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Operator: Good day, and welcome to the MGP Ingredients, Inc. Fourth Quarter 2025 Financial Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Amit Sharma, Vice President of Investor Relations. Please go ahead, sir. Amit Sharma: Thank you. Good morning, and welcome to MGP Ingredients, Inc.'s fourth quarter earnings conference call. I am Amit Sharma, Vice President of Investor Relations, and this morning, I am joined on the call by Julie Francis, our Chief Executive Officer, and Brandon M. Gall, Chief Financial Officer. We will begin the call with management's prepared remarks and then open to questions. Before we begin, this call may involve certain forward-looking statements. The company's actual results could differ materially from any forward-looking statements due to a number of factors, including the risk factors described in the company's reports filed with the SEC. The company assumes no obligations to update any forward-looking statements made during the call, except as required by law. Additionally, this call will contain references to certain non-GAAP measures we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures is included in today's earnings release, which was issued this morning before the markets opened and is available on our website at mgpingredients.com. At this time, I would like to turn the call over to Julie for her opening remarks. Julie Francis: Thank you, Amit. Good morning, everyone. As we close out 2025, I want to start with a clear message. We are doing what we said we would do. We made progress on each of the five initiatives, and we finished the year above the top end of our guidance. The operating backdrop remains challenging for the spirits industry and we recognize that 2026 is likely to be another down year for the industry and our company. That said, we are increasingly optimistic about MGP Ingredients, Inc.'s future. Our confidence is grounded in three things: First, our ability to deliver sustained growth off of our 2026 guidance expectations, which has been accelerated by our proactive self-help action. Second, our newfound strategic clarity prioritizing our right to win, which we believe will also position us for solid and sustainable growth. And third, our financial strength, which in this environment is a competitive advantage of increasing magnitude. As I mentioned on our last call, we undertook an exhaustive review of our businesses to create a clear strategic roadmap for the next phase of our growth. This was a well-defined process grounded in an objective, data-driven assessment. We have since shifted from broad strategic discussions to a clear enterprise roadmap, including an organizational structure aligned to the strategic priorities of our business, to further enhance our right to win. Strategy and structure are critical, but having the right talent and processes to execute with discipline is what we believe will lead to our ultimate success and sustainable growth. To that end, we recently announced organizational changes across our senior leadership teams. These were difficult decisions, but aligned with our strategic roadmap and positioned the company for long-term success. On our last call, I shared the hiring of our new Chief Marketing Officer and Senior Vice President of Operations. Since then, we have also added a Senior Vice President of Strategy and Insights. Each of these leaders brings to MGP Ingredients, Inc. track records of success and global best practices. In the coming quarters, they will be at the tip of the spear of building out best-in-class processes that are designed to enable disciplined execution and long-term success. Let me now provide a brief overview of our fourth quarter and full-year results before outlining key elements of our strategic roadmap and the progress we are making against our key initiatives in each business. Our fourth quarter and full-year 2025 results came in ahead of our expectations as the teams continue to act with diligence and focus. For the fourth quarter, consolidated sales declined 23% compared to a year ago, as double-digit sales growth in our Premium Plus portfolio was more than offset by the expected declines in the rest of our business. Adjusted EBITDA declined to $26 million while adjusted basic earnings per share reached $0.63. For the full year, we delivered consolidated sales, adjusted EBITDA, and adjusted basic EPS of $536 million, $116 million, and $2.85, respectively. Despite lower earnings, operating cash flows for the year increased by 19% to $122 million. Brandon will provide more detail on our financial results and 2026 guidance, but let me touch on the overall environment and our key initiatives that will shape our results over the next year. At the broader level, the spirits industry has historically shown great resilience across economic cycles and periods of consumer behavioral changes. While we are confident about the long-term outlook for the industry, we expect near-term category trends to remain below historical levels. Consumer sentiment and spending remain under pressure, with competition from spending from online gambling, gaming, and from cannabis-infused beverages, as well as an increased focus on health and well-being impacting consumer behavior. While we expect the near term to remain challenging, we are starting to see some encouraging signs, including a more balanced public conversation around alcohol and its role in social settings and in overall well-being. The recently released U.S. Dietary Guidelines place greater emphasis on moderation and individual occasions for alcohol consumption rather than the no-safe-level guidance of the past. As we know, across generations, cultures, and geographies, shared moments and occasions of celebration have included a drink among families and friends. In addition, a recent study from the American Heart Association concluded that low levels of alcohol consumption may not increase cardiovascular risk. The shift in overall tone is constructive and reinforces our long-term confidence in the category, but these developments are not expected to drive an immediate inflection in industry trends, and our 2026 outlook does not assume a return to historical growth rates for the overall industry. Shifting to our Branded Spirits segment, we believe this segment will continue to be our primary growth engine and the foundation of our long-term value creation strategy. In 2025, we executed well against our initiative to concentrate on more attractive growth opportunities. Our Nielsen-reported sales growth for the 52-weeks period ending December 27 came largely in line with the category, while our Premium Plus sales growth outperformed the overall category by 900 basis points during that same time period. As we look ahead, our focus here is clear. Win in the Premium Plus category with Penelope Bourbon, strengthen our focus brands, increase penetration in national accounts, and strengthen our digital marketing capabilities. Penelope is a key driver within this strategy. While Premium Plus American whiskey Nielsen-reported dollar sales declined 3.5% during the 52-week period ending December 27, Penelope's reported dollar sales increased by 80%, making it the second-fastest growing brand during this time period among the top 30 Premium Plus American whiskey brands. This growth was fueled by innovation and distribution gains, with Penelope Wheated and Penelope Ready-to-Pour Cocktail being two of our biggest new product launches in 2025. These products were very well received and helped deliver a 100% growth in points of distribution and a 12% increase in velocity. Our focus is on sustaining this ongoing momentum while strengthening our core by making incremental, targeted investments designed to drive brand awareness, improving in-store execution, and filling distribution gaps. Beyond Penelope, we have a portfolio of high-quality brands, evidenced by Yellowstone and Lux Row's inclusion in Whiskey Advocate’s prestigious Top 20 Whiskeys of 2025. We are the only company to have two brands in this year's Top 20 list. This external validation reinforces the strength across our portfolio and highlights the unrealized potential of a focused portfolio. To achieve this potential, we have established a comprehensive cross-functional portfolio management review process, which will take a deeper look at the long tail of our Branded Spirits portfolio, reduce complexity, and rationalize SKUs and brands. As a first step, we are targeting a rationalization of 20% of the portfolio's tail brands. We believe this new rigorous portfolio review process will help us make even clearer decisions about where we invest and where we protect to better position our brands across targeted consumer segments, channels, price points, and consumption occasions. Another key priority for the Branded Spirits segment is to increase our penetration in national accounts across both retail and on-premise accounts. We believe that having a greater presence with these customers not only creates additional distribution opportunities, but also drives greater scale, visibility, and recognition of our brands. Our continued commitment to invest behind our most attractive growth opportunities underpins these initiatives. We ended the year with Branded Spirits A&P spend at 12.5% of segment sales and expect it to increase modestly in 2026 to roughly 13.5%. We are also prioritizing investing in digital media, analytics, and tools designed to drive awareness and consideration for our key brands, to bring greater discipline in how we track and improve brand health, and allow us to connect more precisely with consumers around specific consumption occasions and social moments. Our Distilling Solutions segment saw sales and profitability reset in 2025 as many large customers paused purchases in an effort to balance their whiskey inventories and manage working capital. Full-year 2025 sales and gross margin declined significantly from 2024 but came in modestly ahead of our expectations, as our initiatives to strengthen our partnership with key customers led to improved visibility and alignment. We continue to stay close to these customers and expect to gain greater clarity on their brown good needs for 2026 and beyond towards the end of the second quarter. Overall domestic whiskey production continues to decline sharply, and we continue to see media reports about closed or idle distilleries. According to the latest available TTP data through October 2025, domestic whiskey production was down 26%, 29%, and 27% for the trailing twelve-, six-, and three-month periods. In this environment, we are focused on creating a differentiated value proposition to better position MGP Ingredients, Inc. as a long-term strategic partner for both large and small customers. That means broadening our premium white good offerings to complement our brown goods portfolio, rebuilding our aged whiskey pipeline, and attracting and retaining a wider pool of customers by offering greater value-added services. Our increasing focus on premium white goods is designed to leverage the scale, heritage, and quality of our Indiana distillery to produce premium gin and GNS spirits that are customized for our customers. This would allow us to move beyond commoditized offerings to not just generate more attractive economics and better asset utilization, but also serve as a bridge to longer-term, deeper relationships with strategic customers. With respect to our aged whiskey strategy, producing and storing various vintages and mash bills is critical, and after taking a pause in 2025, we are committed to prudently building our aged whiskey offering. MGP Ingredients, Inc. is one of the few distillers with the technical depth and operational expertise to consistently produce high-quality whiskey at the precise specifications of our customers, and that capability continues to differentiate us. Our focus is on broadening our customer base, better leveraging the depth of our aging whiskey inventories, and capturing a greater share of aging whiskey sales. We also see meaningful opportunities to expand aged whiskey sales to both domestic and international private label whiskey customers, an area that has historically been underpenetrated for our brown goods business. While the industry-wide aged whiskey dynamic is unlikely to improve meaningfully in the near term, the strategic repositioning of our Distilling Solutions business and the actions initiated by our team give us confidence that our Distilling Solutions segment sales and profitability will approach trough levels in 2026. Turning to our Ingredient Solutions business, as expected, the outage of a key piece of equipment that impacted Q3 results remained a sales and profit headwind in the fourth quarter. The equipment came back online in November as planned. As I look ahead, I continue to draw confidence as our Ingredient Solutions business continues to enjoy consumer-driven tailwinds. Commercially, we continue to focus on driving growth through our three core platforms: specialty fiber with Fibersym, specialty protein with Arise, and extrusion protein through ProTerra. Each of these platforms serve large and growing end markets. Consumer demand for high-protein and high-fiber products remains strong, and we are leveraging our R&D and innovation capabilities to make MGP Ingredients, Inc. an even more integral part of our key customers' supply chains. In our textured protein business, the continued commercialization of a large multinational customer is a clear example of our ability to build strategic, growing, and sustainable relationships with leading food companies. With the commercial demand side of Ingredient Solutions on solid footing, our focus remains squarely on the supply side and returning to operational excellence. To that end, we are adding people, increasing capital investment, and implementing new processes to return operational execution back to historical levels. As a result, we are seeing early signs in more consistent throughput that these efforts are paying off in the form of reduced unplanned outages. This improved reliability gives us confidence to deliver strong double-digit growth in segment sales and improved gross margins in 2026. As I have spent more time focusing on this business, it has become clear that waste treatment and disposal is more complex and more costly than initially expected. The commercialization of the biofuel plant, along with our other waste stream handling initiatives, is helping to reduce these costs, but a portion of these costs will persist in the near to medium term and is reflected in our full-year guidance. Managing high disposal costs remains a key priority. We are evaluating additional measures and continue to expect to remove these costs over the long term. Finally, I want to highlight the progress we are making on our enterprise-wide productivity agenda, which was one of our five key initiatives in 2025. We are proud of our teams for delivering against all of our 2025 initiatives, and more importantly, productivity is becoming embedded in how we operate at MGP Ingredients, Inc. We are reinforcing an ownership cost mindset by incorporating productivity and cost discipline into our operating routines, performance management, and compensation metrics. Productivity and the cost management focus is becoming a part of our regular management routines, helping us uncover and track opportunities to eliminate waste and operate more efficiently and effectively across the organization. As we look ahead, we are encouraged by the progress we are making. Across all three businesses, our strategy is grounded in focus, execution, and discipline, and we are actively evaluating all available levers to operate more efficiently. I am committed to addressing our challenges directly, focusing on disciplined execution and accountability, while positioning MGP Ingredients, Inc. to emerge better aligned, more resilient, and well positioned for long-term value creation. With that, let me hand it over to Brandon for a more detailed review of our financial results and 2026 guidance. Brandon M. Gall: Thank you, Julie. For 2025, consolidated sales decreased 23% compared to the year-ago period to $138 million. Branded Spirits segment sales declined by 1% in the fourth quarter and 3% for the full year. Our Premium Plus sales posted its strongest quarterly sales growth of the year with a 10% increase, driven primarily by Penelope Bourbon's continued momentum. Our mid and value price brands collectively declined by 11% for the quarter, slightly better than the 13% decline for the full year. Distilling Solutions sales declined 47%, including a 53% decline in our brown goods sales. Full-year segment sales declined 45% and gross profit declined 52%. Each of these came in ahead of our initial outlook, underscoring the improved visibility in our brown goods business. Ingredient Solutions sales declined by 10% for the fourth quarter and 7% for the full year. The equipment outage and higher waste stream disposal costs that Julie mentioned earlier were the key drivers of lower segment sales and profits. On the other hand, fourth quarter extrusion protein sales reached a new high. We continue to increase sales volume to new customers and expand our extrusion platform beyond wheat. Consolidated gross profit declined 35% to $48 million during the quarter, primarily due to lower gross profits in the Distilling Solutions and Ingredient Solutions operating segments. Consolidated gross margin declined by 630 basis points to 34.9% in the fourth quarter, while full-year gross margin decreased 350 basis points to 37.2%. Fourth quarter SG&A expenses increased by 5%. On an adjusted basis, SG&A increased by 18% as the reinstatement of performance incentives more than offset our cost savings initiatives. Excluding these incentives, adjusted SG&A declined by 5% for the quarter and 4% for the full year. Advertising and promotion expenses declined 11% in the fourth quarter and 23% for the full year as we realigned our spending behind our most attractive growth opportunities. For the full year, our Branded Spirits A&P was approximately 12.5% of Branded Spirits segment sales. Adjusted EBITDA decreased 51% to $26 million for the fourth quarter and decreased 41% to $116 million for the full year. Net income for the quarter declined to a loss of $135 million primarily due to a discrete non-cash adjustment of $153 million to lower the carrying amount of goodwill and certain indefinite-lived intangible assets in the Branded Spirits segment. On an adjusted basis, net income decreased 60% to $14 million. Basic earnings per common share decreased to a loss of $6.22 per share, while adjusted basic EPS decreased 60% to $0.63 per share. Despite lower earnings, our cash flow from operations increased 19% to $122 million for the full year as we continue to prioritize strong cash generation by managing our working capital, including barrel inventory put-away reduced from $33 million in 2024 to $19 million in 2025. Full-year capital expenditures of $32 million were down more than 50% from the year-ago level as we continue to optimize capital expenditures in the current environment. Turning to our 2026 outlook, we expect the operating environment to remain challenging, and we are planning accordingly. Our outlook assumes continued pressure in certain categories, lower contracting activity levels in Distilling Solutions, and improving execution in Ingredient Solutions as our operational initiatives take hold. Specifically for 2026, we expect net sales in the $480 million to $500 million range, adjusted EBITDA in the $90 million to $98 million range, adjusted basic earnings per share in the $1.50 to $1.80 range with average shares outstanding of approximately 21.4 million shares, and a full-year tax rate of approximately 27%. Our first quarter tax rate is expected to be approximately 75% due to the vesting impact of share-based awards granted during periods of higher share prices. Full-year CapEx is expected to be approximately $20 million. We expect first quarter adjusted EBITDA to represent approximately 15% of our full-year target and to be the lowest quarter of the year. 2026 Branded Spirits sales are expected to be down mid-single digits compared to 2025 as our continued momentum and growth in the Premium Plus category is expected to be offset by lower sales of our mid- and value-priced brands as well as lower private label sales. We expect Branded Spirits segment gross margin to improve modestly in 2026. Given the ongoing brown goods environment, we expect 2026 to be another down year for our Distilling Solutions segment with sales down 35% and gross profit down 40% compared to 2025. We expect performance for both metrics to be down relatively more in the first half of the year than the second half when compared to the prior year as we cycle against completion of certain large contracts during 2025. However, as Julie outlined earlier, we believe that our proactive actions are helping us stabilize this business and position it for growth from the 2026 levels. We also believe our Ingredient Solutions business is poised to recover after a tough 2025. Given sustained commercial tailwinds and expected operational improvements, we expect segment sales in the $140 million to $150 million range and gross margin in the mid- to high-teens in 2026. As Julie stated, we expect first half gross margins to improve from 2025 to the low teens and improve again in the second half of 2026 as our operational efforts set in. We expect Branded Spirits A&P to be approximately 13.5% of segment sales and total company SG&A to be approximately 18% of total company sales, both of which are up versus prior year primarily due to our lower sales outlook. Maintaining a flexible balance sheet remains a priority. As we look ahead to 2026, we expect to pay $111 million in the second quarter as an earn-out payment related to our Penelope acquisition. We also expect to refinance $201 million of convertible notes in the fourth quarter. Given the Penelope earn-out payment, our net debt leverage is expected to peak and be approximately 3.75 times in 2026. We remain committed to reducing costs, prioritizing cash generation, managing working capital, and being deliberate about our capital allocation. We expect that these actions will allow us to delever over time following the Penelope payment. To that end, we expect 2026 CapEx to be approximately $20 million and net whiskey put-away in the $13 million to $18 million range, which represents a second consecutive year of meaningful capital optimization and stewardship. We expect full-year interest expense to be approximately $12 million and for it to increase sequentially during 2026 due to the Penelope payment and the convertible note refinancing. The Penelope earn-out payment will reduce our 2026 operating cash flow by nearly $50 million. Excluding the impact of this payment, we expect 2026 cash flows from operations in the range of $40 million to $45 million and free cash flow in the $20 million to $25 million range. To close, I want to echo Julie's comments. 2025 was a year of progress, discipline, and important foundational work, and we believe that the actions we are taking position MGP Ingredients, Inc. to emerge stronger, more focused, and more resilient over time. With that, I turn the call back over to Julie. Julie Francis: Thank you, Brandon. Before we wrap up, I want to thank the entire MGP Ingredients, Inc. team for all their hard work, persistence, and focus in a dynamic environment. This past year was not without its challenges. The operating environment remains difficult, and we are clear-eyed that 2026 will likely be another down year of sales and earnings. At the same time, 2025 was a year of important progress for MGP Ingredients, Inc. We delivered results in line with, and in several areas ahead of, expectations while beginning the hard work we feel is required to reposition the company for the future. I have shared that since joining in the third quarter, I have made it my priority to look within, to fully understand what makes this company unique and what actions we need to take. In doing so, I have traveled to all of our facilities, many numerous times. I have spoken with customers and suppliers of all sizes, engaged in exhaustive business unit function reviews, and hosted more than 60 one-on-ones with employees. These insights were used to formulate our strategy, design an effective organizational structure, bring in the right talent to drive impact, make prioritization decisions, and implement processes designed to enable sustainable results and growth. The success we aim to achieve will not come overnight, nor will it be without tough decisions. But the progress we have made over the last six months has been made with expeditious prudence. We believe it has positioned us to deliver sustained growth off of our 2026 guidance expectations, to sharpen our strategic focus and strengthen execution across the organization, and to utilize our financial strength to position us for long-term and sustainable growth. While I am pleased with the progress we are making, what gives me the greatest confidence is the alignment I see across our teams. There is a growing clarity around where we can win, greater accountability for results, and a shared commitment to doing what we said we would do. We will now open for questions. Operator, please open the lines for questions. Amit Sharma: Thank you. We will now begin the question and answer session. Operator: The first question will come from Sean McGowan with ROTH Capital Partners. Please go ahead. Sean McGowan: Thank you. First question is a general one. What are you seeing and what do you expect regarding pricing in the industry? Are you able to hold the prices that you have taken? And then a more technical question: does your credit facility allow, or is there any limitation on how you can use the credit facility regarding the Penelope payment? Thank you. Julie Francis: Good morning, Sean. It is Julie. How are you doing? I appreciate your question. On pricing, broadly speaking, I would say pricing is rational. You certainly have pockets across states and in a couple of different categories. Affordability is an issue, so our price-package architecture we have sharpened up. In particular, we are launching smaller sizes—50 mLs and 375 mLs—to have a more affordable price point out there. Broadly speaking, in Branded, I would say it is very rational. In Distilling, obviously, we have an oversupply situation, so while pricing is certainly impacted, we have the tools that we need, and we understand where we want to be on some of the barrel pricing, and we have been moderately pleased with our ability to work with our customers. Our partnership approach is working. We have not lost any customers to date, and so the ability to have those conversations and understand their intent really helps us in that matter. Now I will turn it over to Brandon for your second question. Brandon M. Gall: Yes, Sean. As far as the credit facility as it relates to the Penelope earn-out, no limitations. As you recall, we upsized and extended the facility in the first part of last year. Our bank group views this payment as a positive thing. They are excited for Penelope. They view this as all good news, and we are very, very fortunate to have such a supportive bank group that we do have. We also have the ability to exercise our acquisition holiday in Q2 if needed, which actually gives us even more covenant headroom on that side of things should we desire to do that. So no limitations. Sean McGowan: Great. Thank you. Thanks. Operator: The next question will come from Seamus Cassidy with TD Cowen. Please go ahead. Seamus Cassidy: Hi, this is Seamus Cassidy on for Robin. Thanks for the question. First, I am curious if your expectations for a down year for the industry take into account the slightly positive year-to-date trends we are seeing in scanner data. And then on brown goods, can you speak to your visibility, sort of on 2026 being the trough? I.e., are new distillate contracts largely locked in? And then, sort of on that point, you spoke to a pivot back to aged whiskey sales. This has historically been more choppy and difficult to predict demand for, so I am hoping you can talk us through that dynamic. Julie Francis: Yes, thanks so much. I appreciate the question. I would say, going back to Branded Spirits, our 2026 guidance does reflect both our Premium Plus momentum and then the mid-to-value expectations across the portfolio. We feel we have good visibility in what we are seeing, and we are pretty encouraged by some of the commercialization strategy planning and execution that we have newly introduced. We see that coming into play, but you would expect Penelope to continue to drive our Premium Plus brands. In addition, our other three focuses have some refinements in how we are looking at the mid-to-value price tier. We do think that there are a few key brands where we can really dial in some of our pricing, some of our architecture on offerings and sizes to really address that. But I would say, broadly speaking, our 2026 guidance reflects the industry and where we have visibility. And then switching to your Distilling question, from a guidance there, certainly most of our, I would say, under contract for a majority of our aged and distillate customers