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Operator: Good morning, ladies and gentlemen, and welcome to the Loblaw Companies Limited 2025 Fourth Quarter and Full Year Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, February 25, 2026. I would now like to turn the conference over to Roy MacDonald, Vice President, Investor Relations. Please go ahead. Roy MacDonald: Thank you very much, and good morning, everybody. Welcome to the Loblaw Companies Limited Fourth Quarter and Full Year 2025 Results Conference Call. As usual, I'm joined here this morning by Per Bank, our President and Chief Executive Officer; and by Richard Dufresne, our Chief Financial Officer. So before we begin today, I'll remind you that today's discussions will include forward-looking statements, which may include, but are not limited to, statements with respect to Loblaw's anticipated future results. These statements are based on assumptions and reflect management's current expectations. As such, are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from our expectations. And these risks and uncertainties are discussed in the company's financial materials filed with the Canadian securities regulators. Any forward-looking statements speak only of the date they are made. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than what's required by law. Also, certain GAAP -- non-GAAP financial measures may be discussed or referred to today. So please refer to our annual report and the other materials filed with the Canadian securities regulators for a reconciliation of each of these measures to the most directly comparable GAAP financial measure. And I will add that following the announcement of the sale of our PC Financial business to EQ Bank and that ongoing partnership, our PC Financial results are presented under discontinuing ops. It's important to note that we are not getting out of the financial services. As such, unless otherwise indicated today, our remarks will focus on the comparable adjusted consolidated results, excluding the impact of the extra week this quarter. And with that, I will hand the call over to Richard. Richard Dufresne: Thank you, Roy, and good morning, everyone. I'm pleased to report on another quarter of consistent financial and operational performance, reflecting our ongoing focus on retail excellence and our commitment to deliver value, quality, service and convenience to Canadians. As Roy mentioned, with the announced sale of PC Financial to EQB, the results of the bank are now presented in discontinued operations. It's important to highlight that we're not getting out of financial services by virtue of our interest in EQB, so we will continue to focus on our consolidated results. When the transaction closes, the current discontinued operations business will be replaced by Loblaw's proportional ownership share of EQB profits. In the fourth quarter, on a 12-week basis, revenue growth was 3.5%, reaching $15.5 billion. Our top line growth was supported by the opening of 30 stores in the final quarter of the year. In the year, we added 1.5% square footage to our food retail stores and 2.1% to our drug retail portfolio. This growth was primarily focused on adding Hard Discount stores and pharmacies to underserved communities. Adjusted EBITDA increased by 4.8% to $1.8 billion and margin improved by 10 basis points to 11.5%. Adjusted diluted net earnings per share grew by 10.9%. On a reported basis, revenue grew 11% and adjusted EPS was $0.67, up 22% in the quarter. In Food Retail, we once again delivered traffic and basket growth, resulting in tonnage market share gains. Absolute sales outpaced same-store sales by 160 basis points at 3.1%, reflecting our new store growth. Absolute sales also outpaced our internal inflation, which reflects our market share gains. Our food same-store sales grew 1.5%. It's worth indicating that we are lapping a strong Q4 last year when we increased promotional activity. As we progress through Q4 2025, our same-store sales growth accelerated, and this has continued in the first quarter of 2026. We continue to see positive momentum across key categories in the right-hand side of our stores with continued accretive growth in toy, apparel and home and entertainment. That said, with continued pressure in liquor, tobacco and HABA categories, right-hand side resulted in 20 basis points of pressure on food same-store sales. Our internal CPI-like food inflation metric was significantly lower than Canada's grocery CPI of 4.4%, and that gap widened over the final 2 months of the quarter. So customers are seeking value and are finding it in our stores. This reflects our effort to push back on unjustified cost increases from suppliers and the effectiveness of our loyalty and promotional offers. As consumers continue to focus on value, our Hard Discount banners remain a key driver of absolute sales growth. We opened 15 new Hard Discount stores in the quarter, bringing our total opened in the year to 48. These stores are meeting expectations and will start rolling into comparable sales throughout 2026. In fact, 20 of the new Hard Discount stores opened in 2024 are already in our comps and are averaging healthy double-digit same-store sales. We're also pleased with the momentum and performance of our conventional stores. In the quarter, this growth was led by our Fortinos and YIG banners. Across conventional, multicultural, natural value and prepared foods continue to be growing categories. In drug retail, absolute sales increased 4.4%, while same-store sales grew 3.9%. Pharmacy and health care services grew same-store sales by 5.6%, driven by broad strength in prescription and new health care services. Our specialty prescription growth continued to lead our pharmacy performance. Patients continue to respond positively to the convenience and expanded level of primary care we offer to our more than 1,800 pharmacies across the country. I'm happy to confirm that we've achieved our target of opening 250 in-store clinics this year, improving access to health care services for Canadians in underserved communities. Our front store same-store sales continued to improve, growing 2.2%, reflecting the ongoing strength of our beauty category. We saw an increase in our OTC sales as Canada was hit hard by the cold and flu season with influenza cases reaching a 3-year high. Flu season peaked in December, a shift from last year when it peaked in our first quarter. We continue to be pleased with YIG's underlying strength and profitability in our front store business. Online sales continue to demonstrate strong growth, reaching over $4.5 billion last year. In the fourth quarter, our digital sales increased by 19.6%, highest growth in the year. Delivery continues to be led -- to lead that growth, particularly in discount. In November, we launched another third-party delivery partnership across our grocery banners and early results are very positive. Our retail gross margin improved by 10 basis points to 31%, driven by improvements in shrink and drug, while food trading margins remained stable. Our retail SG&A rate was flat with operating leverage from higher sales, offsetting incremental costs related to the opening of new stores and the ramping up of our automated distribution facilities. I'm very pleased with our ability to maintain a flat rate despite the additional costs associated with this growth. Retail adjusted EBITDA grew 4.6% and retail EBITDA margin increased by 10 basis points to 10.9%. The ramp-up of our first automated distribution center in East Gwillimbury continues to progress well. Both cost and productivity improvements came in better than planned. This allowed us to roll out our ambient sections 2 months ahead of schedule. We are pleased with our progress and expect to be fully ramped up later this year. Construction on our second automated DC in South Caledon is progressing very well. The project remains on plan with automation installation beginning by the end of this year. PC Financial's revenue increased 3.1%, driven by higher insurance commission income and higher interest income. The bank's adjusted net earnings increased by $12 million or 36%. This was primarily driven by higher revenue and the favorable impact from lower expected credit loss provisions. The previously announced sale of PC Financial to EQ Bank will streamline the company's operation. We expect the transaction to close later this year. Free cash flow from the retail segment was $1.9 billion for the year. And in the quarter, we repurchased $592 million worth of common share for a full year total of $1.9 billion. Our balance sheet remains strong, and we continue to improve our key return metrics. Our return on equity sits at 26.3% and our return on capital at 12.4%. On a full year basis, our consolidated revenue grew 4.4% to $63.7 billion, net earnings of $2.8 billion and EPS grew 10.7%. Including the impact of the 53rd week, EPS grew an incremental 2.9% to 13.6%. Turning to 2026, we have a solid plan in place, allowing us to continue delivering consistent financial and operating performance while advancing our growth initiatives. New store investments will be similar to last year with an increase in Shoppers Drug Mart stores. We plan to grow our grocery square footage in line with 2025. However, our drug footprint is expected to increase by 3%. In 2026, we expect the timing of the closing of the sale of PC Financial and the lapping of the 53rd week to impact the company's financial results. Excluding these impacts, we expect our retail business to grow earnings faster than sales and adjusted earnings per share growth in the high single digits. We plan to invest approximately $2.4 billion in capital expenditures. Again, we plan to return most of our free cash flow to shareholders through dividends and share buybacks. We're more than halfway through the first quarter, and same-store sales are showing continued momentum. Looking ahead, our focus on retail excellence and on the execution of our strategic initiatives will allow us to keep on delivering value to our customers and performance to our shareholders. While early, 2026 is off to a good start, I will now turn the call over to Per. Per Bank: Many thanks, Richard, and good morning, everyone. I'm very pleased to share our solid fourth quarter results, which caps a very successful year for Loblaw. We delivered revenue growth of 3.5%, reflecting both the success of our strategic investments in new stores and strong operating performance. This top line growth enabled us to deliver the 10.9% adjusted EPS growth in the quarter. We accomplished this earnings growth while increasing our spending to support the opening and ramp-up of our two 1 million square foot DCs and our new stores, including the successful opening of our second T&T store in the United States. This past year has truly showcased that we have the right strategy, we are executing well, and everything is grounded on an unwavering focus on our customers. More than ever, we have seen Canadian prioritize value. We know that affordability is so important for many households, and that's why we are expanding our Hard Discount network. We opened 48 new No Frills and Maxi stores this year. These new locations were strategically placed in underserved communities. This year, we also invested to expand our e-commerce service for our Hard Discount customers and are very pleased to see our digital penetration rate doubled in these banners compared to last year. This highlights the vital role that our Maxi and No Frills stores play in helping families stretch their budgets without compromising on quality, selection or convenience. Our commercial banners, including the high-performance Fortinos and T&T stores continue to attract and delight shoppers. Fortinos, which focus on fresh, local and premium offerings remained a community favorite, while T&T Supermarket continued its impressive growth trajectory. We saw really strong performance in areas of strategic focus, including our multicultural assortment and our right-hand side refresh. We have now updated 34 stores and are seeing high single-digit sales growth in these stores led by apparel, cosmetic and toys. I'm actually especially excited by how well our toys category performed with sales increasing almost 50% in Q4. Beyond value, we recognize our customers' desire for choice, quality and a superior shopping experience, including a strong preference for supporting local manufacturers. I'm proud to share that in '25, we added 267 new Canadian supply to our network, reinforcing our commitment to Canadian businesses. When Canadian businesses grow, communities grow, when local producers win, we all win, and we're actually just getting started. In Drug, we continued our trajectory through quarter 4 as we delivered our fourth consecutive quarter of positive sales growth momentum in front store. This reflects continued strength in Beauty and strength in our HABA OTC and baby categories. We're also seeing early shoots from our initiatives to bring more value and sales productivity to front store. In Pharmacy and Healthcare Services, we continue to deliver solid performance led by growth in the specialty drug category. In line with our commitment to being where Canadians need us the most, we are actively building new pharmacies and clinics to provide essential health care services, especially in underserved communities. Q4 was very busy as we opened a record of 15 new pharmacies in the quarter, bringing our total to 27 for the year. Our pharmacies and health care professionals play an increasingly important role in the health and well-being of Canadians, and we are committed to supporting them with the tools and resources they need to provide exceptional care, making it easier for Canadians to manage their health closer to home. For Loblaw, investing to be at the forefront of innovation has always been key to building customer loyalty. To support growth and enhance our customer experience, we made record investments in the future this past year. These strategic capital deployments were focused on strengthening our foundation and expanding our reach across key growth areas. We significantly grew our store network with investment specifically directed towards new discount stores, additional pharmacies and the continued expansion of T&T. These investments are not just about stores, they're also about strengthening the backbone of our operations and investing in innovation to serve our stores and customers more effectively. I previously highlighted the significant success of our [indiscernible] program. Building on these achievements, we remain deeply committed to continuous product innovation. This year, our investment in this crucial area have successfully brought more than 250 new products to Canadian households under our private label brands like the President's Choice, no name and Farmer's Market. These exciting new additions have not only enhanced our offering, but have also generated nearly $400 million in sales. Beyond our core retail operations, we also strategically grew our alternative businesses, including retail media, our logistics as a service offering and significantly enhanced our health care services through clinics, and the expansion of our Lifemark business. We have talked about media and logistics in the past, but I would like to spend just a moment on Lifemark. With over 4 million customers visits each year, Lifemark offers a range of rehabilitation services through 320 locations across the country. Lifemark is another small, but quickly growing business that we expect will deliver $100 million in EBITDA this year. Technology too, plays a crucial role in our differentiation. We are not simply adopting AI, we are building an AI-enabled organization. We are experimenting with intent and discipline, focusing on practical use cases that create real value for customers. Our recent partnership with OpenAI and Google were first in Canadian retail and great examples of embedding AI into the tools Canadians already use every day while also building purpose-built application where it makes sense. We also continue to deploy AI inside our organization, optimizing operations, improving forecasting and assortment decisions, simplifying workflows for colleagues and enhancing the shopping experience. None of these achievements would be possible without the incredible dedication of our 220,000 colleagues. The uniqueness and strength of our culture is a cornerstone to everything we have accomplished. To each and every one of you, in stores, distribution centers, pharmacies, clinics, offices, I extend my sincerest gratitude. Your hard work, commitment and passion for serving our customers are incredibly important to our success. As we look to the future, we remain optimistic and determined. The foundational investment we made, coupled with our resilient business model, unwavering focus on the customers and being where Canadians need us the most, positioning us exceptionally well for sustained growth and continuous market leadership. We will continue to innovate, adapt and evolve to meet the changing needs of Canadians, whether that's through expanding our value offering, supporting local suppliers or bringing essential health care closer to home. Our commitment to delivering unparalleled value, quality and convenience remains steadfast, as does our dedication to our communities and helping Canadians live life well. With that, I will now open the floor for questions. Many thanks. Roy MacDonald: Thank you, Per. Operator, if you'd please introduce the Q&A process. Operator: [Operator Instructions] Your first question comes from Mark Carden with UBS. Mark Carden: So to start, I just wanted to see how the consumer is faring overall. Are you guys seeing any shifts in spending patterns, any incremental trade down occurring? And then has anything changed in the competitive landscape in your core markets? Per Bank: Thank you, Mark. And I would overall say that customers are behaving a lot like they have done in the past. So not that much has changed. I would say, though, that the discount strategy for us is working very well. Promo penetration still stays high. And private label in the quarter 4 is outperforming national brands. And we are seeing some category trade downs. I just looked at an example the other day where an impulse category like berries, the organic berries is down double digit, where the conventional berries would be up. So more of the same. Maybe one flavor more if I look at the discount. So our discount, which I mentioned in my script, the penetration in e-commerce and discount has doubled. So we are seeing more customers now that they have more access to our discount e-commerce, they're choosing that. But within the stores, it stayed the same. So the gap between conventional and discount, I would say, staying the same. So still value-conscious customers, but more of the same. Mark Carden: That's great. And then as a follow-up, you guys noted that retail same-store sales steadily improved throughout the quarter. How did the cadence play out month-to-month? I know there's some promo compares in there. And how have you trended thus far in 1Q? Richard Dufresne: Yes. As I mentioned in my remarks, in 2024 in Q4, we were a little bit more aggressive than we were this year. And so that affected especially the first month of Q4. And so as we started to lap that month, we saw a sequential improvement in same-store sales. And we're actually seeing further improvement as we begin 2026. So definitely, we feel good about our same-store sales performance. Operator: Your next question comes from the line of Irene Nattel with RBC Capital Markets. Irene Nattel: Just continuing with consumer behavior, how should we be thinking about the cadence of same-store sales and margin evolution as we move through 2026 and we normalize for some of the headwinds, notably at Shoppers and perhaps see some of the headwinds from the right-hand side starting or continuing to diminish? Richard Dufresne: So what I'd say, Irene, if you -- our outlook, the way we see it, like big picture is you're going to see above normal top line growth, as we've talked about because of new stores. So you're going to see that. You're going to see stability in gross margin, stability in the G&A rate, maybe a little bit of increase in gross margin rate as the year progresses as we continue to find more shrink benefits in Shoppers. And that, together with all of the other efforts should allow us to be delivering our high single-digit EPS growth. Per Bank: Yes. And I would say that we are confident in our comp sales and our total sales. Our new stores are working really well for us, and that's both our Shoppers and our Hard Discount. And when we look at the second year comp, we are seeing some really, really good numbers, actually better than we expected. So again, we feel confident about our strategy. But whether comp sales will be a little bit up one quarter and down another quarter, I don't think it's that key to our overall performance. So we will keep our guidance no matter whether it fluctuates a little bit because, of course, it can and have done, but we stay very confident in our sales projection. Irene Nattel: And just as a follow-up to that, how would you describe the spending in some of the more discretionary categories at Shoppers? I mean, Per, you made the comment just a second ago about organic versus regular berries, which is interesting. What are you seeing at Shoppers in front store... Per Bank: We're seeing that prestige continues to -- prestige beauty continues to be up. So that's good. But when that is said, there's not a lot of difference in Shoppers. Maybe I think in the beginning of the year, we are seeing that GLP-1 has increased a little bit in sales because prices are coming down, which is really good for customers because now more customers have access to that drug. And of course, we all know that it goes generic in the second half. So hopefully, more to come. We just don't know precisely when that's going to happen. And then, of course, spending, if you look at a big picture, it is also depending on inflation. And I'm just looking at an interesting store map here that we got some information from Nielsen on inflation. So it differs from area to area because when we look at produce inflation, it's flat to 1% only for quarter 4, where dry grocery is up by 4%, impacted by, in our opinion, the unjustified price increases by the big CPGs. And then meat, of course, because of commodity increase in general is up by 7%, where frozen is at 2%. So I thought that will be interesting. And, of course, also impacting customers. But what customers they do, they actually mitigate that inflation by shopping differently. Operator: Your next question comes from Chris Li with Desjardins. Christopher Li: Just at a high level, Richard, as you look at your EPS outlook for this year, are there certain areas where there might be some conservatism being embedded? And vice versa, what areas do you see having a higher variability or risk? Richard Dufresne: For us, when we look at the 2026 plan, it looks a lot like the 2025 plan. So it's pretty -- if you look by quarter, it should be pretty similar all quarters and not much volatility amongst quarters. That's how we're seeing it for now. There's going to be all the noise regarding when the PC Financial deal closes for sure. And -- but we'll deal with that when we know when that happens. But other than that, like it's going to look a lot like '25. Per Bank: One detail to add to that would be that this is the second year where we're opening around 70 stores. Last year, it was 77. This year, we project around 70. So while we are ramping up, of course, it costs us a little bit more also because the new stores, they don't really in food and drugs for that example, don't get profit before like between year 3 and 5. So we will have incurred a little bit more cost in the beginning, and we're seeing that this year as well. But the 76 stores from last year, they're now in the base. Richard Dufresne: Yes. So tailwind we talked about last year are more or less the same, like new stores and T&T U.S. So that's -- those are the tailwinds in our plan, and we've accounted for them. Per Bank: On sales. Richard Dufresne: Yes. Christopher Li: And my follow-up is just on -- with CapEx going up a little bit this year and it looks -- doesn't look like there's any sort of funding from asset sale to partially fund the CapEx like previous years. Do you expect to maintain a similar pace of share buybacks this year versus previous years? Richard Dufresne: Yes. We've actually were saying it would be around $1.8 billion for '25. We did $1.9 billion. And so we have -- we plan to do about $1.9 billion in '26. Operator: Your next question comes from the line of Vishal Shreedhar with National Bank. Vishal Shreedhar: Just a quick clarification. When you talked about the same-store improving through the quarter, was that a comment specifically to food? Or was that also related to Shoppers? Richard Dufresne: It was food. Per Bank: And it was basically because we lapped in the beginning in our P11, we lapped a very high promotional period last year that we, for many obvious reasons, didn't want to repeat. Vishal Shreedhar: And with respect to Shoppers, the comment regarding the change in timing of the flu season, the implication is that it could be softer in Q1 for Shoppers on same-store? Richard Dufresne: It could have a bit of an impact. We'll see as the quarter progresses. But definitely, last year, P1 in cough and cold was very strong. And this year, it finished in December. But the business continues to be strong. Vishal Shreedhar: Richard, obviously, 2025 has a high number of investments in terms of dollars flowing through the P&L and Loblaw continues to hit its framework. I was wondering if you can give us some context on a dollar value of the cost, if not a dollar value, just some qualitative commentary on the costs related to the new stores, the DC, the T&T ramp-up and how these all might impact and the degree to which you have to implement offsetting plans in order to grow. Richard Dufresne: No, I won't give you numbers, but like we expect that '26 will be the worst year from a drag on T&T U.S. So i.e., the drag will be more in '26 than it was in '25. Having said that, the ramp-up cost of East Gwillimbury is going to be less. We think Q1, maybe a little bit of Q2 of ramping up costs and then we will be done. So all in all, the drag should be a little bit less than it was last year. Having said all that, we've accounted for that when we did our planning for '26. I don't know if that's helpful. Operator: Your next question comes from the line of Mark Petrie with CIBC. Mark Petrie: You guys both touched on it in your script, but I wanted to ask more about Prepared Foods. It seems notable that the 2 best-performing full-service banners are leaders in that area. Could you just talk about where Prepared Foods ranks in your list of priorities? Obviously, some nice tailwinds in your favor as consumers look for value in food, but still want convenience and accessibility. Per Bank: That's a really good point, and that's something that we are doubling down on at the moment, and it was accretive to our comp sales in quarter 4. And when I look at the beginning in this quarter, it's also accretive to our overall business. So customers, they are looking for meal solutions more and more. I don't know whether it's because they eat less out for others to judge. But we are seeing that it's really helpful for us. And we are planning some good stuff that you will all see in our stores this quarter. I remember that we have some one-pan meals supporting customers who want a single-serve meal or for smaller household, I think that's important that we support singles and smaller households even more. And then we have the Korean Fried Chicken and Bao Kit program. That's innovation in the Korean kitchen to create more convenience and excitement in our stores. And then the last example I can remember, we have Halal Chicken now expanded to all our stores across the market. So meaningful, and I'm curious to see how that develops over the next year. Mark Petrie: Yes. Okay. I also wanted to just ask about Shoppers at a very high level. I know it's early in Gregers tenure as leader there, but curious to hear any comments on his initial take on the business and opportunities that he sees and focus areas. Per Bank: Yes. I think there's not a lot of news since we spoke last time, but it's still an opportunity about online. Our penetration for online shoppers is very low. So I'm sure over the next years, we'll be able to do better there. And then Gregers, he comes with a wealth of experience within beauty. So that will also add to the experience for our customers in Shoppers. But it's not something you will see because it takes time before you look at the assortment, before you go to change the stores, but we aim to have a few stores with a new layout being ready within this first year, but it's 3 weeks in. So I'm only quoting what we have discussed so far. But we are really positive on Gregers and his start in Shoppers and what he brings to the table. Operator: Your next question comes from the line of Michael Van Aelst with TD Cowen. Michael Van Aelst: You've been talking about AI and specifically agentic AI more in recent quarters. Can you get into a little more specifics in terms of discussing the most rewarding applications of agentic AI to date and how it's helping you either drive your sales higher or lower costs and things like that? Per Bank: Yes. So big credit to our digital team who have made 2 collaborations, both with OpenAI, which is the Food part and then with Google, which is more the Health and Beauty and in apparel. So on the OpenAI, remember, if you go in and search and try it out, write at PCX and then you can state what you want and what you're looking for because then with one click, you'll be taken through and you will be watching going from app to app and from product to product. So it's more seamless for customers and actually very convenient for customers to use that. And when we look at it, there's like millions of Canadians who are searching more and more for meat solutions and products on OpenAI. First of all, for us, it's important to be first as I'm aware of that we at Loblaw, we were first when we started the e-commerce and food. And that we are still benefiting from today because we have a significant higher market share on food e-commerce than we have in the past. So that's good for us, good for customers. So being first is meaningful. I don't think it will be something that we can read in the numbers in the next quarter or 2. But over time, I think that's important. So that's one part. That's what's great for customers, and that's how we help customers. Another thing is our internal use of AI, which I think is going to be more and more important as we go forward. It's how do we make it better for our colleagues to serve and doing the right thing for customers. We have a tool called Robin internally, where I think I mentioned that on some of our previous earnings call that where the district manager, the store managers have access to data, they can search and they can make things right in stores faster than we have ever done before. So all in all, I think it's going to be meaningful over time. It's not something you will see in the next quarter. We are first in Canada with a lot of it, and we will continue to drive that agenda very hard. Michael Van Aelst: And then just a separate question. Can you explain how the tax holiday impact or how the tax impact -- holiday is having an impact on same-store sales in the food side? Richard Dufresne: Like it's hard to measure with precision. But obviously, like the price of certain items went down, okay? And then now when they record the price this year, it's much higher. And so that's how it's affects CPI. So I suspect that unlike other retailers, the number of categories that were taxing them for us were not as significant. So that's why probably there's a big gap between our internal inflation measure and the CPI food that's measured by StatCan. Because as we said in our remarks, the gap has expanded significantly over the last 2 months, and our internal inflation is not materially higher than what it was like a few months ago. Operator: Your next question comes from the line of Etienne Ricard with BMO Capital Markets. Etienne Ricard: So to follow up on the transaction with EQB, I recognize it's still early in the process. How meaningful is the potential for additional PC Optimum Point issuances? Because the way I see it, it depends on offering a wider range of payment services to the EQ Bank customers or maybe also having a broader banking service to the PC Financial customers. So what gives you the confidence that these customers would be willing to own more than one product in the new entity? Richard Dufresne: I think, Etienne, you're right, but that's more in the long term. Like the key driver for us is more credit cards. Like we are not bankers, we're grocers. And so the way we've been managing the bank has been very conservative. Like a normal banking institution will be a little bit more liberal in its issuance of cards and EQ Bank was quite confident that they could be issuing more credit cards than we did historically. So -- and we know that customers who have the PC Mastercard are better customers from a customer long-term value perspective. So for us, that's what's most strategic. And we have a number in mind that they think that they can increase the number of annual cards with, and that's going to be the biggest driver. So more cards, more points, more loyalty. And over time, yes, you will see expansion in other products. But like initially, expect to see more credit cards, and that's what's going to drive the sales conversion in Loblaw. Etienne Ricard: And I appreciate the willingness to simplify the financial reporting at Loblaw. Now if we look past closing for this deal, should we expect long term the ownership in the EQB shares to remain at the Loblaw level? Or could you still have a say in the program without directly owning within Loblaw? Richard Dufresne: There's no plan to do anything for the moment, yes. We're very -- we haven't even closed the deal yet. And -- but suffice to say, there is -- there needs to be the building a very strong and tight relationship between EQ Bank and our loyalty program. And so that's going to be the first task at hand. And so that's what we'll be focused on for the short to medium term. Operator: Your next question comes from the line of John Zamparo with Scotiabank. John Zamparo: I wanted to ask about the real estate picture. I guess, first, a clarification on the planned openings for '26, are we right to assume that's going to skew a bit more towards the smaller format? But then the broader question is when we're seeing grocers increasingly taking up expectations for square footage growth, are you seeing any change in the quality of locations you're finding or the attractiveness of the lease terms? Per Bank: First of all, in 2026, we opened a little bit more conventional, and I think we're opening one of our bigger superstores as well. But looking at the discount stores, it's a good mix of normal size 32,000 square feet or down to 15,000 square feet, down to 10,000 square feet. I would say that in some of the underserved areas, we are doing more of the smaller stores. And if you look at the mix, we open a little bit less discount, a little bit more Shoppers this year. And it's just basically a coincident. And going forward, we are looking to do about the same number. And I said, it's quite easy to find good sites in Canada. And there's many, many underserved areas around the country where customers they want discount. Richard Dufresne: The only thing I'd add is our pipeline for '27 is already pretty much full on both food and drug. So we still see a lot of runway for opportunities to build stores. John Zamparo: And then my follow-up is on the PC Express OpenAI announcement. I wonder if taking a step back, is there anything you can say about the state of profitability of Loblaw's e-commerce operations now to help us better understand the bottom line impact of the overall greater shift to e-com, not necessarily the OpenAI announcement, but the broader shift e-comm. Per Bank: Yes. No, it's a good question because when we go back a few years, it was diluting. Now it's not diluting anymore. So it's a good support both to customers who want more of it, but also to our profitability. So it's actually okay for us now. It's not diluting. Richard Dufresne: And the key driver for it is us using third parties to do delivery. And so that is dramatically altering the financial equation to our favor. So that's why we like it. Per Bank: And also because we don't have any fulfillment centers around the country, we pick in store. So not only is it helping our efficiency, it's also helping the waste and food waste that we have in stores because customers who buy online, they buy more deep into the range. So it's helping the overall store productivity when we see more online sales, and that's not something that you normally think of. Operator: Your next question comes from Chris Li with Desjardins. Christopher Li: Just maybe a couple of questions on Pharmacy. First, is there any update on the genericization of GLP-1 drugs? Is the expectation that it's going to be around the summer? Per Bank: It has moved a few times. So we're actually not certain. Our best guess now would be around August. That's August, September, that's our best estimate right now when it will go generic because they still need those approval, and it's hard to say when they will get them. Christopher Li: And then my second question is just around the Pharmacy Clinics. How is the performance so far? And I noticed the pace of the new openings is slowing a little bit this year. Is that because you're taking a more measured approach to the rollout to see sort of how the regulatory landscape evolves? Or are you starting to reach a bit of a saturation point in terms of the number of clinics? Per Bank: I'm glad that you asked that question because there's a good sound reason for why we slowed down because we heard up to do it in the provinces where we had expanded Care scope, so -- which was Alberta and Nova Scotia. So there we are -- we've done. And then we're basically waiting for the other provinces to come up so where we can prescribe for more, then there we also meet the clinics. So we are not in urgent need in the other provinces. When that sets, all our new stores are built with clinics, and we are good in the provinces where we are. So you will see more of it. The performance we are seeing is following the plans that we had. So we're really pleased with the performance. There's just no urgent need to hurry up. And since we have a very healthy nice different divisions who are competing for the CapEx, then we allocate the CapEx elsewhere because CapEx is -- we are fighting for that, which is good because they're all giving us a very good return. Operator: [Operator Instructions] your next question comes from Mark Petrie with CIBC. Mark Petrie: I just wanted to ask about T&T and the growth plans there, both for Canada and the U.S. I guess, specific in the U.S., 2 stores you've called out performing very well. How aggressively can you pursue that opportunity? Richard Dufresne: So there's been no change in plans since we last saw you. So we have 11 stores approved. There's a few more that are -- that we're looking at. But for 2026, there are 3 U.S. stores planned to open, 3 in Canada. I hope we opened all the 3 because the last one is scheduled to open like mid-December. So that could slip. But if it doesn't slip, like there's going to be 3, one in San Jose, one in San Francisco and one in L.A., and the last one is the one in L.A. Operator: And with no further questions in queue, I would like to turn the conference back over to Roy for closing remarks. Roy MacDonald: Great. Thanks, everybody, for your time this morning. You know where to find me if you have any follow-up questions. And put a circle on your calendar for Wednesday, May 6, when we will be releasing our Q1 results. Have a great day, everybody, and thank you again. Operator: This concludes today's conference call. You may now disconnect.
Operator: Ladies and gentlemen, good morning, and welcome to TIM preliminary 2025 Results and 2026 Update Presentation. Paolo Lesbo, Head of Investor Relations, will introduce the event. Paolo Lesbo: Ladies and gentlemen, good morning, and welcome to TIM Full Year 2025 Preliminary Results and 2026 Update Presentation. I am pleased to be here with the CEO, Pietro Labriola; the CFO, Piergiorgio Peluso; and the rest of the management team. We will start with Pietro, who will outline the key messages and strategic highlights of today's presentation. We will then review our 2025 operating and financial performance before addressing selected topics that are particularly relevant to understanding the evolution of the group. Finally, we will provide an update on our 2026 targets and priorities going forward. As usual, we will conclude with a Q&A session. Please refer to the safe harbor statement included in the annex for details on the reporting perimeter. With that, I will now hand over to Pietro. Pietro, the floor is yours. Pietro Labriola: Thank you, Paolo, and good morning, everyone. 2025 marked another key milestone in our journey to make TIM a normal company, operational discipline, strategically consistent and financially predictable. We delivered on our guidance for the fourth consecutive year, reinforcing our track record of execution and credibility with the market. At the beginning of the year, process investment in TIM strengthened our shareholder base, enhancing governance stability and providing full alignment behind the group's strategic direction. We also reached a positive outcome in the 20-plus year long legal dispute regarding the 1998 concession fee, fully in line with our expectation and removing a longstanding source of uncertainty. TIM shareholders recently approved a significant overhaul of our capital structure. This will simplify our equity and increase strategic and financial flexibility going forward. Importantly, the 2026 guidance and growth trajectory presented last year are confirmed. Looking ahead, we plan to host a Capital Market Day in the second half after the summer once we have full visibility on several key developments, including the outcome of the savings share conversion, the expected approval of the rent sharing agreement with Fastweb plus Vodafone and the definition of the full synergy perimeter with Poste. Let's start with the full year results. In 2025, group delivered solid growth across all key financial metrics, confirming the strength of our operational execution and financial discipline. Revenues increased by 2.7% to EUR 13.7 billion, supported by continued commercial momentum across our core businesses. EBITDA after lease grew by 6.5% to EUR 3.7 billion, reflecting operating leverage and tight cost control. CapEx remained disciplined at below 14% of revenues amounting to EUR 1.9 billion fully consistent with our investment framework. As a result, EBITDA after lease minus CapEx increased by 17% to EUR 1.8 billion translating into stronger cash generation. Equity free cash flow after lease reached EUR 0.7 billion, further reinforcing our deleveraging profile. Net debt after lease stood at EUR 7.9 billion with leverage at 1.86x in line with our targets and capital structure objectives. Geographically, performance was strong in both our markets. In Italy, despite continued competitive intensity, we reported a resilient and improving financial profile. Revenues increased by 1.9% to EUR 9.5 billion. EBITDA after lease reached EUR 2 billion, up 5.1% year-on-year. CapEx on revenues was just above 12%. EBITDA after lease minus CapEx increased by 18%, reaching EUR 0.8 billion. In Brazil, the market environment remains rational, allowing us to continue delivering sustainable growth and profitable expansion. Overall, the year confirms that the post NetCo team is structurally stronger, more cash generative and better positioned to deliver sustainable value creation. For the fourth consecutive year, both group and domestic results were fully in line with guidance across all metrics and unprecedented achievement in TIM's recent history and a clear testament to the consistency of our execution. In the next slides, I will focus on EBITDA after lease, equity free cash flow and leverage, outlining the key operational and financial drivers behind this performance. Starting with EBITDA after lease, full year growth was fully in line with our guidance at both group and domestic level. In Italy, the year-on-year acceleration progressed as expected. The improvement was sorted by initial comparison base and by positive drivers materializing in Q4. Notably, the full contribution from the back book price adjustments and the typical seasonality of the enterprise business. At group level, Italy and Brazil contributed almost heavily to EBITDA growth. Revenues accelerated at a faster pace than operating costs, resulting in operating leverage and a 1 percentage point margin expansion year-on-year. On segment profitability, we are currently revising the cost allocation framework between TIM Consumer and TIM Enterprise to better reflect their economics. The objective is to provide a more precise representation of the underlying profitability of each business, even considering the mutual intercompany contribution. Given that this work is ongoing and to avoid unnecessary comparability noise, we prefer to disclose segment profitability metrics based on the revised allocation framework at the upcoming Capital Market Day. Cash generation in the year was robust and fully supportive of the reduction in net debt after lease. Equity free cash flow amounted to EUR 0.7 billion, materially above target. The outperformance was driven by 2 distinct components. First, the underlying core performance generated approximately EUR 0.55 billion, around 10% above target. This was primarily supported by stronger operating free cash flow in line with the trajectory we had anticipated in previous earnings calls. Second, in addition, EUR 0.2 billion derived from nonrepeatable items. This included the early collection at year-end of certain public administration receivables originally due in 2026. This timing effect will reverse in 2026. The positive cash impact related to the stock split and stock grouping at TIM Brasil. Turning to net debt after lease shown on the right-hand side of the slide, the reduction was in line if anything, slightly better than expected. The main drivers were 3, the first one. The stronger equity free cash flow just discussed. The second approximately EUR 0.1 billion cash proceeds from the divestment of 2 financial assets completed in Q4. Third, the distribution by TIM Brasil of earnings totaling BRL 2.2 billion in December 2025. This represented an advance of shareholder remuneration originally due in 2026 and resulted in an additional dividend leakage to TIM Brasil minorities of approximately EUR 0.1 billion. Overall, total dividend leakage to TIM Brasil minorities in 2025 amounted to EUR 0.3 billion. As a result, net debt after lease at year-end stood at EUR 6.9 billion with leverage at 1.86x fully consistent with our deleveraging path and capital structure objectives. Turning to TIM Consumer. In the fourth quarter, total revenues and service revenue declined by 2.3%, primarily reflecting a lower contribution from wholesale. The MVNO business experienced volatility with Fastweb and CoopVoce exiting. Retail performance remained stable. For the full year, total revenues amounted to EUR 6 billion, down 0.9% year-on-year, while service revenue were broadly stable, a meaningful outcome in a still competitive environment. A key driver of this stability was our repricing campaign. In 2025, we implemented price increases across more than 8 million fixed and mobile consumer lines. The impact was visible across all KPIs. Wireline ARPU increased by 5.1% year-on-year. Mobile ARPU was up 0.4%. Churn remained firmly under control despite multiple pricing action over time. This performance confirms the effectiveness of our volume-to-value strategy launched in 2022. Notably, similar pricing initiatives have recently been announced by other market players starting in 2026, reinforcing the sustainability of this approach. On the commercial front, wireline net adds improved in the full year with almost 25% fewer line losses compared to 2024, supported by the growing contribution of FTTH and 5G FWA. In mobile, net adds were broadly stable versus 2024. More importantly, number portability was neutral again in Q4, confirming the stabilization trend seen in previous quarters. During the quarter, we disconnected approximately 400,000 SIMs that had been inactive for more than 12 months with no impact on ARPU or service revenues. Finally, on our customer platform, TIM Vision service revenue continued to grow steadily, up almost 5% year-on-year. With the recent addition of HBO Max and Paramount Plus, TIM Vision now represents the most comprehensive content aggregation platform in the Italian market. The sustained top line momentum validates the strategic rationale of this positioning. Turning to TIM Enterprise, Q4 marked the 14th consecutive quarter of growth, with both total and service revenue increasing at double-digit rate, confirming the structural momentum of the business. For the full year, total revenues increased by 7% year-on-year to EUR 3.5 billion, while service revenue grew 9%, reflecting a favorable mix shift toward higher value-added services. Our strategic focus on ICT and digital platforms continues to deliver tangible results. Cloud was the clear growth engine, expanding by 24% year-on-year and representing more than 40% of TIM Enterprise service revenue in 2025. Connectivity evolved as expected, with a moderate overall decline. Within the mix, fixed connectivity remains stable, while mobile was affected by phaseout of a large public administration contract that we consciously decided not to renew in line with our disciplined approach to margin protection and avoidance of low-return tenders. Other IT services grew by 4%, supported by strong demand in cybersecurity and IoT. The integration of our infrastructure assets with advanced cloud, IoT and cybersecurity capability underpins TIM Enterprise competitive edge and market differentiation. Our ambition is clear: to leverage this foundation becomes Italy leading provider of sovereign digital services. In this context, the National Strategic Hub stands as Europe's first concrete example of a sovereign cloud initiative. TIM Enterprise revenues generated within this framework have doubled over the past 12 months, giving us a structural head start in a strategically critical segment. Moving to Brazil. Results once again confirm strong execution and disciplined management. The market remained healthy and rational and TIM Brasil continued to deliver profitable growth, reaffirming its position as the most efficient operator in the country. For the full year, top line growth was in the mid-single digits, driven by mobile service revenues. Monetization of the customer base remains a key priority, supported by successful upselling from prepaid to postpaid, resulting in the highest ARPU in the market. Efficient operational execution drove high single-digit EBITDA after its growth and margin expansion. Operating expenses remain below inflation while EBITDA after lease up nearly 9% year-on-year. The combination of EBITDA after lease growth and disciplined CapEx translated into double-digit growth in cash generation. These results demonstrate that the operational discipline and value-oriented approach that have driven success in Brazil are the same principle guiding the transformation of our domestic business. Across both markets, the formula is consistent, focused efficiency and value creation and the results speak for themselves. I will now hand over to Piergiorgio for a detailed review of the financial results. Piergiorgio Peluso: Thank you, Pietro, and good morning, everyone. Let me start with a few comments on group CapEx and OpEx. Group OpEx rose modestly in 2025. Around 2/3 of the year-on-year growth was attributable to the domestic perimeter with the remaining 1/3 related to TIM Brasil, where cost growth remained well below inflation, confirming continued cost discipline. In Italy, the slight increase in OpEx was primarily driven by revenue-related components, namely higher cost of goods sold linked to ICT revenue growth as well as higher G&A and labor cost. These effects were partially offset by lower industrial costs, including savings in network operations and energy. OpEx related to FiberCop MSA reduced 11% year-on-year. Group CapEx declined 1.7% year-on-year to EUR 1.9 billion, with Brazil stable and Italy down 2.6%. CapEx intensity stood at around 14% of revenues. In Italy, about 25% of CapEx was customer-driven while 50% was allocated to infrastructure investment, including mobile network, IP backbone and data center, where we are expanding capacity to meet the surge in cloud demand. In Italy, our transformation plan continues to enforce strict OpEx and CapEx discipline. As a reminder, progress is tracked against the inertial OpEx and CapEx trajectory that is the cost baseline we would have incurred without the plan. Domestic transformation plan delivered to EUR 266 million in cash cost reduction versus inertia plan achieving 130% of the full year target. In previous earnings calls, we indicated that cash generation would accelerate in Q4 and that the group was on track to achieve and potentially exceed full year guidance. This is exactly what happened. Equity free cash flow came in materially above target, as already outlined by Pietro. In addition, Q4 included some nonrepeatable items below the equity free cash flow line. As a result, group net debt after lease decreased by EUR 0.4 billion over the last 12 months from EUR 7.3 billion to EUR 6.9 billion. This slide summarizes the main moving parts. Starting with equity free cash flow of EUR 0.7 billion resulting from EUR 2.0 billion of EBITDA after lease minus CapEx. This reported figures include the positive profit and loss impact of the concession fee and the negative profit and loss effect related to the reversal of wireline contract cost following the reassessment of deferral period implemented at year-end. I will address both items in the next slide. EUR 0.7 billion net working capital absorption. This figure includes both the concession fee and the reversal of wireline contract cost, but with the opposite cash effect compared to the profit and loss, resulting in a neutral net cash impact. Working capital also reflects cash out items such as preretirements and the final installment to DAZN. Excluding these extraordinary components, the change in underlying net working capital would have been broadly at breakeven. A detailed breakdown is provided in the annex. Below equity free cash flow, the main items were EUR 0.3 billion of dividend leakage related to TIM Brasil minorities, EUR 0.1 billion for the buyback in Brazil, EUR 0.1 billion of cash proceeds from the disposal of 2 financial assets completed in Q4. The resulting net debt after lease at year-end stood at EUR 6.9 billion with a leverage at 1.86x. Before moving to the 2026 update, I would like to address a few special topics that require attention. Please feel free to raise any clarification point during the Q&A session, should anything require further detail. The first topic relates to the '98 concession fee. As you know, last December, the Italian Court of Cassation ruled in favor of TIM, bringing to a close of a more than 20-year legal dispute and triggering approximately EUR 1 billion not appealable compensation. From an accounting perspective, this amount was recognized as other income within 2025 reported EBITDA. However, it was not reflected in the year-end net financial position. As previously communicated, in July, we anticipated the expected cash in through a factoring transaction. The related proceeds were temporarily recorded as financial debt and from an accounting standpoint with no impact on the net financial position. This liability will unwind in 2026 upon receipt of the payment from the Italian Government. The 1998 concession fee leads to the next special topic on Slide 16. On the 28th of January, ordinary and savings shareholders approved the 2 key resolutions aimed at simplifying our capital structure and increasing strategic flexibility. The first resolution concerning the reduction of share capital from almost EUR 12 billion to EUR 6 billion. This will not alter total value of net equity or economic substance. Rather, it will realign the equity structure and restore available reserve, thereby enhancing financial flexibility, including the potential for future shareholder remuneration. The figures shown in the slide refer to year-end 2024 and will be updated in March following the approval of the 2025 financial statement. The second resolution relates to the conversion of savings shares, a long anticipated step towards simplifying TIM capital structure. Moving to a single class of shares will improve stock liquidity and index relevance while eliminating preferential rights attached to saving shares and fully align the interest of all shareholders. Going forward, TIM's capital structure will be leaner, more efficient and more remuneration supportive. This slide outlines the time line for the conversion process. I will not go through each individual step. In summary, assuming no position from creditors to the share capital reduction, a scenario we do not expect, the conversion is anticipated to be completed by the end of May. The last special topic concerns the reassessment of the deferral period for the one-off cost related to wireline contracts introduced at year-end 2025. Let me start with industrial rationale. Following the disposal of the wireline access network in 2024 and the progressive implementation of our customer platform strategy, our business model has evolved. Customers are no longer identified by a single fixed line but by a broader ecosystem of services, connectivity, entertainment, energy, insurance and more. Consistently, our cost structure has shift from an infrastructure-based model to a more variable and service-driven structure. This new operating context require the reassessment of the deferral period of wireline one-off contract cost. There is no change for variable cost, which will be -- continue to be expensed in the profit and loss on an annual basis as long as the line remains active. Starting the 1st of January 2026, one-off cost will be no longer deferred over 8 years previously aligned with the average customer useful life, but over 4 years, reflecting the economic payback period. These one-off costs mainly include the subscriber acquisition and provisioning costs incurred at contract inception. Most importantly, this accounting change has no cash impact. The cash out associated with this cost is and will continue to be fully recognized in the year of activation. With the adoption of the revised deferral period, we aligned the previously deferred cost to the new 4-year amortization period. This led to a nonrecurring charge of approximately EUR 0.6 billion recognized in 2025 reported EBITDA. Starting from the 1st of January 2026, one-off activation cost will be amortized over 4 years with 1/4 of the amount recognized in the profit and loss each year. Overall, the net impact on EBITDA is expected to be broadly neutral over time. The initial headwind resulting from the shorter amortization period of new activation will be offset by the tailwind from lower residual deferred costs still to be released to the profit and loss. As I want to reiterate, this reassessment as 0 cash impact. Its rational is industrial and economic. Future efficiency in one-off cost will be reflected more rapidly in the profit and loss, improving the alignment between EBITDA performance and cash generation and enhancing the transparency of underlying profitability. A simplified illustrative example of new versus old treatment is provided in the annex. Before moving to the 2026 update, let me briefly recap the key messages on these special topics. The 1998 concession fee enhances our financial flexibility. In the short term, it will support the financing of the savings shares conversion. The positive impact on the net financial position will materialize in 2026 upon cash received. The new capital structure will be leaner, more efficient and better positioned to support shareholder remuneration, thanks to the restoration of the distributable reserve. The conversion to a single class of shares will eliminate preferential rights, fully aligned shareholder interest, improved stock liquidity and increased index relevance. The revised deferral period of wireline contract one-off cost has no cash impact and will improve the alignment between EBITDA and cash generation, increasing transparency on underlying profitability. One additional update yesterday, the Board of Directors approved a 10-for-1 reverse stock split. Subject to approval at the shareholders' meeting to be held on April 15, this measure is expected to reduce share price volatility and broaden the potential investor base. With that, I hand back to Pietro for the 2026 update. Pietro Labriola: Thank you, Piergiorgio. Before we move into 2026 outlook in detail, let me reiterate the key points. The strategic framework presented last year is fully confirmed. You will see some refinements in business assumptions, but the direction of the travel remains unchanged. To ensure full clarity, these slides summarize the main assumption underpinning our 2026 guidance. Starting with Italy. Equity free cash flow will include around EUR 1 billion related to the concession fee with a corresponding reduction in year-end net debt. We are assuming no material contribution from Poste synergies in 2026. I will elaborate further on this on Slide 26. The MVNO segment will remain somewhat volatile during the year. PosteMobile will progressively migrate inbound, reaching full contribution in Q4, while Fastweb and CoopVoce will complete their outbound migration in the first half. No material impact is assumed from the RAN sharing agreement with Fastweb and Vodafone, subject to expected approval by the National Regulatory Authority. Value of services provided to FiberCop will progressively scale down during 2026. Our guidance assumes 0 contribution from the NetCo earnout. We assume completion of the Sparkle disposal in Q2, reflecting timing in the authorization process. We are not concerned. This is merely a matter of time. In terms of shareholder remuneration, our assumptions are: a cash-out of approximately EUR 0.7 billion in May representing the cash component of the savings share conversion. The declaration of a dividend of approximately EUR 0.5 billion for fiscal year 2026 payable in 2027. The launch of a share buyback after Sparkle disposal closing for an amount equal to 50% of the transaction proceeds. Turning to Brazil. We assume cash-out of approximately EUR 0.2 billion related to the acquisition of the remaining 51% stake in I-Systems. On shareholder remuneration, TIM Brasil has maintained a trajectory of sequential improvements. Let's now review the priorities for our 3 entities. For each, the strategic focus outlined last year remains confirmed. TIM Consumer, we expect a stable retail top line and the reduction in MVNO as previously explained. Profitability will be supported by disciplined cost control. CapEx will remain focused on 5G deployment and the customer platform. TIM Enterprise. Growth above market is expected to continue. Our priorities include further margin improvement through cost efficiency and optimize mix versus by mix. Investments will focus on data center and AI capabilities progressively position TIM Enterprise as the Italian champion in sovereign cloud. TIM Brasil, the focus is on delivering EBITDA growth above inflation. Will still strengthen the mobile value proposition, deploy targeted offers and expand ancillary revenues while maintaining selective broadband investment and accelerating B2B connectivity, IoT and ICT services. Across the group, our ESG agenda remains a structural pillar of long-term value creation, fully embedded in our industrial strategy rather than treated as a parallel initiative. In 2026, we will focus on 3 clear priorities. First, on the environmental front, we'll present our environmental transition plan setting up a structural pathway to decarbonization with defined milestone and accountability. At the same time, we will address execution challenge, increasing transparency and control over remission that historically sit outside direct telco boundaries, particularly Scope 3 and supply-related emission by strengthening tracking engagement and governance mechanisms across the value chain. Second, on the social dimension, we'll continue to advance gender balance across all levels of the organization. Our objective is not incremental improvement, but measurable progress in leadership and critical roles, reflecting a deeper and lasting culture shift. And finally, on governance. In strong alignment with TIM Enterprise's strategic positioning, we will reinforce our commitment to digital sovereignty. This means enhancing secure, resilient and trusted digital infrastructure and services, contributing to a more robust and strategically autonomous digital ecosystem. Let me now turn to one of the most important structural shift shaping our industry. The evolution from cloud adoption to cloud governance. For years, cloud was primarily about efficiency, about scale, speed and cost optimization. Enterprises migrated workloads to global hyperscaler to gain flexibility and reduce infrastructure complexity. Adoption saw the scale challenge. Today, the conversation has fundamental change. Cloud is no longer just about computing power. It is about control, control over data, operation and technology. We are witnessing a clear transition from the old model '21. Previously, business drivers were scale and speed. Today, they are controlling resilience. Customer priorities are shifting from pure cost efficiency to risk mitigation. Architecture are moving from global centralized hyperscale model to jurisdiction aware distributed designs. Most importantly, companies and public administrations are rethinking control over their data, moving from vendor concentration toward multilayer sovereignty. In short, adoption solved scale. Governance now addresses risk. This shift is particularly relevant in Europe and in regulated industries, including public administration, finance, health care, and critical infrastructure, where data sovereignty, compliance and operational resilience are strategic imperatives. This is exactly where TIM is uniquely positioned. We are not just a connectivity provider. We operate critical national infrastructure, understand regulatory framework, manage secure network at scale and already serve the most sensitive segments of the economy by leveraging our existing sovereign infrastructure, combining secure data -- secure data center, advanced cloud capabilities, edge computing and trusted partnership we are building a compelling sovereign cloud proposition. And this is not theoretical. It is already translating into commercial momentum and long-term contracts, strengthening the quality and resilience of our revenue base. Let me briefly highlight another structural shift shaping our performance and future growth, the move from volume-based to value-based connectivity. In the past, the industry competed mainly on price per gigabyte. Network were largely best effort and demand was driven primarily by video and social media. In that context, connectivity risk becoming a commodity. Today, the paradigm is shifting. Latency, symmetry, resilience and reliability are now critical. Both consumers and enterprises increasingly demand guaranteed performance not just data volume. We are moving from price per gigabyte to price per call for quality. Application as cloud gaming, 4K live streaming, smart home security, industrial IoT, edge computing and AI workloads all require ultra low latency, jitter control, stronger uplink capacity and built-in redundancy. Performance metrics now define value. This shift plays directly to our strengths. Investment in 5G stand-alone and network modernization are enabling ultra-high-performance connectivity, allowing us to differentiate introduced premium proposition and improve monetization. For enterprise customer, in particular, connectivity is becoming mission-critical infrastructure, supporting longer contracts, higher quality revenues and stronger margin. We are not talking about the access. We are talking about the backbone, the electronic in our network. In 2025, we continue to enhance network quality and expand coverage, reinforcing our positioning in other segments. This message is simple. As connectivity becomes strategic, value creation increases, our high-performance network and backbone is a key enabler of sustainable growth going forward. Before moving to the guidance, let's briefly review the strategic partnership we're developing with Poste. Conceptually, the expected synergy can be grouped into 3 main areas. MVNO contract at the full run rate, this is expected to generate high-margin revenues of approximately EUR 100 million per year, representing a clear derisking of the business plan. TIM Consumer and TIM Enterprise initiatives, several projects are already underway with others to be launched shortly. We expect a positive impact on EBITDA after lease of approximately EUR 50 million per year at full run rate. Additional transformation project, these initiatives are still under evaluation. They have significant potential, but we need time to finalize them. We will provide further details at the upcoming Capital Market Day. Now I leave the stage to Alberto Griselli, Chief Executive Officer of TIM Brasil to talk about the Brazilian guidance for 2026. Alberto Griselli: Thank you, Pietro. Good morning, everyone. I'm Alberto Griselli, CEO of TIM Brasil. Pietro has just outlined our results. We delivered a strong quarter and closed year with solid performance, reflecting consistent execution and discipline across the business. Importantly, 2025 marked a key milestone for TIM Brasil. Our return on invested capital exceeded the consensus cost of capital, confirming that our strategy is translating into tangible value creation. As we move into 2026, our direction is clear. We continue to focus on value creation across mobile, B2B and broadband supported by 3 company-wide enablers, artificial intelligence, efficiency and ESG. TIM Mobile profitability remains the priority, supported by a customer-first approach. In B2B, our increasingly scalable portfolio positions us well to capture new growth opportunities. In broadband, we entered the year with a more efficient operating model and a portfolio line with disciplined expansion. Across the company, artificial intelligence is becoming a core lever to improve productivity and decision-making, while efficiency and capital discipline remains central to protecting margins and cash generation. This brings us to our guidance, which reflects continuity and discipline. Service revenues are expected to grow in real terms, supported by resilient mobile performance, a recovery in fixed and redevelopment of new revenue streams. EBITDA is expected to grow faster than revenues with margin expansion driven by OpEx efficiency, digitalization and the progressive materialization of artificial intelligence-related gains. Investments will remain disciplined, guided by an efficient capital allocation framework, focused on network quality and technological evolution. We will continue to strengthen our revenue to cash conversion through a holistic approach to operational efficiency. Finally, taken together, these elements support a faster expansion of shareholder returns fully aligned with cash flow growth. Back to you, Pietro. Pietro Labriola: Thanks, Alberto. Let me walk you through our 2026 guidance at group and domestic level. Group total revenues are expected to grow by 2%, 3% with domestic growth in the range of 1% to 2%. Group EBITDA after lease is expected to increase between 5% and 6% with domestic growing at around 4%. As already mentioned, domestic revenue and EBITDA trends incorporate the temporary volatility in the MVNO segment. PosteMobile will progressively reach full run rate during 2026, becoming a structural tailwind from 2027 onwards. CapEx on revenue is expected to remain below 14% at group level and around 12% for domestic, confirming our disciplined investment framework. In terms of cash generation, we expect equity free cash flow after lease of around EUR 1.8 billion, excluding the net cash in from the concession fee, which will contribute below EUR 1 billion post tax and taking into account reversal of public administration invoices anticipated in Q4 2025, we are confirming the EUR 0.9 billion target announced last year despite the weaker foreign exchange rate. Leverage will remain below the maximum threshold of 1.7x that we committed to last year. I will provide further detail on this in the next slide. Turning to shareholder remuneration for fiscal year 2026, we envisage 3 components: a dividend of approximately EUR 0.5 billion corresponding to 70% of equity free cash flow after lease, net of concession fee and dividend to TIM Brasil minorities. The payment will occur in 2027. A share buyback equal to 50% of the proceeds from the Sparkle disposal to be launched following completion of the transaction. A cash payment of up to EUR 0.7 billion to current savings shareholders in connection with the share conversion with completion expected by the end of May. Let's now take a final look at 2026 cash dynamics. There will be 3 main sources of cash. Equity free cash flow after lease, the cash related to the 1998 concession fee, proceeds from the Sparkle disposal. After distributing dividend to TIM Brasil minorities and executing the share buyback in Italy, part of this financial flexibility will be allocated to finance the cash component of the savings share conversion and the acquisition of a 51% stake of I-Systems in Brazil. The 2026 year-end net debt will remain below 1.7x, a level we consider optimal for our capital structure and one that positions TIM in a best-in-class peer comparison. Additional financial flexibility may be deployed to accelerate both organic and inorganic growth. On the ESG, this slide shows a very clear progression, strong execution against our 2025 targets and a more focused agenda for 2026. On the environmental side, we have reached 100% green energy, a significant operational milestone supporting our decarbonization pathway. In parallel, we are strengthening Scope 2 measurement capabilities laying the groundwork for a more structural rollout in 2026. On social dimension, progress is tangible. Women has reached 52.3% our target trajectory and women in leadership position increased to 33.5%, moving steadily toward our 2027 objectives. In 2026, the focus remains on sustaining this momentum both in hiring and in leadership representation. On governance and digital transformation, Italy is delivering high operational targets, advanced digital solutions grew by 22%, exceeding the 17% target for 2025. One, digital identity services reached 34% outperforming expectations. In 2026, we aim to scale the public administration governance platform with more than 30% new customer versus full year 2025 activation, and to expand sovereign services with around 20% year-on-year growth in commercialized services. In Brazil, we continue to invest in people and capabilities. We have already upskilled 60% of the workforce in digital competencies and plan to train at, at least 20% more employees in 2026 compared with 2025 levels. Overall, execution remains disciplined and measurable with clear operational milestones supporting our broader ESG framework. Let's now move to the closing remarks to wrap up. Looking back and considering TIM's reputation in the financial community in past year, it is noteworthy that we have achieved our targets for 4 consecutive years. I want to emphasize again that the new governance has brought greater stability and full support to the group strategy, enabling planning with much higher visibility than before. The near-term outlook is clear. The 2026 trajectory is solid and fully aligned with the guidance we announced 1 year ago. Execution will continue with consistency and discipline. Guidance is confirmed. Looking beyond 2026, the best is yet to come. Details will be shared at our upcoming Capital Market Day. With that, we are ready to take your questions after some few seconds of rest. Operator: [Operator Instructions] The first question is from David Wright at Bank of America. David Wright: I hope you can hear me well. So I just need a little bit of help with the numbers. You talked about the exit of MVNOs, including Fastweb and then the onboarding of Poste. So I just wondered how much in euro terms of revenue are we losing in 2026 from the exiting MVNOs, how much are we gaining from Poste? I think you suggested full run rate in Q4, but if you could just balance those numbers for us a little. And I guess that's suggesting some weaker H1, stronger H2 phasing in the domestic run rate. That's question 1. And then question 2 on the Enterprise business. The prepayment of revenues that came in, in Q4, it looks to me that's give or take sort of EUR 100 million of revenues. Is that right? And should we then expect full year '26 growth to be equally weaker? So again, we're going to get 6% '24, 9% '25. Are we going to go back down to sort of 3% levels in 2026 before we normalize again in '27. So I'm just trying to understand the phasing a little and any numbers you can give me on that would be super useful. Sorry for being a bit more technical. Pietro Labriola: Thank you, David. I think that you want me to explain what we should stated during the call because exactly what we'll have is that we'll have a weaker first half 2026 compared to the first half of 2025 and a stronger second half 2026 compared to the second half 2025. Why that? If we look also in the Excel number that we shared with all of you, the first quarter 2025 was the highest one in terms of MVNO revenues. Then it was shading through all the 2025 and this is something quite normal. The PosteMobile phasing we started at the beginning of the second quarter 2026 and we reach a regime situation in the third quarter 2026. What it will mean? And so it's very important to say to everybody that you will see a weak EBITDA in the first half 2026 compared to the previous year. Just for this movement, no panic, no hurry. It's a normal trend of the revenues. At the same time, you will see a first quarter of 2027, stronger in terms of comparison year-over-year because you will have in the first quarter 2027, a complete amount of the MVNO of Poste. So everything was under control. And these are the dynamics of this component. And this explain also reading also some of the comments, a weaker EBITDA growth year-over-year at 4%, but this was mainly related to the delay of the, let me say, phase in, phase out between the MVNO contract. Overall, what is -- we're talking about a contract that is closed between EUR 80 million and EUR 100 million on a yearly basis. I hope that on this point is more clear now before to move to the second question. Is it? David Wright: Yes. That's cool. Pietro Labriola: But again, I want to stress that we want to be a transplant company or better, as you mentioned in one of your report, a more normal company, no surprise, the first quarter, the EBITDA will be weaker not because we are stupid. And the first quarter 2027 will be better, not because we are superman. Then when we move to Enterprise, what we are mentioning that is a prepayment has no impact on the competence and so on the revenue year-over-year, on the EBITDA year-over-year because it's an anticipation of payment and it allow us to explain also the trend of the equity free cash flow. We are closing better the 2025. It's important to highlight that is not a lottery ticket, the better result of 2025 because also if we have some nonrecurring activity. I have to remember to everybody that it's quite normal that the company has a guidance and an internal budget. In TIM, I'm used to give to my team a budget and the target that is higher than the guidance because we want to put the market on a safe side without surprise. So this result of 2025 is the result of the activity of the TIM. Then when we compare the result of 2025 towards the guidance of 2026. What's happened? In 2026, we are putting EUR 1.8 billion. Of this EUR 1.8 billion, around EUR 950 million is related to the [indiscernible] the concession fee. So it remains EUR 850 million. Our previous guidance was EUR 900 million, but we will have in the first quarter of 2026, the reverse of the anticipation that we had in the last quarter of 2025 by the public administration. And in the meantime, if you look at the currency rate that we are using for our plan 2026 is worse than the 2025 assumption. It means that if we should compare on an equal basis, the real -- or let me say, the organic equity free cash flow -- equity free cash flow number in absolute value for 2026 should have been EUR 950 million. So in some way, is as we are declaring that we are upgrading the fact our guidance, absorbing these 2 movements. Is it more clear now, David? David Wright: Yes. Yes. That's super. Operator: The next question is from Mathieu Robilliard of Barclays. Mathieu Robilliard: Hopefully, you can hear me well. I had a question first on the front book back book. I mean you've done quite a bit of price increases on fixed and mobile throughout 2025. It has had no impact, no visible impact on churn. So I guess this is probably or possibly because of the front book and back book gap continues to be quite reduced. If you can give us a bit of color into that, that would be helpful. The second question was about NSH. So very strong growth between '24 and '25. Should we assume that this type of growth -- this magnitude of growth can continue in '26? And lastly, I mean, you're starting to have a rich company problem with leverage coming now with leverage coming down a lot in 2025, and we fast forward to 2026, it's going to be extremely low. So how should we think about capital allocation? Of course, you reinstated the dividends. But even with that, it seems you have a lot of flexibility or will have a lot of flexibility. Pietro Labriola: Okay. Thank you, Mathieu. I will leave Andrea to answer to the first question to give some more colors. But what is important that today, we are performing very well compensating the line erosion with the price. But as we put in the presentation, we think that the next challenge for all the telco in Europe in the following years will be the market consolidation and in some way, I'm answering also to last your question, we must be ready to be part of this process. And the second to be able to ask for a premium for the better quality of our services. I want to highlight this point. This is not something that will happen in 2026. But if you look at 2027, 2028, the quality of the network will become key for the end user services. You will need more latency, you will need more uplink, but you need also a much better backbone. And we are the player in Italy today that is positioned in the best way to try to exploit this opportunity. But I leave to Andrea to give more color. Andrea Rossini: Thank you, Pietro. Thank you, Mathieu. You're right. We did quite a lot of work on the back book price up, especially during '25, we said several times that we had an impact of around EUR 100 million from the back book price up. The impact on churn was actually compensated by several items, meaning that we worked on convergence. We worked on the diffusion of TIM Vision. The TIM Vision-based increased quite a bit and this contributed to somehow stabilize the impact of price up on back book that is inherently generating some impact of churn. The most important thing is also to notice that as regards the front book trend, we see some positive evidence from the market. So after the merger between Vodafone and Fastweb, we actually see some rationality in pricing. And we see along the second half of the year also some action on back book price up. So this is a positive outcome. The other thing is on mobile, we do see a reduction of the rotational churn in the market. And this is contributing to stabilize the churn effect. Meaning that as we said several times, the impact of Iliad in the market is decreasing and the impact of Fastweb that was acting like a disruptor until 2020, 2024 has come down. Therefore, this contributes to create a positive scenario for the stabilization of the churn effect. Pietro Labriola: About the second question, I'll leave Elio to give you some more details. Elio Schiavo: So sorry for my voice. I hope you can you hear me? Pietro Labriola: Yes. Elio Schiavo: Okay. Good. So we don't see any discontinuity in revenue generation. Actually, we feel very positive about 2026. Just to let you understand why we registered this 9%. Actually, we have a lot of seasonality in quarter 4, as we told you many times. And what happens here is that we got an extraordinary quarter 4 because, let's say, if we compare quarter 4 '25 versus '24 is EUR 144 million higher. And in the year -- in the previous year was only -- the difference was only EUR 56 million and when we look at the difference between quarter 3 and quarter 4, in 2024. It was EUR 180 million. In 2025 was EUR 310 million. But just to let you feel good about our revenue forecast for 2026. We got backlog at a level of EUR 4.2 billion of revenues that we have already secured for the years going forward. And in 2026, the fraction of this backlog, which represents revenues already secured is above 60%. So we don't see the trajectory of our revenues to go down for no reasons. Pietro Labriola: Mathieu, and now I will take the third one. First of all, again, we are really [indiscernible] because if you look at our presentation of the last year in our Capital Market Day, we're already showing that after the cash-in of the concession fee, we should have reached a level of leverage where our target should have been 1.7 as rational, and the remaining part should be