expiring in 2026 has been successfully renewed, which enhanced income visibility and occupancy maintained at stable level at 81.6% in the market with abundant supply. The lease maturity profile is now well spread after all these actions in the next years after renewal with our anchor tenants last year. So at Three Garden Road, we are doing more than just providing office space. We are building a vibrant community and ecosystem. Our year-round calendar of festive and wellness event attracted over 6,700 person times. For Langham Place office, the property remains a preferred location for health care, beauty and wellness operators, while lifestyle and wellness tenants accounted for 68% of area as at 31st December 2025. And last year, we have introduced over 10 new wellness tenants as well as other sales services tenants to enhance tenant diversity. And occupancy remained stable at 86.9% as at 31st December 2025. And we continue to solidify our position as a premier wellness hub across 6 dimensions, namely physical, emotional, intellectual, spiritual, social and financial well-being. Our 6D Wellness channel have accumulated 4.6 million views since launch and a social wellness hall at 49th floor of the property held a series of wellness events such as social, sound healing, therapy dog yoga, dance work shop, which were well received by participants. And we also partnered with the Hong Kong Retail Management Association, HKRMA, to introduce the first quality service charter in Hong Kong for beauty and wellness operators with over 90% tenants -- related tenant participate. This sets a new benchmark for service excellence across beauty, health, medical and lifestyle categories. For Langham Place Mall, we continue to reinforce the positioning of the mall as a retail transactor with agile leasing and marketing strategies as the mall celebrated its 20th anniversary last year. Our proactive tenant management captured market trends and brought in up and coming new tenants, including popular IP brands, which resulted in double-digit sales growth in lifestyle segment. Occupancy of the mall maintained at a high level of 99.3%, while rental income was affected by replacement of anchor tenant occupying 13.8 percentage by lettable area, also some softening in tenant sales in particular category. So we adopt stay local trend global strategy by integrating local cultural elements with global retail trends. Last year, we introduced over 30 new tenants, including first in Hong Kong, Chiikawa Ramen Buta, and various tenants across different segments as shown in the slide. The new tenant generated sales of 80% higher than the previous tenant, demonstrating the positive result of tenant mix refinement. Throughout the year, Langham Place Mall delivered a strong and diverse event calendar. We begin with collaboration featuring local artists in emerging brands, followed by a series of fashion-driven activities designed to reinforce the mall's positioning as the leading retail trendsetter. And we also deepened engagement through partnership with global IPs, including Squid Game, Star Wars, Baby Oysters, Chiikawa, Kuromi and finished the year with the debut Noodoll in Hong Kong in the Merry PotatoMAS event. IP collaboration and emotion-driven experiences are popular across different generations. To capture this trend, we partnered with a range of global IPs to deliver differentiated and engaging experience in Langham Place Mall. This brought in pop-up store sales of marketing -- major marketing events recording triple-digit growth last year. Our regular festive season promotion events also continue to strengthen the engagement of our loyalty club members. During the year, our member base grew by 27% year-on-year and member spending increased by 11% year-on-year. So now I will pass to Amy to talk about the sustainability. Amy Ka Ping Luk: Thank you, Christina. On sustainability, we continue to work closely with our tenants and business partners to drive measurable impact across our portfolio. Leveraging on artificial intelligence, we optimized the utilization of chiller plant at Three Garden Road, which resulted in 6.1% reduction in energy usage. Last year, our ESG Gala, the theme innovation, inspiration and integration gathered over 1,000 industry leaders and change makers. Also, our tenant engagement program, EcoChampion Pledge, delivered positive results with 80% of participating tenants formalized their energy targets and action plans. On social aspect, we continue to partner with community organizations to deliver meaningful social impact. Among these efforts on social and community, our ethical consumption pop-up store at Langham Place Mall, which promoted cautious consumptions engaged nearly 20,000 visitors. While we continue our support for the government Strive and Rise program for the third consecutive year, our Christmas celebration event, which connected the community in our Three Garden Road generated 