for the year. So we have good visibility in 2026. Our brown goods guide reflects similar spot ages to 2025 at current market pricing. The partnership approach is working, and so we have expanded with some of our larger customers into the premium white goods. So our guidance reflects premium white goods up double digits, and we really like this. Number one, it is sticky, right? We are deepening our relationship with some key customers. And two, it is a great mechanism to reduce costs of raw goods. And then our warehouse services continue to play an important role. Our customers are tight on working capital, and we can provide them this service, and it is also fairly strong cash flow generation. So that is a balanced approach, good visibility, but certainly I think our guidance reflects appropriately the oversupplied environment that we are seeing. Seamus Cassidy: Understood. Thanks. Amit Sharma: Thanks, Seamus. Operator: The next question will come from Marc J. Torrente with Wells Fargo. Please go ahead. Marc J. Torrente: Hey, good morning and thank you for the questions. I guess just building off the last one, any more visibility that you could provide into the guidance building blocks for Distilling? Just specifically, what is embedded from fully committed orders that you proactively worked with customers on? How much potential spot business is assumed? And then just any other color you can give on cadence through the year? Brandon M. Gall: Yes, thanks for the question, Marc. For our brown goods business, let us start with aged. Aged was obviously ahead of our expectations last year, albeit they did start from an expectation standpoint at a pretty low point. So what we are guiding for this year is the same spot volume sales that we were able to do last year. We feel that level is appropriate in this environment given the success we were able to have last year. There are more aged sales above that, and that is really due to the team’s successful efforts in commercializing some private label large customers internationally and domestically, and so those aged sales are under contract. So that is factored into our guide. And then, as it relates to our new distillate, substantially all of that is under contract. So we feel that we are exercising the same discipline and visibility that we were able to exercise throughout the course of last year. As it relates to Ingredient Solutions, moving on there, as we said in our opening comments, 2025 was a tough year, and we learned quite a bit, and we are doing the right things. We are putting the right efforts against it. You will see sequential improvement as the year goes on. That is going to be seen in double-digit growth in sales as well as pretty substantial improvement in gross profit. So we are excited about what is to come this year with Ingredients. And Julie already spoke quite a bit to Branded Spirits, but those are our building blocks. As far as quarterly cadence goes, Q1 will likely be the low point for the year, which is pretty typical. Brown goods customers tend to take a little bit of a pause during the quarter, and Branded Spirits is historically softer coming out of the holidays, but we do expect to perform against all these expectations as well as contracts as the year goes on. Marc J. Torrente: Okay. I appreciate that. And then on Branded, you spoke to the rationalization of tail brands. Maybe talk about the ability to reallocate resources behind your premium brands, where this can take Premium Plus as a percentage of the portfolio in the near term, and how to think about margin potential and, I guess, balance of the portfolio going forward? Thanks. Julie Francis: Thanks for that question. We did a pretty intense portfolio review process of all of our brands. We are starting this year again. We have a roadmap, so this strategic roadmap starts in 2026. As shared on the call, that 20% of the tail brands—and it is important to note they are tail brands—so availability and presence out in the marketplace is different across different states. These first 20% are not our high-visibility, high-volume ones, but certainly they take away focus. They take warehouse space, they take up raw ingredients, they take up production line availability, etc. So we are going to start there. It is not going to reduce any scale with distributors or anything like that because, again, broadly speaking, we have our lineup in Premium Plus, so I will not say there is a change to Premium Plus lineup of our core four focuses. I attribute our commercial execution and planning that we are really ramping up in that area not directly to portfolio review, but really linked to having a new leader in marketing. We have dialed-in commercial strategies, dialed-in execution plans, and then tools and enablement at a distributor level to ensure that we are delivering the key value drivers we expect, and most importantly, what that look of success is that we expect in the different channels and the different customers. That is really what is going to drive some nice movement, we believe, with our Premium Plus and our distributors. But we do think portfolio management and rationalization plays an important role. As we get past this first 20%, you would expect towards the end of the year and into 2027 for us to focus on the next 20%, which we do feel is out there for rationalization. Marc J. Torrente: Great. Thank you. Amit Sharma: Thanks, Marc. Operator: The next question will come from Mitchell Brad Pinheiro with Sturdivant & Co. Please go ahead. Mitchell Brad Pinheiro: Yes, hey. Good morning. So most of my questions have been asked. I did want to follow up on the Distilling Solutions business, where we are looking for a trough year here this year, and you talked about some of the reasons why you have some confidence there. What would cause you to miss that trough-year expectation? Brandon M. Gall: I will start on that. What gives us the confidence are all the actions that we are taking, which we went into in a lot of detail in our opening remarks. Our connection and continued connection with our customers, especially those large customers that are pausing on brown goods buying. We are talking to them about other projects, whether it is ways to innovate with the barrels they currently have in their warehouses, or whether it is to do some of these really interesting premium white goods services and products that we have talked to. So just that connectivity definitely gives us a lot of confidence. But, as time goes on, they are going to have to come back to the table, and we have to continue to be good partners in the interim. We have shared that we hope to have more visibility by the midpoint of this year. Ultimately, we are going to do what is right for them and what is best for them, and what gives us a lot of the confidence is just the levels we are at today, Mitch. The level of brown goods sales that we are forecasting and guiding to—a lot of the risk has been removed from that standpoint. Not to say that there is not ever risk out there, but we feel like a lot of that has been alleviated from our outlook. Mitchell Brad Pinheiro: Okay. And then when you look at the most recent sort of industry inventory data—it is over, like, thirteen years of inventory right now, and typically, back in the 2022–2023 range, it was down around nine or ten years. That delta of four years, some of it obviously has to do with consumer preferences for more aged product. But I am wondering, how does that compare to your inventory levels? Are you out there that long with your barrel distillate, or is your barrel distillate closer to your near-term demand needs? So I guess what I am trying to say is, had you overproduced on your barrel distillate, or do you feel that your performance is in a better shape than the industry? Brandon M. Gall: I do not think anyone has gotten it exactly right over these last five years, ourselves included. But what we do feel, Mitch, is that we have taken actions very quickly. Industry numbers are down over the last twelve months anywhere between 25–30%. If you look at just our sales in Distilling Solutions and equate that loosely to production, we are down much more than that, and then we are also guiding this year for Distilling Solutions sales to be down another roughly 35%. So we have definitely taken our production down, but we are still putting away anywhere from $13 million to $20 million in both years for our future because both our brands and having a full aged portfolio offering are critical strategies of ours, and we are committed to those. But we do think we are doing the right things. We have also been able to do so in a very cost-effective manner. Our cost structure overall for brown goods is in a really, really great spot, due to the team’s ability to reduce costs, largely fixed costs, out of the operations, but also our ability to do unique things that our competitors cannot do, like offer premium white goods that can absorb a lot of the cost structure that otherwise would not be there. Julie Francis: The only thing I would add to that, Mitch—I think Brandon did a great job summarizing—is that volume and pricing is reflected in our guide. In the toughest of environments, we are still guiding to mid-30s, and as Brandon said, reducing our operating cost, the team has done a great job. We have cash-generating warehouse services, aged whiskey sales inventory. We have expanded into aged whiskey with private label contracts, and we are pleased that a couple of them—these take a long time to get through the process—but by the end of first half, we should have some sales for a couple of them. And we are entering into premium white goods, both services and saleable products. So again, tough environment. We are pleased with some of the progress, but certainly I think our actions are very appropriate, and we are pleased where some of the TTP data has come in. Mitchell Brad Pinheiro: Okay. Thanks. That is helpful color. One last question is, curious if you mentioned it before; I apologize, but I am curious where your marketing focus is on your Branded Spirits—what particular brands, what you intend to do, if you can talk about that. Julie Francis: Sure, Mitch. I would love to give you a little color. First, Premium Plus will be our primary growth engine. We are fairly pleased with our Penelope results. It continues to have a mass consumer appeal. Innovation has been robust. We would have another strong year as well in 2026, so you can certainly expect us to have that focus. We are going to have even more digital dollars on Premium Plus led by Penelope. Our A&P in 2025 was about 12.5% of sales. We are modestly going to take that up in 2026, but most importantly, we are going to shift to digital media. We are increasing over 200%. We are also taking a streamlined approach to our agencies—better brand briefs, better dialed-in RFPs. We think one to two points of shifting A&P to actual media or in-store dollars. From a commercial support perspective, we did shift from 55% brand building to 45% commercial support for 2025. We think this is appropriate given the current environment to bring those pull-throughs. So it will be mainly focused on Premium Plus—El Mayor, Yellowstone, Rebel, and also, obviously, Penelope. We have a great NASCAR activation program for the races this year with our number 8 Kyle Busch car. We are looking forward to that, but that is where we will be spending our dollars. Mitchell Brad Pinheiro: Great. Thank you very much. Thanks. Operator: The next question will come from Ben Klieve with Benchmark/StoneX. Please go ahead. Ben Klieve: Thanks for taking my questions. First question on the expectation of rationalizations in the Branded Spirits segment. I am wondering, Julie, if you can first of all characterize the degree to which those rationalizations are proactively built into your 2026 guidance that you laid out, or if there is going to be potential downside to the Branded Spirits outlook when those rationalizations come. And then second, the degree to which you think those are going to be monetizable versus just written off. Julie Francis: Good question. Number one, broadly speaking, they are not going to be an impact on our 2026 guidance; that is reflected in that. So the 20%—again, it is important I use the word it is our long tail—and by that, it is probably our heritage Luxco brands that are in value space in some categories and segments and states that are unique. So it should be no impact on 2026 guidance, and it is accounted for. Moving forward, we do have our next wave of that, and certainly, as you optimize SKUs, there are a few different things we can do. We think there is a handful of them that we will divest, and we think recovering at least our packaging and inventory cost is the minimal amount that we will get for those. We are also going to be prudent, efficient, and effective on how we draw those down—whether it is a write-off or there are several different places and/or states that we could go to that it may make sense. Those will come forward as they are expected in 2026. As we move forward to our next 20%, that is when we will move into some other stronger volume plays that we think streamlining them does provide us with the ability to replace some of these SKUs and their shelf presence with some higher-velocity SKUs. So that is our roadmap for portfolio management, and it is in progress, it is accounted for, and most importantly, it is not an episodic event. Ben Klieve: And then my follow-up question, moving to the Ingredients segment. Great to see your encouraging outlook for that business in 2026. I am wondering if you can break down or quantify the impact of mechanical challenges and the elevated cost of the waste stream within 2025. I am wondering how much of a profit headwind those two buckets were. And then second, if you can characterize the degree to which those headwinds are going to persist in 2026. Especially in the waste stream, I thought that was going to be effectively zero with the emergence of the biofuel facility, but clearly those are going to persist a bit. So help me understand those dynamics. Julie Francis: I am going to take your questions together, and then Brandon can clean up any of the impacts that you seek. Let us talk Ingredient Solutions. First and foremost, there are significant consumer tailwinds—high fiber, high protein are on point right now—and our ability to have co-creation events with large customers. Many of these products are well known and very strong, and so our ability to partner with them on these, and we have consistent demand. We have been able to now, most importantly since late November, get out the production pounds and have had stronger operational reliability than we had in the last four months. You are going to see segment sales up well north of double digits in 2026. That being said, the effluent part—and yes, I think I was transparent in our remarks—has been a little bit more complex. It has been more costly. That plant was stood up sometime in 2025. There are multiple waste streams, one of which this biofuel cannot digest, and so we do have to send that out to a municipality. That municipality was offline since early December. We expect them to go back online sometime in 2026, so that certainly will help mitigate some costs. We have work underway—and this work is months, not weeks—on how to eliminate that final waste stream, or food stream, that we cannot mitigate right now. I will tell you, we are very bullish from the commercial side of the business. We have very good operational reliability. We are getting out the pounds, and the effluent certainly is the last kind of stool on this leg that we have to get better at. I would expect sequential improvement across gross margins and that waste stream across each quarter, and the back half of the year. In 2027, we do expect this to be in the 20s gross margin. It will take us to that time to get there, but we think those are comfortable ranges that we can get to. Brandon? Brandon M. Gall: Well said. It really depends on the month and the quarter, but largely speaking, if you just look at Q4 in terms of what was the driver to the profitability headwinds in this segment, year over year, the segment was down $5.7 million in gross profit. A little more than half of that was due to that key equipment outage, and the other half or less was due to the effluent and disposals. As we get into Q1 of this year, that effluent disposal is expected to be more of the cost driver and headwind because, as Julie said, a lot of the front-end throughput and reliability issues are being resolved. If you look at it in three areas, the demand side is still intact and very constructive, the throughput and reliability is improving every day, which is really allowing us now to circle around the last item, which is the effluent, and that is what we are going to do. Ben Klieve: Got it. Very helpful. Thank you both for taking my questions. I will get back in the queue. Amit Sharma: Great. Thanks, Ben. Operator: This concludes our question and answer session. I would like to turn the conference back over to Julie Francis for any closing remarks. Julie Francis: Thank you. In closing, thank you for your time and engagement with MGP Ingredients, Inc. We look forward to talking again soon and after our next quarterly announcement. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning. Thank you for attending today's Haleon's Fiscal Year 2025 Results question-and-answer. My name is Sarah, and I'll be your moderator today. [Operator Instructions] I would like to pass the conference over to our host, Jo Russell. Please go ahead. Joanne Russell: Good morning, everyone, and welcome to Haleon's Full Year 2025 Results Q&A Conference Call. I'm Jo Russell, Head of Investor Relations, and I'm joined this morning by Brian McNamara, our Chief Executive Officer; and Dawn Allen, our Chief Financial Officer. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans and expectations. Please refer to this morning's announcement and the company's U.K. and SEC filings for more details, including factors that could lead to actual results to differ materially from those expressed or implied by such forward-looking statements. We have posted today's presentation on the website this morning, along with a video running through the results in detail. So hopefully, you've all had a chance to see that ahead of this call. And with that, let's open the call for Q&A, and I'll hand back to the operator. Operator: [Operator Instructions] Our first question is from Guillaume Delmas with UBS. Guillaume Gerard Delmas: So one question. So my one question is on your organic sales growth guidance of 3% to 5% for 2026. I mean it does seem to signal some sequential acceleration relative to the 3% you posted last year. So wondering what will be the main drivers behind this sequential improvement? I mean, is it predicated on category growth accelerating and/or your level of outperformance gaining further momentum? And then related to this, Brian, you reiterated your medium-term ambition of 4% to 6%. I guess what underpins your confidence in the 4% to 6% when you may be delivering an organic sales growth below the bottom end of that range for now 2 consecutive years? Brian McNamara: Thanks, Guillaume. I appreciate the question. So maybe let me take the 3% to 5% guidance, and I'll go to medium-term view. So if you take a step back and let's look at 2025, we grew 3%. That clearly was below what we were expecting when we were at Q3 based on the cold and flu season. But the U.S. was down about 0.5%. APAC and EMEA, LatAm grew mid-single digits. Now we did experience a market slowdown. A vast majority of that was obviously what we've talked about in the U.S. market and then the cold and flu category, which I mentioned. Now remember, 70% of our cold and flu business is also outside the U.S. So in that context, we did deliver competitive performance. We outgrew the market overall and 60% of the business gained and maintained share. Looking at 2026, we're not planning on material improvement in the market. Consumers are likely to stay cautious. We're absolutely focused on driving category growth. I'm confident we will continue and improve on our competitiveness. And that's through investment in A&P, strong innovation plan, sharper commercial execution behind our new operating model. And listen, the U.S. will return to growth in 2026. And that's based on the progress we've had to date. We ended the year where we expected to with inventories at the right place. And that's -- part of that is we did have softer cold and flu, but we had stronger Oral Health business, which helped offset that. And we also have plans in place that we know is going to help us improve through the year. So for instance, in Q2, we have a lot of key customers doing shelving resets. We're gaining distribution. We're gaining shelf placement. On the profit side, the productivity program continues to deliver. You saw the 220 basis points of gross margin improvement. We feel great about that. That, combined with the efficiencies coming from the operating model, will allow us to deliver high single-digit operating growth at constant currency and still invest in growth, still invest in A&P, R&D and some key capabilities that we're continuing to build on. So now if we step back and think the medium-term guidance. I mean you said it, the guidance doesn't necessarily mean we're going to be outside the range. But obviously, part of the guidance is outside our medium-term range. I think it's an acknowledgment of the uncertain market we're dealing with. Based on what we know today, we'd expect to be in the middle of that range, based on what we know today. You also asked about the phasing. What we do know today is that Q1 cold and flu season is going to be below a year ago. We're now almost 2 months into the quarter. And the results, we saw a spike towards the end of the year, and then we saw it come down after that. So we're going to be below a year ago, and that's not only in the U.S., it's outside the U.S. My confidence, listen, these are still attractive categories. I still believe there's huge potential. Everything we've talked about in the past, closing the instant treatment gap, success of our premiumization continuing, the low-income consumer opportunity, which we're still only at the beginning at. And as we progress through 2026, I expect to see stronger performance in North America, as I said and continued strength in emerging markets. We feel good about China, and I expect an acceleration in India. Actually, India for us is performing extremely well. And then as we continue to drive that productivity agenda, again, we will be able to continue to invest in the business, which again underpins my confidence in getting back to that 4% to 6% growth. Operator: Our next question is from Warren Ackerman from Barclays. Warren Ackerman: It's Warren Ackerman here at Barclays. Outside of the numbers, Brian, could you talk about the new reorganization? You've got a new Chief Growth Officer, Chief Transformation Officer, new reporting structure, new hires in the U.S. other than Natalie I've seen. Can you maybe sort of walk us through how that's going to be a growth unlock and how you'll drive more volume growth in the U.S., more innovation? Anything you can say on sort of shelf resets and how the things are shaping up in the U.S. in what is clearly a tougher operating environment? Brian McNamara: Thanks, Warren. And I think you captured it. This is first and foremost about unlocking growth and agility. And I think about the journey we've been on as a company, we're now 3.5 years in as a company. The strategy we laid out is very clear. And there was still an opportunity for us to streamline and simplify the way we work and drive strategy to execution. So as you said, we created this Chief Growth Officer role that combines our category structure, our marketing effectiveness and capabilities, our business insights and analytics strategy and a new commercial excellence function. And then 6 operating units replacing our 3 regions. As you're aware, Latin America, India and Middle East, Africa will now have a seat around the leadership team table. So I think a couple of things. It's one on the commercial execution function that we've created. Centrally, we're driving AI-driven tools behind net revenue management, next best action. We're going to be able to drive this quicker and faster through the organization. This structure of CGO, the 6 operating units, is going to allow us to really, really much quicker drive our category strategies through to execution, better leverage scale, better be able to move resources around, react to, what I would say, as you said, a very uncertain environment. And then as a result of it, we're taking a layer out of the organization. So we're talking about a flatter, leaner organization, and that leads to the $175 million to $200 million in gross savings we talked about, which gives us incredible flexibility, frankly, to invest in those growth opportunities and to invest in innovation and drive the capabilities. Now your question on the U.S. -- specifically on the U.S., yes, well, first of all, overall in the team, we did, as part of those changes, bring new members of the team. We got a fantastic leader in India, a fantastic leader in Latin America that came from outside the company who know these markets extremely well. Our Middle East, Africa leader is now sitting on the leadership team, and she's an incredible talent. In the U.S., as part of all this, Natalie made a number of changes in our category heads or category general managers. So we have one of our top talents now on the OTC business. We brought external talent in Oral Health and in the Wellness category, which is a combination of VMS and Digestive Health. I mentioned it a bit earlier, Warren, but we know that in Q2, we will see across a number of key customers, some wins on distribution and shelving across Oral Health, VMS and Pain Relief, and that's locked. That's going to happen in Q2, and we feel good about that commercial execution. We also feel good about the innovation. The one thing I will say, it's broadly across the business, specifically in the U.S., Oral Health is doing incredibly well. And it really did better in Q4 than we expected, which again helped us offset, land the U.S. where we wanted to despite the tough cold and flu season. Operator: Our next question is from David Hayes with Jefferies. David Hayes: So just on emerging markets, there was a sequential slowdown in the fourth quarter. So just trying to dig a little bit deeper into whether the emerging is performing as you would expect it to be, like it to be at the moment. And then which areas specifically maybe are not doing as well? And I guess in that context, Oral Care continues to be amazing and impressive, obviously, still in this difficult consumer environment. So is there something different about Oral Care and the dynamics there versus some of the other categories ex Respiratory because of the cold and flu? But it feels like Oral Care could ride the consumer dynamic whereas the other brands can't. Is there something you point to that says that this is what's going to change as the consumer maybe picks up in the other areas? Brian McNamara: Yes. Thanks, David. So listen, I will take the Oral Care question linking to other categories, and I'll pass it to Dawn to talk about what we're seeing more broadly in emerging markets. So first of all, we do feel really good, as you pointed about around Oral Care. And as we've been talking about now for a while, the clinical range in Sensodyne has really resonated well with consumers. And it's beyond clinical white, it's clinical repair, it's clinical enamel strength. Beyond that, we're seeing great progress in places like India with low-income consumer on Oral Health. And Parodontax is an amazing brand in gum health. We don't talk about it as much as Sensodyne. It's obviously not as big, but it's growing in the strong double digit in the mid-teens. We launched in China this past year. It's still quite early in our ramp-up for distribution, but we couldn't be happier with the progress that we're seeing there. So we feel great about Oral Health. And the Oral Health model is very, very clear. It's linked to the dental recommendation. It's linked to the innovation. And obviously, we compete on the therapeutic side of the business. Listen, in the other categories, quite -- listen, when we talk about the impact of cold and flu, to be clear, we talk about our cold and flu portfolio specifically, which are brands like Theraflu and Robitussin and Otrivin, which sit in that category. There is also impacts across other areas like Pain Relief and some VMS and things like that tend not to be as much but there does tend to be a little bit of that impact that happens, too. Fundamentally, I believe these are real strong categories that as we move forward, we can move ahead. I think we're just radically differentiated versus the competition in Oral Health in a way that's very, very unique. We're talking about now over 10 years of kind of high single-digit to double-digit growth in Sensodyne, and we continue to see that continuing to hum. And we're seeing good competitiveness in the other categories, but we're continuing to focus on innovation, things like our 12-hour patch launch on Voltaren in a number of