financial flexibility. We are reaching this target in advance compared to the previous plan. And it will help us in terms of capital allocation, then I will leave to Piergiorgio to elaborate more on that, to work on the possibility that could arrive to be part of a potential market consolidation because I continue to bet on the fact that it will happen, and I completely subscribe the position of Mario Draghi at the European level, something that was also subscribed by the GSMA. We must try and the time is now to catch the opportunity of the sovereign cloud and digital sovereignty. This is not an Italian clean. It's an European point on which everybody are putting pressure and to be a company, a team that now is considered a national champion for us it will be much easier to do that. And then there's a matter of capital allocation also on the internal project. But I'll leave to Piergiorgio to give some more colors on that. Piergiorgio Peluso: Thanks, Pietro. Good morning to everyone. The point of the capital allocation, as you can imagine, is a crucial point that we are analyzing and working on since the -- since a few months. I would say first comment, we have already decided to execute certain transaction considering the capital allocation that has been available, thanks to the concession and to the potential sale of Sparkle. So I would say first answer to your question, Mathieu is that the acquisition in Brazil of IHS in the region of EUR 200 million plus the savings share conversion and the shareholder moderation that we are already envisaging in our current guidance is already a first answer to your point on how we look at the capital allocation in the future. Of course, we consider dividend distribution in terms of a sustainable remuneration to the shareholder, while having or limiting buyback to certain extraordinary items in order to have, let's say, a shareholder remuneration based on the recurring profitability through dividend. In terms of, let's say, more in general on capital allocation, I would say that we have started a work and allocating EUR 200 million of CapEx in 2026, included in our guidance in order to execute a certain transformation project, and I don't know, just to make simple example, back office automation in customer care or reduction of legacy services or platform decommissioning and supplier consolidation, digitalization of procurement. And I mean, it could be as long as you want. But as you can imagine, with -- in this moment, there are several opportunities that we can work on. And this is the first time that the company is allocating, let's say, an important amount of money dedicated to those projects. Of course, this will have a limited impact in 2026 and it will be much more evident in 2027 and so on, but this will be more part of the presentation that we will have in the Capital Market Day already with the initial results of these projects. The idea is I just want to anticipate one point, which is crucial. The idea is to consider, let's say, much more the profitability of Telecom Italia and the domestic business, particularly based on the cash EBIT result, let's say, net operating profit after tax compared to the cost of capital in order to identify clearly the legacy that we have in our net invested capital and clearly present to you a set of KPIs where we'll be managing and switching off all these legacy. So this is a journey that we have started, and I think it's part of our transformation effort that we are already launching. Mathieu Robilliard: If I can follow up, maybe Pietro, you talked about consolidation. How could that be source of capital allocation from your point of view? It doesn't seem in Italy, you would be involved in something major, but maybe I'm wrong. Are you talking maybe about small adjusted businesses in Italy? Pietro Labriola: But about market consolidation, I don't want to speculate it on that, but the number of all the players are quite clear. So if you want to be sustainable in the market, in the medium, long run, you must look for market consolidation because there will be an optimization at network level, at all the different cost level and you could have also a more rational approach. But I'm not saying something that is different from what you are experiencing in France, in Spain, what's happened in U.K. Europe is in the same situation. The only way to recover in terms of profitability is the market consolidation where market consolidation doesn't mean price increase, but a much better level of efficiency at all the levels. The second that is not related to the market consolidation is. Are you using AI? Well, if you are using AI, you will need a higher level of latency. If you want to be in a stadium and been able to do something on your mobile while you have a crowded stadium with 70,000 spectators you have to pay for a premium. Just to give you an idea, we put as first chart. The first chart was the Milano Cortina sponsorship that we did. We were able to put in the hands of all the different spectators, but also all the athletes, mobile lens that we're able to navigate and serve and experience a very good network quality because of our network. I think that this is the trend. Then we are always open to look at all the opportunity that generate value. And for us, value as Piergiorgio was explaining, is not growth on EBITDA, but cash generation because this is the main driver. I hope that was clear, Mathieu? Operator: The next question is from Ajay Soni at JPM. Ajay Soni: Hope you can hear me. I've just got a couple. First is on Poste synergies of EUR 50 million. So what are your time lines on this? And any costs that will be incurred to deliver these synergies? You mentioned the MSA OpEx accounts for 22% of your domestic OpEx, and that's reduced 11%. So is this just due to fewer lines? What are the moving parts here? And what are your expectations for this cost line into '26 and '27? Pietro Labriola: Thank you. About if I catch in the right way your first question is related to the synergy with Poste, if I'm not wrong. In such a case, what we show is mainly procurement synergy that will enter in 2027 and will be a regime in 2028, just because being procurement synergy, you must wait that the previous contract will end to do some joint activity or some contract, but we are working on further other activities. Some of them are transformation that we'll disclose in the second half. About the MSA OpEx. The optimization of the MSA is not only related to the fact that you will have a reduction of the line because this is a variable component. For sure, I would like to not do a kind of saving on the cost line because they will keep for me the customer. But there are other areas, for example, we have to choose between FWA, FTTH, FTTC and the level price of each of this technology is different. With different level of CapEx, margin and cash generation. So be very clever in managing that is an opportunity. Then in the meantime, we have also some part of the MSA that is related to the use of some services. And we are optimizing. This is not a 1-year work because you have to remember to everybody that by 2029, there will be a good part of the MSA that will completely expire, and we will have to decide if we have to renegotiate or not. In such -- in this case, we have to highlight that we are also working on the use of AI because of some of this activity. AI could substitute that kind of activity. So it's difficult to say. Stay tuned until then to see some transformation. But it's important to show to everybody that we're a company that is not working anymore. Just for the next quarter, but for the financial sustainability of the company in the medium, long run. Ajay Soni: Follow-up. So then it's reduced 11% this year or 2025. What are you expecting for '26 and if you have numbers for '27, that would be great. Pietro Labriola: We have in our number, a reduction of the cost that is related to 2 components, as I was mentioning to you. The one is a volume-driven approach. If we will lose further line, we'll have that. And another part that is an optimization. But in any case, I cannot disclose the number, but there will be a reduction also 2026 on 2025 and also 2027 on 2026 on the MSA cost. Operator: The next question is from Joshua Mills at Exane. Joshua Mills: Hopefully, you can hear me now. Sorry about that. Two questions from my side. One is just on the FY '27 numbers. So I know that you're not reiterating the free cash flow guidance today and you're waiting for the Capital Markets Day in the second half to give more detail. But just if we think about the building blocks you've laid out for 2026 and what looks to be an implied uplift to the free cash flow guidance this year when you adjust for the pull forward of the nonrepeating items. Are there any headwinds that we should think about or potential challenges yes, headwinds to free cash flow in '27 that might negatively affect the EUR 1.1 billion number that was put out previously? But am I right to infer that as you walked through this presentation and talking about opportunities and cost savings, et cetera, that the risk is probably to the upside on the EUR 1.1 billion. That's the first question. And then secondly, I wanted to get a sense of how you're thinking about the RAN sharing deal with Swisscom. I note that in the presentation, you're referring to potential cost savings, but do you also expect there to be a network impact and improvement in network quality? And if so, how meaningful do you think that might be in the medium term? Pietro Labriola: Okay. About the first question, we don't see any kind of risk or headwind for the 2027. We delivered a better result for 2025. We are confirming the result for 2026. And so we will continue with the same path that we told also the previous year for 2027. So we don't see any risk or headwind. Related to the RAN sharing, as we told to the market about the JV, the joint venture with Vodafone Fastweb, we were saying that we see that result of the activity we started to be exploited ahead in the -- if I'm not wrong, 2029, we'll start to see some savings for the JV about that. And in our number, what is happening is that we are considering the actual CapEx, also part of the CapEx to start that activity. So in some way, what is happening is that we are doing better than what was forecasted because in the previous plan, it was not included. Now if Elio elaborate -- want to elaborate some more on that. Elio Schiavo: Sure. Thank you, Pietro. Yes, we are expecting the approval from the AGCom that is the authority. And we start this year, this RAN sharing agreement. At the beginning, we have to invest to consolidate the network. And we expect, as Pietro mentioned, to have the running cost saving in 2029, but we started to see some results already in 2027, 2028 else longer we proceed with this kind of agreement. Remember that we are talking about to have a JV that every company will keep the asset along and we will share the energy cost and the investment for the 5G. So when you're talking about the benefits, we will be cost saving, but our CapEx avoidance as well. Pietro Labriola: But Joshua, what is important is that respecting the previous guidance when the JV was not planned, we are maintaining the same level of CapEx absorbing in that level of CapEx, the investment needed to pursue the saving that we will have from the JV. Is it clear? Joshua Mills: Yes. Great. Operator: The next question is from Domenico Ghilotti at Equita. Domenico Ghilotti: Can you hear me? Pietro Labriola: Yes. Domenico Ghilotti: Okay, fine. So a few questions. The first is on Sparkle. We have seen another delay. So just to get your comments, your color on what's going on there. And if you can confirm the expected proceeds that were around EUR 700 million. Second is on the decision to use the buyback as a shareholder remuneration for '26 instead of a dividend distribution based on the Sparkle proceeds. If you can elaborate on this decision given the strong rally maybe it was more interesting to give a buyback dividend. And third, on the price hikes, I wanted to know if you are planning for additional price hikes on the back book also for 2026? Pietro Labriola: Thank you, Domenico. About Sparkle, we are -- what is happening is that we are waiting for the approval mainly in 2 countries. European Union and U.S. In the U.S., there's a delay because several shutdowns that happened in the public administration in the U.S. delayed the process. At European level, we are confident that we will receive the approval by the end of April. So we are quite optimistic. What was happening that we gave a first request, then we change some of the details and we answer to the question of the European Union. And so now we are waiting to deliver the final notification but the process is under control. About the price, as we mentioned, we think that the cash in, but we have to wait the closing of everything should be in the -- around EUR 700 million, as we always stated. Then about the buyback. So let's remember that today, and then I will leave to Piergiorgio, if you want to elaborate more on that. Something that is related to an extraordinary activity that is the sale of Sparkle and something that is related to the natural and normal cash generation of the company. We gave a dividend policy for what is the normal cash generation of the company with the guidance that is exactly the one that we gave last year, 70% of the equity free cash flow. Instead, about the Sparkle sale, what is happening that as Piergiorgio is teaching me every day that we have to work on the capital allocation, what is better today in terms of capital allocation to buy our stake, our stake where you have to consider that we are still below the multiple of EBITDA of our peers. We still have to show the potential synergy coming from Poste. All the market is betting on the fact that there will be a market consolidation. So in such a case, I have a rational approach to divide it by 2, the shareholder remuneration, the one that is related to the traditional flow of cash that give you a dividend policy. And the use of buyback, we think that is the best way to do the interest of all the shareholders and of the company. And about -- if Piergiorgio has nothing to say, I will leave to Andrea to talk about price hike. Andrea Rossini: Thank you, Pietro. Very quickly, Domenico. We plan to continue the price hikes. We -- as I said in the previous answer, we see an opportunity in the market, and we actually see also a positive trend that also some other operators are coming along on the back book price up. So we see an opportunity and the amount of price hikes will be broadly similar to the one in 2025. The phasing will be slightly different in the quarter. But the overall impact in here will be broadly the same. Operator: The next question is from James Ratzer at New Street. James Ratzer: Hopefully you can hear me okay? Pietro Labriola: Yes, perfectly. James Ratzer: Great. Yes, Pietro, I have 2 please. So the first one was sorry to come back to just your guidance, which I'm pretty sure you're reiterating. But the EBITDA in 2025 was plus 4% in the domestic business. You're guiding for around 4% for 2026. So to get to the bottom of your range for EBITDA growth to 2027 at 5% to 6%, that would imply that your EBITDA growth in 2027 needs to reaccelerate back up to 6% or more. Is that what you are kind of implying with the comments today? And then the second question was just coming back to the point that was just discussed about price hikes. You've been able to increase pricing and ARPU during a period where FiberCop's prices to you have largely been unchanged, and that's allowed you to expand your margins. I think the new AGCom rulings will allow FiberCop now to increase their wholesale pricing, which I understand that they plan to do. So does that mean you now need to raise pricing at an even faster level? Or does this imply that your margins could start to get squeezed a little bit? Pietro Labriola: Thank you, James. About the first question, you are completely right. We'll have an acceleration in 2027, but it's not just an Excel exercise. If you remember at the beginning of the call, I explained that in 2026, we'll have a first quarter in which we will have the lack of part of the revenues and EBITDA coming from the MVNO. So mathematically, when in the first quarter 2027, I will have the overall Poste MVNO, you will have an increase of EBITDA in 2027 compared to 2026. We are talking about something close to EUR 30 million. I have to remember to everybody that today in the number of team, 1 percentage point of EBITDA means EUR 20 million of EBITDA. So just to give you a rough number, exactly the math is right, 5% in 2025, 4% in 2026 and 6% in 2027, roughly. About the price hikes. Once FiberCop, we start to increase the price and then we have to talk about our MSA with FiberCop that allowed to keep some price flat. What will happen that everybody will receive this price increase. So my question is in front of this price increase, I will react the energy player that are the most aggressive one in the market today. Can they subsidize in the telco with the energy, the telco business, I think that this is something very interesting that will put in the market more rationality. But we have the MSA with for certain components the price are already defined, the MSA was approved. And then for the rest, the increase of price will be for everybody. So let me say, more aggressive players, I will react to that kind of price increase. I look at that not as a threat, but an opportunity to have a more regional market. But I leave to Andrea that is responsible for that number to answer on that. Andrea Rossini: Thank you, Pietro. So in terms of the trend we see, our ARPU scale up is due to several factors, not only price hikes. Notably, we have done upselling, cross-selling action and also the TIM Vision business has contributed quite a bit. So we see an opportunity to increase revenues not only due to price hikes. As Pietro said, we do believe that the possible price increase on FiberCop and fiber in general may bring some rationality in the players. So we see an opportunity on the front book pricing trend in the market. Also, we reinforced with market consolidation, but also before market consolidation, probably some rationality may arise. I hope that's clarified. Operator: The next question is from Giorgio Tavolini at Intermonte. Giorgio Tavolini: I have 3 questions from my side. The first one is on the renewal of the spectrum licensing expiring in 2029. When should we expect greater clarity on the next steps? The second one is on the cash financial charges in your free cash flow below EUR 600 million. I was wondering if there was any one-off and what is the trajectory for 2026? And the third question is on AI adoption. I guess it may create opportunity for further acceleration of your transformational plan. But at the same time, I was wondering if you see any AI disruption risk, for example, potential disintermediation in certain processes related to TIM Enterprise. For example, the consultancy activities following an increase in sourcing by clients. Pietro Labriola: So Giorgio, about renewal, our expectation and our hope is that by the beginning of the second half, we will have some more clarity. About the second question, I will leave to Piergiorgio to give you some more details. About the third one before to leave to Elio, it's important to understand that today is not only a matter of the use of AI to sell in the market. But AI could be also a further accelerator of efficiency inside of our company. Because what is happening today is that, for example, for a company like our that for historical reason has legacies, you are not obliged today to move to new system, but you can use AI to have what they call, I don't want to see and polite, digital sleeve to facilitate some activity that until today will be expensive, timely and needed for a lot of human being be done for a very cheap cost by some AI. And it will be one of the points on which we'll bet for our transformation improvement. Then about the enterprise impact I leave to Elio to give you more color and then Piergiorgio will answer on the cash financial charges. Elio Schiavo: Thanks, Pietro. Thanks Giorgio, for the question. So we see this as a very interesting opportunities instead because as you probably know, we buy from the market about 2 billion services and products. So actually, the more AI will penetrate the market, the less we believe we will pay for the services that we are currently buying. So let's say, on the consultancy spectrum, we are on the good side of the equation because we buy services. And so if AI will generate efficiency on that side, we will benefit from that process. More in general, we believe that for adoption of the new technology, which will cost a lot of money, you need to have a very large shoulder has it happens to TIM Enterprise. And so we believe that we will be a main actor in that space. We look at this with 2 different lens. One is how much efficiency we can generate by adopting those technologies. On the other side, how much we can contribute to large enterprise and public administration to let them to adopt new technologies that we could buy from large players and resell to our customers. But let's say, all in all, we see a very positive trend in front of us. And as I said before, I see that the point that you mentioned, you mentioned on consultancy actually plays in our favor. Piergiorgio Peluso: Thank you, Giorgio. On the net financial charges after lease, which is more or less in line with the cash interest that you see in the cash flow analysis. I would say there are no material difference between 2025 and 2026. It is just a fact that the Italian component is lowering in terms of average cost, while, of course, the Brazilian one is slightly increasing. And as you know, in Brazil, there is, let's say, a slight increase in leverage, given that we also have a portion of leverage in Brazil that we use it as a cash flow range for our Brazilian stake. But I would say there are no material difference. In 2026, we expect a slightly lower number in terms of cash interest. Operator: The next question is from Fabio Pavan of Mediobanca. Fabio Pavan: Yes. A couple questions. First one is a follow-up. So we're looking at '27 targets provided you will give us some more color after the summer. My question is, should we think about the equity free cash flow target previously disclosed as the number which makes sense from '27. Second question is for -- on enterprise [indiscernible] cloud after the 24% growth we had in 2025. How are you thinking about '26 and '27 grow? And again, on this, are you still scouting some option for JVs on partnerships? This seems to be the trend for the sector. Very last question for Pietro. You mentioned noncontribution from earnouts has been assumed. Should we see this as you are not expecting any contribution or you are simply adopting a more prudent step at this stage? Pietro Labriola: Thank you, Fabio. About this question is we did all the things that we promised in 2022. So now the earnout is not included in our number, but it's something that we'll continue to pursue because we think that it's something that is still achievable. Then about '27 targets, the direction is that one. So there's no reason to change the target that we had also in the previous plan. And the second one is on Elio? I hope the answer in the meantime for the first 2? Elio Schiavo: Yes. Thanks, Pietro, and thanks, Fabio, for the questions. So Fabio, as you said, let's say, we are registering a very, very high growth on cloud. The market is running around 17%, 18%, we are above 25%. And this is mainly driven by the position that we have on public administration because as a matter of fact, the National Strategic Hub is performing much better than we were expecting at the beginning. And this is creating further acceleration on the cloud business. As Pietro said at the beginning, let's say, we do see also the opportunity of sovereignty going forward because it is clear that the more the market will go toward the theoretical disintermediation of hyperscaler, the more this business will become a make business and margins will become higher and higher. So if you look at the world, the market is foreseen for sovereignty, the growth for banks, insurance, large enterprises and public administration is twice higher than it is today. And this is a space where clearly we can play a very important role because we have all the assets. We have backbone colocation data centers, a very capillar large sales force, and we are part of the National Strategic Hub. So as I used to say very often in this kind of conversation, so we are likely because we grow in the market growing, but clearly, our positioning is a premium positioning. So I don't see cloud to change the trajectory. Operator: The next question is from Andrew Lee at Goldman Sachs. Andrew Lee: I had 2 questions. The first question was a bit of a follow-up on your expectations for Italian growth drivers. And the second one was on Italian CapEx intensity. Thanks for your help in understanding the MVNO impact in 2026, which sounds like it's suppressing the growth a little bit in 2026 in Italy. Are you anticipating the underlying trends through 2026 outside of that MVNO impact are the same, i.e., continued cloud growth versus connectivity declines? And do you expect those trends to continue into 2027 absent any consolidation? Just trying to think about what we should be thinking about for structural growth once those MVNO impacts dissolve. And then second question, just on CapEx intensity. It's clearly been coming down. You're guiding for 12% in 2026. What we're clearly seeing is there's a little bit of a sitting on hands moment for Italian mobile operators while you wait to see how and when and whether consolidation plays out. Do you see that 12% CapEx intensity as a new kind of structural norm? Or is this just a temporary suppression in your CapEx ahead of having greater clarity on the market structure? Pietro Labriola: So about the first question, adjusted. Can you repeat. Yes. Okay. So because I didn't try to. I was forgetting the team will remember me. Now our business model is quite clear. In the Consumer segment, if you will not have the market consolidation and if you will have no opportunity to increase the price for the increase of the quality, the opportunity that we have for the first time in the last 15 years because for the first time, you have customers that are starting to use services, cloud gaming, application, AI that requests a larger quality. This is an opportunity to increase our revenues and to improve our EBITDA because it's not necessarily driven by CapEx intensity. But if it will not happen, and if you will have no market consolidation, we must be very transparent. The life of Andrea and me in the Consumer segment, but not only in Italy, in Europe will be tougher because you cannot think that you can continue forever to exchange lines erosion with price increase. But again, this is not something strange. This is the reality in which everybody today in Europe are struggling and are asking a loud voice for market consolidation. Or if you will have no market consolidation in terms of M&A, you have to work at the network level. You have to allow JV as the one that we are doing with Vodafone Fastweb because putting together part of the network will allow to have efficiency. This is something that will be needed for 2026. No, our trajectory, 2026, 2027 is already defined, but if you ask me something about '29, '30, it's clear that something in the Consumer segment have to change. When we move in the Enterprise segment, what is happening is that we are not working on AI. That is become a disruptor. We are not working on software development where AI is disrupting. What is happening is that everybody will need cloud, connectivity and cybersecurity. And these 3 components are not looking for geography scale, the backbone is in Italy, you cannot have a synergy because you are a backbone in Italy, in France and in Germany. The backbone needed today for some of these services, must be in Italy. The cloud and data center cannot be remotely in Denmark or Norway because to exploit some services you need the range of 300 kilometers. And cybersecurity system but must be national, cannot be foreigner for a matter of digital sovereignty. Why I'm mentioning that? Because while in the past was showing you the increase in the growth coming from the cloud today, the part will become sovereignty. So these are the driver of our plan. If you image at a certain time in the consumer, there will be a market consolidation. It is quite clear that everything will change and repeat. The market consolidation can come from the merge between player or for a situation which you put together the network infrastructure at the mobile level. Then about the CapEx intensity today, our CapEx intensity, as you can see, we were able to confirm the guidance absorbing in our CapEx intensity, the increase of investment for the JV. So we don't foresee in the next 2, 3 years, the need for an increase of CapEx intensity to deliver our plan. Then if we start about new business model or something like that many or whatever. At that time, we'll do all the evaluation, having in mind that we must be market-friendly, cash-driven and not look only at the return on investment in the long term, because this sometimes was a mistake in the telco environment. If you look at our ROIC versus our WACC, the issue is that a good part of our investment was made when the ARPU was double than today and the technology was changing every 10 years. Now the ARPU is very low. So we have only opportunity for the increase. But the technology change every 1 or 2 years. So we must be very careful in new activity. That doesn't mean avoid or to put obstacle to the innovation, but be very clear in understanding the right wave that we have to serve. Hope that was clear. Andrew Lee: Yes. That's really clear. So it sounds like do you think that at least existing operational intentions that you can maintain the CapEx intensity that you're guiding to for 2026 and then your -- the growth guidance or the underlying trends in terms of your growth in Italy, the key drivers are going to continue as they are unless we see consolidation. Andrea Rossini: Andrew, this is Andrea. We do see the following assumption. We believe that the underlying trend on the retail side will be broadly stable, net, therefore, so separated from the effect of the MVNO impact. So we do see this opportunity. Pietro clearly highlighted that there will be further opportunity, of course, if market consolidation comes and if we see an acceleration in the front book price up due to network quality differentiation. But we do believe that the underlying trend on the consumer and SMB side will be broadly stable. Operator: The last question is from Paul Sidney at Berenberg. Paul Sidney: Obviously, a lot of questions have been asked already. So just a couple of big picture questions, please, on the domestic market. Firstly, in Consumer. You mentioned Iliad is less of a disruptor, Fastweb be more rational. You're clearly following a value-over-volume strategy, which is a phrase we hear time and again from operators across Europe and the U.S. value over volume. And the question is, in your view, is the telecom value -- sorry, volume game over? And then on Enterprise, your growth is substantially higher than your European peers. I know you gave huge insight to that fantastic event in Milan last year. But could you just remind us what is different to you versus your peers? Is it something you're doing differently operationally? Or is it something different about the Italian market structure? Pietro Labriola: Okay. We cannot say that our formula can be applied everywhere. When we are in the consumer and mobile ARPU that is the lowest of the world. And also on the fixed, we are among the 3 lowest in the world. The cost of acquisition gives you a breakeven in 3, 4 years. So we are not more clever than the other. But in such a game, spend money to acquire a customer, when the cost of acquisition is a breakeven of 2, 3 years, makes some sense. So it oblige everybody to move in that direction. We declared in 2022, but the SIM declaration was made by the Chief Executive Officer of Swisscom when they acquired Vodafone. They expressly stated in Italy, there's no return on investment to play a game that is based on the volume. So this is the Italian situation and letting that I'm seeing more or less throughout Europe everybody that are starting to say that the strategy is to move from volume to value. Then in U.S. with an ARPU of $50, I don't know because it's something different compared to our ARPU. So this is the main difference in Italy. And in some way, starting from a level of ARPU that is so low, I think that compared to other country, we have some more opportunity. I have to remember to everybody that EUR 1 that is less than a coffee in room is not in New York or in London because there the coffee has a cost of EUR 7, but each euro of increasing price means EUR 160 million of equity free cash flow. And this shows the opportunity that can come from a more rational market. When we move to the Enterprise segment, is the difference that, for example, if you compare us with some other peers, they prefer to sell the data center and to keep the last mile. Due to the regulation, we did exactly the contrary. We don't think that the last mile is a competitive advantage because when you have to offer that last mile to everybody with the same price, putting you the CapEx upfront to do that is no more a competitive advantage. We own the data center and they have to remember that we are the only player in Italy with 8 Tier 4 data center. The future services, Enterprise and Consumer will need a ray of the presence of the customer below 300- and 400-kilometer to experience that kind of service. We have in Italy, the widest backbone compared to the other players. We have, in Italy, a company 100% owned by us that is [indiscernible] in the perimeter of area -- that is a company that works on security, not only for the private market, but also for the Italian National Security. We serve the communication between the Italian Embassy and the foreign minister. These are all elements -- sorry, and we were the first one to sign agreement with some of the hyperscaler to have cloud region with -- in Italy with the cryptography in the hands of an Italian company. So these are the element that makes us different from the other player and the other country. Then in some way, the digital sovereignty that is becoming a must at the European level. If you see in France, the French government want to forbid the use of Microsoft Teams. In Denmark, they don't want to use Microsoft Office. In Germany, they don't want to use public cloud solution. In France, too. I think that it is a trend. And thanks to God we started to work on these things not now, but 4 years ago. Paul Sidney: Just a quick follow-up. I totally agree with you on the ARPU point at EUR 10. It's just crazy when you think about a coffee or a local bread and stuff you buy every day. But is there any reason why ARPUs can't move to 15 or 20 years on mobile in Italy over time? Pietro Labriola: But I was discussing with my team and they will do to you an example. The main mistake was of the telco, because we were unable to show to everybody understand to everybody how much is important the connectivity. We cannot work in terms of strike. I cannot do a strike of 1 day without mobile because I will be in jail. But I will do exactly this example. In Milan in San Siro will cover the stadium with a much better quality. Now if you go in the San Siro Stadium, you will see a pop-up on our mobile, let's say. Do we want to serve at the right pace, you can click here. Today, I'm not asking money. But in the future, I won't cost money for that. Why the customer should clean? If you go to San Siro you pay the coke, 3 times of the price that you should pay out of San Siro. If you buy a sandwich, you will pay 3 times the price that you buy outside. If you get the coffee, you pay 3 times. Why as a tech operator, we were so stupid and idiot to not allow the customer to understand that. A coffee per month is something that you can avoid, but the quality of the network is something that is mission-critical for your personal life. I think that the call is end. So I want to say thank you to everybody. It's important to remember to everybody that this is not the journey that we started 4 years ago is not ended, but now start a second journey because we are able to bring the company in a more normal condition, but the toughest job is starting now. So I want to say thank you to all the team. And we will follow up in the next day to our IR. And thank you to everybody for the trust and thanks to the team. Operator: Ladies and gentlemen, the conference is over. Thank you.
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.
Operator: Good day, and welcome to the Acadia Healthcare's Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Patrick Feeley, Senior Vice President, Head of Investor Relations. Please go ahead, sir. Patrick Feeley: Thank you, and good morning. This morning, we issued a press release announcing our fourth quarter 2025 financial results. This press release can be found in the Investor Relations section of the acadiahealthcare.com website. Here with me today to discuss the results are Debbie Osteen, Chief Executive Officer; and Todd Young, Chief Financial Officer. To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP in the press release that is posted on our website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Acadia's expected quarterly and annual financial performance for 2026 and beyond. These statements may be affected by the important factors, among others, set forth in Acadia's filings with the Securities and Exchange Commission and in the company's fourth quarter news release. And consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. At this time, I would like to turn the conference call over to Debbie. Debra Osteen: Good morning, everyone, and thank you for joining us. I'm pleased to be with you today on my first earnings call since returning as CEO. I want to begin by recognizing our clinicians and employees across the country. The work you do every day makes a meaningful difference for patients, families and communities, and I am grateful for your dedication. I also want to thank our leadership team, partners and Board for their support during this transition. Our mission remains unchanged, and my focus is on stability, execution and clear communication. Since returning, I've spent time assessing the current operations at Acadia. I know this industry. I know many of our teams and I understand what drives quality and performance in behavioral health care. My approach is grounded in focus and accountability. I am committed to supporting our teams in the field to drive strong fundamentals and consistent execution across the organization. With that context, I want to briefly reflect on the leadership transition and how I'm approaching this role. My intention is to bring steady leadership, reinforce operational discipline and help position the company for success in both the near term and the long term. I have great confidence in our teams and in the long-term direction of the company. And I am fully committed to supporting Acadia through this next phase of improvement. Let me now outline the most important priorities that are guiding our work. The first area of focus is the quality of management at all levels. I believe that performance in our business starts with having the right people in the right positions, both at corporate and in the field. I'm reviewing leadership depth and the layers of operational supervision with the goal of ensuring our teams in the field are supported. We are returning to fundamentals. This includes a tighter operating focus and faster escalation when issues arise. Many operational misses result from miss details rather than flawed strategy. The need for behavioral health services remains strong. Our focus is on ensuring we consistently meet that need. We will continue to maintain strong relationships with our partners, align staffing and provider coverage with patient needs and remove internal barriers that slow problem solving. Our priorities translate directly into what we need to achieve at the facility level. Some of our newer facilities have not ramped as quickly as expected. There is no single cause. We are evaluating each facility individually and we will be building a clear, standardized approach to our new hospital openings. We are focused on the 2026 openings and have adjusted our planning process to ensure successful execution. Alongside this work, we continued to expand our presence through joint ventures with leading health systems. In 2025, we opened new joint venture facilities with Henry Ford in Michigan, Geisinger in Pennsylvania, Ascension in Texas, ECU Health in North Carolina, and Fairview in Minnesota. Each partnership is tailored to the needs of the local system and community. And we work closely with our partners to ensure alignment of mission, priorities and values. We are excited about these opportunities to better serve the needs of the local community and advance our position as a leading provider of behavioral health services. As I look across the business, I am encouraged by the significant opportunity. The company has added more than 2,500 beds over the past 3 years and is on track to add an additional 400 to 600 beds in 2026. After a period of record expansion, the priority now is to shift our focus toward operational excellence and execution. The environment is not without challenges, but there is a large opportunity to unlock the EBITDA and free cash flow potential within our existing facilities. Relative to the start-up losses included in our 2025 results, the incremental EBITDA opportunity represented by the new facilities opened from 2023 through 2026 exceeds $200 million. Given my history in this industry and with Acadia, I am confident that we are well positioned to deliver on this opportunity. Our operational and clinical priorities also guide how we deploy capital. We intend to allocate capital with discipline. Each project must stand on its own merits, supported by clear market fundamentals and patient needs. In parallel, we are evaluating our service lines in a comprehensive manner, always with a focus on long-term value creation. At the same time, quality and patient safety are the foundation of everything we do. That's what drives our mission and our results. We keep it simple. We measure what matters. We look at it every day and we act fast when something doesn't look right. Our quality dashboard gives leaders real-time visibility into more than 50 measures so we can spot issues early and share what's working across our facilities. And building on the data that was shared last quarter, we're expanding outcomes tracking across more programs in 2026, so we can be more transparent about patient progress over time. The early results are encouraging, and we've began to share them on our website. The industry is also operating in a more active survey environment, and I'm pleased with how our teams have performed, including strong accreditation survey results. Surveyors are spending more time on units, talking with patients and directly observing care and we welcome that accountability. At the same time, we're moving faster on prevention. Because of the investments we've made in technology, we are able to identify patterns that may signal safety risk earlier, so we can intervene sooner and prevent harm. Finally, regarding regulatory matters, we are cooperating fully. I will not comment on timing. My focus is on the recruitment and retention of highly qualified leadership and staff that deliver high-quality care to our patients. These are factors we control, and they are critical to reducing risk and maintaining consistency across the business. As we look ahead, the operational priorities we have in place provide us with a solid foundation. We are aligning our teams, sharpening our focus and reinforcing the execution discipline to support more consistent results. With that, I will turn it over to Todd to review the financial details and our expectations for the year. Todd Young: Thanks, Debbie, and good morning, everyone. Turning to our fourth quarter results. We reported revenue of $821.5 million, representing a 6.1% increase over the fourth quarter of last year. Adjusted EBITDA for the quarter was $99.8 million. Fourth quarter results included a $52.7 million adjustment to the company's reserve for professional and general liability, in line with the updated guidance that was provided on December 2, 2025. For the full year 2025, we generated revenue of $3.31 billion, an increase of 5% over the prior year and slightly above the upper end of our guidance range of $3.28 billion to $3.3 billion, a reflection of improved volume. Adjusted EBITDA was $608.9 million, near the upper end of our guidance range of $601 million to $611 million. In the fourth quarter, same-facility revenue grew 4.4% year-over-year, driven by a 1.3% increase in revenue per patient day and a 3.1% increase in patient days, an improvement over recent quarters. Included in fourth quarter results was $12.8 million in start-up losses related to newly opened facilities compared to $11.2 million in the fourth quarter of 2024 and $3.6 million in net operating costs associated with closed facilities. On a same-facility basis, adjusted EBITDA was $152 million in the fourth quarter. We invested $93 million in CapEx in Q4 and a total of $572 million for the full year of 2025, nearly $50 million favorable to our prior guidance. Costs related to managing the government investigation were $12 million in the fourth quarter, down 69% sequentially. From a balance sheet perspective, we remain in a solid financial position. As of December 31, 2025, we had $133.2 million in cash and cash equivalents and approximately $595 million available under our $1 billion revolving credit facility. Our net leverage ratio stood at approximately 4x adjusted EBITDA. Moving to development activity. During the fourth quarter, we added 181 beds, including 144 beds from opening of a new joint venture facility in North Carolina. For the full year 2025, we added 1,089 beds, exceeding the high end of our guidance range. This includes 778 beds from opening 6 new facilities. As previously discussed, over the course of 2025, we made the decision to close 5 facilities, including 4 specialty facilities and 1 acute care hospital. These closed facilities totaled 382 beds. Looking forward to 2026, we expect to add between 400 and 600 new beds, primarily through the opening of new facilities nearing completion. This includes 3 facilities with joint venture partners, including new hospitals with Tufts Medicine, Methodist Health and Orlando Health. During the fourth quarter, we also opened a new de novo in our CTC line of business, bringing the total to 15 new CTCs added to the full year 2025. De novos in our CTC line of business continue to be capital-efficient way to expand our footprint into new markets that are underserved. Turning to our 2026 outlook. We expect full year 2026 revenue to be between $3.37 billion and $3.45 billion and adjusted EBITDA of $575 million to $610 million. We expect adjusted EPS of $1.30 to $1.55. Full year guidance includes the following assumptions: we anticipate full year same-facility volume growth between 0% and 1%. This growth is driven by the incremental contribution from ramping beds, including approximately 630 beds that will be added to the same-store bucket in Q1. That is partially offset by an approximate 350 basis point headwind to the same facility growth from changes in the New York Medicaid program, which I will discuss further in a moment. Moving to pricing. For the full year, we expect a 2% to 3% increase in same-facility revenue per patient day. This includes a decrease in Medicaid supplemental payment revenue for the full year 2026. As a reminder, our fiscal year 2025 results included a nonrecurring $34 million revenue benefit from Tennessee's supplemental payment program, which was recorded in the second quarter of 2025. We also expect to recognize $11 million of out-of-period supplemental payments in the first quarter of 2026. Guidance does not include any programs that have not yet been approved. We estimate certain programs currently awaiting regulatory approval, represent at least a $22 million EBITDA benefit if approved this year. Start-up losses are expected in the range of $47 million to $53 million compared to $56 million in the prior year. Guidance assumes start-up losses will be weighted or towards the early part of the year with approximately 60% coming in the first half of the year. 2025 consolidated results include approximately $40 million of revenue from closed facilities. The closure of those facilities is expected to create an approximate $9 million tailwind to 2026 adjusted EBITDA. As we previewed in January, the State of New York has decided that it will no longer allow Medicaid patients to receive care in out-of-state facilities. We continue to estimate a $25 million to $30 million annual EBITDA impact. As a result of this change, we are consolidating our footprint in that market and have closed 2 leased specialty facilities. We are actively working to backfill the remaining occupancy in the market. For 2026, PLGL expense is expected to range between $100 million and $110 million, in line with our prior guidance. We anticipate generating positive free cash flow this year as we expect to see CapEx decline to a range of $255 million to $280 million. Moving to our outlook for the first quarter of 2026. Revenue is expected to fall between $820 million and $830 million. Adjusted EBITDA is expected to be between $130 million and $137 million. This outlook reflects the following assumptions: start-up losses of approximately $14 million, the recognition of $11 million in supplemental payments related to the prior year and the impact from severe weather of approximately $3.7 million. I will now turn the call back over to Debbie for closing remarks. Debra Osteen: Thank you. As I look across the business, I am encouraged by the strength of demand and the need for our services as well as the significant opportunity across all of Acadia's service lines. Over the last several years, we have expanded our footprint to over 12,500 beds, taking care of 84,000 patients per day. The focus now is on delivering quality care for patients and consistent operational performance. We have the right mission, the right markets and the right foundation to deliver improved results. This work will take discipline and consistency. We remain focused on providing care with the highest standards for our patients and the communities we serve. We are fortunate to have an experienced and dedicated team who provide quality patient care for those seeking treatment for mental health and substance use issues. I am confident in the value we can unlock through focused execution. With that, we are ready to take your questions. Operator: [Operator Instructions] And the first question will come from A.J. Rice with UBS. Albert Rice: Welcome back to Debbie. First, I just wanted to ask, I know last year, the company had embarked upon a -- I think, what was described as a value creation review with some outside advisers. That wasn't mentioned in the prepared remarks. I wondered, can you just update us on the status of that? Is that still ongoing? Or now that you're back, has that been put on hold? Debra Osteen: Thank you, A.J., for welcoming me back. It's not on hold. I think that what we are focused on right now is really what's in front of us, which is 2026 and making sure that we perform and that we're able to address some of the issues from last year in 2025. We're always looking for opportunities to create value. So that's really an ongoing process. We didn't mention it, but it's important that we look at short-term and long-term value. And so that's continuing. We are -- as I mentioned in the remarks, we are looking at our service lines to make sure they're aligned that they will create the value that our shareholders expect. So I think there's more to come there. There is a real focus right now, though, on immediate progress. And then, as I said, looking at the long-term value as well. Albert Rice: Okay. Great. And let me -- for my follow-up. Just as you've had a chance, I know it's still early in your assessment of things. But I think we've always thought about this industry, at least in recent years, in a normal environment can generate low to mid-single-digit organic volume growth, low to mid-single-digit pricing gains. And then with the de novos to have some opportunity for margin improvement over time. Is there anything you're seeing? I know there's noise in what's been happening in the last 18 months. But as you come out the other end of this and this year is probably getting back to normalcy year, is there any reason to think that, that growth algorithm is different as you reassess the landscape? Debra Osteen: No, I don't think it's different, A.J. I do think the demand continues to be very strong. And I certainly don't see anything that would impact that either short term or long term. Todd Young: A.J., overall, we feel good about where it is and how we're playing out this year. A lot of noise in the numbers over the last couple of years that we think as we get stable here and add to our beds with less closures, we should get back to more of a normal course on the growth side. Operator: Next question will come from Whit Mayo with Leerink. Benjamin Mayo: Obviously, there's a lot of embedded earnings inside the organization from all this development activity. I think you framed it as $200 million of incremental EBITDA, Debbie. What's the time frame that you think you could realize those earnings? Is it 2 years, 3 years, 5 years? Just how do we think about the pace of that? Todd Young: Yes, Whit, it's Todd. I think we have not defined the pace of it. But clearly, we think it's inside 5 years. We're going to keep doing this based off increasing occupancy. We've added a number of beds since 2023, and we'll add an additional 400 to 600 beds this year. As we look at that on a facility-by-facility basis and looking at it based off occupancy rates, that's how we've calculated out that performance improvement and do think it's inside 5 years. We're not committing, is it 3 years? Is it 4 years? But certainly, it's in this 5-year window as we drive occupancy at all of these new facilities we've brought online. Debra Osteen: And I'll just add with -- we built these beds because there was a market need. And we entered into the joint venture partnerships because of the market need. And in many cases, they had beds that were folded into our operations. So we're going to move with a sense of urgency here. We want to eliminate the barriers and really start to see our investment be realized. And as you said, there's a lot of opportunity embedded there. And I know the team is committed to move quickly and to work in collaboration with not just our partners, but in the markets where we put beds in as de novo as well as expansions. Benjamin Mayo: Okay. Maybe just my follow-up, Debbie, I'd just be curious on any of the obvious areas that you see for improvement, whether it's change in the divisional or reporting structure, maybe just more specific details around what you're doing to address. I think you said like removing internal barriers to slow problem solving. Todd Young: Operator, next question. Operator: The next question will come from Brian Tanquilut with Jefferies. Brian Tanquilut: Debbie, nice to hear back from you here. I guess I was thinking question-wise, as we think through the challenges that the company faced, especially towards the last year at the end of the previous regime, one of the things that got called out was the pressure from managed Medicaid on average length of stay, where approvals on approved days for patients, especially in acute were being pressured. So I'm just curious, how do you foresee pushing against that pressure from managed Medicaid to sort of maintain stability in that length of stay metric? Debra Osteen: I've been in the business a long time, as everyone knows. And I think there's always going to be a natural push and pull in the reimbursement environment, not just with managed Medicaid. I don't think it's a new development. I think that some states and payers are more challenging than others. But -- and we address those situations individually. We really have a very stable length of stay. It's obviously on a same-store basis, we're going to see that, I think, stay stable. However, there is an impact this year on length of stay with respect to the New York Medicaid, which I think everyone is very well aware of. Those patients tended to stay longer. So you'll see an impact on that. But just generally, we consistently advocate for patients when there are concerns about getting authorizations or medical necessity. And we really try and work with our payers. We want to make sure the patients are in the right setting. But overall, I think that we have very strong relationships. And I think this is just part of the behavioral health business, and I don't see a big change there or see -- we're not anticipating a change this year. We're both doing what we need to do. Ours is to advocate for the patient. And they have their concerns, but we really want to work in collaboration with them. Brian Tanquilut: I appreciate that. And then maybe my follow-up, Debbie, as I think through just the bed adds that Todd laid out for us earlier, I mean, obviously, very exciting. But as we think about, again, the previous regime, there were offsets to the bed adds with bed closures. So just philosophically, as you look through the portfolio today, how are you thinking about the opportunity to grow net beds or kind of like maintaining or maybe even avoiding bed closures at this point? Debra Osteen: Well, we -- I think as I was here at prior time, we always looked at our portfolio to evaluate what makes sense. But in my mind, that accelerated pace that you've seen over the last couple of years in closures is behind us. And I think that we would only consider closing beds if there's no clear path to viability. And our focus right now is really on operating and improving the existing portfolio. So we're not talking about closures at this point and don't anticipate being in that situation. Todd Young: Yes. The only caveat on that is we did close 2 leased facilities in Pennsylvania as a result of New York's decision driving more efficiency by consolidating in bigger locations. And because the leases were up, it just made logical time to close. But otherwise, very aligned with Debbie. The opportunity in front of us is to treat the demand that's out there and look forward to operating all of our facilities. Operator: Next question will come from Pito Chickering with Deutsche Bank. Pito Chickering: Welcome back, Debbie. Talked a little about this, but can you give us more details on exactly how you plan to rebuild trust with the referral sources and how you'll change how Acadia operates at the facility level in order to rebuild that trust? Debra Osteen: Well, I think we have good referral relationships, Pito. I do think that it has to be consistent, and it's got to be a focus every day to make sure that we are delivering the high-quality care that our referral sources expect. And I think that we are doing that. As far as some of the issues in the last year in particular, with just beds ramping, I don't think it was really related to a disconnect with our referral sources, but there were other issues involved around getting these hospitals open. But I feel good about our relationships. And we have -- as you know, a team of people that really want to connect with them and they do that every day to make sure that we understand what they need in services, but then also that they're satisfied and the patient is getting what they need. Our outcome data, I think, is going to be very helpful with referral relations because it is -- we are in a very good place with those outcomes. So it's our job to show our referral sources what we can do and that builds trust. And it's a track record of really treating their patients with the excellent care they expect and then also being able to demonstrate that through outcome data. Pito Chickering: Okay. Then for the follow-up here, what is sort of your goal on the first 90 to 180 days? Is at the facility level going into each hospital individually? Is it at the divisional level? And as you think about the current utilization of dashboard systems and processes, kind of where do you want to focus on most in the next 90 to 180 days? Debra Osteen: Well, my priorities are improving our volume, which we just talked about with particular focus on the same-store growth, but also on the 1,200 beds that we've added over the past 2 years. And I think that when I think about the team, I want to make sure that we have the right people, and I mentioned that in the remarks. I think that's key. I do think that we need to improve our operational discipline. We do have a lot of visibility now, and I've been very impressed, certainly with the quality dashboards. But there -- we also have benchmarking around some of the other areas with respect to the financial key factors that our facilities need to use to operate. So what I'm really trying to convey to the team and they're embracing this is use the data, use it for problem solving, but make decisions and take action. So if we see something that is not in line we need to act. And I think that started day 1 here as I rejoined the team. Operator: The next question will come from John Ransom with Raymond James. John Ransom: Welcome back. I'll add my salutation as well. Thinking about the long-term CapEx, how should we think about the cadence of that beyond 2026? And then what's the -- are we going to commit to maybe a moratorium on building new hospitals and focus on bed adds? Or what's the capital discipline to look like from here? Todd Young: John, we appreciate that question. I think you see a significant reduction in CapEx in 2026, which is going to lead back to free cash flow growth. We will continue to evaluate opportunities in markets that have high demand and meet our threshold for bed adds, understanding that the cost of construction has increased a lot over the last few years. So that bar has changed versus where it was 3 years ago. With that lens, we'll also look for continued expansion opportunities within existing facilities and the possibility that M&A may be a better option than building depending on what that cost multiple is. But fundamentally, right now, we're focused on delivering in '26, ramping the new facilities we put in the ground and then being very disciplined on CapEx in the years after that as we get back to generating free cash and really showing off the cash-generating power the underlying business has now that we have these beds available and as we fill them. Debra Osteen: And I'll just add to that, John. We really are focusing on the improved performance at our existing facilities. In terms of at least how I look at capital, it has to stand on its own merits, which I mentioned. But we always have said, and I think it's still accurate that bed expansions to existing facilities,are the best use of our capital. You have the demand there and you already have built in the overhead and other elements. So we're going to be very careful this year about what we do with capital. And Todd mentioned M&A, that's -- we're looking at that really not as a short term unless there's just some great opportunity there. But we're looking really more focused on what we're going to do with the beds that we've added and what we're going to do with the beds that we plan to add this year. John Ransom: Okay. And my follow-up is med mal. I know it's a lagging indicator, but that's -- the industry has been in a long -- in a cycle where they're chasing experience with increased reserves. So where do you think we are in that? Is there any leading indicators to suggest maybe that's going to crest at some point in the foreseeable future? Todd Young: It's a fair question, John. Obviously, the PLGL expense was a significant headwind to 2025. We've continued to analyze our claims coming in, and they are consistent with where we were in December relative to that expectation, which is why we held guidance for 2026. As we look out, we're making a lot of investments at the facilities and really focused on the training. It's our people that make the difference. And we think they will continue to provide really quality care. And that will be the driver, understanding that this is part of our industry and we're never going to get incidents to 0. But certainly, our goal is to continue to provide quality care and reduce the opportunities for more lawsuits in the future. Operator: The next question will come from Ryan Langston with TD Cowen. Ryan Langston: DSO was up, I think, 6 days year-over-year. Was there a particular payer, maybe group of payers driving this? And is this related to the higher denials rates you've talked about recently? Or just, I guess, anything else to call out there would be helpful. Todd Young: Yes, Ryan. It's a good call. We did see some slower payments on a couple of things. A couple of these were nuanced. There were 2 states that had different programs that needed to get finalized, including the supplementals we saw here in Q1 of this year that meant we had to wait for the payments on previous services until those came in. So those monies have started to come in such that I wouldn't be concerned about the DSO. But we did see denials in line with what we expected for Q4, but cash collection is certainly a focus of the team and do expect it will be better in 2026. Ryan Langston: Great. And then just following up. Debbie, welcome back. On the New York and Pennsylvania issue, I guess, are there any other sort of geographies in the portfolio that you could maybe potentially see a similar dynamic where one state limits sort of out of state care to another? Debra Osteen: I think New York is an outlier. I do think that we have opportunity there to diversify our payer mix. So we were very dependent, as you can see from the impact of it on New York Medicaid in a few of our facilities up in Pennsylvania. But I don't see that as -- it would not be a risk that I would list. I think that states oftentimes don't have the resources available to adequately treat the needs of the patients. So they do send out of state. In this case, there was a policy in place, and they made a decision to enforce that. We're advocating because we don't believe there are sufficient resources in New York, understanding that we had to recognize the impact of this. But we're also working very diligently to really find new payer sources. And we're starting to see some early results from that. And we'll continue to do that to ensure that the hospitals that we had there continue to be viable, but with a different payer mix. Operator: The Next question will come from Andrew Mok with Barclays. Thomas Walsh: This is Thomas Walsh on for Andrew. The core EBITDA growth in the bridge seems to outpace the underlying components of rate and volume. Can you help us understand what else is contributing to the 6% to 7% core growth potentially on the cost side? Todd Young: Certainly, Thomas. The big driver of the core growth is the ramping facilities opened in '23 to '25. So you're getting an occupancy benefit and just getting the greater leverage in the EBITDA than what you would have at facilities that are already at a high occupancy level. And so that's a big driver of the core growth in the bridge and why we're very confident that the initiatives we're putting in place in these facilities and as they get longer tenured in the markets are getting that traction and driving the growth. Thomas Walsh: Great. And following up, could you help us understand how you're preparing for the changes in California's staffing requirements expected to phase in midyear? And what's embedded in guidance for this? Todd Young: Sure. Now as everyone is aware, California has some new guidelines regarding nursing staffing ratios. The team was working very diligently to be ready for this for January 31. It's been pushed back to June 1. We expected to have about a $4 million EBITDA impact that's embedded in our guidance. Overall, it's really not about us needing more people because we were very well staffed to take care of patients across California, but rather, we now need a higher level of nurse in many cases, which is just an incrementally higher cost to us versus a full FTE, it's at the margin. So that's our expectation for the impact in 2026. Debra Osteen: And I'll just add that we're obviously not the only company that's being impacted in California. And we're working very closely with the California Hospital Association, their position, and we certainly agree that if a new regulatory requirement comes in, that there should be an offset in funding for that. I don't want to say that, that's been set, but I do know that there are discussions with the state about putting in new regulatory requirements and the practice and what we believe to be their responsibility to fund that regulation. Operator: The next question will come from Ben Hendrix with RBC. Benjamin Hendrix: Welcome back, Debbie. I wanted to talk a little bit about the ramp of new facilities, and I appreciate that you're in the process of assessing those on a facility-by-facility basis. But it does sound like some of the top line outperformance versus the high end of guidance for 4Q was driven by that new capacity. I'm just wondering if there's any early observations on the puts and takes of the ramp pacing? Are there some new projects that are gaining better traction than others? Any high-level thoughts on what might be working, what might be lagging in those new projects in a high level? Debra Osteen: Well, as we think about the 2025 issues around the ramp of our new facilities, we have identified common themes. And it's really in getting the facilities open. And there's a lot of detail that go into getting our new hospitals open. We have construction, we have to hire staff. But I think what we have seen as probably a common theme is that we need licensure obviously, and then we need billing tie-in to be able to build for the patients within the facility. When we get that, it's not a matter of need. It's not a matter of patient demand. It's really more through these processes that we have to work through in each state, and they vary with respect to licensure. And then also, as I mentioned, just being able to bill for the patients that are coming to us. So we have a plan around that because I think that we recognize that we can work earlier on some of the areas, and we plan to do that. But as our hospitals open, we are pretty confident that we're going to see those patients come in. And again, back to what I said earlier, there was a need in the market. And we just need to make sure we get our hospitals open as we expect. And not all of them were opened on the time line that I think the team thought was going to happen. So we're going to do -- we're changing our processes for this year, and I'm hopeful that we'll see a difference in the ramp and the issues that we saw in 2025. Benjamin Hendrix: Great. And I wanted a quick follow-up on the Pennsylvania facilities. You mentioned that some of the -- you consolidated those and maybe repositioning those for a change in payer mix and maybe repositioning towards in-state volume. What is the kind of the timing of a shift like that, given the magnitude of this headwind? And then could these be slated for a potential exit or strategic review in the near future? Todd Young: Ben, great question. I think overall, we have closed the 2 facilities that I mentioned to consolidate from essentially 8 facilities that were impacted by this down to 6. We've opened up 1 new state, New Jersey that we're excited to start trying to source patients from -- for these facilities as well as in the Pennsylvania market. And so we've given the $25 million to $30 million EBITDA impact for '26. That is our expectation. At the same time, we're very much looking to change that mix and deliver better results than that over the course of the year as we find new referral sources and look for ways to fill up these really good facilities that take care of our patients extremely well. Operator: The next question will come from Matthew Gillmor with KeyBanc. Matthew Gillmor: Let me echo that, welcome back to Debbie. Maybe following up on the operational discipline discussion. Debbie, you had mentioned a comment about looking at operational layers. I was hoping you could just help us sort of unpack that and sort of understand maybe how the team is organized today and what changes you're contemplating and how that might benefit the organization? Debra Osteen: Yes. I mean we are taking a look not only at the corporate structure, but also the leadership structure that supports those in the field. And over my years in behavioral health and being in a public company, I have a strong belief that whatever we do here at corporate has to support what happens in the field. And that, that principle is -- really should guide what everyone does here in this office. So I have started in the process of looking at scope of each of our leaders, how the geography is set up and also just what their experience level is and do they have the right experience. And we have some new leaders, and we have those that really have been here. And I've seen a lot of familiar faces as I've rejoined. But my focus is on what do we absolutely need and what do we need to support the growth because we've had a lot of that. And what does that look like from a corporate point of view as well as a field point of view. And I think that it will be an ongoing process, but we've already started to make some changes, which I won't go into detail on this call. But I do think that the team is eager to make sure that we are rightsized, both here at corporate and in the field. So that's going to be a continuing process over the next few months. Matthew Gillmor: Understood. And then on the fourth quarter volume performance, particularly on patient days, it seems like that came in a little bit better than recent trends and the length of stay improved a little bit and that then drove the upside to revenue or was at least part of it. I was curious how the volumes performed relative to your expectations? And were there any areas of sort of notable strength to call out in terms of the fourth quarter volumes? Todd Young: No. We're very pleased with the team's delivery in Q4, as you noted, slightly better than expectations. And that was really pretty broad-based with strength in both acute and specialty. Operator: The next question will come from Ann Hynes with Mizuho Securities. Ann Hynes: Welcome back, Debbie. I want to focus my question on cash flow and leverage. So you said earlier on the call that it could take 5 years to unlock the EBITDA. And I'm assuming that's the same timetable for cash flow. I guess that would be my first question. But my real question is, I know you don't want to discuss the outstanding lawsuits. But how do you think about leverage with the potential upcoming settlements with the timing of unlocking the EBITDA and cash flow? Do you have any maybe short-term, intermediate and long-term leverage goals that you could share with us? Todd Young: Thanks, Ann, for your question. As I said, it's certainly inside 5 years to unlock that $200 million opportunity. We're looking to be cash flow positive this year. And so we've brought down the CapEx significantly. We expect our legal costs to be -- and transactional costs to be lower than last year. And as I said, expect for some working capital improvements as well. All of that should lead to a positive on reducing debt. As we think about our outstanding legal challenges and the like, we are taking that into account as we look at leverage over both the short and the near term. But fundamentally, we do expect to grow EBITDA and to improve free cash flow in '26 and in '27 and '28. All of which then drives improvement in leverage, understanding that there may be some additional cash required to pay for a settlement or otherwise that can exist. But fundamentally, we do think our leverage will stay in a reasonable range, maybe not as low as it has been in the last few years because of these draws on cash, but not in a way that will create any risk to the enterprise. Ann Hynes: Great. And the de novos that are not performing to your expectations, what's the drag on EBITDA in 2026? And do you expect that to continue like have these start-up losses in 2027 and 2028? Todd Young: No, we expect start-up losses to improve. We're improving modestly in 2026 versus 2025. And as I mentioned earlier, a big part of our core growth is the ramping of facilities opened in '23 to '25, and that continued ramping of these facilities will be the driver of improved EBITDA and cash flow performance in the next few years. So we would expect in '27 given we don't have substantial beds or new facilities opening that those start-up losses would decline more than they are here in '26 versus '25. Operator: The next question will come from Jason Cassorla with Guggenheim. Jason Cassorla: Welcome back, Debbie. I wanted to hit on 2026 volume quickly. You've got flat to up 1% total same facility, 350 basis point impact from the New York Medicaid dynamic. You've got facility closures and you've got over 600 beds coming into the same facility stat. I guess could you help maybe bifurcate what the volume growth expectation would be on like a non-Pennsylvania, non-new bed same-facility basis? I'm just kind of like relative to like the over like the 2% to 3% longer term. Just curious on what you're seeing on that front would be helpful. Todd Young: Sure, Jason. And as you just rattled off there, we've got a lot of moving pieces that does make this a more complicated baseline than normal. As we called out, we think underlying core growth is in the 1% to 2% range, and then we're going to get a 1% to 2% benefit from our ramping facilities on the '23 to '25 basis. And so again, that ramping facility is going to be a big driver going forward. We've added a lot of new beds to our facilities and to new facilities and JVs over the last couple of years. But again, this drag on the 3.5% roughly from New York Medicaid is the big negative this year that we don't expect will repeat in future years, and then we'll get back to this growth as we ramp our facilities and exit the start-up losses and really drive that EBITDA growth from just getting a higher utilization of the fixed costs of each of the new facilities. Jason Cassorla: Great. Very helpful. And maybe just as a follow-up, I just wanted to ask quickly on the first quarter '26 guidance. If you net out the $11 million of out-of-period DPP benefit that you're expecting to book, it looks like first quarter EBITDA is down about high single digits. '26 guidance, if you net the out-of-periods, it's pretty flat on a dollar basis. Maybe it's the run rate PLGL, maybe it's the maturation of new beds, start-up cost timing and seasonality. But is there anything to call out in the first quarter '26 specifically that might be impacting the guide? Or is it just conservatism given some of the moving pieces? Todd Young: No, a very fair question. I think we do have a weather impact here in Q1 that the big storm that really knocked out the team here in Nashville. We had a lot of folks without power for a week. That hit a lot of our facilities because it just hit so many states and so we called out about a $3.7 million headwind there. We do expect that the facilities ramping will create a greater EBITDA benefit in the back half of the year than in the first half of the year. So that also is different than the Q1 run rate would suggest. And then finally, we expect supplementals from just the normal course of already approved programs also has a bigger second half benefit than it does first half. So those are the number of pieces that allows for us to feel good about the acceleration in the EBITDA run rate relative to Q1. Operator: The next question will come from Joanna Gajuk with Bank of America. Joanna Gajuk: Debbie, great to have you back for sure. So you mentioned in your prepared remarks also a review of service lines. So can you give us a little bit more color on kind of what metrics you're looking at to kind of make these decisions and maybe early indications which of these service lines you were referring to, were thinking they might require divestiture? Debra Osteen: Thank you for welcoming me back. I really wasn't trying to infer that we're going to be taking any action on any of our service lines. What I meant by those remarks is we are wanting to make sure that all of our service lines are performing at the highest level that they can. And I think that certainly, most of the new beds that we've added have been in the acute area. So we're looking at that as a separate focus. But with regarding CTC, we really feel like that's a very important and strategic part of the company. It actually has some very attractive characteristics. When you think about it, it's low capital intensity, it's low labor intensity and we really have just very, very strong predictable demand. So when I reference looking at all of our service lines, what I'm looking at is just where are they performing now, how can we improve that performance? And do we have the right leadership and the right teams in place to see that happen. Joanna Gajuk: If I may, a follow-up on the commentary around new hospital ramp-up. It sounds like it could be construction delays or just approvals. But you also mentioned staff. So can you kind of maybe double down on that topic in terms of are there any markets with some shortages or just issues around staffing? And in particular, also as it relates to some other questions about management or other referral sources, are there any trust issues maybe with local health care workers that it's creating issues staffing new beds? Debra Osteen: No. Staffing, we always have staffing as a focus to make sure that we have -- especially with the new hospital, as you can imagine. But no, it's not about trust of our referral sources. The ramping issues that happened in 2025 really have to do with getting all of the regulatory approvals in place to open. And then as I said earlier, to build for those services, I think we entered into these relationships with our partners because they were very strong in their market. We've learned that we need to leverage that strength even more than we have in the past and do it earlier. But there -- we're focused on really collaborating and meeting their needs and making sure their patients can access the new facility. So I wouldn't see it as a staffing issue that's been a barrier really or a lack of trust by referral sources. I've met with several of our partners since I've come back, and they're very excited about being able to meet the mental health needs, but do it with us and the strength that we bring. So that, I think, is in a very good position. And I don't think that we have issues going forward. Really, as we think even about the new facilities ramping, we've got some really strong partners that will be opening facilities with this year. Operator: Next question will come from Sarah James with Cantor Fitzgerald. Sarah James: Debbie, it's great to have you back. I'm wondering, does your expansion of the quality dashboards include new investments in recognizing and responding to patterns in clinical outcome measures like readmissions or relapse rates? And could those metrics factor into payer negotiations or claims approval rates? Debra Osteen: Well, the 50 measures that we are looking at, some of them have to do with on the unit and how our clinicians are performing. Certainly, the performance and the -- of our patients and how they improve within our facilities, I do think can be a key part of our discussions with the payers. We're aligned in that. They would like to see these patients improve as we would as well. So we are using those -- that data. I think we can do it even more than we have because now we have some published information that we can -- and we're putting it on our website, as I mentioned. So it's very clear that our patients are coming in and they are improving from admission to discharge. So we do plan to use that more to demonstrate the difference that we make as they consider what they intend to reimburse us and we want alignment with that. And the dashboards give a lot of visibility and it's visibility that is immediate so that you can look at a particular hospital and a particular measure and know for that day what is happening, which I think is a great tool. Sarah James: Great. And just one follow-up on the referral channels. Can you provide us with a framework of what the referral channel mix looks like now? How that's different from 2 years ago? And as you're making these investments on building relationships, where that mix could go in the next few years? Debra Osteen: Yes. As I've come back, I don't see a big difference in the referral patterns. They do differ by service line. As you know, Sarah, just from following us, I think that we still get business from the emergency rooms who are in need of placing patients and might be boarded there for a period of time. We also have many professional referral relationships with those out not only practicing in psychiatry, but also other physicians. In each state, it's going to differ as to who is sending patients. But I don't really see a big shift there. I think that it's the same group of individuals that are referring. But our job, and I think we're very focused on this is making sure we're connecting with them and that we are being proactive with them to talk about what we can offer to their patients as well as the outcome measures, which we've talked about. Operator: This will conclude our question-and-answer session as well as our conference call for today. Thank you for your participation. You may now disconnect.
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.
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.