9.7% in social value for each HKD 1 sponsorship. Our sustainability efforts continue to gain prestigious recognition. In 2025, we were honored to receive the GRESB 5-star rating for the third consecutive year, and we are also pleased to be awarded AA+ in the Hong Kong Sustainability Benchmark Index. These achievements reaffirm our commitment to deliver high standards in sustainability. I'll now pass back the time to Christina to talk about the outlook. Shun Hau: Thanks, Amy. Looking ahead, we will continue to adopt proactive strategy to optimize performance across our portfolio. For office, we aim to solidify Three Garden Road's position as a top wealth management destination. Currently, we will diversify tenancy at Langham Place Office to build on its wellness hub foundation, ensuring resilience amid ongoing supply pressure in the office market. For retail, the average daily inbound of Mainland and overseas tourists increased by 11% and 16%, respectively, in 2025, despite the outbound Hong Kong residents remain. The growth in tourist arrival should provide support to the Hong Kong retail market. And we will reinforce the stay local trend global strategy for Langham Place Mall and continue to capture evolving customer trends to refine our tenant mix. At the same time, we will enhance our retail payment offerings to mitigate rising headwinds from online retail. For liability management, we will explore opportunities to broaden our lender base and maintain a balanced portion of fixed rate debt. And finally, we'll further strengthen our role as a super connector and super value adder to create value through deeper collaboration with tenant partners and stakeholders across our ecosystem. And this is the end of our presentation. Thank you. Carina Chow: So let's come with the Q&A section. So please feel free to raise your hand and state your name and company. Xinyuan Li: So this is Cindy from Citi. Three questions from me, please. The first one is on your 20th anniversary. I'm wondering if you would consider returning to 100% distribution to celebrate that. Second question is on the office enquiries. So obviously, the 60% increase in inflection is very encouraging. I'm just wondering if that would translate into, say, better expectation on occupancy and rents into 2026. What's the current spot rate and what's the expectation for 2026? The third question is actually related to the budget speech today that government mentioned to facilitate brief restructuring or privatization. How is your reading into this? And do you expect Champion REIT to benefit from such in any aspect? Shun Hau: Thank you, Cindy Li. So back to your first question about the 100% distribution. Currently, we maintain the 90%, I think, is quite prudent and suitable because we retain some of the surplus to upgrade our premises by putting up CapEx work to improve the quality, the hardware of our building. So that, of course, is subject to the Board's decision, but we did think this is -- at this level is appropriate. And for the office inspection, yes, it is encouraging. The inspection growth by 61% and it, in fact, did translate into more leases or new leases in 2025, in fact. So we hope to see the momentum continue, and with the momentum of the stock market and financial market and financial performance, wealth management in Hong Kong, we do see the increase in demand, then it will induce expansion needs and also new office setup needs in Hong Kong that require a prime Central location as the office premises. So the current spot rent for Three Garden Road is mid-60s to 70. So yes, regarding the reprivatization is also -- at this moment, we have not touched a point on this issue yet. And yes... Wai Ming Liu: This is Raymond Liu from HSBC. I've got 3 questions. So the first question is about the Three Garden Road. Can management elaborate the change in the passing rent of the project on the office side over the past 12 months? Should we expect similar changes to take place in 2026? This is the first question. And the second question is about the rental reversion. Just wanted to have more idea on this one. Because management commented over 75% of 2026 expiries were concluded. So can management share with us a little bit more color about the rental level that you signed year-to-date compared to the latest passing rent? So the last big question is about the Langham Place Mall. So can management share with us the tenant sales performance year-to-date, seems that the footfall has been very good based on our on the ground observation. Shun Hau: So the change in passing rent in 2025, in fact, is dragged down by the renewal of an anchor tenant, okay, which is around mid-teens of our occupied area. And the rent reversion, we do see there's narrow -- the gap has been narrowed, and we foresee that the rent reversion gap will be continued to remain a narrower situation. So the sales of the Langham Place Mall, when we look into the