European countries. Otrivin Nasal Mist continues to do well. We're growing aggressive share there. Our OptiSorb technology on Panadol, we're rolling out to another [indiscernible] market. So we feel like we have a good innovation plan that should underpin our -- certainly our medium-term guidance. Dawn? Dawn Allen: Yes. Good morning, David. Hi, everyone. So let me talk a bit about emerging markets because we feel really excited about our emerging markets business. If I look at Asia Pac, first of all, I mean, we continue to deliver strong performance in Asia Pac. We expected an acceleration in half 2 versus half 1, and that has come through. And when I look at the growth drivers in Asia Pac, 80% of our growth is coming from volume mix. And that is a factor of us driving penetration and expanding reach across lower-income consumer groups. If I look within Asia Pac, let me talk about India. I mean, an incredible performance in India, double-digit growth in the year, an acceleration in quarter 4 on the back of the macro changes around GST, but also on the fact of our activations. If I look at our INR 20 pack and Sensodyne is performing incredibly well. We continue to expand our reach across rural areas, across villages based on our investment in terms of bringing our sales force in-house. And actually, I was out in India the first week of this year, and it was great to be on the ground with the team, visiting stores and really seeing our brands come to life. So that was India. If I look at China, we're also really excited about China, mid-single-digit growth in the year. And just some pockets to talk about. If I look at our e-com business, it's around 40% of our business in China. And Douyin, we're growing more than 100%. And our online to offline business is also growing double digits. So actually, we feel really good about China. If I move on then to EMEA, LatAm. EMEA, LatAm, actually, we've seen a good performance, particularly across LatAm and EMEA, Middle East and Africa as well as Central Europe. But it is fair to say that whilst we've seen a good performance, particularly in LatAm and specifically Brazil, we are seeing a much more challenging macro backdrop, both in terms of the consumer behavior, but also in terms of retailer behavior as well. So we did see a slowdown in LatAm, particularly in quarter 4. And if I talk about kind of Middle East, Africa continues to perform well. Central Europe also has seen a good performance. But again, based on the soft cough, cold and flu season in quarter 4, we saw a slowdown in Central Europe because of that. But overall, as I said, we're really excited about emerging markets. It's a huge growth opportunity for us. When I look at our A&P investment, half of our increase in A&P investment in the year actually went to emerging markets, and you can see that coming through in the performance. Operator: Our next question is from Celine Pannuti with JPMorgan. Celine Pannuti: My question comes back on the overall guidance and how you manage top line performance versus margin improvement. Clearly, strong delivery in margin and your cost savings initiative augurs well for the years to come. At the same time, your top line has disappointed. And if I look at the past 3 years, volume has been 1%, which is quite low compared to the overall European staples, best-in-class are trying to achieve at least 2% and above. So in order to grow 4% to 6%, what kind of volume level do you think you need to have? And how do you -- like the discrepancy between margin progression and volume performance, does it mean that you may need to reinvest more or maybe look at your price positioning in order to grow volume faster? Brian McNamara: No, thanks for the question, Celine. So let me kick that off, and then I'll pass it to Dawn to give a bit more perspective. I think if you take a step back, I do think we're investing in the right places on the business. If you look at our A&P investment in the last year, we were over 7% ahead of a year ago, and R&D was over 7% ahead of a year ago. That is the absolute benefit of the gross margin improvement and the improvements we've seen in our supply chain and structure, giving us 220 basis points of operating -- of gross margin improvement, which is allowing us to invest in the business. We continue to focus on where is the best of that investment. By the way, a lot of that incremental investment this year went against Oral Health, and you see the results that have come out. And we understand that in a lower cold and flu season, also while we can gain share, we're going to have a very difficult time driving volume overall. But maybe, Dawn, you can talk a little bit about how we see the algorithm going forward and where we see the role of volume growth, which we're very focused on volume growth. So Dawn? Dawn Allen: Yes. Thanks for the question, Celine. And you're right, and Brian mentioned it, we are very focused on driving volume growth in 2026 and moving forward. We've always said that the right price volume mix split for this business is around 60-40, 40-60. I already talked about Asia Pac in terms of 80% of that growth is coming from volume on Asia Pac, and we feel really good about that. When I look at EMEA, LatAm, if I take out the two shoulders of the year, so if I take out Q1 and Q4 for 2025, where we had a soft cough, cold and flu season, actually, in Q2 and Q3, we did see a more balanced price volume mix profile. And that obviously should give us confidence moving forward that we can deliver that. And then if I look at North America, look, it's been a really challenging market in North America in 2025. But as Brian has talked about, we have put in place the key actions to drive volume growth in 2026, whether it's about us no longer doing destocking, whether it's about reducing the drag from smokers health, the distribution builds that we expect to get from shelf resets as well as the strong activations. These are all important drivers in terms of driving the volume growth. So whilst for '26, I'm not going to guide to specific volumes, I would expect us to be improving the split of price volume mix in '26. Operator: Our next question is from Olivier Nicolai with Goldman Sachs. Olivier Nicolai: I got one question first. Could you go back to the change you have implemented in the U.S. over the last 12 months and specifically also the incentive structure you put in place for the new management there? And just following up on the press release on Page 5 regarding the overall equipment effectiveness. It has improved by 7 points in 2025. It's a bit lower than what you expected at H1. Should we assume a stronger improvement in '26 compared to '25 on these metrics? Brian McNamara: Yes. So thanks for the question. Let me talk a bit about the U.S. As you know, we announced a new leader in the U.S. in May. As we looked at our operating model structure broadly, we worked very closely as an executive team to define that. I talked a little bit earlier when Warren asked the question about that and we worked that very closely with the U.S. So one of the things we've done is we've created [indiscernible] category General Manager role, which obviously report directly up to our President of the U.S. and also are connected to our global category heads, which is going to help us really drive kind of this strategy to execution even faster. We're making a number of changes around net revenue management and the tools that we're providing. We've made a number of changes in our sales force and our sales leadership and structure. And all of that was really pretty much done on January 8 when we announced the broader stuff in the U.S., you obviously move much faster on those kind of changes. So I feel really good about those changes and how they're going to drive growth. And as I said, we've seen progress to date. There's no question about it. We ended up again where we expected to. Inventories are kind of where we expected to. Oral Health has been extremely strong. Advil grew share in Q4. So that was a really important element. We're seeing -- we see these opportunities on the distribution and stuff that I talked about in Q2. So I feel like we're in a very good place to really drive those changes in the U.S. Dawn Allen: Yes. And I think, look, in terms of the productivity program, Brian talked about it, we're really pleased with our supply chain productivity program. It was even better than we expected. I mean, 220 basis points improvement in gross margin is incredible in the year, and it is a collective effort across the whole organization. And that's important because it helps to drive flexibility and agility in the P&L to be able to invest for growth. And if you remember, we talked about 3 drivers of how are we going to deliver that gross margin improvement and productivity benefit. The first one we talked about was immediate accelerators. So this was reducing complexity in our supply chain, whether it's around number of languages on pack, harmonizing packaging, formulations. And let me give you an example. So in Europe, in 2025, on our Aquafresh brand, we had 44 single language packs. And we've now reduced to 18 multi-language packs in the year. And that is a huge optimization piece in terms of supply chain. The second area that you referenced in your question was around operational efficiency. And this is all about debottlenecking upfront, process improvements, equipment optimization. And let me give you an example of that. In our Levice factory in Europe, we reduced formulations by 30%. So if you think about the impact of that, that reduces change over time, but it also increases the capacity, the available capacity on that line, which is really important. So I think, as I said, it's an incredible effort that is helping us to continue to invest in the business to drive growth. Moving forward, I wouldn't expect to see, it would be great if we had that level of improvement each year. But moving forward, 50 to 80 basis points is what we've built into our guidance. That will be a strong performance on supply chain productivity. Operator: Our next question is from Jeremy Fialko with HSBC. Jeremy Fialko: So the one for me is more on the U.S. market more generally. So the first element is just the pharma channel within the U.S. Do you see that continuing to be under pressure in 2026? Or do you think with some of the ownership changes there, there's the possibility that the channel could become a little bit better in some of the broader drops there, which have, I guess, led to pressure on inventories and overall sell-through could abate? And then maybe if you look at the U.S. more broadly, is it just a case of waiting for the consumer to get a bit better before the market growth can improve? Or are there some other elements that you think are kind of specific to the market getting a bit better, let's say, putting aside any cold and flu impacts? Brian McNamara: Thanks, Jeremy. Thanks for the question. Let me take that. I think as you talk pharmacy channel, really, what we've talked about is the 2 big retailers in the U.S., which is Walgreens and CVS. What I can say is we see the channel shift that we've seen for many years, which is drug channel and obviously, e-com. E-com growing quite aggressively and that's walmart.com or that's amazon.com, that will continue. The dynamic we saw in 2025 was lower inventory levels in those retailers as they were dealing with their own challenges. We believe we're where we need to be, and now we're just managing normal channel shift as we can. And by the way, that channel shift is not a bad thing for us. If we look at our Amazon shares, 18 brands on Amazon account for 90% of our business on Amazon and 16 of those 18 brands have higher share online than offline. So as that channel shift moves, it's something we can take advantage of. We have good capabilities there. So we feel good about that channel shift. Yet to be seen what happens under new ownership at Walgreens, if that's a positive or not a positive. But again, I don't feel like this is a situation that if gets worse, we baked it in. We proactively managed our inventory levels to try to be at a place where we felt good about so we can stop talking about it as we move forward. In the overall market, you said ex seasonality, so I will take that out because there's certainly a seasonality impact that we're kind of seeing. Listen, what we see in the dynamic is we see club channel doing a bit better, dollar channel doing a bit better as consumers are looking for more value. Some consumers looking for lower price points, some consumers looking for -- different consumer want value, higher price point, lower price per use. We're very focused on those 2 channels and increasing our offering to make sure that we're meeting the affordability issues of consumers in the U.S. And we believe we can also play a role, and we do play a role certainly in Oral Health in driving that category growth. So we're not sitting back and waiting for the categories to change. We're just acknowledging that we -- there are some things we can't control. We're focused on competitiveness, growing market share. We feel confident in that, and we're focused on driving that category growth where we can. Operator: Our next question is coming from Sarah Simon with Morgan Stanley. Sarah Simon: Just one question from me. How important is it in terms of securing shelf space and sort of with your retailer negotiations to have that cold and flu business? Because I think in your bit to become a sort of steady compounder with predictable top line, this is obviously the kind of bit that's causing the biggest issue. So I'm just wondering how much do you need to own that business? Brian McNamara: Okay. Sarah, thanks for the question. Let me take that. Listen, I think cold and flu plays an incredibly enormous role in consumer health and for consumers. And if you look over the history, I've been involved in the -- in consumer health now for over 20 years. So I've seen quite a few cold and flu seasons. This year, we're seeing kind of two seasons in a row that are down because if you remember last year, we were down. We know that Q1 is also going to be down. It doesn't happen that often, but it has happened in the past. We've experienced that in the past. I believe if you look over time, you're going to see growth in this category going forward. It's a bit exasperated this year because we are dealing with multiple headwinds in the U.S. environment, which this has compounded on. But I think it's a very important category. We feel good about our positions in the category and our portfolio. I think it's going to -- it plays a very important role for our customers, too, as you were saying, this is category management around pain and cold and flu. And frankly, cold and flu and pain have some common brands, Panadol Cold and Flu, Advil Cold and Flu. So we think it's an important part of the portfolio as we move forward. Operator: Our next question is come from Karel Zoete with Kepler. Karel Zoete: I'd like to go a bit deeper into 2 categories. The first one is the Digestive Health business. Historically, a good business for you, not so seasonal, but we've seen a slowdown in '25. What should we anticipate for '26? Why should things get better? And then coming back to pain, I know there's a bit of cold and flu impact in there. But if you zoom out, 2024, '25 have not been great years for pain despite of some of your strongest franchises such as Panadol in Asia are there. So what is needed for the pain franchise to start performing more in line with the anticipated growth rates? Brian McNamara: Okay. Thanks very much, Karel. I appreciate the questions. So let me start with Digestive Health. If you think about our Digestive Health business, just to get us grounded, it is -- over 80% of that business is focused in 3 countries: U.S., India and Brazil. In India and Brazil, it's ENO, which is a fantastic brand and does very well in both cases and is part of our strategy and our growth strategy, certainly in both those countries and certainly in India. So now you get to the U.S. where we have Tums, we have Nexium, brands like Gasx and XLax, Benefiber, which is a fantastic brand. We have seen a drag on Nexium in the U.S. There's no question that is one brand in one category, and we're not alone in this that has been impacted by private label. If I zoom out and look at the U.S. overall, we've gained share versus private label. But Nexium has been a bit of a challenge there. One of the opportunities we see in Digestive Health, and we feel really good about and we're now working is supporting consumers on GLP-1s because there's multiple side effects on GLP-1s that brands like Tums and brands like Benefiber address. There's also side effects like dry mouth, which we have a mouthwash brand. We don't talk about much in the U.S., Biotene, which is actually quite effective in dry mouth. And there's nutritional supplementation, and we've actually created the Centrum variant that's specifically focused to GLP-1 consumers. So we see an opportunity across our categories to drive that. Tums is a tremendously performing brand and so is Benefiber. We have dealt with a little bit of a drag from the Nexium side of the business. Listen, on Pain Relief, it's a great portfolio. I mean, Voltaren is #1 topical analgesic in the world. By the way, we talk about -- a lot about the topical. We also have a very strong patch business. I mentioned earlier, we're launching 24-hour patch in a number of markets around the world, and we're seeing quite a successful pickup of that. Panadol has done quite well in Asia. We don't have quite the same strength of a systemic pain relief business through Europe, and we're addressing that. We're launching there. And the big thing is on Advil. Like I said, we're growing Advil share in Q4. We're really confident that now with the new structure, with the new focus, our ability to invest and everything else that will get Advil back to a more consistent performer. That's going to be important for us. So that's one of the things we need to make sure that we drive and deliver on the business. But overall, listen, we've always said the OTC categories in general would be 2% to 3% growth categories, and we could outgrow that. They've seen a little bit of headwinds here and in the U.S. as all categories have been a bit muted, again, not super declines, but a bit muted. So we're addressing that, but we feel very good about that franchise and the global nature of that franchise. Operator: Our next question is from Edward Lewis with Rothschild & Co Redburn. Edward Lewis: Brian, just returning to the medium-term guidance. Should we think that getting back to that range is all about the U.S.? Or do you think you can deliver against that with a structurally slower U.S. market but greater contribution from the rest of the world, given the confidence you're obviously expressing about India and China? Brian McNamara: Yes. So listen, as I think about the medium-term guidance, I do expect that the U.S. will perform better. There's two things. We've outperformed the market, to be clear, in 2025. But do I feel like the performance is -- we're hitting it on all cylinders? We have not. We can do better. Just outperforming the market isn't enough, and I am confident we can do better. So we do expect an improvement in that U.S. environment. And I believe over the next couple of years, we'll get that U.S. environment, if not too close to the bottom end of our algorithm growth. Outside of that, we also expect that, again, over time, emerging markets will continue to be a strong contributor and the low-income consumer strategy we have, which is taking hold in certain places, and we're learning a lot, to be very clear. And that takes a bit of time to kind of build up to be significant, and we see those opportunities. So overall, I do feel the medium term of 4% to 6% that nothing has fundamentally changed versus what we have said and what we've said in the past about our strategy and our opportunities. What you're hearing from us this year is 3% to 5% because the market is still quite uncertain, and we want to make sure we're providing the proper context for everyone on where we see things are at. And again, where we sit now, knowing Q1 is going to be softer due to cold and flu, middle of the range is kind of where we're at on that, and we'll update as the year goes on. Operator: Our next question is from Tom Sykes with Deutsche Bank. Tom Sykes: One quick follow-up and one on A&P, please. Are you able to quantify the shelf space stocking benefit that you'll get in either Q1 or Q2 in North America, please? And then just on the A&P spend, I mean, there can't be many consumer companies that have increased A&P by almost 8% to 20% of sales and still running at negative volumes. So where is the A&P ineffective? And where is it effective? And does it make much of a difference in your non-oral care businesses at the moment? And can you talk about whether you're allocating more of that A&P increase to oral care or to non-oral care, please? Brian McNamara: Thanks, Tom. Thanks for the question. Let me take the U.S. stocking, and I'll pass it to Dawn on the A&P question. Listen, we're not going to guide to specific improvements on the shelving increases. But let's just say it's part of the thing that gives us the confidence as we progress through the year that we'll see stronger results because it's real. Consumers will see more of our brands. We will have a bigger shelf space and in a number of cases, we'll be at a better visibility point in some key resellers. Dawn, do you want to talk about A&P? Dawn Allen: Yes. Look, thanks for the question. And I think it also builds on one of the comments that Celine talked about in terms of the margin profile as well. So let me say a few words about that. I think, look, it's often easy for companies to cut A&P when the market is more challenging. We have not done that, and we haven't done that because we're really focused on ensuring the long-term sustainable growth for this business. So we -- you're right, we've increased A&P 7.5%. We've increased R&D 7.7% in the year. And we invest in our brands at a healthy and the right level to drive that sustainable growth. So if I kind of give a bit more color behind that. So what -- where has that increase in A&P, where has it gone? We've already talked about it. Half of that increase went to Oral Health. You've seen the growth momentum on that this year in terms of high single digit and acceleration in Q4 and the ROI on that Oral Health is incredibly strong. The other half, I referenced it earlier, went to emerging markets. So India, D-com in China, and that's really important. And the third area actually is around experts. So expert is a critical part of our business model in terms of the work that we're doing around the Haleon Health portal, where registrations have increased 27% in the year and on our field force engagement, which has also increased 16% in the year. So that's where the spend has gone. The other thing that we are particularly focused on as well as ensuring it's the right level is also around the return, the efficiency and the effectiveness. So in the year, we've improved our working, nonworking split, so 12% growth in working media. We've also increased our overall ROI mid-single digit, and we've increased the coverage, the global coverage to around 3/4 of our business. The other thing that we're focused on is also the mix. So 60% of our working media is allocated to digital. And that's an important balance for us as we think about the shift in the broader economy. So I would say, overall, look, it's an important focus area for us. We invest at a healthy level, 20.5%. I feel really good about that. And we also continue to focus on improving the efficiency and effectiveness of our spend as well as ensuring that we are shifting and having the right mix around digital versus legacy. Brian McNamara: Okay. Super. Thanks, Dawn. Listen, I think we are going to close the call now. So thanks, everyone. I appreciate you joining us today. Look forward to catching up with all of you in upcoming meetings and roadshows. And please feel free to reach out to the IR team if you have any further questions. Really appreciate your continued interest and support in Haleon. Thanks, everybody. Operator: Thank you. That concludes Haleon Fiscal Year 2025 Results Q&A. Thank you for your participation. You may now disconnect your lines.
Operator: Thank you for standing by. You are on hold for the Blackstone Secured Lending Fund Fourth Quarter and Full Year 2025 Investor Call. At this time, we are gathering additional participants and should be underway shortly. We appreciate your patience and ask that you continue to hold. Good day, and welcome to the Blackstone Secured Lending Fund Fourth Quarter and Full Year 2025 Investor Call. Today’s conference is being recorded. For operator assistance, please press 0. If you would like to ask a question, please signal by pressing 1. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I would like to turn the call over to Stacy Wang, Head of Stakeholder Relations. Please go ahead. Stacy Wang: Thank you, Katie. Good morning, and welcome to Blackstone Secured Lending Fund’s fourth quarter and full year results conference call. Joining me today are Brad Marshall, Co-Chief Executive Officer, and Teddy Desloge, Chief Financial Officer, along with other members of the management team available for Q&A, including Jonathan Bock, Co-Chief Executive Officer, and Carlos Whitaker, President. Earlier today, we issued a press release with the presentation of our results and filed our 10-Ks, both of which are available on the shareholder resource section of our website, www.bxsl.com. We will be referring to that presentation throughout today’s call. I would like to remind you that this call may include forward-looking statements, which are uncertain and outside of the firm’s control and may differ materially from actual results. We do not undertake any duty to update these statements. For some of the risks that could affect results, please see the risk section of our Form 10-K filed earlier today. This audiocast is copyright material of Blackstone and may not be duplicated without consent. With that, I will turn the call over to Brad Marshall. Brad Marshall: Thank you, and good morning, everyone. Before highlighting the results from the quarter, and some key observations, I would like to take a moment to share our macroeconomic views heading into 2026. Stepping back to the broader macro environment, despite periods of volatility over the past year, including tariff uncertainty, geopolitical instability, and elevated headline risk, we continue to see a fundamentally healthy economic backdrop. Overall, earnings growth has remained resilient, the consumer continues to demonstrate strength, and fiscal and monetary conditions remain supportive. Together, these factors are contributing to sustained economic momentum. A key driver of that momentum is the ongoing technology and AI-driven investment cycle, which I will provide more details on shortly. We believe we are in the early stages of the significant capital expenditure buildout focused on AI, digital infrastructure, and related technologies, providing a durable support to growth across multiple sectors. Particularly when you couple that with encouraging signs on inflation, we believe this macro and investment backdrop has translated into robust capital inflows into Blackstone’s private credit strategies over 2025, and particularly strong demand from the institutional channel most recently. We are coming off one of our most active quarters of investing for BXSL, and have over $5,040,000,000,000 of dry powder to invest in direct lending into a market that, in our view, remains highly receptive to direct private credit solutions. Looking ahead, we believe this combination of a constructive macro environment, improving credit fundamentals, and a defensive first-lien orientation positions the BXSL portfolio well from a performance and investing standpoint. On earnings, BXSL reported another strong quarter with our net investment income, or NII, of $0.80 per share, representing an 11.8% annualized return on equity made up overwhelmingly of interest income rather than income from PIK or dividends. Our distribution of $0.77 per share was 104% covered by our net investment income per share and represents an 11.4% annualized distribution yield on NAV. BXSL delivered a 9.6% net return for the year, outperforming the leveraged loan market by 360 basis points with an 11.2% annualized return since inception seven years ago. BXSL at the outset was designed to have a lower cost structure so that it could focus on what we believe is a higher-quality portfolio, and you are seeing that durability reflected in quarterly performance. A few core topics I will discuss from the quarter include a busy quarter of deployment, recent headlines around private credit, and related concerns around software companies and the impact that AI may have on them. On deployment, the fourth quarter was our second most active quarter of funding since 2021. We increased our overall portfolio to 316 companies, including 40 industries, funding 13 new credits, which had an average LTV at underwrite of 41% and an average spread near 500 basis points, and completed 15 add-ons to incumbent names. Some of the larger