Operator: Good morning, everyone, and welcome to Lowe's Companies Fourth Quarter 2025 Earnings Conference Call. My name is Rob, and I'll be your operator for today's call. As a reminder, this conference is being recorded. I'll now turn the call over to Kate Pearlman, Vice President of Investor Relations and Treasurer. Kate Pearlman: Thank you, and good morning. Here with me today are Marvin Ellison, Chairman and Chief Executive Officer; Bill Boltz, our Executive Vice President, Merchandising; Joe McFarland, our Executive Vice President, Stores; and Brandon Sink, our Executive Vice President and Chief Financial Officer. I would like to remind you that our notice regarding forward-looking statements is included in our press release this morning, which can be found on Lowe's Investor Relations website. During this call, we will be making comments that are forward-looking, including our expectations for fiscal 2026. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties and important factors, including those discussed in the risk factors, MD&A and other sections of our annual report on Form 10-K and our other SEC filings. Additionally, we'll be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in the quarterly earnings section of our Investor Relations website. Before turning the call over to Marvin, I'd like to ask that you please hold December 9 for 2026 Analyst and Investor Conference, which will take place in New York City. Now I'll turn the call over to Marvin. Marvin Ellison: Thank you, Kate. Good morning, everyone, and thank you for joining us today. In the fourth quarter, sales were $20.6 billion and comparable sales increased 1.3%. For fiscal year 2025, we delivered sales of $86.3 billion, positive comparable sales of 0.2% and adjusted operating margin of 12.1%. This led to adjusted earnings per share of $12.28, a 2% increase over last year. Despite a challenging industry backdrop, our relentless focus on expense management allowed us to hold adjusted operating margins flat to the prior year when excluding the impact of our recent acquisitions. While our outperformance in the fourth quarter demonstrates our team's disciplined execution, our outlook for 2026 remains cautious given the persistent volatility in housing macro. This uncertainty continues to pressure big-ticket discretionary DIY projects as many consumers are reluctant to make significant investments in their homes. Within this challenging macro environment, it is imperative to remain focused on our perpetual productivity improvement or PPI initiatives. This commitment to PPI is at the center of the announcement we made recently to eliminate approximately 600 corporate and support roles. Although these are difficult decisions to make, this workforce reduction will help us create greater financial agility within our dynamic industry while continuing to invest in customer-facing areas of the company. We will continue to manage what is within our control, which is reflected in the strength we delivered across Pro, online and home services as our total home strategic initiatives are resonating with our small to medium Pro and DIY customers alike. Starting with our Pro results, we delivered another quarter of growth as we continue to gain traction with our transformed offering. Our Pro customers are responding to our compelling brand and product assortment, investments in inventory, job site delivery, enhanced service levels and a tailored digital experience, and we're further enhancing our Pro brand offering by extending our assortment of the #1 power tool brand, DEWALT, the tool of choice for Pros for over 100 years. We are excited that we now carry the largest selection of the walk power tools and accessories in our stores and online. Moving to online. We delivered a 10.5% growth this quarter and set new sales records this holiday season on both Black Friday and Cyber Monday. Both DIY and Pro customers continue to shift their shopping online as our enhanced user experience and fulfillment options offer the ease and convenience they are seeking. In fact, on Black Friday, our Lowe's app was so popular that it was the #1 free app in the shopping category on Apple's App Store in the U.S. This level of engagement reflects the investments we've made to create a seamless omnichannel shopping experience. And as customers continue to integrate AI into their shopping habits, we are collaborating with leading digital platform so that we are well positioned to participate in Agentic commerce. Now turning to home services, where we delivered high single-digit growth. This is another example of a customer experience that we have overhauled at Lowe's by removing the friction for what was a time-consuming process through digital tools and enhanced service to create an intuitive installation solution for our do-it-for-me customers. Let me now shift to our view of the broader macro environment. Consumer confidence remains subdued given inflationary pressures and overall economic uncertainty. And despite modest relief in short-term interest rates and market expectation for additional Fed cuts, mortgage rates remain elevated. As a result, a persistent lock-in effect remains in place keeping housing turnover and new home stars under pressure, leading us to expect improvement in both the housing and home improvement markets to be gradual. That said, the structural demand drivers of the home improvement industry remain strong with home equity setting new record levels and homes continuing to age, averaging 44 years old. With the chronic supply-demand imbalance in housing, analysts continue to expect that approximately 16 million new homes will be needed in the United States over the next decade. Despite near-term industry headwinds, we're pleased that our investments in our total home strategy and operational excellence are paying dividends. Our compelling product assortments, flexible fulfillment options, innovative installation solutions, and best-in-class digital experiences are appealing to both the value-conscious homeowner and the busy pro. We're confident that these investments position the company to outperform the market, regardless of macro conditions. With the recent acquisitions of Foundation Building Materials, or FBM, and Artisan Design Group, or ADG, we are well-positioned to participate in the expected recovery in housing. As we start the year with these two companies, our integration efforts are on track, and we're focused on capturing cost synergies by leveraging our combined scale. We're also developing solutions to support cross-selling opportunities that will enhance our offering to our respective pro customers by capitalizing on complementary product offerings. While FBM and ADG are navigating a challenging residential construction market, we expect them to build on their leadership position this year, leveraging their reputation for exceptional customer service while maintaining operational discipline. In addition, we're pleased with FBM's commercial business, which represents roughly half of its revenue, as they continue to win new data center contracts, which reflects the benefits of a diverse customer base. Before I close, I want to take a moment to recognize our frontline associates who continue to show up every day with a strong sense of ownership and commitment to serving our customers and communities. As a demonstration of our appreciation for their efforts, we awarded a discretionary bonus of $125 million to our dedicated frontline associates for their outstanding performance in the fourth quarter. This includes our assistant store managers, department supervisors, and hourly associates in our stores and distribution centers. It's an honor for me to continue to support these hardworking men and women. Our dedicated frontline associates are the primary reason Lowe's was recently recognized as Fortune's #1 most admired specialty retailer. This honor truly belongs to them. I'd like to congratulate our team for delivering another year of outstanding customer service. With that, I'll turn it over to Bill. William Boltz: Thanks, Marvin. Good morning. We're pleased with our sales performance this quarter as we delivered positive comps in 9 of our 14 merchandising divisions. Our teams remain focused on offering value and innovation to consumers who continue to be mindful about their home improvement spending. This holiday season, we helped our customers celebrate with exciting offers and deals on appliances, tools, Trim-A-Tree, and more, making Lowe's a popular destination for holiday shoppers, both in-store and online. Starting with building Products. We delivered broad-based growth, driven by solid performance in both Pro and home services. Rough plumbing was a standout, with continued strength in water heaters, water treatment, and HVAC, along with strength in other Pro-focused areas within our plumbing assortments. This includes a new merchandising display for SharkBite PEX pipe and fittings. It showcases straight pipes stacked upright, which Pros prefer over coiled Product, as it makes it easier for them to use on the job site. We delivered positive comps in millwork with strong performance, especially in windows and doors, supported by leading brands such as Pella, Therma-Tru, and LARSON, which are exclusive to Lowe's in the Home Center channel. Our convenient installation solutions, combined with our affordable credit offers, are helping customers manage these larger replacement projects. Turning to home decor, where we delivered positive comps across kitchens and bath, paint, and in appliances, where we continue to build on our market leadership position. With the widest assortment of leading brands, competitive pricing, and rapid delivery, consumers are turning to Lowe's more often for their appliance needs, whether urgent or planned. As a reminder, Lowe's remains the only retailer that can deliver and install major appliances next day in virtually every zip code in the U.S. In kitchens and bath, our recent reset in bathroom vanities continues to drive results as customers appreciate the improved shopping experience and the easier access to big and bulky products. Within our bath program, we're pleased that we've been selected by TOTO to be the first big box retailer to offer their innovative toilets as we leverage our larger showrooms to feature their premium product, which will be exclusive to Lowe's in the Home Center channel. This quarter, we were also encouraged by our results in paint, where we delivered positive comps with broad-based growth across interior and exterior paint, primers, stain, and attachments, as customers took advantage of milder weather earlier in the quarter to work on outdoor projects. We're off to a great start with the new Sherwin-Williams ProBlock Quick Dry Primers, which we introduced in Q3. Pros are responding to the superior quality and performance versus the competition, helping to drive double-digit Pro comps in primers in Q4. Looking now at hardlines. We delivered growth in hardware, seasonal and outdoor living, and lawn and garden, driven by strong holiday and gift-giving assortments, along with storm-related demand. It was exciting to see customers line up at our stores early on Black Friday, inspired by our creator network, to take advantage of our My Lowe's Rewards Blue Bucket giveaway, including a chance to win a golden ticket for a free appliance priced at $2,000 or less. Our holiday Trim-A-Tree assortment was also a hit, driven by our strength in animatronics, and customers also responded to great deals in the Tools Gift Center with values from Klein, DEWALT, Bosch, and Kobalt. We also had compelling member-only deals online as well, where we delivered yet another record for the Black Friday/Cyber Monday weekend, along with several viral moments that centered around our bucket giveaway and trending Products like mini buckets, teeny totes, and mini toolboxes. In January, we helped customers prepare for winter storms Fern and Gianna with generators, snowblowers, ice melt, flashlights, and gas cans, which contributed to positive comps in seasonal and outdoor living and lawn and garden. In the quarter, we also completed the rollout of pet and workwear to more than 1,000 stores as we continue to expand our offering of convenience items that help our busy customers make the most of their shopping trips. Given the solid results from these new assortments, we'll be expanding them to the remainder of our stores in 2026. Shifting gears, our teams are delivering against our ongoing perpetual productivity improvement, or PPI initiatives, which I outlined at our last Analyst and Investor Conference. These include disciplined product cost management, improving inventory productivity, maintaining a disciplined approach to pricing and promotions, and expanding Lowe's Media Network. This year, our supply chain, merchandising, and finance teams drove inventory productivity and completed our multiyear SKU rationalization initiative, while also effectively navigating an unprecedented volume of tariffs and ensuring strong in-stocks to drive sales. We are growing our Lowe's Media Network as we help our suppliers better connect with our shared customers, leveraging insights gained through our loyalty programs. As we look ahead into 2026, we'll empower our merchants with new AI tools that make their workday more efficient, freeing up time for them to focus on driving sales and optimizing our product assortments. We will also introduce new tools to our merchandising services team, or MST associates, that will direct them to service the right base at the right time based on the sales trends of their store. Looking ahead to spring, we're ready to capitalize on the demand driven by our biggest season of the year with great values, the best products and brands, and strong in-stocks to help our customers tackle all their spring projects. We have an unmatched outdoor power equipment lineup in the home center channel, the only one to offer Toro, the leading gas-powered brand, and EGO, the leading battery-powered brand. We have a wide array of grills to choose from across Weber, Char-Broil, Blackstone, Pit Boss, along with our own private brand, Master Forge. Our new patio lineup is stronger than ever, designed to help our customers enjoy their outdoor living spaces in style. We will also continue to earn customer loyalty through our DIY loyalty Program, My Lowe's Rewards. We recently introduced a new perk for members, My Lowe's Rewards Kids Club, featuring in-store workshops, family engagement events, and giveaways for young DIYers, helping us connect with the next generation of homeowners. As part of these efforts, we are also excited to expand our relationship with the number one influencer in the world, MrBeast. Later this spring, you'll see us activate this partnership across family experiences, merchandise, and more. As I close, I want to thank our merchants, MST associates, and vendor partners for their hard work and partnership this year. Their focus on delivering the best for our customers really sets the bar, and we value the important role that all of them play in helping to drive our success. With that, I'll now turn the call over to Joe. Joseph McFarland: Thank you, Bill. Good morning, everyone. I'd like to begin by thanking our frontline associates and store leaders for their outstanding work, supporting our customers impacted by Winter Storms Fern and Gianna, reflecting the critical role our stores play during hard-hitting weather events. Their commitment matters. It is just one example of the ongoing focus on customer service that our associates deliver day in and day out. Once again, this quarter, we drove improved customer satisfaction for both DIY and Pro customers, including during another busy Black Friday and Cyber Monday weekend. Customers appreciated our flexible fulfillment options during the busy holiday season, as they relied especially on same-day gig delivery to meet last-minute shopping needs. Turning to our fourth quarter performance, I'm pleased that we delivered another quarter of growth in Pro. We are building on our momentum by expanding our Pro sales force, which allows us to reach new customers while also growing share of wallet with existing Pros, including in their planned spend. With the recent rollout of our new AI-enabled Pro Companion, we're giving our Pro sales team even more opportunities for success. This new capability helps sales associates quickly prepare for conversations with Pros by enabling rapid access to relevant information so they can walk in with recommendations already in hand, leading to more effective customer interactions. We're helping the sales associates at the Pro desk serve complex orders through the Pro Extended Aisle, which is a direct interface to our suppliers' catalogs. We've just introduced a new feature that allows us to stage job site delivery, so Pros can get what they need immediately and then deliver the rest of the order at a later date based on their schedule. This new capability not only improves the customer experience, it replaces what was a time-consuming process for our associates with a single click. I'm also excited to share that Lowe's is now the exclusive national home improvement partner to the National Association of Home Builders, or NAHB. This allows us to connect with their 140,000-plus Pros and offer member-only savings. Looking ahead, in our recent survey, our core Pro customer indicate they continue to work on smaller-ticket repair projects and that their backlogs remain stable. Now, let me discuss the progress we've made this year against our perpetual Productivity improvement initiatives or PPI. As a reminder, each year, our store operations teams tackle a number of productivity initiatives. Let me give you a couple of highlights from 2025. In the fourth quarter, we completed the rollout of our front-end transformation across our store portfolio. This multiyear effort meaningfully improves the checkout experience for customers while freeing up labor hours, so associates can spend more time serving customers in the aisle. The transformed front end includes an expanded buy online, pickup in store area that makes it faster and easier for our customers to grab their online orders, helping us better serve the continued shift to omni-channel shopping. We've also enhanced our freight flow as part of our PPI work. By redesigning the process and leveraging tech-driven solutions, we've made meaningful gains in labor productivity as we more efficiently move product from the truck to the sales floor. Looking ahead to fiscal 2026, we're already working on our next set of PPI initiatives. One priority is to even further enhance our stocking through an initiative we're calling Freight Flow 3.0, which allows us to better sequence inbound inventory from our distribution centers. Overnight teams will focus on stocking the highest priority product immediately, while early morning teams arrive earlier to manage the remaining product flow. This approach means more associates are available to help our Pro customers when they arrive early to shop before heading to their job sites. These changes are already yielding better inventory accuracy and in-stocks, while also supporting customer service. Another PPI goal this year is our new full shelf replenishment initiative, which launched across all stores last month. Using real-time data to identify out-of-stocks, this AI-enabled technology sends stores a prioritized list of the most critical items to restock, which helps ensure that products are available where and when customers need them. These enhancements are improving both the associate and customer experience. With better visibility, smarter prioritization, and more product on the shelf when it's needed, our stores are becoming easier to shop every day. Finally, as Marvin mentioned, we are recognizing our frontline teams in our stores and supply chains for their critical contributions to our results in the fourth quarter and this year with a discretionary bonus. Assistant store managers will receive $5,000, and hourly associates will receive bonuses ranging from $150 to $700. These bonuses are on top of their normal incentive plans. These associates show up every day with a relentless focus on customers and eagerness to embrace new technology and a commitment to helping one another succeed. This bonus is a reflection of a culture of winning together that we have created. That's what sets Lowe's apart. With that, I will turn the call over to Brandon. Brandon Sink: Thank you, Joe. Good morning. Starting with our fourth quarter results, we generated GAAP diluted earnings per share of $1.78. In the quarter, we recognized $149 million in non-GAAP charges associated with the acquisitions of Foundation Building Materials, or FBM, and Artisan Design Group, or ADG. Keep in mind, in the fourth quarter of last year, we also recorded a pre-tax gain of $80 million associated with the 2022 sale of our Canadian retail business. Excluding these impacts, we delivered strong results for the quarter with adjusted diluted earnings per share of $1.98. My comments from this point forward will include certain non-GAAP comparisons that exclude these impacts, where applicable. Fourth quarter sales were $20.6 billion, with comparable sales up 1.3%, driven by growth in Pro, online, and home services, as well as winter storm activity. We estimate that the demand related to winter storms Fern and Gianna positively impacted Q4 comp sales by approximately 50 basis points. With a strong start to the holiday season, we delivered positive comps of 0.4% in November. Comps were down 1% in December, then accelerated to 5.8% in January, lifted by storm-related demand. Comparable average ticket increased 3.6%, driven by price increases and a mix into Pro and appliances, while comparable transactions declined 2.3%. For the fourth quarter, adjusted gross margin was 32.7%, down 18 basis points as the dilutive impact of FBM and ADG was nearly offset by higher credit revenue, multiple PPI initiatives, and favorable Product mix. Adjusted SG&A was 21.4% of sales, deleveraging 37 basis points as higher frontline discretionary bonuses and annual incentive payouts, as well as sales-driving actions, were partly offset by the accretive impact from the acquisitions. Adjusted operating margin rate of 9% was down 41 basis points versus prior year, and the adjusted effective tax rate of 23.6% was consistent with the prior year rate. Consistent with our expectations, FBM and ADG operating results were accretive to adjusted EPS for the fourth quarter, while diluting operating margin by approximately 30 basis points. Inventory ended Q4 at $17.3 billion, in line with prior year, despite the inclusion of approximately $500 million in inventory from acquisitions as well as higher tariffs. We continue to execute on multiple inventory productivity initiatives through AI-enabled solutions while also benefiting from SKU rationalization. These outstanding results demonstrate the strategic alignment and collaboration we're driving across the organization. Shifting gears to capital allocation. In 2025, we generated $7.7 billion in free cash flow and returned $2.6 billion to shareholders through dividends, which includes a dividend of $1.20 per share in the fourth quarter, totaling $673 million. We invested approximately $3 billion in cash for the acquisitions of ADG and FBM, and borrowed $7 billion to finance the remainder of the purchase price of FBM. During the year, we also repaid $2.5 billion in bond maturities. Capital expenditures totaled $2.2 billion for the year, driven by investments in our Total Home strategic initiatives. Adjusted debt to EBITDA was 3.31 times at the end of the quarter. We ended the quarter with $982 million of cash and cash equivalents and delivered return on invested capital of 26.1% for the year. I would like to discuss our 2026 financial outlook. While short-term interest rates have been coming down, affordability and the lock-in effect continue to pressure demand. Consumers are still cautious about discretionary big-ticket purchases. While many homeowners will receive larger refunds this year, it is unclear how much of that will be spent on home improvement. It is also unclear when mortgage rates will ease, which will continue to exert pressure on existing home sales and new home construction. Taking all of this into account, we forecast the home improvement market to be roughly flat this year in a range of down 1% to up 1%. We remain confident in the continued execution of our Total Home strategy, which will enable us to grow faster than the market and take share. With that, we are expecting 2026 sales ranging from $92 billion to $94 billion, with comparable sales in a range of flat to up 2%. We anticipate that ADG and FBM will contribute approximately $8 billion to sales. We expect operating margin in a range of 11.2% to 11.4% and adjusted operating margin in a range of 11.6% to 11.8%. This includes 30 basis points of dilution related to the wrap of FBM and ADG in 2026. As a reminder, the acquisitions drive approximately 50 basis points of dilution on an annualized basis. We expect gross margin to decline approximately 75 basis points compared to the prior year when we factor in the dilution related to the acquisitions. However, the acquisitions are accretive to consolidated SG&A as a % of sales. We will continue to drive our perpetual productivity improvement, or PPI initiatives, across the enterprise with a target of roughly $1 billion of productivity again this year. This includes the impact from the workforce reduction that Marvin mentioned earlier. This productivity will offset pressure from merit increases and general operating cost inflation and continued investments in our Total Home strategic initiatives. Additionally, we expect net interest expense of approximately $1.6 billion as we absorb incremental expense related to the FBM acquisition, partly offset by planned repayment of $2.3 billion of bond maturities in the first quarter. These assumptions result in expected full-year diluted earnings per share of $11.75 to $12.25. We expect adjusted diluted earnings per share of approximately $12.25 to $12.75. This includes the impact from FBM and ADG, which is expected to be accretive to adjusted EPS for the year. We also expect capital expenditures of approximately $2.5 billion for the year as we invest in our strategic imperatives to drive growth. This will be heavily concentrated in our retail business. Finally, to assist you with your modeling for the first quarter, here are a few points to keep in mind. Given severe winter storm activity in February, we are now expecting Q1 comp sales to be below the midpoint of our full-year guide. Adjusted operating margin rate is expected to be approximately 20 basis points below the bottom end of our full-year guide due to the dilutive impact of the acquisitions. In closing, we're pleased with our track record of disciplined execution and that our DIY and Pro initiatives are gaining momentum. Looking ahead, we are confident that we're making the right investments to deliver long-term sales growth and sustainable shareholder value. With that, we will open it up for your questions. Operator: [Operator Instructions] Our first question is from the line of Peter Benedict with Baird. Peter Benedict: I guess my first one is just on the Pro Extended Aisle efforts that you guys started to kind of roll out last year. Just maybe give us a sense for where you are with that. It got a brief mention in the prepared marks, but I'm just curious kind of where you sit with that, what the opportunity is going forward. That's my first question. Marvin Ellison: Peter, this is Marvin. Look, we continue a multiyear build-out for 2026. We're very pleased. It's actually exceeding all expectations. And we're adding new suppliers, new markets every single week, and we'll do that throughout 2026. You know, this is helping us create more traction with planned Pro spend. That's something that has been on our playbook for quite a while. We're excited to get new products like vinyl siding, building materials, doors, flooring, electrical wiring. Overall, we feel really good about this. We're not yet providing specific financial results other than to say, this is exceeding expectations, assisting with the planned Pro spin, and something we're excited about, and we think it will help to drive our Pro business for the balance of this year. Peter Benedict: I guess my follow-up would be maybe for Brandon, just how should we think about the incremental margins here once we get past, you know, integrating the acquisitions and the noise that's kind of related with that? I think there's a question out there in terms of, you know, as sales eventually start to recover, you know, what the flow through is gonna look like. Any updates to your thoughts there? Just level set us on what your view is there. Brandon Sink: Yes. Sure, Peter. I'll start with the fact that, you know, we're very pleased here with our Q4 performance progression of the year. We had positive comps here for the last 3 quarters. Marvin announced a payout to our frontline associates of $125 million in discretionary bonuses, delivered another $1 billion in productivity, delivered flat operating margin on the core business for the year. That all being said, as we look ahead to operating margin for 2026, as we've referenced, and as I said in my earlier comments, FBM/ADG is creating an additional 30 basis points of dilution related to the RAP, 50 basis points on an annualized basis. We are generating $1 billion incrementally in productivity for 2026, as we outlined at our AIC last year. We are seeing some modest incremental cost pressures that we haven't previously anticipated that are also embedded within that. I also mentioned that we're continuing to invest in a number of sales-driving initiatives that are tailored to, you know, value-conscious consumer, investing in fulfillment options, member benefit. All that's reflected in our updated expectations for 2026. The last thing I'll say, Peter, you know, I think this team's demonstrated a history of disciplined execution. We believe it's a hallmark differentiator for us and expect that to continue here in 2026 as we focus on landing that number. Operator: Our next question is from the line of Chris Horvers with JPMorgan. Christopher Horvers: So my first question is just thinking about demand. I know you said Fern and Gianna were 50 basis points benefit to the quarter. You know, that would still suggest like a 2 or 3 in January. If you look at the 2-year run rate, you know, that also improved in both December and January. For the quarter, and you were lapping, I think, a 70 basis point headwind relative to the hurricane recovery last year. You know, at a big picture level, do you think the demand in the category is just starting to elevate at the margin? Could you maybe try to put together the narrative around the winter storms versus lapping polar vortexes versus lapping also hurricanes last year? You know, some detail there on sort of the net weather, and elevate to a high level, how you think about whether or not maybe the demand's just getting better at the margin? Brandon Sink: Yes, sure, Chris, this is Brandon. A lot to unpack, as you mentioned here for Q4. I'll start with... you know, you referenced we had 100 basis points of headwind from Hurricane Selena and Milton last year. That has been in part offset by the benefits. I called out 50 basis points for Fern and Gianna here in Q4. We also referenced on the call last year an easier lap from the ice storms that played out over the course of January. As it's specific to the month of January, the 50 basis points on the quarter for Fern and Gianna was about 200 basis points on the month. Sorta cutting through all of that noise, we're still very pleased with the underlying demand trends, and traction that we're seeing across all areas of the business, Pro, DIY, DIFM. As that translates, looking at Q1, we do expect the demand drivers that we've seen, the underlying consistency, to be again consistent with what we've seen in Q4. We are seeing some level of disruption here out of the gates with the aftereffects of Fern and Gianna to start the month of February and now Hernando up in the northeast, here to end the month. You know, we're managing spring over the course of the first half, looking at it as a first-half event. Excited about everything we have locked and loaded. We have the biggest weeks ahead of us, and for the first half of the year, focused on, you know, delivering at the midpoint of the guide. Bill, you may want to reference just some underlying strength across categories that are separate from sort of the weather demand that we've seen. William Boltz: Yes. Thanks, Brandon. I think, you know, when you look at January and you set the weather aside, you know, we saw strength across, you know, as was called out in our prepared remarks, these pro-related categories, millwork, lumber, building materials, electrical. Then we continued to see strength in paint, garden businesses outside of ice melt, hardware, soft surface flooring, which is carpet, kitchens and bath, rough plumbing. You know, those are all built around the foundation, and, you know, we're gonna leverage those as we go into the first half of the year and continue to drive those. Christopher Horvers: And then my follow-up question is as you think about sort of the post-storm and post-tough winter recovery and lawn and landscape and even exterior of homes, we haven't had a winter like this in perhaps a decade. You also have a larger relative, you know, outdoor business relative to your peers. Is there an analog? How are you thinking about the potential pickup in sales in the first half of the year as it relates to the tough winter that we've had? Marvin Ellison: Chris, this is Marvin. Look, we're optimistic, and we've tried to build all of that into our guidance. Candidly, we've also tried to take a conservative approach. I think, it's pretty obvious, and I'll state the obvious, that this is a pretty unique environment with unpredictable tariffs, high interest rates, and a consumer demand that is not as sustained as we would like it on the DIY side. We feel really good about our plan for spring. We feel great about our plan for 2026, and part of that is the fact that we have the best in-stock that we've had in my tenure here going into spring. We have the best garden strategy that we've had in my tenure here going into spring. We have a lot of things working in our favor, not to mention that we have, you know, 30 million and growing members of our MyLowe's Rewards loyalty program that gives us a unique opportunity to message to those members. We are optimistic, but we're also cautiously optimistic just because there's lots of uncertainty out there. But we are very confident that whatever the macro environment provides, we will outperform the macro. We will take share. We took share in the fourth quarter. We took share in the third quarter. We'll take share in 2026. Operator: Our next question is from the line of Kate McShane with Goldman Sachs. Katharine McShane: We wanted to drill down on the comment that you'll be investing in sales, driving initiatives for the cost-cautious customer in 2026. What could that look like? Are you looking at price investment, promotion, some combination of both? How does that compare to how you managed through that in 2025? Marvin Ellison: Kate, this is Marvin. Thank you for the question. Kate, there's really no major change coming to our strategy relative to price or promotion. We manage price on a portfolio basis in this really volatile tariff environment. We'll continue to do that. We will be very specific on what we call tier one promotional events. You know, think the launch of spring, you know, think Labor Day, Memorial Day, Fourth of July. You'll see us leaning hard on some of those time frames, but other than that, we don't plan to be more promotional than any years past. What I will tell you, and I hand it over to Bill, is that we're really excited about offering the customer value and making sure that the cost-conscious homeowner can look to Lowe's, both in-store and online, to find anything they want at a value and also find anything they want that could be more of a premium item. I'll let Bill talk about some of the things we have in store for spring in 2026. William Boltz: Yes. Thanks, Marvin. You know, Kate, I think as we look at 2026, it's, you know, largely reflective of what we tried to do in Q4. That was, you know, meet the customer where they want to be met. Both online and in-store, offering these values for both a DIY and a pro customer, be out there, be relevant, with seasonally relevant products, which is very similar to what we've been doing and working on over the last few years. We're excited about what we've got planned in our lawn and garden business. We're excited about the new that we have, the innovation that we have across the store. The merchant teams have done just a really nice job of bringing new, exclusive and innovative values that we can put in front of the consumer. We've got great brands, we've got great partners with our vendors. You know, we're starting from deep south to north, and we'll take it as the season comes and as spring starts to, you know, come alive. We want to be there and meet the customer where they're at. We'll just have great offers out there, throughout the spring season. Joseph McFarland: Kate, I'll just add, in addition to that, you know, we mentioned the Pro Extended Aisle, and we continue to make the investments. This is a multi-year build-out, and so as we think about that, meaningful growth opportunity is still ahead of us. The investments that we have made, with our transform offerings in our home services business, and so, and continuing to make the investments in the Total Home strategy. Katharine McShane: Then I just wondered if we could follow up with Brandon, how we should be thinking about the cadence of transaction versus ticket throughout 2026? Brandon Sink: Yes. Sure, Kate. I think when we look at 26 and what's embedded with the guide, similar to the second half of 2025 that we saw, we do expect the growth to be more weighted towards ticket in the first half of 26, and that's primarily as we, as we wrap the tariff price increases that we've been implementing. As we move into the second half, we do expect to see transaction trends to improve. We're gonna start cycling that over the second half of the year and expect that to move more in line with neutral again as we, as we start looking at the second half of the year. Operator: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Unknown Analyst: This is Zach on for Simeon. Thanks for taking our question. What are the strategic priorities for the wholesale distribution business? Can you give us an update on the integration of FBM and ADG with the core Lowe's business? Marvin Ellison: This is Marvin. I'll take the first part, and then I'll let Brandon jump in. First, what I would say is that we're really excited about the integration activities and the progress that we're making with both FBM and ADG. When you think about the future of acquisitions, we've already made a few tuck-in acquisitions for both FBM and ADG, and we feel as though we'll continue to do that to ensure that we're building out this interior solutions platform that we talked about. Our objective is to have the ability, when you combine Lowe's, ADG, and FBM, to provide the home builder with virtually everything they need for the interior space of the home. You know, think doors, windows, ceiling systems, insulation, appliances, cabinets, countertops. That is the strategic vision that we're building out for both. As we think about, you know, future tuck-ins, they will be more than likely in that direction to ensure we're building out that portfolio of companies and products and services so we can serve that larger home builder. I'll let Brandon provide some additional context. Brandon Sink: Yes, sure, Zach. As we put some financials to this, as we look ahead to 2026, I mentioned we're gonna have revenue, we're guiding revenue of about $8 billion combined for ADG and FBM. That does represent organically low single-digit positive growth, solidly accretive to adjusted EPS as we look at 2026. We like what we're seeing on the commercial side with FBM, as we manage through sort of the cyclicality of what we're seeing, some of the near-term pressure we're seeing on the home building side. As Marvin mentioned, we've activated our integration teams. We continue to work together with both FBM and ADG on our strategies and plans to realize synergies. We're making really nice early progress, specifically, you know, work that we've done with vendors on product costs, looking at SG&A, logistics, back office, and then at the same time, really looking go forward at the cross-selling opportunities that exist across all three of these businesses. Really nice progress. Excited about what's ahead for 2026. We'll continue to manage this and continue to get after it. Unknown Analyst: That's helpful. And then just as a quick follow-up, if we adjust for the mix impact of these acquisitions, can you speak to what you're expecting for the core on core EBIT margin in 2026, both at the low end and the high end of the range, and how that relates to the rule of thumb, if you will? Brandon Sink: Yes, sure, Zach. I think I mentioned earlier, you know, stripping this out, really it's just a function of top line. Excluding the 30 basis points of step back, again, you're gonna see at the high end a reflection on our 2% comp, and that's if we see, you know, upside traction that we have with some of our sales-driving initiatives, you know, potential for tax refunds. Then the low end is essentially on a flat comp for the core business is gonna be at the low end. Really just a reflection. We mentioned the investment and the sales-driving initiatives, and then where we fall within that range is just gonna be a function of how the top line plays out. Operator: Our next question comes from the line of Michael Lasser with UBS. Michael Lasser: The guidance you provided spans a bit broader of a range than Lowe's has historically provided. If 2026 turns out to be meaningfully better or worse than that range, what internal and external key performance indicators would have told you that first, and what is that KPI saying today? Marvin Ellison: Michael, this is Marvin. I'll take the first part of that. I think the best way to think about your question is, whatever we get from a macro perspective in housing, we intend to outperform it. That is our internal expectation every year, and I think consistently, we've been able to do that. We're basically forecasting home improvement macro to be relatively flat, looking at 2026, and therefore, we set a guidance from 0%-2%, with the expectation that we'll outperform the macro and we'll take share against any competitor, small or large, and we think that we demonstrated that in the back half of this year. Having said that, there are always indicators in merchandising categories, certain financial metrics we're looking at. Obviously, the one thing that we look at closely relative to the DIY are big-ticket, discretionary purchases. When we start to see a sustained number of discretionary big-ticket purchases from the DIY, that's gonna give us an indication that the consumer is getting healthier, and they're more confident in making those purchases. I'll let Brandon add any additional context. Brandon Sink: Yes, Michael, I would just add a 2% spread has been pretty consistent the last couple of years as we've come out with the guide. In an uncertain environment like this, I'll just add a little bit more color to what Marvin said. This is really for us, I think where we fall is purely sort of indicative of, you know, overall home improvement in the macro and what plays out versus what doesn't. I think on the low end, probably an environment where we're seeing elasticity is a bit more pressured, deteriorating consumer sentiment, you know, the continued deferral of big-ticket spend, which we've been experiencing now for a number of years. On the high end, I think potentially some uptick in big-ticket discretionary projects, potential benefit from the tax refunds, HELOC activity, which we think is an opportunity for us, and then, you know, obviously continued momentum in some of the core areas of the business, you know, primarily pro with some of the planned spend initiatives. That's just to give you an indication, sort of on the high end and the low end, as to how the macro could play out and how that translates to where we fall within the guide. Michael Lasser: That's very helpful. And my follow-up question is a bit broader of a question, but Marvin, there's a lot of focus in the market and in the economy as of late, about what all of the technological innovation is gonna mean, both for companies as well as industries. The home improvement sector seems to be perceived to be a bit more insulated, at least as of today. How are you thinking about the broader impact of artificial intelligence on home improvement? How is Lowe's looking at the potential positive versus the drawbacks from deploying all this technology, both from a demand perspective as well as how it's evolving the cost structure over the next couple of years? Marvin Ellison: No, well, Michael, I appreciate the question. I think for us, we set an internal framework that AI will help us improve how we sell, shop, and work. Basically, as we think about AI internally, we frame it around those three strategic areas of our business. As a result of that, we're very focused on employing AI to help our associates sell, to improve the shopping environment for our customers, both in-store and online, and creating productivity in the workspace, both in-store and at our store support center. Some examples of that are things like our Mylow Companion, which we are leveraging as a virtual assistant, not only for customers, but also as a companion tool for our associates. We've seen roughly 1 million questions a month come through this virtual assistant and this companion tool. We built this on an OpenAI platform. It learns, and it gets better with every interaction. It helps our associates do the most difficult part of transition to a home improvement world, and that is product knowledge. One of the biggest challenges that Joe faces and our HR team faces whenever we bring on a new associate, is giving them the confidence they can be on the sales floor, engage a customer, and provide specific product knowledge. Not only does this platform and this assistant allow that to happen, it also now can do it in Spanish. That helps to break the language gap that we may have in certain geographic areas. We've seen dramatic improvements in customer service in a 200 basis points range in our stores where associates are adopting this, and we're seeing our conversion rates online roughly double when customers engage with Mylow. That is just one tangible example of how we're taking AI and we're making it work, not in a philosophical, you know, not in a theoretical perspective, but in a very tangible perspective. As Joe mentioned in his prepared comments, we're leveraging this in Pro. We've now built a Pro Companion tool, which gives our Pro team the ability to understand exactly how to prepare for customer conversations. When they engage with a large pre-planned Pro, they can be informed, they can have great advice and counsel, and they can provide good direction. I can give you 50 examples of how Bill is leveraging this from the merchant team, how we're freeing up his merchants from being task-driven and now being more strategically driven, working with suppliers on how we can drive revenue, how the tech team is using AI tools for development and code review, and they're seeing double-digit productivity gains and increasing speed to market. We are embracing this as a net positive, and we're understanding that it's coming and we're on the cutting edge of working with it, and we're excited about some of the work we're doing in agentic commerce with some of the leading tech platforms out there as well. It's something, as a large company, that we understand is critically important to our current state and our future, and we're embracing it. Operator: The next question is from the line of Jonathan Matuszewski with Jefferies. Jonathan Matuszewski: Marvin, if you adjust for the weather and put the storms aside, are there commonalities in markets where you're seeing comp sales underperforming and where they're outperforming? Basically, can you draw any conclusions from home prices or white-collar employment or other factors on a market-by-market basis? Marvin Ellison: Jonathan, thank you for the question. I can say that there are really no material differences that we're seeing in geographies if you strip out weather. Now, we understand that there are housing dynamics across the country, we've seen no material difference in our overall financial performance in these geographies thus far. Jonathan Matuszewski: And then a follow-up question, you know, you referenced Lowe's Media Network. Was hoping you could share an update there in terms of how that's contributing from a P&L standpoint, and how you see any tailwinds to the gross margin guide in 2026, Brandon, as that continues to grow? Marvin Ellison: Well, I can tell you we're really excited about the media network. It's something that we've been investing in for a while. We've now hired a new leader. We've improved our technology platform, and what I'll do is I'll let both Bill and Brandon talk about how we're leveraging it from our supplier partnerships on Bill's side, then I'll let Brandon provide any financial perspective. William Boltz: Yes. Marvin, I'll jump in here. Just, you know, a couple of things. We're leveraging insights from our customers from both our loyalty platforms, both the Pro and the DIY, you know, which has given us a key differentiator for our Media Network. We're expanding channels, looking at creator networks, as I mentioned in my prepared remarks, across our sports marketing, connected TV, and online video. We're also looking at how we provide visibility and measurable results to our suppliers, leveraging, you know, the value creation that we can drive here. 'Cause we think, you know, with our Media Network, we open up a number of different avenues for these guys to be able to tap into. So, we're excited about kind of where we're going and the early results of it, and we're in the early innings, but we're off and running. Brandon Sink: And Jonathan, this is Brandon. Last thing I'll say, just the benefits of Lowe's Media Network, the advertising revenue, the growth, is reflected in our expectation of $1 billion of productivity into 2026. That's roughly split evenly into gross margin, which would include the benefits from the Lowe's Media Network, and then the other half in expense. Again, factored in the growth, it's scaling in line with our expectations and gonna be a big part of what we expect to deliver for 2026. Operator: The next question is from the line of Brian Nagel with Oppenheimer. Brian Nagel: So First question I have, I guess it's from a macro standpoint. You know, a lot of thought lately, including on today's call, about the ongoing stagnation in the U.S. housing market and, you know, the headwind of higher rates. The question I want to ask, you know, we're starting to maybe see rates move lower, you know, in the data. As you're watching your data, are you seeing? You know, again, recognizing it's early, are you seeing some type of, you know, benefit, you know, as rates have started to move lower? If not, are you starting to see I guess the other question, would you be seeing some type of break, and what would that normally be, that relationship between rates and your business? Marvin Ellison: Brian, this is Marvin. I'll take the first part of that. Look, I would, you know, say that we are obviously watching this really close, but you said it's just a little too early to have any definitive point of view that there's a correlation between rates going down of late and any type of demand changes in the marketplace. Look, we think intuitively that when you get rates down on a sustainable basis below 6%, we think that that's gonna be as much of a psychological unlock as anything else. It's just too early for me to sit here today and give you a definitive financial point of view on it. I'll let Brandon provide some thoughts. Brandon Sink: Yes. Brian, I'll just add, you know, we've looked at the Fed cut 175 basis points in the last 18 months. There's a consensus of a couple of more cuts, 50 basis points, this coming year in 2026. The near term impact that is easing the burden for consumers in areas like, you know, credit cards, auto loans, HELOCs. Watching the long end of the curve, more particularly, which is, as you know, pegged to the 10-year, which has been hovering somewhere around 4% to 4.5%. We do look at sub 6% rates as potentially stimulating demand. We saw that this week, for the first time, dip just below 6%. Translating all of that into the guide, there is a delay, as Marvin referenced. We don't know exactly when that's gonna start to take shape and how that's gonna impact consumer spending. Again, for us, that's what's resulted in us having a little bit wider range, just given the opportunity and some of the uncertainty that continues to be out there. Brian Nagel: That's helpful. I appreciate it. And then my follow-up question, I guess, also bigger picture, but just with respect to tariffs, you know, you and your sector have done a very good job of managing the tariffs we've seen. We've gotten, I guess we'd say, new news and maybe some from certain further shifts in tariff rates. Again, recognizing this is also early, but, you know, any thoughts on, you know, what we're seeing now and, you know, what the adjustments that could spur within your business? Marvin Ellison: So Brian, I'll state the obvious, the tariff policy is fluid. We're currently reviewing all the new rules like everyone else. What I will tell you is that we remain confident in our full year guide regarding the top and bottom line. In the meantime, we're just gonna continue to execute our global sourcing playbook, and we're gonna just be in tune to everything that is changing and adjusting. Again, it's just such a fluid situation. It's just too early, again, to have a really specific point of view other than we have a very, very effective playbook. We're gonna manage that playbook, and we're gonna be very, very alert to any other changes that happen. Brian Nagel: I appreciate it. Thanks, Marvin. Marvin Ellison: So everyone that's our final question, and I'd like to close with a couple of comments. First, I'd like to take a moment to recognize Kate Pearlman, our VP of Investor Relations and Treasurer, after a distinguished tenure with Lowe's, Kate has decided it's the right time to embark on a new chapter of her Professional journey. While we are sad to see her go, she leaves us on the highest note having built a world-class IR and treasury function. So we want you to join us in thanking Kate for her years of dedication to Lowe's, wishing her nothing but grace favor and blessings in our future endeavors. And we now look forward to speaking with you again on our May 20 earnings call. So Rob, that's all we have. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for joining us for the Lowe's fourth quarter 2025 earnings call. Thank you.
Hamayou Hussain: Well, good morning, everyone. It's wonderful to see you all, and thank you for joining us. 2025 has been a pivotal year for Hiscox. In May, we set out our strategy going deeper into our retail business and making several important commitments. We're executing on that strategy and delivering on those commitments with pace and energy. Our diversified portfolio is built for this market. Growth is accelerating with premiums up $275 million or 6% year-over-year. This is high-quality profitable growth across each of our businesses, driven by product innovation, expanded distribution and customer growth built on our specialty expertise and technology capabilities. and we're expanding our margins. Our undiscounted combined ratio of 87.8% is the best in a decade, and our record insurance service result is the fifth consecutive year of underwriting earnings growth. And growth is translating into a larger asset base, underpinning a record investment result and contributing to a third consecutive year of record profit before tax. We are delivering excellent returns with a 12% growth in book value per share and an operating RoTE of 21%, materially above our target. This strong performance, continuing momentum and execution of our strategy enables us to reward shareholders through a new $300 million share buyback and a further 20% step-up in the final dividend per share as we announced at the CMD last year. This excellent performance, combined with our diversified portfolio makes our business strongly capital generative. Indeed, over the last 3 years, we have organically generated over 100 points of regulatory capital, enabling us to deploy capital in an unconstrained way to pursue profitable growth in each of our businesses and reward our shareholders with returns of $1.1 billion over the last 3 years. Now turning to our results by segment. Retail added almost $200 million of premium as the pace of growth increased to 6.3%, a continuation of our multiyear acceleration. This growth is broad-based across each of our retail businesses, driven by strong customer growth of 7.5% and crucially not rate dependent. And most importantly, this is profitable growth. The retail undiscounted combined ratio at 92.6% is the strongest since 2016. In London Market, we are successfully navigating a competitive environment, returning to growth through product and distribution innovation, while delivering a combined ratio in the 80s for the sixth consecutive year. And in reinsurance, we selectively deployed additional capital to support 6% growth, mostly in specialty lines. And the quality of our reinsurance business is demonstrated by a combined ratio in the 60s for the third consecutive year. Now let's take a look at how we delivered that growth. And frankly, the pace, energy and innovation of our colleagues has resulted in premiums from growth initiatives increasing fivefold in 2025 compared to the previous year. Supported by the launch of more new products than in the last 5 years and expansion of distribution. As we set out at the CMD, there is a huge structural growth opportunity in Retail. And we're capturing this through entering more segments, launching more products, expanding distribution and more markets. Retail is on a multiyear growth acceleration journey. We grew 4% in 2023, 5% in 2024 and over 6% in 2025 and plan to step up growth to 8% for the full year 2026. We have set the course to achieve double-digit growth in 2028. In London Market, we are leveraging our deep underwriting expertise to expand into new adjacencies while deploying AI augmented technology platforms to access new markets. In reinsurance, we have captured the opportunities of the hard market, increasing our net premium by 180% since 2020. Now the ability to innovate is a crucial part of our Hiscox DNA. It has and will continue to open up new growth opportunities in every part of our business. Now let's take a look at innovation in action at Hiscox. Now what you can see here is a sample of the initiatives we've taken in the last year to expand our business and drive growth. We're executing on these with pace and energy, launching new products at an excellent rate. Some of these you may remember as work in progress at the half year. These have now been launched, and we have refilled the pipeline with new products and opportunities that will begin production in 2026. For instance, in the U.S., one of our largest DPD partners has expanded our access to their agent network. And in the U.K., we followed up on the signing of one of our largest ever distribution deals in 2025 with an even larger opportunity that will begin producing premium in the first half of this year. In France, we successfully launched our new cyber product in the fourth quarter. This will be rolled out across all of retail in due course. These actions and many more are accelerating retail growth and enabling us to capture more of the $317 billion target addressable market. And in big ticket, our innovation is moderating the impact of cycle management in certain lines. During the year, we leveraged our existing technologies to grow into SME cargo and U.S. middle market property. In addition, using our underwriting expertise, we expanded into new adjacencies such as tech E&O and financial institutions. The blend of technology and underwriting expertise gives us the confidence to pursue new opportunities with more initiatives set to appear on this list over the coming periods. Now let's turn to the transformative force that is beginning to reshape our industry. Now with the advent of generative artificial intelligence, we are seeing the beginnings of profound changes in society and our market. The way consumers and small businesses are buying insurance is beginning to evolve. Large language models, LLMs are increasingly a key part of the buying process. Now with our experience, decades experience of providing specialist insurance directly to customers, we have an established competitive advantage from our trusted and distinctive brand to our leading Net Promoter Scores and high-quality service. These objective strengths stand out even more in the world of AI, where agents -- AI agents can evaluate a policy quickly on more than just price. We've been investing in technology for many years, building out our core systems and improving data quality. We have a leading global digital platform for small commercial insurance, now approaching $900 million of premium at almost 900,000 customers. These investments enable us to implement AI tools relatively quickly at a modest cost. We're excited about the efficiency and growth opportunities that AI brings. And we're not standing still. This year, we will begin to roll out new, more powerful customer and broker portals in the U.S. and in Europe. These will enable us to personalize the purchasing journey and help customers identify their insurance needs and simplify and speed up processes for brokers. As of this month, in fact, I think it's today, we are deploying AI agents into our U.S. customer contact centers to create real-time feedback loop for our operations and marketing teams on customer experience and sentiment. And if a customer wants to make a claim, an AI agent will be there to help. We are embracing generative AI for the benefit of our customers, our colleagues and our shareholders, and I believe Hiscox is well positioned to win. Now turning back to today's results. We've delivered on our promises in 2025. Retail has grown 6.3%. This growth will accelerate in 2026, building to 8% for the year before reaching double digits in 2028. Our operating RoTE of 21% is materially above our mid-teens through-the-cycle target. The change program has delivered a P&L benefit in the year of $29 million and is on track to deliver $75 million of benefit in 2026. Paul will provide further details on this. And our shareholders benefit from our growth and earnings with a 20% increase in the final dividend per share and a new $300 million share buyback. With that, I'll now hand over to Paul. Paul Cooper: Thanks, Aki, and good morning. It's great to be here with you all today presenting another strong set of results. We have achieved high-quality growth across each of our segments with ICWP up $275 million or 5.9% against the backdrop of falling rates, demonstrating the strength of our diversified growth. Importantly, we have delivered excellent profitability alongside this growth. The undiscounted combined ratio of 87.8% drove a record insurance service result of $614 million. The group's profit is supported by the record investment result of $443 million, underpinned by increased AUM following stronger premium growth. Our superb underwriting and investment results have translated into a record profit before tax of $733 million, up 6.9% and delivered an attractive RoTE of 20.9%. This is despite a 2.5% drag from the increase in the effective tax rate. The group's excellent profitability has driven substantial capital generation with a year-end estimated BSCR of 233%. And this is after returning over $400 million of capital over the course of 2025. As a result of our strong capital generation and balance sheet, the Board has ratified the 20% step-up in the final dividend per share announced at the CMD. In addition, we will be returning $300 million to shareholders through a new buyback, resulting in total returns of over $450 million in respect of 2025. Delving into these results a little further, starting with our Retail segment. In line with guidance, Retail ICWP grew by 6.3% in constant currency to over $2.6 billion. This growth has been broad-based across all markets as management actions delivered results. Growth has been accompanied by an improvement in the undiscounted combined ratio to 92.6 partially due to early benefits from the change program. Importantly, retail growth is transforming the shape of the group's earnings profile with retail representing nearly half of the group's PBT, up from just over 40% in 2023. Moving on to London Market. London Market returned to growth with ICWP increasing by 1.6%. In a competitive market, the business benefited from product innovation and opportunities arising from London Market's diverse portfolio. Profitability continues to be strong with an undiscounted combined ratio of 85.9%. This is testament to our underwriting discipline, risk selection and pricing as we navigate the market's micro cycles. Turning to reinsurance. Net ICWP grew by 7.9%, driven by growth in pro rata and specialty lines, including our climate resilience portfolio, mortgage and surety. The quality of our risk selection is demonstrated by an insurance service result of $189 million and an undiscounted combined ratio of 67.4%. Fee income of $109 million is very healthy, above $100 million for the third consecutive year. And we continue to see strong interest in our ILS funds with more than $330 million raised in the last year and a robust pipeline for 2026. ILS AUM on the 1st of January 2026 is $1.5 billion. As we continue to see strong capital inflows from third parties, while managing our own net exposure to property cat perils, the earnings mix between fee income and underwriting will continue to evolve. Moving on to our change program. We're making strong progress. On this slide, you can see examples of achievements against our ambition and some of the actions that will deliver benefits in 2026. We have significantly increased fraud detection rates through new capabilities, representing a real cash saving in 2025. However, given our conservative reserving philosophy, much of the benefit is yet to be recognized in the P&L. We have in-sourced over 100 roles in our Lisbon Tech Hub, enhancing the capabilities that drive our competitive advantage while leveraging the use of a lower-cost location. In 2026, we will build on this, rolling out more centers of excellence and further extending the scope of outsourcing where we benefit from the greater scale that specialist providers, partners provide. In procurement, we have reduced our property footprint and continue to consolidate our suppliers, enabling us to negotiate better terms. Over the coming year, we will double down on this, increasing the number of strategic partnerships and preferred suppliers while better managing demand within the group through improved cost governance. Finally, in technology, we decommissioned 20% of our applications in 2025 while launching new automation tools across the value chain, which will help to drive scale into the business. This will continue in 2026 as we launch new automation tools that will deliver efficiency benefits alongside driving revenue growth. Looking at the benefits. We're on track with our change program and we have achieved a benefit of $29 million at a cost of $24 million. And while we're slightly ahead of our 2025 benefit guidance, there is no change to our targets. We remain on track to deliver a $75 million benefit in 2026 as we optimize processes, sourcing and procurement, fraud detection and recoveries. We expect the cost to achieve to be $75 million, which includes costs associated with in-sourcing and outsourcing, legal expenses and tech implementation costs, including some of the exciting new capabilities that Aki referred to earlier. And these will help to deliver a $200 million P&L benefit in 2028. Let's look at how this is impacting the P&L. Disciplined cost management and savings from our change program means that our underlying expense base has increased by just $6 million. This is despite inflation and changes in variable comp and the investment in growth and technology initiatives highlighted by Aki. This, in turn, is driving improvement in our operating jaws with a 0.8% increase in underlying expenses comparing favorably to a 5% growth in premium in constant currency. Overall, this is very pleasing progress. Now turning to investments. Our record investment result benefited from strong yields and increasing assets under management as growth in the business translated into more assets on the balance sheet. As we go forward, that increase in AUM will help to offset the small reduction in the reinvestment yield to 4%. As such, strong investment returns should continue to provide a tailwind for the group. The quality of the fixed income portfolio remains high with an average credit rating of A, and the business is conservatively positioned on the asset side. Looking at reserves. Our conservative reserving philosophy is unchanged with a risk adjustment of $345 million, representing an increase in the confidence level to 86%, slightly above our target range. And this is despite a healthy level of prior year releases and reflects the point where we are in the cycle, the quality of our underwriting and the conservatism of our reserves. Over time, we expect the confidence level to return to within the 75% to 85% range. The conservative nature of our reserving has enabled us to release $293 million or 7.2% of opening reserves for 2025, continuing our long history of an uninterrupted positive reserve development. All accident years are below the initial estimate and continue to run off favorably. Finally, an update on capital. The group has delivered outstanding organic capital generation of 34 points. This has supported both investment in the business and returns to shareholders of 22 points of capital, resulting in a year-end BSCR of 233%. Following the payment of our final 2025 dividend and our new $300 million share buyback, we have a pro forma BSCR of 211. This compares favorably to our through-the-cycle operating range of 190 to 200, providing us with the flexibility to capture opportunities as they arise in a rapidly changing market. Thanks for listening. And with that, I will now hand over to Jo, who will provide you with an update on underwriting. Joanne Musselle: Thank you, Paul, and good morning, all. So our underwriting results reflect disciplined cycle management, profitable expansion and a strategic investment in both data and capability to continue to build a balanced and diversified portfolio, which you can see on this next slide. Our retail compound growth is anchored in profitable underwriting, delivering a core of 92.6%. In the U.K., Private Client is up double digits as we continue to benefit from our market-leading expertise. Commercial growth is due to an expanded customer base and a sharper sector focus. In Europe, France and Germany are leading the charge as we continue to go deeper into our chosen segments and deliver new products tailor-made to our customer needs. And in the U.S., Digital Direct is continuing its excellent growth. Momentum in partnership is building and broker once again expanding as we have delivered improved service delivery and a slightly broader appetite. Turning to the London market, where our ability to manage those micro cycles has remained a key differentiator, and we've once again delivered a combined operating ratio in the 80s. So property has seen some growth fueled by a U.S. high net worth portfolio and the tech-enabled expansion into mid-market. And this is offsetting some intentional cycle management in major property and commercial lines. We've seen some modest growth in casualty. We've had some rate tailwinds in general liability and a successful launch of financial institutions and technology E&O. And this is mitigating some declines in cyber and D&O as those markets continue to soften. And then lastly, reinsurance, a slightly softer market in 2025, but still a really favorable market. And despite another year of over $100 billion in industry losses, our risk selection, our robust reserves and a benign second half has enabled us to deliver a core in the 60s. So where are we in the cycle and how favorable is the market? So this next slide, hopefully, a familiar slide to you. So the chart on the left is our rates indexed back to 2018 for our segments. The purple line, which is Retail, is just less sensitive when it comes to the rate cycle. Rates were up in aggregate 2% and pricing across U.K., Europe and the U.S. remains strong. In 2025 for the first year in many saw aggregate rate declines for both London Market and reinsurance, although we remained in an attractive market. So the blue line is our property cat reinsurance rates come down 4%. This moderated as we went through the year as our midyear renewals, particularly those loss affected, attracted some rate increases. Across the whole of the reinsurance segment, rates were down about 5%, but still up 83% since 2018. And we saw a similar story in London Market, a 4% dip in 2025, but still at 67% since 2018. And that softening has continued in 2026. So our January renewals saw London Market come down another 4% and reinsurance down 13%, particularly in the areas of property, cat and retro. So the chart on the right gives you an indication of what we believe that does to the rate adequacy of our portfolios. So as a reminder, adequate means we believe it's adequately priced to deliver a good return in a mean loss environment. Adequate plus means we've got margin in addition and low, still profitable, but just below our target underwriting reserves. And you can see, despite the softening, we believe that much of the portfolio is still really well positioned to deliver a good return. And we benefited from some tailwinds in our own outwards reinsurance purchasing. So mastering changing markets and managing micro cycles is not new to us, and we continue to have many different portfolios in many different parts of the markets. And you can see this on the next slide. So the London Market rate environment is highly nuanced both at a line and a divisional level. And you can see the divisional picture on the right-hand side is quite different to the London Market headline. During this period, casualty rates have declined, whilst property rates have seen significant gains, and we've acted decisively. So during the same period, our average exposure per policy and casualty has reduced by 20%. And more recently, we've added over $100 million of property income. This laser focus on exposure management and profitable expansion has been the key to that consistency in that combined operating ratio. So we've learned from lessons of the past and our enhanced cycle management is really focused on 4 things. Firstly, a forward-looking view of risk, really understanding those inflationary trends, whether they be economic, societal or climate. A market in transition framework. This is a framework that's honed to capture the position of each one of our lines in the market and proactively respond to evolving conditions. Exposure management, we absolutely know -- need to know when to trim when we don't believe we're getting paid to take that risk, but also when to expand when we believe the expected returns justify the exposure. And lastly, new, of course, we want to actively manage the portfolio that we have and seize new opportunities for profitable growth. So this next slide gives you a little bit more information on our market and transition framework. So what you can see here, each bubble represents a line of business in London Market. So this is a proprietary framework. We built it around 10 quantitative type metrics, things like technical index, exposure deductible. And we add to that 5 more subjective metrics on the market. These could be things like broker interaction or terms and conditions. So for London Market, we're monitoring 285 metrics on a quarterly basis, and we have a very similar framework for our reinsurance business. Now each metric has an expectation or a tolerance and flags for investigation if it's outside of that. Now not all investigations will result in underwriting action. Most often when we look, the underwriting action has actually already been taken. But when it is required, responding really quickly is key, and that could be reducing your line size as an example. So in summary, a transitioning market, but a largely attractive market. So unlike our big-ticket businesses that flex with the cycle in Retail, we're looking for compound growth through the cycle, all anchored in consistent profitable loss ratios, and you can see that from the chart on the left-hand side. We've built out a specialist underwriting ecosystem from risk selection through to claims management, all underpinned by investment in brand, technology and capability. Our focus is squarely on customer value. We invest in our segments for the long term. We maximize value through market-leading retention and product penetration. After decades of investments, the majority of our retail customers already benefit from being auto underwritten, but we have ambition to go much further. And lastly, new, we want to deliver new products and services to existing customers, go deeper into our segments to attract new and boldly go into new markets. So as I look forward to 2026, my 3 priorities are clear. Firstly, a relentless focus on managing our portfolio, knowing when to trim, but also knowing when to expand when the outlook is compelling. Turbocharge innovation. We want to find quicker ways to bring new products, new services and expanded appetite to market. And lastly, capability. We want to blend humans with the best humans with advanced technology to really amplify our specialist underwriting expertise. And we want to train our underwriters for skills for the future so they've got data fluency and a practitioner at their core. Thanks very much. I'll now hand back to Aki. Hamayou Hussain: Thank you very much, Jo. So looking ahead to this year, as a result of the pace, energy and innovation we've generated, this year is positioned to be another really exciting year for Hiscox. Retail growth momentum will continue into 2026, building to 8% for the full year and on track for double digits in 2028. In big ticket, we expect innovation and new opportunities will moderate the impact on growth from our disciplined cycle management activities. And in reinsurance, following strong growth in recent years, in 2026, we expect to maintain our natural catastrophe exposures broadly flat on a net basis, while we are continuing to seek out growth opportunities in specialty classes. And finally, as you've heard from Paul, our change program remains on track to deliver $75 million of P&L benefit this year. So in closing, 2025 has been a pivotal year, a year of record underwriting results record investment results, record profits, and momentum has been building over the last few years and is set to continue. The group's combined ratio is the best in the decade. Retail's margin continues to expand. London Market has delivered a combined ratio in the 60s -- sorry, in the 80s, I wish 60s, 80s for the sixth consecutive year and reinsurance in the 60s for the third consecutive year. And in our change program, we are delivering expense efficiency and a significant build-out of capabilities with more to come. Our operating ROTE of 21% is materially above our through-the-cycle target. And our capital generation has been strong, enabling us to deploy capital in an unconstrained way to pursue high-quality growth in each of our businesses and to reward our shareholders with capital returns of $1.1 billion over the last 3 years. We look forward with confidence and optimism. These are exciting times at Hiscox. Thank you for listening. And now we'll take questions. Okay. Why don't we go right to left. So Shanti? Shanti Kang: It's Shanti from Bank of America. The first question was just on the retail growth outlook, that step up to 8% in '26. Where is that really being driven from by region? A walk of how to get there from the 6% that you've done this year would be quite helpful. And then I was just looking at the claims ratio in Retail this year, and it looked like that deteriorated a little bit year-on-year based on the restatement. Is there any reason for that deterioration? Is that really on more conservative initial loss picks? That would just be helpful. Hamayou Hussain: Okay. So kind of taking each of those in turn. In terms of the growth outlook, okay, I think context is important as well. So we've already taken the business from what was 4% growth in 2023 to 5% and then over 6%. And as you say, we're guiding to 8%. This is broad-based growth. There's no one single action that's driving this. It ranges from the effectiveness of our distribution teams and our distribution functions. And as you've heard me say many times before, we are increasingly winning positions on broker panels. We're winning new opportunities, new distribution deals. In fact, the U.K. has been leading the charge across the group on that. In our U.S. business, we're adding more partners. This year or in 2025, we added a further 23 partners. So as those gain traction and build production as well as growth from our existing partners. We're continuing to invest in marketing. In 2025, we increased the investment by 9%. I think we're now at about $109 million. You can expect that to go up by a further 10%. This is a great investment. We get very good returns from the step-up. We have stepped up our product innovation and expansion into adjacencies. And you can see that reflected in the 5x growth from new initiatives. We've turned around the U.S. broker business. That is now growing. So it's a range of different factors that are driving that -- that are achieving that growth. And as I mentioned earlier, and this is not rate dependent. In fact, rates have been going the other way. We have now come off the rate step-up that we were seeing in the Retail business as a result of inflation as inflation has abated. And if you go back to 2023, the rate increase was about 7%. Now the rate increase is 2%. At the same time, the growth has grown from 4% to 6%. You can see what the underlying is doing here. This is a volume-driven growth story here, and it's largely about the effectiveness of the management actions we've deployed over the years. In terms of loss ratio, look, we don't land this on the head of a pin. That is a market-leading loss ratio for the Retail business, we're very pleased with it. Andreas, I know this will and keep going. Andreas de Groot van Embden: Yes, Andreas van Embden, Peel Hunt. Just on cycle management. It sounds like we're going to continue growing exposures into a softening cycle in the next few years. I just wonder if you take a 3-year view through this planning cycle, what are your assumptions about the increases in capital requirements across the business. Is that going to be a gentle sort of rise over time as you grow exposures or will you, at some point, de-risk that property cat book and will capital requirements come down again? That's the first question. And the second question is on your reserve buffer. You're now at the top end or slightly above the top end of the range. Is this something that will be released in the future? Are you being sort of extra cautious or will inflation eat into those buffers, so it will naturally erode within that 75%, 85% range? Hamayou Hussain: Okay. Thank you, Andreas. So I think there are kind of a number of parts to that question. In terms of how we expect the big-ticket business to evolve over the next period, I think we've spoken about the fact that our product innovation and expansion into adjacencies will moderate the cycle management activities. I think Jo can provide a little bit more detail on that. In terms of capital requirements, as we expect them to evolve and the reserve buffer, Paul will address that. Joanne Musselle: Yes. Thanks, Aki. So as I said, we are a disciplined underwriter, you can see that in terms of our track record. So what we didn't say was we're looking to grow exposures, there's lots of lines where actually we have actively and decisively shrunk exposures. So we talked about some of the casualty lines where the rate has been decreasing. We've been actively taking -- reducing our exposure during that time. And as we look forward, we're seeing some softening in our property lines. And clearly, if that continues, we'll trim. So first and foremost, we are a disciplined cycle manager in our big-ticket businesses, albeit we are still in an attractive market today. And obviously, the rate adequacy slide show that in the majority of the portfolios, we still have rate adequacy. So that's -- but I think what we did say is what we've managed to do, particularly in 2025 is we've just mitigated some of that intentional cycle management action by some of the new things that we've been doing. And that's the launches of adjacencies. So we mentioned a couple in casualty. I mentioned the sort of mid-market property expansion as an example. That is offsetting some intentional reduction elsewhere. In casualty, we launched technology E&O. Now we've been a tech E&O writer for a couple of decades across all of our Retail business. It's a real heartland for us. And we launched a new product in our London market business. So this is to capture the slightly larger customers, find their way to London, written on a subscription basis. So that's what we're talking about in terms of that cycle management. Of course, we are a disciplined writer. I always say our job is to make money in the market that's in front of us, not the market that we'd like to have in front of us. So we'll react accordingly, and we're looking for new opportunities to profitably grow. And it's the combination of those 2 things. So it's actually really underpinned that consistency you see particularly in the London market with an 80s combined for the last few years. Paul Cooper: Yes. Building on that and how that translates into capital. So I think there's kind of 3 drivers. One is market conditions looking ahead of us, the second is the retail business and the third is cat P&L. And I think if you look at sort of consumption over, say, the last 2 years, it started to moderate. Now the reason that started to moderate is we've really held our cat P&Ls constant, but at the same -- and that's off of, obviously, a very high base as rates of strength. And you heard that we've increased our premium income 180% from a capital perspective over the last 5 years. So we sort of hold that constant. But what you've seen is the retail business accelerate in terms of its momentum. And looking forward, we've talked about 8% in 2026 and double digit for 2028. Now clearly, that requires more capital. Retail is the least capital intensive part of the business, but it still requires some capital on the balance sheet to grow. And so what I'd expect is that degree of moderation looking ahead now, clearly, the third dynamic is what happens with market conditions and also what happens about these opportunities that Jo has talked to around innovation, that will dictate whether we sort of need less capital and reduce exposure or actually need more because we're taking advantage of these opportunities. So that's sort of the outlook ahead of us from a capital perspective. I think from a reserving perspective, I think the important aspect around inflation is it's built into our loss picks. So we do have a cautious approach to reserving. We have a cautious approach to our loss picks, and that does obviously generate redundancy coming forward. Now our positioning at 2025 from a year-end perspective has been quite deliberate. We obviously have built on that sort of conservatism that we've talked about by increasing the confidence level. We are at 86% from 83% but we've also increased the level of margin in the reserves. And I think that puts us in a great position in terms of where we are at this point in the cycle. And you're absolutely right, Andreas, that looking prospectively, we've got a range of 75% to 85%. I'd expect us to trend back within that range. And I don't think inflation as we currently see is an issue because it's already built into the loss picks. Hamayou Hussain: Will? William Hardcastle: Will Hardcastle, UBS. If I can try and pin you down slightly on one of those answers, Paul. You mentioned the capital consumption. I think it was 13 points in that solvency bridge last year. Just linking it with Andreas' question, is that likely to be a relatively stable number? And I know there's a bit of a range around that? Or is it likely to go more likely down than up next year? Then on the LLM impact into the SME distribution, I guess you touched on it in the conversation, Aki, but I'm really trying to understand whether you -- what are the risks, what are the threats and what are the opportunities for Hiscox to really take advantage and why? And it's really thinking about broker disintermediation by the LLMs. Hamayou Hussain: Okay. Paul, if you address the capital point, but let me cover the LLM point first. I guess, first and foremost, we are pretty excited about the ability and the prospect of using LLMs and frankly, the emerging world, which is not quite here yet of agentic e-commerce. We have a long track record of investing in technology and being on the front foot, particularly when it comes to that small commercial business segment, which is a heartland for the retail business. And again, if you look at the context, we've been investing in that business in terms of technology, et cetera, for decades. We have a market-leading global platform now that covers 12 countries, U.K., U.S. and Europe, with $900 million of premium flowing through it and serving 900,000 customers roughly, which is highly automated with all the underwriting automated. So in excess of 99% of the risks that flow through that platform are auto underwritten. So we've invested in the technology. We've been ripping out core systems and replacing them with new. We've been cleaning up the data for many, many years. And actually, that puts us into a fantastic position now that with the advent of Gen AI, we can actually build our own or adapt -- adopt rather the AI tooling relatively quickly and for a relatively modest cost. And that's exactly what we've been doing across the business. So we're excited about the efficiencies that this will bring, but we're also really excited about the growth opportunity, the expansion of our reach into our customer -- into our prospective customer base and also the opportunity to develop new products that, frankly, just didn't exist before, and I think that's going to be a real opportunity for us as well. I mentioned earlier that we're deploying AI today, right? So there's things that we've just done. There are things that are in development that we are doing. And what we've done, we're already using AI agents in our marketing analytics. We're using it to triage broker submissions in the U.K., and that's going to be rolled out across the whole of the group. We were first to launch an AI augmented lead underwriting platform in London market. That was the first for Lloyd's. Again, we were able to do that because we've already invested in the tech and the data. The emerging things that we are doing, which are really going to open up the funnel for growth. It will take a bit of time because it does require customer adoption as well. So we have -- I think it's today or yesterday, we've launched AI agents into our U.S. call centers. That will give us, I think, as I mentioned earlier, real-time feedback, immediate feedback to our operations teams on customer sentiment and experience and also feed directly into our ads platform, right, which then dictates how we then market back to those customers. If you think about the strength that we've built up over the last decade, which is having a trusted and distinctive brand, market-leading claims service. We have an NPS score, which is in the 70s and 80s. The market average is materially lower than that. Our world-class customer service, the tailored coverage that we provide, these are all objective strengths, which in the world of AI agents and agentic e-commerce stand out, right? In the old world or -- sorry, in the current world, really, if you go online, the only thing you can really compare on is price. We don't trade on price. In the prospective world, as a new person who's buying insurance for their small business, you can get much more information. And in that world, I think we open up the platform. I think we will stand out much more, and we are readying our platform for the world of agentic e-commerce. As I said, we're in the process of building for deployment later on this year, new, much more powerful portals. These will sit alongside. If you think back about the strategy that we've had, we have an omni-channel distribution approach, right? We are building leading platforms to enable us to access and trade with brokers. We trade with partners and we go direct. This agentic e-commerce channel as it were, certainly for the moment, will just sit alongside depending on customers' preference. So we're pretty excited about it. But a lot of the hard work has been done, and now it's about implementing these new tools and seeing how they're adopted, both internally and externally. Paul Cooper: Just on consumption, yes, to knock that one off. Yes, so based on the conditions we see ahead of us today, consumption will be lower. Hamayou Hussain: Ivan? Ivan Bokhmat: I've got one big AI question and 2 small finance questions, please. So on the big AI question, I'll start with that. I think there's a perception that for reinsurers, the underwriting edge is essentially the moat that can protect you from being disrupted. So I was just wondering if you could maybe provide some of your views on this. And if you think about your data and what's out there in the market for available for underwriting, how much of it is publicly available, like cat models or cyber models or whatever it might be? How much of it is proprietary? And how much of it is unstructured proprietary that you could still tap on, but maybe where you are in that journey versus peers? So that's question one. And then question two, I mean, I've noticed that across your growth initiatives, and this has been a trend for a little while now, you don't really have like AI CapEx, data centers and all that. And I was just wondering what your thoughts on that might be? Is it the next leg for you to expand in? Or is there a reason why you haven't really been pushing there? And the third question is, I mean, on the capital ratio, obviously, you have to 11% now, 13% stress. It gives us 180% post-stress ratio, which I think in the past was like a good guide for how you would manage your capital. Is this still the case? Or any developments there? Hamayou Hussain: Okay. Thank you for those questions, Ivan. So what's our underwriting edge in reinsurance? I think that's one for Jo. In terms of underwriting appetite then in terms of data centers, et cetera, again, another one for Jo. And Paul, if you want to address the question on capital and how we manage that within the ranges? Joanne Musselle: Yes. Thanks, Aki. So I think in answer to the question, it is a combination. So what we rely on is, of course, and I talked about it, we, of course, rely on in that reinsurance world, the best external models as an example. We take what's available, but then we blend and we overlay what we call a Hiscox view of risk. And we do that across both our reinsurance and indeed, all of our other insurances. And that is really important, and that is proprietary, where we are utilizing our own proprietary information, our own bespoke data sets, building in things like that forward-looking view of inflation. It's really important for us to get ahead of some of these trends and price forward. So I'd say in terms of the edge, it is a combination. We are utilizing the best external data, but also blending that with our own internal data. And of course, we're using technology, have been for many years in that underwriting process to do 1 of 3 things, either to make us easier to do business with. So take the reinsurance example, how can we consume submissions quicker. Clearly, the advance of technology enables us to consume more submissions in a much shorter time, much better in terms of response time back to, in that instance, brokers or indeed more broadly, customers, we're utilizing it there, absolutely utilizing it to make better decisions. So whether that is ingesting third-party data, make us -- make better underwriting decisions, underwriting of pricing decisions, that's sort of the second area that we're utilizing and clearly making us more efficient. So I'd say it's a combination. It definitely is looking outside and taking the best external information that exists and then blend into our own proprietary data sets. So with regard to data centers, yes, absolutely. I mean, data centers is definitely becoming a significant area. We talk -- there's a lot of talk about it being a structural growth opportunity, and it really is underpinning that digital economy. We're really thoughtful. We're really thoughtful. We have lent into that. We're curious. We've deployed some capacity in both our primary and our London market business and in our reinsurance business. But at the moment, we're thoughtful because one of the significant areas that we need to get a head around is accumulation. And we're also investing at the same time, deploying a little bit of capacity. We're also investing in building our own accumulation model. So we're really clear around where these accumulations lie, and we can actually manage them -- managing them ourselves. So yes, watching it, deploying some capacity, but also thoughtful in terms of accumulation. Paul Cooper: On capital, at the CMD, we announced our target operating range through the cycle of 190% to 200%. You'd see the 211% on a pro-forma basis is a bit outside that. So sometimes you can expect through the cycle we will be outside it. I think it's a small amount above. I think we've struck the right balance between the increased share buyback that we have announced today of $300 million and retaining the optionality for further opportunities for growth. We are a growth business, if you look at our capital management framework, the first priority is growing the business. Hamayou Hussain: Okay. Let's keep going along. Abid? Abid Hussain: It's Abid Hussain from Panmure Liberum. I've got 3 questions. The first one is on the pricing cycle. Just wondering if you could talk to your past experience on previous soft cycles and that move from adequate pricing to inadequate pricing. Is that typically gradual? Or does it happen in a sort of cliff edge moment? And if so, are you looking forward, are you sort of seeing potentially any cliff edges on any key lines of business, so that's the first question. The second one, just coming back on the reserving philosophy. So you're reserving now at 86% above the 75% to 85% confidence interval that you set yourself as a target. And it sounds like you're saying you're just being conservative because pricing is softening. Just wondering if there were indeed any areas where you saw loss picks deteriorating, any sort of concerns at all? Or is it just genuinely just being conservative? And then just sort of how quickly would you expect yourselves to trend back to around 80%. So that's the second one. And then just finally, very quickly, the final question on M&A. Are there any areas where you benefit from participating in M&A? So I'm thinking really sort of adding new capability, new sort of product sets in adjacent areas to help you accelerate growth in adjacent areas. Hamayou Hussain: Okay. Thank you, Abid. So in terms of the evolution of the pricing cycle, Jo will take that. In terms of reserving, Paul will provide commentary. In terms of M&A, I guess the first thing to say for our business, as you can see from the results today and from previous years and the diversification within our portfolio is we don't need M&A for growth. We have a fantastic retail franchise, where I think last year, we set out the extraordinary growth opportunity. And what you can see is