Hong Kong retail sales, yes, in fact, the last year's 1% growth of total retail sales was mainly driven by the double-digit increase in online sales. So that imposed some impact on the offline sales, which, in effect, has decreased by 0.1%. And within that, in fact, the electronics and also the watches, jewelry, especially the gold price had risen a lot in 2025, right. That the gold rush did impose a huge increase in the sales of the jewelry shops. So -- but however, in Langham Place, we don't have this jewelry shops in our portfolio. So we are not able to capture that same amount of sales increase in our Langham Place Mall. And we have 5% decrease in sales, mainly driven by the high base in 2020 high base back in 2024 on the beauty segment. Mark Leung: This is Mark Leung. I got about 2 questions is regarding on the office. First of all, we saw that the vacant space is roughly less than 10% for Three Garden Road and around maybe 13% for Langham Office. Could you elaborate whether these 4 vacant space are interconnected? What I mean it is a 12, 13, 14 or it's really spread around. I think that's the first question. And then the second question is, have we -- if it is more like a connected big space, have we seen any interest from an anchor tenant? Do you see possibility for anchor tenant take any large space from these vacant 2 buildings in the next 12 months? Shun Hau: I think for our Three Garden Road, some are whole floor, but they are not connected, okay? So for Langham Place, also it's the same situation. Some are scattered. Some -- we have some whole floors vacated by some anchor tenants, okay? But do we think -- do we foresee their needs? Yes. We do, for example, some tenants that require larger in area, new tenants, we have been actively in discussion, but still not yet anything we have -- we can disclose now, yes. Amy Ka Ping Luk: And in fact, last year, we got existing tenant at Three Garden Road taking more space from the financial sector. Shun Hau: Yes. So they expanded a whole floor to set up their private bank section. Percy Leung: This is Percy from DBS. I have 3 questions. First of all is regarding your strategy at Three Garden Road. I understand that inquiries have improved significantly recently. Just wondering what is your leasing strategy going forward? Would you be more -- continue to be more flexible in terms of the rents in order to secure higher occupancy, which will you prioritize more? And also what is the expiring rent for 2026? Secondly, in terms of the Langham Place Office for 2026, could you give us more color regarding the expiry profile? And what's the current renewal process for that chunk? And thirdly, I got a question regarding the Langham Place Mall. I understand that our rental income actually dropped quite a bit, mainly due to the major cinema operator lease renewal as well as, I guess, lower turnover rent. However, when we take a look in terms of the passing rent per square foot is actually higher compared to December 2024. Just want to check what's the strategy... Shun Hau: So for Three Garden Road, I think to maintain higher occupancy is also our top priority because we want to mitigate the expenses of the net property expenses. That means the building management fees, et cetera. So our priority remains the same. We provided flexible leasing terms and also tailor-made solutions. And also we -- last year, we have built manufactured units that were quickly leasing out to cope with the market needs and to cope with those commercial related, family office-related tenants demand. So we continue to do that. So also, we will look into our hardware provisions as well in order to -- for us -- we have kickstarted the toilet renovation in 2022, and we'll complete it in 2027. But we are undergoing a total review and study of our hardware in Three Garden Road, whether there is room for upgrading and improvement to uptick our competitiveness. So that's our strategy. And expiry in 2026 of Three Garden Road is around 80s. So -- and also for Langham Place Office, the renewal is not as -- the early renewal situation is not happening in Langham Place Office because they are operators, they are really using the premises for doing business. So they are like retailers, they would wait and see how their business going. The macro -- they are very sensitive to the macroeconomics and how their business is doing. So they tend to confirm the renewal at closer to their renewal date or the lease expiry date. And that's the usual pattern we saw in the Langham Place Office. And actually, the passing rent as at -- on the retail side, the passing rent as at 31st December of 2025 is higher because of the base rent and the turnover rent at that date, in fact, is doing better than 2024. So that's the reason. Carina Chow: So if there's no further questions, so we could conclude the briefing section today. Thank you for joining us. Amy Ka Ping Luk: Thank you. Shun Hau: Thank you.