fundings during the quarter were to AmTrust, an insurance managing general agent focused on specialty programs, MannKind, a public biopharma business, IEM, an electrical equipment manufacturer supplying data centers, and Sabre Power, an engineering firm that is a provider of electrical infrastructure services. BXSL led all four of these senior secured transactions and was the sole lender in three of them. Additionally, another large investment during the quarter that BXSL co-led was for a digital aviation solutions business called Jefferson, sold by Boeing for $10,500,000,000. We believe this company has a dominant market position, is performing exceptionally well post-close, and is categorized by BXSL as being well positioned from AI risk given its deep entrenchment in the aerospace industry and high cost of failure. These deals highlight how we are investing around some of our core themes at Blackstone, including life science and AI infrastructure. Despite positive trends in deal activity as outlined during last quarter’s call as well, external narratives around bubbles in the credit market continue to percolate in the news. What we are seeing on the ground and across the over 300 credits we are invested in in BXSL is broadly inconsistent with this. In fact, if you look at the top 90% of our names in the portfolio, these companies are growing EBITDA at 9% over the past twelve months, have interest coverage over two times, and have an average mark of 99. This is consistent with my comments earlier about a healthy economic backdrop and the benefits of lower interest expenses for our portfolio companies. Meanwhile, there has been significant external focus on AI’s impact on the overall economy and on software companies specifically. It is helpful as a starting point to highlight that Blackstone has been at the forefront of AI and its impact for many years, with its deep technology vertical supporting and informing investment activity across the broader platform. This is one of the big advantages of being part of the world’s largest alternative asset manager and has helped drive our focus on deeply embedded high-retention businesses. Blackstone sees the AI revolution creating generational opportunities, and we want to stay ahead of this as leaders in the space. We receive real-time insights through our firmwide resources and use that to make us better investors. Additionally, Blackstone is one of the largest investors in the entire AI ecosystem, including the infrastructure around it, as the largest owner of data centers globally. Leaders across the firm focused on AI are in active dialogue with the AI market leaders such as OpenAI, Anthropic, Google, Meta, and others. These relationships help inform our perspective on where the industry is headed, and we believe that BXSL, with the help of the broader Blackstone platform, has an incredibly well-informed view on AI. It is also important to understand that you cannot paint software with a broad brush. There are sub-verticals of software with proprietary systems, huge data lakes, and incumbent long-term customer relationships that may be more protected or see tailwinds from AI adoption, while other areas will be more at risk of displacement. BXSL has typically avoided the less differentiated business models. Sub-verticals that we believe are likely to be protected are vertical software, ERP, data infrastructure, data management, and security. These account for the majority of BXSL’s software exposure where we have seen 40% EBITDA growth since underwrite, and today, these businesses generate over two times interest coverage. Importantly, the public market is differentiating in a similar way. While software valuations have compressed from 18x NTM EBITDA last September to 14x today, these sub-verticals that I mentioned earlier continue to trade in the 15x to 20x EBITDA range, implying well over two times enterprise value coverage of BXSL’s first-lien exposure. We also put significant value on partnering with larger companies, with sophisticated ownership and forward-leaning management teams to drive adoption of AI technology. As a reminder, 99% of our portfolio companies are private equity owned or large public companies with market caps exceeding $5,000,000,000. On Medallia, a name that we have discussed in previous quarters, we continue to mark the asset now at 77.75, which implies over a 70% reduction to its setup enterprise value due to a slower-than-expected turnaround. For background, BXSL led a first-lien term loan through 26% LTV at underwrite, supporting the $6,400,000,000 take-private acquisition of Medallia by the current sponsor, Thoma Bravo, who together with its co-investors have funded over $5,000,000,000 in cash equity for this deal today. The company has been underperforming not because of anything related to AI, but due to what we believe to be execution-driven issues, particularly in its go-to-market function. Early last year, Thoma Bravo installed a new leadership team, and they are working through a turnaround plan. We also expect there to be discussions around the capital structure. If I zoom in on the rest of the bottom 10% of performers in the portfolio, a common thread is operational challenges rather than any secular concerns. As such, these companies have been marked lower to an average mark of 82. On average, these companies have been modestly down from an EBITDA growth perspective since underwrite, and were set up at underwrite with an average 42% LTV. The good news with these names is that over half of them have seen further equity and junior capital commitments by the sponsor, or are experiencing improving performance overall. In fact, we saw the watch list decline this quarter compared to last quarter as a result of some of these trends. However, to provide some illustrative framing, if you take this bottom 10%, and just punitively assume the companies all defaulted—which, again, we do not, underscore, do not expect to see this happen—and BXSL recovers 65% over the next four years, in line with long-term recovery of first-lien public loans, and based on where they are marked today, this would only impact the equity by approximately 100 basis points per year. I state these numbers just to reinforce what I mentioned earlier. BXSL’s model was designed to be defensive by focusing on first lien larger private equity owned businesses across a portfolio with diversified industries. In reality, underperforming companies can recover. Just this quarter, for example, SelectQuote, Colony, and Alliance Ground were three underperformers and at their lows had a weighted average mark of 93. All have been paid or expected to repay this quarter at par, generating nearly $100,000,000 of liquidity. So putting it all together, we are encouraged by deal activity from the quarter as improved portfolio turnover and funding efficiency, which in turn should support ongoing earnings, and we remain very comfortable with the overall portfolio mix and positioning. We have seen similar market dislocations before, including during COVID, and even following the post-tariff news this time last year. And in periods like this, our focus is on providing as much transparency and clear facts as possible to help investors look through the headlines and assess the facts on the ground. For context, this is my twenty-first year of Blackstone’s credit business. Across multiple cycles and periods of volatility, BXSL has invested over $155,000,000,000 in our North American direct lending strategy with an annualized loss rate of less than 10 basis points. This is a result of focusing on investing defensively, as I just mentioned. But equally important is leveraging the advantage of Blackstone’s scale and expertise, all of which we believe will continue to support excellent long-term results for our investors. With that, I will turn it over to Teddy. Teddy Desloge: Thanks, Brad. I will cover BXSL’s performance, portfolio fundamentals, and liability profile for the fourth quarter. First, on performance, BXSL’s net investment income for the quarter was $186,000,000, or $0.80 per share, representing 104% coverage to our dividend on a per-share basis. Year-over-year fourth quarter total investment income was up over $5,000,000, or 1.5%, and interest income excluding payment-in-kind, fees, and dividends represented over 91% of our total investment income in the quarter. BXSL continued to out-earn its dividend in the fourth quarter with a predominantly first-lien portfolio and among the lowest operating and financing costs across our traded BDC peers compared to Q3 data. We will continue to assess our dividend with our Board as we do every quarter as lower base rates flow through our portfolio. As previewed on last quarter’s call, we experienced increased repayment activity in the fourth quarter, and with accelerating M&A and deal activity as Brad outlined earlier, we are expecting similar levels of turnover in the upcoming quarters. Moving to the balance sheet, we ended the quarter with over $14,200,000,000 total portfolio investments at fair value, $8,100,000,000 of outstanding debt, and $6,200,000,000 of total net assets. Net asset value per share at quarter end was $26.92, down from $27.15 in the third quarter, which was primarily impacted by $0.27 of net unrealized losses in the portfolio, partially offset by $0.01 of net unrealized gains and $0.03 of excess net investment income generated to our dividend. As Brad highlighted, we saw healthy fundamentals on average across our portfolio companies, demonstrated by high-single-digit percentage EBITDA growth, and stabilizing interest coverage ratios at two turns as rate resets are improving cash flow profiles of our borrowers. Non-accruals in the fourth quarter were just 0.6% at cost and 0.5% at fair market value, up from 0.3% at cost and 0.2% at fair market value in the fourth quarter of last year, as two smaller positions were added this quarter. Further, our Q4 amendment activity by issuer was down over 25% compared to the third quarter, with over 85% of amendments associated with add-ons, M&A, DDTL extensions, or immaterial technical matters. Only four issuers experienced material amendments, accounting for 0.8% of the portfolio by fair market value. Turning to activity, BXSL funded $1,000,000,000 for the second consecutive quarter, and committed over $900,000,000. Net funded investment activity was $400,000,000 after $629,000,000 of repayments and sales, up nearly 45% quarter over quarter. This represented an annualized repayment rate of 15% of the portfolio at fair value, up from 13% for the prior quarter and 6% for the same quarter in the prior year. As we sit here today, we are tracking over $550,000,000 of potential repayments for the first six months of the year, which could create additional balance sheet capacity if they materialize. Importantly, BXSL’s Board of Directors approved a discretionary share repurchase plan under which BXSL may repurchase up to $250,000,000 in the aggregate of its outstanding common shares in the open market at below its net asset value per share. As we see repayment activity create additional capacity, we will continuously evaluate capital allocation decisions between new opportunities and buying back shares. Our liability profile remains diverse across multiple financing markets, including $10,500,000,000 and $8,100,000,000 of committed and funded debt, respectively, as of the fourth quarter. This includes $2,400,000,000 committed to our corporate revolving credit facility, priced at SOFR plus 153 at its tightest levels, which we believe is the lowest-priced revolver across the traded peer set. We also have $2,700,000,000 committed to our asset-based facilities with multiple banks, which had a weighted average drawn spread of SOFR plus 187, down 23 basis points since Q4 2024, in addition to over $450,000,000 of CLO debt outstanding priced at SOFR plus 154. Lastly, we have nearly $5,000,000,000 of unsecured bonds outstanding as of the fourth quarter, $2,800,000,000 of which are not swapped and have an average coupon of 2.88%. This includes a $500,000,000 five-year bond we issued in October, priced at 155 basis points above the benchmark Treasury rate, or a 5.125% coupon, which was subsequently swapped at SOFR plus 166. In 2025, BXSL had the tightest public bond spread issuance amongst its traded BDC peers, and taking this all together, our all-in cost of debt for the fourth quarter was 4.93%, down from 5.24% in 2024. Total liquidity at the end of the fourth quarter was $2,500,000,000, including unrestricted cash and undrawn debt available to borrow, while ending leverage as of December 31 was 1.3 turns on a gross basis and 1.25 turns on a net basis, net of cash. Our balance sheet strength, portfolio composition, and long-term operating history all help support BXSL in achieving ratings among the top three when compared to our traded BDC peers, with a Baa2 and stable outlook by Moody’s, BBB- and positive outlook by S&P, and BBB and stable outlook by Fitch. With that, I will ask the operator to open it up for questions. Thank you. Operator: Thank you. To allow as many callers to join the queue as possible, we will take our first question from Finian Patrick O’Shea with Wells Fargo Securities. We will now open for questions. Brad Marshall: Hey, everyone. Good morning. Finian Patrick O’Shea: First question, big picture, we are looking at the potential scenario where the non-traded channel slows, I know you have your share of institutional capital, but that is, you know, perhaps less so than some of the other great houses of direct lending. So how do you how do we think about the impact where, for example, you have often talked about the importance of check size, larger companies, and so forth. Should we think about should we see it as a risk that you might have to go back down market on on new origination? In the event there are non-traded headwinds. Thanks. Brad Marshall: Thanks, Fan. Thanks for the question. Maybe just as a starting point, to frame the market. So the U.S. leveraged finance market is about a $5,000,000,000,000 market. You look at high yield, it is about $1,500,000,000,000. And if you look at leveraged loans, about $1,400,000,000,000. Private credit in the institutional non-BDC channel is actually about $1,500,000,000,000. The non-traded BDCs are about $275,000,000,000 and traded BDCs are about $235,000,000,000. So it remains very much, as you point out, an institutional-driven market. And and why? Because institutions see the asset class, I think, similar to how you view it, which is it is very defensive. We are driving a premium to what you can get in the public markets. And that is really important. If you look at kind of our business more broadly to to answer your question, our credit business is $520,000,000,000. We are in every crevice of the the credit market. We are invested in, I think you have heard us mention this before, 5,000 companies around the world, which gives us incredible insights into going on with what is going on in the world and helps back up some of our investment themes. So our business is broad and deep, in every channel. If I look at kind of corporate lending, specifically non-investment grade, we have about $40,000,000,000 of dry powder. So I expect us to remain fairly active in the remainder of 2026, similar to kind of how active we were in 2025, which was our busiest investment quarter since 2021. So our business will remain active. We have lots of pools of capital to draw from, and it really comes back down to performance. And I think that will continue to attract capital in this space to the managers that are performing well. Finian Patrick O’Shea: Great. Appreciate that. And I will on another sort of hypothetical, but also front and center question. You are a little below book. Still better than most. But we might be here for a little while. In that case, does it make sense to sit on spillover or should we expect you to revisit that in a potential special? Thanks. Brad Marshall: Great. Thanks, Fan. And I appreciate you actually pointing that out. We do have spillover income as a result of us out-earning our dividend over time, and and we have taken those over-earnings and invested it back into new loans to drive income for our investors. I think as maybe answer the question a little bit differently, as we get new cash proceeds into BXSL, either because of income or repayments—we mentioned we have a series of repayments coming over the next two quarters—we have options. We can reinvest in new loans. We can buy back, as you point out, discounted shares. We can delever. Those would be the the core kind of options. And and you are right. We could pay a a supplemental dividend. But as you know, our dividend at 11.4% being the very high end of the market. So our focus has been on these other options at this point. But of course, appreciate you highlighting the fact that we are in this enviable position of having out-earned the dividend. And I also appreciate the point that we are in an unusual time where we are trading below book. So we need to consider all these options. But at the end of the day, it is a discussion on how do we want to best use our cash on hand to deliver attractive options for our investors, and all options are on the table. Operator: We will take our next question from Robert James Dodd with Raymond James. Robert James Dodd: Hi, guys. On kind of related somewhat to Finn’s question, when when we look at the the the grand scheme of things, flows in the the BDC perpetuals, in my view, or the the private market, are not that significant to affecting pricing and spreads. Right? To your point, it is a $5,000,000,000,000 market and all the BDCs together have half a trillion. What do you think the potential is if flows do deteriorate across the whole market for for retail fundraising? What do you think the potential is that is actually going to have a discernible impact on spreads in the market? I mean, CLO formation still looks pretty healthy. A lot of the other areas of the market still look pretty healthy. The retail flows seem to be quite a small part of that. Is there any any reason why that would actually influence pricing out in the marketplace? Brad Marshall: I think it is a little early to tell, Robert. It is a good question. And I appreciate you highlighting the the liquid market, because they remain actually quite strong. I think 66% of the the liquid market is trading 99% or above. Spreads remain, you know, fairly tight in in the liquid markets. And so the the credit markets generally, again, despite what we read in the headlines, are actually pretty healthy. There is capital available. And and and as I mentioned, if you just look at our platform with, you know, $40,000,000,000 of dry powder, we will remain active in this market. And the overall credit quality of the deals that we are seeing, the credit quality of the deals that we are in, are not suggesting that spreads should widen at this point. So we will continue to watch the market evolve. But right now, things feel pretty stable. Robert James Dodd: Got it. Got it. Thank you. If I can kind of put that to, like, software, and I appreciate all the detail you you you gave and and and the framework to think about it. On, I mean, do you expect if if I was going to say, you know, three years from now, do you think the software mix in your portfolio would be higher or lower than it currently is or stable? I mean, do you is it there is more potentially uncertainty? I mean, obviously, the different business models, etcetera. But would would you are you looking to, you know, maybe not participate in the next time something gets refinanced, or would you prefer to shrink that exposure or keep keep it where it is? We will go it. Wow. Brad Marshall: The the three-year crystal ball, I I do not have, Robert. But what what what I would say is we are seeing very good investment opportunities in the infrastructure around AI. And you saw that in the fourth quarter. We made an investment in IEM. We made an investment in Sabre Power. And so that is definitely on theme for us. The picks and shovels kind of around this AI buildout, which I mentioned in our prepared comments, you could see us continue to to lean into those themes and those opportunities because we think they have very good tailwinds. Robert James Dodd: Got it. Thank you. Operator: Thank you, Robert. Thank you. We will take our next question from Arren Saul Cyganovich with Truist Securities. Brad Marshall: Thanks. Good morning. Arren Saul Cyganovich: Maybe you could just talk a little bit about what the sponsor conversations have been like over the last few weeks. You know, clearly, the public markets are are are very trigger happy. What what are the sponsors thinking, you know, given that this was supposed to be a big, you know, capital markets year in in in kind of reviving, you know, IPOs, etcetera. You know, maybe just your thoughts on on those conversations. Brad Marshall: It is a little bit like last year when the tariff noise came out, and there was a lot of volatility and uncertainty. Sponsors are kind of watching the markets and trying to see where they settle out before they, you know, bring assets to to market. So I I think like us, they are not terribly terribly disrupted, but they are, you know, holding back right now, bringing some of these assets to market. And but I I do expect for all the reasons we mentioned earlier, it will remain a fairly active year this year, because you do see growth in the economy. You do have lower cost of capital, which is positive for M&A activity. So all those tailwinds still exist. And we just need to work through a period of of heightened uncertainty and volatility, largely around the software space. Arren Saul Cyganovich: Got it. That is helpful. Thanks. And then, there is a follow-up on, we have seen a a couple of BDCs make some asset sales recently. One of them had already said they were going to do this last quarter, so it was not necessarily a surprise. Do you have a view on that? You know, you are you are trading below book, but not dramatically below book. Is there any benefit to selling assets at fair value and, you know, putting that back into the stock? Brad Marshall: So what I would say to that is is we are definitively long-term holders of assets. And we also have $2,500,000,000 of liquidity. Like we mentioned on the call, we have $550,000,000 of near-term repayments. I suspect there is another $1,000,000,000 or $2,000,000,000 that will occur over the balance of the year. So the the fund itself, you know, naturally generates liquidity because of the term nature of the investments that we make. And with those proceeds, we will look at all the options that I mentioned in answering Finn’s question, which is we will look at buybacks. We have approval to do that. We will look at new loans that that come through our system. We may look to to delever. So all those options will be on the table. And it is probably worth just just hitting on this turnover and and repayment dynamic, which actually can be quite positive for BDCs and BXSL in particular. I mentioned three assets that that will be repaid this quarter. You know, those assets were had been marked down to to 93 at their low, and now they are getting refinanced at at par. So that sort of activity, as we get those repayments, will be positive to on those underperforming assets to pull NAV up. And it will be positive to generate liquidity if which we can use to do one of many things, as I as I just highlighted. So lots of, you know, different, you know, options on the table for us. Operator: Thank you. We will take our next question from Kenneth Lee with RBC Capital Markets. Kenneth Lee: Hey, good morning. Thanks for taking my question. I think previously you talked about operating leverage perhaps closer to the higher end of the target range there. Given the potential opportunities to deploy into as well as the share repurchase, maybe just give us some thoughts about where leverage, you know, where could you could trend over the near term, where you are looking to operate near? Thanks. Teddy Desloge: Yeah. Thanks, Ken. This is Teddy. I am happy to take that. So just starting with the facts, as highlighted, 1.3x gross ending leverage, 1.27x average, 1.25x on a net basis. As Brad mentioned, we did have a very active end of the year. It was our second most active quarter on gross originations since 2021. We did have some deals, deal processes accelerated toward the end of the year. So we ended at slightly above the 1.25x range. We also do have $2,500,000,000 of immediate liquidity, $550,000,000 of repayments near term. So so really taking that altogether, Ken, no change. Long-term target remains 1.25x. Would expect to be able to manage near the high end of that range in the near term. Kenneth Lee: Gotcha. Very helpful there. And just one follow-up, if I may, and this is just on the the software book here, and really appreciate the the additional details and and color around there. How do you think about specifically recovery rates for software companies just given lack of tangible assets? How do you get confidence around the valuations and all sorts around that? Thanks. Brad Marshall: Yeah. I can I can take that. I think we when we look at our software business, businesses, we look at kind of how they are performing as a starting point. And and they are performing actually, they are the best performing part of our our our business. No doubt, the public market has rerated software companies. As I said in our remarks, even in that instance, you take the 25% kind of markdown or rerating of of public company software businesses and we are still two times covered. So we feel very good about our coverage on our software business. We do have a small subset, less than 5% of the portfolio, of assets that we think are more impacted by AI and and some operational challenges. Those are a little bit harder to pinpoint from a value standpoint. But they are set up with a lot of equity in the business, and and we suspect the sponsors will continue to support them. Kenneth Lee: Gotcha. Very helpful there. Thanks again. Operator: Thank you. We will take our next question from Douglas Harter with UBS. Brad Marshall: Thanks. Douglas Harter: You mentioned weighing the share repurchase, obviously, with the new authorization. Can you just walk through the thought process, how you will evaluate that? You know, and kind of how we should think about actually using that versus kind of having it there for, you know, kind of in case further declines. Teddy Desloge: Yeah. Doug, this is Teddy. I am I am happy to take that. I think the short answer is we are going to watch it and be very opportunistic. We do have $250,000,000 approved by the Board. We also have turnover increasing in the portfolio, as Brad mentioned. Historically, below a 10% discount to NAV can be quite accretive for buybacks. We have done this previously post-IPO. Announced a $250,000,000 repurchase that got done in 2022, and then we announced another plan in 2023. So we will be opportunistic with it. We will watch it. It will be a capital allocation decision between, as Brad said, paying down debt, new deals, and share repurchases. Douglas Harter: Great. Appreciate your time, Teddy. Operator: Thank you. We will take our next question from Ethan Kaye with Lucid Capital Markets. Ethan Kaye: Hey, guys. Quick question on some of the unrealized appreciation during the quarter. Maybe might have touched on it a bit in the prepared remarks, but I guess kind of specific to, you know, this quarter, it looks like the the depreciation was largely driven by maybe a handful of positions, you know, call it five to 10 positions with maybe single-digit percentage point markdowns. I guess my first question is, is this kind of consistent with with your read, or or do you see it as more of a broad kind of driven by broad market movement? And then, you know, second question, assuming it is, in fact, driven by, you know, a few names here, can you walk through any potential, like, common denominators? I know you mentioned the operational challenges, but, you know, do you see these as as a kind of idiosyncratic? Any, I guess, additional specificity here would be appreciated. Teddy Desloge: Yeah. Absolutely. Thanks, Ethan. I will I will start with just the facts. So you are right. NAV per share was $26.92. That is versus $27.15 prior quarter, so down $0.23 or less than 1%, about 85 basis points. When you dig into the $0.23, we had $0.26 of unrealized losses, about a penny of gains, and $0.03 of excess earnings. And within the unrealized losses, you are right. The marks were concentrated to a small handful of positions. Two accounted for about 50% of net unrealized gains and losses, and the top five accounted for over 60%. So taking a step back, what we see on the ground is stability. Earnings growth consistently high single digits, increasing interest coverage ratios and cash flow profiles. While you certainly can see some movement in marks tied to both performance and spreads over time, what we are seeing is around 85% of the portfolio seeing stable or improving trends based on fundamentals. Brad Marshall: Yeah. And maybe just add to that. Because I mentioned this in the remarks, the number of deals on our watch list actually declined during the quarter. If I look back over the past seven years, since we started BXSL, we have we have