over the years, we are accelerating the pace at which we're capturing that opportunity, and we're very confident and optimistic, frankly, about getting to 8% in 2026 and extending that up to double digits in 2028. And in our big-ticket business, again, we've demonstrated we are leading class in terms of cycle management. At the same time, we are -- we've stepped up the product innovation, and we are expanding into adjacent classes to moderate the impact of cycle management. Now again, if you look at the history, we're approaching $5 billion of premium. That is almost exclusively organic growth. That is the predominant form of growth that we will achieve. But what you also saw from 2025 is where there's a strong strategic rationale and the financial metrics make sense, we will consider small bolt-ons. Of course, we purchased a very small entity called Lokky in Italy, which we closed in the second half of last year. That gave us a toehold into the country. Frankly, no premium, but it gave us a system, and it's given us 23 people who understand the local market. It was a pretty new start-up. And we are now consolidating that and that we will move forward from there. Pleasingly, we are getting premium in 2026. And then we also deepened our presence in the U.S. where we made, again, a very small acquisition. And just building on your point, Abid, that did give us access to a couple of classes of business that were on our to-do list, but it's given us quality underwriters, some engineering capability and access to life sciences and tech start-ups. And it's also given us the beginnings of a tech platform for our broker intermediated channel as well. Over to Jo on the pricing cycle. Joanne Musselle: Thanks, Aki. And maybe if we can just bring up that pricing chart because I think it's a helpful backdrop. I'm not going to give any predictions on the pricing cycle going forward, but just maybe just some observations on the cycle that we've already been in. I think this has been a very different pricing -- a hard market or hardening market than we've had historically. I think if you look at that slide, I mean, we've had gradual increases over many, many years across different lines. And I think that's because it's been driven by lots of different things. So it's not just been driven by significant cat activity. It's been driven by lots of things, whether it be low interest rates, whether it's high inflation, geopolitical uncertainty, emerging risk, climate change. There have been so many different factors that have driven this current cycle that it's been really, really prolonged. So it's difficult to see one thing disappearing and the market changing overnight. I think the other thing about this cycle, which has been very unusual is it was actually primary insurance led. So normally, cycles are reinsurance rates led, reinsurance rates go up and therefore, you have to put your primary rates up. Actually, you can see that red line, which is our London market lines. I mean, they moved significantly quicker than the blue line, which is property. And actually, during that early period, '18, '19, '20, I mean, we were calling for a harder market in reinsurance because we just didn't believe we were getting paid to take the risk. And so we were actually very vocal in terms of that. The other thing on the red line, and I showed you with the sort of underneath is that's an aggregate view. What actually was happening with those early rate rises was casualty. So casualty was the early rate rises. Casualty has now softened, but rates went up 200%, 300% for some lines, and now they're moderating. Property lines really started to move in sort of 2023. And I think the other really important thing about rating is what you can't see on this slide is terms and conditions. We all talk about the rates going up or down. We talk about rate adequacy, but actually terms and conditions are really significant. So the biggest driver of the '23 blue line, yes, of course, rates went up 30%, 40%. But actually, terms and conditions materially changed, particularly attachment points in reinsurance and terms and conditions tighter around the coverage and those have largely been maintained. So when we look back at this softer part of the cycle as in '26, where rates have come off, actually, it was a price-led softening. Terms and conditions, attachment points have largely maintained, which is why there's a vast majority of that. So I talked about it being a really active year, over $100 billion, $120 billion of industry losses in 2025, but a lot of them didn't make their way to the reinsurance because of that attachment point. So yes, no predictions for the future other than to say it's difficult because it's being driven by so many different things. I can't think of if one thing changed overnight that obviously, the cycle would dramatically change in one go. Paul Cooper: Its a good segue across to the reserving. I think -- so what I'd say is and what we said consistently is our conservative reserving approach remains the same. So it's unchanged. We have a prudent best estimate, and we've built upon it. I think the important point for 2025 is we're coming at this from a position of strength, the increase in the margin and the increase in the confidence level to 86%. And that really builds on what Jo has just said. We're coming at this from a point where we've got high-quality underwriting. I mean, look at the loss ratios that we've delivered across each of our business segments. So the quality of the underwriting, the diversity of the portfolio enables us to do what we've done in 2025. I think in terms of the pace of the -- getting back within the range, I'm not going to guide to that, but we will be back within it. Hamayou Hussain: Just to add to Paul's point, if you flip back to the slide which shows the reserve releases, where you can see we're in a, I guess, in a fantastic position where you've seen stronger reserve releases predicated on, frankly, every accident year seeing a positive trend and at the same time, increasing reserve redundancy. And that's something just to kind of factor in as a package. That's what you're seeing here. Daniel? Daniel Wilson-Omordia: Daniel, Morgan Stanley. Encouraging to see the change program coming through as expected this year. I'm just wondering the actions you put through this year, do you see them as quick wins or easier than the actions to follow from here? Or is there any -- another way to phrase the question, is there anything that's been harder to achieve this year than you expected or anything that's coming up that you think will be harder to achieve than what you put through this year? Hamayou Hussain: Okay. Paul will cover kind of the detail of that. Let me just give you a kind of overarching comment. The overall program, I think we laid out the categories last year, is tech rationalization, capability buildup, procurement and operational excellence. The program is underpinned by tens of initiatives. There's no one single initiative that's going to kind of drive the savings. And reality is not everything is going to work. But that's kind of factored into the number of listings we have, which if they all work, the sales will be a little bit more than what we set out. So there's some contingency built into that, but I'll let Paul get to the meat of the issue. Paul Cooper: Yes, absolutely. Thanks. So I think the important thing to bear in mind is what we're trying to achieve. So it is all about really driving scale, improving productivity across the business and the $200 million falls out of the back of that. If you look at what we've done for 2025, the $29 million gives us a really good baseline going into 2026, and we've got a clear line of sight of that $75 million that we'll deliver by the end of this year. There are, of course, some quick wins within this. So setting up a procurement function is one aspect where you can renegotiate some contracts. I mean, I say it's easy, but there's obviously a lot of work in understanding how you get to that point. But I'd say to Aki's point, the number of initiatives that we've got on and the strong sponsorship and the program management around this gives us strong confidence in those areas. So we talked about the benefits and the visibility that we're seeing around, say, fraud and recovery, we have in-sourced as you can see there, more than 100 roles to Lisbon that is at a lower cost. So that is already sort of underway. We're sort of in the middle of outsourcing since certain components. And again, good line of sight on track in terms of that component. So I'd say the program is well established. You can see the areas that we are tackling. It will give us a business that is much, much more scalable than it is today. Hamayou Hussain: James? James Shuck: It's James Shuck from Citi. I just wanted to ask about the Google Cloud relationship. It's a multiyear relationship and up to this point, it's really been focused on kind of efficiency gains and underwriting. With the pace of change that we're seeing, it's not clear to me what else they can bring to the table, the larger language models that are emerging, whether it's agentic AI. Since you kind of started that agreement, sort of what are your views on how far that relationship can develop and what else can they bring to the table? We start to use unstructured external data? Where else can it be applied to? That's the first question. And secondly, probably the only accounting question today. But on Slide 51, just interested in the reinsurance receivables, which remain very elevated. I presume some of that is COVID-related. In which case, I'm kind of wondering at this point why we haven't reverted back down to the 10% average that we've seen prior to COVID? If we did see that 15% reinsurance recoverable come back down to the 10%, does that have any implications for the solvency? Hamayou Hussain: Okay. So I think the accounting one is directed to you, Paul. So in terms of Google Cloud, et cetera, look, we have strong and deep relationships with a number of, I guess, leading software and cloud companies, including Microsoft and Google. Look, they -- those partnerships extend to a range of different factors. So firstly, we have a lot of our applications and software on the cloud. And I think with the advent of gen AI and agentic e-commerce, et cetera, I don't think that's going to change. Those are facilities that frankly, those 2 companies and others invest billions and billions of dollars in, in terms of making sure they're high-tech secure, et cetera. Where else do we use the skills of those companies? Those organizations have tens of thousands, if not hundreds of thousand software engineers. And what they can help us do is accelerate the journey that we're on. Now what do we bring to the party? I said -- the thing that we bring to the party are kind of 3 things. One, we have invested significantly in our technology over the years. This is not something new to us. It's already within the P&L. You can see it. We have spent years gradually cleaning up our data. It's never perfect, but it's in pretty good condition. And the third thing is ambition and culture. So we have a culture that's a business builder culture. So we're looking for new opportunities. We're continuously experimenting. So we use the state-of-the-art AI tooling these days that they are bringing, but we already have a system where we can integrate it and build it and start to develop real use cases within our business. So for instance, in our London market business, they're using, was it Google X, which is, again, one of the divisions within the Google business. And we're using some of the technology there to help us underwrite some of the risks in the U.S. and the property risks in the U.S. with some really, what we think is high-quality, very granular data with a very long history. We're using these organizations to help build some of the base technology for the new powerful portals. Now once we build those, we can do a lot of things ourselves. So that partnership, I think, will continue. The shape of it, of course, evolves over time. But the key thing they bring to us is capability and acceleration of our own ambitions, which we can then amplify with our own capabilities. Paul Cooper: Yes. And then I think on reinsurance recoveries, I think it's sort of multifaceted. I think the first point is around actual reinsurance collections that are COVID related have gone very, very well. We're very happy with that perspective. I think what's happening and what you can see in terms of the recovery is versus, let's say, 10 years ago is book mix. So one is it's going to be much more shorter tail business 10 years ago than it is today. But also think about the re and -- well, now re-mix, so the third-party capital is obviously greater than it was 10 years ago, and therefore, you've got a natural level of additional recoveries on the balance sheet that you'd have a decade ago. So I think that's that in terms of implications for solvency I mean as that comes down, obviously, the credit risk charge comes down. It's pretty modest in terms of our overall sort of capital. It's not a big driver at all, but clearly, there will be a modest benefit as that comes down. Hamayou Hussain: Okay. Vash? Vash Gosalia: This is Vash Gosalia from Goldman Sachs. I have 2 questions. One on the retail business. So you've announced or you've delivered 6.3% constant currency growth in '25. But at the same time, you've had benefit on the rate 2% and then policy count of growth of 7.5%. So could you just help us square those numbers as to -- and I'm guessing the difference comes from mix shift, but then where exactly or which product line is it that you grew in or what geography and maybe how are each different from the other? That's the first one. And the second one, just on reserves again. Trying -- so honestly, we were a bit surprised by the reserve release that we saw in the second half. So could you unpack as to where those reserve release have come from, either accident years or any particular events that you saw improve? Hamayou Hussain: Okay. So Paul will comment on the reserve releases. In terms of retail, I think you hit the nail on the head. It is entirely mix. So yes, we did receive -- we did see a 2% rate accretion across the retail portfolio and 7.5% increase in policy count within the 2 big kind of segments are the digitally traded business, so largely direct and through partners. There, the average premium is kind of $1,000 or slightly less. That is simply growing faster and therefore, adding more policy count than the broker business. I think as you would expect, healthy growth in both, but the digital platform is growing a little bit faster. Paul Cooper: Yes, just in terms of reserving H2, it was basically all years, you could see actually on the chart, all years and all segments, so really across the business. I think it comes back and we can't state enough that this is a manifestation of conservative reserving -- conservative loss picks. So if you're strong on the way in, clearly, you're going to be strong on the way out from a redundancy perspective, and you can see that in all of those years trending down. And Aki is right, you sort of bear in mind that point about strong releases are a manifestation of increasing redundancy. Hamayou Hussain: Okay. Ben and then Kamran. Benjamin Cohen: Ben Cohen, RBC. I had 2 related questions. Firstly, could you say how much kind of good fortune was in the result in the second half of the year because that's quite hard to unpack? And secondly, when we look at the rate declines that you've announced for January renewals, how should we think about that in terms of -- how that's likely to feed through into the combined ratio over the next couple of years? Hamayou Hussain: Okay. In terms of good fortune, well, we all need some, I think. And I think Jo will kind of provide a bit of commentary on that. I guess my overarching comment is we've not received any more good fortune than anybody else, so we're very pleased with the outcome, but Jo will comment on that. In terms of rate declines and how that might impact the combined ratios and so on. Let me kind of just kind of deal with that. Again, just for completeness, retail business, we continue to forecast 8% growth and a combined ratio within the 89% to 94% range and with a gradual improvement within that range as operating leverage and the efficiency program continues to deliver. In terms of our big-ticket business, look, it's -- the eventual combined ratio will be a factor of many, many things. I think the key thing I would ask just kind of bear in mind is if you go back to Jo's slide on rates and the quality of the portfolio, the majority of the portfolio, both for reinsurance and London market is in a very, very good place. So -- and therefore, the potential for strong earnings growth or earnings in 2026 remains pretty high. Joanne Musselle: Yes. Thanks, Aki. So absolutely, I think when we look at the year as a whole, there was still $120 billion of industry losses. We started January with the really tragic events in California. We ourselves reserved $170 million for that event. Majority of that was in our reinsurance. So of course, when we talk about the sort of benign second half, yes, absolutely, that particularly the North American wind season was more benign. And so looking at the totality of the year, it was still a pretty active year. I think the thing that I always look at, though, is the underlying because the wind can blow or not. And clearly, we respond. But actually, it's the underlying health of the portfolio. And so looking at the attritional loss ratio, looking at the risk loss ratio. And across all of our segments, whether that's London market reinsurance and indeed retail, all within expectation. And that for me is the real health of the portfolio is that attritional loss ratio. So yes, pretty pleased with that underlying claims performance being within expectation. Hamayou Hussain: Thank you, Jo. And Kamran. Kamran Hossain: It's Kamran Hossain from JPMorgan. First question is on retail. So clearly, kind of 9 months into the new strategy, the new plan, things seem to be going very well. Just trying to work out whether actually your historic kind of retail combined ratio range now probably looks quite conservative. If I think of the tailwinds you've got this year seems to have gone quite well. You're clearly very excited about the potential benefits from AI. You probably should have taken a point off that range anyway for DirectAsia last year. If I assume a lot of the expense savings come into that, it feels like the historic range seems a little bit cautious. You're 9 months in, so I understand that. So just interested in whether you feel kind of more or less confident on delivering maybe outperforming that number at some stage. The second question is on share buyback versus dividend. Clearly, the step-up in the buyback was great. I think it reflects the confidence you have in the business. At some stage, do you expect to change the mix between dividend and buyback? Because at the moment, I think it's not unlike peers, but at the moment, the buyback is quite a lot bigger than the dividend. And one last question. I know we talked about AI and data centers. We didn't talk about data centers in space, but that's probably for another day. But what's the -- there's clearly going to be product demand for AI errors, admissions, hallucinations. What are you seeing in the market for that at the moment? Hamayou Hussain: Okay. Very good. Thank you, Kamran. So in terms of underwriting data centers in space and AI hallucinations, et cetera, and how we deal with it from an underwriting perspective, Jo will cover that. In terms of share buybacks versus dividend, Paul will cover some of the detail. But suffice to say, I think certainly for the moment, we are very happy. And I think we -- again, we -- this is all about balance. I think we're striking the right balance in the form and quantum of capital return that we're providing to shareholders and balancing that against also the investment that we're putting into the business for both near- and long-term growth. In terms of the retail core, the guidance is 89% to 94%. We expect to improve within that range. We have ideas where we have been at the upper end of that range. We are providing guidance that we expect over the next few years that we will edge towards the lower end of that range as the business continues to grow and deliver operating leverage and the expense efficiency program and the build-out of capabilities that Paul has laid out delivers. But why don't we go to Jo first on data centers in space. And then Paul, any more color you want to add to that. Joanne Musselle: Yes, absolutely. I think I'll focus on the AI part. Hamayou Hussain: Well, that was the core of the question. Joanne Musselle: Look, we talked a lot today about our own use of AI and maybe our customers' use of AI. But just to be clear, we have just as much thought going into how our customers are using AI and that's going to change the nature of the risks that we insure. So this absolutely is an emerging risk. There's going to be some areas of risk that actually gets better because some of it is still driven by fat finger and actually with an AI that is more consistent in terms of decision-making, maybe some of those errors and emissions actually improve. But there's definitely new areas of risk for sure. And we're being really thoughtful about that. Certainly, from our point of view, we're not going down the route of blanket exclusions. We're being really thoughtful around the risks that they present, understanding those risks and then indeed accommodating those risks, either pricing for them or providing sort of affirmative coverage. So a good example would be in our U.K. portfolio and our technology. We were one of the first to confirm affirmative AI coverage within that policy. I think the other area that we think about is not just the risk, but actually the opportunity. So we are an insurer, a specialty insurer for emerging economies, for new economies. There's a lot of people. There's a lot of investment in AI and data centers and that attached to this digital world that all need insurance. And we're really well placed to be able to provide insurance for the consultant who happens to be in that AI world. So we're also thinking about it from an opportunity point of view. How do we understand the risk, how do we develop our own products and services to help our customers with that risk and then also how do we broaden our appetite to capture some of this more new economy in terms of their own insurance needs. But yes, a lot going on, on that space internally. Paul Cooper: Yes. Thanks, Jo. And so the nature form structure of capital returns fits squarely within the capital management framework. So we will prioritize growth. We'll maintain a strong balance sheet. We'll have a progressive dividend. Now you've seen that we've increased our final dividend per share 20% in each of the last 2 years and then have a progressive dividend thereafter. When we've done all of that, then the surplus that's left after that will be returned to shareholders, and that remains the condition. Hamayou Hussain: Okay. Chris? Chris Hartwell: Chris Hartwell from Autonomous. Just 2 very quick questions, hopefully. First of all, just on the recent reorganization within Hiscox Re, I was wondering if you can talk about what advantages you think that brings? And in particular, on Hiscox Capital Partners, where would you like to see the fee element of Re going over the next few years and particularly if it's the right time or a good time in the cycle to be doing that? And then it's probably my lack of understanding or lack of knowledge rather, just on tax and Bermuda. A lot of your Bermuda peers have been sort of talking about the tax credits that they will accrue from the recent tax reforms in Bermuda. And I guess sort of 2 parts to the question. First of all, if you could help me understand what is your, I guess, on island expenses or headcount or something where I could sort of think about that? And if there's anything you can do to to really take advantage of that? Hamayou Hussain: Okay. In terms of Bermuda tax, Paul will cover that. In terms of Hiscox Re and the sort of reorganization to create Hiscox Capital Partners. Look, as you know, we've had a long-term strategy using third-party capital that wants to access, frankly, the fantastic underwriting capability of our Hiscox reinsurance business. And we've had a number of different sort of verticals. We've had traditional capital in the form of quota share providers, partners rather. We created ILS funds just over sort of 10 years ago, and those have evolved. We have a number of ILS funds with different sort of risk levels. We have an SPV. We have sidecars. We've also then expanded into cat bond fund capabilities. And frankly, the Re and ILS was a nomenclature, which no longer describes what we actually do. It is much more mature and much more sophisticated in terms of the different capital basis that we're managing. And that's a reason for -- first reason for kind of using the new nomenclature. And in terms of -- at this point in the cycle, we are -- frankly, last year and this year, we have seen increased interest in third-party capital coming in to benefit from our underwriting. I think you heard from Paul earlier, the AUM, the one thing we quote, which is ILS AUM has increased from, I think, $1.4 billion at the start of last year to $1.5 billion at the start of this year, albeit that deployable capital has gone up a little bit more because we had some outflows and then some new money coming in. In terms of fees, again, as you heard from Paul, the last 3 years of fees have been in excess of $100 million. So a nice contributor to the reinsurance business and to the overall group. The fees are structured essentially, as you can imagine, two-fold. So you have a fixed component and you have a profit commission component. And over the last few years, because of the underwriting results, the profit commission component has increased quite significantly, getting us to over $100 million. What we have done actually over the last couple of years is also gradually restructured some of those fees. So now the majority are fixed. In terms of where that fee income will go, well, there's 2 major drivers. One is the quantum of third-party capital that we're able to deploy. And I think that is going to grow. So that will kind of push the fee income up, but then it's down to the actual results. Whilst the majority is now fixed versus PC, profit commission. The PC is still pretty significant, and that will be determined by the outcome of in-year results. Paul ? Paul Cooper: So yes, the Bermuda-based tax credits, I mean, they're small, they're sort of single-digit millions. They're absolutely dwarfed by the introduction of the global minimum tax this year. And you can see that our tax rate has gone from 8.5% to like 17.6%, so that's a big uplift. What can we do more in order to sort of maximize that benefit? Essentially employ more people on Ireland that don't need a work permit. That that's the sort of driver that will trigger more benefits. The reality of it is, it's caped at around 150 people. So there is a limit to sort of how much additional benefit you can get out of that. That's the biggest driver for it. Hamayou Hussain: Okay. I think we're done. So guys, thank you very much. This is a time of change, right? I think it's time for the nimble and the bold and those who can really turn imaginative ideas into operational reality. And I think that describes the culture and capabilities at Hiscox. These are really exciting times for us. So thank you very much.
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.
Hamayou Hussain: Well, good morning, everyone. It's wonderful to see you all, and thank you for joining us. 2025 has been a pivotal year for Hiscox. In May, we set out our strategy going deeper into our retail business and making several important commitments. We're executing on that strategy and delivering on those commitments with pace and energy. Our diversified portfolio is built for this market. Growth is accelerating with premiums up $275 million or 6% year-over-year. This is high-quality profitable growth across each of our businesses, driven by product innovation, expanded distribution and customer growth built on our specialty expertise and technology capabilities. and we're expanding our margins. Our undiscounted combined ratio of 87.8% is the best in a decade, and our record insurance service result is the fifth consecutive year of underwriting earnings growth. And growth is translating into a larger asset base, underpinning a record investment result and contributing to a third consecutive year of record profit before tax. We are delivering excellent returns with a 12% growth in book value per share and an operating RoTE of 21%, materially above our target. This strong performance, continuing momentum and execution of our strategy enables us to reward shareholders through a new $300 million share buyback and a further 20% step-up in the final dividend per share as we announced at the CMD last year. This excellent performance, combined with our diversified portfolio makes our business strongly capital generative. Indeed, over the last 3 years, we have organically generated over 100 points of regulatory capital, enabling us to deploy capital in an unconstrained way to pursue profitable growth in each of our businesses and reward our shareholders with returns of $1.1 billion over the last 3 years. Now turning to our results by segment. Retail added almost $200 million of premium as the pace of growth increased to 6.3%, a continuation of our multiyear acceleration. This growth is broad-based across each of our retail businesses, driven by strong customer growth of 7.5% and crucially not rate dependent. And most importantly, this is profitable growth. The retail undiscounted combined ratio at 92.6% is the strongest since 2016. In London Market, we are successfully navigating a competitive environment, returning to growth through product and distribution innovation, while delivering a combined ratio in the 80s for the sixth consecutive year. And in reinsurance, we selectively deployed additional capital to support 6% growth, mostly in specialty lines. And the quality of our reinsurance business is demonstrated by a combined ratio in the 60s for the third consecutive year. Now let's take a look at how we delivered that growth. And frankly, the pace, energy and innovation of our colleagues has resulted in premiums from growth initiatives increasing fivefold in 2025 compared to the previous year. Supported by the launch of more new products than in the last 5 years and expansion of distribution. As we set out at the CMD, there is a huge structural growth opportunity in Retail. And we're capturing this through entering more segments, launching more products, expanding distribution and more markets. Retail is on a multiyear growth acceleration journey. We grew 4% in 2023, 5% in 2024 and over 6% in 2025 and plan to step up growth to 8% for the full year 2026. We have set the course to achieve double-digit growth in 2028. In London Market, we are leveraging our deep underwriting expertise to expand into new adjacencies while deploying AI augmented technology platforms to access new markets. In reinsurance, we have captured the opportunities of the hard market, increasing our net premium by 180% since 2020. Now the ability to innovate is a crucial part of our Hiscox DNA. It has and will continue to open up new growth opportunities in every part of our business. Now let's take a look at innovation in action at Hiscox. Now what you can see here is a sample of the initiatives we've taken in the last year to expand our business and drive growth. We're executing on these with pace and energy, launching new products at an excellent rate. Some of these you may remember as work in progress at the half year. These have now been launched, and we have refilled the pipeline with new products and opportunities that will begin production in 2026. For instance, in the U.S., one of our largest DPD partners has expanded our access to their agent network. And in the U.K., we followed up on the signing of one of our largest ever distribution deals in 2025 with an even larger opportunity that will begin producing premium in the first half of this year. In France, we successfully launched our new cyber product in the fourth quarter. This will be rolled out across all of retail in due course. These actions and many more are accelerating retail growth and enabling us to capture more of the $317 billion target addressable market. And in big ticket, our innovation is moderating the impact of cycle management in certain lines. During the year, we leveraged our existing technologies to grow into SME cargo and U.S. middle market property. In addition, using our underwriting expertise, we expanded into new adjacencies such as tech E&O and financial institutions. The blend of technology and underwriting expertise gives us the confidence to pursue new opportunities with more initiatives set to appear on this list over the coming periods. Now let's turn to the transformative force that is beginning to reshape our industry. Now with the advent of generative artificial intelligence, we are seeing the beginnings of profound changes in society and our market. The way consumers and small businesses are buying insurance is beginning to evolve. Large language models, LLMs are increasingly a key part of the buying process. Now with our experience, decades experience of providing specialist insurance directly to customers, we have an established competitive advantage from our trusted and distinctive brand to our leading Net Promoter Scores and high-quality service. These objective strengths stand out even more in the world of AI, where agents -- AI agents can evaluate a policy quickly on more than just price. We've been investing in technology for many years, building out our core systems and improving data quality. We have a leading global digital platform for small commercial insurance, now approaching $900 million of premium at almost 900,000 customers. These investments enable us to implement AI tools relatively quickly at a modest cost. We're excited about the efficiency and growth opportunities that AI brings. And we're not standing still. This year, we will begin to roll out new, more powerful customer and broker portals in the U.S. and in Europe. These will enable us to personalize the purchasing journey and help customers identify their insurance needs and simplify and speed up processes for brokers. As of this month, in fact, I think it's today, we are deploying AI agents into our U.S. customer contact centers to create real-time feedback loop for our operations and marketing teams on customer experience and sentiment. And if a customer wants to make a claim, an AI agent will be there to help. We are embracing generative AI for the benefit of our customers, our colleagues and our shareholders, and I believe Hiscox is well positioned to win. Now turning back to today's results. We've delivered on our promises in 2025. Retail has grown 6.3%. This growth will accelerate in 2026, building to 8% for the year before reaching double digits in 2028. Our operating RoTE of 21% is materially above our mid-teens through-the-cycle target. The change program has delivered a P&L benefit in the year of $29 million and is on track to deliver $75 million of benefit in 2026. Paul will provide further details on this. And our shareholders benefit from our growth and earnings with a 20% increase in the final dividend per share and a new $300 million share buyback. With that, I'll now hand over to Paul. Paul Cooper: Thanks, Aki, and good morning. It's great to be here with you all today presenting another strong set of results. We have achieved high-quality growth across each of our segments with ICWP up $275 million or 5.9% against the backdrop of falling rates, demonstrating the strength of our diversified growth. Importantly, we have delivered excellent profitability alongside this growth. The undiscounted combined ratio of 87.8% drove a record insurance service result of $614 million. The group's profit is supported by the record investment result of $443 million, underpinned by increased AUM following stronger premium growth. Our superb underwriting and investment results have translated into a record profit before tax of $733 million, up 6.9% and delivered an attractive RoTE of 20.9%. This is despite a 2.5% drag from the increase in the effective tax rate. The group's excellent profitability has driven substantial capital generation with a year-end estimated BSCR of 233%. And this is after returning over $400 million of capital over the course of 2025. As a result of our strong capital generation and balance sheet, the Board has ratified the 20% step-up in the final dividend per share announced at the CMD. In addition, we will be returning $300 million to shareholders through a new buyback, resulting in total returns of over $450 million in respect of 2025. Delving into these results a little further, starting with our Retail segment. In line with guidance, Retail ICWP grew by 6.3% in constant currency to over $2.6 billion. This growth has been broad-based across all markets as management actions delivered results. Growth has been accompanied by an improvement in the undiscounted combined ratio to 92.6 partially due to early benefits from the change program. Importantly, retail growth is transforming the shape of the group's earnings profile with retail representing nearly half of the group's PBT, up from just over 40% in 2023. Moving on to London Market. London Market returned to growth with ICWP increasing by 1.6%. In a competitive market, the business benefited from product innovation and opportunities arising from London Market's diverse portfolio. Profitability continues to be strong with an undiscounted combined ratio of 85.9%. This is testament to our underwriting discipline, risk selection and pricing as we navigate the market's micro cycles. Turning to reinsurance. Net ICWP grew by 7.9%, driven by growth in pro rata and specialty lines, including our climate resilience portfolio, mortgage and surety. The quality of our risk selection is demonstrated by an insurance service result of $189 million and an undiscounted combined ratio of 67.4%. Fee income of $109 million is very healthy, above $100 million for the third consecutive year. And we continue to see strong interest in our ILS funds with more than $330 million raised in the last year and a robust pipeline for 2026. ILS AUM on the 1st of January 2026 is $1.5 billion. As we continue to see strong capital inflows from third parties, while managing our own net exposure to property cat perils, the earnings mix between fee income and underwriting will continue to evolve. Moving on to our change program. We're making strong progress. On this slide, you can see examples of achievements against our ambition and some of the actions that will deliver benefits in 2026. We have significantly increased fraud detection rates through new capabilities, representing a real cash saving in 2025. However, given our conservative reserving philosophy, much of the benefit is yet to be recognized in the P&L. We have in-sourced over 100 roles in our Lisbon Tech Hub, enhancing the capabilities that drive our competitive advantage while leveraging the use of a lower-cost location. In 2026, we will build on this, rolling out more centers of excellence and further extending the scope of outsourcing where we benefit from the greater scale that specialist providers, partners provide. In procurement, we have reduced our property footprint and continue to consolidate our suppliers, enabling us to negotiate better terms. Over the coming year, we will double down on this, increasing the number of strategic partnerships and preferred suppliers while better managing demand within the group through improved cost governance. Finally, in technology, we decommissioned 20% of our applications in 2025 while launching new automation tools across the value chain, which will help to drive scale into the business. This will continue in 2026 as we launch new automation tools that will deliver efficiency benefits alongside driving revenue growth. Looking at the benefits. We're on track with our change program and we have achieved a benefit of $29 million at a cost of $24 million. And while we're slightly ahead of our 2025 benefit guidance, there is no change to our targets. We remain on track to deliver a $75 million benefit in 2026 as we optimize processes, sourcing and procurement, fraud detection and recoveries. We expect the cost to achieve to be $75 million, which includes costs associated with in-sourcing and outsourcing, legal expenses and tech implementation costs, including some of the exciting new capabilities that Aki referred to earlier. And these will help to deliver a $200 million P&L benefit in 2028. Let's look at how this is impacting the P&L. Disciplined cost management and savings from our change program means that our underlying expense base has increased by just $6 million. This is despite inflation and changes in variable comp and the investment in growth and technology initiatives highlighted by Aki. This, in turn, is driving improvement in our operating jaws with a 0.8% increase in underlying expenses comparing favorably to a 5% growth in premium in constant currency. Overall, this is very pleasing progress. Now turning to investments. Our record investment result benefited from strong yields and increasing assets under management as growth in the business translated into more assets on the balance sheet. As we go forward, that increase in AUM will help to offset the small reduction in the reinvestment yield to 4%. As such, strong investment returns should continue to provide a tailwind for the group. The quality of the fixed income portfolio remains high with an average credit rating of A, and the business is conservatively positioned on the asset side. Looking at reserves. Our conservative reserving philosophy is unchanged with a risk adjustment of $345 million, representing an increase in the confidence level to 86%, slightly above our target range. And this is despite a healthy level of prior year releases and reflects the point where we are in the cycle, the quality of our underwriting and the conservatism of our reserves. Over time, we expect the confidence level to return to within the 75% to 85% range. The conservative nature of our reserving has enabled us to release $293 million or 7.2% of opening reserves for 2025, continuing our long history of an uninterrupted positive reserve development. All accident years are below the initial estimate and continue to run off favorably. Finally, an update on capital. The group has delivered outstanding organic capital generation of 34 points. This has supported both investment in the business and returns to shareholders of 22 points of capital, resulting in a year-end BSCR of 233%. Following the payment of our final 2025 dividend and our new $300 million share buyback, we have a pro forma BSCR of 211. This compares favorably to our through-the-cycle operating range of 190 to 200, providing us with the flexibility to capture opportunities as they arise in a rapidly changing market. Thanks for listening. And with that, I will now hand over to Jo, who will provide you with an update on underwriting. Joanne Musselle: Thank you, Paul, and good morning, all. So our underwriting results reflect disciplined cycle management, profitable expansion and a strategic investment in both data and capability to continue to build a balanced and diversified portfolio, which you can see on this next slide. Our retail compound growth is anchored in profitable underwriting, delivering a core of 92.6%. In the U.K., Private Client is up double digits as we continue to benefit from our market-leading expertise. Commercial growth is due to an expanded customer base and a sharper sector focus. In Europe, France and Germany are leading the charge as we continue to go deeper into our chosen segments and deliver new products tailor-made to our customer needs. And in the U.S., Digital Direct is continuing its excellent growth. Momentum in partnership is building and broker once again expanding as we have delivered improved service delivery and a slightly broader appetite. Turning to the London market, where our ability to manage those micro cycles has remained a key differentiator, and we've once again delivered a combined operating ratio in the 80s. So property has seen some growth fueled by a U.S. high net worth portfolio and the tech-enabled expansion into mid-market. And this is offsetting some intentional cycle management in major property and commercial lines. We've seen some modest growth in casualty. We've had some rate tailwinds in general liability and a successful launch of financial institutions and technology E&O. And this is mitigating some declines in cyber and D&O as those markets continue to soften. And then lastly, reinsurance, a slightly softer market in 2025, but still a really favorable market. And despite another year of over $100 billion in industry losses, our risk selection, our robust reserves and a benign second half has enabled us to deliver a core in the 60s. So where are we in the cycle and how favorable is the market? So this next slide, hopefully, a familiar slide to you. So the chart on the left is our rates indexed back to 2018 for our segments. The purple line, which is Retail, is just less sensitive when it comes to the rate cycle. Rates were up in aggregate 2% and pricing across U.K., Europe and the U.S. remains strong. In 2025 for the first year in many saw aggregate rate declines for both London Market and reinsurance, although we remained in an attractive market. So the blue line is our property cat reinsurance rates come down 4%. This moderated as we went through the year as our midyear renewals, particularly those loss affected, attracted some rate increases. Across the whole of the reinsurance segment, rates were down about 5%, but still up 83% since 2018. And we saw a similar story in London Market, a 4% dip in 2025, but still at 67% since 2018. And that softening has continued in 2026. So our January renewals saw London Market come down another 4% and reinsurance down 13%, particularly in the areas of property, cat and retro. So the chart on the right gives you an indication of what we believe that does to the rate adequacy of our portfolios. So as a reminder, adequate means we believe it's adequately priced to deliver a good return in a mean loss environment. Adequate plus means we've got margin in addition and low, still profitable, but just below our target underwriting reserves. And you can see, despite the softening, we believe that much of the portfolio is still really well positioned to deliver a good return. And we benefited from some tailwinds in our own outwards reinsurance purchasing. So mastering changing markets and managing micro cycles is not new to us, and we continue to have many different portfolios in many different parts of the markets. And you can see this on the next slide. So the London Market rate environment is highly nuanced both at a line and a divisional level. And you can see the divisional picture on the right-hand side is quite different to the London Market headline. During this period, casualty rates have declined, whilst property rates have seen significant gains, and we've acted decisively. So during the same period, our average exposure per policy and casualty has reduced by 20%. And more recently, we've added over $100 million of property income. This laser focus on exposure management and profitable expansion has been the key to that consistency in that combined operating ratio. So we've learned from lessons of the past and our enhanced cycle management is really focused on 4 things. Firstly, a forward-looking view of risk, really understanding those inflationary trends, whether they be economic, societal or climate. A market in transition framework. This is a framework that's honed to capture the position of each one of our lines in the market and proactively respond to evolving conditions. Exposure management, we absolutely know -- need to know when to trim when we don't believe we're getting paid to take that risk, but also when to expand when we believe the expected returns justify the exposure. And lastly, new, of course, we want to actively manage the portfolio that we have and seize new opportunities for profitable growth. So this next slide gives you a little bit more information on our market and transition framework. So what you can see here, each bubble represents a line of business in London Market. So this is a proprietary framework. We built it around 10 quantitative type metrics, things like technical index, exposure deductible. And we add to that 5 more subjective metrics on the market. These could be things like broker interaction or terms and conditions. So for London Market, we're monitoring 285 metrics on a quarterly basis, and we have a very similar framework for our reinsurance business. Now each metric has an expectation or a tolerance and flags for investigation if it's outside of that. Now not all investigations will result in underwriting action. Most often when we look, the underwriting action has actually already been taken. But when it is required, responding really quickly is key, and that could be reducing your line size as an example. So in summary, a transitioning market, but a largely attractive market. So unlike our big-ticket businesses that flex with the cycle in Retail, we're looking for compound growth through the cycle, all anchored in consistent profitable loss ratios, and you can see that from the chart on the left-hand side. We've built out a specialist underwriting ecosystem from risk selection through to claims management, all underpinned by investment in brand, technology and capability. Our focus is squarely on customer value. We invest in our segments for the long term. We maximize value through market-leading retention and product penetration. After decades of investments, the majority of our retail customers already benefit from being auto underwritten, but we have ambition to go much further. And lastly, new, we want to deliver new products and services to existing customers, go deeper into our segments to attract new and boldly go into new markets. So as I look forward to 2026, my 3 priorities are clear. Firstly, a relentless focus on managing our portfolio, knowing when to trim, but also knowing when to expand when the outlook is compelling. Turbocharge innovation. We want to find quicker ways to bring new products, new services and expanded appetite to market. And lastly, capability. We want to blend humans with the best humans with advanced technology to really amplify our specialist underwriting expertise. And we want to train our underwriters for skills for the future so they've got data fluency and a practitioner at their core. Thanks very much. I'll now hand back to Aki. Hamayou Hussain: Thank you very much, Jo. So looking ahead to this year, as a result of the pace, energy and innovation we've generated, this year is positioned to be another really exciting year for Hiscox. Retail growth momentum will continue into 2026, building to 8% for the full year and on track for double digits in 2028. In big ticket, we expect innovation and new opportunities will moderate the impact on growth from our disciplined cycle management activities. And in reinsurance, following strong growth in recent years, in 2026, we expect to maintain our natural catastrophe exposures broadly flat on a net basis, while we are continuing to seek out growth opportunities in specialty classes. And finally, as you've heard from Paul, our change program remains on track to deliver $75 million of P&L benefit this year. So in closing, 2025 has been a pivotal year, a year of record underwriting results record investment results, record profits, and momentum has been building over the last few years and is set to continue. The group's combined ratio is the best in the decade. Retail's margin continues to expand. London Market has delivered a combined ratio in the 60s -- sorry, in the 80s, I wish 60s, 80s for the sixth consecutive year and reinsurance in the 60s for the third consecutive year. And in our change program, we are delivering expense efficiency and a significant build-out of capabilities with more to come. Our operating ROTE of 21% is materially above our through-the-cycle target. And our capital generation has been strong, enabling us to deploy capital in an unconstrained way to pursue high-quality growth in each of our businesses and to reward our shareholders with capital returns of $1.1 billion over the last 3 years. We look forward with confidence and optimism. These are exciting times at Hiscox. Thank you for listening. And now we'll take questions. Okay. Why don't we go right to left. So Shanti? Shanti Kang: It's Shanti from Bank of America. The first question was just on the retail growth outlook, that step up to 8% in '26. Where is that really being driven from by region? A walk of how to get there from the 6% that you've done this year would be quite helpful. And then I was just looking at the claims ratio in Retail this year, and it looked like that deteriorated a little bit year-on-year based on the restatement. Is there any reason for that deterioration? Is that really on more conservative initial loss picks? That would just be helpful. Hamayou Hussain: Okay. So kind of taking each of those in turn. In terms of the growth outlook, okay, I think context is important as well. So we've already taken the business from what was 4% growth in 2023 to 5% and then over 6%. And as you say, we're guiding to 8%. This is broad-based growth. There's no one single action that's driving this. It ranges from the effectiveness of our distribution teams and our distribution functions. And as you've heard me say many times before, we are increasingly winning positions on broker panels. We're winning new opportunities, new distribution deals. In fact, the U.K. has been leading the charge across the group on that. In our U.S. business, we're adding more partners. This year or in 2025, we added a further 23 partners. So as those gain traction and build production as well as growth from our existing partners. We're continuing to invest in marketing. In 2025, we increased the investment by 9%. I think we're now at about $109 million. You can expect that to go up by a further 10%. This is a great investment. We get very good returns from the step-up. We have stepped up our product innovation and expansion into adjacencies. And you can see that reflected in the 5x growth from new initiatives. We've turned around the U.S. broker business. That is now growing. So it's a range of different factors that are driving that -- that are achieving that growth. And as I mentioned earlier, and this is not rate dependent. In fact, rates have been going the other way. We have now come off the rate step-up that we were seeing in the Retail business as a result of inflation as inflation has abated. And if you go back to 2023, the rate increase was about 7%. Now the rate increase is 2%. At the same time, the growth has grown from 4% to 6%. You can see what the underlying is doing here. This is a volume-driven growth story here, and it's largely about the effectiveness of the management actions we've deployed over the years. In terms of loss ratio, look, we don't land this on the head of a pin. That is a market-leading loss ratio for the Retail business, we're very pleased with it. Andreas, I know this will and keep going. Andreas de Groot van Embden: Yes, Andreas van Embden, Peel Hunt. Just on cycle management. It sounds like we're going to continue growing exposures into a softening cycle in the next few years. I just wonder if you take a 3-year view through this planning cycle, what are your assumptions about the increases in capital requirements across the business. Is that going to be a gentle sort of rise over time as you grow exposures or will you, at some point, de-risk that property cat book and will capital requirements come down again? That's the first question. And the second question is on your reserve buffer. You're now at the top end or slightly above the top end of the range. Is this something that will be released in the future? Are you being sort of extra cautious or will inflation eat into those buffers, so it will naturally erode within that 75%, 85% range? Hamayou Hussain: Okay. Thank you, Andreas. So I think there are kind of a number of parts to that question. In terms of how we expect the big-ticket business to evolve over the next period, I think we've spoken about the fact that our product innovation and expansion into adjacencies will moderate the cycle management activities. I think Jo can provide a little bit more detail on that. In terms of capital requirements, as we expect them to evolve and the reserve buffer, Paul will address that. Joanne Musselle: Yes. Thanks, Aki. So as I said, we are a disciplined underwriter, you can see that in terms of our track record. So what we didn't say was we're looking to grow exposures, there's lots of lines where actually we have actively and decisively shrunk exposures. So we talked about some of the casualty lines where the rate has been decreasing. We've been actively taking -- reducing our exposure during that time. And as we look forward, we're seeing some softening in our property lines. And clearly, if that continues, we'll trim. So first and foremost, we are a disciplined cycle manager in our big-ticket businesses, albeit we are still in an attractive market today. And obviously, the rate adequacy slide show that in the majority of the portfolios, we still have rate adequacy. So that's -- but I think what we did say is what we've managed to do, particularly in 2025 is we've just mitigated some of that intentional cycle management action by some of the new things that we've been doing. And that's the launches of adjacencies. So we mentioned a couple in casualty. I mentioned the sort of mid-market property expansion as an example. That is offsetting some intentional reduction elsewhere. In casualty, we launched technology E&O. Now we've been a tech E&O writer for a couple of decades across all of our Retail business. It's a real heartland for us. And we launched a new product in our London market business. So this is to capture the slightly larger customers, find their way to London, written on a subscription basis. So that's what we're talking about in terms of that cycle management. Of course, we are a disciplined writer. I always say our job is to make money in the market that's in front of us, not the market that we'd like to have in front of us. So we'll react accordingly, and we're looking for new opportunities to profitably grow. And it's the combination of those 2 things. So it's actually really underpinned that consistency you see particularly in the London market with an 80s combined for the last few years. Paul Cooper: Yes. Building on that and how that translates into capital. So I think there's kind of 3 drivers. One is market conditions looking ahead of us, the second is the retail business and the third is cat P&L. And I think if you look at sort of consumption over, say, the last 2 years, it started to moderate. Now the reason that started to moderate is we've really held our cat P&Ls constant, but at the same -- and that's off of, obviously, a very high base as rates of strength. And you heard that we've increased our premium income 180% from a capital perspective over the last 5 years. So we sort of hold that constant. But what you've seen is the retail business accelerate in terms of its momentum. And looking forward, we've talked about 8% in 2026 and double digit for 2028. Now clearly, that requires more capital. Retail is the least capital intensive part of the business, but it still requires some capital on the balance sheet to grow. And so what I'd expect is that degree of moderation looking ahead now, clearly, the third dynamic is what happens with market conditions and also what happens about these opportunities that Jo has talked to around innovation, that will dictate whether we sort of need less capital and reduce exposure or actually need more because we're taking advantage of these opportunities. So that's sort of the outlook ahead of us from a capital perspective. I think from a reserving perspective, I think the important aspect around inflation is it's built into our loss picks. So we do have a cautious approach to reserving. We have a cautious approach to our loss picks, and that does obviously generate redundancy coming forward. Now our positioning at 2025 from a year-end perspective has been quite deliberate. We obviously have built on that sort of conservatism that we've talked about by increasing the confidence level. We are at 86% from 83% but we've also increased the level of margin in the reserves. And I think that puts us in a great position in terms of where we are at this point in the cycle. And you're absolutely right, Andreas, that looking prospectively, we've got a range of 75% to 85%. I'd expect us to trend back within that range. And I don't think inflation as we currently see is an issue because it's already built into the loss picks. Hamayou Hussain: Will? William Hardcastle: Will Hardcastle, UBS. If I can try and pin you down slightly on one of those answers, Paul. You mentioned the capital consumption. I think it was 13 points in that solvency bridge last year. Just linking it with Andreas' question, is that likely to be a relatively stable number? And I know there's a bit of a range around that? Or is it likely to go more likely down than up next year? Then on the LLM impact into the SME distribution, I guess you touched on it in the conversation, Aki, but I'm really trying to understand whether you -- what are the risks, what are the threats and what are the opportunities for Hiscox to really take advantage and why? And it's really thinking about broker disintermediation by the LLMs. Hamayou Hussain: Okay. Paul, if you address the capital point, but let me cover the LLM point first. I guess, first and foremost, we are pretty excited about the ability and the prospect of using LLMs and frankly, the emerging world, which is not quite here yet of agentic e-commerce. We have a long track record of investing in technology and being on the front foot, particularly when it comes to that small commercial business segment, which is a heartland for the retail business. And again, if you look at the context, we've been investing in that business in terms of technology, et cetera, for decades. We have a market-leading global platform now that covers 12 countries, U.K., U.S. and Europe, with $900 million of premium flowing through it and serving 900,000 customers roughly, which is highly automated with all the underwriting automated. So in excess of 99% of the risks that flow through that platform are auto underwritten. So we've invested in the technology. We've been ripping out core systems and replacing them with new. We've been cleaning up the data for many, many years. And actually, that puts us into a fantastic position now that with the advent of Gen AI, we can actually build our own or adapt -- adopt rather the AI tooling relatively quickly and for a relatively modest cost. And that's exactly what we've been doing across the business. So we're excited about the efficiencies that this will bring, but we're also really excited about the growth opportunity, the expansion of our reach into our customer -- into our prospective customer base and also the opportunity to develop new products that, frankly, just didn't exist before, and I think that's going to be a real opportunity for us as well. I mentioned earlier that we're deploying AI today, right? So there's things that we've just done. There are things that are in development that we are doing. And what we've done, we're already using AI agents in our marketing analytics. We're using it to triage broker submissions in the U.K., and that's going to be rolled out across the whole of the group. We were first to launch an AI augmented lead underwriting platform in London market. That was the first for Lloyd's. Again, we were able to do that because we've already invested in the tech and the data. The emerging things that we are doing, which are really going to open up the funnel for growth. It will take a bit of time because it does require customer adoption as well. So we have -- I think it's today or yesterday, we've launched AI agents into our U.S. call centers. That will give us, I think, as I mentioned earlier, real-time feedback, immediate feedback to our operations teams on customer sentiment and experience and also feed directly into our ads platform, right, which then dictates how we then market back to those customers. If you think about the strength that we've built up over the last decade, which is having a trusted and distinctive brand, market-leading claims service. We have an NPS score, which is in the 70s and 80s. The market average is materially lower than that. Our world-class customer service, the tailored coverage that we provide, these are all objective strengths, which in the world of AI agents and agentic e-commerce stand out, right? In the old world or -- sorry, in the current world, really, if you go online, the only thing you can really compare on is price. We don't trade on price. In the prospective world, as a new person who's buying insurance for their small business, you can get much more information. And in that world, I think we open up the platform. I think we will stand out much more, and we are readying our platform for the world of agentic e-commerce. As I said, we're in the process of building for deployment later on this year, new, much more powerful portals. These will sit alongside. If you think back about the strategy that we've had, we have an omni-channel distribution approach, right? We are building leading platforms to enable us to access and trade with brokers. We trade with partners and we go direct. This agentic e-commerce channel as it were, certainly for the moment, will just sit alongside depending on customers' preference. So we're pretty excited about it. But a lot of the hard work has been done, and now it's about implementing these new tools and seeing how they're adopted, both internally and externally. Paul Cooper: Just on consumption, yes, to knock that one off. Yes, so based on the conditions we see ahead of us today, consumption will be lower. Hamayou Hussain: Ivan? Ivan Bokhmat: I've got one big AI question and 2 small finance questions, please. So on the big AI question, I'll start with that. I think there's a perception that for reinsurers, the underwriting edge is essentially the moat that can protect you from being disrupted. So I was just wondering if you could maybe provide some of your views on this. And if you think about your data and what's out there in the market for available for underwriting, how much of it is publicly available, like cat models or cyber models or whatever it might be? How much of it is proprietary? And how much of it is unstructured proprietary that you could still tap on, but maybe where you are in that journey versus peers? So that's question one. And then question two, I mean, I've noticed that across your growth initiatives, and this has been a trend for a little while now, you don't really have like AI CapEx, data centers and all that. And I was just wondering what your thoughts on that might be? Is it the next leg for you to expand in? Or is there a reason why you haven't really been pushing there? And the third question is, I mean, on the capital ratio, obviously, you have to 11% now, 13% stress. It gives us 180% post-stress ratio, which I think in the past was like a good guide for how you would manage your capital. Is this still the case? Or any developments there? Hamayou Hussain: Okay. Thank you for those questions, Ivan. So what's our underwriting edge in reinsurance? I think that's one for Jo. In terms of underwriting appetite then in terms of data centers, et cetera, again, another one for Jo. And Paul, if you want to address the question on capital and how we manage that within the ranges? Joanne Musselle: Yes. Thanks, Aki. So I think in answer to the question, it is a combination. So what we rely on is, of course, and I talked about it, we, of course, rely on in that reinsurance world, the best external models as an example. We take what's available, but then we blend and we overlay what we call a Hiscox view of risk. And we do that across both our reinsurance and indeed, all of our other insurances. And that is really important, and that is proprietary, where we are utilizing our own proprietary information, our own bespoke data sets, building in things like that forward-looking view of inflation. It's really important for us to get ahead of some of these trends and price forward. So I'd say in terms of the edge, it is a combination. We are utilizing the best external data, but also blending that with our own internal data. And of course, we're using technology, have been for many years in that underwriting process to do 1 of 3 things, either to make us easier to do business with. So take the reinsurance example, how can we consume submissions quicker. Clearly, the advance of technology enables us to consume more submissions in a much shorter time, much better in terms of response time back to, in that instance, brokers or indeed more broadly, customers, we're utilizing it there, absolutely utilizing it to make better decisions. So whether that is ingesting third-party data, make us -- make better underwriting decisions, underwriting of pricing decisions, that's sort of the second area that we're utilizing and clearly making us more efficient. So I'd say it's a combination. It definitely is looking outside and taking the best external information that exists and then blend into our own proprietary data sets. So with regard to data centers, yes, absolutely. I mean, data centers is definitely becoming a significant area. We talk -- there's a lot of talk about it being a structural growth opportunity, and it really is underpinning that digital economy. We're really thoughtful. We're really thoughtful. We have lent into that. We're curious. We've deployed some capacity in both our primary and our London market business and in our reinsurance business. But at the moment, we're thoughtful because one of the significant areas that we need to get a head around is accumulation. And we're also investing at the same time, deploying a little bit of capacity. We're also investing in building our own accumulation model. So we're really clear around where these accumulations lie, and we can actually manage them -- managing them ourselves. So yes, watching it, deploying some capacity, but also thoughtful in terms of accumulation. Paul Cooper: On capital, at the CMD, we announced our target operating range through the cycle of 190% to 200%. You'd see the 211% on a pro-forma basis is a bit outside that. So sometimes you can expect through the cycle we will be outside it. I think it's a small amount above. I think we've struck the right balance between the increased share buyback that we have announced today of $300 million and retaining the optionality for further opportunities for growth. We are a growth business, if you look at our capital management framework, the first priority is growing the business. Hamayou Hussain: Okay. Let's keep going along. Abid? Abid Hussain: It's Abid Hussain from Panmure Liberum. I've got 3 questions. The first one is on the pricing cycle. Just wondering if you could talk to your past experience on previous soft cycles and that move from adequate pricing to inadequate pricing. Is that typically gradual? Or does it happen in a sort of cliff edge moment? And if so, are you looking forward, are you sort of seeing potentially any cliff edges on any key lines of business, so that's the first question. The second one, just coming back on the reserving philosophy. So you're reserving now at 86% above the 75% to 85% confidence interval that you set yourself as a target. And it sounds like you're saying you're just being conservative because pricing is softening. Just wondering if there were indeed any areas where you saw loss picks deteriorating, any sort of concerns at all? Or is it just genuinely just being conservative? And then just sort of how quickly would you expect yourselves to trend back to around 80%. So that's the second one. And then just finally, very quickly, the final question on M&A. Are there any areas where you benefit from participating in M&A? So I'm thinking really sort of adding new capability, new sort of product sets in adjacent areas to help you accelerate growth in adjacent areas. Hamayou Hussain: Okay. Thank you, Abid. So in terms of the evolution of the pricing cycle, Jo will take that. In terms of reserving, Paul will provide commentary. In terms of M&A, I guess the first thing to say for our business, as you can see from the results today and from previous years and the diversification within our portfolio is we don't need M&A for growth. We have a fantastic retail franchise, where I think last year, we set out the extraordinary growth opportunity. And what you can see is over the years, we are accelerating the pace at which we're capturing that opportunity, and we're very confident and optimistic, frankly, about getting to 8% in 2026 and extending that up to double digits in 2028. And in our big-ticket business, again, we've demonstrated we are leading class in terms of cycle management. At the same time, we are -- we've stepped up the product innovation, and we are expanding into adjacent classes to moderate the impact of cycle management. Now again, if you look at the history, we're approaching $5 billion of premium. That is almost exclusively organic growth. That is the predominant form of growth that we will achieve. But what you also saw from 2025 is where there's a strong strategic rationale and the financial metrics make sense, we will consider small bolt-ons. Of course, we purchased a very small entity called Lokky in Italy, which we closed in the second half of last year. That gave us a toehold into the country. Frankly, no premium, but it gave us a system, and it's given us 23 people who understand the local market. It was a pretty new start-up. And we are now consolidating that and that we will move forward from there. Pleasingly, we are getting premium in 2026. And then we also deepened our presence in the U.S. where we made, again, a very small acquisition. And just building on your point, Abid, that did give us access to a couple of classes of business that were on our to-do list, but it's given us quality underwriters, some engineering capability and access to life sciences and tech start-ups. And it's also given us the beginnings of a tech platform for our broker intermediated channel as well. Over to Jo on the pricing cycle. Joanne Musselle: Thanks, Aki. And maybe if we can just bring up that pricing chart because I think it's a helpful backdrop. I'm not going to give any predictions on the pricing cycle going forward, but just maybe just some observations on the cycle that we've already been in. I think this has been a very different pricing -- a hard market or hardening market than we've had historically. I think if you look at that slide, I mean, we've had gradual increases over many, many years across different lines. And I think that's because it's been driven by lots of different things. So it's not just been driven by significant cat activity. It's been driven by lots of things, whether it be low interest rates, whether it's high inflation, geopolitical uncertainty, emerging risk, climate change. There have been so many different factors that have driven this current cycle that it's been really, really prolonged. So it's difficult to see one thing disappearing and the market changing overnight. I think the other thing about this cycle, which has been very unusual is it was actually primary insurance led. So normally, cycles are reinsurance rates led, reinsurance rates go up and therefore, you have to put your primary rates up. Actually, you can see that red line, which is our London market lines. I mean, they moved significantly quicker than the blue line, which is property. And actually, during that early period, '18, '19, '20, I mean, we were calling for a harder market in reinsurance because we just didn't believe we were getting paid to take the risk. And so we were actually very vocal in terms of that. The other thing on the red line, and I showed you with the sort of underneath is that's an aggregate view. What actually was happening with those early rate rises was casualty. So casualty was the early rate rises. Casualty has now softened, but rates went up 200%, 300% for some lines, and now they're moderating. Property lines really started to move in sort of 2023. And I think the other really important thing about rating is what you can't see on this slide is terms and conditions. We all talk about the rates going up or down. We talk about rate adequacy, but actually terms and conditions are really significant. So the biggest driver of the '23 blue line, yes, of course, rates went up 30%, 40%. But actually, terms and conditions materially changed, particularly attachment points in reinsurance and terms and conditions tighter around the coverage and those have largely been maintained. So when we look back at this softer part of the cycle as in '26, where rates have come off, actually, it was a price-led softening. Terms and conditions, attachment points have largely maintained, which is why there's a vast majority of that. So I talked about it being a really active year, over $100 billion, $120 billion of industry losses in 2025, but a lot of them didn't make their way to the reinsurance because of that attachment point. So yes, no predictions for the future other than to say it's difficult because it's being driven by so many different things. I can't think of if one thing changed overnight that obviously, the cycle would dramatically change in one go. Paul Cooper: Its a good segue across to the reserving. I think -- so what I'd say is and what we said consistently is our conservative reserving approach remains the same. So it's unchanged. We have a prudent best estimate, and we've built upon it. I think the important point for 2025 is we're coming at this from a position of strength, the increase in the margin and the increase in the confidence level to 86%. And that really builds on what Jo has just said. We're coming at this from a point where we've got high-quality underwriting. I mean, look at the loss ratios that we've delivered across each of our business segments. So the quality of the underwriting, the diversity of the portfolio enables us to do what we've done in 2025. I think in terms of the pace of the -- getting back within the range, I'm not going to guide to that, but we will be back within it. Hamayou Hussain: Just to add to Paul's point, if you flip back to the slide which shows the reserve releases, where you can see we're in a, I guess, in a fantastic position where you've seen stronger reserve releases predicated on, frankly, every accident year seeing a positive trend and at the same time, increasing reserve redundancy. And that's something just to kind of factor in as a package. That's what you're seeing here. Daniel? Daniel Wilson-Omordia: Daniel, Morgan Stanley. Encouraging to see the change program coming through as expected this year. I'm just wondering the actions you put through this year, do you see them as quick wins or easier than the actions to follow from here? Or is there any -- another way to phrase the question, is there anything that's been harder to achieve this year than you expected or anything that's coming up that you think will be harder to achieve than what you put through this year? Hamayou Hussain: Okay. Paul will cover kind of the detail of that. Let me just give you a kind of overarching comment. The overall program, I think we laid out the categories last year, is tech rationalization, capability buildup, procurement and operational excellence. The program is underpinned by tens of initiatives. There's no one single initiative that's going to kind of drive the savings. And reality is not everything is going to work. But that's kind of factored into the number of listings we have, which if they all work, the sales will be a little bit more than what we set out. So there's some contingency built into that, but I'll let Paul get to the meat of the issue. Paul Cooper: Yes, absolutely. Thanks. So I think the important thing to bear in mind is what we're trying to achieve. So it is all about really driving scale, improving productivity across the business and the $200 million falls out of the back of that. If you look at what we've done for 2025, the $29 million gives us a really good baseline going into 2026, and we've got a clear line of sight of that $75 million that we'll deliver by the end of this year. There are, of course, some quick wins within this. So setting up a procurement function is one aspect where you can renegotiate some contracts. I mean, I say it's easy, but there's obviously a lot of work in understanding how you get to that point. But I'd say to Aki's point, the number of initiatives that we've got on and the strong sponsorship and the program management around this gives us strong confidence in those areas. So we talked about the benefits and the visibility that we're seeing around, say, fraud and recovery, we have in-sourced as you can see there, more than 100 roles to Lisbon that is at a lower cost. So that is already sort of underway. We're sort of in the middle of outsourcing since certain components. And again, good line of sight on track in terms of that component. So I'd say the program is well established. You can see the areas that we are tackling. It will give us a business that is much, much more scalable than it is today. Hamayou Hussain: James? James Shuck: It's James Shuck from Citi. I just wanted to ask about the Google Cloud relationship. It's a multiyear relationship and up to this point, it's really been focused on kind of efficiency gains and underwriting. With the pace of change that we're seeing, it's not clear to me what else they can bring to the table, the larger language models that are emerging, whether it's agentic AI. Since you kind of started that agreement, sort of what are your views on how far that relationship can develop and what else can they bring to the table? We start to use unstructured external data? Where else can it be applied to? That's the first question. And secondly, probably the only accounting question today. But on Slide 51, just interested in the reinsurance receivables, which remain very elevated. I presume some of that is COVID-related. In which case, I'm kind of wondering at this point why we haven't reverted back down to the 10% average that we've seen prior to COVID? If we did see that 15% reinsurance recoverable come back down to the 10%, does that have any implications for the solvency? Hamayou Hussain: Okay. So I think the accounting one is directed to you, Paul. So in terms of Google Cloud, et cetera, look, we have strong and deep relationships with a number of, I guess, leading software and cloud companies, including Microsoft and Google. Look, they -- those partnerships extend to a range of different factors. So firstly, we have a lot of our applications and software on the cloud. And I think with the advent of gen AI and agentic e-commerce, et cetera, I don't think that's going to change. Those are facilities that frankly, those 2 companies and others invest billions and billions of dollars in, in terms of making sure they're high-tech secure, et cetera. Where else do we use the skills of those companies? Those organizations have tens of thousands, if not hundreds of thousand software engineers. And what they can help us do is accelerate the journey that we're on. Now what do we bring to the party? I said -- the thing that we bring to the party are kind of 3 things. One, we have invested significantly in our technology over the years. This is not something new to us. It's already within the P&L. You can see it. We have spent years gradually cleaning up our data. It's never perfect, but it's in pretty good condition. And the third thing is ambition and culture. So we have a culture that's a business builder culture. So we're looking for new opportunities. We're continuously experimenting. So we use the state-of-the-art AI tooling these days that they are bringing, but we already have a system where we can integrate it and build it and start to develop real use cases within our business. So for instance, in our London market business, they're using, was it Google X, which is, again, one of the divisions within the Google business. And we're using some of the technology there to help us underwrite some of the risks in the U.S. and the property risks in the U.S. with some really, what we think is high-quality, very granular data with a very long history. We're using these organizations to help build some of the base technology for the new powerful portals. Now once we build those, we can do a lot of things ourselves. So that partnership, I think, will continue. The shape of it, of course, evolves over time. But the key thing they bring to us is capability and acceleration of our own ambitions, which we can then amplify with our own capabilities. Paul Cooper: Yes. And then I think on reinsurance recoveries, I think it's sort of multifaceted. I think the first point is around actual reinsurance collections that are COVID related have gone very, very well. We're very happy with that perspective. I think what's happening and what you can see in terms of the recovery is versus, let's say, 10 years ago is book mix. So one is it's going to be much more shorter tail business 10 years ago than it is today. But also think about the re and -- well, now re-mix, so the third-party capital is obviously greater than it was 10 years ago, and therefore, you've got a natural level of additional recoveries on the balance sheet that you'd have a decade ago. So I think that's that in terms of implications for solvency I mean as that comes down, obviously, the credit risk charge comes down. It's pretty modest in terms of our overall sort of capital. It's not a big driver at all, but clearly, there will be a modest benefit as that comes down. Hamayou Hussain: Okay. Vash? Vash Gosalia: This is Vash Gosalia from Goldman Sachs. I have 2 questions. One on the retail business. So you've announced or you've delivered 6.3% constant currency growth in '25. But at the same time, you've had benefit on the rate 2% and then policy count of growth of 7.5%. So could you just help us square those numbers as to -- and I'm guessing the difference comes from mix shift, but then where exactly or which product line is it that you grew in or what geography and maybe how are each different from the other? That's the first one. And the second one, just on reserves again. Trying -- so honestly, we were a bit surprised by the reserve release that we saw in the second half. So could you unpack as to where those reserve release have come from, either accident years or any particular events that you saw improve? Hamayou Hussain: Okay. So Paul will comment on the reserve releases. In terms of retail, I think you hit the nail on the head. It is entirely mix. So yes, we did receive -- we did see a 2% rate accretion across the retail portfolio and 7.5% increase in policy count within the 2 big kind of segments are the digitally traded business, so largely direct and through partners. There, the average premium is kind of $1,000 or slightly less. That is simply growing faster and therefore, adding more policy count than the broker business. I think as you would expect, healthy growth in both, but the digital platform is growing a little bit faster. Paul Cooper: Yes, just in terms of reserving H2, it was basically all years, you could see actually on the chart, all years and all segments, so really across the business. I think it comes back and we can't state enough that this is a manifestation of conservative reserving -- conservative loss picks. So if you're strong on the way in, clearly, you're going to be strong on the way out from a redundancy perspective, and you can see that in all of those years trending down. And Aki is right, you sort of bear in mind that point about strong releases are a manifestation of increasing redundancy. Hamayou Hussain: Okay. Ben and then Kamran. Benjamin Cohen: Ben Cohen, RBC. I had 2 related questions. Firstly, could you say how much kind of good fortune was in the result in the second half of the year because that's quite hard to unpack? And secondly, when we look at the rate declines that you've announced for January renewals, how should we think about that in terms of -- how that's likely to feed through into the combined ratio over the next couple of years? Hamayou Hussain: Okay. In terms of good fortune, well, we all need some, I think. And I think Jo will kind of provide a bit of commentary on that. I guess my overarching comment is we've not received any more good fortune than anybody else, so we're very pleased with the outcome, but Jo will comment on that. In terms of rate declines and how that might impact the combined ratios and so on. Let me kind of just kind of deal with that. Again, just for completeness, retail business, we continue to forecast 8% growth and a combined ratio within the 89% to 94% range and with a gradual improvement within that range as operating leverage and the efficiency program continues to deliver. In terms of our big-ticket business, look, it's -- the eventual combined ratio will be a factor of many, many things. I think the key thing I would ask just kind of bear in mind is if you go back to Jo's slide on rates and the quality of the portfolio, the majority of the portfolio, both for reinsurance and London market is in a very, very good place. So -- and therefore, the potential for strong earnings growth or earnings in 2026 remains pretty high. Joanne Musselle: Yes. Thanks, Aki. So absolutely, I think when we look at the year as a whole, there was still $120 billion of industry losses. We started January with the really tragic events in California. We ourselves reserved $170 million for that event. Majority of that was in our reinsurance. So of course, when we talk about the sort of benign second half, yes, absolutely, that particularly the North American wind season was more benign. And so looking at the totality of the year, it was still a pretty active year. I think the thing that I always look at, though, is the underlying because the wind can blow or not. And clearly, we respond. But actually, it's the underlying health of the portfolio. And so looking at the attritional loss ratio, looking at the risk loss ratio. And across all of our segments, whether that's London market reinsurance and indeed retail, all within expectation. And that for me is the real health of the portfolio is that attritional loss ratio. So yes, pretty pleased with that underlying claims performance being within expectation. Hamayou Hussain: Thank you, Jo. And Kamran. Kamran Hossain: It's Kamran Hossain from JPMorgan. First question is on retail. So clearly, kind of 9 months into the new strategy, the new plan, things seem to be going very well. Just trying to work out whether actually your historic kind of retail combined ratio range now probably looks quite conservative. If I think of the tailwinds you've got this year seems to have gone quite well. You're clearly very excited about the potential benefits from AI. You probably should have taken a point off that range anyway for DirectAsia last year. If I assume a lot of the expense savings come into that, it feels like the historic range seems a little bit cautious. You're 9 months in, so I understand that. So just interested in whether you feel kind of more or less confident on delivering maybe outperforming that number at some stage. The second question is on share buyback versus dividend. Clearly, the step-up in the buyback was great. I think it reflects the confidence you have in the business. At some stage, do you expect to change the mix between dividend and buyback? Because at the moment, I think it's not unlike peers, but at the moment, the buyback is quite a lot bigger than the dividend. And one last question. I know we talked about AI and data centers. We didn't talk about data centers in space, but that's probably for another day. But what's the -- there's clearly going to be product demand for AI errors, admissions, hallucinations. What are you seeing in the market for that at the moment? Hamayou Hussain: Okay. Very good. Thank you, Kamran. So in terms of underwriting data centers in space and AI hallucinations, et cetera, and how we deal with it from an underwriting perspective, Jo will cover that. In terms of share buybacks versus dividend, Paul will cover some of the detail. But suffice to say, I think certainly for the moment, we are very happy. And I think we -- again, we -- this is all about balance. I think we're striking the right balance in the form and quantum of capital return that we're providing to shareholders and balancing that against also the investment that we're putting into the business for both near- and long-term growth. In terms of the retail core, the guidance is 89% to 94%. We expect to improve within that range. We have ideas where we have been at the upper end of that range. We are providing guidance that we expect over the next few years that we will edge towards the lower end of that range as the business continues to grow and deliver operating leverage and the expense efficiency program and the build-out of capabilities that Paul has laid out delivers. But why don't we go to Jo first on data centers in space. And then Paul, any more color you want to add to that. Joanne Musselle: Yes, absolutely. I think I'll focus on the AI part. Hamayou Hussain: Well, that was the core of the question. Joanne Musselle: Look, we talked a lot today about our own use of AI and maybe our customers' use of AI. But just to be clear, we have just as much thought going into how our customers are using AI and that's going to change the nature of the risks that we insure. So this absolutely is an emerging risk. There's going to be some areas of risk that actually gets better because some of it is still driven by fat finger and actually with an AI that is more consistent in terms of decision-making, maybe some of those errors and emissions actually improve. But there's definitely new areas of risk for sure. And we're being really thoughtful about that. Certainly, from our point of view, we're not going down the route of blanket exclusions. We're being really thoughtful around the risks that they present, understanding those risks and then indeed accommodating those risks, either pricing for them or providing sort of affirmative coverage. So a good example would be in our U.K. portfolio and our technology. We were one of the first to confirm affirmative AI coverage within that policy. I think the other area that we think about is not just the risk, but actually the opportunity. So we are an insurer, a specialty insurer for emerging economies, for new economies. There's a lot of people. There's a lot of investment in AI and data centers and that attached to this digital world that all need insurance. And we're really well placed to be able to provide insurance for the consultant who happens to be in that AI world. So we're also thinking about it from an opportunity point of view. How do we understand the risk, how do we develop our own products and services to help our customers with that risk and then also how do we broaden our appetite to capture some of this more new economy in terms of their own insurance needs. But yes, a lot going on, on that space internally. Paul Cooper: Yes. Thanks, Jo. And so the nature form structure of capital returns fits squarely within the capital management framework. So we will prioritize growth. We'll maintain a strong balance sheet. We'll have a progressive dividend. Now you've seen that we've increased our final dividend per share 20% in each of the last 2 years and then have a progressive dividend thereafter. When we've done all of that, then the surplus that's left after that will be returned to shareholders, and that remains the condition. Hamayou Hussain: Okay. Chris? Chris Hartwell: Chris Hartwell from Autonomous. Just 2 very quick questions, hopefully. First of all, just on the recent reorganization within Hiscox Re, I was wondering if you can talk about what advantages you think that brings? And in particular, on Hiscox Capital Partners, where would you like to see the fee element of Re going over the next few years and particularly if it's the right time or a good time in the cycle to be doing that? And then it's probably my lack of understanding or lack of knowledge rather, just on tax and Bermuda. A lot of your Bermuda peers have been sort of talking about the tax credits that they will accrue from the recent tax reforms in Bermuda. And I guess sort of 2 parts to the question. First of all, if you could help me understand what is your, I guess, on island expenses or headcount or something where I could sort of think about that? And if there's anything you can do to to really take advantage of that? Hamayou Hussain: Okay. In terms of Bermuda tax, Paul will cover that. In terms of Hiscox Re and the sort of reorganization to create Hiscox Capital Partners. Look, as you know, we've had a long-term strategy using third-party capital that wants to access, frankly, the fantastic underwriting capability of our Hiscox reinsurance business. And we've had a number of different sort of verticals. We've had traditional capital in the form of quota share providers, partners rather. We created ILS funds just over sort of 10 years ago, and those have evolved. We have a number of ILS funds with different sort of risk levels. We have an SPV. We have sidecars. We've also then expanded into cat bond fund capabilities. And frankly, the Re and ILS was a nomenclature, which no longer describes what we actually do. It is much more mature and much more sophisticated in terms of the different capital basis that we're managing. And that's a reason for -- first reason for kind of using the new nomenclature. And in terms of -- at this point in the cycle, we are -- frankly, last year and this year, we have seen increased interest in third-party capital coming in to benefit from our underwriting. I think you heard from Paul earlier, the AUM, the one thing we quote, which is ILS AUM has increased from, I think, $1.4 billion at the start of last year to $1.5 billion at the start of this year, albeit that deployable capital has gone up a little bit more because we had some outflows and then some new money coming in. In terms of fees, again, as you heard from Paul, the last 3 years of fees have been in excess of $100 million. So a nice contributor to the reinsurance business and to the overall group. The fees are structured essentially, as you can imagine, two-fold. So you have a fixed component and you have a profit commission component. And over the last few years, because of the underwriting results, the profit commission component has increased quite significantly, getting us to over $100 million. What we have done actually over the last couple of years is also gradually restructured some of those fees. So now the majority are fixed. In terms of where that fee income will go, well, there's 2 major drivers. One is the quantum of third-party capital that we're able to deploy. And I think that is going to grow. So that will kind of push the fee income up, but then it's down to the actual results. Whilst the majority is now fixed versus PC, profit commission. The PC is still pretty significant, and that will be determined by the outcome of in-year results. Paul ? Paul Cooper: So yes, the Bermuda-based tax credits, I mean, they're small, they're sort of single-digit millions. They're absolutely dwarfed by the introduction of the global minimum tax this year. And you can see that our tax rate has gone from 8.5% to like 17.6%, so that's a big uplift. What can we do more in order to sort of maximize that benefit? Essentially employ more people on Ireland that don't need a work permit. That that's the sort of driver that will trigger more benefits. The reality of it is, it's caped at around 150 people. So there is a limit to sort of how much additional benefit you can get out of that. That's the biggest driver for it. Hamayou Hussain: Okay. I think we're done. So guys, thank you very much. This is a time of change, right? I think it's time for the nimble and the bold and those who can really turn imaginative ideas into operational reality. And I think that describes the culture and capabilities at Hiscox. These are really exciting times for us. So thank you very much.