actually had zero net realized losses for investors. So it it does kind of get back to, we do mark the the portfolio quite actively, you know, but it is really really designed to be defensive. That is why we are first lien in the capital structure, why we are at large businesses, why they are largely sponsor backed, why we have picked some low-default sectors. So I just want to highlight that and the journeys that sometime assets take like the three I mentioned that just got repaid at par, you know, were all in the kind of low 90s at one point. So companies do not always go up to the right. We work through them. And I also mentioned this on on the call. I have been doing this twenty-one years, and and our direct lending business, our realized loss rate is 10 basis points a year over that twenty-one years, and that is obviously through a lot of different economic cycles. So this is just ordinary kind of marking of of assets, and we feel very, very good about the overall portfolio. Ethan Kaye: Okay. Great color. Thank you, guys. And then one quick, you know, unrelated question. You mentioned I just want to get these numbers right. You mentioned $550,000,000 of repayments over the first six months, kind of in the, you know, in sight. And then, John, I think you also mentioned an additional billion throughout the year. Can you just kind of flesh that out? Yeah. And those numbers for the timeline. Correct? Brad Marshall: Yeah. Ethan, this is Brad. So we have clear line of sight to $550,000,000 of repayments. These are committed deals that are have or will be refinanced. If you look at a a typical repayment cycle, it is somewhere between 15% to to 20% a year. So if you just use 20%, that is $2,800,000,000 of repayments this year. And that is where we give the range of an expectation that we will have another $1,000,000,000 or $2,000,000,000 behind that, just given the latter vintages of of our portfolio. Ethan Kaye: Excellent. Thank you, guys. Operator: Thank you. We will take our final question from Rich Shane with JPMorgan. Brad Marshall: Hey, guys. Thanks for taking my questions. Rich Shane: And most have been asked and answered. The the outlook on leverage is very helpful. Look. You guys have announced a repurchase. We just discussed the possibility of $2,000,000,000 of repayments this year. Leverage sounds like it is going to be flat. So you are going to be making some choices in terms of how to deploy capital. With where we sit today, is your best incremental investment deploying capital into new assets, or is it buying back stock? And it helps us sort of understand how you guys are thinking about that repurchase program. Brad Marshall: Thanks, Rick. It is it is Brad. And it is great to have you on the call. I think we are in a little bit of new territory for us. We have been trading at a premium for so long that trading at a discount is is, you know, more of a, you know, more recent issue. I think Teddy framed it well. We have bought back shares in the past. Quite a bit, actually. So we are not afraid to do so. We do have a lot of, you know, things that we need to manage, leverage levels, and and making sure that we can support our existing portfolio companies. But I will say that given where the stock is trading, you know, buying back shares is is it is a very interesting price to do so. But there are a lot of different, you know, factors that it is not as simple as as that. So we have done it in the past. We think it is attractive. There are lots of factors we will evaluate. Rich Shane: I appreciate that. And it is helpful. And, again, realizing it is a complex decision, yeah. Look. The other the other thing is and and, you know, it is interesting revisiting the space after all these years. You know, look. You guys are trading at a discount to NAV, but you are trading at a relative premium to most of your peers. Historically, we have seen in those environments, particularly where peers are trading at substantial discounts, some opportunities for strategic decisions that are actually accretive despite trading at a discount to NAV. Are there pools of assets out there right now that you find attractive, or do you feel like those opportunities are just taking on other people’s problems. Brad Marshall: Yeah. If if you are referencing buying, you know, secondary loans that that other investors are looking to sell, you know, we have we have looked at, you know, portfolios. We we do think that investing in new loans is the best use of capital for BXSL. The secondary credit sales remains to be a fairly kind of active market. And we look at that across our broader platform. But for BXSL specifically, I think we want to, you know, continue making kind of new primary loans where we have had the ability to do very deep underwritings. As you know, these take months and months of of detailed work. When you are buying a secondary portfolio, you are it is a little bit more of a tabletop analysis. So so BXSL will focus on on new loans. Rich Shane: Great. I appreciate the clarity of the answer. Thank you, guys. Operator: Thank you. That will conclude our question and answer session. At this time, I would like to turn the call back over to Stacy Wang for any additional or closing remarks. Stacy Wang: Thank you for joining us this morning. We appreciate your engagement and ongoing support of BXSL. Do not hesitate to reach out with any follow-up questions, and we look forward to continuing our dialogue next quarter.
Operator: Greetings, and welcome to The Boston Beer Company Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to Mike Andrews, Associate General Counsel and Corporate Secretary. Thank you, Mike. You may begin. Michael Andrews: Thank you. Good afternoon, and welcome. This is Mike Andrews, Associate General Counsel and Corporate Secretary of The Boston Beer Company. I'm pleased to kick off our 2025 Fourth Quarter Earnings Call. Joining the call from Boston Beer are Jim Koch, Founder, CEO and Chairman; and Diego Reynoso, our CFO. Before we discuss our business, I'll start with our disclaimer. As we stated in our earnings release, some of the information we discuss and that may come up on this call reflects the company's or management's expectations or predictions of the future. Such predictions are forward-looking statements. It's important to note that the company's actual results could differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's most recent 10-Q and 10-K. The company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. I will now pass it over to Jim to share his comments. C. Koch: Thanks, Mike. I'll begin my remarks this afternoon with an overview of our strategy and operating results before turning the call over to Diego to discuss our supply chain, fourth quarter results and 2026 financial outlook. Immediately following Diego's comments, we'll open the line for questions. As I look back on 2025, I'm pleased with how our operational discipline enabled us to deliver on our financial commitments in a challenging industry volume environment. Our 2025 depletions were down 4%, in line with the overall beer industry. Our disciplined Fewer Things Better Innovation approach drove a successful national launch of Sun Cruiser, which is both revenue and margin accretive. Efficiency improvements across our breweries and our productivity agenda drove 410 basis points of gross margin expansion allowing us to increase brand investment meaningfully. Our business continued to be highly cash generative with 2025 free cash flow of $216 million or $19.72 per share, which allowed us to repurchase $200 million in shares in 2025. Looking ahead into 2026, we expect industry volume headwinds to continue. As I previously discussed, consumers are tightly managing their budgets given economic uncertainty and there is pressure on the Hispanic consumer. Moderation trends are also having an impact on demand. And in certain states, hemp-derived beverages are competing for shelf space and drinkers despite recent federal regulations, which restrict their availability after November 2026. We continue to see long-term growth opportunities in the Beyond Beer category, which is 85% of our total company volume and where we are the industry's second largest player. From 2019 to 2025, driven by growth in hard tea and hard seltzer, the Beyond Beer category has doubled in volume and now represents 9% of total U.S. alcohol consumption. We expect that Beyond Beer's volume and share of the category will continue to grow as the drinker is younger and more diverse than traditional beer. We believe beer companies are the best positioned to service the Beyond Beer category as they have the production capabilities to produce these beverages and beer wholesalers have the infrastructure to service them. The Boston Beer Company's innovation capabilities, manufacturing infrastructure, best-in-class sales force and strong wholesaler relations provide a meaningful competitive advantage. This is reflected in the performance of Sun Cruiser, which was among the top volume gainers in RTD spirits in 2025 and quickly scaled into a top 5 RTD spirits brand. However, we have seen greater competition in Beyond Beer as consumers seek variety and more players enter the category. Combined with economic uncertainty, this has been a headwind for our volume performance. We continue to believe that the macroeconomic environment is a significant driver of weaker alcohol consumption trends and the deceleration in our leading brand Twisted Tea's performance. Our 2026 volume outlook of flat to down mid-single digits assumes that macroeconomic headwinds persist. We are highly focused on controlling what we can, maintaining or growing market share and investing behind our brands to position us well for when the environment improves. Our priorities for the year will be supporting our full portfolio of brands through advertising and local in-market execution investments developing margin-accretive innovation and driving margin improvement through productivity. We continue to believe that sustained brand investment is the right strategy to drive volume improvement over time. Building on our initiatives we began in 2025, we will continue reinvesting in our brands with new creative, additional compelling partnerships, activation around key events, including the World Cup and investing alongside our wholesalers in local market activation. We are partnering with some of our wholesalers to increase local brand building capabilities and improve execution on the shelf. This includes shared development of grassroots marketing plans and on-premise promotions, sampling local radio and billboard advertising. With respect to innovation, we continue to prioritize high-growth, margin-accretive opportunities. In 2026, we are focused on scaling Sun Cruiser in its second year of national availability while expanding the distribution of Sinless vodka cocktails to additional states following a successful test launch in 2025. Sinless is a very lightly carbonated vodka-based RTD cocktail with 0 sugar, 0 carbs and less than 100 calories per can. It is positioned as guilty of flavor free of sugar and carbs and targets incremental consumer segments that complement our core brand portfolio. We've made strong progress across our margin enhancement initiatives, which Diego will discuss further in his remarks. This has been a multiyear effort across the organization, and I'm pleased that we delivered margin improvement faster than we expected in this difficult operating environment. In addition to margin improvement, these initiatives have enabled us to achieve record high customer service levels in 2025 and lower our inventory days on hand. Our efforts across procurement savings, brewery efficiency and waste and network optimization will continue in 2026, and we're also in the early stages of adding revenue management capabilities to provide further long-term margin benefit. I'll now provide an overview of our brand performance and plans for 2026. In terms of depletions, we're encouraged by the strong consumer reception to Sun Cruiser, a third consecutive quarter of growth in Angry Orchard and Dogfish Head and positive drinker reception to our higher ABV offerings. Our larger brands continue to be impacted by the headwinds I discussed earlier, particularly Twisted Tea that overindexes with lower-income households and Hispanic drinkers. After starting the 2025 year with growth, Twisted Tea was down 6% in dollar sales in measured off-premise channels for the full year 2025 in an F&B category that was down 4%. The brand gained distribution in 2025, but declined in velocities, driven by category headwinds, a decline in features and displays and some interaction with Sun Cruiser and its competitors. Single-serve continues to perform much better than large packs, which tells us that consumer interest in the brand remains strong. We are working hard to ensure Twisted Tea maintains its fair share of display space. Numerator data shows approximately 20% of the drop in Twisted Tea is due to the Vodka Tea category, which includes Sun Cruiser. To the extent that Sun Cruiser sources volume from Twisted Tea, this is revenue and margin accretive for us. Despite some headwinds, Twisted Tea is the #10 brand family in the overall beer market and remains the clear leader in malt-based hard tea with over 85% market share. We're encouraged by the performance of Twisted Tea Light and the high ABV Twisted Tea Extreme, which have seen growth in velocities and have room to gain additional shelf space. Our 2026 plans include increased advertising investment with strong creative and local activation, adding new partnerships and launching new pack sizes and Twisted Tea Extreme flavor innovation. Twisted Tea has unique and clear brand voice and attitude, and our advertising plans include continuing to run our high-performing key drop national ads across many category entry points, including sports, ski slopes, beaches, lake and pool, complemented with in-store display programs. We'll also be adding always-on media for Twisted Tea Light and Twisted Tea Extreme. In 2026, we are expanding our partnerships that are most relevant to our drinkers such as Barstool's Pardon My Take, the #1 sports podcast, DraftKings, WWE Wrestling, country music's Chase Matthew, NASCAR, AMA Supercross and Motocross racing and Realtree Camo. Lastly, we continue to increase our investment in Hispanic and Spanish language brand content, including new media and digital content to widen the brand's appeal. With respect to pack sizes, we're expanding the rollout of our entry-level price point 4-pack, launching a 16-ounce can for C-stores to add a lower price point in addition to the current 24-ounce can and adding a 24 can value pack. Building on the success of our high ABV offerings, we've added a Twisted Tea Extreme variety pack that was launched in early 2026. Twisted Tea Extreme Lemon and Blue Raz are the #1 and #2 largest FMB growth SKUs in convenience and to further capitalize on the high ABV trend, we'll be launching new extreme singles flavors, Long Island Iced Tea, Fruit Punch and Tropical Punch. Our goal for 2026 is to improve share and grow volume in the overall hard tea category through showing progress in Twisted Tea and growing Sun Cruiser. We're very excited about the outlook for Sun Cruiser, which grew volumes over 300% from 2024 to 2025 and is expected to make a strong contribution to our hard tea portfolio this year. Sun Cruiser is built in the on-premise channel, where in some markets, it represents over 40% of the brand's volume. We believe this is the right way to drive trial and build the brand and are pleased that Sun Cruiser is the leading RTD spirits and lemonade brand in on-premise bars and restaurants according to Nielsen. Bartenders have been and continue to be a very important influencer group for Sun Cruiser. Sun Cruiser continues to expand its off-premise distribution, but given its strong presence in on-premise and independents, measured off-premise data still only reflects a portion of the brand's total volume. Advertising support for Sun Cruiser includes building an organic following through social media as well as more traditional content around the Let the Good Times Cruise media campaign, which includes television, paid social and digital advertising and key influencers. We'll be present where Sun Cruiser fits into our drinkers' lifestyles across sports and music. Sun Cruiser will have committed media presence in MLB, the NFL and the sponsorship of the AEG music concert series. And in 2026, we'll add exciting golf and ski partnerships. Golf programming includes tournament activations, golf media influencers and experiential marketing programs as well as wholesaler incentives. Additionally, Sun Cruiser is a key sponsor of Teton Gravity ski film festival along with ski resort sponsorships and samplings that help reinforce its position as a brand for all 4 seasons. From a product innovation perspective, we intend to keep a disciplined number of tea and lemonade styles while continuing to expand package options. In the first quarter of 2026, we added new single-serve 12.2-ounce packages and new tea and lemonade sampler 12-packs, which we expect will help expand drinker occasions and drive further growth in 2026. Turning to hard seltzer. The overall hard seltzer category declined 5% in dollars in measured off-premise channels for the full year 2025 as consumer preferences continue to shift towards more premium RTD spirits-based beverages. Our brand strategy for 2026 is to invest in new equity building creative, capitalize on the World Cup, launch new pack sizes and varieties and continue to expand Truly Unruly. Our advertising plans include leveraging our sponsorships of U.S. soccer as its Beyond Beer sponsor with targeted World Cup activation, along with our new creative platform that we recently launched called Make Your Dreams Come Truly. The 2026 World Cup, which will take place in North America for the first time in more than 3 decades, includes 11 cities, over 100 matches and 4 billion global viewers. Our Truly World Cup plans, which have been well received by major retailers include driving visibility and displays and launching a U.S. soccer collector set of singles along with the World Cup themed rotator variety 12 pack. In addition, we have significant local investments in the 11 host cities, including local media and retail program. High ABV offerings continue to be a bright spot in hard seltzer and Truly Unruly has grown to a 3% volume share of hard seltzer. Based upon drinker demand, we added a new Truly Unruly variety 24-pack in 2026. In cider, Angry Orchard has returned to growth behind a combination of new positioning and creative and a strong Halloween program, which included Friday the 13th movie-themed advertising, promotions, packaging and displays. Importantly, Angry Orchard's success comes from driving growth of the core offering. Our beer brands, Samuel Adams and Dogfish Head have combined to hold share in a challenging craft beer category. During the first quarter, we are excited that Samuel Adams will begin programs and promotions as well as launch limited edition packaging to help celebrate America's 250th anniversary. For Dogfish Head, we're particularly pleased that Dogfish Head's Grateful Dead beer collaboration and the brand's Minute Series IPAs have helped fuel Dogfish Head's return to growth. In summary, I'd like to thank our Boston Beer team and our distributors and retailers for their continued support. I'm encouraged by the progress we made in 2025 amid a dynamic environment. While consumers remain cautious and the near-term outlook is still challenging, I'm confident in our operating plans for 2026. We're continuing to invest in our brands. We're building a strong innovation pipeline, and we're highly focused on our multiyear productivity initiatives. Importantly, we're focused on controlling what we can control. We're executing in the marketplace to improve share trends and expand our margins. These efforts, along with our innovation capabilities, strong sales force and unique culture position us well for a successful long-term future. I'll now pass the call to Diego for a detailed review of the fourth quarter and our 2026 guidance. Diego Reynoso: Thank you, Jim. Good afternoon, everyone. 2025 was a year of continued progress for Boston Beer in a dynamic industry environment. Disciplined execution and supply chain efficiencies enabled us to meet or exceed our financial commitments, including very strong gross margin outperformance. This margin upside enabled increased investment in advertising support for all our brands while still delivering EPS ahead of our guidance. Cash conversion was strong with $270 million in operating cash flow, and we ended the year with $223 million in cash and no debt. 2025 revenue was down 2.4% year-over-year, driven by shipments down 4.7% and 2.3 percentage points of positive price and mix. Price realization for the year was within our prior guidance of 1% to 2%, with the remainder being positive mix. We delivered 410 basis points of gross margin expansion with gross margin reaching 48.5%, inclusive of $10.1 million in tariff costs. Excluding contractual prepayments and shortfall fees, the gross margin was 50%. This is the highest full year gross margin rate since 2019. EPS of $9.89 was up 4.7% year-over-year, excluding prior year impairment and onetime contract settlement charges. This EPS growth was inclusive of a $61 million increase in advertising spend, while general and administrative expenses were flat. Turning to the fourth quarter results. Depletions decreased 6% and shipments decreased 7.5% year-over-year, primarily driven by declines in our Twisted Tea, Truly Hard Seltzer and Sam Adams brands that were partially offset by growth in the Sun Cruiser, Angry Orchard and Dogfish Head brands. As we expected, volumes slowed sequentially in the fourth quarter from the third quarter. Twisted Tea volumes continue to be soft and Sun Cruiser continues to show strength, but had a lower contribution in the fourth quarter due to seasonality. We believe distributor inventory of 4 weeks on hand as of December 27, 2025, is an appropriate level for each of our brands. Revenue for the quarter decreased 4.1% due to lower volumes, partially offset by increased pricing and favorable product mix. Gross margin of 43.5% increased 360 basis points year-over-year. Gross margin primarily benefited from improved brewery efficiencies, procurement savings, price increases and product mix as well as lower inventory obsolescence. These factors were partially offset by inflationary and tariff costs and increased shortfall fees. Advertising, promotional and selling expenses increased $8.4 million or 6.0% year-over-year, primarily due to incremental brand, media and local marketing investments of $8.0 million, with the remainder driven by higher freight costs. General and administrative expenses for the fourth quarter increased $4.5 million or 9.4% year-over-year, primarily due to increased salaries and benefits costs. We are continuing to execute on our 3 buckets of multiyear savings projects ahead of our initial timing expectations. We saw significant benefit in 2025 and have more savings to come in 2026, albeit at a lower rate. To be specific, in brewery performance, we continue to see improvements in OEE driven by process improvements, which helped to increase our internal production capacity. In the fourth quarter, we produced 99% of our domestic volumes internally compared to 85% in the fourth quarter of last year. Full year 2025 domestic internal production increased to 86% of our volume compared to 74% last year. In 2026, we expect to continue increasing the rate of in-sourced production, but at a smaller year-over-year benefit due to achieving a high in-source percentage in 2025. In procurement savings, our fourth quarter results benefited from lower negotiated pricing on certain packaging and ingredients. As discussed previously, procurement savings initiatives are the area where we have made the most progress over the last 2 years. While we expect some continued benefits in 2026, the impact is expected to be moderate. In waste and network optimization, we're continuing to enhance the customer ordering and trade inventory management system that we implemented last year. These efforts helped us achieve record high customer service levels that resulted in lower inventories internally and which helped improve our cash flow. In addition, we reduced obsolete inventory 71% in the fourth quarter and 48% for the full year. In addition to our 3 buckets of savings, we are beginning to add revenue management capabilities as part of our margin agenda. These efforts are in early stages in 2026 with a more meaningful contribution expected in 2027. Turning to our 2026 guidance. Our fiscal week depletion trends for the first 8 weeks of 2026 have declined 3% from 2025. We are currently planning 2026 depletions and shipments to be flat to down mid-single digits. Where we land within this range will be impacted by the pace of improvement in the overall consumer environment and the time it takes for our brand investment initiatives to drive market share improvement. We expect price increases of between 1% and 2% and some additional benefit mix. Full year 2026 reported gross margins are expected to be between 48% and 50%. Our outlook expects that we cover commodities and non-tariff-related inflation with pricing and that the lower shortfall fees and prepayment amortization broadly offset increased tariff costs. 2026 reflects a full year tariff cost estimate of $20 million to $30 million versus a partial year in 2025 of $11 million. These tariff cost estimates are based upon tariffs in place prior to the February 2026 Supreme Court ruling. We will continue to drive our savings initiatives to help buffer any volume deleverage. Our long-term gross margin target continues to be in the high 40s with any individual year dependent upon volumes, commodity inflation and tariff environment. As Jim discussed earlier, we expect to increase our advertising levels to support our brands. The investments in advertising, promotional and selling expenses are expected to increase between $20 million and $40 million. This does not include any changes in freight costs for the shipment of products to our distributors. We estimate our full year 2026 effective tax rate to be approximately 29% to 30%. We are currently targeting a full year 2026 earnings per diluted share of between $8.50 and $11. As you model out the year, please keep in mind the following factors. Our business is impacted by seasonal volume changes with the first quarter and the fourth quarter being lower absolute volume quarters and the fourth quarter typically our lowest absolute gross margin rate of the year. We have difficult shipment comparisons in the first quarter and the first half of the year as we shipped ahead of depletions in 2025 to build wholesale inventory of our product innovation, which included Sun Cruiser and Truly Unruly. We currently expect the first quarter and first half shipments to be down towards the lower end of our full year volume guidance, but with better shipment performance later in the year. During full year 2026, we estimate shortfall fees and noncash expenses of third-party production prepayments in total will negatively impact our gross margins by 40 to 60 basis points. We expect year-over-year gross margin rate improvement to be most meaningful in the fourth quarter. We typically expense the majority of our shortfall fees in the fourth quarter. We expect lower shortfall fees in 2026 and the timing of this benefit, together with the fact that the fourth quarter is a smaller dollar quarter has an outsized favorable impact on the gross margin rate. Incremental advertising investment is expected to be weighted to the second and third quarters to support the key summer selling season. Turning to capital allocation. We ended the quarter with a cash balance of $223 million and an unused credit line of $150 million, which provides us with ample flexibility to continue to invest in our base business, fund future growth initiatives and return cash to shareholders through our share buyback program. For the full year 2026, we expect capital expenditures of between $70 million and $90 million. These investments will be primarily related to our own breweries to build capabilities and to improve efficiency. We will continue to be disciplined in our capital spending as we monitor the dynamic industry environment over the long term. During the 52-week period ended December 27, 2025, and the period from December 29, 2025, through February 20, 2026, we repurchased shares in the amount of $200 million and $14 million, respectively, for a total of $214 million of repurchase since January 2025. As of February 20, 2026, we had approximately $215 million remaining on the $1.6 billion share repurchase authorization. This concludes our prepared remarks. And now we'll open the line for questions. Operator: [Operator Instructions] And the first question comes from the line of Peter Grom with UBS. Peter Grom: So 2 questions from my end. Maybe one on the gross margin outlook. I would love to understand what you're embedding or expecting as it relates to kind of underlying inflation. I'm sure you're aware of one of your competitors outlined as it relates to aluminum and the Midwest premium. So just curious what impact that may be having on your margin target looking ahead? Diego Reynoso: Yes. Thank you for the question. So as you probably know, we do not hedge in aluminum. We've seen the aluminum Midwest premium continue to grow. So we are expecting a little bit of inflation, but not as much as we've had in the past. And that's kind of what we built into next year's margins. Peter Grom: Okay. Great. And then I was hoping to get some perspective just on the year-to-date performance and just it's running a bit better than what you delivered last year as it relates to depletions, certainly better than what you saw in 4Q. So just as we -- just based on what we've seen, do you have a view on why the category seems to be doing better thus far? And maybe just as we think about the path forward, what are you expecting in terms of category growth from here? Diego Reynoso: Okay. So I'll start giving you our numbers, and then I'll hand it off for Jim for the category view. So in our case, the biggest difference at the beginning of the year is the improvement in trends for Twisted Tea. And we're continuing our support of the brand and our investments, and we feel pretty good about how we started the year. From a category point of view, I'll hand it over to Jim to give his perspective. C. Koch: Thank you. Peter, it's -- the category has clearly gotten better in the last, call it, 2 months, maybe it started in December. And we're basically seeing beer category trends maybe 2 or 3 points better than they were in 2025. 2025 was just, in some ways, kind of a black swan year. I don't think anybody in the industry expected beer to be down over 5%. And I think we all went into the year thinking it was kind of going to be down 2%, which would it be consistent with the previous 5 years of up and down through COVID, and then it turned out to be down a whole lot more without obvious, clear explanations for it. So I'd have to say that the improvement is certainly welcome. I wish I could tell you what was going on. I think there's been some moderation in the clamor around health and alcohol causes cancer. We had the government guidelines come out and be pretty much consistent with previously. It said it's okay to drink, just don't drink too much. I think that might have been helpful. Maybe the Hispanic community has adjusted to some of the new realities and found ways to come back and be visible and go to the stores and not send their kids to buy things. So there's some of that perhaps. I think the bloom is a little bit off the rose with hemp, partly because of what happened in November and the hemp loophole, so-called, being closed. So that might have contributed to it. So those are the best explanations I could come up with, but the numbers are the numbers. The category trends are down -- have improved by about 300 basis points. And I would like to tell you that our depletions are up -- have improved by that same amount, and it's all this great stuff that we did. But a lot of it is the whole category is healthier than it was 3 months ago. Operator: And the next question comes from the line of Rob Ottenstein with Evercore ISI. Robert Ottenstein: Terrific. Two questions. One, can you talk a little bit about the improvement at Twisted Tea? It sounds like what you're seeing there may be a little bit more due to your own interventions rather than the category. So just love to understand why Twisted Tea is doing a little bit better and if those particular actions are things that you expect to see follow through for the rest of the year? And then second, if you could talk about what's going on with shelf space, both at the kind of category or macro level, given all the declines that the industry has had, is the overall industry holding shelf space? And then how are you doing on the shelf space side, particularly in terms of both beer as well as the Beyond Beer area and the key brands? Diego Reynoso: Jim, would you like to take the first part of that? C. Koch: Absolutely. I think we do feel good about some of the actions that we started taking towards the end of last year with respect to Twisted Tea. We did some diagnosis, and we found that our pricing might have been too aggressive in certain markets, in certain packages, in certain channels, primarily 12 packs in supermarkets and maybe 20%, 25% of the markets, and we've worked with our wholesalers to fix those. Typically, it might be we were at $22 a 12-pack and $19.95 is a really significant price point reduction. So we addressed places where we were up at Stella Artois type pricing. And that does seem to have helped us in those places. We have also been more aggressive in pushing Twisted Tea Extreme and Twisted Tea Light, both of which are growing pretty nicely. And a little bit of just trying to get displays back because we lost some displays to RTDs, and we've been mildly successful in doing that. So there have been some direct actions, and those will continue in 2026 in addition to working with our wholesalers to do more local market support in terms of our sort of share the burden program with them where for every $3 we put into additional local marketing, they put $1 in. And so that's also been helpful both in terms of the actual spend itself and getting our wholesalers involved in making sure that Twisted Tea remains a strong and hopefully growing brand going forward. It's -- Twisted Tea is the #10 brand in beer. And for a lot of our wholesalers, it's in the top 5 or 6 brands. So it's important to them, and they've gotten engaged with that. In terms of your second question of shelf space, roughly -- well, for the industry, there has been some erosion of shelf space, though the erosion of beer shelf space has gone to RTDs. And while they are liquor-based, they kind of live and operate as beer, the same type of packages, same sort of price points. They're sold out of the cold box. So if beer loses some shelf space to RTDs, most of those are coming today from beer suppliers and beer distributors. So net-net-net, from all of that, there is not a -- to my -- from what I've seen, not a significant erosion of cooler space to beer. The possible exception would be in those states where hemp-based beverages have become really strong. They're not a lot of states, but you do have places like Louisiana, Tennessee, South Carolina, Minnesota, where they're reaching 5%, even 10% of beer dollars, and they're in the cooler. And they have taken some beer shelf space and in places like total wine, beer displays as well. And while the jury is still out, I think my betting is that the repeal of the hemp loophole will probably stand in Congress. And so the impact of the hemp-based beverages will diminish and won't go away. There's -- you can still have it at a state level. It just has some federal restrictions to it. But I believe we'll get some shelf space back from that in 2026. Operator: And the next question comes from the line of Filippo Falorni with Citi. Filippo Falorni: So maybe first, Jim, can you talk a bit about the plans for year 2 on Sun Cruiser and like what are the incremental distribution opportunities there? Obviously, you made a big push in 2025, but there's still quite a bit of white space. And then maybe some of the flavor innovation that you launched, what are the results, early results? And like is there potential to further expand into flavors? C. Koch: Sure. Sun Cruiser had a great 2025. It grew almost 400%, firmly established itself within the RTD category. It's about the #5 RTD from kind of nowhere 1.5 years ago. So we were very happy with the success of Sun Cruiser. And a lot of that success happened without getting chain authorizations. We really didn't kick in with Sun Cruiser until the last quarter of 2024, which means we missed the window of presenting it to the chain. So we didn't get shelf placements in many chains. We did very well in Walmart. They really got behind it. But most of the other chains were very limited, 1 SKU, no SKUs. And that's now changing in 2026. So we're getting strong distribution support from a lot of the big chains, Albertsons, Safeway, Kroger and on down that list. So we're going to be well represented in accordance with being the #5 RTD. So -- and we're going to continue very high level of support, even add to our spending on Sun Cruiser. Some of it is things like national advertising and national programs and sponsorships. A lot of it is more local sponsorships, local billboards, lots of sampling, brand ambassadors, a lot of really grassroots work, especially on-premise, something like 40% of Sun Cruiser's volume is on-premise, and we believe that's how brands are built. And so we're going to -- they may not deliver the same volume of off-premise, but the volume that they deliver is much more brand supporting, if you will, for having it in a bar than buying a 6-pack in a convenience store. So we are not slackening at all. We're actually putting more fuel on the fire for Sun Cruiser, and we're looking forward to -- it's not going to grow 300% or 400%, but we're looking for it to be a major contributor, hopefully, to overall company growth in 2026. In terms of flavor innovation and that kind of -- that pipeline, the -- I guess the big news is one of our flavor innovations in 2025 has proved very successful. And so we are rolling it out. It's not entirely national, but it's 30-plus states. So it's close to national. And that innovation is a vodka cocktail, very, very lightly carbonated. It's called Sinless. It's 100 calories. So it enables you to have a spirits cocktail and still have the sort of guilt-free, no carbs, no sugar that you would get from a seltzer, but get a much bigger flavor profile. So we will see how that does, but we're optimistic enough to roll it out in the majority of the country. And then further up in the pipeline, we have things like just Hard Squeeze, which is a 10% juice product. It's alcoholic. We have a Social Pop, which is a kind of new wave soda with alcohol and Wild Leaf, which is an upscale version of Twisted Tea with lower calories, lower sugar and more leaning into the quality of the tea in the product. Those are still just in a handful of test markets. So I really don't have anything significant to report. But I can say that from our pipeline in 2025, we have a new quasi national launch in Sinless. Filippo Falorni: Great. That's very helpful. And maybe a quick follow-up for Diego on Peter's question on the Midwest premium and aluminum. Can you give us a bit of sense of how you source aluminum, just given the big rise in the Midwest premium, it would imply that there's maybe a little bit more impact on the inflationary side in 2026, but maybe is there some sourcing, some hedging? Can you give us some sense of why it's not a big impact for you guys? Diego Reynoso: Yes. So what we have is we have contracts with our suppliers that have a pass-through of the Midwest premium as part of the price. So -- and since we don't hedge it, we will get the pass-through as the premium moves during the year. So again, to the question, our expectation is there's going to be a little bit of inflation on the premium, but not. If that is different, you'll see that going through our P&L given that we don't have a hedge in place. Operator: And the next question comes from the line of Kaumil Gajrawala with Jefferies. Kaumil Gajrawala: Diego can I just follow up on that because I'm confused. If it's a pass-through, wouldn't that mean you get hit with fully of the big spike that we've had in the increase already? Diego Reynoso: Yes. We -- like we get hit through the pass-through, and we did last year, and that was part of the reason that our costs went up in materials, but we were able to offset it by savings. So we do get hit by the premium as we go through the year. Kaumil Gajrawala: I see. Okay. Maybe it was implied that you have less of an impact, but okay, I get it now. Jim, I guess, as you talked about the marketing, you laid out a lot of things. And it's hard for us to perhaps get scope on, is this higher or lower than perhaps where you were last year? I believe ad spend might have been up double digits last year and it's expected to be up again this year. But when you put this all together, it seems like there's some big increases in investment. We haven't really seen volumes turn yet. So is that lack of idea? Do you feel like maybe you're investing in the wrong places? Is that course corrected for '26? Or maybe just trying to make that connection between the increases in investments and still having sort of declines on volumes? C. Koch: That's a really good question. Let me see if I can sort of clarify it, maybe simplify it. When we think of investing behind our brands, it's -- sometimes we use media as a term, but more appropriately, you should think of it as brand support, of which media is a component, but -- and probably the biggest, but there's a whole lot of other stuff that we have, which you could think of as more sort of local market execution including salespeople and including the point of sale that they put up and that accompanies them as an expense. It includes a lot of local sponsorships. It includes things like sampling teams, brand ambassadors, distributor incentives. It's a fairly long and diffuse list of things. And media is only, I don't know, depending on how you want to run the numbers, 25%, 30%, 35% of it. But the other is a whole bunch of little -- what is meaningful to us that drives local market execution. And that's -- our brands have kind of been built with a lot of grassroots efforts since day 1 when I was selling the beer from bar to bar. And to get to your second question, well, how come we're spending all this additional brand support money and we're still declining? I think it's a really good question. And believe me, it's one that I ask to make sure that we're not wasting a lot of money on this. I guess in total, we were down last year 4%. The overall beer category was down a little more like 5%, 5.5%. So I think some of it was spent to do that. And a significant amount of the increase in 2025 was spent behind Sun Cruiser and I view Sun Cruiser as it's a strong brand now in a category that's growing double digits. And in my world, that's kind of -- in the old BCG matrix, that's a star. That's a place where you overinvest to get growth and you keep doing that as long as the categories got high single digits, low double digits growth. So we definitely overinvested in Sun Cruiser. Did that pay off? I have to say, yes, it did. I mean we went from kind of nowhere to the #5 brand, kind of close to where NUTRL is, which is a really great brand from Anheuser-Busch that they've built over the last 4, 5 years, and we were able to do that in 1.5 years. Operator: And the next question comes from the line of Eric Serotta with Morgan Stanley. My apologies, Nadine Sarwat with Bernstein. Nadine Sarwat: Two for me. First one on tariffs. I know you guys guided to the $20 million to $30 million of costs for this year. Can you just remind us what items are driving this? And then how that impact is going to be phased throughout the year? And then second question on gross margins. If I remember correctly, I think you guys said to get to the 50% or above point would require top line growth. So it is a pleasant surprise to see that 50% included at the top end of the range here. Could you just give us the building blocks for the gross margin guidance in particular? Where -- what would you need to get to the high end of the range versus the low end? You guys went through a similar exercise for the top line for us, which was very helpful. So any color on that for gross margins would be appreciated. Diego Reynoso: Perfect. So let me start by tariffs. So we -- as we laid out, 20% to 30%, if you remember last year, we had bought a lot of products already. So the big impact of tariffs last year was in the back end of Q3 and Q4. So therefore, the year impact -- the year-over-year impact will be bigger at the beginning of the year, particularly in Q2, just given the size of the volume. if you break down what's included in that is aluminum is a big piece of that. And as of now, that's still in place. POS coming particularly from China is a piece of that. And we also have ingredients, sugar and for our RTD, for example, that are coming from other countries, specifically Canada that are part of it. So that's why we've decided to leave as the tariffs at the beginning of February until we see exactly what pieces might change. As I mentioned right now, the aluminum piece, for example, which is the biggest piece has not changed. So that's -- we will provide better guidance once we have more clarity on what's going to be the tariffs going forward. The second piece is you're correct. I think we're very happy with our performance in our savings agenda. I think the operations team have done an amazing job working in the buckets we laid out. As we included in our statement before, we are adding revenue management as another bucket. We are going to set it up in the back end of 2025, we started, but 2026 will -- we're really going to invest against it, and we believe we're going to get some benefits this year, but really for 2027. That will help our margin profile. The second piece, as you mentioned, tariffs is a big piece of it. So how those go forward will be the second part. And then the third piece is really being able to leverage volume. So right now, if we're in the top end of our guidance, that will help us get closer to the top end of our margin guidance because volume absorption is a big piece of where the opportunity lies going forward, given that we are producing a lot of it internal at this point in time. C. Koch: Nadine, yes, I'll add my two cents worth on that, which is probably literally two cents. I would just observe that in the past, our gross margin has been as high as 52%. So it was sort of pre the takeoff and the chaos of doubling our production during the Truly boom. And it's my aspiration to get back into that low 50%. It's not easy, but I believe we have the best supply chain team that we've ever had. We are still kind of in the middle, maybe in year 3 of a 5-year lean manufacturing journey, which is showing very good results. We continue to look for high ROI capital investments in the breweries. We obviously are not cash starved. So if there's -- we are actively looking for high ROI manufacturing investments. And then on the other side, in the sales, we are looking to have the majority of our growth come from margin-accretive products. So my aspiration is more than just the high 40s, and we've been there before. So I don't think it's unrealistic. Operator: And the next question comes from the line of Eric Serotta with Morgan Stanley. Eric Serotta: Nadine beat me to the punch on the detailed tariff question. One quick follow-up, housekeeping on that and then another question. On the tariff piece, are you including in tariffs only the direct impact from tariffs? Or would higher Midwest premium, which is kind of indirectly driven by tariffs be included in your tariff bucket? I know it's a little bit of semantics, but maybe it would help us get a handle around some of this confusion around your Midwest premium exposure? And the second question would be in terms of how you're thinking about sort of midterm growth potential for Sun Cruiser, perhaps learnings from other RTDs in the space. And clearly, Truly didn't grow to the moon, how you're thinking about sort of a maturation curve for Sun Cruiser and then, Jim, how you're thinking about what the next big thing is, which I think always tends to be on your mind or lots of little things that may become the next big thing. Diego Reynoso: Okay. I'll take the first one, and then I'll give Jim the second one. So it's hard to break out exactly which is tariffs versus the premium, but the approach we've taken to break it out is we know what the tariff percentage is. So we know right now, there's like a 50% tariff on aluminum. We'll take that tariff and count that as tariff. Any other movement in the Midwest premium, we'll take as inflation. So although they're both related one to each other, that's how you break it out as you quantify the tariff based on the actual tariff percentage and assume the rest of the movements in the Midwest premium are inflation-based. They both end up in cost of goods, but that's how we break them out when we give the tariff point of view. Jim, I'll hand it off for the second part. C. Koch: Great. Eric, you asked about midterm prospects for Sun Cruiser, and we believe that there is certainly 1 more year, maybe 2 more years, but 1 more year of really strong growth in Sun Cruiser. We got a late start in the category. And we believe that the category itself of vodka and lemon -- vodka tea and lemon-based products, that category has probably got another year of strong growth. And we were -- we started late, so we also believe that we're going to pick up share in 2026 in the category given that we're getting disproportionate increases in our shelf space. We're getting into chains that we weren't in at all last year. And the -- with respect to next big thing, honestly, if I knew what it was, we'd already be putting it into the market. But we do pride ourselves on being an innovative company. We're sort of built for that. We have a growth mindset. We're staffed for it. We have a very -- the largest sales force in the beer business. We have a very large product and flavor development team. So there's a lot of stuff that we come up with and we're generally putting things in the pipeline, 3 or 4 a year and hoping that something is going to come out. So this year, we're looking for Sinless to see if that can become the next Sun Cruiser, but it's hard to predict. And we're looking at some package innovation as well that we're not sure if we can make it work. So there is just this -- it's in our nature to innovate and approach things as the company we are, which is smaller and more entrepreneurial. Operator: And the next question comes from the line of Michael Lavery with Piper Sandler. Michael Lavery: Just wanted to dig into Truly a little bit. It still had some struggles even as White Claw's momentum has recovered and improved. Can you give a sense of maybe just what your hopes for that brand are? And can it also get back to growth? Is it just managing it kind of to moderate or to some of the declines? Or how do you see it positioned? And what's the opportunity for its -- any trajectory change there? C. Koch: I'll take that one. We look at Truly as having the potential of being a strong and viable #2 in the category, which it remains. There's really -- there's White Claw, which is the clear #1 in the category. We have been kind of, honestly, a weak #2. And so -- and I believe Hard Seltzer is a viable category. I believe it can be stable. White Claw's volume has actually grown. So they've done a great job, and you can see the payoff from that. We would like to get Truly to the point where it's no longer absorbing the category losses and where maybe it's growing low single digits a year and continues to remain a big enough product to be meaningful to our wholesalers and our retailers, which it certainly is today and off of that base, grow low single digits. So we're actually investing more in it this year than we did last year. The U.S. soccer team partnership is a very big deal. And we've got promotions around the 11 cities that are -- where the games are being played. They represent a big part of the U.S. population, those 11 metros. So we'd like to get it to be a stronger #2 than it is now with low single-digit growth. Michael Lavery: No, that's helpful. And just one more on some of the innovation, looking at the drift towards some higher ABV products, both in your portfolio and more broadly. Can you give a sense -- it's -- it typically appears -- it's a better value for the consumer, kind of more bang for the buck. If just hypothetically or assuming the consumer isn't looking to get more intoxicated, it would have a headwind to your volumes for the same amount of alcohol in the liquid even if the liquid is less. Is there enough of a mix benefit to offset that? Or like how do you manage that trade-off? And I realize there's competitive dynamics that drive a lot of it. But is there a way to make that trade-off work that's not as maybe apparent from a distance? C. Koch: I don't know of it. I think you raised a good point, but it's clearly -- our experience would say it's not a one-for-one trade-off as we get disproportionate growth with Twisted Tea Extreme, we are also growing the lower ABV Twisted Tea Light. So there is that trade-off. Do people drink more liquid because if they're drinking Twisted Tea Light because it's 4% ABV, Probably. Do they drink less with Twisted Tea Stream, which is 8% ABV? Probably. But -- so ultimately, I don't -- I can't give you a really good number, but it's certainly -- those trade-offs are manageable. And as we're going into vodka-based or liquor-based products, there is some expectation of maybe slightly higher ABVs. And hopefully, we are sourcing that volume from Spirits. So it's -- there's probably some -- you have to be right, there's some downward effect, but it's not really noticeable in the noise of the numbers. Operator: And the next question comes from the line of Bonnie Herzog with Goldman Sachs. Bonnie Herzog: I just have a couple of quick follow-up questions to some earlier points. I guess, Jim, I've talked to you about this in the past just about the cost of growth, which is increasing. So I guess in the context of that, I did want to ask about gross margin improvements. They've been impressive so far. So congratulations on that. But how should we think about the sustainability of your margins going forward, I guess, in the context of no volume growth. I mean you're guiding at the high end flat. So I'm just trying to think through that. And should we just think about, I don't know, last year, maybe this year still just big investment years as you kind of really invest in your business with the goal of returning to volume growth. I'm curious if you have a time line of when we could expect to see that. Diego Reynoso: Okay. So I'll take the first part of the margin question, and then I'll give Jim the volume part. So as we mentioned before, we had 3 buckets of savings. We've really kind of -- 2 of them are really far ahead. We still have some opportunities we're going after this year and next for our footprint. We're also adding revenue management. So we believe those pieces will be able to, in the short term, help us continue to improve our gross margin to be high 40s, close to 50% despite where volume goes. And I think I've always been straightforward in saying like we can get there without volume. To get past it, volume is important. Now below gross margin, we are investing last year in this and we're doing the same this year in our brands because we believe that gaining share like we did last year, and we're planning to do this year in the current market is the best way to set ourselves up for success and continue to innovate. And I think that's where we believe it's the right thing to do right now for the future. Now I will hand it off to Jim to give an idea of where he sees that going forward. C. Koch: To me, there is both onetime savings on the cost of goods sold which we're seeing those come in almost surprisingly strongly this year. And our plans for next year are not quite as big, but they're still pretty aggressive. And then -- but the onetime savings will -- eventually will exhaust those. But I believe the -- there should be significant, call it, 3% a year input productivity savings which I think you would find in most of the manufacturing sector, even in highly developed countries, there are just always more efficiencies to be gained. It's just productivity in the economy goes up every year and manufacturing productivity goes up faster than service productivity. So it's not out of the question to say we can take 3% out of our manufacturing costs forever. So that's how I would view that. It has given us fuel last year and this year, these onetime savings to increase our brand support. The rough numbers, you're talking maybe $50-plus million in 2025 and maybe $30 million in 2026, so $80 million or so. And that in some ways is the cost of growth. We are, as a company, just temperamentally and structurally oriented to try to drive growth. And you and I have talked about it. Growth is -- I guess, my view is growth is not cheap, but decline is really not cheap. So that's how I think about it. Diego Reynoso: Sorry, I was going to add at the end, Bonnie, is obviously, as we go forward in the next few years, how we see that trend, we have the ability to change that strategy, either double down or back off. So I would say it's the right thing that we believe for right now, and that's why we're guiding to where we're guiding. But it doesn't mean that as we go forward based on where the industry is and we are a company, we have the ability to go one way or the other. C. Koch: That's an important statement, actually, Bonnie, that Diego just made. If we came to believe that there was no possibility of growth in our category and our business, then a lot of costs come out. Operator: Okay. And at this point, there are no further questions. So that concludes our question-and-answer session, and I would like to turn the floor back over to Jim for any closing comments. C. Koch: Well, thank you to everybody for joining us this afternoon, and we look forward to talking to you in, I guess, it's about 2 more months. So thanks, and I hope everybody is dug out of the snow. Operator: Ladies and gentlemen, that does conclude our conference today. Thank you for your participation. You may disconnect your lines at this time.