Operator: Good day, and welcome to the Cargojet Year-End Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to David Tomljenovic, Vice President, Investor Relations. Please go ahead. David Tomljenovic: Good morning, everyone, and thank you for joining us on this call today. With me on the call today are Ajay Virmani, Executive Chairman; Pauline Dhillon, Chief Executive Officer; Aaron McKay, Chief Financial Officer; Sanjeev Maini, Vice President, Finance; and Remi Tremblay, General Counsel and Corporate Secretary. After opening remarks about the quarter, we will open the call for questions. I would like to point out that certain statements made on this call, such as those relating to our forecasted revenues, costs and strategic plans are forward-looking within the meaning of applicable securities laws. This call also includes references to non-GAAP measures such as adjusted EBITDA, adjusted earnings per share and return on invested capital. Please refer to our most recent press release and MD&A for important assumptions and cautionary statements relating to our forward-looking information and for reconciliation of non-GAAP measures to GAAP income. I will now turn the call over to Ajay. Ajay Virmani: Good morning, everyone, and thank you for joining us this morning. Before we begin the detailed review of the quarter, I'd like to offer a few broader remarks. Cargojet operates at the intersection of global trade, capital discipline and time-critical logistics; in stable environments that create opportunities; in volatile environment that demands clarity, discipline and execution. What defines this company is not the cycle. It is how we manage through it. As previously announced, we transitioned to a single CEO structure as part of our long planned succession framework. I'm pleased that this is our first quarterly call with Pauline Dhillon as Chief Executive Officer. This next phase of Cargojet's evolution is centered on sharpened accountability and disciplined execution. The Board has been very clear in its mandate to Pauline and her management team. Our priorities are extremely straightforward: deliver profitable growth with strong returns on invested capital; maintain operational excellence and industry-leading reliability delivered safely; exercise rigorous cost control and discipline while maximizing utilization of our fleet and infrastructure; and last of all, continue investing in our people and leadership depth to ensure sustainable and long-term performance. Strong financial outcomes are only possible with a strong culture and an engaged workforce. That remains a core competitive advantage for Cargojet. These principles guide our capital allocation, our operating discipline and our long-term value creation. Pauline and her team are fully focused on delivering against these objectives. Before I turn the call over, I'd like to express my sincere appreciation. On behalf of the Board of Directors, I want to thank more than 2,000 Cargojet employees for their professionalism, resilience and commitment to excellence. I want to thank them for coming through one of the roughest winters that I have seen in the last 30 years and maintaining our on-time performance. To our customers, thank you for your continued trust. We'll continue to earn your business every day. And to our shareholders, thank you for your confidence and long-term support. We remain totally committed to disciplined execution, financial strength and sustainable value creation. With that, I want to thank everyone and turn the call over to Pauline. Pauline Dhillon: Good morning. Thank you, Ajay, for your kind words and continuous support. Before we discuss the details of our fourth quarter and full year results, I would like to echo Ajay's comments to start by thanking the entire team at Cargojet for their incredible effort and dedication over the past year. The strength and resilience of our business comes from our team who show up every day and every night to deliver world-class service for our customers. As Ajay mentioned, that was never more true than during peak 2025. Despite the extreme conditions across the nation, our teams delivered exceptional on-time performance at 99%. On behalf of myself and the entire executive, we want to thank every single member of the Cargojet team. During our Q3 call, we noted persistently high levels of uncertainty throughout global shipping lanes due to volatile tariffs and geopolitical conditions. We anticipate that global uncertainty will persist, and we will continue to limit our visibility for the foreseeable future. As a result, we intend to continue with our disciplined approach to aligning our fleet, our operations and cost to current market conditions to ensure we protect our margins and profitability while delivering industry-leading on-time performance to our diverse customer base across 3 business lines. Cargojet experienced some event-driven activity in the fourth quarter that impacted our results. The grounding of MD-11 cargo freighters left their operators with reduced capacity and an uncertain outlook for the MD-11's return to service. Some of our long-term partners have been impacted by the grounding and asked Cargojet to support their needs in the fourth quarter. We continue to support those partners into the first quarter and will continue to do so for as long as they require. We are thinking of our fourth quarter of 2025 as the tale of 2 cities that exist within our business. While the domestic network remained robust, long-haul transatlantic and transpacific lanes continue to be impacted by geopolitical uncertainty. According to recently released data from China customs, 2025 experienced the first decline in e-commerce volumes since 2022. China to U.S. e-commerce volumes fell by 50% in the third month in a row, including December and were down 28% for all of 2025. While global uncertainty persists, we believe that Q4 2025 should represent the trough for our ACMI customers. While it is early, we are cautiously optimistic that ACMI conditions will show signs of improvement towards the end of 2026 if global political, tariff and economic conditions improve. While global conditions remain challenging, our core domestic overnight business experienced a strong seasonal peak period. During our Q3 call, we were cautious about the resilience of the Canadian economy and consumer demand. Despite challenges from inflation and job uncertainty, Canadian consumers were active during the holiday season. As well, our domestic business continued to benefit from the ongoing adoption of e-commerce across the Canadian retail sector. Increasingly, retailers are choosing e-commerce channels to optimize inventories and to best satisfy customer needs. The speed of delivery is critical to ensuring ongoing customer satisfaction in an increasingly e-commerce-driven retail environment. We expect this transition in buying behavior to provide an ongoing tailwind for our business. Our focused efforts on developing new charter opportunities have resulted in the commencement of new charter services that align with our current North to South Americas flying. As well, we will deploy our assets to increasingly align with opportunities best suited to the composition of our fleet on lanes that are less impacted by political and trade-related tensions while we wait for broader shipping conditions to improve. During Q4 2025, we commenced service between North, Central and South America for a new scheduled charter partner. This charter operates 5 days per week with destinations in the Caribbean as well as Central and South America. This charter business is well suited to our fleet and aligns well with the activities across other lines of our business. In Q4, we also announced a new weekend service to Liege, utilizing capacity within our fleet. This service reestablished a scheduled connection between Europe and Canada with the goal of building up this lane over time. During Q4, the service captured strong seasonal demand in Europe for premium Canadian seafood and other Canadian goods, while our general sales agent in Europe delivered consistent volumes on the westbound sector. In many cases, the westbound volumes feeds into our domestic overnight market. Our Liege service has continued into the first quarter, and we will keep it going as long as it represents the best use of fleet capacity. We continue to explore opportunities in a similar manner as we have with Liege. Our goal is to develop new profitable reoccurring revenue opportunities that utilize existing fleet capacity while also enhancing the value of our core domestic overnight network to other parts of the world. We are seeing changing global trade patterns impacting our China charter business with transpacific exports from China beginning to fall for the first time since 2022, according to our previously noted report. In the fourth quarter of 2025, ongoing political and tariff challenges kept our frequencies relatively flat sequentially compared to the back half of 2024. When we announced our agreement with our Chinese partner, we noted that total revenue for the agreement was expected to be approximately $160 million. With the early success and extra flying we completed in late 2024 and early 2025, we have approached that total deal value in early 2026. Given current conditions, we have mutually agreed with our partner to suspend ongoing service early in 2026. Our relationship remains strong, and we look forward to future business together when geopolitical and trade uncertainty allow. We expect that the new arrangements I noted earlier with both existing and new partners will more than replace expected minimum revenue in 2026 from our previous Chinese flying, while keeping our aircraft closer to home and operating missions best suited to their most efficient use. As we look forward to 2026, our core focus on customer obsession will be demonstrated through our continued best-in-class on-time performance. We are always -- we are aware that we are operating in an unstable global trade environment and believe our disciplined approach to service delivery, cost management and capital deployment will set us up for success regardless of challenging operating conditions. We've proven our ability to be nimble to find and execute on new opportunities and to take advantage of changing markets to deliver value to our customers and our shareholders. Despite the ongoing uncertainty that exists within global trade lanes, we will continue to look for and sign new opportunities for growth while remain focused on disciplined and profitable execution across all of our business lines. I'm going to pass the call over now to Aaron for his comments on our financial performance. Aaron McKay: Thank you, Pauline. As Pauline noted, despite a challenging operating environment, Cargojet's disciplined approach to customer service, cost management and capital deployment as well as our ability to be nimble and take advantage of new opportunities allowed us to deliver strong Q4 results that we are proud of. That happens because of the experience and dedication of the Cargojet team, and I'd like to echo Pauline's thanks to the entire team for all the hard work through the fourth quarter. As Pauline discussed, global trade uncertainty remains high, which means our forward visibility remains lower than we would like. Despite these challenging conditions, our disciplined execution and expense controls resulted in another quarter of strong adjusted EBITDA and adjusted EBITDA margins, which came in at $95 million and 33.4%, respectively, despite a small year-over-year decline in total revenues of 2.9%. Revenues from the domestic overnight business were $120.2 million, an increase of $17.4 million or almost 17% from the same period last year, which led to a full year increase of almost 14%. This growth resulted from continued e-commerce penetration across Canada as consumer demand remained robust through Q4 and the holiday season. Looking forward, given broad geopolitical and trade uncertainty, we remain cautiously optimistic about continuing Canadian consumer demand and the continuation of e-commerce penetration we've seen, which may be offset by broader economic challenges. Disruptions in transatlantic and transpacific trade routes continued in Q4 2025, which drove a continuing year-over-year decline in our ACMI revenue, in line with the declines we saw in the third quarter. Despite the lower activity, our ACMI partnerships remained strong and generated $64.6 million of revenue, a decline of $18.9 million from Q4 2024. As in the third quarter of 2025, in Q4, our ACMI flying consisted of shorter stage length north-south routes compared to those flown in the same period of 2024 when activity levels were higher than baseline economics of our long-term ACMI agreements. The lower block hours, which result from the shorter stage lengths were the primary driver of the year-over-year decline. Current activity levels are aligned with those baseline economics, supporting revenue stability and certainty moving forward. We remain as the top service provider to key customers because of our relentless focus on maintaining our industry-leading on-time performance and customer service. The charter business in Q4 2025 was also impacted by global political and tariff conditions, particularly on transpacific trade routes. Our total charter revenue was $58.2 million, down from $64.4 million in Q4 2024. The year-over-year decline was primarily driven by muted incremental peak season flying in Q4 2025 for our Asian charter partner because of ongoing uncertainty and unfavorable tariff and trade conditions. This was partially offset by increased seasonal peak flying for some of our long-term customers. We expect to continue to support our customers through what has begun as an event-driven charter opportunity. Currently, it's difficult to predict whether these represent longer-term economic opportunities. We continue to believe that discipline in cost management and capital deployment is the correct approach to running the business through the current period of volatility. Our ongoing cost control initiatives allowed us to maintain EBITDA margins in the low to mid-30% range in the fourth quarter. The diversity of our revenue streams, our high level of customer service and existing flexibility in our fleet position us to capture new opportunities that develop in the market while longer-term global and political conditions normalize over time. Turning to our fleet and CapEx. During the quarter, we completed the divestiture of our last Pratt & Whitney-powered aircraft. The 767 fleet is now standardized around the use of GE-based engines, which allows us to optimize our spare engine pool, spare parts inventory and ongoing maintenance activities. At the end of Q4 2025, our operational fleet was 41 aircraft. CapEx for Q4 2025 was $45.6 million, which consisted of $37.5 million of maintenance CapEx and $8.1 million of growth CapEx. This compares to Q4 2024 CapEx of $136.9 million, which included $92.7 million of maintenance CapEx and $44.2 million of growth CapEx. We believe our current fleet of aircraft offers the operational capacity to accommodate our current customer commitments with enough available capacity to capture near-term growth opportunities. In the first quarter, we expect some delivery payments for aircraft to be more than fully offset by the proceeds we received for the sale of 2 aircraft in the back half of 2025. Outside of that, we intend to tightly control growth CapEx through 2026 and any such spending will be tied to new long-term committed revenue agreements. Prudent and disciplined capital allocation remains a key priority for Cargojet. Maintaining a net debt to adjusted EBITDA below 2.5 turns over the long term, supporting the investment-grade credit rating we achieved in the second quarter of the year is a key objective for us. The current operating environment as well as the timing of certain transactions means that the ratio remains slightly elevated at the end of 2025. Although pro forma for the receipt of proceeds received in early 2026 for the aircraft sold in 2025, our net leverage ratio was 2.8x. We remain dedicated to that goal and we'll balance that objective with returns to shareholders through continued dividend growth and the opportunistic use of our normal course issuer bid. With that, I'll hand the call back to Pauline. Pauline Dhillon: Thank you, Aaron. Our position as the #1 air cargo carrier in Canada is the result of decades of discipline and execution that provides us with the experience to consistently meet our customers' high expectations for on-time performance regardless of the operating environment. 2025 again demonstrated the resiliency and the flexibility of our business to deliver through all market conditions. That resiliency comes directly from our unique culture and the efforts of our almost 2,000 Cargojet team members. I want to close today by again saying how proud we are of the entire Cargojet team for their continued dedication to the success of our business, resilience and discipline they demonstrate in their work every day. While the economic environment remains uncertain, we are confident that all those qualities will continue to drive the success of our business in the long run. We thank our customers for their continued belief in us. And to our shareholders, we remain committed to creating value. And with that, we will open the call for questions. Operator: [Operator Instructions] With that, your first question comes from Kevin Chiang with CIBC. Kevin Chiang: Maybe just a clarification question first on the update you provided on the Great Vision HK contract. It sounds like you're confident in being able to replace that revenue. Do you have that revenue in hand already? Or is it optimism around when you look into the pipeline that you'll be able to replace that as we get through this year? Pauline Dhillon: Yes. Let me start by addressing the China question, Kevin. That contractual revenue was net in early 2026. This is a rapidly changing trade lane. As I stated in my prepared notes, I highlighted the decrease in the traffic primarily as a result of global uncertainty and tariffs. We, as a company, continue to look for opportunities. We look at trade flows, trade lanes constantly changing. We have seen a decrease in the China to North America markets, but an increase from China to Europe. We are also seeing an increase from Canada to Latin America and Canada to South America. As I stated in my remarks, we mutually suspended the China route, and we continue -- we'll continue to revisit that with them as there's more stability in the global markets. In the interim, we have found opportunities in North America for better utilization of our aircraft, better rotation, better revenue, better margins and better shareholder value. Kevin Chiang: That's helpful. And then, Aaron, maybe this is for you. Strong sequential revenue improvement into the fourth quarter and peak season, tough weather conditions as well. But if I look at your OpEx less fuel and depreciation, I'll call it, your controllable costs, on a per block hour basis, they were flat to modestly down. Just wondering how we should think about your cost control initiatives as we go into 2026 here? Like are we starting to see maybe some of that cost momentum you highlighted last year? Or is there anything you'd call out in Q4 that might be anomalous that we shouldn't just straight line into 2026 here? Aaron McKay: No, I think generally, what you're seeing is the outcomes of those cost control initiatives. And we're continuing to look at new opportunities. I mean one thing I'll call out, and this is not onetime, this is something that we'll keep going is if you look at crew costs within direct costs, you can see the impact of the work we did even late 2024 into 2025 of hiring and training the crew pool to the right levels for the business. So overtime costs are down quite a bit. That continues into 2026. Now obviously, we have the [indiscernible] in 2026 that will drive changes there. But it's a long-winded way of saying, I think what you're seeing is the outcomes of our cost control initiatives, and we expect those to be long-term savings. Kevin Chiang: Okay. That's helpful. And maybe just a quick accounting or modeling question. It looks like you had a reevaluation of your depreciation. Is the number we saw in Q4, is that kind of the right run rate to move forward with? And then just working capital was a pretty decent drag in Q4 and for the year. Does that reverse in '26? Or is there anything we should be thinking about from a working capital perspective? Aaron McKay: Yes. On the first part of that, I think you're correct. I used the Q4 depreciation number. On the second part, I think there were a few items right at the end of the year that probably contributed to things like AR being a little elevated and created some of that working capital drag. So I think there'll probably be at least a modest reversal of that. Operator: And your next question comes from the line of Konark Gupta with Scotiabank. Konark Gupta: On good performance in Q4. Just maybe a clarification on the MD-11s. Did you quantify the revenue benefit you saw in Q4 or what you expect in Q1? And then did it only impact the domestic line of business? Or did it also show up in the charters? Aaron McKay: It all showed up in the charters. Pauline Dhillon: In the charters. Konark Gupta: Okay. And then what sort of magnitude would you say that, that had? Because, I mean, just if we kind of straight line the revenue for that line of business, should that be sustaining into the second half as well? Probably not. Ajay Virmani: Konark, I'll take that. We have a quarterly commitment from -- of that opportunity. It's a quarter-to-quarter, but we expect it to be lasting at least till quarter 3 or quarter 4 of next year because quarter 4 becomes the peak where everything is required, but we expect -- we haven't seen anything from FAA or Boeing or anything when the MD-11s are going back or even if they are going back to service. So there is going to be a 54 aircraft capacity lag in the global cargo world. And I think that depending on the hours we fly, it's quite a fluid situation. But let's put it this way that it makes up more than what we had in China and some of the other charters. It's the utilization of the assets within our own network that produces that revenue. And we're pretty hopeful that this is going to be a consistent revenue for this quarter and a couple of other quarters. Konark Gupta: Okay. That's great color. And on the China contract, so thanks for the details there. But just wondering, with the early termination, and I believe the contract would have been due in May 2027, was there any penalty on either side or any kind of termination fee or compensation from the customer? Pauline Dhillon: No, Konark, nothing such. Ajay Virmani: As a matter of fact, it was a mutual suspension of the contract, while the Chinese look at their -- not only their shipping, but their incentives from the governments for exports. So that's under review. And we had better opportunities keeping our, as Pauline said, aircraft closer to our home for maintenance, for pilots and all that stuff. So it was a very good opportunity for us to deploy the aircraft in this part of the world. And for them, it was also to review how they stand with the Chinese government and also with the U.S. government on tariffs. So it was kind of a mutual suspension for the time being. And it could start any time depending on when U.S. and China could end up in a deal. They will eventually. And I think it has a lot more potential in the future years. So it's all amicable and very -- as a matter of fact, the Chinese customer is also a big domestic customer of ours. Konark Gupta: Right. Okay. And last one for me before I turn over. Capacity, I think you guys mentioned that you don't need to necessarily invest in growth CapEx, and it will be very contained going forward until you see any opportunities. But what kind of capacity or excess capacity you might have in the system today? I mean, I think with the China contract suspension and then some replacement contracts you talked about, would you still have excess capacity? Or would you need to get a couple of more aircraft if you get new contracts? Ajay Virmani: My answer to that is, Konark, this team has always found capacity because the team we have in our scheduling and operations working with maintenance when the aircraft are needed. The excess capacity for charters, we have never said no, we find a way to get it done, and we will. On a paper, you might see that, okay, we are 97% utilized on the aircraft. But we always find ways to locate the aircraft, downgauge the aircraft, upgauge the aircraft according to the demand and find that excess capacity for charters. The idea is that we never say no. Pauline Dhillon: Yes, Konark, just to echo what Ajay is saying, we always are looking for opportunities. We have an exceptional skilled set of individuals who explore every single charter opportunity that comes in. Bringing the aircraft back all into North America certainly helps us with our fleet utilization. So we're constantly looking for growth, constantly looking for opportunities, and we believe that we have the right fleet to continue with our current customer needs and our projected customer needs. Operator: And your next question comes from Walter Spracklin with RBC. Walter Spracklin: I know there's a lot of focus here on China and MD-11s, but your core business, the domestic overnight, that was up 17% in the quarter. This is during a freight recession. Just curious, can you -- I know e-commerce continues to do well. Was that the main driver? And is that going to -- is there anything onetime in that fourth quarter? Or do we see that kind of growth continuing into 2026 here? Pauline Dhillon: Yes. Walter, great call out. Yes, you're absolutely right. We did see growth in the fourth quarter. I think e-commerce is the factor that we've seen this growth, especially over the entire year. We remain cautiously optimistic about 2026, and we continue to see e-commerce on the rise in Canada. As we've stated in previous calls, Canada has certainly been behind the rest of the globe in e-commerce activity. The new generation that's out there probably doesn't know how to shop in retailers, they're online. So we continue to be hopeful to see that continued growth in Q1. Again, we were a bit surprised ourselves that the domestic growth was so significant over the year. We remain committed to hopefully seeing single-digit growth in Q1, but it's going to be, I guess, on purchasing powers and what the consumer market does. Walter Spracklin: Okay. That's great. And just in terms of modeling, Aaron, maintenance CapEx for 2026, I know growth you said would be offset by some sales. So is it going to be entirely maintenance CapEx? And do you have a range for us for '26 in maintenance CapEx? Aaron McKay: Yes. Our expectation is that the 2026 CapEx will be largely maintenance CapEx. I think we've said in the past that we're seeing the maintenance CapEx come back down towards what we think of a long-term mean. So somewhere, I think, in the range of between $190 million and $210 million is a good number for 2026. Walter Spracklin: Okay. And then finally, capital -- yes, capital deployment, where do you focus free cash flow for '26? Is it bringing leverage? Is it keeping your leverage in that range you were focused on? I know you did a 10% dividend increase. Is there any room left for buyback? What are you thinking on capital deployment? Aaron McKay: Yes. I think we've said over the long term, we want to keep that net leverage ratio below 2.5 turns. We obviously want to balance that with returns of capital to shareholders. So like you said, we saw the 10% dividend increase we just announced, and we'll obviously continue to think about opportunistic use of the NCIB. The leverage target, again, is where we'd like to get back to over the long term. Operator: And your next question comes from the line of Benoit Poirier with Desjardins Capital Markets. Benoit Poirier: Congrats for the strong finish into the Q4. When we look in terms of adjusted EBITDA margin, you finished the year close to 33%, strong execution from a margin standpoint. You mentioned, obviously, a favorable environment with the MD-11 and also some rotation into more profitable lane. What about the -- whether the tighter capacity with the MD-11 helped in terms of pricing? And if you could maybe provide some thoughts about how we should be thinking in 2025, that would be great. Ajay Virmani: Well, it's Ajay. The pricing on the MD-11s, we obviously can't divulge into customer individual pricing. But let's say -- let's put it this way, that we do -- this is an opportunity which came out of a very unfortunate incident. We cannot see -- we do -- our style of business is that we do not -- this is from our existing customers. We do not look this -- take this opportunity as taking advantage of gouging the customers. All I can say to you is the pricing is extremely fair, competitive. And also, we were not the only game in town, like they had 10 carriers to select from, and we were one of the top 3 carriers they selected. So we have to be competitive, but they're also aware of that this is something they need on top of their. So it produces better-than-average margins, and we will continue to build that relationship with that customer. Benoit Poirier: That's very good color, Ajay. And could you maybe provide an update on the pilot agreement that is up for renewal this year? Ajay Virmani: Yes. We are in the middle of negotiations. We have a very cordial and excellent relationship with the pilot group and their leadership. We have been on the table for 3 to 4 months. We are making steady progress. The contract is due till June. Both parties have a willingness to get the deal done prior to that period. And so far, we have not seen any sort of road blockers on that. I think that everybody realizes -- both parties realizes the realities, which are the uncertain climate, some competitiveness of wages on the other side, we recognize that. But also, we are also focused on -- besides financial gains, the company is also focused on productivity improvements, which the other side we're also aware of. So our target is to get a balanced deal done by the end of June. That's our target. And we have enough dates in the calendar, and we've had enough meetings and everything so far is very, very cordial and there's a willingness to do a win-win deal. Pauline Dhillon: Yes. And just to echo Ajay's comments, Benoit, our pilots do understand our business, and they understand that providing our customers with the service levels that they've become accustomed to is paramount, not just for the organization, but for them as the pilot group. So we're very optimistic, as Ajay stated. Benoit Poirier: Okay. That's perfect. And maybe just a quick one for Aaron. You mentioned that maintenance CapEx should be at around a range of $190 million to $210 million. What about the proceeds from the disposal we should expect this year? Aaron McKay: Yes. So that's a great point, Benoit. Just to clarify, that number that I gave is a gross number. That's before netting off any proceeds of disposal. So we have mentioned previously that there is a little bit of gross growth CapEx in Q1 as we make some delivery payments for aircraft. So that will be more than offset by the proceeds from the aircraft that we sold last year. And then we'll continue to explore opportunistically sale-leaseback transactions like we looked at in Q3 of last year. So I think there is good potential to have a significantly smaller net number on CapEx. Operator: And your next question comes from Tim James with TD Cowen. Tim James: Congratulations on a good quarter to end the year. Yes. Just wondering, returning to the domestic revenue, just a great number to see there, e-commerce B2B. Is there anything in terms of particular lanes within Canada or regions? Or I know you don't get into customers, but customer types. So just -- I'm still amazed at how strong that was. But I'm just wondering if there's any sort of particular pockets in there that you would call out as driving that number. Pauline Dhillon: No, Tim, it's just e-commerce. We're seeing an uptick in e-commerce. We saw probably more activity on the domestic overnight as we indicated in Q4, but it's primarily driven by e-commerce and consumer spend. Aaron McKay: The only other thing I might add, Tim, is we've been seeing some of the same news reports I think everyone else has about the changing stocking patterns at retailers in 2025. So it's really -- it's difficult for us to see exactly what's happening with the freight on the planes. But I think we did see a little bit of a pattern where some of that stocking was pulled forward at the start of the year into Q1, Q2. And then there was a little bit of a hesitation of stocking in Q3, and then we saw that pick back up for the holiday season. Tim James: Okay. Okay. That's helpful. And then just turning to the lease service. It sounds like good volumes on the westbound. Anything you're seeing right now in that service that would suggest that it won't be sustainable or anything in particular that suggests it definitely is a feasible long-term service? I'm just trying to understand kind of the outlook and where the bias is at this point, if the current sort of revenue and economics of that, if they continue, you keep it in place? Or does something need to change to justify continuing with the service? Pauline Dhillon: Yes. Good question. Good call out there, Tim. Yes, that was a research and development kind of a lane for us. It was something that we wanted to reenter Europe with -- on what trade lane we were going to go into, what airport. And Liege is very similar to Hamilton. It's the hub of cargo for Europe. It's proven to us that there is a lot of potential there. We ran it through Q4. Q1 still is looking very optimistic. It's a lane we're certainly going to watch. But at this time, we have no concerns or no hesitation to continue operating into Liege. Operator: And your next question comes from the line of Chris Murray with ATB Securities. Chris Murray: So maybe turning back to the charter. This is maybe more of a conceptual question. If I look back over the last few years, Charter was always one of those kind of lumpier businesses, ad hoc contract here, contract there. But if I'm listening to you, it almost feels like you're trying to build a much more sustainable charter business, be it -- you talked about the North-South planes, the MD-11 contracts, which you could conceivably see those turning into an ACMI or something like that, [ Liege ]. You talked about other perhaps lanes that you could open. Is this a conscious effort on your part to try to build this business to be more consistent or more stable? And should we start thinking about this as less of an ad hoc charter and more of just a scheduled operation but more internationally focused? Pauline Dhillon: Yes. Yes. Thanks, Chris. Good question. We're always looking for opportunities. I think we spoke about this at your conference. Cargojet is always looking for growth. We always look towards building our brand. One of the things that we had decided in 2026 was our domestic footprint is very strong here in Canada that our growth will come from global expansion. So we're constantly looking at new trade routes, new ACMI, new charter. And I think one of the reasons that we started Liege was for this reason, and it's proven to be a successful R&D project for us. And as we enter 2026, we're going to continue to look for opportunities always on the domestic and continual growth opportunities in North America, South America and Europe. That's going to be our primary focus as we enter the year. Operator: Okay. Along those lines, any -- like I guess if you're going to stay in those geographies, so there's no thought of like either looking at a connection to Asia or other parts of the world there? Pauline Dhillon: No, we will continue to look at all opportunities, but we want to make sure that with the fleet size that we have, with the utilization of the fleet that we have, that we integrate that fleet and those opportunities to marry one another. Chris Murray: Okay. That sounds good. And then, Aaron, maybe just to go back on the CapEx and the sale-leaseback question. So maybe I'm a bit confused. So the $190 million to $210 million numbers, that's gross CapEx and then we should expect that sale-leasebacks will reduce that number overall. Is that the right way to think about it? Aaron McKay: Yes. That's gross maintenance CapEx to be 100% clear. There will be a little bit of gross growth CapEx as well in Q1, but that will be more than offset by the proceeds that are coming in, in Q1 for the aircraft that we sold in 2025. And then yes, any sale-leasebacks that we look at will further net down the total CapEx. Chris Murray: Okay. So maybe a different way to ask a question. Like if we were to think about all the moving parts here, independent of other like unplanned sale-leasebacks, what's the net number going to look like roughly? Aaron McKay: Independent of other sale-leasebacks, I'm just doing the math in my head, somewhere in the [ $160 million to $170 million range ], I think. Operator, I think that will be our last question for today. Operator: I would like to hand it back to Pauline Dhillon for closing remarks. Pauline Dhillon: Thank you, everyone, for joining us today. We appreciate you taking the time. We will move on to the one-on-ones that have been scheduled. Anyone else that wants to reach out, please reach out to David to set up any additional questions that you may have. Wishing everyone a wonderful day ahead. Thank you. Operator: Thank you, presenters. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
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.
Operator: Good morning, and welcome to Element Fleet Management's Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. [Operator Instructions] You are reminded that this call is being recorded. [Operator Instructions] Element wishes to caution listeners that today's information contains forward-looking statements, and the assumptions on which they are based and the material risks and uncertainties that could cause them to differ are outlined in the company's year-end and most recent MD&A and AIF. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially. The company also reminds listeners that today's call references certain non-GAAP and supplemental financial features. Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with a better understanding of how it assesses results. A reconciliation of these non-GAAP financial measures to add -- to IFRS, pardon me, measures can be found in the company's most recent MD&A. I am now pleased to turn the floor over to Laura Dottori-Attanasio, Chief Executive Officer. Welcome, and please go ahead. Laura Dottori-Attanasio: Good morning, and thank you for joining us. The fourth quarter marked a year of record performance for Element, highlighting the disciplined execution that we applied in support of our long-term strategy. In 2025, we advanced our key focus areas, continued to invest in our capabilities and delivered strong financial results. Our efforts translated into record net revenue and double-digit growth in both adjusted earnings and free cash flow per share. Adjusted return on equity was 17.9%, reflecting the strength of our capital-light model. In recognition of our cash generation and confidence in our outlook, we increased our annual common dividend by 15% to $0.60 a share. Importantly, we achieved these results while successfully navigating a complex operating environment earlier in the year. This performance underscores the resilience of our business model, the dedication of our team and the growing relevance of our solutions-led tech-enabled platform. Throughout the year, we saw strong client engagement and building commercial momentum. In 2025, we welcomed 156 new clients. We continued to convert self-managed fleets and expanded relationships with existing clients through more than 1,000 share of wallet expansions. Our Strategic Advisory Services team identified over $1.6 billion in cost savings opportunities across our clients' fleets, and approximately half of those opportunities have already been actioned, a testament to the tangible value that we provide. At the same time, we've been strengthening the foundation of our business. The investments we've made over the past 2 years are translating into measurable outcomes. Our Dublin leasing initiative continues to perform as expected, and we are firmly on track to achieve our previously communicated run rate targets of $30 million to $45 million in revenue and $22 million to $37 million in adjusted operating income by 2028 with a targeted 2.5-year payback. Electrification is another area where we made meaningful progress in 2025. We increased electric vehicles under management by 36% year-over-year to approximately 129,000 vehicles. Our charging platform is now live in the U.S. and Canada, and we plan to expand globally in 2026 through new partnerships across our markets. Alongside improvements in our core business, we continue to broaden our offering beyond traditional fleet management and accelerate our entry into mobility. Since launching Element Mobility, we have developed a clear go-to-market approach centered on connected mobility, including telematics, road optimization and adjacent solutions. The integration of Autofleet has been central to our progress. By bringing development in-house, we are lowering structural costs and increasing our agility, accelerating product cycles, shortening time to market and responding faster to clients. We expect this to be a sustained competitive advantage. We launched our Element ONE app for drivers in March, and feedback has been very positive as our adoption continues to grow quickly, and we expect a broader rollout throughout 2026. Our digital ordering platform remains on track with the initial MVP targeted for release in the first half of 2026. In December, we completed the acquisition of Car IQ, adding embedded vehicle-initiated payment capabilities that enhance fleet operations and data connectivity. Together with Autofleet and our partnerships with industry leaders such as Samsara and Motus that we announced earlier in 2025, Car IQ meaningfully advances our digital strategy and our mobility platform. Collectively, these actions improve how we operate, enhance the client experience and support scalable growth. Looking ahead, the steps we've taken in 2025 position us well to capitalize on future opportunities. We closed the year having made strong progress on our digitization agenda, deepen client relationships and broadened our capabilities. The investments we've undertaken have resulted in a stronger operating model and position Element for sustainable growth in the years ahead. And with that, I'll turn it over to Heath to cover the financials and take us through our 2026 guidance. Heath Valkenburg: Thank you, Laura, and good morning, everyone. Our results this quarter and throughout 2025 reflect the continued disciplined execution of our strategy. We delivered strong performance across key metrics including record levels of net revenue, adjusted operating income and margins and adjusted EPS and free cash flow per share. These measures all finished the year within or above our 2025 guidance ranges. I'll begin with a review of our full year performance on an adjusted basis and then discuss some of the nonrecurring items that impacted our results in Q4. In 2025, net revenue was $1.2 billion, an increase of 9% year-over-year, reflecting strength across all of our revenue streams. Services revenue totaled $623 million, up 5% from last year, primarily driven by increased penetration and utilization across our client base. While VUM increased 3% during the year, the revenue impact builds over time as onboarding and implementation progress. We expect this will support continued service revenue growth in the coming quarters. Net financing revenue was $498 million, up 11% year-over-year, driven by ongoing efficiencies from our leasing and funding initiatives, higher gain on sale in Mexico and growth in net earning assets. This resulted in the core NFR yield of 4.73%, an expansion of 35 basis points versus 2024. Syndication revenue for the year was $64 million, up 50% from last year despite a reduction of $1.1 billion in assets syndicated. This was largely driven by favorable mix, the reinstatement of bonus depreciation and continued demand for our syndication product. Full year originations were $6.5 billion, down 4% year-over-year and below guidance, as previously communicated. This primarily reflects seasonal softness in client ordering during the summer months, combined with later year model availability that pushed deliveries into future periods. Importantly, underlying demand remains strong. Order volumes reached record levels of $2 billion in the fourth quarter and $6.2 billion for the year, providing good visibility into originations for the first half of 2026. As mentioned, our reported fourth quarter results were impacted by several nonrecurring items, the majority of which were noncash in nature. Most significant items included a $130 million deferred tax asset adjustment related to updated jurisdictional profit expectations, a $52 million write-off of our legacy ordering platform resulting from the continued transition to the Autofleet technology platform and $9 million of restructuring and acquisition-related costs related to the Car IQ transaction, which closed on December 31. We do not believe these items are indicative of our underlying operating performance, and therefore, have been excluded from our adjusted results. On an adjusted basis, operating expenses totaled $520 million, up 7% year-over-year, reflecting continued investment in digitization, scalability and product expansion. A combination of solid revenue growth and disciplined expense management generated positive operating leverage of 2.1% and resulted in adjusted operating margin of 56.2%, an expansion of 90 basis points year-over-year. Our performance translated into strong bottom line results with adjusted earnings per share of $1.24, an increase of 13% year-over-year, and adjusted return on equity of 17.9%, up 190 basis points from 16% in 2024. Briefly, on the fourth quarter, our adjusted EPS of $0.33 was up a strong 24% year-over-year, underpinned by record quarterly revenue of $313 million. Top-line growth of 16% reflected contributions from all revenue components, including service revenue, which rose 4% quarter-over-quarter to reach a record level of $163 million. Operating leverage in Q4 was a robust 7.3%, and we generated adjusted return on equity of 18.5%. Turning to capital allocation. We repurchased 5.4 million common shares in 2025 at an average price of $32.10 per share. In total, we returned $269 million to shareholders through dividends and share repurchases. This represented 43% of our adjusted free cash flow and was supported by strong cash generation with adjusted free cash flow per share increasing 15% year-over-year to $1.57. Capital expenditures remained well contained totaling $71 million in 2025. In addition, we continue to manage leverage within our target range, ending the year with a debt-to-capital ratio of 76.9%. As Laura mentioned, we have enacted a 15% increase in our common dividend to $0.60 per share annually and have remained active on share repurchases thus far in 2026. I will now turn to the year ahead and our 2026 financial guidance. We expect 2026 will be another year of solid financial performance with Element, highlighted by revenue growth in the range of 8% to 10% and the combination of positive operating leverage and share repurchases driving strong growth rates in adjusted EPS and free cash flow per share. Specifically, we expect to deliver net revenue of $1.28 billion to $1.305 billion, adjusted operating income in the range of $720 million to $745 million, adjusted operating margin in the range of 56.3% to 57.3%, adjusted EPS between $1.40 and $1.45, adjusted free cash flow per share of $1.67 to $1.72 and originations between $6.5 billion and $6.9 billion. These ranges provided prior to any material foreign exchange fluctuations or adverse impacts related to changes in global trade agreements or broader political uncertainty. In conclusion, 2025 was another year of solid performance across the Element business. We entered 2026 with strong momentum and a resilient financial position giving us confidence in our ability to continue executing our strategic priorities and delivering value for our clients and shareholders. Thank you. Operator, we are now ready to take questions. Operator: [Operator Instructions] We'll take our first question today from the line of Vasu Govil at KBW. Vasundhara Govil: I guess, Laura, I first wanted to ask about the Car IQ acquisition. I know you mentioned briefly in your prepared comments, but if you could elaborate a little bit on how you think about strategic benefits of owning that asset and bringing some of the payment functionality in-house? And I know it's early days, but sort of any color on how you think about the contribution that this business could have over time on revenue and margins? And if anything is baked into the '26 outlook? Laura Dottori-Attanasio: Yes, absolutely, Vasu. Thanks for the question. So super excited about the Car IQ acquisition that closed in December 2025. So Car IQ has this in-vehicle payment solution that effectively enables vehicles to act as payment nodes to help our clients reduce fraud, modernize their billing, and it can really deliver, I'm going to say, scalable solutions to our clients. So it's exciting for us in that it's going to enable us to embed payments into our digital ecosystem. It's going to allow us to transform what I'd say is a relatively outdated process into a really strategic one with better margins for us. And it's going to allow us to capture more spend. And for our clients, it does many things, including removing the need for physical cards, embedding payments directly into the vehicles in their telematics environment. So it's going to be -- well, today, it can be used for fuel, tolls, violation and parking, and it has some really interesting future use cases that we're super excited about. Our plans to integrate it into our Element ONE, our client portal and to our driver app. We're super excited. I would tell you this is -- for the years that I've been here, this is the first time we have had a lot of reverse inquiries from prospects and clients that want to access this capability. And so exciting when we did our due diligence, Car IQ had one case we saw with a client where they could cut their fuel spend by almost 14% just by eliminating card misuse. So we think this has a great capability for our clients. We did a few proof of concepts ourselves. And with one of the clients we did this with, it provided such great results that our client told us they didn't want to come off the platform and want to continue to use this. So we're feeling really optimistic and positive about what this can do, not just for us but for our clients. And so from a financial impact perspective, I'd say a little dilutive in this year given that this is the year that we need to do implementation and conversion. We do expect it's going to have a meaningful impact for our clients, as I talked about, so to really help them reduce their total cost of operation. For us, it will be over time that we'd expect it to drive more profitability. So we are projecting some, I'm going to say, modest accretion that should come in 2027, and that would be on both an adjusted operating income and free cash flow basis. Vasundhara Govil: Great. That's great color. And then maybe just my second one is on the services -- servicing income growth. That's obviously lagged a little bit. I know I caught your comments about the VUM growth and that should help us in '26. But maybe if you could talk a little bit more about what sort of fell short of expectations this year? And then, as we think to '26, what kind of growth should we be modeling for that piece of the business? Heath Valkenburg: Yes. Vasu, I'll take that one. So from a service revenue perspective, in 2025, we delivered $623 million. Excluding FX and the onetime items we have announced, it's approximately 7% growth year-over-year. And Q4 reached a record level of $163 million. What we did see in the first half of the year with the macroeconomic environment, including tariff uncertainty and trade-related concerns, is we did see a slower growth rate in the first half of the year of VUM growth and that did moderate sort of the full year service revenue expansion. Obviously, in the second half of the year, VUM growth resumed 6% -- 3% growth rather in the last 6 months, which gives us good momentum going into 2026. What we do see though is typically the incremental contribution of the VUM growth does build over time. So as we cross-sell additional products, as utilization on the vehicles increases over time. And also, many of the vehicles on board, especially in Q4, only contribute partial revenue for that period. So we expect over the medium term services will continue to remain the strongest part of our growth driver. And we're certainly focused on accelerating VUM, expanding our product penetration as well as continuing to enhance our product set, and Laura took us through the most recent acquisition in Car IQ. Operator: Our next question today will come from the line of John Aiken at Jefferies. John Aiken: Heath, just a couple of questions that followed from the guidance that you provided, which is not an argument. Thank you very much for that. But when we take a look at the anticipated originations, obviously, below the levels of the guidance that you had last year. What's impeding the outlook for originations? And then, what impact should we expect that to have under vehicles under management growth? Heath Valkenburg: John, so maybe I'll touch on originations for 2025 more broadly, and then, we can talk about sort of impact to '26. So 2025, we delivered $6.5 billion in originations, and that was slightly down year-over-year and $200 million below our guidance range. It is important to contextualize this against 2024, which benefit from supply chain normalization and the backlog conversion that did elevate origination volumes. What we also saw in Q4 was we had really strong demand. So we had $2 billion of orders in Q4. We did see a modest extension in the order to delivery cycle times for vehicles that required upfit. And that pushed some of those Q4 orders into 2026, but gives us a good starting point for 2026. So in terms of our guidance, we're guiding $6.5 billion to $6.9 billion. That implies 7% growth at the upper end of that range. And to answer your question on impact in revenue, originations is an important metric, but it can fluctuate based on client behavior. And it should be viewed alongside other metrics, so VUM growth, net earning assets, yield, and the latter 2 are primarily the drivers of net financing revenue. And again, in 2025, we saw a really strong improvement across both of those metrics. NEA was up 3%. Our average yield was up 35 basis points, and that ultimately drove record net financing revenue of $498 million. John Aiken: And then, in terms of the guidance, the free cash flow per share growth implied is a little bit lower than what you're forecasting for the EPS growth. Should we assume that we're looking at higher sustaining capital investments like we saw in the fourth quarter throughout 2026? Heath Valkenburg: Yes. Maybe I'll take the sustained capital fourth quarter question first, and then, come back to the sort of the free cash flow growth. So Q4 was elevated. There's some timing in there. We continue to target approximately $80 million of spend across both sustaining and growth CapEx and nothing has changed from that perspective. In 2025, we actually saw slightly lower spend, where we spent $71 million in CapEx across the 2, which is one of the reasons that impacted the free cash flow. So when we think about free cash flow relative to EPS, it's really mechanical. So nothing has changed in terms of our ability to generate cash from the business, and it is timing. So free cash flow actually outperformed EPS in 2025 and was really, really strong. And we just see that sort of flipping around in 2026. Operator: We will hear next from the line of Stephen Boland at Raymond James. Stephen Boland: I hate asking accounting questions, but Heath, I'm going to, can you explain what updated jurisdictional probability outlook of what that actually means on that charge? Heath Valkenburg: Yes. No problem, Steve. I love accounting questions. So maybe I'll just give a bit of more color into sort of the key one-off items. So the first one, deferred tax asset, we recorded $130 million partial derecognition of a historical deferred tax asset. I want to stress that this does not reflect any deterioration in the operating performance of any of our geographies, and all of our regions continue to perform strongly. So the change really relates to some internal intercompany funding structure changes, as we look to optimize how we sort of fund the business internally. And ultimately, from a funding perspective, this gives us increased flexibility to raise more local funding, particularly in areas like Mexico, where we're seeing strong growth. So it's important to note, it has no impact on our effective tax rate or cash tax rate. It's a noncash accounting adjustment, and it does not impact sort of global profitability, or importantly, impact our ability to utilize those tax losses in the future. Stephen Boland: Okay. So this is really the jurisdictional is Mexico, that's kind of where it's focused? Heath Valkenburg: Some of the focus is Mexico, but it's a realignment of our internal funding structures and intercompany funding structures globally. Stephen Boland: I'm not sure who this question can go to. But I guess when we were -- a bunch of us were in Mexico, I don't know, 18 months, 2 years ago, there was a program that was talking about a global review of services, pricing, and there was going to be a net benefit that was talked about. I won't say the number, but I'm just wondering, has that global review been completed? And is that kind of baked into some of the results in '25, I don't think -- certainly, I hadn't asked this question. But -- and is that -- I guess, is that review completed at this point? Heath Valkenburg: Yes. So the pricing and go-to-market strategy is something we continue to refine, not only for Mexico, but all locations across the globe. We set up the leasing business and have seen some strong output as we continue to mature that leasing business and the learnings that we have do get applied to Mexico. So yes, we continue to refine our strategy from that perspective across all locations. Stephen Boland: Okay. I'll sneak one more in here. Just, Laura, you talked about the -- I'm probably a broken record here, the partnership with Samsara, you mentioned in your opening remarks. Can you just provide an update what that partnership is starting to look like? What services or cross-services that you're looking to add, referrals, et cetera? And would it be helpful, please? Laura Dottori-Attanasio: Yes. Sure, Steve. I guess what we talked about these partnerships with Motus that do reimbursements for vehicle expenses for individuals, and then, Samsara, who have telematics camera productivity offering. And all of that was done really to add, I'm going to say, additional services for our clients. We wanted to work with some of the best in the industry, and that's what we're doing. And it's going pretty well. Again, early days, but everything has been quite, I'm going to say, positive in line with what we expected. With both Samsara and Motus, we've already activated units and clients that have come through the referral program. And so, all looking good. Worth a reminder, we had said that in 2026 that we were expecting those partnerships to give us about mid-single-digit revenue. And so we're on track for that. Operator: Our next question today will come from Tom MacKinnon at BMO Capital. Tom MacKinnon: Two questions. First, just with respect to share buybacks, certainly more of an elevated pace year-to-date. You got the preferreds out of the way, converts out of the way. How should we be thinking about share buybacks? Should we sort of extrapolate a little bit about the accelerated pace you've had, and you do have a 10% NCIB that was launched mid-November 2025? And I have a follow-up. Heath Valkenburg: Yes, so in 2025, we paid out 43% of our free cash flow in dividends and share repurchases, so $150 million and $120 million. For 2026, as Laura announced, we have increased -- a 15% increase in the dividend to $0.60 per share, which is approximately 28% of our trailing 12-month free cash flow. In the first 2 months of this year, we've already repurchased $34 million of shares. And so we do expect to continue to be active in share repurchases for the 2026 year. Tom MacKinnon: Okay. And maybe you can talk a little bit about expansion in the services update on insurance services, and how should we be thinking about service attachment rates going forward? Laura Dottori-Attanasio: Thanks, Tom. I'm -- I'll start off just maybe talking about insurance, and then, I'll let Heath take that broader question, services in general. So you'll recall, and we talked about this, we launched our insurance offering in January of 2025 under the banner of Element Risk Solutions, and we did that in partnership with Hub. So our plan was to combine insurance coverage placement. We're going to do that with claims management and safety services and do it in a modernized way. As I believe I shared, we did miss the mark on this one in that we had some gaps in our product offering, some gaps in our go-to-market approach. And I guess I'd also say from a lessons learned perspective, we underestimated the complexity of standing up our insurance offering inside of our fleet ecosystem. So while we still believe there is a worthwhile opportunity for us in insurance, we remain committed to doing it. We have put it on the back burner given some of the things we talked about like our Car IQ acquisition that have some real benefits to us in the short term. So on insurance, we're making some organizational changes. We're working with Hub, and we're looking at how we refine our approach and fill some of those gaps before we come back to market with the relaunch, but we are still selling the product. It's just not, I'm going to say, exciting enough to deliver what our expectations were when we first talked about this ideation. And maybe with that, I'll hand it over to Heath to talk about the broader services offering. Heath Valkenburg: Yes, absolutely. So we expect the VUM attachment rates to continue to migrate higher. It's important to note, though, that new clients that you onboard sometimes have a dilutive impact to that migration. And we saw that in Q4, where the new VUM we brought on had a lower attachment rate of 2.2 services per unit. Obviously, the Car IQ VUM came on, had 1 services per unit. So those items do dilute the broad portfolio. But we expect over time for that VUM per unit to migrate over -- up over time, which -- so increased VUM, increased product penetration, and services per VUM will continue to drive higher service revenue over time. And then, maybe just to circle back on your previous question on the share buybacks, so we -- just to close that out, we generally target sort of a 1% to 2% of shares outstanding. I think we were 1.3% for 2025 and expect to sort of be at the higher range for 2026. Operator: [Operator Instructions] Moving forward, we'll hear from Munish Garg at CIBC. Munish Garg: Just one question for me. So on the off-balance sheet structures, I was wondering if you could provide an update on the progress on the new off-balance sheet structures that you have been working on similar to the Blackstone that was announced last year? Heath Valkenburg: Yes, absolutely. So during the quarter, we did incur some one-time costs to enhance and expand our funding structure. So we do already have a strong and diversified funding platform, but this initiative is designed to provide additional flexibility, as we grow the business while optimizing for yield and overall returns. So during the quarter, we made meaningful progress. However, we're not yet in a position to formally announce the associated transaction. Operator: Our next question this morning will come from Graham Ryding at TD Securities. Graham Ryding: Laura, this is probably for you. Just interested about the autonomous vehicle sort of area. It seems like it's developing quickly. Is this a fleet management opportunity for you? And how much of an area of focus is this for you relative to everything else you've got going on? Laura Dottori-Attanasio: Yes. Graham, thanks for that question. Super important, which, in large part, we started doing all the digitization, automation, acquisition of Autofleet, all of that to ensure that we remain in the connected vehicle. So I'd tell you today, autonomous vehicles represents a great opportunity for our company. We're starting to see some of them going from, I'm going to say, pilots -- piloting to commercialization. And we know that in doing so, they're going to have to scale through fleet ownership. So all of that's going to require funding, branding, maintenance oversight, safety reporting, real-time monitoring, scheduling, you name it. Those are all the things that we offer today and that we'll be able to offer to autonomous vehicles. So I would say with everything we've been doing, we are incredibly well positioned to support autonomous vehicles. And I believe we'll be able to win in the space just given the operational expertise that we have, so a positive. Graham Ryding: Okay. Perfect. Maybe on more of a sort of competitive macro question, just GenAI and the related competition, it seems to be sort of weighing on the markets and concerns in a lot of sectors. Can you talk about the durability of your business, where you could see some competition from AI-related competition? Or where do you see the business being more durable and positioned well? Laura Dottori-Attanasio: Absolutely. Look, I think our stock did get caught up in all of that, and AI does have the potential to pretty much upend absolutely everyone's business models. That said, for us, I think AI is going to have a meaningful benefit for us, not just from an internal efficiency perspective, but also from a client experience perspective. So again, we're super excited about the opportunity that that's going to present. And I talked a bit about it, but we started a couple of years ago to digitize, to automate, and that's where we put all of our pretty much capital allocation. So it's been to transition this, I'm going to say, leadership position that we've had in fleet management to intelligent mobility that we talked about, so we could really transform, what I'd say, has been historically somewhat of an antiquated industry into intelligent mobility. So with Autofleet in 2024, not only did we pick up, again, a phenomenal team of experts, but we picked up a great platform that we're building elements off of. And that platform, and this is important, and we never really talked about it a lot when we announced the acquisition, but it did come with AI already embedded in it. And it has, I'm going to say, an AI tool in it called Nova, one that can simulate whether it's supply-demand patterns and things in route optimization, improved fleet deployment, reduce downtime, et cetera. Nova was actually the first AI-powered large language model that was designed specifically for fleet management. And it's so good that it actually won an AutoTech AI Innovation of the Year award back in 2024 at, I think it was, the AutoTech Breakthrough Awards. So we are in a really good place with some of the actions that we've taken over the years. And I'd just say for Element more broadly, we also went out and got AI licenses for our team members, did all the training. We had all of our functions come up with use cases that could help increase client experience and take out costs. And so now in 2026, I'd say we're moving from that broader experimentation we did in 2025 to a lot more implementation in 2026, that's going to allow us to reduce manual processes and just move even faster in terms of automating how we do things. And I won't bore you with -- I find them exciting, but with the different use cases we have and the things we can do, I'd just say that pretty much every part of our business, when we look at it, AI can help us improve and do a lot better. And that's why we see it as a positive. And then, when you look at our broader business, and we talk a lot over the years about how resilient we are, we benefit from and -- we don't talk about it perhaps as much, but we've got some of the things that will allow us to continue to win. We've got scale with 1.5 million vehicles. We've got solid funding capabilities that can support all of our leasing, and again, leasing requires people, requires specialization and a balance sheet. And that's almost half of our business. And again, we've got our strong OEM relationships, where we get preferred vehicle pricing, allocation for our clients and an incredibly large network of service providers that also help drive savings for our clients. So all that to say, I think we're really well positioned from a resiliency perspective and that AI, as it goes, is just really going to help further enhance our value proposition for our clients. So again, feeling very excited about this one. And looking forward to, as we go in 2026, delivering on more capability through our Element ONE platform. Operator: [Operator Instructions] We'll move forward to the line of Bart Dziarski at RBC Capital Markets. Bart Dziarski: I wanted to ask around Element Mobility and the Autofleet. In your prepared remarks, Laura, you talked about lower structural costs and increased agility. And just hoping you can maybe help us out with some quantification or numbers around those 2 benefits? Laura Dottori-Attanasio: Yes. Happy to talk about both. And I'll ask Heath maybe to clean up my answer because I might not give you the answer that you're looking for, but from an Autofleet perspective, and I know this isn't what you're looking for, but from a payback period, from where I stand, this paid back in spades already like almost from the first month. So -- for Autofleet, very specifically, the company as a stand-alone, its ARR was up, I think, almost 50% over last year. So that's a positive. But more importantly, it's really everything it's been doing for Element or what we're calling Element Mobility. It's allowed us to bring in, and I had some of that in my prepared remarks, but bringing in all of our development in-house or a lot of it, I should say, we're just much more agile, and we can bring products to market sooner, so just shorter time to market. So I really see that as a sustained competitive advantage for us and that it's got just intrinsic value that is hard to quantify, although Heath is doing a pretty good job of that, where we're looking at the amount of cost avoidance we have, savings and reduced cycle times and whatnot. And that's what allowed us to create this Element Mobility that we talked about. And so it's really an umbrella, or if I could call it, a division that's meant to drive innovation across our fleet landscape. And so sitting under this, I can call it an umbrella, we have things we've talked about, our innovation lab, that's going to be focused on next wave technologies. So that will include some of the things we talked about earlier, whether it's autonomous vehicles, AI, we'd also look at robotics. So all the things that are really going to dynamically transform, I'd say, how businesses manage their fleets. And so that would sit there, would have our intelligent routing, ride-hailing, telematics, in-vehicle payments, et cetera. And so in setting that up for sort of what comes next, we think that will allow us to lead on, I'm going to say, transformation without losing focus on execution and the day-to-day stuff that we have that we do so well when it comes to leasing and different services that we provide. And so, for mobility, there is no real number as we sort of put things under this umbrella. And we're going to take 2026 to think through what that looks like. And I know I've over-talked, but I'll hand it over to Heath to see if he has what you're looking for, which are numbers. Heath Valkenburg: Bart, I'd probably break it down into 2 components. So the first one would be from a CapEx perspective and the spend that we had to incur to deliver some of our key projects that Autofleet have delivered. We saw a meaningful reduction in the cost of those. So a number of those projects we had scoped up with external parties prior to the transaction with Autofleet taking them on, we saw upwards of a 60% cost reduction. And that was partly -- or one of the reasons why we saw reduced CapEx spend of $71 million for the year relative to the $80 million target. So that is one benefit. The other benefit is on the operating expense side of the equation. You do see in the investor presentation, we break out the $9 million of efficiencies achieved during the year. What I would say is that most of our spend is really focused on digitization, product expansion and focused on growth, but that does have an added benefit on automating some internal processes and those sorts of things that do have an OpEx benefit as well. And I think you saw that in 2025, where our expense rate normalized from what was a double-digit expense growth rate in prior years to 7% in 2025. So looking forward, we expect our expenses will continue to grow as we do invest in the business, so new products, new capabilities, digitization, but we expect those efficiencies will continue to drive positive operating leverage. Bart Dziarski: Awesome. That's very helpful color. And then one thing that jumped out this quarter was we saw continued VUM acceleration despite originations declining. And so I think there is an underlying trend there where maybe you're not as reliant incrementally on originations needing to drive VUM growth. And if that's the case, where are you seeing some other benefits or wins, if you will, on the VUM side? Heath Valkenburg: Yes. So it's a great question. The VUM and the originations don't necessarily move in unison. We can grow VUM by bringing on service only VUM, and we can also have origination growth without actually driving VUM growth, where it's just clients returning an old vehicle and taking out a new vehicle at a higher cap cost. So they are somewhat decoupled. But over time, we expect growth in both originations and VUM. And as I sort of spoke on the top, we did see a slow start to the year on the VUM growth with macroeconomic environment. But pleasingly, we saw a strong increase in the back half of the year. And with things like Laura has spoken about, so Autofleet, Motus, Samsara, Car IQ, we expect that those things will also help us drive VUM growth and service revenue growth into the future. Operator: Our next question will come from Jaeme Gloyn at National Bank Capital Markets. Jaeme Gloyn: Just wanted to maybe dig in on the syndication a little bit, another quarter of greater than 3% yields. Is that something we should kind of expect here going forward? Or are there some other factors that's driving that for the past couple of quarters? And then, in terms of the volumes, thinking back to 2024, it was well over $3 billion. But outside of that, kind of in that $2.5 billion range. So just kind of want to get a sense as to how that -- you should expect that to flow from originations through to either average earning assets or syndications? Heath Valkenburg: Yes. Jaeme, so I'd kick it off by saying syndications, first and foremost, is a balance sheet management tool, so we ended the year at a debt-to-capital ratio of 67.9%, which is at -- 76.9%, I should say, which is in our target range of 73% to 77% and well below our debt covenant, which is 80%. In terms of the volume in 2025, we were deliberate in pacing syndications as we deferred transactions while we waited for the reinstatement of bonus depreciation. Since that's come in, we've seen sequential increases in volumes in both Q3 and then in Q4 again. What we also did in 2025 is we've really prioritized client level funding optimization, which, coupled with bonus depreciation has seen really strong results in syndication yields. Having said that, client mix does contribute to the strong yields. And we expect from an ongoing run rate perspective, it'd probably be more in line with the full-year average as opposed to what we saw in Q3 and Q4. Jaeme Gloyn: Okay. Great. And then, as we think about the Autofleet, I guess, penetrating more of the Element business, there is an ordering platform shuffling this quarter. What other -- are there other aspects of the business here that are right for that Autofleet to overtake? And, yes, I guess, maybe a little bit of color on some of those potential items that we could see down the road. Laura Dottori-Attanasio: Well, maybe, Jaeme, I'll kick it off and hand over again to Heath just for some numbers and to talk about the write-off, but with Autofleet, as I mentioned, we bought not just -- and we have great people there with their innovation, but the platform that we're looking to put all of our capabilities on to just given what a great platform that it is. And so, as time goes, that is the expectation that we will be on one platform, and it's all going to sit on Autofleet as the direction that we're headed on. And so for maybe this piece, Heath, if you want to talk just a bit about what we've done. Heath Valkenburg: Yes. So when we announced the Autofleet acquisition, part of the rationale was no doubt to enhance -- to acquire an enhanced tech platform, which would drive sort of client experience and those sorts of things, which Laura has touched on. So the announcement today really to move away from our legacy ordering platform really just reflects the efforts of the Autofleet team and the continued adoption of their technology. So we took a one-off write-down of a historical amount, $52 million noncash impairment, as we really move to a new technology that will drive meaningful improvements in the client experience and our business. And that's a one-off item that we don't expect to happen in the future. Jaeme Gloyn: Yes. I guess, what I'm getting at is like -- this is the ordering platform today, is there -- what -- is the entire Element business now on the new Autofleet ordering platform is -- maybe if I kind of extrapolate a little bit, like is there a mobile app where something similar, we see everybody move over to that new mobile app, something along those lines? Is there any additional color you can kind of dig into on that or am I just getting a little ahead of myself? Laura Dottori-Attanasio: No, it's great. Look, I want everything for yesterday also. But we're moving everything onto this new platform. And so parts of ordering are going there. We do have other platforms. So we've written this one off. There are smaller other things. So I don't want to say never from other write-downs perspective, although we wouldn't expect anything like this, I'm going to say, size into the short term in the future. But yes, everything would move on to this platform eventually, and so, we would have our Element ONE client portal, and there is an Element ONE driver app, and the 2 speak to one another. And so the -- both the portal and the app, and as you know, our app is out there, our portal will be releasing soon, has taken some time because we do have some existing technology that's out there, and we wanted to ensure we were very thoughtful about how we were coming up with the new platform. So essentially, all the change we've done have sat on both, I want to say, old and new platform, and that is to ensure integrity of data and information that we have so that when the new platform, if you will, is being utilized that no information, no data integrity is compromised, et cetera. And so that's why this has taken us longer. But I think that's your question, directionally, yes, everything is going to sit in this one place. Operator: [Operator Instructions] We'll hear from Stephen Boland at Raymond James. Stephen Boland: Sorry, I'll be quick here. Just in terms of the Car IQ, you mentioned that there has been some test cases with existing clients. Is the plan to just introduce this to new clients or start rolling out to the existing client base as well? Sorry, I just want to clarify that. Laura Dottori-Attanasio: Yes. Stephen, our plan is to offer it to our existing clients and to our new clients. So we're going to be looking at both. We -- well, I would say, we could do a forced conversion. That's not how we operate. Our plan is to offer it to our client base, and we will allow our clients to determine what they would prefer, if you will, to use. And so when I think of our partner there, Wex, we have had a long-standing and a really successful partnership with him. What we're doing here is, I'm going to say, we're really focusing just on making sure our clients are in the -- if I could say, in the right solution for them. And so I think of it kind of as, forgive us, a grocery store, where you think that you've got both trusted brands and your own high-quality store brand. And so that's sort of what our approach is going to be. And so we're really going to be providing our clients with choice and putting them in what we believe is the best offering. And as you know, all clients are different. And so, for some, it will be one option; for others, it will be a different one. But I'd just say that our priority is just going to be to ensure that we put our clients in the best offering for them. Operator: Ladies and gentlemen, that was our final question from our audience. This concludes the question-and-answer session. I am pleased to turn the conference back over to Laura Dottori-Attanasio for any closing or additional remarks. Laura Dottori-Attanasio: Great. Thank you, operator, and thank you all for joining us today and for your continued interest in Element. I do want to thank our investors and our analysts for their ongoing support and engagement and want to really thank our team members for their dedication because our achievements wouldn't be possible without their focus and commitment. So thank you, and we look forward to speaking with you again on our next quarterly call in May. Operator: Ladies and gentlemen, this does bring to a close today's conference. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the National Bank of Canada First Quarter 2026 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Marianne Ratte. Please go ahead. Marianne Ratte: Welcome, everyone. We will begin the call with remarks from Laurent Ferreira, President and CEO; Marie Chantal Gingras, CFO; and Jean-Sebastien Grise, Chief Risk Officer. Our business heads are also present for the Q&A session, including Julie Levac, Personal Banking; Judith Menard, Commercial and Private Banking; Nancy Paquet, Wealth Management; Etienne Dubuc, Capital Markets and [indiscernible] International. Before we begin, please refer to Slide 2 of our presentation for forward-looking statements and non-GAAP measures. Management will refer to adjusted results unless otherwise noted. I will now pass the call to Laurent. Laurent Ferreira: Marianne, and thank you, everyone, for joining us. For the first quarter of 2026, we generated EPS of $3.25, representing an 11% year-over-year increase. Our results were driven by strong performance across our retail and business segments as well as cost and funding synergies related to the CWB transaction and share buybacks. We generated a return on equity of 16.6%, and our CET1 ratio is solid at 13.7%. This morning, we announced that we are upsizing our NCIB to repurchase up to 14.5 million shares from 8 million currently pending regulatory approval. To date, we have repurchased 6.4 million shares under our program. Earlier this month, we closed the syndicated loan transaction with Laurentian Bank. The retail SME portfolios are on track to close by late 2026, subject to regulatory approvals. Our capital deployment priorities are to drive organic business growth and operational efficiency and to grow dividends at sustainable levels. This will be complemented by share buybacks and depending on opportunities, selective tuck-in acquisitions in P&C and wealth. We want to operate with strong capital levels and continue to target a CET1 ratio converging towards 13% by the end of 2027. Turning to our economic outlook. The geopolitical and economic backdrop continues to weigh on the economy. We are far from our GDP potential. Trade tensions and uncertainty around CUSMA are affecting our country and business investment has slowed down. Our economy must take a different strategic direction and go through structural changes. We are encouraged by our government's actions and by momentum across the country to reestablish our economic sovereignty. We are particularly pleased to see concrete actions towards our reindustrialization, including Canada's initiative to welcome the Defense Security and Resilience Bank as well as the announcement of Canada's defense industrial strategy. Turning now to our business segments. With revenues of more than $1.5 billion and net income of $442 million, P&C Banking delivered strong performance in Q1. We executed on CWB's integration with a focus on client transition and are realizing on cost and funding synergies. And we have also made early gains on revenue synergies from capital market solutions. Our balance sheet is growing. Personal mortgages grew 3% sequentially, a strong start against a mid-single-digit growth target for 2026. Commercial loans grew 1% sequentially, and we still expect to start growing the CWB portfolio in the second half of the year. Net income in our Wealth Management segment increased 13% year-over-year to $274 million, supported by strong growth in fee-based and transaction revenues. Assets under administration grew 3% sequentially to reach close to $900 billion with resilient equity markets and strong net sales. Capital Markets generated net income of $443 million, up 6% year-over-year, driven by strong contributions from both our trading and nontrading businesses. In Global Markets, our strong performance in equities was supported by opportunities in securities finance and elevated issuances in structured products. We continue to see steady opportunities in our rates and credit business as expected. Meanwhile, corporate activity supported by strong equity and debt issuances and banking revenues in our CIB franchise. Credigy delivered net income of $47 million with average assets up 9% year-over-year and 1% sequentially as we continue to benefit from recurring flows from established partnerships. We remain highly disciplined in pursuing new deals given the prevailing competitive market dynamics and pricing conditions. At ABA Bank, net income increased 9% year-over-year, reflecting balance sheet growth and a build in performing PCLs. Revenues were up 13% over the same period with deposits and loan up 18% and 11%, respectively. I will now pass the call to Marie Chantal. Marie Gingras: Thank you, Laurent, and good morning, everyone. We delivered strong results in the first quarter. Revenues rose 21% year-over-year and PTPP grew 23%, driven by solid organic performance across all segments and by the CWB transaction. Operating leverage was positive at 2%, supporting through focused execution and synergy realization. Excluding CWB, revenues increased 11% year-over-year and PTPP rose 12%. Expenses were up 10.2%, driven mainly by higher variable compensation. Excluding variable compensation, expenses rose 8.6%, in part driven by salaries and benefits. Moving to Slide 9. Net interest income, excluding trading, grew 5% sequentially. Prepayment revenues of $12 million were generated in Credigy, contributing 1 basis point to the all-bank margin. The P&C segment benefited from strong balance sheet growth and margin expansion of 2 basis points sequentially, driven by higher margins on both loans and deposits. In Q1, we reclassified $30 million NII from trading to nontrading, which had no impact on the bank's total revenues. Excluding this, nontrading NII grew 4% sequentially, while the margin was up 2 basis points. Looking at next quarter, we expect the P&C NIM to remain relatively stable from Q1 levels. A better deposit margin is expected to be largely offset by balance sheet mix as loan growth continues to outpace deposit growth. Turning to Slide 10. We continue to grow both sides of the balance sheet. Loans rose 23% year-over-year or 9%, excluding CWB, reflecting contributions from all segments. Deposits increased $5 billion or 2% sequentially. Personal deposits grew $1.5 billion, mostly driven by Wealth Management and ABA. Now moving to capital on Slide 11. We ended the quarter with a CET1 ratio of 13.74%, supported by capital generation of 41 basis points. RWA growth consumed 14 basis points of capital. Business growth of approximately 26 basis points, partly offset by a reduction in credit risk RWA from refinements as well as a change in the CAR 2026 methodology for Market Risk. Share buybacks during the quarter reduced the CET1 ratio by 33 basis points. Since the launch of our current NCIB, we have repurchased 6.4 million shares, representing 80% of the current program. Now turning to Slide 12. We have realized $176 million of cost and funding synergies to date, exceeding our year 1 target of $135 million. We continue to build strong momentum on synergy realization and remain on track to deliver $270 million by the end of fiscal 2026. On revenue synergies, we are progressing as planned towards our $50 million target by year-end. We delivered a strong start to the year, supported by solid underlying performance across all business, ongoing cost execution and realization of CWB synergies, all while credit remained aligned with expectations. In addition, we accelerated share buybacks under our existing share repurchase program. Accordingly, EPS growth in 2026 is now expected to be at the top end of our 5% to 10% outlook. Reflecting these factors, we are raising our 2026 ROE target to around 16% from around 15% previously. On Slide 13, we outlined a path to our ROE objective of 17% plus in fiscal 2027. We forecast that organic earnings growth over 2026 will add approximately 110 basis points to ROE. We also assume incremental CWB revenue synergies will contribute 20 basis points in 2027. The previously announced EPS accretion of 1.5% to 2% from the Laurentian transaction will add approximately 30 basis points to ROE. Reaching a CET1 ratio of 13% by the end of fiscal 2027, helped by share buybacks accounts for approximately 40 basis points of the increase. Finally, ROE will be reduced by approximately 100 basis points, reflecting the capital required to support RWA growth. So together, these drivers are expected to deliver an ROE of 17% plus. With that, I will now turn the call over to Jean-Sebastien. Jean-Sebastien Grise: Good morning, everyone. Since our last call, Canadian economic growth has remained modest and the labor market continues to be soft. Headwinds persist, including trade tensions and uncertainty around CUSMA. However, a lower interest rate environment, diversification of trading partners and plans to fast track nation building projects should help support economic activity. In this complex environment, our resilient portfolio mix, disciplined risk management and prudent provisioning underpinned our strong credit performance. Now turning to the first quarter results on Slide 15. Total PCLs were $244 million or 32 basis points, down 1 basis point quarter-over-quarter. We added 3 basis points on performing provisions in Q1, primarily driven by portfolio growth, partially offset by more favorable macroeconomic scenarios. PCL on impaired loans were $215 million or 28 basis points, stable quarter-over-quarter and within our guidance of 25 to 35 basis points for the full year. At CWB, impaired PCLs were 33 basis points, down 36 basis points quarter-over-quarter. Personal Banking provisions were $3 million higher sequentially, mainly driven by consumer credit. Commercial Banking provisions were primarily driven by 3 files and were down $9 million quarter-over-quarter. Capital markets provision rose by $15 million, largely reflecting one previously impaired file in the mining sector. At Credigy, provisions increased by USD 6 million, in line with expectations, resulting from the normal seasoning of residential mortgages and consumer loans. At ABA, impaired provisions were down by USD 8 million sequentially to USD 17 million, in line with lower formations. Turning to Slide 16. Our total allowances for credit losses were $2.5 billion, representing 5.9x coverage of our net charge-off. Our performing allowances were $1.6 billion, demonstrating a strong performing ACL coverage ratio of 2.1x. We have been building allowances for the past 15 quarters and continue to be comfortable with our prudent and defensive provisioning levels. Turning to Slide 17. Our gross impaired loan ratio was 111 basis points, excluding USSF&I, GILs were 81 basis points and remained flat quarter-over-quarter. Net formations were down 8 basis points compared to last quarter, primarily driven by commercial and capital markets. In conclusion, we are pleased with the credit performance in the first quarter and continue to expect that impaired provisions will be within the 25 to 35 basis points range for the full year. While we remain cautious as we navigate ongoing uncertainty, our defensive qualities, resilient business mix and prudent allowances position us well for the rest of the year. And with that, I will now turn the call back to the operator for the Q&A. Operator: [Operator Instructions] Your first question comes from Matthew Lee with Canaccord Genuity. Matthew Lee: Maybe I want to start on the new segmented ROE breakdown you've provided. Canadian P&C looks a little bit lower than some of the peers at 13%. Can you maybe just talk about why that might be and what opportunities you have to get closer to industry levels? Laurent Ferreira: Matt, thank you very much for your question. This is Laurent. Look, it is subpar versus our peers, and we're aware of that, not surprised. But what I think we want to highlight here is there's going to be upside for us. We have started a strategic review of the sector. We plan to do this throughout the year, and we'll be able to provide you update maybe towards the end of the year. But at this point in time, I guess the message is there's upside in terms of our performance in P&C, ROE, but it is too early to provide you with the outcomes and the magnitude that we think we're going to be able to deliver. Matthew Lee: Okay. Got it. Yes. And then maybe on the new ROE guidance for 2026, I think the delta is probably about half of it to the buyback. But can you maybe talk about what's changed in the operations from the last 80 days or so that make you comfortable to change '26 and then '27? Marie Gingras: Matthew, it's Marie Chantal. I can follow up with your question. So thanks for that. There's a significant amount of information on that slide. So maybe let me break down the key components underlying our path to 17% plus ROE by 2027. And I'll start with 2026. So as you heard us say, we're increasing our target for 2026 from 15% previously to 16% -- approximately 16%. So we did have a very strong start to the year, and we are very pleased with the performance of the first quarter and encouraged also by the trajectory that we're seeing for the rest of the year. We've had solid underlying performance across all our businesses. We continue to execute with discipline the CWB synergies, credit remains within our guidance. And we, as you saw, continue to be very active on the NCIB program that we just increased. So those are the different drivers that brings us to the 16% for the end of fiscal 2026. When we move on to 2027, we do plan for organic earnings growth at the midpoint of our 5% to 10% growth in net income to common shareholders. This represents 110 basis points on the increase, and it factors in efficiency improvement at historical level. So anything above that would be upside. When we look at revenue synergies, we reflected in 2027 $90 million incremental revenues which is in line with the midpoint of our target. So again, anything above that would also be upside. Those revenue synergies when net of applicable expenses, PCL and taxes, they contribute for 20 basis points to our increase in 2027. Moving on with the Laurentian Bank transaction. So as disclosed last quarter, it's generating EPS accretion of about 1.5% to 2% in the first year, and that's equivalent to 30 basis points of ROE. And that's assuming that we close by the end of 2026, which is still our target. And then lastly, on capital, we continue to converge to a CET1 ratio of 13% by the end of 2027, and that would generate 40 basis points of ROE. And then the CET1 required to support our RWA growth net of benefit from the AIRB conversion is [ 100 ] basis points. So that brings us to our 17-plus ROE objective for 2027. So let me tell you now what it does not include. It does not include any credit improvement. And as Laurent said earlier, it does not include any potential upside in the P&C segment coming from our strategic plan. So those are the main drivers contributing to our 17% plus ROE for 2027. Operator: Your next question comes from the line of John Aiken with Jefferies. John Aiken: Apologies about that. Hopefully, a couple of quick questions on Credigy. In one of the prepared comments talked about the market and the pricing conditions. Can we expect then to see possibly lower volume growth because of that similar to what we saw Q4 over Q3? And then secondarily, it looks like there was wider net interest margins for Credigy in the quarter. Was there anything unusual that was driving that? Etienne Dubuc: John, thanks it's Etienne. So to maybe describe the quarter for Credigy and what the outlook looks like. So we had strong deal flow in Q1 with more than $700 billion (sic) [ $700 million ] deployed, and that led to a solid quarter-over-quarter growth in average assets, including the prepayment that we alluded to in the script. So specifically, we had a loan prepayment of close to $300 million, and that impacted sequential growth and that impacted margins. So if we look at the outlook because you're right. So we -- there's strong deal flow. There was a good momentum, but the current deal pipeline suggests deal activity could be a bit slower in Q2 2026. And that's really a function of the market still being very competitive and not meeting really our pricing thresholds right now in most cases. But for the full year, we expect growth to remain on our long-term target range of 5% to 10%, with margins expected to be fairly stable and to be -- and to continue to be really attractive and accretive for the bank. Operator: Your next question comes from the line of Sohrab Movahedi with BMO Capital Markets. Sohrab Movahedi: Thank you very much for the ROE waterfall. Etienne, pretax pre-provision in capital markets in '25 was a very strong, I think, $2.2 billion or thereabouts. Coming into this year, I think you were trying to guide us to $1.8 billion to $2 billion. Having the first quarter under your belt, is there any revisions or updates to the pretax pre-provision for capital markets for the full year? Etienne Dubuc: Sohrab, it's Etienne. Thanks for the question. So maybe I'll walk you through our thinking in terms of the outlook because, yes, quick answer is that we feel increasingly good about our Jan outlook that was calling for, like you said, a PTPP number in the $1.8 billion to $2 billion range. You still have macro uncertainty. You still have geopolitical uncertainty but we see client dialogue remaining active and a really good deal pipeline. There is pent-up demand. There's corporate balance sheets that are strong, and you have attractive funding conditions. Also, we feel the November 2025 federal budget priorities will catalyze M&A as companies reposition around these strategic areas. And on the market side, the investor interest remains high. Market-making activity in equities and rates continues to be robust. So this bodes well for the next few months in trading. So considering all that with this healthy momentum we see across the businesses, we feel good about our ability to hit the upper part of this range of $1.8 billion to $2 billion. Does that help? Sohrab Movahedi: Yes, it's very helpful and comprehensive. And then just one quick one for Jean-Sebastien. I mean, Jean-Sebastien, you've talked about the economic outlook and the sluggish kind of backdrop. Does the -- 2 questions. Do you still feel as skewed, I'll call it, when it comes to credit risk to Quebec post CWB acquisition? And do you still feel that, that Quebec skew is a relative positive for you as you look through the next 12, 18, 24 months? Jean-Sebastien Grise: Thank you for your question, Sohrab. So obviously, very pleased with the results that we've had in our first quarter, so lower part of our guidance. And when you look at our different types of portfolio, I think my answer will be a little bit different for all the different portfolios. Obviously, our retail portfolio and when you look specifically at our residential portfolio, we do see a difference in performance in terms of delinquency between Quebec and between the rest of Canada. So obviously, when you look at our book there, we're 52%, 53% Quebec, 27% insured. I think we're exactly where we're supposed to be. Then when you look at commercial, obviously, we bought a bank that has a commercial footprint, and we're comfortable with the performance. You saw this quarter also a vast improvement in terms of the PCL performance of CWB. It's a more lumpy portfolio because it's a portfolio that has more commercial side to it. But I would say there, we will follow the strategy we've been talking about before, which was we will grow in general commercial more than in real estate, and we're pleased with where we're going right now. Operator: Your next question comes from the line of Doug Young with Desjardins Capital Markets. Doug Young: Laurent, your prepared remarks, you talked about CWB revenue synergies, and I think you talked about early gains in capital markets and solutions and then starting to grow the CWB, I think, loan book in maybe the back half of this year. Just hoping you can flesh this out a little bit more? Laurent Ferreira: Judith, do you want to take that one? Judith Menard: Yes, I can take that one. Laurent Ferreira: Judith is going to take the question, Doug. Judith Menard: Thanks, Doug, for your question. So as expected, as Laurent said in his script, we're seeing revenue synergy mostly in noninterest income coming from capital markets. So mostly RMS M&A company, which is a group we formed 2 years ago, but they are active in the market right now. So we expect NII synergy to start materializing in the second half of 2026, and we're still on track to reach the target of $50 million for 2026. So our key levers include enhanced risk management solution, as I said, balance sheet expansion within existing and new client relationship, which we're seeing right now. We see some good wins around that, deployment of our cash management capabilities and leveraging CWB's equipment financing expertise for National Bank Alliance. So we just formed a group in Quebec to leverage CWB Equipment Finance, which is also a positive in our integration. Doug Young: Just a follow-up. I mean, relative to the targets that you set when you did the deal, we saw the expense side. But on the revenue side, in particular, how are you feeling about your ability to kind of get this? You were ahead of plan on the cost side. Are you ahead of plan in terms of where you thought you'd be on the revenue synergy side? Judith Menard: Yes, we're slightly ahead of plan for Q1, and I'm feeling very positive for our target, which is like the pipeline is good with CWB. This is -- we're still in the integration phase. And that's why we said that we're going to grow on the last 2 quarters. So conversion is finished. So this is a big milestone that we just achieved last weekend. So conversion is finished. We're still training people. There's a lot of things that we need to train people on processes, platforms, client value proposition as well. How do we -- you pitch National Bank when you're in CWB. So all of that is happening. So for me, I'm very positive, and there's very good momentum in the field right now. Doug Young: Okay. And then just second question, and I think I've got this right, but you can correct me if I've got it wrong, but it looked like there was a 10% quarter-over-quarter sequential increase in market risk RWA. What would have driven that? Etienne Dubuc: Doug, it's Etienne. So that market risk increase, I don't -- I cannot point you to a specific factor. What I'll say is that FRTB, because it does not take into account the different correlations and optionalities we have in terms of protection, especially on the downside, FRTB tends to move in ways that are less intuitive. We don't get the benefit of our diversification. So for example, we could have more downside protection, but run a slightly longer delta exposure, and that would show up as higher RWAs. So -- and it's also very point in time. So it tends to move. So that's really what I see in terms of explanation for that RWA. I don't think I would make -- I would conclude from that movement. Doug Young: Okay. So this is an unusual quarter. You wouldn't expect this level of expansion, I would assume, quarter in, quarter out. Etienne Dubuc: I'm sorry, I did not get your question. Doug Young: No, just like -- it sounds like this is an abnormal increase in market RWA. Is that what you're trying to say? Like there's... Etienne Dubuc: No, I don't think so. I think market RWA moves up and down in that kind of amplitude a lot. It's just that it's very difficult for me to point you to there was a -- it's because of volatilities or because of our different positioning, which is why it's very tough to conclude something really specific. Doug Young: Okay. Just one maybe last quick one. In your ROE waterfall, you talked about share buybacks. Can you quantify like what -- like I see the impact of buybacks, but like what level of buybacks are you assuming? I don't know if you can quantify it kind of... Marie Gingras: Yes. Doug, it's Marie Chantal. So what we've included in our buyback is for 2026, we're planning to execute on our NCIB program that we've just increased this morning, and that's up to September 2026. And then when you look at 2027, what we're expecting to do is really, as I explained earlier, is continue buybacks to converge towards a CET1 ratio of 13% by the end of 2027. So in line with what we had also shared last quarter. Operator: Your next question comes from the line of Paul Holden with CIBC. Paul Holden: First question is with respect to that ROE waterfall guide for 2027. Just want to understand the assumption behind no improvement in PCL. Is that just because you're baking in conservatism? Or are you suggesting that sort of the 25 to 35 basis points should be sort of the good run rate for National long term? Jean-Sebastien Grise: Paul, it's JS. I'll take this one. Obviously, we don't give guidance to 2027. We're keeping our guidance for 2026. We're very comfortable with 25 to 35 basis points. So I think your assumptions are correct. It's somewhere within the guidance that we have this year that we're applying for next year. Paul Holden: Okay. Because I thought I heard an earlier comment that there is no benefit in the ROE waterfall for 2027 from PCLs. So again, just trying to understand why that assumption would be made if it's conservatism or if you're suggesting something else. Marie Gingras: Paul, it's Marie Chantal. So just to make sure that I was clear earlier, there are no upside in 2027 included in our waterfall coming from credit improvement. So I guess that's what Jean-Sebastien was explaining that we're keeping our 25 to 35 basis point target similar for next year. Jean-Sebastien Grise: So you could see it's prudent. Paul Holden: Got it. Okay. Okay. Another question for you and maybe going back to one of the original questions on the ROE for Canadian P&C banking. When I think about the different levers, one of them clearly is net interest margins and particularly as it relates to low-cost funding. So on that point, when I look at the average deposit balances for personal, see it's declined the last couple of quarters, not by a large magnitude, but still sort of 2 quarters in a row, and that's typically where I tend to look for low-cost deposits. So one, can you kind of address what's driving that decline? It might just be term rolling off? And two, is it right to assume you'd obviously want that to go in the other direction? And if you can give any kind of sense on plans around that. I know Laurent said it's early, but love to hear any thoughts on planned deposit growth. Unknown Executive: This is Julie. I will start by giving you the personal deposit view, and then I'll pass it along to Judith and Nancy to provide a holistic view. So on the personal deposit side, we're down about 1% Q-over-Q, and that movement is largely explained by the CWB portfolio. As expected, we saw higher attrition in the CWB deposit book, which was built really around higher rate offerings and therefore, attracts a more noncore monoproduct customer segment. Some runoff is natural, and we -- and it's fully consistent with our expectations at the time of the acquisition. From an NBC point of view, when you look at deposit and mutual funds together, total client assets continue to grow, which is also a good measure of franchise momentum. With rates expected to remain low, deposit growth will stay neutral. Judith? Judith Menard: Yes. So on the commercial banking side, so deposit growth was strong in Q1, and it made a clear acceleration versus 2025. So I'm very pleased about that. Growth was broad-based across all segments, supported not only by the government and public sector, but also by a stronger contribution from general commercial, confirming solid and sustainable funding momentum. This is something that we wanted to see, and we're starting seeing. So again, I'm really pleased about that. So Nancy, you want to complement on the Wealth? Nancy Paquet: Yes. So for Wealth Management, demand deposit growth is consistent with what we see when client base and adviser base expand. More client relationship typically means more operating and investment cash balances, obviously. So the relation of demand deposit to AUA in each business is more stable. So as our AUA grows, our demand deposit grows as well. So we're very happy with the trend that we see and positive. Paul Holden: Okay. Just one follow-up on that. I don't think you break down deposit margins versus loan margins or if you do correct me. But how -- just on the deposit margin, like should we view even though the personal deposits declined, it sounds like it's high cost. Like was that positive for deposit margins? Is that how we should read that? Marie Gingras: So Paul, it's Marie Chantal here. So on -- when you look at the P&C NIM for the quarter, we saw a strong balance sheet growth with higher margin on both loans and deposits. So yes, in the quarter, it's something that we've seen. Operator: Your next question comes from the line of Mike Rizvanovic with Scotiabank. Mehmed Rizvanovic: First one for Marie Chantal. I just want to go back to the $270 million. Given that, that guidance was provided a while ago, obviously, you're more in the thick of things in terms of getting to where you want to be. And you're obviously ahead of schedule on that. So I'm wondering, is this a function of maybe that $270 million was potentially a bit conservative or you've just gotten there quicker. You've been able to execute quicker on getting those cost and funding synergies. I think a lot of investors have the same question that I have. And just in terms of -- I'm not trying to pin you on new guidance, but how should we look at the $270 million? Is there a possibility that it could be beyond that beyond 2026? Marie Gingras: So thanks, Mike, for the question. So you're right, we are executing more rapidly than what we had expected. And we continue to track ahead of plan in terms of execution that supports our confidence that the full target will be achieved as expected before the end of fiscal 2026. As Judith was saying, we just finalized our fourth and final client migration last weekend. So we are now very confident in achieving that target in 2026. Mehmed Rizvanovic: So no color on potentially going beyond that at this point. Too early maybe? Marie Gingras: No, no, not at this point. We're -- as I said, we just finalized the last conversion, and then we'll see what this brings next. Mehmed Rizvanovic: Okay. Fair enough. And then maybe just one for Julie. Just on the mortgage growth in the quarter, I think 3% sequentially. That's actually a very impressive number just in the context of what's happening in the housing market. And I'm just wondering, is this largely the Quebec-focused dynamic? Just Quebec is -- it just happens to be a much better market for growth these days? Or is it more so that you're doing something to win market share and just doing something better than your competitors currently? Unknown Executive: So thank you for the question. Obviously, we're doing something better. We delivered 11% year-over-year portfolio growth, which is impressive, driven by market conditions being more favorable. We delivered growth while improving our margins. Thus the business generates strong NII. As always, we maintain a disciplined and stable pricing strategy that supports sustainable penetration. And specifically in Quebec, our market share continues to expand, supported by strong brand positioning and deep long-standing real estate relationship. Mehmed Rizvanovic: Okay. And just one really quick follow-up on that. So what about the Optimum portfolio that was acquired? I'm wondering if that book is growing as well. I'm guessing that's embedded in the overall resi mortgage balance. I don't recall the size of Optimum, I think $3 billion purchase, but is that being expanded as well? Marie Gingras: So currently -- thank you for the question. Currently, the Optimum has around 4% part of our -- the real estate book for -- on the personal side. We demonstrate through Optimum strong performance, and it's at the core of our diversified strategy. Short to midterm, it's disciplined growth. So our main objective remains quality over volume. Mehmed Rizvanovic: Okay. So part of that growth is inclusive of Optimum balances as well, correct? Marie Gingras: Yes. Operator: Your next question comes from the line of Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: I guess just a follow-up question, one on the ROEs. I guess one more question on the ROEs. But when we think about the capital markets, the Slide 23, one, do you see the mid-20% ROE as a sustainable ROE actually? This is the other side of the P&C business where you see upside. When we think about the capital markets business and the mid-20% ROE, is that sustainable? Could that get better, worse? Like how should we think about it? And second, I think, Etienne, you talked about FRTB impact on RWA as we think about the Fed maybe putting out a new Basel end game proposals in the U.S., is there any discussion with the OSFI around FRTB rules or any discussions around whether that could get revisited in Canada? Unknown Executive: Yes. Thanks for the question, Ebrahim. So I'll start with the ROE and give you some color because, yes, mid-20% is obviously a very good number. We want to keep it in the 20%. And the way that we think about it, I think the biggest driver is our business mix. We want to continue to focus on scaled businesses in global markets where we generate strong returns through the cycle, including in a more volatile period. And when you get volatile markets, activity usually increases, spread widens, dislocations create opportunities, and those are environments where these franchises can be very resilient. And also, part of how we think about it is how we've been disciplined about where we deploy capital. We stay nimble and allocate capital dynamically based on client demand and based on risk-adjusted returns rather than trying to do everything. And I think that discipline matters a lot, and we'll continue to do that. There's also an efficiency part. We've maintained a strong focus on cost discipline as we've scaled the franchise. And we've continued to invest in technology, particularly in our trading and issuance businesses. And on the corporate and investment banking side, there's upside there because we've made focused investments over several years that are paying off. We strengthened connectivity with the markets teams. We've increased our share of wallet, share of leads, and we've been very intentional about prioritizing sectors where we see long-term strategic importance and where we can build real franchise strength. So it's a consistent strategy. Ideally, we want to maintain it where it is now. I think that trading will not always be that good, but there's upside on the corporate and investment banking side. So we'll continue to stay focused on scaled, high-return activities and maintain cost control and invest in the right client franchises. I think for your second question, Laurent has more discussions with us than I have. So I think he could give you color on the FRTB. Laurent Ferreira: So Ebrahim, thank you for your question. And you're right on point. I think I talked a bit about FRTB before and that it has certain volatility and it doesn't capture all the risk the way I think we should capture it. With our peers, we have brought it up to OSFI as something that one we think does not capture the risk. So that's one with U.S. banks or European banks, which are not subject to FRTB at this point in time. So we have a healthy discussion with our regulators about FRTB. Ebrahim Poonawala: Got it. That sounds healthy. And I guess maybe following up on a question I think Paul Holden was trying to ask was, as we think about -- I get that you don't expect PCLs to decline next year versus this year. But maybe there is a mark-to-market as you think about the Canadian economy and your loan book, do you expect PCLs or impaired PCLs to improve as the year moves and as we think about just fundamental credit quality? Or is it still too uncertain, too soon to tell? Unknown Executive: I think it's the latter. But when you look, we're starting at a very strong position, right? So we're starting at 28 basis points, so strong credit quarter. We're also very pleased with the lower level of formations, but it's an environment to stay humble. We're still in the credit cycle. We're still seeing recuperation rates in non-retail and the big one is CUSMA. So as long as CUSMA is still in flux, there's still some risks. And it's very aligned to what I said about our 2025, where we could see swings between quarters, 10 basis points between ups and downs, but we are maintaining our 25 to 35 basis points guidance for the year. Operator: Your next question comes from the line of Mario Mendonca with TD Securities. Mario Mendonca: First a question on the advisory business, the underwriting advisory. It would appear that you've reached an entirely new level. The last 3 quarters, the underwriting advisory revenue is up something like, what is it, 50% to 90% relative to comparable quarters. I figured to some extent, this is what the market has given you, but it seems like there's more going on here. Can you talk about what National has done specifically, either it's bankers, geographies, products, something new you've done over the last 3 quarters that's driving this? Etienne Dubuc: Thanks for the question, Mario. It's Etienne. It's true that in C&IB, you saw broad-based strength across the franchise, and that led to, well, more than 30% increase of revenues from last year. I think where we saw much higher activity year-over-year is in deal flow and advisory mandates across equity capital markets and M&A. These were really slow last year, if you remember, at this time of year, and it's gotten really active this year. And that's across multiple sectors. It's not just metals and mining as some people think it's been very diversified. And we think really that M&A backdrop remains constructive. We've had our best M&A year ever last year, and that fueled activity across the broader franchise. And I think -- and that's also including ancillary activity like risk management solutions. So that's also very encouraging. We've advised on several mandates, including both public and private companies across infrastructure, power energy, mining, industrials. We also continue to see activity building with private companies. That's something we're working on. And with the ongoing integration of CWB, I think that positions us to further deepen our penetration in Western Canada. And in debt capital market, it's been really consistent. The growth has continued as clients took advantage throughout the quarter of very open and attractive funding markets. So yes, the franchise has evolved. As I was saying in my answer to Ebrahim, we've really increased the number of leads, the number of share of wallets. We've made -- continue to make some investments on that side. And I think this partly explains why we've had a bit of a higher tick in the expenses this quarter. I think we continue to build to accompany the growth, especially in Canada. Mario Mendonca: So it sounds like your answer is both. Like the market has been super helpful, but you've made a bunch of investments in this business as well. Those are both. Etienne Dubuc: Yes, I think that's accurate, Mario. Yes. Mario Mendonca: All right. Now going to this ROE disclosure, it raises more questions, frankly, than it answers because the segment ROE domestic is, what, 600, 700, 800 basis points lower than most of the other banks and your capital markets ROE is probably 600 or 700 basis points higher than the other banks. When you present disclosure like this, do you put any effort or thought into whether your capital allocation is different or the same as your peers? Like how can we be comfortable or maybe the answer is we shouldn't be. How can we be comfortable that these ROE calculations are even comparable to the other because they're so wildly different? Laurent Ferreira: So maybe I'll take this one, Mario. I think the scale has something to do with it in terms of our performance in P&C. We knew that for a long time. But we approach this as an opportunity. Part of the reason why we disclosed ROE per segment is because we believe that we could improve it significantly over time. And that's something that we started working on. Julie has been with the bank for a very long time and has started in her role and is looking at that specifically right now. So they are comparable. I mean all banks are different. And I think it is something that we are going to focus on over the next several years. And we do believe that we are going to be able to deliver more. Again, early days, we're starting a strategic review of our segment. And we'll -- as always, we're going to provide updates on potential outcomes and upside. Mario Mendonca: So just to be clear, you're suggesting that the 12.7% ROE in P&C Banking at National is comparable to the 20% plus from some of the larger banks and that scale accounts for that difference? Because you don't really see it in the -- well, that's not fair. You do see it in the efficiency ratio. So perhaps that's the answer. It's the efficiency ratio of 51% versus some of these larger ones around 40% to 45% -- that's the point. Jean-Sebastien Grise: You got it. Operator: Your next question comes from the line of Darko Mihelic with RBC Capital Markets. Darko Mihelic: Maybe before I hit my question, just on that point, I mean, it looks like you're using an 11.5% ratio to allocate capital. So presumably, as you get benefits from CWB on AIRB, that would flow through as well. Would that be fair? Marie Gingras: Yes. That's correct, Darko. We are using 11.5% for the capital allocation on the ROE segment that we've started to disclose this quarter. Darko Mihelic: Okay. And then just maybe just my question really is just for modeling purposes, I just want to sort of visit the other segment. I mean there was help from treasury, some gains in there. How should I think about that help in the quarter and a modest loss? And what should I think about it going forward? Marie Gingras: So thanks, Darko, for the question. So I'll answer the best I can do for your modeling. So on the revenue side, we've experienced 2 things this quarter for the other segment. So larger investment gains that we realized compared to prior periods. And we've seen the overall level of performance from treasury also improving. On the expense side, we expect lower levels in 2026, mainly from variable compensation, which was elevated in 2025. And remember, last quarter, we've given a guidance of a PTPP loss for the other segments ranging between $225 million to $275 million. We're pointing now more towards $225 million. Darko Mihelic: Okay. Okay. That's helpful. And just with regard to treasury activities, what is it that's helping you there? And how should we think about that for the rest of the year? Marie Gingras: Well, as you know, in your other segment, our banking book interest rate risk is centralized into our treasury group. So you can see some variation from quarter-to-quarter in the performance. So volatility is expected, and we're comfortable with what we're seeing so far. Operator: Your next question comes from the line of Jill Shea with UBS. Jill Glaser Shea: I just wanted to follow up once more on the ROE waterfall. Just in terms of the RWA growth piece that's impacting the ROE by 100 basis points. Can you just talk about the pace of organic growth embedded in there? Does that embed an acceleration in loan growth relative to what you're pacing currently? Realizing that, that number is actually net of the AIRB conversion benefit. So just trying to think through the balance sheet growth component versus the benefit from AIRB that's embedded in that number? That would be helpful. Marie Gingras: Thanks, Jill. It's Matt Chantal. So yes, on the RWA growth, we're expecting 100 basis points there. When you look at our RWA consumption, historically, we've been disclosing approximately 30 basis points on average every quarter. So I guess that assumption would be the right one to think. As we're moving with the synergy revenue on the conversion of CWB, Judith was sharing that we're expecting high single digit in terms of loan growth. Etienne was talking about a good pipeline as well on the corporate side. On the mortgage side, we expect the portfolio to grow in the mid-single-digit range. So those are some of the assumptions that you can continue to use for understanding our ROE target for 2027. Operator: We have no further questions at this time. I will now turn the conference back over to Laurent Ferreira for closing comments. Laurent Ferreira: Thank you, operator, and everyone on the call. Our Q1 performance was strong, and I'm very happy with our execution, and you should expect us to continue to focus on delivering sustainable earnings growth and a premium ROE. On that, thank you. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Enrique Martinez: Good evening to all. I'm very pleased to be with you today to comment on our 2025 annual results, a defining year for the group, with, of course, the launch of the Beyond Everyday plan. I'll begin by presenting the highlights of the year, and then Jean-Brieuc, our CFO, will detail our financial results. The figures we're presenting today follow-on from the preview of the 26th of January after the EP Group tender offer. Lastly, I'll come back for the conclusion and will be available, both of us, to take your questions. So if you're following the Slide #4, our revenues are up 0.7% on the year, notably driven by services, posting a double-digit growth across the majority of geographies. Trends and consumption, the situation is contrasted. We have a challenging consumption situation in France, notably in Q4. In this context, we're nevertheless up. It's a good performance that we believe 2 points above the market trend according to the figures published by the Bank of France at the end of January. The rest of Europe, we're delivering strong growth of plus 1.1%, driven by very good performance in Spain and Portugal. Our results are, therefore, solid with current operating income of EUR 203 million, that's 2% of our revenue, and a very solid free cash flow at EUR 145 million. As I said, Jean-Brieuc will return in detail on these figures in a few minutes. We presented back in June 2025, our new strategic plan Beyond Everyday through 2030. This plan follows on the successful previous plan. Last year, as you know, early '26, EP Group, a leading shareholder through its subsidiary, VESA, announced the planned tender offer on our company. Over the years, we've built a trustful relationship with them. And we welcome this expression of interest. Moving to Slide 5. After the success of our Everyday plan, Beyond Everyday projects us into the future, resting on 3 strategic pillars that we'll recall. To become the benchmark play on high value-added products and to accelerate the rollout of subscription services with circularity is the main focus. Secondly, define the market standards in terms of customer experience across all touch points. And lastly, develop our expertise with our partners and across all geographies through 2030. We've also defined ambitious objectives at group level and notably in financial terms with a growth of our operating margin to reach at least 3% in 2030 and cumulative free cash flow of at least EUR 1.2 billion over the period 2025, 2030. Regarding the first pillar that's focused on the rollout of subscription services and circularity, we got specific indicators to measure our progress and reach our objectives. We're aiming for 4 million subscribers by the end of 2030. At the end of 2025, we've already reached 2.4 million subscribers. We aim a twofold increase of our revenue on 2nd Life offer. In 2025, we recorded growth of 24% over 2024 on the same offer. Lastly, at the end of 2030, a contribution of service activities to our growth margin from 25% to 30%. We're already at 27% at the end of '25. That's a growth of 200 basis points over 2024. Develop the reflect of repair and purchase of the reconditioned products requires very proactive initiatives. To strengthen transparency on household products and to remove obstacles to 2nd Life products, early 2026, we launched the Digital Passport for large household products, and we aim for the deployment of 1 million products by the end of the year. Moving to Slide 7. On Pilar 2 of the Beyond Everyday plan, we want to define the market standards in terms of customer experience across all touch points. This requires investing in our stores of the duration. We plan to renovate over 200 stores and to open 150 stores over the lifetime of the plan. This year, we've already reopened Fnac at Callao, center of Madrid, the new store of Barcelona transferred to the Ramblas, and the new Fnac in Dijon. For Darty, we've opened Rouen in the Docks 76 shopping center, still benefiting from the latest innovations. The momentum of openings will continue in Portugal, where, at the end of the year, we launched the Darty brand that we plan to develop. The brand is already benefit, great spontaneous recognition amongst household and consumer electronics in just a few months. Store traffic is up 4% and revenue is up 10% since the change in the brand. Return to Pillar 3, we'll deploy our expertise with our partners and across all geographies. Online sales are up almost 6% in '25, with an increase in traffic and volumes, representing 22% of total group sales today. Click & Collect continues to confirm its success. It represents over 50% of our online sales. And we, in fact, have more than 9 million products recovered in stores in 2025. This figure shows the power of our model. We've seen a very dynamic activity in 2025 in our marketplace activities of the Reverse Marketplace, and our JV for logistics, weavenn, held equally, that's continuing to grow strongly. 2nd Life activities, both with Fnac and Darty represent an important share of this momentum. All in all, its sale growth of close on 10% on these channels. A word of Unieuro integration. 2024, the acquisition of Unieuro in Italy was a defining deal for the group. Integration is progressing very well. [indiscernible], the French and Italian teams are working hand-in-hand on deploying the plan Beyond Everyday, both digital logistics with the new warehouse opened at Colleferro near Rome, renovation of points of sale and store openings. We're also developing large-scale Ledwall store windows for retail media we've done in France. The objective, at least EUR 20 million in synergies by the end of 2026 is confirmed and has already begun to materialize this year. Operating performance of Italy is very satisfactory and alone accounts for over 60% of the COI growth of the rest of Europe. A word on the current takeover bid, and to conclude my section of Part 1, I'll return to the announcement of the EP Group that communicated on an all-cash offer for Fnac Darty shares. EP Group has been our major shareholders since 2023, and through its subsidiary, VESA, owns 28.5% of our capital. The offer price, EUR 36 per share, represents a 19% premium before the closing prior to the offer January '23 and premiums, respectively, of 24%, 26% of the average price of the 1 month and 3 months. This is, of course, submitted to a mandatory threshold of 50% of the capital voting rights by the [indiscernible], subject to the regulatory authorities in terms of competition law and control of foreign investment. EP Group has indicated that it didn't plan to solicit a mandatory withdrawal after the offer. After an in-depth examination of the proposed offer, the Board favorably received the operation unanimously. It will deliver its recent opinion in the coming weeks after the report of the independent expert, Ledouble, and the advisory opinion of the staff committee. The filing of the offer is expected in the coming weeks before the end of Q1. On Slide 11, the EP's offer continues on the solid partnership we forged together for several years now. It's a major milestone to accompany the acceleration of our strategic plan Beyond Everyday. In the current environment, marked by profound changes of expectations and consumer behavior, the support of a long-term stable shareholder is a great asset. Lastly, I'd like to emphasize that our dividend policy remains unchanged with a payout ratio above 40%. Over to Jean-Brieuc, our CFO, to detail our results. Jean-Brieuc Le Tinier: Thank you, Enrique. Good evening, everyone. Thank you for being here with us. Let's start with Slide 13. You have the new basis for 2024 for our financial statements because of 2 items. The first item is the IFRS 5 restatement of Nature & Decouvertes at the bottom of the income statement because the -- since the COVID crisis, that business, Nature & Decouvertes, faced significant pressure on household purchasing powers and the emergence of online players offering very low cost products. The model Nature & Decouvertes needs to be adjusted to the turnaround plan that we've been implementing for 12 months or so, and unfortunately, didn't come to fruition, and so we started looking for a partner that seems necessary if we want to have a rigorous management of our portfolio. The effect that you see on the slide is related to the results of 2024. It's minus EUR 172 million on revenue, a bit positive on COP to the tune of EUR 14 million. I'll give you comments in a few minutes, few details about 2025. The second restatement is more marginal. It's about Unieuro. With the recording of goodwill as per purchase price allocation to the tune of EUR 6 million in 2024 allocated to the rest of Europe because it is about Italy, the amount for 2025 is roughly identical. And so the developments that I will comment in a moment are based on these restated figures for 2024, that is revenue EUR 10.3 billion and current operating profit EUR 200 million. Let's look at the results for 2025, Slide 14. You can see on this slide the key figures for 2025. As Enrique pointed out a few moments ago, we are pleased with the group's performance in view of a very challenging context in France for the retail industry with significant pressure on consumption and household's confidence. Revenue of the group at end 2025 was slightly up, plus 0.7% like-for-like at EUR 10.3 billion. Gross margin kept growing, reflecting the robustness of the omnichannel model. Operating margin was 2% at end December 2025, up compared to 2024. With a good management of WCR, operating free cash flow, not including IFRS, was EUR 145 million, up from 2024, not including disposals. Slide 15 now. Enrique pointed out that online sales grew significantly, 6%. They account for 22% of revenue and about 50% -- and 50% of them are done through Click & Collect. Let's go through categories. Services kept growing with double-digit growth in most countries because of an enriched offer and the rolling out of Darty Max and Fnac Vie Digitale. With all services, we had 2.4 million subscribers at end 2025 compared to 2 million at end 2024. Our ambition is to reach 4 million by 2030. Diversification remains also dynamic with a double-digit growth for Toys and Games and Stationery. Beds that started in our integrated stores at the beginning of the year, enjoyed rapid growth, just like fully equipped kitchens that are gaining popularity. Domestic appliances were up. Small appliances kept growing with beauty tech and floor cleaning equipment. Large appliances were driven by favorable weather conditions for refrigerators, air conditioning and fans. Editorial products enjoyed the good launch of the Switch Console 2 early in June 2025, 150,000 units sold. Books were slightly down because there were no major novelties. And finally, technical products declined because of fewer television and new phone sales. However, reconditioned phones enjoyed significant growth. Personal computers went up, returned to growth with the termination of support services for Windows 10 and the new cycle of new products has announced tablets, connected glasses and cameras also enjoyed growth. And then IT components with fnac.com in 2025 were very successful. We now are the lead players in all gaming categories. We're trying a new dedicated department for these components in some pilot stores and on the darty.com. Let's look at revenues per geography. France had -- sales were up on the like-for-like basis, plus 0.5%, but they were down 0.6% in Q4. As we said, business suffered in December, in particular, in stores. And that, of course, drove down the performance in Q4. The numbers published by the French Central Bank confirmed a very challenging context in 2025 for the retail industry with significant pressure on consumption and household confidence. Let's look at the rest of Europe. This give a very satisfactory performance. Like-for-like growth of sales, plus 1.1% for the full year, plus 1% in Q4. In Italy, revenue were down 1.1%, but -- and Q4 was down 2.1% because of significant competitive pressure on phones and a high basis of comparison for television, but this had no significant consequence on COP growth. Belgium and Luxembourg enjoyed plus 1.8% growth over the year, 3.9% in Q4. That confirmed the good momentum in online sales. Portugal, significant growth like-for-like, plus 7.3%, 8.7% in Q4. The 2 brands, Fnac and Darty did well both on web and in stores. And as Enrique pointed out, a very good performance of stores that recently joined the Darty brand. Spain displayed an LFL growth of 6.6% for the year and 7.3% for the fourth quarter alone. All categories were up over the period, and services had double-digit growth. The scope effect for Spain reflected the temporary closing of stores for renovations, but they all reopened by year-end. Finally, in Switzerland, LFL revenue was up 5.2%, including 4.1% in Q4, driven by fine both online and in stores and of course, the growth of services. Let's look at gross margin on Slide 17. Over the 2025, this was up 50 basis points and 60 basis points not including the dilutive effect of the franchise. This reflected the good performance of services and Darty Max, in particular. Let's look at other items of the income statement on Slide 18. As I said, the gross margin was up at end December. OpEx, including D&A was EUR 2.26 billion at end 2026 -- 2025, up EUR 38 million compared to 2024 restated. The higher property cost and inflation on other cost were offset by the performance plans. And so EBITDA at end 2025 was up EUR 15 million, and current operating profit, COP, stood at EUR 203 million compared to EUR 200 million at end 2024 restated because of higher depreciation allowances related to leases and IFRS 16. Per area, business in France in December had a negative effect on profitability, but the rest of Europe had a significant improvement in COP, about EUR 15 million. In Italy, that accounted for 60% of the full growth for the region at end 2025, EUR 4 million in synergies were recorded. As Enrique pointed out, the objective of EUR 20 million was confirmed by to 2026. One-off items stood at minus EUR 123 million compared to minus EUR 27 million at end 2024. This is because of the impairment of intangible assets, no cash effect, EUR 96 million, and the recognition of restructuring costs for the same amount as for 2024. Operating profit stood at EUR 80 million at end 2025. Financial expenditures stood at EUR 118 million, up EUR 21 million compared to 2024. This is because of the higher cost of debt -- of net debt, the new financing conditions and the increases of IFRS 16 charges. Taxes stood at EUR 25 million, and that included EUR 10 million extra tax for large companies in France. So net income for continuing activities for the group stood at minus EUR 67 million, a degradation compared to 2024, where it stood at EUR 43 million. But if you restate this for noncurrent items with no cash effects, the EUR 96 million I just mentioned, the net income attributable to the group of continuing activities would have stood at plus EUR 28 million at end 2025. The EUR 78 million charge for held-for-sale activities is because of the restatement of Nature & Decouvertes as a held-for-sale business. Most of this is goodwill amortization to the tune of EUR 60 million. And net loss of the business for 2025, EUR 18 million. In 2024, on that line, you had a loss of EUR 19 million for Nature & Decouvertes, in line with IFRS 5, plus an income of EUR 2 million because of the resolution of the Comet dispute. If you look at cash flow, operating free cash flow, not including IFRS 16, stood at EUR 145 million compared to EUR 210 million in 2024 restated, in line with our expectations. In 2024, net CapEx included disposals including a logistics warehouse in the Paris area, the EUR 93 million, a change in WCR stood at EUR 75 million, and this reflects the good management of that in spite of the challenging Q4 in France. The increase in CapEx is in line with our ambitions. It affects our stores, our supply chain, our IT systems. Italy had increased CapEx with the opening of a new warehouse in Colleferro, which Enrique talked about, and several new stores or renewed stores. The financial position of the group is sound, as you can see in Slide 20. Net financial debt excluding IFRS 16 stood at EUR 958 million with 2 bonds, EUR 550 million due in 2029 and EUR 300 million due in 2032, and the remainder of the OCEANES issue, EUR 46 million at end 2025. The net cash position stood at EUR 146 million, plus undrawn credit lines, the RCF and DDTL worth EUR 600 million. This undrawn line covers both the issue of 2029 in volume and the 2032 issue in maturity. Finally, the S&P Global, Fitch ratings and Scope rating agencies published their ratings, respectively, BB+, BB+ and BBB- with a stable outlook. So we have a sound long-term cash profile. Finally, about the balance sheet. We have an agreement with the trustee of the Comet Pension Fund in the U.K. and Canada Life U.K. to cover all liabilities of the scheme, this pension scheme, with the full buy-in worth GBP 330 million. This operation did not and will not have any significant impact on the group's cash position. And now I'll give the floor back to Enrique. Enrique Martinez: Thank you very much, Jean-Brieuc. In conclusion, I'd like to acknowledge the unfailing commitment of our 30,000 partners and staff serving our customers' expectations, seeking out all growth opportunities. A word on the financial outlook. At our shareholders meeting in May, we'll propose a payment of a dividend EUR 1 per share, equivalent to last year, consistent with our shareholder return policy. The ex date of the dividend will be 3rd of June. In volatile and still uncertain context, we nevertheless expect an increase in our current operating margin and also our free cash flow. And of course, we confirm our 2030 objectives that I announced at the presentation of our Beyond Everyday plan in June 2025. Thank you for your attention. And with Jean-Brieuc, we're now ready to take all your questions. Operator: We have a first question from [ Laurent ]. Did you have expressions of interest for Nature & Decouvertes? Should we expect a cash impact on the disposal? Unknown Executive: Well, I can answer that. Nature & Decouvertes, we launched the disposal process that's formalized. We chosen a bank and an expert to support us for the financial side. At this stage, it's premature to mention the first expressions of interest we've already received. It's too soon to tell you about that. Yes, we've had some expressions of interest, the cash impact on the disposal. We'll get back to you when we have more formal expressions. And as you said, too soon to say. And once again, we confirm our commitment to continue to maintain the activity in stores and all our activities around Nature & Decouvertes continuity until we find a right solution, and we have time. Operator: We got a second question. Bank of France figures in January are not in a good trend. Are you confirming that similar trend? Unknown Executive: Well, thank you. As you know, well, we generally do better than the Bank of France figures. Unfortunately, I cannot confirm what was the -- what the performance is today, but we'll see that for the quarter. But I'd say the group continues to expand confidently in a context that we know well that we're mastering and doesn't, in any way, jeopardize the guidance we've given for 2026. So not good figures from the Bank of France, but let's wait the quarterly results to give the market figures. Operator: We have a question in English. I'll read it in English from [ Marcos ]. Unknown Executive: Well, thanks for that question. As part of the activities that are significant group-wide, that we classify in the services, give vouchers, experience packs, we're not going to give any specific outlook, but we're a leader in this and standard setup for ticketing, well, these segments that are seeing a major expansion of activity. And for shows, these are actually markets that have a great appetite for consumers still in 2026. And thanks to [ Marco ] for his question once again. Operator: Waiting as the questions come in. We will allow a bit more time for questions. Otherwise, we'll wrap up the session. Our teams, Laura, et cetera, are available to -- there's a new question just come in on the guidance. Jeremy Garnier. Question on the guidance of the operating margin, free cash flow. Excluding the synergies or the Unieuro, what could be an improvement, it's upside and scale? Unknown Executive: Well, thanks for the question. Obviously, if we include synergies, levers of our Everyday strategic plan, services, commercial dynamic that's pretty solid across countries, notably in the South. We saw the figures, Portugal, Spain. So we're continuing to benefit from that. Hopefully, consumption dynamism in France will be a bit more favorable, lower inflation and possibly opportunities for exchanging products, the World Cup in July. And of course, the real estate market will perhaps show some signs of recovery, the big and the small are already in this reequipment phase, everything for robotics and floor care, et cetera. There are a lot of good activities that will drive the business forward. And we project the profitability through 2030 at 3%. So we need to travel the path and the difficulty in 2026 is to boost free cash flow generation on activity to deliver our commitments in 2030. Operator: We have a question from [indiscernible], what level of investment should we expect 2026 in the coming years? Unknown Executive: Well, '26, we can expect a level that will be broadly similar to that at 2025, maybe slightly higher. And then we guided on 2030 of investment around EUR 200 million on average. So as we said back then slightly up versus what we were doing historically to incorporate development of IT services, store refurbishment, an important part of the Beyond Everyday plan. Operator: We have another question, Justin, on WCR. Question on WCR chain, plus EUR 75 million. Is there a strong contribution of Italy that explains that high number? Unknown Executive: Italy contributed, I won't give the exact figure, for quite a substantial share, but not the majority of that growth. All countries contributed EUR 75 million, including Italy, like the other countries. Wait a couple more seconds. We can close this session. Of course, we remain available should you require further information and interaction and see you for the next presentation in April and the AGM and following events on the offer that's underway. Thank you for your attention. Pleasant evening. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities, Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. Permit me to inform you that certain statements made during this call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in today's press release and from time to time in the company's periodic filings with the SEC. The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release. Having said that, I would like to introduce management with us today: Charles Young, Chief Executive Officer; John McLaren, President; Fernando Castro-Caratini, Chief Financial Officer; and Aaron Weiss, Executive Vice President of Corporate Strategy and Business Development. After their remarks, there will be an opportunity to ask questions. For those who would like to participate in the question-and-answer session, management asks that you limit yourself to one question so everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded. I will now turn the call over to Charles Young, Chief Executive Officer. Mr. Young, you may begin. Charles Young: Good morning, and thank you for joining us today. I am pleased to report our fourth quarter and full-year 2025 results. We concluded the year with strong operational momentum, delivering core FFO per share of $1.40 for the quarter and $6.68 for the full year, both above the high end of our guidance ranges. The strength of our performance and optimism in our outlook is grounded in the durable fundamentals of the sectors in which we operate. We provide attainable housing and affordable vacationing to our residents and guests in our manufactured housing and recreational vehicle communities. Our operational model is anchored in high resident and guest engagement, which facilitates the recurring and predictable rental streams our properties generate. That stability reflects strong demand, limited new supply, and the value proposition our communities provide, as demonstrated by our same property MH portfolio’s 98.1% occupancy. Affordability is a core attribute of our business model. Manufactured housing offers a high-quality living environment at a cost significantly below traditional housing alternatives, while our RV communities provide accessible short and long-term vacation stays that resonate with today's consumer. After spending time at our MH and RV communities over the past few months, what stands out to me is the sense of community that we create, which I believe is a meaningful competitive advantage for our platform. In MH, our residents are members of active, connected environments that foster long-term relationships and loyalty. In RV, our long-stay guests value the flexibility and lifestyle our properties offer, using them as seasonal homes or year-round destinations. Our results this past year demonstrate these favorable dynamics. North American same property NOI growth was 7.9% for the quarter and 5.7% for the full year, reflecting strong revenue growth and disciplined expense management. From a capital allocation standpoint, 2025 was a year of meaningful positive change. Following the Safe Harbor sale, we significantly reduced leverage and enhanced our financial flexibility. We ended the year at 3.4x net debt to EBITDA, which provides substantial financial stability and a foundation for pursuing attractive, accretive growth opportunities. Importantly, we returned over $1.5 billion of capital to shareholders in 2025. Building on that, as detailed in our recent press release, our Board approved an approximate 8%, or $0.08 per share, increase to our quarterly distribution rate. This reflects our confidence in the consistency of cash flow our portfolio generates, our strong operating performance, and the strength of our balance sheet. As we enter 2026, we are building on our strong foundation and taking a focused, practical approach to long-term value creation. This is not a departure from what has worked; rather, it builds upon and further refines Sun Communities, Inc.'s strong in-place platform, with the emphasis on sharpening execution, enhancing performance, and strategically targeting capital investment. We remain confident in the strength and durability of our core manufactured housing and annual RV businesses. These segments provide recurring, predictable cash flows which we believe will continue to generate steady earnings growth and margin improvement over time. At the same time, we are focused on maximizing the performance of our RV platform to enhance growth and reduce volatility, both within the segment and as an important feeder to growing annual RV. That work is centered on improving operational execution, leveraging better data and technology, and driving greater discipline across the portfolio. Our strategy embodies thoughtful and strategic evolution and involves continued focus on what has positioned Sun Communities, Inc. well, while sharpening our focus on enhancing execution and driving sustainable long-term growth. There are three core pillars that support our strategy to drive long-term outperformance. First, thoughtful capital allocation: maintaining a strong and flexible balance sheet while delivering growth. With our best-in-class balance sheet, we will manage capital prudently while seeking to enhance growth. Second, continued optimization of our operating platform: driving greater consistency, accountability, and efficiency across the organization. And third, strategic investment in our communities, our infrastructure, and a unified digital backbone that will enhance our resident and guest experience and enable better, faster, and data-driven decision-making across the business. We have made meaningful progress over the past year simplifying the business and strengthening the balance sheet, and we believe our strategy positions us to capitalize on the opportunities ahead in our core platform. We look forward to sharing more details and updates as we advance our strategic priorities and actions. I want to thank the entire Sun Communities, Inc. team for the warm welcome over the past few months. I am proud to be a part of this organization and grateful for our team members' commitment to serving our residents and guests every day. With that, I will turn the call over to John and Fernando to discuss results in more detail. John McLaren: Thank you, Charles. For our fourth quarter results, our team executed exceptionally well and our performance reflects that. Total North American same property NOI increased 7.9% year over year, driven by 5.9% revenue growth and 2% expense growth, with blended occupancy over 99%. Within manufactured housing, same property NOI increased 8.8%, driven primarily by exceptional MH performance and disciplined expense management. Revenue grew 7.3%, while operating expenses increased 3.2%, reflecting continued focus on balance, efficiency, and cost control. In RV, same property NOI increased 5%, driven by 2.7% revenue growth and strong expense discipline, with operating expenses up only 60 basis points. Revenue growth reflected higher RV contract rates, with transient performance in line with our expectations. For the full year, North American same property NOI increased 5.7%, driven by 4.5% revenue growth and partially offset by a 2.2% increase in expenses. We exceeded our guidance in manufactured housing, delivering 8.9% same property NOI growth for the year. In RV, same property NOI declined 1.4%, which was within our guidance range. Turning to the UK, fourth quarter same property NOI declined approximately $500,000, reflecting ongoing macroeconomic pressures, including the national minimum wage increase. For the full year, UK same property NOI increased 3.5%, supported by 5% revenue growth driven by higher MH and transient income, partially offset by a 6.6% increase in operating expenses. UK home sales volumes were down 4.9% compared to 2024's record levels. Across the organization, we remain focused on operational excellence, disciplined cost management, and leveraging technology and data to enhance efficiency and the resident and guest experience. Having been a part of Sun Communities, Inc. for nearly 24 years, I can tell you now is truly one of the most exciting times I have experienced as we carry the strong momentum we built in 2025 into 2026. Our 2025 performance reflects the dedication, skill, and focus of our team throughout the portfolio. It is a privilege to be part of it, to service and operational excellence, and I want to thank our team members for their continued commitment. As we enter 2026, we remain focused on consistent execution, driving steady revenue growth, and maintaining expense discipline. With that, I will turn the call over to Fernando to walk through our financial results and 2026 guidance. Fernando? Fernando Castro-Caratini: Thank you, John. In the fourth quarter, core FFO per share was $1.40, beating the high end of our guidance range by $0.10. For the full year, core FFO per share was $6.68, also $0.01 above the high end of our guidance range. During 2025, we continued executing on our simplification strategy, selling over $200 million of non-strategic assets and land parcels. We also deployed 1031 exchange proceeds to acquire 14 manufactured housing and annual RV communities totaling $457 million, further enhancing the quality and growth profile of our portfolio. We purchased the titles to 32 UK properties that were previously controlled through ground leases for approximately $387 million. As a result of the ground lease purchases, Sun Communities, Inc. now holds a freehold interest in nearly all our UK property, further strengthening our long-term financial position and strategic flexibility. 2025 was a transformational year for our balance sheet. During the year, we repaid more than $3.3 billion of total debt. We ended 2025 with net debt to trailing twelve-month recurring EBITDA of 3.4x, no floating rate exposure, a weighted average interest rate of 3.4%, and a 7.1-year weighted average maturity. Following these transactions, we now have a well-laddered debt maturity profile: $492 million maturing in 2026, and no maturities until 2028. As of 12/31/2025, we had $636 million of total cash on the balance sheet. In September, we closed on a new $2.0 billion five-year credit facility, undrawn at year end, further enhancing our liquidity and overall financial flexibility. Importantly, we received two credit rating upgrades in 2025: S&P raised Sun Communities, Inc. to BBB+, and Moody's upgraded us to Baa2, reflecting the strength of our balance sheet and credit profile. Turning to capital return, for the full year we repurchased 4,300,000 shares at an average price of $125.62 per share, representing approximately $539 million of repurchase activity. After year end and through February 24, we repurchased an additional 456,000 shares totaling $57.3 million. These actions reflect a disciplined and balanced capital allocation framework, showcasing our strong financial position while returning capital to shareholders. Turning to 2026 guidance, we are establishing full-year core FFO per share guidance at a midpoint of $6.93 with a range of $6.83 to $7.03. For the first quarter of 2026, we are guiding to $1.28 at the midpoint. Within North America, we expect full-year same property NOI growth of approximately 4.5%. Breaking that down further, manufactured housing is expected to grow by 5.9% and RV is expected to grow by 0.9%. In the UK, we expect approximately 2.2% same property NOI growth for 2026. FFO from UK home sales is anticipated to be approximately $50 million at the midpoint for the year. For additional details regarding our assumptions and the components of guidance, please refer to our supplemental disclosures. Our guidance reflects completed acquisitions, dispositions, and capital markets activity through February 24. Of note, it does not assume future acquisitions, additional share repurchases, or other capital markets activity, which is often reflected in analyst estimates for the year. With that, I will turn the call back to Charles for closing remarks. Charles Young: I would like to take a moment to reflect on what I have learned and where we are headed. These first few months, I have been focused on listening and learning deeply with our team members and our business. I spent time across Michigan, Texas, Florida, and South Carolina visiting our communities and meeting with team members on the ground. Those conversations have reinforced both the strength of Sun Communities, Inc.'s culture and the opportunity ahead to further sharpen focus, strengthen execution, and build for long-term growth. I am energized by what I have seen so far and excited about the next chapter as we turn insights into action and build on Sun Communities, Inc.'s strong foundation together. For 2026, we are focused on three core pillars: disciplined capital allocation, executing consistently across our operations, and investing in our core MH and RV platform. We look forward to keeping you updated on our progress. We will now open the line to questions. Operator: Thank you. We will now conduct a question-and-answer session. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment as we poll for the first question. The first question comes from Steve Sakwa with Evercore. Please proceed. Steve Sakwa: Yes. Charles, or maybe John, could you talk a little bit about the data? Charles, in your opening remarks, you talked a lot about how you are using data and want to make better decisions. Are there concrete things that you can discuss with us that you have implemented, or are there things that you are currently working on that you expect to implement in 2027? Charles Young: Hey, Steve. It is Charles. I will take it, and maybe I will throw it to John if he wants to add in a little bit more. As I said, I have had a chance to go deep within the organization out in the field, and I just want to take a moment and thank the organization for the warm welcome. Specifically to your question, I refer to it as our unified digital backbone. What I will be able to tell you is it is building off of the foundation that was put in place a couple years ago with the NetSuite implementation, and as I watched that, that really became the beginning of our digital journey, if you will, which is a big piece of what I want to try to build on and encourage us to build on. Today, if I talk to the team members around the table here with me, we have more real-time access to data than we have ever had, but there is more there as we really start to build out the platform, which is solid, but there is more from beginning to end that we do. So one of the things I will share that is a focus in my core pillars for this year is starting with the customer journey by enhancing the systems and centralizing some of the contact center work in terms of how we engage with the consumer, eventually on the MH side and our guests. Specifically, I think it will be a help on the RV side. That is one piece that I will give you, but there is a lot more to be done. The bigger picture as you think forward around where the world is going today with AI and otherwise is to continue to build on this foundation, and it needs to be around the data architecture and infrastructure that allows us then to unlock that in the future. John McLaren: Yeah, Steve, I will just add to that. One of the things I shared with everybody last year was just really the focus on the transparency within our sales and leasing funnels, and applying that transparency because of the data that we have across with the implementation of our new ERP that we put in 2024. We can take that data and apply it across all different kinds of transactions and have that transparency, be able to deliver it to the team, be able to rank it with the team so we know better what we are doing at any moment in time. That is one application. Another one is going deeper into where the traffic comes from and being able to link where it is coming from all the way to who actually converts to a transaction, and being more targeted versus broad in terms of the campaigns that we can develop around that. That is what is taking place right now. Operator: The next question comes from Eric Wolfe with Citibank. Please proceed. Eric Jon Wolfe: Hey, thanks. At December, maybe Charles, you talked about slowing down buybacks, but then, of course, saw the $57 million of buybacks year to date. Could you just talk about the approach to repurchases and capital allocation this year? What you are assuming in guidance as far as the use of that $630 million of cash as well? Thanks. Charles Young: Great. I will start. Thanks for the question. I will let Fernando come in on what is in our guidance. When it comes to capital allocation, our objective is straightforward: we want to allocate capital where it generates the best long-term risk-adjusted returns for shareholders. Where we are today as we enter 2026, I joined in a really kind of special time in the company’s history. The strength of our balance sheet, the reduced leverage that we have, we positioned ourselves with manageable maturities and significant liquidity. So there is a lot of flexibility. As I think about capital allocation for the year, we have a balanced toolkit as our approach. One is, as I talked about in my core pillars, investing in our communities and our operating platform. The ability to invest in our strength—the core portfolio, the people, and the systems—is one of those toolkits. The other is pursuing thoughtful and disciplined, accretive external growth opportunities that align with our strategy of MH and RV. So we will continue to look for opportunities there. And then, as you are talking about with the share repurchases, there is returning capital to shareholders and using share repurchases thoughtfully when they represent compelling value. These are all parts of our toolkit. We are going to be balanced as we go through the year, use our flexibility to be prudent with that use, and we will continuously evaluate what is going to add shareholder value. Fernando, you just want to give forward guidance in terms of what we have in there? Fernando Castro-Caratini: And so, Eric, consistent with prior years, we are not assuming capital markets deployment of the cash on hand or our operational cash flow that we generate over the course of this year. So you can assume that the over $600 million of cash on the balance sheet today is generating interest income as it is used for the business. Any acquisitions that we would find and transact on, or any share repurchases, would be incremental to the baseline guidance we provided. Eric Jon Wolfe: Thanks. And then, just a quick follow-up. The $57 million of acquisitions that are in escrow, can you just talk about what those are, the initial yields on them, and then the unlevered returns that you are targeting? Aaron Weiss: Yeah. Thanks. It is Aaron Weiss. Thanks for the question. In terms of what we have on the balance sheet as of year end, we did talk about closing one acquisition in the January period at sort of the consistent yield range we have talked about previously in the mid-4% yield range. In terms of the remaining acquisitions, those are simply held on the balance sheet as 1031s but have not yet been closed. So we will continue to look to identify those and update the market as we see them. As Fernando indicated, to the extent that we do not ultimately close on those 1031 proceeds as occurred in 2025, that would simply move into our unrestricted cash balance. Operator: Our next question comes from Brad Heffern from RBC Capital. Bradley Barrett Heffern: Yes. Thanks. Good morning, everybody. Charles, can you give any updated thoughts on the UK and how it fits into the portfolio? Charles Young: Absolutely. I appreciate the question. I have had a chance to spend some time with the UK team, get over there, and what I have observed is a high-quality operation, best-in-class portfolio, strong assets, and a very talented and capable team. I am impressed with our operational execution. That being said, they are performing well in a challenging UK macro. We all see that, and John can spend a little bit of time around some of the details and what the expense numbers have been in Q4. As I look at the business and as we just talked about being disciplined capital allocators, we continue to evaluate our entire portfolio to determine how best to create long-term shareholder value, and the UK is no different. We are going to continuously evaluate, but right now, our near-term focus is on maximizing value through disciplined execution, strengthening performance, and driving growth where we can, and maintaining cost control and flexibility. So we will continuously assess the UK in the context of our overall strategy and capital allocation priority. John McLaren: The only thing that I would add, Brad, is that we put out in our guidance a 4.1% rent increase in the UK. That is running ahead of inflation in the UK. I think 2025 represents a really good year of home sales. We had close to 95% of the prior record that we had the year before that. When you look at it from a market share perspective, we have a team of people in the communities and locations that we have who are executing brilliantly in the face of it all. The only thing that offsets that a little bit is what Charles said on the expense side, but a lot of that is attributed to the national minimum wage, and everybody is in that boat. It is really pleasing to us to see them execute through that despite it all. Operator: Thank you. Our next question comes from Wes Golladay with Baird. Please proceed. Wes Golladay: Hey, everyone. How do you see the annual RV conversions this year? I think last year was just around 600. Can you give your view on 2026? John McLaren: Hey, Wes. Appreciate the question. I think we are looking at something similar to what we saw last year. We are really pleased with how last year played out, and I am really pleased, especially as I have shared before, that the strategy we took with respect to retention within our RV annual business really took hold. We are seeing that emerge in the form of the renewal rates that we have now in comparison to this time last year, where we are running ahead. So that is how we look at it. It is going to be similar to what we experienced last year. Wes Golladay: Okay. Thanks for that. And then, can you give your view on the transient RV? How does the pace look? John McLaren: It is good. It is pacing well. A little bit about 2025: our RV same property NOI performance in the year finished within the guidance range. I do want to emphasize that we like to work on the entire business, so we are really focused on bottom-line results. Specific to transient RV, I will reiterate that some of what we experienced in 2025 is a direct result of the success we have had and the strategy of reducing the number of transient sites and converting them to annual guests. That was demonstrated by a 9.8% annual RV growth number and the 600 network conversions you referenced. For 2026, we continue to see better signs of stability with improved booking trends in RV. We remain thoughtful and disciplined in our approach, as demonstrated by our guidance, which reflects what we are seeing in our pace at this point in time. To emphasize further, some of the things that we are doing that are seamless to what Charles has talked about with our core pillars: we have several target initiatives in RV, which include OTA expansions—or said differently, booking channel expansions—digital booking enhancements, data-leveraging opportunities. There is a lot to unpack there, and I look forward to having those conversations as the year progresses. A lot of this lines up with what we are seeing. If you look at how we tracked in RV in 2024 versus 2025 versus what we are putting out there in 2026, you are starting to see that stabilization take hold. Operator: Thank you. The next question comes from Jamie Feldman with Wells Fargo. Please proceed. Jamie Feldman: Great. Charles, appreciate your comments to close the call about where you are thinking through the company. Can you give an update on where you are in the process of settling in? I think people expected maybe a noisier print for April, but you pretty much took one impairment in the UK, and everything else seems to be humming along. Then, of course, you had some management changes to start the year. Would you say at this point you are settled in and this is the story going forward? I know the UK, as you guys commented before, still watching it and seeing where the opportunity is long term. But would you say you are pretty much settled in at this point and not a lot to still review big picture, or there is still a lot to work through as you are thinking about the future of the company? Charles Young: Thanks for the question. It is a good question. I am past my listening and learning tour, if you will. I used to be counting in days and then months, and I am in now. I am settled. The team knows who I am. I cannot say enough how special the culture here is at Sun Communities, Inc. and how welcoming it is, and I felt like I have just slid right in, and you can see it from our results that we are working well together. But there is work to be done, and the core pillars, as I laid out, are where the opportunity is ahead. That is why I cannot say I have settled in, but we have work to do in terms of investing in our communities and our infrastructure and optimizing our platform. That is where the work will be done and will continue to be done. I am busy, but I am loving it. I am getting in the flow at this point and enjoying every minute of it. I can go into more details, but at this point, what you are seeing right now: the team put up great numbers for the quarter, we have good guidance, and we are going to execute for the rest of the year. The simplification strategy that the team put in last year—I am building off of that with this core focus and laser focus on the core. That is what it is about, and that is what is going to get us into the rhythm that everybody expects us to do given the nature of this business and the affordability and attainable experiences that we provide for our residents and guests. Operator: Thank you. The next question comes from Michael Goldsmith with UBS. Please proceed. Michael Goldsmith: Good morning. Thanks all for taking my question. Questions on the RV guidance. Can you break down what the underlying expectations are for annual and transient, and then maybe break down what needs to happen to get to the upper end or lower end of that range? Also, a little color about what you have been noticing with the Canadian customer? Thank you. Fernando Castro-Caratini: Thank you, Michael. I think John and I will tag-team that question. At the midpoint of our range, we do have a rental increase for our annual guests of 4%. As John mentioned earlier, we are expecting transient conversions to annual contracts of about 600 over the course of the year. From a transient revenue growth perspective, at the midpoint of the range, we are expecting about a 1.5% decline in transient revenue year over year. This would compare to a 9% decline in 2025 year over year over 2024. That points to, as John was mentioning, some stabilization as it relates to the transient side of the business. John McLaren: I will start, Michael, on the Canadian side, which we shared before. We did experience softness in Q1 and Q3 of last year with Canadian guests. The interesting thing about that is last year we shared that Canada represented about 5% of the RV business. That represents about 3.5% of our total RV transient and annual business today. In other words, what we experienced last year with Canadian guests, combined with some of the offsetting that we did with domestic guests, has been mitigated to some degree versus what we had in 2025. It is really more about what I said earlier, and you alluded to it with the question: what are the strategies we can push on the RV side? We recently added two additional booking channels on the RV side toward the end of 2025, which should bear some fruit in 2026 in that strategies-to-push perspective. On the digital booking side, it is about contact or guest routing enhancements, easing the booking process, and process enhancements, which dovetails into leveraging the tech like Charles was talking about to capitalize on a nimble booking window that aligns more seamlessly with our revenue management capabilities that we have today. If you take it a step further, enhancing the guest journey overall—enhanced and targeted placement. This is not about the old days of RV, broadly throwing things out there, but being targeted and thoughtful in the approach and listening to the data and what it is telling us to do to pick where we want to place it, to help us find those guests, easing the booking process, the on-the-ground experience, the rebooking that happens because of a great on-the-ground experience, and ultimately the referrals that you get from that. Similar to what I have said on the MH side, building the sales force on the RV side for Sun Communities, Inc. Operator: Our next question comes from Jana Galan with Bank of America. Please proceed. Jana Galan: Thank you. Following up on the transaction market, given Sun Communities, Inc. has been very active in the past year, can you provide some details on product in the market, even if it is not in your buy box? Is there more or less volume today than last year in MH or RV? Any significant differences in cap rates across regions, or between age-restricted and all-age? Aaron Weiss: Hey, great question. It is Aaron talking. We were really fortunate to move through 2025 and execute on primarily MH and also some annual RV acquisitions. As we have long said, the cap rate ranges are in that 4% to 5% range. We have not seen a massive change across the years. It is a high-quality asset class, and so the higher-quality MH communities that are probably not transacting are still being asked at sub-4% cap rates. Their quality, the quality of the cash flows—the current sellers believe that is appropriately valued. We are focused on assets in markets in which we operate. Strategically for us, we want to buy portfolios or assets in markets where we have operating leverage and an understanding of the market over the long term, and that is where we have been focused to date. What we are seeing is generally consistent with the past. We do believe the transaction market is picking up. There is a more constructive backdrop in the financing market. Certainly, the lower rate environment today versus 12 to 18 months ago is more conducive to transactional activity, but I would say generally consistent, high-quality assets. Most of what we are seeing continues to be in the single-asset, small-portfolio, local owner-operator environment, and we do not expect that to change. There are very few large portfolio owners to begin with, and while those happen episodically, we would say the market backdrop is constructive. We are generally pleased with what we are seeing in our pipeline, but it is very consistent with what we executed in 2025. Operator: The next question comes from Jason Wayne with Barclays. Jason Adam Wayne: Hi. Good morning. Just looking at home sales volumes that are down year over year in 2025, can you walk through your home sales assumptions for this year and how that gets baked into G&A? John McLaren: Yes. Jason, thanks for the question. What you are seeing when you talk about the home sales for 2025 is that our focus is on real property income. Home sales expectations are really a product of enjoying nearly 98% occupancy in the portfolio, as well as very low resident turnover, which ultimately leads to stability of long-term cash flow from rent. The contribution of home sales is not really as material to FFO as the other things that we are working on. Volumes and margins for this year will be similar to what we experienced in 2025. Jason Adam Wayne: Got it. And then it looks like the ancillary NOI guidance changed a bit as well. Just wondering how much of that is due to marinas coming out of the portfolio? Aaron Weiss: The guidance provided is ex-marina as it relates to the contribution. So it would be contributions from our RV portfolio primarily, and then also contributions from the UK platform. Operator: The next question comes from John Kim with BMO Capital Markets. Please proceed. John P. Kim: Thank you. I wanted to ask if you could provide some of the building blocks for the 7.2% same-store revenue growth that you achieved in MH in 2025. It looks like you had 5.2% rental growth. You had a little bit of an uplift from occupancy, but what really made the difference to get from there to 7.2%? If you could provide the same building blocks for 2026 as far as MH same-store revenue. Fernando Castro-Caratini: John, they will be pretty similar, as our rental increase in 2025 was just above 5%. We had occupancy gains of about 600 on the MH side last year, and then, as you can see in our supplemental, we did have some strong performance from the 10% of the business. Our rental program did drive additional growth to build to that 7%. As John has alluded to earlier, as we look into 2026, we have a rental increase back of 5%. Enjoying 98% occupancy in manufactured housing, we do still expect gains from an occupancy perspective in the 500 to 600 site range, and then there could be some additional revenue. The building blocks are very much similar over the course of both years. Operator: Thank you. The next question comes from David Siegel with Green Street. Please proceed. David Siegel: Hi. Thank you. It looks like the rate of move-outs has been increasing over the last couple of years. I am curious if you can provide some color on what is driving that, and if you can bifurcate it between the MH portfolio and the annual RV portfolio. John McLaren: Yeah, great question, David. Appreciate it. For 2025, the rate of move-out was mainly attributed to RV, and a lot of that had to do with some of the Canadian impact that we experienced in 2025. This is precisely why we focused so much of our attention toward retention over the course of this year, replacing those move-outs with more domestic movements. It is paying off because we are seeing it in the form of the renewal rates that we have now as well. One thing of note: typically in an MH property, when we have a move-out, it is going to be a resident moving out versus a home moving out of the community, and so oftentimes we have a part in that transaction in the form of being able to generate a commission from a brokered home sale, which would be a part of that process and that transaction as well. David Siegel: Great. Thank you. And then can you just briefly talk about what is driving the higher expenses in the UK recently? John McLaren: I think much of it has been attributed to what has taken place nationally, especially the national minimum wage, and really falling more in the payroll line of things than anything else as a result of that, David. Fernando Castro-Caratini: And that is consistent with the expectations for 2026 as well. We do have elevated expense growth in our guidance range, with the midpoint of 2.2% NOI growth, but leading the way as it relates to that increase is the national minimum wage increase that will go into effect in April. Operator: The next question comes from Linda Tsai with Jefferies. With year-end net debt to EBITDA at 3.4x, do you have a targeted range for leverage going forward? Fernando Castro-Caratini: Sure. We stated with the closing of the Safe Harbor transaction and all of the activity we had from a debt paydown perspective that our long-term leverage target will sit between 3.5x and 4.5x net debt to EBITDA. To get to that midpoint, there is some releveraging to do. Linda Tsai: Do you have a view on what it would look like by year end? Fernando Castro-Caratini: From a guidance perspective, we do not include share buybacks or any additional acquisition activity. In the guide today, we would be ending the year pretty similar to how we started. Charles Young: Thank you. I will just jump in. It goes back to my answer earlier on capital allocation and really being balanced in terms of our approach and the tools that we have in our toolkit in terms of external growth—finding accretive opportunities there—having the flexibility with share buybacks, on top of the core pillars we talked about in terms of investing in our infrastructure, in our communities, and in our internal systems. Operator: Thank you. At this time, I would like to turn the call back to Mr. Young for closing comments. Charles Young: Great. Thank you for the conversation. We appreciate everyone's interest and we look forward to seeing everyone at the upcoming conferences. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.
Operator: Good morning. Welcome, everyone, to the Tamarack Valley Energy Limited Conference Call and Webcast on Wednesday, February 25, 2026, discussing the recent Q4 2025 results press release. I would like to introduce today's speakers, Steve Buytels, President; Kevin Johnston, CFO; and Ben Stoodley, Vice President, Engineering. [Operator Instructions] Mr. Buytels, you may begin your conference. Steve Buytels: Thank you, Joanne. Good morning, and welcome, everybody, to the call to discuss the fourth quarter and full year operating and financial results for 2025 as well as our year-end reserve report. My name is Steve Buytels. I'm the President of Tamarack Valley. And today, I'm joined by Kevin Johnston, Chief Financial Officer; and Ben Stoodley, our VP Engineering. This morning, we announced our Q4 and full year 2025 results and our '25 year-end reserves and an operational update. 2025 was a record-setting year for Tamarack with a focus on continued rate of change in the business to further enhance the overall profitability and maximize shareholder value and per-share results. We completed our multiyear transformation into a Clearwater and Charlie Lake oil producer, and our asset portfolio is now exclusively focused on some of the most profitable conventional oil plays in North America, as evidenced by our strong financial and reserve results. The team delivered an exceptional '25 from an operational standpoint, which resulted in 2 positive guidance revisions through the year with capital coming in at the low end of our guidance through efficiency gains, while production significantly outperformed even after adjusting for M&A through the year on the back of strong drilling results in both the Clearwater and Charlie Lake and strong response across our waterflood program in the Clearwater. Further, corporate costs came in below guidance, highlighted by a 17% year-over-year reduction of net operating expenses as we continue to execute margin enhancement opportunities across the business. The combination of these efforts drove free cash flow of approximately $390 million in the year. Shareholder returns were a key focus with the company repurchasing approximately 36 million shares or 6.9% of the 2024 year-end share count at an average price of approximately $5 per share. In addition, we increased the dividend by 5%. In total, we returned $262 million to shareholders in 2025 between share buybacks and the base dividend. When we add the buybacks, the base dividend, production growth and debt repayment together, we delivered a total return for shareholders of approximately 19% in the year. Portfolio optimization and the continued investment in waterflood has had several material benefits to Tamarack. If we compare our 2023 midpoint -- or 2023 to the midpoint of our 2026 guidance, our corporate base decline rate is 13 percentage points lower. The sustaining capital to keep production flat is approximately 30% lower and our net operating expenses on a dollar per BOE basis is approximately 25% lower. Collectively, we estimate this has reduced our U.S. dollar WTI breakeven price by approximately $8 per barrel since 2023, with our 2026 corporate sustaining free funds flow breakeven of less than USD 40 a barrel WTI, excluding hedges or approximately USD 35 per barrel WTI, including our hedge program. We have positioned ourselves as the largest public Clearwater producer with over 12 billion barrels of original oil in place. We continue to expand our land holdings in the play, which grew by 25% in 2025 to now over 850 net sections, and they hold over 2,100 primary locations across our land base. This implies greater than 25 years of drilling inventory across the stacked horizons, not accounting for any future success in Wabiskaw formation in the Pelican region. In addition, the waterflood provides significant recovery upside in the Clearwater, where we see the application doubling, if not tripling primary recovery. We currently have between 10% to 15% of our Clearwater acreage under waterflood with a significant runway remaining. We believe we have an advantaged business model that stands out across commodity cycles, given the unique ability to show top-line production growth while at the same time, reducing our corporate decline through waterflood, which in turn lowers our reinvestment requirements. This allows us to compound and grow free funds flow through the plan even at low prices. I'll now turn it over to Ben Stoodley, our VP Engineering, to walk through our 2025 year-end reserves report. Benjamin Stoodley: Thank you, Steve. I'll begin with a summary of Tamarack's 2025 year-end corporate reserve performance, followed by a discussion of our Clearwater reserves and resources. To start at a corporate level, Tamarack delivered meaningful and capital-efficient reserves growth across all categories in 2025. proved developed producing or PDP reserves increased by 31% year-over-year. Total proved reserves grew by 26%, while total proved plus probable reserves increased by 18%. When excluding reserves and production associated with acquisitions and divestitures completed during the year, total proved plus probable reserves increased by 30%, resulting in 413% production replacement. This performance was driven by the continued successful deployment of secondary recovery in the Clearwater, combined with strong repeatable results in the Charlie Lake. These operational outcomes were further enhanced by our ongoing share buyback program and continued net debt reduction. On a per share basis, debt-adjusted reserve volumes also showed strong growth, increasing 42% on a PDP basis and 28% on a total proved plus probable basis year-over-year. From a cost perspective, 2025 PDP finding and development costs were $8.09 per BOE. Total proved costs were $8.01 per BOE and total proved plus probable costs were $7.93 per BOE. With a 2025 field netback of $41.71 per BOE, Tamarack generated corporate recycle ratios exceeding 5x across all reserve categories. Turning now to the Clearwater. Reserve growth in 2025 was particularly strong. PDP reserves increased by 63%, total proved reserves grew by 64% and total proved plus probable reserves increased by 56% year-over-year. Finding and development costs across all reserve categories averaged approximately $7 per BOE, enabling the Clearwater assets to generate recycle ratios of approximately 6x across each category. Reserves replacement was 256% on a PDP basis, 401% on a total proved basis and 534% on a total proved plus probable basis. Notably, waterflood-related PDP reserve additions achieved finding and development costs of less than $3 per BOE. PDP reserves under waterflood expanded by 300% in 2025, while only 37% of total Clearwater reserves are currently assigned to waterflood development. Collectively, these results underscore the scale, quality and long-term value of Tamarack's Clearwater asset base. In addition to booked reserves, Tamarack continues to expand its resource inventory. As of December 31, 2025, the company held 115 million barrels of best estimate gross unrisked contingent resources in the Clearwater, representing an 8% increase from year-end 2024. Gross unrisked prospective resources totaled 104 million barrels, a 6% increase year-over-year. As Steve mentioned, Tamarack has identified approximately 2,100 net drilling locations, of which 520 are net booked locations. And at our current pace of primary development, this represents more than 25 years of drilling inventory. Operationally, activity in the Clearwater remained robust throughout 2025. During the year, Tamarack drilled 94.3 net horizontal heavy oil wells for primary development in the Clearwater fairway. In support of waterflood expansion, we also drilled 25 water injection wells, drilled 2 source water wells and converted 16 producing wells to water injectors. Waterflood response continues to build with heavy oil production uplift now estimated at more than 5,000 barrels per day, representing approximately 10% of total Clearwater production. Tamarack exited 2025 with water injection rates exceeding 40,000 barrels per day, nearly 3x the rate at the end of 2024. Looking ahead, we plan to increase water injection to approximately 60,000 barrels per day by the end of 2026 with roughly 35% of Clearwater oil production under waterflood compared to approximately 24% today. Waterflood capital expenditures in 2026 are forecasted at $100 million, representing a doubling relative to our capital expenditures in 2025. In addition, Tamarack plans to drill 2 derisked wells in the Pelican area in 2026, one targeting the Wabiskaw and one targeting the Clearwater. Finally, turning to the Charlie Lake. In 2025, Tamarack drilled 13.8 net wells and brought 16.8 net wells on stream across the Wembley and Pipestone areas. The Charlie Lake generated approximately $190 million in asset level operating netback and $70 million in asset level free net operating income during the year. Tamarack's recently drilled 114 of 9 well in Wembley, has achieved -- or in Pipestone has achieved an IP rate of 1,400 barrels per day of oil and 2,000 barrels of oil equivalent per day. During the fourth quarter, Tamarack successfully redirected production to a new third-party CSV Albright gas plant and the AltaGas Pipestone II gas plant expansion. With access to both owned and third-party processing and egress capacity, Tamarack retained significant capital allocation flexibility to support ongoing operations, sustain production and enable potential future growth in the Charlie Lake. For 2026, we plan to maintain a flat exit rate production profile of a 1-rig program, drilling approximately 10 wells across Pipestone and Wembley. Kevin Johnston, our CFO and VP Finance, will talk through some of our 2025 operational and financial highlights in more detail. Kevin Johnston: Thank you, Ben. 2025 was a very strong year for Tamarack. Fourth quarter production averaged 68,635 BOE per day. This represents a 4% increase over the fourth quarter of 2024 and a 9% increase if we exclude the impact of 4,000 BOE per day of non-core production that we divested in mid-October. Clearwater production was approximately 50,000 BOE per day in the quarter, a 16% increase compared to the same period in the prior year. Charlie Lake produced 17,600 BOE per day, a 4% increase from the same period in the prior year. Average corporate production for the full year of 2025 was 68, 176 BOE per day, which represents growth of 6% from the prior year. This was in line with our revised 2025 guidance of 67,000 to 69,000 BOE per day of average annual production and was above our initial 2025 guidance of 65,000 to 67,000 BOE per day, which we had provided when we released our budget in December 2024. This is notable because Tamarack's collective A&D activity throughout the year resulted in a net disposition of production volumes, and our original capital program was decreased by over 10%. In the fourth quarter, Tamarack delivered adjusted funds flow of $172 million, capital expenditures of $99 million and free funds flow of $71 million. For the full year 2025, Tamarack generated $390 million of free funds flow or $0.78 per basic share. Free funds flow per share increased by 10% year-over-year despite WTI prices averaging 14% lower in 2025. Tamarack returned $262 million to shareholders in 2025 through base dividends and share buybacks. Long-term share buybacks allow us to compound organic free funds flow growth into per share returns. Tamarack invested $400 million in capital expenditures in 2025 at the low end of our revised guidance of $400 million to $420 million, and that was an 11% reduction from 2024. This reduction reflects the impact of capital efficiencies from multi-well pad development, improved run times and reduced sustaining capital from strong base and waterflood performance. Net operating expenses declined 17% year-over-year to $7.43 per BOE, reflecting the impact of infrastructure investments, lower water handling costs and waterflood reinjection, higher production volumes and portfolio optimization from the divestment of higher-cost non-core assets over the last 2 years. Tamarack made 2 positive revisions to guidance for net operating expenses in 2025 and full year expenses of $7.43 was still below our revised guidance of $7.75 to $8 per BOE. Tamarack is forecasting a run-rate net operating expense of $7 per BOE in 2026 at midpoint, which represents a 25% decrease compared to 2023. Tamarack achieved its net debt target of 1x net debt-to-EBITDA at USD 50 WTI oil price in Q4 2025. Tamarack will focus on allocating additional free funds flow to shareholder returns through share buybacks in 2026. Long-term share buybacks continue to be the preferred mechanism for returning capital to shareholders. We repurchased over 32 million shares in 2025 and reduced our share count by 6.9% from the previous year-end. Since beginning the share buyback NCIB program, Tamarack has repurchased over 12% of its 2023 year-end share count with over 70 million shares bought back at the end of January 2026. Our President, Steve Buytels, will provide our closing remarks for the call. Steve Buytels: Thanks, Kevin. Tamarack continues to be differentiated by the scale and quality of our assets and our ability to generate growing per share returns even at modest commodity prices. With a breakeven WTI oil price of less than USD 40 per barrel WTI, a corporate base decline rate of 22%, a low-cost structure and low sustaining reinvestment requirements, Tamarack is very well positioned to generate sustainable shareholder returns. As we look to 2026, we remain focused on maximizing shareholder value through a combination of organic growth, further waterflood investment, share buybacks and continued debt repayment. Our mantra of delivering more for less and the continued focus on driving growth and free funds flow per share through lower reinvestment requirements, organic growth and the compounding elements of the buyback positions us in a unique way to drive outsized returns. On behalf of both Brian and myself, I would like to congratulate our team on a truly remarkable year. We would like to thank our Board of Directors, employees, stakeholders and shareholders for their continued support. Thank you. I will now turn it back to the moderator for questions. Operator: [Operator Instructions] The first question comes from Jeremy McCrea from BMO Capital Markets. Jeremy McCrea: Two questions here. The first one is, when you look at all your waterflood responses so far, how many are coming in above expectations versus -- or if any are coming in below? And I'd be curious actually if something comes in below, but how does this impact the way we should think about your guidance here going forward? Benjamin Stoodley: Yes. Thanks, Jeremy. The -- I would say, of course, there's some outsized responses in the short term here where we see these very dramatic IP rates coming in. We've held our EURs pretty standard, though through that period tying to the simulation results. So I think in general, we're really in line on an EUR and reserves basis with where we would expect outside of these really outlier kind of quick response, high response wells. Jeremy McCrea: Okay. And maybe just a bit more of a follow-up question here just on some of the new land and exploration. Is any of those potential well results in your guidance? I'm just thinking if there's some success with the Wabiskaw and there's -- you decide to go for some quick follow-up wells. Is that in potential guidance? Like I'm trying to think of where we could see some upside here related to what you've put out for guidance here for today. Steve Buytels: Yes. No, thanks, Jeremy. It's Steve here. I think following on what Ben talked about, we obviously simulate on our flood results. I think we've been pretty consistent with what we've seen in aggregate with recoveries there. But to Ben's point, we are seeing in certain circumstances, more in the Marten Hills area with the stack patterns and even those W patterns with the results that are coming through the public data, those are probably a little bit ahead in terms of some of that response to IP. So I would say that's one place we continue to see some positive momentum. The other place, too, that we didn't talk a lot about today was even just on the primary well results, and we put it in our presentation, we did see a nice increase in the base outperformance of those primary wells in certain areas as well. So you're seeing lower primary declines or you're just seeing some of these wells with time outperform what our recovery and our reserves estimates would have been. So there are those things that I think are still going on, and that's one of the beautiful things about being in the core and the heart of the play within Marten Hills and West Marten Hills and Nipisi. When you ask about what's not in the plan or some other potential upside, we have the capital in our plan with respect to going to drill a Wabiskaw well at Pelican as well as testing the Clearwater there. You saw that we added incremental acreage in Q4. We really like that area as we build that out to be potentially another core focus for us where you could drive -- I'm going to use a wide range here depending on how things go, but that could be 5,000, 6,000, 7,000 to 10,000 barrel a day development plan potentially with success over time. So we'll drill these wells in the second half of the year. And then there's a lot of competitor activity also going on that will help derisk some of those lands and provide some more color on those lands in terms of what that upside could be. But I just want to make sure we're clear that we don't bake any of that upside into our current plan here today. That would all be on top of it. Operator: We have no further questions on the phone. I will turn the call back over to Tamarack for online questions. Unknown Executive: Our first question online is for Mr. Steve Buytels. Congrats on a great year and exciting upcoming activity. For the Pelican area, are the 2 derisking wells in 2026 going to be drilled on the newly acquired lands or legacy lands? Steve Buytels: Yes, that's a good question. So we will drill 1 well on our legacy lands, and then we will drill one well or our plan is to drill 1 well on our newly acquired lands. And again, what I would preface that with is there is a lot of competitor activity, both in the Wabiskaw and in the Clearwater that is around us there. So we'll look to build off some of that and see some of that data through the first half of the year, and then that will help inform exactly what we're going to do here in the second half and which locations we choose to go after. Unknown Executive: Our next question is for Mr. Stoodley. Tamarack quotes 12 billion barrels of oil in place in the Clearwater with potential reserves and resources at approximately 400 million BOE, implying a roughly 3% recovery factor. What could see this recovery factor increase? And what have analog heavy oil resources typically recovered? Benjamin Stoodley: Yes. I think our like purpose of showing the reserves and resource report and is to show how we've been successful in growing that -- both those -- or all 3 of those categories, doing that through inventory additions as well as delineation of our inventory and the waterflood and promoting it through those categories. It is a relatively low number there as far as recovery goes on that, that will continue to grow as we delineate. When speaking about other heavy oil resources, especially under waterflood, we see about 70% of our OIP sitting in areas that are currently proven for waterflood. And when I look to other pools and other examples, they typically have a tremendously long life. There's many examples that started in the '50s and '60s that are still producing today and recovery factors there get 25% to 40% in a lot of cases in the successful cases. We see the Clearwater as being a very successful case at this time, but we're in the early innings of actually being able to predict where this goes in the long term. So we see it as there's quite a bit of upside on that recovery factor as we go forward. Steve Buytels: Thanks, Ben. And one thing I would add here, it's Steve, I talked about it in my opening remarks. When we think about -- we talked about OIP there and the recovery factors associated with that in terms of the waterflood. I think the other thing that we should talk about, too, and make sure we're clear on is when we think of our total land base that's amenable to flood that we know works today, and this doesn't include the areas of the South Clearwater or Pelican or things like that. That would all be incremental to this. We only have between 10% to 15% of our lands under flood. So when you think about the runway, Ben talked about recovery factors, but we're still so early just in terms of building out the runway and the duration of really where we're going to take this flood through the core areas of Nipisi, West Marten Hills and Marten Hills. So that's another thing to think about, too, when we look at this aside from the recovery factors just in terms of the amount of runway that we still have in front of us and have to get after. Unknown Executive: Our next question is for Mr. Steve Buytels. On your waterflood projects in the Clearwater, have you seen any areas or patterns that have demonstrated water breakthrough thus far? When would you expect it to occur? And might it mean for oil rates in the play? Steve Buytels: Yes. One thing I want to be clear on, breakthrough should not be a surprise when it comes to heavy oil waterfloods, and Ben can add here when I get done, but it's going to happen. This is factored into our simulation and our decline estimates that we've put out for everybody. So I want to make sure that, that's clear. There is no surprise there. The other thing, most heavy floods when we think of the analog floods that we would use here, 60% of the recovery happens at high water cuts or post breakthrough. So we got to remember that we're still -- Ben talked about being in the early innings. You're going to see water cut increases and all of those things. It's more about are you set up and able to handle that. And when you think about it, over the last couple of years, we've put a lot of investment into infrastructure. Kevin talked about what that's done for our OpEx, but it's also about being ready to handle incremental water volumes and water cuts at our facilities. And this year, in Q3, we're expanding and putting in a bigger water plant at our 15-15 facility in West Marten Hills. We've expanded and continue to do work at our 15-22 facility in Nipisi to handle the growth of the waterflood there in terms of we're going to be putting in a bigger free water knockout treaters, et cetera. And then last year, in the third quarter, we went through and expanded our water handling facilities and our water plant at our Marten Hills 11-4 facility. So we are ready to handle when they come, bigger cuts. But again, this should not be panic, and this should not be any surprise to anybody. The other element of it is when you do see incremental water cuts, what do you do and how do you handle it? We have a lot of experience with heavy floods within our technical team here, and you're going to look at upsizing pumps and managing fluid rates. And there are good examples of where we've seen higher water cut patterns in the Clearwater, where then you're upsizing pumps, you might be reducing injection for a point in time to get your oil rate back up. We do not see it as an issue, and there's lots of cases and experience here through the other heavy floods where you continue to be able to produce at a good rate and a very low decline for a long, long time. You just are dealing with higher water cuts. And the last thing that I maybe have Ben talk on is we are designing our patterns for waterflood. So when we think about spacing and we think about managing the different viscosities and so forth in the play, we are setting up our patterns and our well designs to maximize the recovery and obviously deal with the injection and what we see there ultimately in terms of how we're going to handle that. So Ben, maybe I don't know if you want to touch on anything further there, but... Benjamin Stoodley: Yes. No, I think the only thing -- a couple of things I would add is when you do start to see more water show up, you see incremental total fluid show up as well and the actual oil production really sustains a plateau or a very shallow decline through a long stretch. Some of the analog heavy oil stuff that I spoke about, especially the longer-dated stuff, they would have seen breakthrough back in like the early 1960s and have declined 5% to 7% for a long stretch following that. So that's, I think, what you can expect following the breakthrough as it comes through the field is just sustained shallow decline production there as we start to process more fluid. Unknown Executive: Our next question is for Mr. Kevin Johnston. With your 2026 budget press release in December, Tamarack mentioned it was going to allocate additional free funds flow to share buybacks now that Tamarack had reached its debt target. Under the previous framework, Tamarack was allocating 60% of free funds flow to shareholders. Going forward, approximately what percent of free funds flow should we expect to be allocated to shareholder returns? Kevin Johnston: Yes. Our guiding principles are to maximize per share value and total shareholder returns across the commodity cycle. These principles give us greater flexibility to allocate capital depending on the environment, especially now that we've hit our debt target of 1x debt-to-EBITDA at a USD 50 WTI oil price. In the current environment, we're modeling kind of greater than 60%, so 70% to 90% this year, but we are going to be flexible depending on the environment we're in. Unknown Executive: We have no more questions online, and I'll pass it back to Steve Buytels to end the call. Steve Buytels: Thanks. I would, again, just like to reiterate our true appreciation to our team here internally for what a year they had. It really truly was an outstanding year here for us, both from a financial and operating standpoint, but then that really was culminated through what the reserve report was able to demonstrate in terms of the overall profitability of the business. So with that, again, we'd like to thank everybody. We appreciate everybody's time and support, and I will pass it back to the moderator to close off the call. Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Marta Campos Martinez: Hello, everyone. This is Marta Campos, Head of Finance for ROVI. Welcome to our company's review of business results for the full year 2025. Before we begin, let me remind you that today's presentation and associated documentation are available on the Investor Relations section of ROVI's website. Please note that the information presented in this call contains forward-looking statements based on our current beliefs and expectations. Actual results could materially differ due to known and unknown risks, uncertainties and other factors, and we undertake no obligation to update or revise any of the statements. Moving to today's agenda. Juan Lopez-Belmonte, ROVI's Chairman and CEO, will discuss on business performance for the full year 2025 as well as our outlook for 2026. Javier Lopez-Belmonte, ROVI's Chief Financial Officer, will then review full year financial results and provide an overview of our cash and debt position. The presentation will be followed by a Q&A session. Therefore, if you want to ask any questions during the presentation, please do not hesitate to send them through the question button on the platform. With that, I thank you for your presence today, and I will now turn the call over to Juan. Juan Encina: Thank you, Marta. Good morning, everyone, and thank you for joining us today. 2025 was a transition year for ROVI, but also one characterized by strong execution and solid performance. We operated with clear strategic priorities and delivered our financial commitments. In this context, our total revenue in 2025 amounted to EUR 756.1 million, a 1% decrease compared with 2024. Operating revenue reached EUR 743.5 million, representing a 3% decrease versus 2024. This evolution was better than expected and was mainly driven by the performance of our contract development and manufacturing organization business. This increase was partially offset by the strong performance of our specialty pharmaceutical business. Our gross margin reached 66.5% in 2025, an improvement of 3.9 percentage points compared to 2024. It was also a strong year in terms of profitability. EBITDA increased by 4%, and our EBITDA margin expanded by 1.9 percentage points, reaching 29.1% in 2025. With the visibility we have today, we reaffirm our 2026 guidance and ROVI expects operating revenue to grow by high single-digit to low double-digit rates compared with 2025. I'm very pleased with the progress we've made in executing transformative initiatives that continue to strengthen our company. Let me begin with our execution in the CDMO business. In November, we announced a collaboration with Roche for the manufacture of a new medicine in development. This agreement reflects the strong momentum we are seeing in new business and the continued expansion of our partnership base. In September, we announced the acquisition of an injectable drug product manufacturing site in Phoenix, Arizona. We are now integrating the facility, ROIS Phoenix into our network. As part of the transaction, we signed a drug manufacturing agreement with an initial 5-year term, including minimum annual payments of USD 50 million. We're extremely excited about this opportunity as it enhances our value proposition for biopharma partners by providing U.S.-based manufacturing capabilities and adding highly competitive, high potent OEB5 cytotoxic capacities. Turning to our Specialty Pharma business. In July, the Technological Development and Innovation Center confirmed the final approval of the EUR 36.3 million aid granted to ROVI for the LAISOLID project, covering the period from January 2023 to August 2026. In the second half of the year, we collected the full amount and recognized the revenue associated with expenses incurred between January 2023 and December 2025. And finally, in January 2025, we advanced meaningfully in the field of artificial intelligence. We acquired a majority stake in Cells IA Technologies, a pioneer in AI-assisted diagnostic in pathological anatomy, an area with significant potential from transformation to emerging digital technologies. Looking ahead, we expect these actions to translate into strong financial performance over the coming years and give us confidence in our long-term outlook. And now let me begin a quick overview of the 2025 financial results. Total revenues fell 3% to EUR 743.5 million versus 2024, mainly due to the behavior of the CDMO business. Notwithstanding sales of the specialty pharmaceutical business were up 11% to EUR 473.9 million, positively impacted by low-molecular-weight-heparins, Okedi, Neparvis and the contrast agents and other hospital product division. I will touch upon their performance later on the presentation. Moving on to one of our main pillars of growth and specialty pharma area. Sales of prescription-based pharmaceutical products increased by 11% in 2025, reaching EUR 414.1 million, driven mainly by the solid performance of our heparin division, which grew 7% in the year. Within the division, enoxaparin was the main growth contributor. Sales rose 9%, supported by higher order volumes from our international partners. Bemiparin also delivered a strong performance. Sales increased 4% in 2025, driven by a very strong fourth quarter with sales increasing 53% compared with the third quarter. This growth was supported by the strength of our international, where revenues rose 15% to EUR 43.6 million, mainly driven by strong performance in China, Greece and Turkey. We remain focused on becoming a global leader in the heparin field with both bemiparin and our enoxaparin biosimilar. In line with this ambition, we continue to invest in achieving self-sufficiency in crude heparin sourcing, moving to our full vertical integration across all manufacturing stages of low-molecular-weight heparins. Enoxaparin biosimilar continued to strengthen its global position in 2025 with out-licensing agreements covering 82 territories. Sales performance was solid throughout the year, driven by stronger demand from international partners. Sales increased 9%, reaching EUR 157.7 million, reflecting higher order volumes and sustained momentum in markets where the product is already well positioned. Additionally, the year closed with a particularly strong fourth quarter, the strongest of the year, with sales up 36% versus the previous quarter. Growth from the specialty pharmaceutical business was also driven by Okedi, Neparvis and the contrast agents and other hospital products. Okedi, the first ROVI product based on its leading-edge drug delivery technology, ISM for the treatment of schizophrenia in adults, delivered another year of strong growth. Sales reached EUR 56.7 million in 2025, an increase of 97% compared to 2024 and 84% rise compared to the fourth quarter of 2024. Sales of Neparvis, as specialty product from Novartis, indicated for the treatment of adult patients with symptomatic chronic heart failure and reduced ejection fraction, increased 10% in 2025. Finally, sales of contrast imaging agents and other hospital products increased by 11% in 2025. Moving on to our CMO business. Performance in 2025 evolved in line with our expectations. Sales declined 20%, reaching EUR 269.5 million, mainly due to 2 factors: minimal revenue recognition related to the activities carried out in the year to prepare the plant for Moderna vaccine production; and second, lower production revenues from Moderna during that same period. Despite this temporary contraction, our confidence in the year and long-term potential of our CDMO platform remains very strong. We operate in a highly dynamic market where ROVI holds a clear competitive position. To fully capture this opportunity, we are making significant investments to reinforce our global leadership in a sterile fill and finish capacity and services. These investments will enable us to continue benefiting from the structural imbalance between the growing demand for injectable products and the limited supply of high-quality manufacturing capacity worldwide. With expansions underway, ROVI is on track to become one of the largest and most experienced pharmaceutical groups in Spain, operating 8 fully integrated manufacturing sites, 5 of which are dedicated exclusively to contract development and manufacturing activities. This positions us exceptionally well for future growth. We continue to progress on our 2 innovative formulations based on our ISM technology platform. Today, I will provide an update across both programs. First, Letrozole SIE, our quarterly prolonged release formulation of Letrozole for the treatment of hormone-dependent breast cancer. We obtained positive Phase I results at the beginning of 2025 and demonstrated superior estrogen suppression compared with Femara. November 2025, we submitted the investigational new drug application to the U.S. FDA, and we expect to begin recruitment for the first clinical trial in the second quarter of 2026. Second, Risperidone QUAR, our quarterly prolonged release Risperidone injection for the treatment of schizophrenia in adults. It's unique PK profile is capable of providing clinically relevant plasma concentrations from day 1 onwards. The clinical program intends to achieve the same indications as Okedi and to demonstrate that unlike all the other quarterly formulations, patients being attended for an acute episode can be treated with a single quarterly injection of Risperidone QUAR without previous stabilization with monthly medication. We also reported positive Phase I results early in 2025. And the Phase III clinical program will follow a design similar to the one successfully executed for Okedi. Both programs represent meaningful innovation and reinforce the potential of our ISM platform to deliver long-acting treatments that improve patient outcomes and others. To conclude, let's turn to our outlook for 2026. As we've highlighted throughout today's presentation, 2025 was a strong year in terms of execution, and we have led solid foundations for our next phase of growth. In 2026, we expect to return to revenue growth. As I mentioned earlier, 2026 guidance remains unchanged, and we expect operating revenue to increase by between a high single-digit percentage and a low double-digit percentage in comparison with 2025. This outlook reflects several factors. The potential revenue from the manufacturing agreement signed with Bristol-Myers Squibb, closing still pending, as part of the transaction announced on the 29th of September 2025. Revenue arising from other agreements related to the contract manufacturing activity and lastly, the current competitive pressure on pricing in the heparin division. To conclude, we are executing strongly across the business, successfully advancing Okedis' rollout, progressing our clinical programs and delivering solid performance in our CDMO operations. At the same time, we are making the strategic investments required to support sustainable growth over the long term. The progress we've made this year, combined with the momentum we are carrying forward, reinforces our ability to serve patients effectively while building lasting value for our shareholders. Thank you for your presence again today, and I will now turn the call to Javier. Javier López-Belmonte Encina: Thank you, Juan. Good morning to everyone. As Juan noted in 2025, we made meaningful progress on building long-term value for the company. Total revenue in 2025 amounted to EUR 756.1 million, a 1% decrease compared with 2024. Likewise, operating revenue for 2025 totaled EUR 743.5 million, a decrease of 3% on 2024 numbers. This decline was better than expected and mainly driven by the performance of the CDMO business. This decrease was partially offset by the strong performance of our specialty pharma business, which was driven by our heparin division, Okedi, Neparvis and contract agents and other hospital products. I will now walk you through the remainder of our P&L. Gross profit increased 3% to EUR 494.7 million in 2025 compared to 2024. Gross margin was up 3.9 percentage points to 66.5% in 2025. This increase was mainly impacted by the recognition of revenue associated with the R&D aid awarded by the CDTI for the LAISOLID project, which is recorded under the other income line. Excluding the impact of other income, gross margin would have increased by 2.3 percentage points to 64.8%, mainly due to 2 factors: One, first, the increased contribution of Okedi sales, which added high margins; and second, the decrease in low-molecular-weight heparin raw material prices, which had a positive impact on gross margin. ROVI continues to be committed to innovation. R&D expenses increased 47% to EUR 37.8 million in 2025 due to the completion of the Phase I clinical trials for Letrozole SIE and quarterly Risperidone ISM and also for the preparation for the development of Letrozole SIE's Phase III clinical trial. SG&A expenses decreased by 2% to EUR 240.7 million in 2025 compared to 2024, mainly due to an 8% reduction in other operating expenses, excluding R&D. This item, however, includes nonrecurring expenses associated with the strategic projects undertaken in 2024 and 2025. When excluding these nonrecurring strategic projects and other operating expenses, excluding R&D, would have decreased by 4% in 2025, underscoring the continued effectiveness of the company's cost-containment initiatives. These efficiencies offset the 4% increase in employee benefit expenses, always excluding R&D, in 2025 versus 2024, driven primarily by a 3% wage increase due to the entry into force of the 21st Collective Agreement of The Chemical Industry, '24-'26 in the fourth quarter of '24 and also by the hiring of additional CDMO personnel. EBITDA totaled EUR 216.2 million in 2025, an increase of 4% compared to 2024, reflecting a 1.9 percentage point increase in the EBITDA margin, which increased to 29.1% in '25. EBIT increased 4% to EUR 185.8 million in 2025, reflecting a 1.5 percentage point increase in the EBIT margin, which increased to 25% in 2025. Net profit increased 3% to EUR 140.4 million in 2025. If we now perform a pre-R&D analysis, EBITDA pre-R&D calculated excluding R&D expenses in '25 increased by 9%, reflecting a 3.6 percentage point increase in the EBIT (sic) [ EBITDA ] margin to 34.2% in 2025. Likewise, EBIT pre-R&D increased by 9%, reflecting a 3.2 percentage point increase in the EBIT margin to 30.1% in 2025. Net profit pre-R&D in the same way, increased by 8% in 2025. Moving on to the evolution of CapEx and cash generation. Let me say first that we view CapEx as a key enabler for ROVI's future growth and is a key focus for our organization. This way, last year, ROVI invested EUR 67.8 million. Of this amount, EUR 46.2 million relates to investment CapEx related to our facilities, including key important projects such as the new filling lines and the operations expansion, Glicopepton, our joint venture for the construction of a plant dedicated to the production of compounds of high biological value from the intestinal mucosa of pigs and finally, the industrialization of our ISM platform. Lastly, we invested EUR 21.6 million in maintenance and other CapEx. In 2025, we increased cash flow from operating activities by 35% to EUR 187.1 million. Increase is mainly explained by 2 factors: the collection of the CDTI grant from the LAISOLID project and the improvement in inventory resulting from lower prices of heparin raw materials. Our cash generation capacity has also evolved positively with free cash flow reaching EUR 120 million, 57% higher than in 2024. Regarding our debt. As of 31st December '25, ROVI's total debt increased to EUR 121.8 million. So December '25, ROVI had a gross cash position of EUR .9 million and a net debt of only EUR 21.9 million. Let me end this section with our dividend policy, which we consider a key priority for ROVI. ROVI's Board of Directors will propose to the General Shareholders' Meeting, a dividend distribution of over EUR 49 million. This is equivalent to EUR 0.9594 per share entitled to receive it, charged to the '21 profit -- 2025 profit, sorry. This would entail distribution to an amount equivalent to approximately 35% of the consolidated net profit for 2025 attributed to the parent company. So moving to the news flows for '26. Let me say that, first of all, ROVI delivered in 2025, and we are entering 2026 in a very strong position, ready to capture the next wave of growth. The year ahead brings a very attractive news flow across all parts of our business. In specialty Pharma, we expect to strengthen the heparin division as we advance towards becoming a fully vertically integrated company, securing our supply chain and improving competitiveness. In CDMO business, 2026 will be a pivotal year with the full integration of ROIS Phoenix into our network and the continued execution of our capital investments, which will expand capacity, enhance capabilities and support future commercial opportunities. And in R&D, our ISM platform continues to represent a significant value driver with important milestones expected across our later-stage pipeline. Phase III trial of Letrozole SIE and the Phase III program of our quarterly Risperidone formulation. Altogether, '26 is set to be a commercially rich year supported by strong execution, meaningful catalysts across the portfolio and the actions we are taking to position ROVI for sustainable long-term growth. That's all regarding our full year financial results. We can now start the Q&A session, and I will pass the floor to Marta. Marta Campos Martinez: Thanks, Javier. [Operator Instructions] The first question is for Javier, and it comes from Pablo De Renteria Kepler Cheuvreux. Javier, I understand it may still be early to comment, but could you share any indication on your clients' intentions regarding the 100 million dose capacity expected to be operational this year? Specifically, the agreement is expected to contribute between EUR 80 million and EUR 180 million. Do you have any sense of whether the client is likely to utilize this capacity fully or whether it is intended more as a backup option? And as a follow-up, has there been any change to the time line for commissioning the line? Or does September still look like the official target date? Javier López-Belmonte Encina: Thanks, Pablo. We cannot comment much on specific contracts for -- I mean, for confidentiality reasons. To provide some context anyway, we are carrying out a technology transfer works, and that will imply regulatory approvals this year. And again, commercial production is expected to commence probably or likely most likely in the second part of the year. With this contract, the client has, at their disposal, a filling line in San Sebastián de los Reyes [indiscernible] plant up to we normally assess 100 million units of prefilled syringes. And the expectations remain the same. '27 is expected to be the first full year manufacturing year, I mean recurrent from full year, from beginning to end. And if we take into account this potential first full year or this full recurrent manufacturing revenue, the impact in our accounts will range between 20% and 45% over '23 year -- sales year. If you remember that was the guidance that we provided when we announced the contract, and we don't have different views as today. Marta Campos Martinez: Thanks, Javier. The next question comes from Guilherme Sampaio from CaixaBank, and Juan, it's for you. Could you comment on the latest trends regarding heparin raw material cost evolution and to what extent this should be able to offset potential pressures in prices in 2026? Juan Encina: Thank you. Thank you, Guilherme. There's not that much info we can share with you at this moment of time regarding heparin prices. What we are seeing really is a real aggressive price strategies from -- mostly from the Chinese players. What we are right now working is really on executing our plans to improve cost efficiency and to be able to deliver higher gross margins to make our position in the market more competitive. In this regard, it's going to be very critical, the kick of our operations of our new manufacturing plant with the vertical integration of our supply chain. So really, we do believe that we have very positive trends in the future once we can in-house source the crude heparin manufacturing. But right now, really our goal and what it is taking most of our time right now is to make sure that we deliver all our execution plans in terms of making sure that we can make the most of our -- in terms of cost efficiency in our supply chain. Marta Campos Martinez: Thanks, Juan. Javier, Guilherme also wants to know, what is your view on SG&A evolution in 2026? Javier López-Belmonte Encina: Thanks, Guilherme. As we guided the market on '26, we expect to expand the sales of the company. And that will mean that probably we are having an inflection turning point in our CDMO operations compared to the previous year. So that will mean that we'll need to expand -- that we are expanding our operations. And for sure, this is linked to an increase in people and some expenditure. I want to highlight the tremendous performance that the company did on SG&A last year on '25, where we reduced SG&A. I think this is very difficult to replicate because as long as we are fortunate and happy to increase salaries to our people by the collective agreement, the trend normally is to increase at least as an inflection -- as the inflation levels. You know our policy is to be very strict on cost expansion. So probably -- I mean, what I foresee that we will expand our operations, and that will mean that we will need to expand probably our SG&A, but hopefully in a very moderate way. Marta Campos Martinez: Thanks, Javier. The next question comes from Sergio [indiscernible]. Could you talk about reaching Phase III for quarterly Letrozole in 2026? And what do you think the Phase III would last? Juan Encina: I mean that's really our plan as both Javier and myself we have shared with you earlier in our presentations, our target to start recruitment in second quarter this year of Letrozole quarterly injection. The time lines are pretty much already being shared with the market. I mean this is going to be a long execution Phase III clinical trial. I mean the design is extremely attractive. We are targeting superiority versus the comparative drug. And we don't expect to be the clinical trial finalized before 2030, 2031. But definitely, this is going to be one of the major milestones of the company. And I think it's the best signal how do we -- how are we trying to execute the long-term perspective of the company. I think we have tremendous, very interesting short-term drivers of growth while we are already establishing the foundations of the growth of the company for the next decade. Marta Campos Martinez: Thanks, Juan. Francisco Ruiz from BNP has 2 questions. The first one is for you, Juan. After the excellent year on heparins, what are your expectations for 2026? Juan Encina: Thank you, Francisco. Really, as I mentioned to you before, we expect -- I mean, 2025 was a great year. I mean, sales grew 9% on enoxaparin. Bemiparin performance was also solid, especially in international markets. For 2026, we expect a decline in terms of sales basically because the last quarters of last year were very strong in international markets. So that means that our partners right now, they have sufficient stock. So we expect a slowdown in that part of the business. And secondly, we are seeing -- as I mentioned before in a previous question, we're seeing a tremendous price aggressive strategy from mainly our Chinese competitors. So altogether, we expect that for 2026 sales decline for low-molecular-weight heparin. We are -- as I mentioned before, we're investing heavily in making sure that we improve our cost efficiency in our supply chain. And we remain -- I mean, very much excited that we can still become a global player. We're investing heavily. We -- hopefully, Glicopepton will be very soon works finalized, and we will be able to be fully integrated in the supply chain of the heparin production. And definitely, I believe that great things are to be delivered by ROVI on this field. We are experts on heparin, and we have demonstrated in the past that we do have the skills, the products and expertise, and we're just working on the long term to make sure that we continue increasing our sales. Marta Campos Martinez: Thanks, Juan. The second question from Francisco. This goes for you, Javier. After the lower R&D in 2025 versus expectations, could you update if in 2026, it should go above the range of EUR 40 million, EUR 60 million commented? Javier López-Belmonte Encina: Yes. Thank you, Francisco, for the question. I mean probably you are right. Last year was a lower R&D expenditure than expected. At the end of the day, the expenditure of R&D is linked to the evolution of the clinical trials. And as we've been mentioning in today's call, we are expecting to start recruiting patients this year, very soon. And probably recruiting patients in this phase of the clinical trials are the most expensive one. And therefore, we could expect this year to be very intensive on R&D expenditure. At the end of the day, what we -- the guidance that we provided on the Capital Market Day last year around the R&D expenditure for this 5-year terms program from '26 to 2030 don't change at all. So probably we'll be spending EUR 300 million on this year. So overall, that amount will not change. Probably '26 will be one of the years that we'll spend most on R&D. That's also clear. And we are also looking and pushing to spend as much as possible, but that will mean that we are progressing in the right direction. On the other hand and on the positive front, let me remind all of you that on '26, we will account the second part of this aid from this Spanish organization, CDTI that will give us or we will account extra income, let's say, that way, that will be in a substantial amount. So that probably will offset any extra expenditure for the year on R&D. So we are very happy that we were able to collect that grant that will help us to smooth the expenditure on R&D. Marta Campos Martinez: Thanks, Javier. Juan, Álvaro Lenze from Alantra Equities asks, can you provide some detail on Neparvis prospects and the timing of the loss of exclusivity? Juan Encina: Thank you for the question. I mean Neparvis has been a tremendous success. I mean, it has proven the skills of our commercial capabilities in Spain. Unfortunately, the product will lose its patent around November this year. But it has proven really the benefits of the combination in terms of commercialization of Entresto and Neparvis, and this has not proven or is not on the market. So it's been a tremendous success. But unfortunately, I mean, November, last quarter this year, the product will go off patent. Marta Campos Martinez: Thanks, Juan. The next question, Javier, comes from Joaquin Garcia-Quiros and is related to CapEx. CapEx consensus for 2026 is at around EUR 62 million. Are you comfortable with this number? Javier López-Belmonte Encina: Thanks, Joaquin, for the question. As we highlighted during the presentation, we are investing heavily for us on CapEx this year because for us, these investments are setting the foundations to achieve the goals that we internally have for 2030. So as you know, we are expanding our San Sebastián de los Reyes plant. And this year, also, we will set up a new line in ROIS, Phoenix. Apart from that, we are still investing on Glicopepton, which is the JV for the vertically integration heparin plant. So EUR 62 million is similar to the amount that we spend or invest on '25. Depending on how these investments -- the investments that I was sharing with you evolve on '26, depending on how they fall on '26, '27, this figure could be similar to last year figure to EUR 60 million CapEx or it could be slightly even above that figure. So '26 is going to be a key year for the investments of the company. We are acquiring ROIS Phoenix and probably this acquisition, coupled with the current CapEx projects ongoing, will make '26 very, very intensive on CapEx. That's what I would say right now. Marta Campos Martinez: Thanks, Javier. The next question comes from [ Tim Jack ] from Entrepreneurial Investment. Juan or Javier, can you comment on the public information regarding the smaller pipeline and lower R&D spending of Moderna? How does this affect the plant utilization of the established production capabilities? Juan Encina: Thank you, Tim, for your question. Go ahead, Javier. Go ahead. Javier López-Belmonte Encina: No, no. What I was going to say that, I mean, in a public conference like this, we don't comment on other companies' performance. But I could say that the outlook for Moderna for '26 and '27 is better than before. So we are truly excited about our partnership with Moderna and take into account that the last -- past years for Moderna has not been the best for them, and that's public knowledge. If according to their latest comments, they have an uplift of revenues for the coming years. I think that this can only be positive for us. But Juan, please add whatever you want. Juan Encina: No, just reinforcing what Javier has mentioned, I don't think it's up to us to comment on Moderna's guidance. But the only thing that we can express is that the partnership is as strong as ever. And again, we still feel that there is going to be a tremendous important collaboration between ROVI and Moderna in the future. Marta Campos Martinez: The next question comes from Patricia Cifuentes from Bestinver. When do you expect to advance with the Risperidone QUAR trials? Juan Encina: I mean [indiscernible] very similar to those of Letrozole. Our idea is to start recruitment as well in 2026 and to kick off. And again, this is already very much in place. I mean the clinical trial is extremely interesting, and it's going to as well to lay the foundation for tremendous growth for the company probably in the next 4, 5 years once we got the results. I mean we are targeting something that will provide us a commercial competitive advantage is the fact that patients could start right away with our quarterly injection instead of being stabilized with a monthly treatment. And I think that will give us a unique differentiation in the market, in the long-acting injectable market. And again, it's already on the execution mode. And hopefully, if we could just open the window once the clinical trial is finished, there is going to be a tremendous growth and it's a tremendous life cycle management of the existing Okedi, which is doing extremely good as well. Marta Campos Martinez: Thanks, Juan. Javier, the next question comes from Jaime Escribano from Santander. Regarding BMS integration, when do you expect BMS to start contributing in P&L? Javier López-Belmonte Encina: Thanks, Jaime, for your question. The BMS potential revenue for the year, it is linked to the acquisition of ROIS Phoenix. Basically, we signed the acquisition of the plant in Phoenix last year. There is an interim period, and it will be a closing day. This closing day depends on several conditions and things that both companies or both parties have to perform. We are extremely optimistic that this is going to be easy, and we don't expect that much delay on the acquisition of ROIS Phoenix. However, it's still early to predict when this acquisition will take place or will this closing take place. We've been -- I think we can understand that at least we'll have 6 years from BMS contribution during '26, at least. And we are working to sign the -- to have the closing as soon as possible so we can take over ROIS Phoenix and start producing for BMS. And more important than that, start -- we want to start deploying all the investments in ROIS Phoenix to be able to produce to other customers as soon as possible. Marta Campos Martinez: Okay. Thanks, Javier. Jaime also asks about gross margin. What is your expectation for 2026? Javier López-Belmonte Encina: I mean, we don't provide accurate guidance for gross margin for '26. What we are saying that is with the different drivers that we handle at the company, I think we are positive around gross margin for next year. So again, Okedi is growing. We have commented several times that Okedi is a high added value product for us. So meaning that we have higher gross margin in Okedi than in the rest of the portfolio. So this is a very positive contribution. We try to comment also that the CDMO business is highly gross margin driven, too. So positively, if we are increasing the sales of CDMO business on '26, probably this will also contribute in a positive way to the gross margin. And finally, the heparin franchise, as commented, we are having positive tailwinds on the raw material front. So in this area, it will depend on the competitive pricing pressure on the selling side. And depending how the market evolves, we could even have a positive tailwinds on the heparin franchise from a gross margin perspective. But again, that will depend on very much how the pricing pressure will evolve on the different markets. Marta Campos Martinez: Thanks, Javier. And the last question from Jaime is, what is ROVI's base case scenario for the EUR 80 million, EUR 180 million revenue contract range in 2007 -- 2027, sorry, low, mid or high end of the range? Javier López-Belmonte Encina: Well, up to now, what we can tell you is that we are working very hard to hit all the different time lines. We started this project back in '24. And I would say that the contract negotiation was even earlier. So it's been a lot of time, what the team is very focused and at least is what we can do right now is to work on this tech transfer to execute as efficient as possible, to be executed as efficient as possible. So we are more focused on those tasks. I believe that so far, we've been extremely efficient. The line was deployed on time. The different work streams has been hitting the different milestones. And look, we are more focused on this year, trying to get the regulatory approvals to start a routine manufacturing rather than thinking on next year. As any CDMO contract, that will depend on the customer needs. The good thing about this agreement is that we have some important, as we discussed several times, minimum commitments. In this case, it's a full line, and that's what is really key for us. And at the end of the day, what is important for us is that we deliver the best service to the customer, and this turns into the most profitable scenario to us. And again, we need just to wait a few months and see how this contract evolves. Marta Campos Martinez: Thanks, Javier. The next question comes from Javier [indiscernible]. Juan, it's for you. A question for Juan about Letrozole, Please. To better understand the commercialization strategy, are you planning to launch it with a partner to reduce risk? Are you already in negotiations? Or when would you begin negotiating now that Phase III is starting? Juan Encina: Thank you for your question. Really, I mean, I think it's too early to really provide a clear strategy of how we're going to move to the market with Letrozole. I think what we can share with you is that we have -- what we have done with Okedi that definitely we are setting up our commercial capabilities in Europe. And obviously, the obvious case forward would be to leverage those commercial capabilities in Europe. With Okedi, we have shown that we -- we like partnerships as we have shown with the rollout of bemiparin, enoxaparin and lately Okedi with the latest launches in Canada, Australia or Taiwan through partnerships. Right now, we are focusing on really getting the clinical trial moving forward. Our scope is global. We want to get the approval in the U.S. in Europe. And it will depend on how on the results of the clinical trials that will define our final strategy. The market is extremely attractive as we have shared to the market in several occasions. We are talking in terms of treatment close to 3 million treatments. So the market can be between $2 billion, $3 billion to $7 billion, depending on the price strategy. So again, this is a unique opportunity. We really want to hit perfectly. And that's the reason why we have been aggressive on the clinical trial design. We are targeting superiority, which provide a tremendous competitive advantage if the product finally gets approved. And I think it will be once that the clinical trial advance once we start getting some data that we will start defining which is the strategy to follow. But I think Okedi an example of our previous way of doing things could be taken as an example of what is our thoughts in terms of the commercialization study. Marta Campos Martinez: Thanks, Juan. The last question comes from Christian Schmidt from [indiscernible]. What is the likelihood of signing an additional CDMO contract in 2026? This one is for you, Javier. Javier López-Belmonte Encina: Thank you for your last question. I mean we are truly excited about the business. And again, I know that we reiterate sometimes the same message. We are signing contracts on an important way or in a very recurrent way, I would say. The only thing is that we do not publish or do not make public these contracts because they are private and our partners don't want them to be public anyway, unless they are very key for us, and we are forced to publish because it's material for our accounts on a stock exchange regulation or mainly is that -- I think the momentum is still there. Now we are acquiring ROIS Phoenix, and I'm sure that will speed up closing agreements in the next coming months. As I said before, we are really, really excited about the momentum of the business. We are getting there to be known as one of the largest injectable CDMO player in the world. And I think that the pipeline is full of opportunities. Marta Campos Martinez: Thank you very much, Javier. So thank you very much for your participation. The ROVI IR team will answer the pending questions as soon as possible. Let me now turn the floor over to our CFO, Javier Lopez-Belmonte, for the closure of the presentation. Javier López-Belmonte Encina: Well, thank you, Marta. This concludes our presentation of the full year results. As Marta was saying, if there are further questions, which I believe there are, our Investor Relations team will answer them in a one-to-one mode. Thank you very much for joining with us for the full year presentations call, and wishing you a pleasant day. Bye-bye.