Robert Barrie: Hello, and welcome to the Freelancer Limited Full Year of 2025 Financial Results. Apologies for the half an hour delay in getting going. We had some technical difficulties here in the conference room. Not sure what happened. We had a Board meeting here last night and overnight, the machine fried itself. So we've managed to sort that out, and I do apologize for the waiting, and we'll get going now. With me in the room today, I have Chief Financial Officer, Neil Katz; Vice President of Product, Andrew Bateman; August Piao from Escrow.com; and Mas from Loadshift. Today, this is the full year of 2025 financial results as we operate in the calendar year, and I'll get going. Financial highlights. The group gross marketplace volume, which is cash to the business, was $881.5 million, which is down 7.1% in FY '24. The Freelancer GMV was up 2.3% at $133.4 million. Escrow was $748.1 million, down 8.6%. Group revenue was up 4.1% versus the full year 2024 at $55.3 million. Freelancer revenue was up slightly at $40.9 million, and Escrow.com set an all-time record of $12.3 million, up 18.8%. We recorded an all-time record net profit after tax of $2.2 million, which is up from a small loss of -- in the prior year. Escrow just completed its fifth year of consecutive profitability and is paying tax and going to its sixth year of profitability. And with Loadshift, we also achieved a maiden full year profit. We also achieved an all-time record operating profit, excluding unrealized FX of $2 million, which is up 162%. Operating cash flow was a positive $7.7 million, up 32% on PCP. Cash flow was $0.5 million versus $0.8 million on PCP, but also included a net of $1.5 million in buyback of Loadshift shares, which increased our shareholding to 73.4%. Cash and cash equivalents was $22.9 million, down 11.9% on the half year, but flat on the prior year and so forth. So we achieved a significant turnaround in profitability. I've said previously in the last quarterly calls that my goal was to do $0.5 million a month of operating profit consistently. We're about 2/3 of the way there. We have a little way to go, but we're working hard on both the revenue side of the business and also on the cost side of the business. We got -- had a pretty decent cash flow of the business at $7.7 million, I said before, up 33%. And we decided to increase our stake in Loadshift. I think this year for Loadshift is going to be a pretty transformational year as I'll describe a bit later on. So our ownership has been increased to 73.4%. Freelancer is working hard to build the Amazon services. There are many companies out there that are global marketplaces of products that are very large in terms of scale and scope, the likes of the Amazons, the Alibabas and to an extent, Shopify, which is a marketplace of marketplace of products. We're trying to do that for services, and we are in the fields of labor payments and freight. We have over 90 million registered users across all our portfolio of businesses. Freelancer is the largest cloud workforce in the world. Escrow is the world's largest online escrow company, which facilitates the secure large value payments. And Loadshift is Australia's largest heavy haulage freight marketplace. And so we have services that meet the needs of consumers right up to very, very large organizations. For the core marketplace in FY '25, we onboarded 7.32 million new users and 666,000 new projects were added to the marketplace. The average project size continued to climb and averaged at USD 413, up 19.4%. And the sustained expansion in average project size reflects ongoing shift towards higher value, more complex work across the platform and also our targeting of our customer acquisition programs. Liquidity is very strong. And in fact, in many areas, we're doing some work, which we'll explain a bit later to 10% of the liquidity because it is very, very high and nowhere else in the world is as liquid as we are for getting work done. On average, you get 54 people bidding on your project, which is up 8% on PCP and contests have exploded to a fairly ridiculous 761 entries per contest, which is up 50%. So you can see here that really since 2020, we've had a trend up in average project size and that's across both the Freelancer and the Loadshift business. In terms of acquisition, in the fourth quarter, we saw a slight decline in year-on-year performance driven by a decrease in the SEO channel. We've actually rectified that, and it's bounced back down in Q1. Volume from SEM is at record levels as of writing the report and a relatively stable return on investment. We're starting to see a lift in AI-related jobs in the marketplace, and it's still at an early stage, but it is lifting. It's starting to meaningfully contribute to GMV. It's about 5% of total marketplace volume in the marketplace. As I said before, I think we're in probably the third phase of transition of businesses, thanks to the Internet or transformation, thanks to the Internet. In 1994 to 1995, you had the Internet go mainstream in Western economies, and that led to businesses going online for that. They got web development done as they wanted their presences built out on the Internet. We then had mobile phones get deployed and you had app development. And now with AI, you have AI development. And there's a whole range of features and functionality, not the least of which being AI agents, but also using AI to personalize workflows and accelerate productivity. And we do think, as I've foreshadowed in previous quarterly results that this is going to be a very, very big category in the time to come. You get over to the same place to get your AI developed that you get your website developed and your app developed; which is small individual freelancers, small agencies, large agencies and very, very large service providing organizations; and we aggregate all of them on Freelancer. The shift with AI is creating a powerful 2-sided effect in the marketplace. We're getting an increase in new AI-related jobs from clients, but also freelancers have lifted their skills quite dramatically through using AI tooling. We think the killer combination is humans with AI. And certainly, the freelancers are probably one of the largest -- on our site are probably one of the largest and most active users of AI out there with that 90 million people rapidly adopting tooling and lifting in speed, quality and output. And so we think this is a great structural enhancement to the value of our marketplace, the competitiveness of the freelancers and the scalability of our model. We're seeing work coming quicker. We're seeing higher quality work, and we're seeing that across the whole breadth of skills that we have available in the marketplace. In early January, we successfully launched, as we talked about in previous quarters, not just audio and video calling, but client-initiated audio and video calling now before you award the job to a freelancer, so you can post your job, get your bids in and talk to some of the top freelancers over audio and video prior to awarding. We've managed to do that successfully because we have a real-time data science pipeline, which does real-time analysis on those conversations to ensure that we don't have off siding, et cetera. And so as a result, this functionality is great, not just for clients to interact with the freelancers before they make the selection, but also for freelancers to win business. And so that's also led to an increase in membership revenue there on the Freelancer side. We've also managed to automate our project review using both AI and our data science pipeline called Iris. We used to have all the listings on both Freelancer and Loadshift go through human review before they went live in the marketplace. We've now managed to pretty much almost fully automate that, which has led to a lift in conversion as projects go live quicker and don't go through delays. Our focus in the first quarter will be continuous introducing AI into the primary job posting the funnel. We're focusing not on the very top of funnel at this point in time, we're focusing more on the bidding process and to match talent more effectively and counter bid spam. Because we're in the world of AI now, any form of user-generated content out there can be enhanced through AI submissions. And so we're really now focusing on ensuring that the bids that are coming in are true representations of freelancer skills and experience and that very, very quickly, we can make recommendations. We can annotate the bids coming in to provide what freelancers or platform thinks about the freelancers and to ensure that the bids are accurate on the freelancer side. We're also working on improving our payments infrastructure. In the first quarter as well, we've also now launched a Prototyper. This is our AI-powered collaborative whiteboard enables clients and freelancers to basically prototype ideas in real time and also what we call Make It Real and generate code to interpret those drawings and turn them into software with one click. So you start with a blank canvas, you sketch the concepts using whiteboard tools, traditional things like sticky notes, annotations, images and more. And then with click to Make It Real button, we transform those white frames into clickable interactive prototypes with no coding required. And so we can replace lengthy text briefs or conversations with actual visual collaboration, and it provides freelancers clarity early on and clients clarity in terms of where their build is going. So I think that's pretty cool, and there are a lot of different directions that this can head in the future. And of course, all of this stuff is powered by the mainstream foundational models. So we plug into OpenAI and Core, et cetera, powering this back end as well. So that we always keep up to date with all the latest advances in model technology. We remain to be the #1 [ site ] building platform in the world in terms of freelancing and cloud work. We're rated now 4.5 excellent on Trustpilot from 18,000 reviews; 4.7 on SiteJabber, 20,000 reviews. Yet again, we maintain our #1 position, and we've won awards that have celebrated that from those review sites. Our Enterprise division continues to work to expand its client base and operational infrastructure. We launched Concierge services for premium customers and established a Bangalore office to drive sales and operations in that region. It's very clear to us that India is the body shop to the world and every BPO there and every large major tech company has operations there, and that's the place that they source talent. And all those BPOs don't have breadth and the depth of talent that we have across geographies and niche skill sets. So our engagements spanned technology, business services, financial services and education verticals. And we're doing some pretty exciting things where we're marshaling very large fleets of people to work in everything from AI to field services to sales to so forth. And over the course of this year, we'll probably be making a couple of announcements about that. And so we are really focusing in FY '26 on deep pools of repeatable work and workflows. And I think we're pretty excited to hand-in-hand with our office be building out some features in the enterprise product over the course of this year to enable it to happen at scale. Now second half of last year, the Bangalore office started as a sales office and operational office to service enterprise demand and global fleet across India. We've got good momentum and a good pipeline. We're pretty excited about the pipeline of opportunities we've got, and that's headed up by Gerard Christopher, who has worked for us for a couple of years on engagements such as the GitHub Packard engagement. Generative AI work continued throughout the year with projects across a variety of different languages, transcriptions, image collection, going to locations, collecting data for surveys, collecting data for -- going into foundational model training, et cetera. We've also got a new company, where we're doing field service repairs of laptops. There's a picture there of a new brand of laptop that we're repairing in Kolkata. And the project for FY '26 is to really double down in the office, scale up the delivery volumes and scale into the North American markets. On the innovation front, over the course of FY '25, we've announced previously that we were a joint winner of NASA's upscale 10-year USD 475 million NOIS3 contract. That contract is a big upscaling of NOIS2, which we were also a winner of, which went from $75 million to $125 million, now it's $475 million. There has been, over the course of the second half of last year, some delays in task orders being awarded and funded due to various government shutdowns and restarts and shutdowns task orders have started flowing recently again, and we're bidding on them, et cetera. And we're doing some pretty exciting things, everything from genome edited delivery for the NIH. We did some work for the Orion spacecraft in the compiler technology for software testing, lunar south pole navigation concept, zero gravity indicators, et cetera, and so on. We currently have a challenge live for detecting underwater explosive ordinance for the United Nations. We've also got another challenge being launched shortly to model the particle distribution of explosive devices using AI and ML techniques. In addition, our government division is progressing. We've got now, I think, a solid program that can be appealed to both state and national governments around the world around helping people come up unemployment benefits and go to the workforce. We're pioneering that. We pioneered with a few countries and now with Bahrain with the Tamkeen accelerator. I think we've got a pretty robust program that we can scale up and reapply all around the world. In FY '26, the key focus will continue to be, one, to enhance marketplace engagement, continue to improve the user experience and matching capabilities to attract activate and retain high-quality freelancers and clients. I'm pretty excited about the work we're doing here. I mean, obviously, you can address questions at the end to any of the people in the room. But Andrew Bateman, who's here, VP of Product and myself, we're pretty excited last night talking through the range of capabilities that are literally over the next 2 weeks going live to allow you to very, very effectively find great freelancers, have recommendations from the platform in real time on those freelancers, do natural language search to find those freelancers and to curate the bidding lists, the directories and notify the freelancers and so forth. In addition, we have a whole bunch of trust and safety measures cracking down on bad actors. We're also accelerating AI-driven innovation, expanding our integration of advanced AI solutions across products and services, allowing efficiency, automation, and new opportunities for enterprise growth. Our vision here is basically that we provide access to all the tooling of all the major AI tools through the platform to the freelancers. So we act as a distribution channel. As I said before, we have a very large network of users of AI. The freelancers are very active in adopting latest tooling across a range of different areas, and we think we can be a place that can really distribute those products and services to those freelancers to lift their skills and lift their earnings. And we're also expanding our financial service offerings. We're really streamlining our payments infrastructure. We're doing that in a global way to ensure that we have excellent acceptance and excellent native payment methods no matter what geography we're interacting in. And hand-in-hand with that is we have -- we're building out quite a sophisticated capability in our ability to levy taxation. Governments around the world are pretty much broke and they are looking towards platforms to, at minimum, provide reporting of earnings, but also to start collecting taxes in various jurisdictions around the world. And we're quite advanced with that in many jurisdictions. And I do think that in the future, this is going to be a great regulatory shield for us. We've already had some of the biggest $1 trillion tech companies in the world come to us who while they may be able to solve this problem, don't want to solve this problem or find it very hard when they do product innovation to solve this problem. And so they've come to us to basically solve it for them. So I think as we build a more robust offering there, that could be very, very attractive to some very, very large companies. We're also focusing on driving operational excellence strengthen platform reliability, quality and performance through rigorous internal processes. Andrew Bateman leading to a complete overhaul in the way we develop product, the way we ship product, the way we think about product and the way we think about product quality. We're also enhancing customer satisfaction and market leadership. And I've said before, I want to get sustainably $500,000 a month of operating profit every month on an ongoing basis and trend that up over time. And we've made some significant progress you see with our record profit this year in the FY '25 period, and I expect to do even better this year, doubling down on that. In terms of awards, we are recognized for our 13th Webby Awards, which is really the Emmy or the Grammys of the Internet. So we're very pleased to receive our 13th Webby and our 26th Gold Stevie. And I think it's just a testament to the hard work the team is putting in. Escrow.com has a GPV of AUD 195.8 million in the fourth quarter, up 3.8% on PCP, slightly down in U.S. dollars. Full year 2025 GPV came in at $760.4 million, 8.2% down primarily due to the lapping of a large IPV4 transaction in 2024. I'm pleased to report the Q1 numbers as well. I don't want to present them too much, but they're up a bit from here in Q1. So we're seeing a good entry into 2026. Revenue for the full year was up 18.8% to $12.3 million. As I said before, it's our fifth year of profitability entering into our sixth year of profitability, and we've used up all our tax -- deferred tax assets. So we're paying tax now, which is a good first real problem to have. So I think we've got the business into a pretty robust state. As you can see, there's a long-term trend line, which has been continuing through the business, and we hope now to not just continue that trend line, but also to start really kicking in and accelerating that. And as I said before, punching out 5 years of profit and going to a 6-year of profit now, this is a very solid and strong business and also very unique and very strategic in the fact that there has a licensing for 55 jurisdictions for payments. We're also positioned for strong sustainable growth with various e-commerce partnerships. Our pipeline is actually the best it's ever been, both for high-value transactions and also for sales. We were just actually going through the high-value transaction over the last couple of weeks. We're pretty amazed by the quality of things that we're seeing in from our broker network, but also in additionally, we have quite a wide range of new verticals that we're going into. And I think we're going to have pretty significant merchant adoption in 2026, so much so that we're building a go-to-market team as we speak. We've got heads up and in our North American sales hub, which is in Vancouver. We're building out the account management team under Tony Yan, who's been just promoted to Director of Operations as well as building out our go-to-market and our activation team. So we're really trying to -- we're really trying to copy here what Afterpay did. They had a very aggressive team going after merchants and platforms on the sales front and then they had an activation team, which really took you to market once you became a partner and integrated the Afterpay checkout solution. So we really want to use that as inspiration for how we see building out our checkout product. We continue to see strong interest from digital asset marketplaces seeking trust, fraud protection and cross-border transactions. Partnerships include Dynadot and Connexly, market leaders in domain and IPV4 transactions. We're also continuing to invest in new verticals and providing customized experiences through the flow for those verticals. We've got some great B2B electronics marketplaces and broker networks being on board. Some of these guys do very, very big volumes. One of them is over $900 million of GMV per month that they do in entirety. Now we're not going to get anywhere near that number from them, but I think we could, if we execute well, get a substantial volume from these partners. And obviously, when you're selling things like B2B electronics, you've got all sorts of trust and safety issues. Are you getting what you think you're getting? Is it the equipment in good condition? Is it not stolen? Is it not damaged, et cetera and so forth? We have also got key broker marketplaces offering escrow payments through integrated and nonintegrated solutions, sites like BrokerBin, which is the world's largest B2B electronics database broker site, secondhand electronics, BrokerForum, TradeLoop, all wholesale markets. We're doing interesting things in other international trade markets. We've got a very large agricultural transaction that's currently being set up that they should go through shortly. We've got premium luxury goods marketplace in advanced stages of integration and all sorts of other marketplaces, including regulatory marketplaces that are coming on board. And we've got some work also kicking on in automotive. New partnerships for in 2025, increased our visibility and reputation, quite a number of U.S. sort of businesses. This is for WatchFacts, a luxury marketplace that we did some partnership work with that do fine jewelry, handbags, luxury watches, et cetera. Grit Brokerage and domains Immobilium with real estate agents. We're starting to tiptoe into real estate, which is obviously the holy grail. Acquired.com, we really doubled down our relationship there in the M&A of businesses and businesses from the digital side up to medium-sized businesses. And we also just brought on Pitch Capital, which is a capital raising platform, which has secured more than USD 370 million funding for start-ups and now those transactions will start to go through Escrow for fundraising for ventures. We also presented our top Master of Domains award. We published a quarterly report on domain pricing. We're actually, I think, next week, publishing our first IPV4 pricing index, which will be a quarterly pricing index and so forth. We're also releasing next week our quarterly domain report. We did see an uplift in domain volumes. We saw a tripling into AI domains over the course of FY '25. And then while second cousin to dotcom, we are seeing a very, very big lift in volumes. It was up 189%. Is that right, Austin? Is that right, August? Almost a tripling in the volume getting to about $27 million. So we are seeing a contender come in, and we're just seeing where that continues. The other thing we did, I should mention is we completed our first transaction for straight-through financing through our Funding.com subsidiary. We've done over $670 million of vendor financing through Escrow to date in the domain space, and we've actually just completed our first straight-through financing transaction with a third-party financier. We believe Domains offer a premium form of security well and above the assets of the business because you can flick off someone's website or payments or e-mail in 5 minutes and flick it back on again. So we think that as a security for lending, it's a premium asset. We have a custody service where we hold things like domains for lease to purchase options, and we've now got financiers financing, taking advantage of that custody service. We've also now 24/7 with our customer support. That was a very important thing we wanted to do for Shopify. We've got the go-to-market team is being built out for Shopify specifically. We're onboarding more and more merchants. It's still very early days. We're not visible because we haven't crossed the 50 merchant platform threshold yet for that. But over the course of this year, we will be moving that quite rapidly. We needed to make sure we got all our ducks in a row in terms of our operational and service capabilities before we could really pump a lot of volume through this business. So we've really been working on that, and we've been making some changes in terms of the management team to be able to support that. We're also in the process of migrating the front-end technology -- it's 189% I think it's close to 189% [indiscernible]. We're also in the process to migrate the front end of Escrow to the freelancer technology stack. That's the stack that runs Loadshift, it's the stack that obviously runs the Freelancer platform. That allows some very modern features. It's a single page architecture, so it's very quick and very lovely to use. You've got real-time chat and messaging capabilities, obviously, audio and video calling capabilities, which are not available currently on Escrow. We've got AI agent capabilities, we've got whole framework there. We've got AI agents doing support and doing sales and doing operational sort of work. That will become available on Escrow as a result of doing this and a range of other features. And additionally, it also allow Escrow transactions to be available on Freelancer and on Loadshift. So we start extracting more synergies between all of those businesses. And down the track, that will also allow us to do things like upsell freight off the back end of -- sales through Escrow of products, something that's been a long time coming, but with a unified front end it will allow us to do that more easily. The other thing we'll be able to do is have a unified payments infrastructure and a unified identity service. So what that will mean is if you KYC once with any one of our platforms, you're KYC'd everywhere. So you don't have to do [ first ] in Freelancer and Loadshift potentially separately. You can just do it once and it will be done everywhere. So that's some of the synergies we look to extract this year through this unification process. The other advantage is that allow us to be a lot more nimble. We'll be able to move engineering and product and design between the businesses a lot more easily and fluidly. And so we will see a real, I think, acceleration in the product development of all 3 platforms as a result of unification of all on the same technology stack. Loadshift, I think, is starting -- is going to have a breakout year in 2026. We're obviously Australia's largest heavy haulage freight marketplace. Midweek, we get somewhere between 300,000 to 400,000 [indiscernible] on the site, which is the Earth to the Moon. And it's basically the Freelancer stack or heavy haulage freight currently, and it's currently also in Australia only, but we are looking to broaden that out and take that global and that we're starting to do some things in the back end to enable that in the later -- of this year. We had record performance in FY '25, our strongest operational and financial results to date. Revenue and GMV increased year-on-year through improved ops team, marketplace efficiency, conversion and other innovation. Revenue was up 12.4% on PCP. GMV was up 7.7% on PCP. We had an all-time record quarterly revenue consecutively in the third and fourth quarter, up 15% on PCP in the fifth fourth quarter. So you can see it's lifting. 2026, I think, will be a breakout year for us. Job postings are up, award rate was up, total jobs awarded up, delivered workloads are up. So we're starting to see that take off. The big thing that was holding back Loadshift last year was audio and video calling. The big use case difference between Freelancer and Loadshift is that the majority of the work in the heavy haulage freight business happens over the phone and not through a desktop website, for example. So we had to build out the audio and video calling capabilities. And this year, in addition to that, we'll be building out audio capabilities to interface with the app, et cetera. We're pretty excited about where this goes. Not only do we have audio and video calling now fully deployed, but we've got in real time, the conversation is being transcripted, and so we can assist with project management or trust and safety purposes. In addition to all of that, you'll be able to interact in the future with the app through voice. So you have -- if you're driving a vehicle, you don't -- you can't interact with your handset with your hands. So you'll be able to talk to your -- to Loadshift. Obviously, all the capabilities we make available for Loadshift will be available for Freelancer and vice versa. So we're pretty excited about the future of that and being able to have a fully agentic version of Loadshift in the future and where that's going to go. So yes, key innovation is obviously getting that audio and video calling app, which is an app. We also made it -- we polished it with several rounds of improvements, which allows you to use the app very nicely once you're in a call, et cetera and so forth. We're also now focusing on enhanced GPS tracking capabilities. We're pretty excited about the features and functionality there. We're going to not just have real-time tracking of all of our fleet, no matter where in the world that will be, but there's a whole bunch of features that are rolling out hand-in-hand with that around compliance, around delivery notifications, pick-up notifications, tracking of the state of any cargo to ensure that hasn't been damaged in transit. And really, it's going to be a pretty comprehensive suite of functionality over the course of this year, which I think is going to be pretty, pretty exciting. We've also got a number of enterprise -- large enterprise clients now starting to come and talk to us wanting this technology. And that ranges from companies that do equipment hire, that do auctions of automotive and storage and so forth. So we're pretty excited to see where some of those conversations go. And we're engaged with some of the largest mining companies in the country. So we've got some pretty solid client base here. So overall, at group level, we had NPAT of $2.2 million positive, which is an all-time record. There was a small loss of last year. Additionally, we had a positive cash flow of $0.5 million, operating cash flow of $7.7 million, up 33%. We had outflows of $6.9 million, primarily related to lease payments for office premises. Across offices, the costs are coming down. In fact, I think it's next weekend, we're moving into our new office in Manila. We've got some improvements. Neil Katz has done a phenomenal job. Every time we do a lease renewal of chipping down the leasing costs in pretty much every office location we've got around the world. And I will say in Sydney in 2027, we'll be moving office as well, and we'll also get a reduction in our lease costs. So that's a line item that continue to tick down. As of 31st of December, we held $22.9 million in cash and cash equivalents. It's down a bit because we did a buyback of Loadshift shares primarily. We now own 73.4% of Loadshift shares. So that's fantastic. In terms of group management, we strengthened our management team with several key appointments and promotions. Andrew Bateman was promoted to VP of Product for the group, bringing over 2 decades of technology and product leadership experience. He sits to my right. And after this call, you can in the Q&A, ask any question of Andrew, if you wish. Owen Smith is the Director of Legal Compliance and expert in regulatory affairs. He heads up our compliance team, and he's doing a great job of kind of building that out and building our capability for world's best compliance and AML. Brent O'Halloran joined us as Director of Communications. He ran the foreign news desk for Sky News. He's been a pretty serious foreign correspondent for quite a number of news organizations, and he's really lifting our communications capability across the business. Tony Yan is Director of Operations for Escrow, he is overseeing partnerships, account management, the global support team under Dean and parts of payments, and he's a scientist by background. And Trisha Epp, who runs innovation was promoted to Director of Innovation for NASA. Gerard Christopher runs our India office. And we wound down the Buenos Aires office at the end of last year on the 31st of December, which was no longer fit for function. It was supposed to be a second 24/7 premium support team for a very, very high-end account management. We've moved that to Vancouver now primarily. Instead, it was a bit hard to communicate with the time zones between Sydney and BA, as well -- they were fit for purpose. And particularly a number of the functions now we've managed to automate with AI or move to Manila as well at the back end. So instead, what we've done is we opened up an office in Bangalore, and it's a sales office and operational office that's on the front end, pointy end of working with enterprise customers. I will also say another notice went out today this morning. Neil Katz, our Chief Financial Officer, has announced his retirement. We've had a very, very good run with Neil. He's with the business for 16 years. He took us from startup to a listed entity. He was very instrumental in many parts of the business that are very, very complex on the financial side. The 55 jurisdictions we're licensed in, Neil pretty much spearheaded most of that. We took from 8 licenses in 2015 when we bought it to 55. That is a very, very, very complex thing to do. And in fact, I could not do that again from scratch if I tried. And it takes 5 to 7 years for jurisdiction to get a license. You are then audited every 2 years on average by the regulators. We've managed to go through that very smoothly, albeit it did take time because it does take time, but he did that very, very well. He went through the IPO with us. He's been through the expansion of the businesses. I don't know how long his dongle chain of bank account access tokens is, but we've got bank accounts in currencies all around the world that he controls and manages and all the treasury function and so forth, the modeling and so on. And in fact, Neil and I have obviously worked together, not just at Freelancer, but also in my prior company, where he was chief financial officer. There's been about a 20-or-so year history of this. So it's been a long track record. And I do thank Neil very much from not just the management team, but also the Board last night and the Board of Directors for his service. It's a very orderly transition. It's been well flagged for the last couple of years. We have been out there looking for -- it's a 2IC under study for some time for Neil's group. As of today, we'll be upgrading the job listing to a Chief Financial Officer search, that we are kind of well advanced in kind of succession planning and have been for many years here. Neil's notice period is 6 months. So he's going to be with us to August 2026. And he's also very graciously in the Board meeting last night, offered to potentially stay on past that and potentially in a part-time capability should the new CFO wishes and so forth. So from all the company and myself and the Board, a heartfelt thank you for Neil for his service. It's a very, very long and track record for achievement. But we're out there and we're active in the process of searching for a replacement, and we'll make notifications to the market in due course when we select the final candidate. Now I apologize again for starting half an hour late on this call. We had some technical difficulties that I'll ensure does not happen again. You may now direct questions to anyone in the room. To remind everyone of who's in the room, you obviously have myself, Matt Barrie, the Chief Executive Chairman of the business. You have Neil Katz, Chief Financial Officer; you have Andrew Bateman, who is VP of Products; August Piao from Escrow and Mas from Loadshift. We'll now open it up for questions from the audience. And if Oscar, if you could read them out if any are in the chat. Operator: Yes. First question from Ray Johnson. Have there been any tangible outcomes from the expansion of the Board? Robert Barrie: Ray asked, has there been any tangible outcomes from the expansion of the Board? The answer is absolutely yes. Over the course of last year, we added Craig Scroggie, who's the Chief Executive of NEXTDC and also Patrick Grove, who is the founder of many businesses from ICar Asia to iProperty Group and is Chairman of Catcha Group. Yes, they have certainly -- there's a whole spectrum of things we've done. One is we've improved how the Board functions in terms of just generally how we run meetings and how we -- what we talk about and the strategy and so forth. Patrick has been pretty [ inspiring ] in pitching a few ideas that we're currently evaluating. Craig has been very instrumental in the execution and thinking about the execution of those ideas and how we can actually go about organizationally implementing them. And I think the discussion has really lifted to the strategy and even the governance. We obviously had our Board meeting last night with the Audit Committee, meeting, et cetera, Craig's already led quite a number of questions of the orders, et cetera. So I think we've really lifted the capability of the Board to the next level. I'm very pleased to attract -- be able to attract to the business such world-class entrepreneurs. Craig, for example, is probably one of the hottest CEOs in town right now, obviously, running NEXTDC and building data centers pretty much anywhere there's a square meter of real estate in a city in Asia Pac. He's building data centers. And then Patrick, obviously, one of the greatest entrepreneurs that Australia has produced, having built marketplaces in property, in automotive and in media, he's got marketplaces in Latin America. Last night, he was in Panama with his latest business, et cetera. So no, it's been a phenomenal step up, I think, in the Board's sophistication and capability. Operator: Next question from Katherine Thompson. Within the enterprise part of Freelancer, could you rank the contribution to revenue from the various areas, e.g., NASA, field services, GenAI in full year '25 and '23? Robert Barrie: Yes. So we don't break them out in the financial results. They are currently fairly de minimis to be frank. We do expect a big uptick to be coming from NASA, for example, very shortly. There's been some government shutdowns that have kind of held up the deployment of capital from the NOIS3 program, but that it should start to flow. We're starting to see task orders coming in now. We are the largest company that is a winner of NOIS3. It is a joint tender, for example, but we are the largest cloud workforce capability, and that's represented in all of NASA's presentations. On the enterprise side, the focus -- we think we have a lot of work happening in terms of activity on the AI services side. We had a whole call last night with a very large major BPO that is using us actively on some small-scale stuff. The trick we have figured out is we have to build a bigger product so that we can effectively scale these workflows up to very, very large scale. The company to look at is Scale.AI. That's a company that's only a few years old that Meta bought half of, for about a $14 billion purchase. We can do everything Scale AI does and better. We have a deeper network of workers with more skills and more capabilities and greater geographic reach. And in fact, I would not be surprised if actually Scale AI. I got a bunch of freelancers from our site, to be honest, through various means. But we have to build the workflows. What -- where I think we have somewhat been misdirected with the enterprise work we've done with Freelancer is we've had pretty much every major Fortune 500 come to us looking for a contingent labor solution. They're saying, okay, what you do. We've got full-time staff in our office. We've got service providers that provide us with contractors. We've got various HR technology infrastructure that can manage those fleets of people. But what we don't have is we don't have a contingent labor capability with gig or cloud. The -- and that's the approach we have been taking is really to really react to that demand, whether it's a Deloitte or whether it's Arrow Electronics and literally all the Fortune 500 in there and try and build them like this generic contingent labor capability. Now the challenges we run into when we've discovered is even though those customers pay us, I think Deloitte paid us about USD 5 million to build their capability. It's quite complex and it's quite custom. You have to integrate with their vendor management systems. You have to integrate with their single sign-on system so that all the staff can log in and it's got the same look and feel. You've got to potentially integrate with their time tracking system, active directory, this, that, the other. And then you have to do quite a large amount of customization. While we are chipping away at the product capability to make that easier and easier and simpler and simpler to be able to deploy that for any large enterprise, really what we've come to discover is you've got to find where the deep pools of repeatable work are and really build workflows and then automate those workflows with freelancers. And I come back to my comment about Scale.AI. I think they did that very, very well and very, very efficiently in a very, very narrow niche area where they built very effective workflows, a very small number of workflows, but they did that very effectively and then they managed to rip through there with huge volumes of work. And that's really the focus we're taking now moving forward with enterprise with Freelancer is we really -- we know the pieces we need to build. We've put together a whole product plan. In fact, there's probably 8 iterations of that product plan in terms of that capability. We've got quite a number of partners that potentially might be interested in building that capability with us and financing that capability. We know what needs to be done. We're building some of the building blocks. And I'm pretty confident when we get up and running, we have a workforce that ultimately is more capable and deeper and more sophisticated and more skilled to be able to rip through that work better than anyone out there that has done it before. So there are some examples of people who have done this with workflows. They've got very big businesses quickly because it becomes very pump work through. We know what to do, and we're going to do it. At the moment, the contribution is fairly small. And -- but we are learning a lot. We're bidding on some big stuff for field services right now. There's a big satellite installation DISH capability we're bidding on. We've got another partner that we started up with field services laptop repairs. I think over -- and we've got some big things happening in field sales. I've got some big expectations, for example, with the India office and kind of what they're doing. Contribution right now is fairly small. We have learned a lot with enterprise, trying a lot of different things. No one has really figured it out globally out there. But -- and I think we have the inherent innate advantage with the largest cloud workforce in the world to be able to do it very, very well. No one's done it yet. We're working towards it. There's a $1 trillion problem to solve both at the consumer level and the enterprise level, and we're chipping away at it, but not big. With Escrow, I have said this repeatedly before, and I can feel it getting closer and closer. One of the customers we're going to onboard or partners want to onboard will do the entirety of Escrow GMV times by some multiple. There's some very, very, very big volumes that are out there in the global payment space at the high end. We had to build our capability to be able to service that. We -- for example, we have a Shopify solution to go into the Shopify ecosystem. And I do get asked by investors, well, why isn't that fully guns blazing just yet and turned on. I have purposely slowed that down because we need to make sure that the support, the compliance, the back-end systems, the payment processing, everything is as slick as possible so that we can really scale and do so reliably. So we now have 24/7 support. We now have done a complete review of all our AML controls and are in the process of automating quite a number of them. We have done a couple of team restructures in terms of making sure we've got the best structure for servicing high volumes. And we're just getting our ducks in a row. So while that business is ticking up fairly well, I do think we're going to have some really blowout years soon with Escrow, but we need to get just all our ducks in a row in terms of the capabilities and processes of the systems to be able to cater for that. But we're getting there, and it's getting closer and closer. And with Loadshift, the good thing about Loadshift is, I mean, that -- the frame industry that we focus on is extremely chunky. It's high-value loads. It's the big end of town, and we are starting to see some pretty good enterprise interest coming in. We've got a couple of proposals out for a multimillion dollar integrations that would lead to pretty significant volumes. They are relatively early days in terms of progressing, but we are now at the point where we are focusing more on enterprise in our sales process, and we are out there actively pitching proposals. We've built an enterprise dashboard, for example, which is being very well received. And I do think that very soon, we're going to have a pretty robust enterprise capability. So I know it's been a long time coming across these businesses, and I will be very open and honest about that. We have learned a lot from dealing with enterprises. We know what works. We know what doesn't work. We kind of know how to think about now structuring and building the product and the operational teams and support to be able to service these organizations. And I do think that we are chipping away the problem across all 3 businesses. Thank you for your question. Operator: Katherine asks again, in the Loadshift business, are you able to say which country you would like to enter next? And how high do you think you could get the award? Robert Barrie: Next country will be Canada. It will be Canada because it's very similar to the freight we do in Australia. We're well advanced in our planning for that, and we also have an office in Canada able to service that region. But the next location will be Canada. Operator: And how high do you think you could get the award for? Robert Barrie: For Loadshift? Operator: Yes. Robert Barrie: Yes. So I literally had a conversation about this morning. Mas is smiling. I literally went to his desk and discussed it with him. Look, I personally think -- so when you have a marketplace of whether it's Freelancer or Loadshift and to an extent when you have an account managed transaction on the Escrow, if you leave transactions alone and self-serve, and obviously, you can chip away at this over time with better product and features and so forth, particularly with AI, you can do a lot. Transactions will close will match at a certain percentage, right? And across the labor space, and you look at any of the marketplaces that are out there, so I'm just talking about -- and I've looked about 200 or so financials of marketplaces because we bought about 35 businesses over the life of this company. So I've looked at a lot of these things. The labor matching in these marketplaces match around plus or minus, they're at 30%, right? So all the jobs being posted about 30% get matched and paid and so forth. If you put a human in there and that human chaperones the transaction, so it gets on the phone and talks to the client and talks to the freelancer and you do it a market making or you kind of do it of recruiting, et cetera. And you can bump that number by plus 20% pretty much across the board. With the peak performing human doing the matchmaking and the market making and so forth, you can get up to about 65% or so in terms of the conversion on the award rate. You can burst a little bit, maybe a little bit above that, but that's kind of the peak. Above that, you have clients that just lose interest. You have -- which makes up the other 35%. You've got people posting jobs for time machines, wanting to get things done for $0.99, completely unrealistic or nonfirm, just trying get an idea or maybe in the shower, they want to be an entrepreneur one day and they put the job and the next day, they kind of get busy or whatever it may be. And so that gives you a feeling for adding a human. The same is in Escrow. When you put an account manager in an Escrow transaction, they lift it by a 20% absolute the conversion rate of a transaction closing because there's handholding. And you got to remember, Escrow plays with complex high value end of deals -- so some of these deals, there's a lot of complex negotiations [ breaking ship ]. There might be multiple sellers, multiple brokers involved in the transactions, et cetera, and so forth. But you can usually bump by plus 20% if you put a human in there. On Loadshift, I think we're doing somewhere between 27% and 31%, I think, award rate at the moment. The primary thing holding back Loadshift award rate has been the fact that most of the transactions happen by audio that happen over the phone. And so we still, to this day, still hand out all the phone numbers to the drivers because historically, when we bought the Loadshift bulletin board business, it was the bulletin board you pay $69 a month and you kind of, if someone posted a job, you saw the phone number. So that business, traditionally, that's how it operated. We managed to transform that successfully into a marketplace model, have the payments flow through us. We cleaned up the trust and safety in the marketplace. There are a lot of cowboy operators, et cetera, people that are not licensed properly, not insured properly. We cleaned all of that up. We now have feedback. We have reviews. We have a whole compliance function that we provide as a layer on top. We provided more enhanced functionality, et cetera, and so forth. But we still hand out the phone numbers. With the in-app calling, which is live, you can do audio video calling, et cetera. It currently does not bridge to the PSTN or the packet switch telephone network. So it's -- if you've got the app installed on both sides or if you're on the desktop experience and you've got the app on side, we now connect. And very shortly, we've literally got in testing, we'll be connecting to the phone network. So it will be like an Uber where the driver can call you on your phone number rather than on the app. Once we have that, we think we will be a big leg up in the award rate just simply because we've just been easy, easy as it goes in terms of transforming the business model from a model primarily to a marketplace model. I personally think that the award rate on Loadshift should be higher than on Freelancer simply because if you've got an excavator and you're posting a load to move it from Kalgoorlie to [ Whoopu ] you have the excavator or you are looking at a price check because you want to buy it. They're basically the 2 scenarios. I personally believe that the ultimate peak award rate of Loadshift should be around 85%. So I think there's a significant way to go in terms of where we can lift that, but it should be significantly north of where it is now. We've been just very gentle. We obviously took it from 0% to somewhere between 27% and 31% now. The next leg up will happen with the PSTN calling because we've obviously got to control the marketplace a little bit better, and we've got to clamp down off siding and so forth, which we've really started to do on the Freelancer side recently and -- through the audio and so forth that we've deployed. So I think we've got a big leg up there just even on existing volumes we have right now, there's significant potential for very, very large revenue growth just on the volumes we have through looking at award rate. So it is actually a great question. There is a debate kind of how high we think we can get it to. But I think that -- if you're posting a load and you want to move something, the thing that you're posting load for exists and you either own it or you're about to own it or you do a price check on it. And as opposed to on Freelancer, somebody will wake up in the morning and they want to be an entrepreneur and they post a job and then realize how hard it is to actually start a business and they kind of flake out. So I personally think the award rate on Loadshift should be higher than Freelancer in the countries. Thanks for your question. Any other questions from the audience? Apologies again for starting a bit late. I'll ensure that next time we do this, it doesn't happen. But we do have an old Cisco machine here in the conference room and sometimes it's got a mind of its own, whether the cameras are working, et cetera and so forth. But we will endeavor to ensure that, that starts on time at 9:00 next time. I'll leave it open for another 30 seconds if someone has asked a question. Normally, there's a few people who are a bit shy who've got their microphone on mute that take a little bit of time to get one in. But otherwise, if there is nothing coming in, I will shut the call down. As always, you may direct questions to myself or any of the management team at any time. If you send an e-mail to matt@freelance.com, matt@freelance.com or investor@freelance.com, we'll be happy to arrange a one-on-one with any of the team. Okay. There is another question that just came in on? Operator: Yes. From [ Doug ]. Robert Barrie: Doug you are on audio. You are on mute. Unknown Analyst: I just want to know how each of the divisions have done year-to-date. Robert Barrie: Okay. You are off mute but I can't hear you. Maybe if you want to type your question. Operator: He did ask it in the chat as well. Robert Barrie: He did. Operator: How has each division performed in Jan and February compared to last year? Robert Barrie: Yes. So we've had a -- I don't want to preempt a little bit. I think Escrow and Loadshift have been the standouts in Jan and Freelancer is lagging a little bit, and that's traditionally, I think, what we've been kind of really focusing on, and that's continued into 2026. I do think however, pretty soon, we should have a good uplift in the Freelancer numbers. We've got some very, very enhanced functionality on, I think what I think is the core thing to focus on right now to maximize the lift in revenue, which is that bidding matching experience. And I know that we've had conversations before about that, Doug. I'll be happy to go through in a one-on-one the sorts of things we're doing there. But there's a massive focus on us to really bridge that uncanny valley where it's very easy to post a job on Freelancer. It's very easy to get the bids in. And there's a moment where you kind of get all these bids in and you kind of a bit confused about who's actually good, who can actually do my work, who's using an auto bidder, who's using ChatGPT to write their bids. And we've got some -- a whole suite of measures coming in to kind of bridge that gap because once you kind of get through that and you find a great freelancer, the work is done efficiently, it gets done cheaply. It's mind-blowing and very addictive. And we see that sort of in the long-term retention curves. Once you kind of cross that valley, you kind of stick, but we've got to cross that valley. And that valley, the chasm has been widening a little bit over the last few years through automation, right? So what's been happening over the last few years is there's been auto bidding software. You've got people generating ChatGPT generated bids using that auto bidding software. Sometimes those bids misrepresent the skills and experience of the freelancer and create a negative effect. Firstly, sometimes the bids come in too quickly and you don't think they actually wrote their brief. Secondly, you kind of go, well, these bids are too good to be true and then you browse their profiles and you realize they're not. So we know how to solve that problem. I think at least make major inroads into that problem. We literally have 7 things we have going up in the next 2 weeks, something like that, both on -- give you an idea, we are going to annotate the bids on what we think the bids should say, so give you a high signal to noise ratio there. We've got a classifier looking for the people who are misrepresenting their skills and we're penalizing them. We have LLM search. We have a prefiltering step where we're separating the people we think are likely to be able to do the job from the people who are not likely, and we're surfacing relevant reviews for items, et cetera, and so forth very, very quickly. And all the testing we've done, it's a huge step forward and it should test very, very, very positive. And then on top of that, we've got some stuff that we wanted to get out last year, and we struggled to get through the AB testing through, I think, 4 different attempts, but really smoothing out the whole sign-up experience, e-mail verification, phone verification, what have you. Down funnel, it tested very positive, plus 10% on the financial metrics up funnel, it was causing some issues. We split it into 2, and we should be able to chaperone that out in the next quarter. So we could see a big lift there. But it's basically in terms of the ranking is sort of Escrow, Loadshift, Freelancer in terms of performance this year, same as last year. Any other questions? Operator: Doug says, Thanks, Matt. You've preempted my other questions already. Robert Barrie: No problem. Okay. Well, thank you, everyone. As I said before, happy to arrange one-on-ones, please send it into either matt@freelance.com or investor@freelance.com and we'll arrange for either with myself or anyone with the management team, and you're welcome at any time to come talk to us physically or online. So thank you for your time, and apologies again for the late start today.
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