Hinda Gharbi: Good morning, good afternoon, and good evening to everyone. Thank you for joining us for our full year 2025 results. I'm joined by Francois Chabas, our Group CFO. In keeping with our solid plan execution, 2025 delivered sector-leading organic growth and strong margin progression. In the second year of our LEAP 28 strategy, we delivered results fully aligned with our ambition to accelerate growth and enhance returns. During the year, we implemented our new organization, which is now accelerating strategy execution across our geographic platforms and product lines. Our results reflect the strengthened portfolio, the tangible impact of our performance programs and efficient capital allocation. I'm proud of our leaders and their team's contributions across the world and of the consistency in delivery in a fast-changing market. Let me start with our financial highlights for the year. 2025 was the second year of our LEAP 28 strategy, and we continue to gain traction across all pillars. We delivered 6.5% organic revenue growth, including 6.3% in the last quarter of the year. Adjusted operating margin of 16.3%, up 32 basis points year-on-year and 51 basis points at constant currency. Adjusted earnings per share is up 2.8% on a reported basis and 9.2% at constant currency. Free cash flow of EUR 824 million with a very strong 107% cash conversion. At constant currency, we delivered double-digit shareholder returns. For 2025, we will propose a cash dividend of EUR 0.92 per share, up 2% versus last year. It is fully in line with our 65% payout ratio. Finally, as we have done in the last 2 years, we will be issuing a new EUR 200 million share buyback program to increase shareholder returns. Moving now to our revenue performance by business and geography. Across the portfolio, our organic growth was supported by strong momentum in energy, the continued buildup of digital infrastructure and rising demand for corporate and risk -- enterprise risk assessment solutions. This sector-leading growth reflects the attractive mix of our strengthened portfolio. Industry, Certification and Marine & Offshore delivered the strongest performance, growing from high single digit to double digit organically. The rest of the portfolio grew in the mid-single-digit range with some activities benefiting from very powerful structural drivers. In B&I and Infrastructure, data centers were up 30% organically year-on-year. In Industry, energy-related activities were up 13.9%. In Commodities, Metals & Minerals were up 9.2%. From a geographical perspective, strong organic growth across all regions. The Americas grew by 4%, supported by sustained energy spend and expanding data centers. Our momentum in Europe continues with 4.1% organic growth, largely above GDP growth. Asia Pacific reported 8.2% organic growth with broad-based expansion across Asia and Australasia. And our fastest-growing region was the Middle East and Africa, up 16.6%, benefiting from major infrastructure programs and sustained energy investments. I would like to report now on the progress of CSR -- of our CSR programs. In health and safety, continuous prevention programs further reduced our accident rate versus last year. On decarbonization, we further reduced our Scope 1 and 2 emissions by 7% year-on-year. This is fully in line with our science-based target initiative expectations. For gender diversity, steady progress with our ongoing program. In 2025, we improved or maintained all our major nonfinancial ratings, confirming Bureau Veritas's leadership. We raised our EcoVadis score to 80 out of 100 and obtained the top 5% distinction in the S&P Global Sustainability Yearbook 2026. Let's now move to the business highlights. I will start with Marine & Offshore. The division delivered a very strong performance in '25 with 14.3% organic growth. This marks the third year in a row of double-digit organic revenue growth. These results were driven by the ongoing renewal and modernization of the global fleet and the expansion of specialized vessels. Looking at it by segment, new construction delivered high double-digit growth from accelerated shipyard deliveries and capacity expansion, particularly in China and Korea. In 2025, we secured 14.4 million gross tons of new orders, bringing the backlog to 33.5 million gross tons, up 23% year-on-year. Core In-service achieved mid- to high single-digit growth, largely driven by increased volumes and some pricing. At year-end, we serviced more than 12,300 ships. Marine & Offshore continues to invest in new solutions to support our clients' energy transition. In Qatar, we opened a global gas center of excellence, supporting LNG projects worldwide through our global technical network. Looking at our Agri-Food & Commodities. This business delivered 3.7% organic growth this year. In Oil and Petrochemicals, performance remained resilient in challenging market conditions. Non-trade activities grew strongly, supported by increased demand for biofuels, marine fuels and sustainable aviation fuel and also from new lab capabilities. Metals & Minerals delivered high single-digit organic growth, driven by increasing projects in copper and gold and by the expansion of our lab network, specifically in Chile. In Agri-Food, we are completing the pivot of our portfolio with the sale of our food testing business in 2025. This divestment will be accretive to the divisional margin on a 12-month basis. In Industry, the division delivered 8.9% organic growth in 2025. We are a key player in the industry segment, a [ EUR 1.4 billion ] division, predominantly exposed to energy and energy adjacent sectors. This performance reflects robust market dynamics, supported by strong energy sector investments as countries continue to secure energy supply, decarbonize and transform their energy mix. The evolution of the portfolio is ongoing with acquisitions supporting the new strongholds of renewable and low-carbon energy services. By segment, Oil & Gas delivered double-digit organic growth, driven by new projects, particularly in gas and in major resource holding regions. Geographically, the Middle East, Africa and Asia have sustained investments in new oil and gas fields. Power & Utilities maintained double-digit growth. This was supported by investments in renewables and nuclear as electricity demand accelerates on the back of data center expansions and national electrification programs. Geographically, strong momentum across North America, Asia Pacific and the Middle East. In terms of transition services and green objects revenue streams, in the Middle East, we entered into a memorandum of understanding with Masdar, an Abu Dhabi clean energy company to help shape renewables and green energy standards in the region. We were also awarded a contract to support a client's first renewable energy project, combining solar generation and battery energy storage in the United States. Moving on to Buildings & Infrastructure. We delivered 5.2% organic growth in 2025, including a strong 8% in the fourth quarter. Today, B&I represents EUR 2 billion in revenue, a clear leader in the sector. 2025 was a strong year for our portfolio expansion with successful integrations, particularly the APP Group in Australia and further portfolio streamlining, including the divestment of noncore construction technical supervision business in China. Growth for B&I at constant currency was at a high 11.6%. Our CapEx activities delivered high single-digit growth, fueled by data center commissioning projects across the U.S., Europe and Asia and supported by recent acquisitions that are already accelerating organic growth. OpEx activities remained resilient, underpinned by the structural need for environmental measurements and energy efficiency audits. Infrastructure delivered steady growth. It now represents 20% of the divisional revenue. This was supported by government-led spending in Europe and major rail and terminal programs in North America. Major infrastructure investments are also ongoing in Asia Pacific and the Middle East. We are expanding our services for green objects in B&I. We secured a multiyear contract for a new battery gigafactory in Spain. In transition services for this division, we delivered a large-scale decarbonization program for a European fitness chain. Moving to Certification. In this division, we delivered a strong performance in 2025 with 7.9% organic growth for the year, with an acceleration at 8.4% in the fourth quarter. The certification business benefits from increased needs for assurance, decarbonization, supply chain resilience and cybersecurity solutions. This business represents many opportunities to innovate and create new schemes for customers as they pursue their own business plans. A number of acquisitions were completed in the last 18 months are expanding this portfolio in sustainability and cyber. Growth at constant currency in certification was up double digit. Looking by segment, QHSE, quality, health, safety and the environment and Specialized schemes grew at a high single-digit rate, supported by robust activity in most regions and very strong demand for food safety certifications. Sustainability and digital certification recorded double-digit organic growth. This was fueled by rising demand for carbon and greenhouse gas verification, supply chain ESG audits and upcoming regulatory requirements such as the Carbon Border Adjustment Mechanism. During the year, we secured several important transition services contracts ranging from large-scale ESG audits for a global aerospace manufacturer to a decarbonization road map for a major Middle Eastern energy company. We also secured a contract to support the cybersecurity work stream for autonomous military land vehicles for the European Commission. Lastly, looking at Consumer Products Services. The division delivered 3.7% organic growth in 2025, including 2.6% in the fourth quarter against very tough comparable. Performance was supported by accelerated sourcing shifts away from China with South and Southeast Asia leading growth, while Latin and Central America began to benefit from recent investments. This division is navigating a diversification strategy for the last 2 years, culminating in the acquisition of 9 companies. These additions contributed to the expansion of our services in new geographies, in new sectors and with new services, helping essentially pivot the portfolio circa 10% towards higher growth elements. In January, we completed the acquisition of SPIN360 in Italy, strengthening our sustainability, testing and certification capabilities for luxury brands. By segment, Softlines, Hardlines & Toys delivered low to mid-single-digit organic growth with a front-loaded first half of the year and a normalized half 2 as sourcing shifts gradually took place. Supply Chain and Sustainability Services achieved double-digit organic growth, driven by strong demand for supply chain resilience services and social audits amid sourcing changes in Asia. For the Technology segment, it delivered stable organic growth, supported by diversification with contribution from acquired companies offsetting softer wireless and automotive activities. On the electrical consumer goods and appliances front, sourcing shifts enabled growth in our Central and South American business, contributing to a robust performance. Finally, transition services continued to expand as we supported client sustainability programs, including full decarbonization support for a leading sportswear brand and a large-scale social audit program for a global technology company, therefore, reinforcing transparent and responsible supply chains. I will now hand over to Francois for the financial review. Francois? François Chabas: Thank you, Hinda. Thank you very much. Good afternoon to everyone. So let me now turn to our financial performance and to the sustained momentum we delivered in growth and in returns. So as it has been already briefly presented to you, 2025 was once again a solid year for the group, marked by robust and broad-based organic revenue growth, 6.5% across the year. This growth translated into strong profitability with a reported adjusted operating margin of 16.3%, up 32 basis points in a reported manner. At constant currency, we expanded our adjusted operating margin by 51 basis points. We take the advantage of higher operating leverage programs and continued progress on functional scalability initiatives. Bottom line, the adjusted EPS reached EUR 1.42, up 9.2% at constant currency. The company will propose as a consequence, a further increase in its dividend at EUR 0.92. It is payable in full in cash as usual. Turning to cash generation. Free cash flow amounted to EUR 824 million. It includes a couple of one-off effects linked to the disposal of our food testing business, notably the tax cash out on the capital gain. Excluding this transaction, free cash flow increased even by close to 4% year-on-year. On the next page, we sum up a little bit the last few years when it comes to -- since the start of our plan. So as you've seen, we continue to deliver consistently on the long-term objective. For several years in a row, we have delivered consistently at or above high single-digit revenue growth at constant currency each and every year. This is a mix of organic growth and a positive net scope effect from acquisition and divestment together. It reflects our commitment to active portfolio management. Since the start of the plan, we have rotated almost 10% of our portfolio, taking into account both acquisition and divestment combined. In terms of profitability, the ongoing execution of our program produced measurable improvement in operating leverage and functional scalability. This led to meeting expectations for both reported adjusted operating margin as well as constant currency margins. On the cash front, right below, cash conversion exceeded expectations, reaching 107% this year, mainly driven by a further reduction of working capital as a percentage of revenue by another 100 basis points compared to 2024. And as you see, we've delivered 3.7% at the end of '25. Returns now expressed at constant currency, including dividends, adjusted earnings per share and the benefit coming from the EUR 200 million share buyback program have met or exceeded projections each and every year. Including negative foreign exchange impact, returns were maintained at high single-digit level. Let me now deep dive into the revenue for '25. We delivered almost EUR 6.5 billion in '25, corresponding to a 3.6% growth on a reported basis. Organic stood at 6.5%, supported by strong business fundamentals and increased demand in energy, digital infrastructure and risk assessment solutions. Bolt-on acquisition closed in past quarters contributed 2.9%, almost 3% to the growth. This was partially offset by the divestment of the food testing business as part of our active portfolio management. Factoring in those M&A component together, the net scope effect was 0.8% on a full year basis. Currency fluctuations negatively impacted revenue by 3.7%, mainly due to the euro strength against most currency, especially U.S. dollar, Australian dollar, Canadian dollar and the renminbi. Now if we take a closer look at our business and how they perform in '25, you see here both the organic growth and the scope component of the growth. All divisions grew well with several delivering very strong performance. Including scope effect, 4 businesses posted double-digit growth, reflecting both solid organic traction and the impact of our disciplined M&A bolt-on executions. Let me briefly walk through those segments. M&O, Marine Offshore delivered double-digit organic revenue growth. Industry grew high single digits, powered by strong global demand for energy solutions. Oil and gas, renewable, nuclear all delivered double-digit growth in 2025. Building & Infrastructure and Certification also reached double-digit growth at constant currency, boosted by last year and this year acquisitions in sustainability, cybersecurity and infrastructure, which contributed, respectively, 6% and 3% to the growth of each segment. Consumer Products, we just touched upon, delivered mid-single-digit growth at constant currency with a solid organic performance of 3.7% and a scope contribution at 1.7%. Finally, Agri-Food & Commodities posted low to mid-single-digit organic growth, mainly driven by Metals & Minerals, partially offset by the divestment of our food testing activity, which is now fully completed. So overall, this broad-based performance highlights the strength and the active pivoting of our portfolio. It's part and parcel of our LEAP 28 strategy and commitment to the investors. If we now turn to the margin bridge, -- before going to the basis points and the percentage, let me share with you that for the first time in [ Veritas ] history, we crossed the EUR 1 billion adjusted operating profit mark, which we are all very proud collectively. On a reported basis, we delivered a strong 32 basis point margin improvement, closing the year at 16.3%. It is another year of disciplined execution and operational leverage. Organically, we delivered a strong 74 basis point improvement, driven by operating leverage, the benefit of our 2024 restructuring and tight cost discipline. Scope had a negative impact of 23 basis points, reflecting the investment made to scale our newly acquired businesses. At constant currency, our 51% margin uplift is very solid. Aligned with our LEAP commitment, we aim at delivering consistent margin progression year-on-year. If we look now at our divisional margin performance for the year '25, -- starting with Marine & Offshore. We held a strong margin at 23.4%, essentially stable year-on-year with organic improvement bringing 67 basis points of improvement and offset by currency headwinds. Agri-Food & Commodities delivered a notable uplift to 15.1% of margin, up more than 100 basis points, driven essentially by very strong organic improvement, plus 122 basis points and the continued dynamic of our Metals & Minerals segment. Scope-wise, we expect the full benefit of the food testing divestment to positively impact 2026 as this actually divestment took place throughout the year 2025 in different momentum. Building & Infrastructure posted a strong increase to 13.6%, up 81 basis points. Robust organic leverage, plus 138 and the first sign of our performance programs are starting here to materialize. On the same note, Consumer Products continued to strengthen, reaching 22.4% of margin, here again, supported by 55 basis points of improvement on an organic manner. On the other side, Certification ended at 18.2%, down 138 basis points, reflecting investment to scale our sustainability and cybersecurity acquisitions. Organically, however, margins remained broadly stable. And finally, Industry closed at 13.9%, down 52 basis points, with organic decline limited to 21 basis points. So it is mainly driven by a change of mix due to project delays at year-end. Looking now at other financial metrics. On the bottom line, our adjusted earnings per share continued to grow regularly. It was up 9% at constant currency. This evolution has been driven by the incremental operating profit, up 11.2% at constant currency as well. Net financial expenses increased year-on-year, reaching EUR 116 million in '25 compared to roughly EUR 70 million in the prior year. This evolution is mainly driven by lower income on cash and cash equivalents, reflecting the change in cash levels and decrease in interest rates versus 2024. On the tax front, our adjusted effective tax rate continues to normalize downwards. We closed the year now at 30%, 50 basis points below last year despite for the specialist, the exceptional [ French ] corporate tax contribution that we've supported in '25. Turning to cash generation. Another year of reduction of our working capital needs of our revenue, as you can see on the chart on the right-hand side, [ Veritas ] is now well set below the 5% threshold. Let's remember that not so long ago, the working cap of our revenue used to be at 9% and above. So it reflects our constant attention to free cash generation and to cash discipline in general. Overall, free cash flow amounted to EUR 824 million, slightly below the record level achieved last year. It takes into account some one-off effects linked to the disposal of the food testing business, notably the tax cash out and the capital gain. As I mentioned in introduction, this -- excluding this transaction, free cash increased by close to 4% year-on-year. Now I would like to summarize for you what we have done in terms of capital allocation in '25. First, on M&A, we've invested EUR 162 million in 9 acquisitions and completed 2 divestments in line with our strategy to optimize the [ Veritas ] portfolio. Year-to-date, 2026 this time, we have already added 3 more acquisitions. On CapEx, we stayed very disciplined with a ratio of 2% of our revenue. In 2026, we expect to remain within the LEAP 2028 range and get somewhat closer to the 2.5% to 3% that we had announced during the Capital Market Day. Our leverage is at 1.1x at the low end of our guidance, as you can see. We have significant headroom to accelerate our M&A agenda while returning cash to shareholders at the same time. Speaking of returns, after completing our EUR 200 million share buyback in '25, we are now launching a new EUR 200 million program. This reflects both our confidence in the prospects of the company and the resilience of the business model of Bureau Veritas. So overall, [ Veritas ] delivered another year of strong financial results, and I want to thank all our team for their continued commitment and performance quarter after quarter. With that, I'll hand it over back to Hinda for an update on our LEAP 28 strategy. Hinda Gharbi: Thank you, Francois. I'll start with a few highlights on the major secular trends shaping our markets. From early on in this decade, megatrends included urbanization. We talked about connectivity and digitalization, energy transition, increased ESG compliance expectations and the gradual evolution at the time of supply chains following the COVID shock. You fast forward to last year, 2025, the picture has evolved. The technology race we are witnessing in this age of intelligence will have a profound impact on reindustrialization and urbanization. In addition, the rapid development of AI and the associated needs in computing capacity and data storage are feeding a massive buildup phase for data centers and all related ships and equipment to take a few examples. This is also creating an unprecedented demand for electrical power. Therefore, energy supply worries are mounting, driving developments of all energy sources from fossil fuels to new forms of energy. Finally, we are seeing a shift for organizations, both private and public, from a compliance-driven approach to sustainability to a risk-based approach that aims to protect their reputation, their brand and their competitive advantage. I believe that these developing trends support a consistently growing and accessible market for our services and solutions. Now from a LEAP 28 strategy execution angle, looking at the portfolio. If you recall, our portfolio strategy is about refocusing on key leadership markets, both existing ones and future ones. It is about an active portfolio management approach. Here, we are gaining traction. Since the start of the plan in '24, we have acquired businesses totaling EUR 279 million in annualized revenue and divested EUR 202 million of noncore activities. These transactions are progressively reshaping our revenue stream. Overall, and Francois mentioned it, after 2 years, we have pivoted circa 10% of our original portfolio mix. From a mix perspective, new strongholds is leading the growth with 19.8% revenue growth at constant currency, supported by both organic momentum and targeted M&A. We're scaling capabilities in renewables and cybersecurity. Second, our expand leadership stream covering our activities in Certification and B&I delivered 9.4% growth at constant currency since we onboarded significant acquisitions in B&I and some in certification as well. Finally, as expected, the optimized value and impact businesses are growing at an aggregate rate of 3.1% at constant currency, reflecting the divestment of our noncore food testing activities. These businesses continue to constitute half of our portfolio today and are essential to our cash generation and baseline growth. Turning now to the performance. And on the performance-led execution side, our performance programs are progressing well, both in terms of creating operating leverage and getting some functional scalability. In line with LEAP 28 road map, our margins have continuously improved over the last 2 years, both at constant currency and as reported. In '24, we improved our adjusted operating margin by 38 basis points. And in '25, we improved again with an additional 51 basis points, both at constant currency. This steady year-on-year improvement is also enabling investments in new production systems and digitalization programs. So in summary, we're pleased with the progress with our performance -- of our performance programs, and we intend to continue on this structural margin improvement path. A third update I would like to share is about our new operating model implementation that is essentially taking -- took place early this year from January 2026. This organization intends to simplify our operating model through the rationalization of our geographical platforms. It will also integrate and connect product lines into the regions. The intention is very clear. It is to better leverage our client proximity to maximize our sales as we consistently scale our product line services and solution. This new structure will allow us to take advantage of our company scale, both from a geographical and expertise perspective. We will also speed up decision-making, capturing additional opportunities and accelerating innovations. We intend to make a step change in growth and performance through increased cross-selling and global coordination of opportunities. To ensure the success of this organization, we have also introduced a new short-term incentive package for managers that formalizes common objectives between different parts of the new operating model. I would like now to spend some time exploring our approach to AI. The role of a third-party independent and impartial organization like Bureau Veritas remains critical to secure trust in any commercial or trade transaction. Bureau Veritas builds on its equity of almost 200 years of trust brokerage. The value proposition of our company resides in its ability to assess physical assets to test actual products in accredited labs and to certify projects and systems with no interference. This is achieved through qualified and accredited experts within a regulatory or quality infrastructure framework. Now we believe AI represents multiple opportunities for the company. We look at them in 2 ways. On the one hand, there are opportunities in existing services. On the other hand, others exist through our new ways of working and new services. First, let me start with the existing services and markets. The buildup of the infrastructure ecosystem to feed AI needs is spurring unprecedented investments in data centers and specialized manufacturing. Bureau Veritas is uniquely positioned to benefit from these investments. We have established a leadership position in data center commissioning and quality assurance and control, working with leading hyperscalers and other growing data center players around the world. The insatiable need for electrical power from data centers is triggering increased investments in all types of energy sources and energy infrastructure. We will benefit from this trend as we build on our unmatched global footprint and capabilities in oil and gas and other forms and expand it into renewables and low-carbon energy. This AI dynamic is also contributing to the development of new supply chains that need to be deployed fast and that must be assessed to manage and mitigate risks. Bureau Veritas has robust expertise in supporting customers as they shift their sourcing and redesign their supply chain. Let me now to the second part and where we see the opportunities. And those are in our ways of working and in creating new services. First, the rapidly developing capabilities of LLM models and Agentic AI are opening new possibilities to transform our ways of working, creating substantial gains in efficiency and productivity. Additionally, these technologies will impact customer service quality, profoundly changing their experience and increasing the stickiness of our services. In Bureau Veritas, we are accelerating the implementation of such technologies. We have been rolling out a new production system and certification since mid-2025. This will be the first product line to be transformed. Second, the integration of AI into customer workflows and organizations requires them to verify and validate that these AI models are fully aligned with their values and policies, compliant with their legal frameworks and respond to their customers and other stakeholders' expectation. Bureau Veritas today is building capabilities for AI assurance to address these needs, especially as the regulatory landscape around AI assurance evolves every day. Finally, Bureau Veritas conducts over 10,000 inspections or assessment of assets, products, projects or systems every single day, generating hundreds of terabytes of data per year. In addition, our experts have a full understanding of our customers' equipment, workflows and assets life cycle. Through this knowledge, we believe there is an opportunity to help them impact their performance. As an example, for our industrial customers, maximizing the uptime of their operating facilities is a major challenge. They manage equipment from different manufacturers and juggle with maintenance priorities. They must optimize the fully integrated system. In combining our deep knowledge of their facilities with the data collected, we can integrate AI technologies to pinpoint vulnerabilities that can then optimize their uptime and their facility performance. This is an exciting journey for us, one we are starting with a sense of positive urgency, and we will be reporting on our progress regularly. Moving now to the outlook and looking ahead to 2026. We entered the third year of LEAP 28 with confidence. Our markets are strong, supported by increased energy investments, rapidly urbanizing countries and a massive digital infrastructure buildup. The ongoing technology and defense race and increasing risk management and mitigation needs are acceleration factors. Continuing our sector-leading trajectory of growth, we expect to deliver in 2026 mid- to high single-digit organic revenue growth, continued adjusted margin improvement at constant currency. As usual, we remain committed to a strong cash flow generation while we deploy our capital allocation program. We will be expanding our capabilities through acquisitions. We will accelerate the integration of AI in our workflows, and we will deploy CapEx in growth markets. Moving to summarize. 2025, our second year of LEAP 28, shows the impact of our strategy and the consistent execution of our plans. We delivered sector-leading growth and strong margin expansion, underpinned by structural performance programs and the ongoing transformation of our portfolio. The secular trends I have discussed earlier are structurally supporting our served markets growth. The energy sector massive transformation, the ongoing and rapidly moving urbanization, the AI-driven buildup of the intelligence infrastructure and the evolving supply chains are feeding sustained demand for our services in this period of rapid change. Our portfolio rotation is also accelerating. Since the start of the plan, we have already rotated around 10% of the portfolio. And in line with our LEAP 28 strategy, we intend to double that in the next 12 months. This is a shift toward businesses with higher growth, higher margin and stronger strategic relevance while exiting noncore activities with limited potential. At the same time, we continue to invest in innovation and in capabilities that enhance differentiation and enable long-term growth. Finally, we remain committed to superior shareholder returns with the dividend increase and the launch of our third share buyback since the start of the plan, we are demonstrating both confidence in our strategy and efficient capital allocation. Before opening the queue for the Q&A session. I wanted to share that we will be looking forward to welcoming you to our Capital Market Day on September 22 in Paris. We will update you on the next phase of our LEAP 28 strategy. Thank you. And now Francois and I are actually are happy to take your questions. Operator: [Operator Instructions] Our first question today is coming from Annelies Vermeulen of Morgan Stanley. Annelies Vermeulen: I have 2 questions, please. So firstly, on data centers, which I think saw a strong acceleration in Q4. Was that mainly in the U.S.? Or was it relatively broad-based? And perhaps could you talk a little bit about how you estimate your market share of new data center commissioning? Do you think you have a #1 position in most of your end markets? And how your expectations for data center growth are shaping your growth outlook for B&I in 2026, i.e., can we expect further acceleration? And then second question was just on AI. So thank you for the additional color on AI for Bureau Veritas. I was just wondering if we could put some numbers around this. So when you look at Slide 21, for example, when you talk about performance improvements, where do you think that, that comes through? Do you think it means you can keep headcount flat while continuing to grow mid- to high single-digit organic through productivity improvements? And if you could talk about which divisions or sort of service lines you see the biggest opportunity for those efficiency gains driven by AI, that would be helpful. Hinda Gharbi: Thank you, Annelies. Thank you for the questions. Look, the data centers, the market itself, the spend, if you look at the spend of the hyperscalers and others, is actually growing double digit in the low teens. We have been growing, and we made no secret about it, double digit, a strong or a high double digit. So the growth has been actually global. The U.S., of course, there's a major spend in the U.S. Europe is also growing. Asia Pacific is also growing. So I would say those are the key top regions with the U.S., of course, having the lion's share of the growth. So data center expectation that it will continue to grow, I would say, double digit on the high end, really high double digit. And I'm expecting that, of course, that will carry part of the growth in B&I. Now B&I, it's no surprise that data centers are boosting the growth in B&I. We were very explicit in LEAP28 strategy, and we made it very clear that part of our expansion of portfolio is to develop capabilities in essentially activities in complex buildings like data centers, like other specialized manufacturing. So it's not a surprise that a lot of that growth is carried by those, and we continue to hunt for such activities. So B&I will continue to benefit from that. But there are also other growth areas for B&I. Infrastructure is growing healthily. We are growing geographically in newer regions, what we call -- what we tend to call emerging markets. The United States is also growing in different activities. And there is a dynamic between the different regions that is contributing to the B&I growth. On the AI side, sorry, you had also another question there. You have multiple questions in the first one, at least. So on the commissioning position, look, we are -- there are very few specialists commissioning and doing QA/QC on data centers. We are the largest player. There are, of course, others who in-source the work, very few and tend to be some EPCs mostly. Very few really data center owners do that because they really need the expertise. So I would say, conservatively say we're the top player in the specialists serving the market. The second question is on AI. Look, we really are very, very, very committed to implement AI and benefit from the efficiency and productivity gain. We think this is -- these are use cases that are very clear. It's a matter of implementing them and scaling them consistently, and I would say, quickly. So in terms of performance improvement, I'm not going to be able to give you specifically right now the numbers, but this is something we are looking at and working on very closely. And the reason we are very, in a way, strong and bullish about the value is the fact that today, we're seeing many use cases that are very clear, right? On a baseline level of AI, you can automate so many tasks that our people spend time on. That's gains in personal productivity. It's also gains in full-on productivity and that can actually benefit the customer in terms of turnaround time on their request or on their service. So the productivity and the efficiency we are envisaging today could apply to many businesses. I gave you an example of certification only because it's a business that we have profound -- we're profoundly changing how we will work there by massively investing in a new production system and reviewing systematically all the workflows and automating them. We are, for example, today, we have a very, I would say, near-term to midterm target to have over half of our certification admin work essentially automated, right? So there are many, many things we're working on. But certification is an example. I can give you many others. Inspection services is a great example where we can use AI for efficiency and productivity. And the intention here is because we're pursuing growth, -- this is about doing more with our people. It's really about freeing our people so they can spend more of their time on productive tasks so we can grow our business, grow our volumes very, very efficiently. Operator: [Operator Instructions] We'll now move to Suhasini Varanasi of Goldman Sachs. Suhasini Varanasi: Just a couple for me, please. One is on margins. Given that you've completed the disposal of the food business, can you help us understand the scale of the margin benefit in that particular division for 2026? And similarly, when we think about the drag from M&A scope effect in certification, how should we think about the drag from that scope effect in '26? When does it, let's say, fall away the effects in that particular division? That would be the first one. And I think just on your Marine division, -- can you help us understand what your expectations are for 2026, please? You've obviously had a very strong double-digit growth year in '25. I know we've talked a lot about normalization of growth. Just wanted to get the latest sense here. Hinda Gharbi: Good to hear from you, Suhasini. I'm going to let Francois comment on the margins, and then I'll answer you on Marine. François Chabas: Suhasini, so on the food testing that we've divested, so this business was having a margin lower than the group average. I could answer to you very simply, but actually, the answer is a bit more tricky. We've divested this business in tranches. We've had actually 11 different divestments, 11 different countries, to speak plainly that we sold between December '24 and August '25. So the exact number will be tough to assess, but one, it is positive to group margin, and we could say a couple of basis points, a bit more at group margin level for 2026. So not a step change. It is more positive on the division, of course, group-wise, a few basis points. When it comes to the second question on the M&A dilutive or the scope dilutive contribution to certification, I think it's important to come back to what we said in March '24. The LEAP plan is not only a plan of a pure financial performance is financial performance and investment at the same time. And in this segment, certification, what we are building, we are building solution we are supposed to and capable to scale beyond the domestic market. So we've made a couple of acquisitions with strong position in their native market, home market, and we actually grow them outside their comfort zone to be within a wider area, whether it is Europe for one or all of the U.S. for the other. And this come with a cost, and I think we make no mystery that we are investing. So this is what is happening in 2025 that will resolve in 2026, of course, as it will be payback time. Hinda Gharbi: Yes. Thanks, Francois. On the Marine division, Suhasini, on the growth, you're absolutely correct. We had expectation that the growth would have moderated probably from last year, simply on the assumption that the shipyards would have taken longer time to reach basically maximum, I would say, throughput. Usually, when you -- particularly if you open shipyards that were mothballed for a while, it does take time for them to come up to speed. And the capacity was building up gradually for the last few years, right? Actually, we were pleasantly surprised that they were much, much better at ramping up than in past, if you like, in past times or in past years. And therefore, the throughput was much faster. And that's really where that growth came in. It really came for the new construction, very, very good cadence that allowed us to convert our backlog very quickly. Now -- as we look forward, first of all, our backlog, I mentioned earlier, is 35 -- over 30 million gross tons, 23% year-on-year growth. We have a very comfortable and solid backlog. We have a very good team in place that has been doing all these great work. Really, we have everything with us and the shipyards are progressing, but we have reached that capacity. Now I am not necessarily able to say will there be many new shipyards that can open and come up to speed very quickly or not. And therefore, with everything we know today, we think there will be moderation of the growth from -- essentially from the 14% you have seen to something in the high single digit. This is how we think about mid- to high single digit. It all depends whether the shipyards can move much faster or can be much more productive than what we thought. But today, that's the, I guess, the limited visibility we have. It's the one time that I will say, I hope I'm wrong on this one, but we'll see. Operator: We'll now go to Geoffroy Michalet of ODDO BHF. Geoffroy Michalet: Congratulations for those very nice results. Three questions for me. First one would be for Francois maybe. What is your unspeakable target for working cap since it is always improving now. You haven't set a formal threshold you would like to reach or flow, let's say. The second question is on your M&A pipeline. Do you have confidence it could accelerate on, let's say, larger transaction? And the third question is on AI again, but maybe on another angle, the angle of potential threat or newcomers or new solutions that you are seeing on the market? Hinda Gharbi: Absolutely. Thank you, Geoffroy. Francois, do you want to address the working capital. François Chabas: Geoffroy, it's a difficult question. Just to remind everyone, you don't come from a 10% working cap of revenue to 3.4% with magic. It's been done the good old way, just making sure our clients are paying on time. And from a situation that where somewhat -- somehow the cash element was a bit less considered, less regretted as what it should have been. So we've put back the discipline in place each and every year. I'm very pleased with having gone below the 4% leverage threshold. I'm not -- I will not commit to a further downside. We still have options, by the way, we still have the option to further improve. But I would say, I think it's no mystery. We are getting very close to some kind of natural threshold the bulk of our business, 70% of our business is inspection related. So by definition, you work a week or 2 or 3 and then you invoice. So contrary to our lab segment of our business, which operate on a daily basis and where working cap can go as low as 0% inspection, you reach a threshold. So I would say I would be very happy if we stay for the coming year around the 4% working cap of revenue. We have ammunition to go a bit below, but it's too early to commit. I'll let you know perhaps more when we cross the June line on how we progress. Hinda Gharbi: Thanks, Francois. On the second question, Geoffroy, on the M&A. Look, the M&A pipeline is there. We have several multiple midsized or bigger than the bolt-ons you have seen recently targets that we are follow looking at in very specific markets that are of interest to us. So it's not an issue of pipeline. It's a matter of finding the right target that can be not only response to our strategic needs, but also can be integrated and scaled in an optimum way, allowing us to actually deliver the returns we want. So it's an equation that needs to balance all that. And that's why we could say with confidence that within 12 months, we'll be able to continue to rotate the portfolio. I think our M&A program is going in a way, is addressing what we need. There are a number of things we would have liked to do slightly faster, but not at any price. And that's very important that we have that balance between delivering what we need for the portfolio so we can progress with our growth agenda, but also making sure that our returns fit within the parameters that we have fixed for ourselves. So no concerns there in terms of availability of targets. Now looking at the AI question, look, I think 2 things. I think it's very important to step back and say, and that's something I tried to address earlier in my remarks on the AI, what do we do and why we are needed. I am not concerned today that we will be completely replaced by AI for a very simple reason. We have we are necessary for that trust. And what does it mean? It means that you have an entity, a structure that can actually be in the loop to, in a way, assess whatever decision or whatever transaction or whatever asset is being built or reconstructed and needs to validate that. That will require a human in the loop, a human in the lead. Now that is not a license to be complacent and not do anything. I think the biggest threat today for us is to essentially be too slow to adopt AI. I think the urgency, and I tried to say it earlier, is to adopt AI very quickly because that is the catalyst, the turbo factor, if you will, to be able to grow faster. And I think with the technology movement, with the cadence of innovation, you cannot adopt this technology in the way we have -- we may have adopted other technologies before. So urgency is important. We believe strongly that our brand, the fact that you need the human judgment on many, many of the decisions we actually participate in to support customers and to protect them, to protect their risks and their liabilities gives us that moat today. But again, not a license for complacency. It's very important that we adopt the technologies very quickly. Now you mentioned whether there are newcomers and others. There will always be players who would want to find space like the TIC sector where you have lots of people and lots of data. But what a lot of these natives miss is that there is domain expertise and there is the brand that is actually necessary for our customers to secure their risk and to secure themselves against liabilities and show that there is actually a third party who has confirmed what they're doing and has assessed what they're doing. So I hope that answers your question. But I think the key thing probably to retain is we need to remain paranoid, so we can move very fast. And we'll come back to you with progress in the coming publications. Operator: Next question will be coming from Virginia Montorsi of Bank of America. Virginia Montorsi: I just had 2 quick ones. On the margin side, could you help us understand a little bit how to think about industry margins specifically into next year? I think we've touched on all other divisions, but this one. And then just one last question on AI. What are -- I think one of the questions we get sometimes from investors is the ability of testers to maintain pricing power as you guys adopt AI and whether or not customers could potentially ask to be charged less as they know you incorporate AI. So I just wanted to ask how do you think you can leverage your kind of organization and maintain good pricing? And how should we think about that? Hinda Gharbi: Thank you, Virginia. Francois, do you want to comment on this. François Chabas: Yes, sure. So industry, if you again, contextualize a little bit, we had a couple of years with a good momentum from a margin point of view on industry. 2025 have been somewhat a bit disappointing if you look at it on a full year basis. I made some comment about it, but the last -- the second half of the year, we had a bit of a change of mix of service because some of the contracts we were expected to render or to deliver, sorry, in H2 have been moved to Q1 and Q2 2026. These are big shutdowns without going into details. But to give you an idea, if you are running a refinery, you need to shut down your refinery for 2, 3 weeks to make the necessary checks, during which we sent 70 to 100 people. And obviously, the decision on when these shutdowns happen is in the hands of the customers. To some extent, you have ranges during which they can do it. And we were actually expecting more of them to be done in H2. It happens that it will be more in H1 2026 instead. So we do not consider the 2025 margin as a normative one. We should see incremental in 2026 on that segment. I don't know if that answer your question. Hinda Gharbi: All right. Thanks, Francois. Look, on the AI implementation and the so-called deflationary risk, I think it's very important to step back and think about what is really our business model and how we operate. The bulk of our businesses are service fee models. Yes, of course, there are people doing the work, but it's a service fee model. And the way we think about AI integration into our workflows and into our work is it's very important that we articulate the value for the customer from efficiency. If efficiency is only about reducing people, that's not really a value proposition for the customer. So we consider that the integration of AI not only will bring in that efficiency in how people work, but it also will add value to the customer. I'll give you a couple of very specific examples. If you go to high-risk environments, when you send people to high-risk environments, you're actually creating a burden for your customer, whether it's a mining site, an oil and gas [indiscernible], a ship, anywhere there are risks, you're requesting logistics, you're requesting actually -- this is an exposure of people in their facilities, it's time it takes and so on. So less time is actually value for customers. And that's very, very important to be clear on. So we consider that because the bulk of our work is actually in service fee model, we will price differently as we progress. We will have to think of pricing in a different way and really value price. Of course, it's a massive change management in our -- in an industry that is used in a very specific way to price, but that's how we think about it. We don't think it's a fatal kind of risk. We think it's a risk if we don't act on it and we don't really value price, but we think it's manageable. Now of course, there is a small piece that is billable hour. And when you have billable hour, the customer will be even more insistent that they want you to reduce their price. And this is where service quality, customer experience will come in. You have to flip the equation, if you will. You have to make sure that you're not actually only focusing on that number of people that you're going to pull out. You have to think about how you're doing the work and what does it mean for the customer in terms of essentially service quality, turnaround time, whatever parameter will be valuable for them in their own sector and their own circumstance. Operator: Ladies and gentlemen, due to time constraints, we have time for one question. And the last question today will be coming from Allen Wells of Jefferies. Allen Wells: Three quick ones from me, please. Firstly, just on the balance sheet and capital allocation. Obviously, balance sheet leverage is in a good place at the lower end of your 1 to 2x range. Free cash flow was strong. The buyback was obviously in line with what you announced last year. But how should we read into this in relation to capital allocation? How should we think about the cadence and size of bolt-ons versus the potential for further buybacks over the next year or 2? That's my first question. Second question, just circling back on AI. But from the other side, how do we think about the level of investment that's going on internally at [ BVI ]? How should we think about that from a CapEx and OpEx perspective and where we may start to see that in the numbers? And then finally, and apologies if I missed it, just on the consumer margins were strong, up 55 bps, I think, organically in the year. Just looking for a little bit more detail about what's driving that and how we should think about the cadence of further margin progression on the consumer product business into 2026? Hinda Gharbi: Right. Thank you, Allen. Francois, you want to address the margins for... François Chabas: So for consumer, I think you're right to point out, it's been -- you had good incrementals. I think this is coming -- first, it's here to stay. It's not a one-off or any exceptional event. And it's based on 2 very deliberate action we've led now for 2 years, one which is rather visible. I mean, I think in that mentioned this division, Consumer Products has today -- is operating today 10% of its revenue coming from a totally new business compared to what it was at the end of 2023. So we have -- here, we have made very little divestment. Here, we have made add-on, and we've purchased 10% of the current revenue compared to where it stands. So -- and obviously, we've made some bets in terms of acquisition, which are paying off with good margins, good incrementals. So the M&A or the portfolio reshape again -- and actually, to be very fair and transparent with you, this has started even before we announced the plan. We went to the market in March 2024. We had designed the plan with the -- our consumer product team in the if I remember, was back in Hong Kong somewhere in September '23. So this -- they are a bit ahead of the game, I would say, in terms of deploying capital to reshape the portfolio. So that's one to say, a good half of the explanation. The second half of the explanation is we have been working over the last 2 years to in practical term, exit, reduce, limit our exposure to some distressed segment of the tech part. So you remember, you have the consumer -- the traditional product testing, [ softlines ] like toys, 2/3 of the business and 1/3 is tech. In this tech division, subdivision, we had some weak parts there that we discontinued. So I think some of you have noticed that the top line momentum in '23 -- in '24, '20 and early '25 was somewhat weak on tech. It is as well because of those actions we took. And obviously, when those businesses are out, then the margin is back up. And that's why I'm saying it's a sustainable improvement, and we expect this improvement to continue in 2026. Hinda Gharbi: Thanks, Francois. On the balance sheet, Allen, I mean, we have headroom in the balance sheet is very clear. You mentioned it. For us, as we said, we're very clear on what we need. We're monitoring the market. We have pipelines we're working on, and we will balance when we buy. And when we buy, we have that room in the balance sheet, which means that any consideration for additional shareholder return, we'll have to take that into account. Of course, it's very important that we continue to execute our portfolio agenda, growth agenda, and that entails continuing to do bolt-ons, but also very specific M&As in very specific sectors. We have the room. And then when the time is right and we can also do shareholder share buybacks, we will consider that. And that's really what we just did this year, just now when we announced it today. On the -- and the other thing I think is very important to mention is -- the -- I mentioned earlier, we mentioned it a few times. We said we have rotated already circa 10% of our portfolio, and we will double that in the next 12 months. I think that gives you an indication that we have a number of things we will be working on -- we are working on for the next 12 months. All right. The third question is on AI. The investments. Look, we said investments will be between 2.5% and 3% in 2026. We were below that in 2025, as mentioned by Francois. And we have already slotted in investments for AI. And digital, I would say we have a program ongoing, which was always part of our performance programs from the get-go that part of our operating leverage and functional scalability gain will be reinvested in the business as we modernize our product line. So do you want to give anything else on the investments? François Chabas: On the investment, I think today, we maintain what we've said during the Capital Market Day in terms of CapEx intensity, anywhere between 2.5% and 3%. That's where we intend to stay. However, as Hinda mentioned, it's somewhat of an increase compared to the very disciplined approach we had in the first 2 years of the plan. But we don't derail from this. There may be, however, some -- indeed some need in the next year within this range. Hinda Gharbi: Absolutely. All right. I hope that answers your question, Allen. I understand this was the last question. So just a few things to say prior to closing. First of all, I'm very, very pleased with the results that our team have delivered in 2025. It has been, I would say, quite an interesting year to say the least, 2025, but the team have delivered very well. It's fully in line with our LEAP 28. 2026 is our third year. We're looking to accelerate a number of programs. And I think our guidance give you confidence that we have very solid plans to support our growth and performance ambitions. Thank you very much. François Chabas: Thank you.
Ian Hawksworth: Thank you very much. Okay. Yes, we've got the thumbs up. So if we're ready, we'll start. I know you've all got a very busy day and a very busy week. So very much appreciate you coming to our third set of annual results this morning. So we're really very pleased with the results for this year. Another excellent year of progress and performance. I think we're delivering growth as we said we would do. The agenda for this morning, fairly straightforward. I'll give you a bit of an overview of the results. Situl will then go through the financial review. I'll then update on what's going on in the portfolio, and we'll finish with a summary and outlook and some Q&A. So as I said, another very successful year, delivering strong performance, an increase in rents, values, income and dividends while strengthening our financial position and creating significant optionality for the group. Obviously, macroeconomic issues and geopolitical risks have been well documented. However, I'm pleased to say that conditions across the West End are very active. We continue to see positive trends in footfall and sales across our prime portfolio, and the team is successfully delivering leasing well ahead of ERV with excellent levels of activity, limited vacancy and a strong pipeline. During the year, we were pleased to have formed a long-term partnership on Covent Garden with the Norwegian Sovereign Wealth Fund, which highlights the fundamental value and attractiveness of our portfolio. We continue to expand over GBP 100 million invested through acquisitions and capital expenditure and a number of properties are currently under review. And with enhanced liquidity, we're well positioned to take advantage of market opportunities. As one of the largest property owners in London's West End, we play an important role in shaping the area's long-term future. Visitors continue to be drawn to the West End's exceptional cultural, retail and entertainment offering, reinforcing its position as a leading destination for experience-led travel. The portfolio is benefiting from record international arrivals to London airports. Hotel occupancy remains strong, whilst the Elizabeth line continues to broaden catchment for visitors and workers alike. Shaftesbury Capital's irreplaceable portfolio of properties located at the heart of the West End provides high occupancy, low capital requirements and reliable growing long-term cash flows. Turning to results. Our valuation increased 6.6% like-for-like to GBP 5.4 billion. This was led by a 6% increase in ERV and a small 2 basis point inward yield movement. Total accounting return and total property return of 9.1% and 10.1%, which is in line with our medium-term targets. We continue to deliver rental growth, which increased by 6% and every effort continues to be made to enhance customer service whilst delivering meaningful cost savings. Underlying earnings are up 12%, and the Board has proposed a final dividend of 2.1p per share, which brings the total dividend to 4p per share, which is an increase of 14% for the year. We have a very strong balance sheet and access to significant liquidity with low leverage. I think the performance overall demonstrates the exceptional qualities of the portfolio, delivering growth in cash rents, dividends, ERV and valuation. So I'll now hand over to Situl for the financial review. Situl Jobanputra: Thanks, Ian. Good morning, everyone. As you've heard, financial performance was positive in 2025 with growth in rental income, earnings, dividends, valuations and net tangible assets. In addition, we have strengthened our balance sheet and enhanced the group's financial flexibility. So starting with the income statement. The main points are that over the year, there was growth in rental income of 6%, earnings were 12% higher, and we've increased the dividend by 14%. We focus here on group share numbers, that is including Covent Garden at 75% post the transaction with Norges Bank. As is completed partway through the year, we've included in the appendix on Slide 43, a summary of how this affects year-on-year comparisons. Adjusting for this, gross rents were up 5.9% like-for-like to GBP 195.6 million, reflecting a successful year of leasing and asset management. In aggregate, lettings and renewals were 10% ahead of ERV and 14% up on previous passing rents. Management fees from Covent Garden for Q2 to Q4 represent the other income of GBP 3 million. Administration costs of GBP 41 million reflects an increased share option charge, which was up by nearly GBP 5 million compared with last year. Excluding this, costs were effectively 8% lower. Notwithstanding upward pressures, we are targeting further reductions in the absolute level of cash costs over the next 2 years. During the year, the cash receipt from the Covent Garden transaction lowered net debt significantly. As a result, finance costs have been reduced by almost 30% to GBP 41.4 million. This year, we will refinance or repay GBP 400 million of maturing debt. However, based on current levels of borrowing, we are targeting finance costs to be broadly flat overall. All of these movements taken together resulted in a 12% increase in underlying earnings to GBP 81.9 million, equivalent to 4.5p per share. The proposed final dividend of 2.1p per share takes the dividend for the year to 4p, up 14% year-on-year. Our leasing activity contributed to an increase in ERV of 6.2% over the year to GBP 270 million. As illustrated in the chart, there is the opportunity to grow passing rent significantly given the 26% uplift as we move through from annualized gross income on the left to current market rents on the right. There is embedded reversion in our portfolio and good visibility on the income growth potential in each of our locations. This includes almost GBP 16 million of income, which is contracted or relates to rent-free periods, the majority of which will convert to running income over the next 12 months. So turning now to the balance sheet. The market value of properties under management was up 6.6% to GBP 5.4 billion. Net debt has been taken down from GBP 1.4 billion to GBP 0.8 billion on a group share basis with loan-to-value of 17%. NTA was up 7% over the year to [ 2.15p ] per share, driven primarily by the valuation movement. The main driver for the uplift in property valuations was rental growth with ERV up across all sectors and in all of our estates with retail and Carnaby Soho being the strongest performers. Yields moved in marginally by 2 basis points to 4.43% overall, and the commercial portfolio is valued at an equivalent yield of 4.6%. Our assets continue to demonstrate attractiveness and affordability to our customers with average ERV for the portfolio under GBP 100 per square foot and customer sales significantly ahead of 2019 levels, outstripping ERVs. The balance sheet is in a strong position with low leverage and access to significant liquidity. With loan-to-value under 20% and the EBITDA multiple under 7x, there is flexibility to deploy capital towards growing our business through investment in existing assets and new opportunities. In October 2025, we entered into a new 5-year loan facility of GBP 300 million for Covent Garden. The maturity of the group's other banking facilities totaling GBP 450 million of undrawn firepower has been extended to 2029 and 2030. We've also taken the opportunity to reduce the margins on these facilities to better reflect current market conditions and the strengthened position of the group. Part of the proceeds from the Covent Garden partnership were used to reduce gross debt and we are positioned for repayment of the GBP 275 million of exchangeable bonds, which mature at the end of March '26. As well as the new financing extensions and repricing, we have protected finance costs from interest rate movements by capping GBP 300 million of SONIA exposure at 3% for this year. We will continue to review financing opportunities, taking advantage of the attractive credit profile of the group. So to summarize, financial performance has been strong, and we have enhanced flexibility. Total accounting and property returns of 9% and 10% have been achieved in 2025, driven by growth in ERV and cash rents, which, together with cost management, have resulted in good progression in our key financial metrics. We will continue to focus on our priority areas: earnings and dividend growth, deploying capital accretively and balance sheet strength and flexibility. And with that, I will hand back to Ian. Ian Hawksworth: Thanks very much, Situl. I can tell you a little bit about the portfolio, a little bit of color for you. We own an impossible to replicate portfolio. It's located in some of the most iconic destinations across London's West End, Covent Garden, Carnaby Soho and Chinatown. The GBP 5.4 billion portfolio under management comprises 2.8 million square feet of lettable space across 640 predominantly freehold buildings with approximately 1,900 individual lettable units. Portfolio is broadly 1/3 retail, 1/3 F&B, with the balance in the upper floors, which offer office and residential accommodation. Portfolio offers a diverse occupational mix and variety of income streams with a range of unit sizes and rental tones. Occupational demand continues to prioritize the best locations. Availability now on many of our streets is at near record lows, and this supports competitive pricing. Leasing success has been achieved across the portfolio with continued ERV growth. This slide shows some of the new brands introduced, which are attracted by the 7 days a week footfall and trading environment. 434 leasing transactions completed in the year, representing nearly GBP 40 million of contracted rent. They were achieved at an average of about 10% ahead of December '24 ERV and 14% ahead of previous passing rents. Vacancy is very low at 2.6%. The team's active and creative approach, which is informed by a deep knowledge of the West End, positions Shaftesbury Capital to deliver further rental growth. Seeing very strong conditions in leasing -- in retail. Leasing demand is very positive and trading conditions are good. In recent months, we welcomed a number of new brands to Carnaby Street as we enhance the customer mix there. Charlotte Tilbury opened a new flagship store, and they'll shortly be joined by Sephora and also by Edikted over the coming months. Covent Garden continues to attract new high-quality brands, including Nespresso and Byredo, which were introduced during the course of the year. All of this has contributed to a 10.4% retail valuation growth across the portfolio. We're home to approximately 400 food and beverage outlets. Operators are attracted to the vibrant pedestrian-friendly, well-managed estates. And there have been a number of signings across Covent Garden, including Borough in Floral Court, Harry's Restaurant and Bar on the Piazza and Buvette in Neal's Yard. There continues to be strong demand for Soho for the Soho portfolio with the introduction of several new concepts, including Padella and the Shaston Arms. In Chinatown, we've introduced more variety to the area, increasing the pan-Asian offering at a range of price points. So across the portfolio, 37 new lettings and renewals signed 15.7% ahead of December 2024 ERV. Our vibrant locations and the quality of accommodation continue to attract leasing demand for office space. The Carnaby and Covent Garden portfolios offer high amenity value and excellent environmental credentials. And we continue to see customers relocating from other parts of Central London as employers recognize the importance of location and amenity value in attracting and retaining talent. The residential portfolio continues to perform well. During the year, 285 transactions were completed with rents achieved around about 4% ahead of previous passing rents. We have the ability to add value through capital initiatives to our 640 properties. Our pipeline of asset management and refurbishment activities represents 4.2% of ERV, and it's expected to be delivered over the coming 12 to 18 months. The scale of our holdings also help us to shape not just the buildings, but the spaces around them, and we're working with local stakeholders to enhance the public realm across our destinations, making them greener and more enjoyable for everybody. Covent Garden's Henrietta Street public realm is currently being transformed, and we're also undertaking early engagement on improvements to Carnaby Street to enhance the visitor experience whilst preserving the area's unique character. We continue to rotate capital, improving the quality of our exceptional portfolio. And in this year, we disposed of GBP 12 million of assets and invested GBP 80 million in targeted acquisitions. As I said earlier, we have a number of properties under review. Situl mentioned that we introduced sovereign capital to Covent Garden this year. And by partnering with NBIM, leverages our operational expertise and property portfolio, providing investment and expansion opportunities. So our growth prospects are underpinned by strong fundamentals. The West End market has delivered attractive predictable growth over the long term with an annualized rental growth rate of approximately 4% per annum. Our portfolio has outperformed that with nearly 7% ERV growth delivered since 2010. And this is supported by consistently high occupancy and the scarcity value of the West End, where limited new supply continues to drive demand. A strength of the portfolio is its adaptable mixed-use nature, which allows us to evolve space in line with changing demand and importantly, to do so with relatively low CapEx requirements. We benefit from aggregated ownership, enabling us to enhance the public realm and shape our places, supported by data-led customer and marketing approach. And finally, we actively manage the portfolio through capital rotation, focusing investment on our chosen assets and improving performance through refurbishment initiatives. So overall, these factors drive consistent long-term rental growth and valuation progression. I'd like to take a moment to thank everybody involved, including our customers, partners and our very experienced team in delivering this strong performance in 2025. Some of our senior leadership colleagues are with us today, and I hope you'll have the opportunity to meet with them afterwards if you didn't see them during coffee. So in summary, we've had a successful year, and we've made a very good start to 2026. There are obviously a number of challenges in the economy, but the West End continues to perform with high footfall, customer sales growth and low vacancy. There are excellent levels of activity and a strong leasing pipeline. We're confident in our outlook and targets for rental growth of 5% to 7%, a total property return of 7% to 9% and a total accounting return of 8% to 10%. Through active management of our prime West End portfolio, the strength of our operating platform, and we're focused on sustained long-term growth in rental income, value earnings and dividends. And backed by our strong balance sheet, we're well positioned to grow and take advantage of market opportunities. So that concludes the presentation. We're going to move now to Q&A. For those of you that are on the phones, if you could let the operator know that you'd like to ask a question, we'll come to you. But if somebody likes to start the ball rolling in the room, that would be great. Max? Maxwell Nimmo: It's Max Nimmo at Deutsche Numis. Just a couple of questions, if I can. One on Carnaby and the ERV growth was exceptionally strong there. Do you expect that, that is likely to continue as you -- as it sort of catches up with some of the other villages within your portfolio, kind of extracting that low-hanging fruit? Should we expect that to be the strongest growth in the near term? And then secondly, just around kind of firepower with where you're at 17% LTV today. Obviously, fully acknowledge you're trying to manage the interest cost for the business, but how you see that and the relationship with Norges and what that does for their ambition to grow as well? Ian Hawksworth: Thanks, Yes, we're really pleased with the progress we've made on Carnaby Street. I think what gives us confidence that it will continue to perform really well is the brands that we brought into the estate are trading at significantly higher sales densities than some of the previous incumbents. And that gives us confidence that it will support rental growth over the medium to long term. And we are seeing reasonably positive improvements in Zone A rents, which is, as you know, is how the market actually looks at it. But they're still well below other locations within our portfolio and well behind the general tone in the West End. So yes, I do think you'll see significant growth, but we're delivering growth across the portfolio. Covent Garden is doing very well as is Chinatown. But yes, we've got high hopes for Carnaby Street, definitely. Do you want to? Situl Jobanputra: Yes, sure. On your point about firepower leverage growth, I think we're in a very strong position. And that's a deliberate strategy so that we are well protected on the downside. And as you say, we're managing interest costs, but it means that we can put money to work when we see interesting opportunities. And one of our priorities is deploying that capital accretively. So there's plenty of room within our leverage ratios and our liquidity to do that. And as you also observed, the formation of the partnership is a further source of capital for growth in Covent Garden. So we see opportunities across all of our estates. James Carswell: It's James Carswell from Peel Hunt. Maybe just one on -- following on from Max's question. You've got the firepower. What are you seeing in terms of acquisition opportunities? I mean I appreciate the small buildings pretty liquid in your kind of markets. But I mean, are you seeing any [indiscernible] of the larger lot sizes? Do you think that will kind of bring you some opportunities? Ian Hawksworth: Yes. The team has got quite a lot of real estate that they're tracking. Obviously, whilst there's a lot of activity in the West End buildings that are adjacent to our portfolios don't trade very often. So we are focused really on driving value out of the 640 buildings that we've got and being in a position to move quickly when real estate does come available. We bought 1 or 2 things last week -- last year. They are sort of acquisitions that add value to the individual components of the estate. But clearly, at some point, we'd like to expand our ownerships substantially. And I think those opportunities will arise. Oliver Woodall: Oli Woodall from Kolytics. Congratulations on the strong set of results across the board, particularly your office segment seem to have very strong like-for-like rents. I wonder if you could give an outlook for the demand here for office and then separately for food and beverage and retail looking forward, kind of what your outlook is? Ian Hawksworth: Yes. Thanks very much. Well, all parts of the portfolio are performing well. I mean office is about 20% of what we have split into 2 categories, really sort of purpose-built offices and then converted sort of Georgian properties. And as I said in the presentation, the demand is there, not just because the buildings are good and they're well managed, but the locations are really in demand. So we're seeing strong levels of demand, and I think we'll see continued rental growth in those components of the portfolio. But the bulk of what we do is retail and hospitality and retail demand is continues to be very strong. I mean many commentators are saying the retail leasing market is as strong as they've ever seen it. I think there was one of the brokers put out a report recently saying demand is significantly higher than it's been for many, many years. So that supports the prime locations that we have. And you can see that in the number of new transactions that we've done and the pipeline. I think Will Oliver is somewhere in the room. He's in charge of leasing. So he's a very busy man at the moment. So I think you'll see continued activity in that area. F&B also very positive. There's virtually nothing available. And where we do get something available, there's multiple operators want to take the space on. So yes, very, very, very positive conditions across the board at the moment. Thank you very much. Any questions on the telephones? We've got a nod. We hand over to you Nimmo, excellent. Maxwell Nimmo: Okay. We do have one question on the telephone we've taken now. The question will be coming from Zachary Gauge of UBS. Zachary Gauge: Just a quick one from me. Looking at the sort of the consensus numbers for earnings in 2026. I think it's currently at 5p. So assuming a pretty similar growth rate to the one you saw in 2025. I know you don't give formal guidance, but just thinking considering the exchangeable bond refinancing at the end of March and obviously, interest rates in the U.K. probably coming in a little bit over the year with a slight headwind on cash. Do you think that kind of growth rate is in the right ballpark for the year considering that refinancing headwind? Situl Jobanputra: Let's talk about the building blocks, Zach. As you said, we don't normally comment on consensus forecast, and there is a bit of a range. So if we go through the main components that we think about, rental income growth, we talked about aiming to grow that cash rents in line with ERV growth, and we have an ERV growth target of 5% to 7%. On the other components, you'll see continued improvement over the next couple of years in the property level net to gross, and there are a number of initiatives that underpin that. And then on admin costs, we've been quite definitive on the guidance around that in terms of bringing down the cash cost element of that. And then the finance cost is, as you say, you've got some maturities and refinancing or repayment of that, and you've got lower leverage in terms of the effects of the transaction from last year. So our target with the current level of leverage is for the finance costs overall to be flat. So hopefully, that gives you a guide on some of the moving parts. Maxwell Nimmo: Ian, I will turn the call back over to you as we have no further telephone questions. Ian Hawksworth: Thank you very much. Okay, short and sweet. If you'd like to hang around for coffee, Peel Hunt will be very happy to give you one. Thank you very much, Peel Hunt, for the use of the facilities. We'll be around for a little bit. I'd say most of the team are here, asset management team, investment team, marketing team. If you'd like to spend some time with them, please feel free to do so. Otherwise, we look forward to seeing you down on the estate. The sun is out. There's plenty of nice places for you to go and eat and drink, plenty of places for you to go shop. So thank you very much for your attention, and we hope you have a good day. And if there are any questions, just call any of us as the day goes on. So thank you very much.